<PAGE>   1
                                                                    EXHIBIT 10.3

                           INDEMNIFICATION AGREEMENT

        This Indemnification Agreement ("Agreement"), dated as of January 1,
2000, is between WEST COAST BANCORP ("Corporation") and Robert D. Sznewajs
("Indemnitee").

                                    RECITALS

A.      Indemnitee, as member of the board of directors or an officer of the
        Corporation and/or, one or more of its affiliate corporations, performs
        valuable services for the Corporation.

B.      The Corporation's Articles of Incorporation ("Articles") and Bylaws
        ("Bylaws") provide for the indemnification of the officers, directors,
        agents and employees of the Corporation to the maximum extent authorized
        by the Oregon Business Corporation Act ("Act").

C.      The Articles, Bylaws and the Act, by their non-exclusive nature, permit
        contracts between the Corporation and its directors and officers to
        indemnify those directors and officers.

D.      The Corporation has purchased and maintains a policy or policies of
        Directors and Officers Liability Insurance ("D & O Insurance"), covering
        certain liabilities, which may be incurred by its directors and officers
        in the performance of their duties.

E.      Due to changes in the terms, scope and availability of D & 0 Insurance,
        uncertainty exists as to the extent of protection afforded directors and
        officers under such D & O Insurance or under the indemnification
        provisions of the Act, Articles, or Bylaws.

F.      To induce Indemnitee to continue service as a director or officer of the
        Corporation and/or one or more of its affiliate corporations, the
        Corporation desires to enter this contract with Indemnitee.


        Therefore, in consideration of Indemnitee's continued service as a
director or officer, the parties agree as follows:

                                    AGREEMENT

1.      INDEMNITY. The Corporation agrees to hold harmless and indemnify
        Indemnitee:

        (a)     to the fullest extent permitted under each of the Articles, the
                Bylaws, and the Act, as each may be amended from time to time;
                and

        (b)     against any and all expenses (including attorneys' fees),
                witness fees, judgments, fines, ERISA excise taxes, and amounts
                paid in settlement actually and reasonably incurred by
                Indemnitee in connection with any threatened, pending or
                completed action, suit or proceeding, whether civil, criminal,
                administrative or investigative (including an action by or in
                the right of the Corporation) to which Indemnitee is, was or at
                any time becomes a party, or is threatened to be made a party,
                by reason of the fact that Indemnitee is, was or at any time
                becomes a director, officer, employee or agent of the
                Corporation, or is or was serving or at any time serves at the
                request of the Corporation as a

<PAGE>   2

                director, officer, employee or agent of another (i) corporation,
                including without limitation a corporate affiliate of the
                Corporation, (ii) partnership, (iii) joint venture, (iv) trust,
                (v) employee benefit plan or (vii) other enterprise.

2.      LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity under Section 1 will
        be paid by the Corporation:

        (a)     for expenses or liabilities paid to the Indemnitee under any D &
                O Insurance purchased and maintained by the Corporation;

        (b)     on account of any action, suit or proceeding brought by or on
                behalf of the Corporation in which judgment is rendered holding
                the Indemnitee liable to the Corporation;

        (c)     on account of Indemnitee's conduct which is finally adjudged to
                be willful misconduct or knowing violation of law;

        (d)     on account of Indemnitee's conduct which is the subject of an
                action, suit or proceeding described in Section 6 (c)(ii);

        (e)     on account of any action, claim or proceeding (other than a
                proceeding referred to in Section 7(b)) initiated by the
                Indemnitee unless such action, claim or proceeding is
                specifically authorized by action of the Corporation's board of
                directors;

        (f)     on account of any action, claim or proceeding referred to in
                Section 7(b) which action is finally adjudged to be frivolous or
                made not in good faith;

        (g)     if a final decision by a Court having jurisdiction in the matter
                determines that such indemnification is not lawful.

3.      MUTUAL ACKNOWLEDGMENT. Both Corporation and Indemnitee acknowledge that,
        in certain instances, federal law or public policy may override
        applicable state law and prohibit the Corporation from indemnifying its
        directors and officers. For example, the Corporation and Indemnitee
        acknowledge that the Securities and Exchange Commission (the "SEC")
        takes the position that indemnification is not permitted for liabilities
        arising under certain federal securities laws, and federal legislation
        prohibits indemnification for certain ERISA violations.

4.      CONTINUATION OF OBLIGATIONS. Under this Agreement the Corporation is
        obligated to Indemnitee for any period Indemnitee is or was a director,
        officer, employee or agent of the Corporation (or is or was serving at
        the request of the Corporation as a director, officer, employee or agent
        of another (i) corporation, including without limitation, a corporate
        affiliate of Corporation, (ii) partnership, (iii) joint venture, (iv)
        trust, (v) employee benefit plan or (vi) other enterprise). Furthermore,
        this obligation will continue after Indemnitee's service as a director
        or officer terminates and so long as Indemnitee may be subject to any
        possible claim or threatened, pending or completed action, suit or
        proceeding, whether civil, criminal or investigative, by reason of the
        fact that Indemnitee was a director or an officer of the Corporation or
        was serving at the Corporation's request as a director, officer,
        employee or agent of another (i) corporation, including

<PAGE>   3

        without limitation, a corporate affiliate of Corporation, (ii)
        partnership, (iii) joint venture, (iv) trust, (v) employee benefit plan
        or (vi) other enterprise.

5.      NOTIFICATION AND DEFENSE OF CLAIM. Within 30 after Indemnitee receives
        any notice of the commencement of any action, suit, or proceeding,
        Indemnitee will notify the Corporation of it, if a claim with respect to
        the action may be made against the Corporation under this Agreement. The
        failure to so notify the Corporation will not relieve the Corporation
        from any liability it may have to Indemnitee under authority other than
        this Agreement. With respect to any action, suit or proceeding of which
        Indemnitee timely notifies the Corporation:

        (a)     the Corporation is entitled to participate at its own expense;

        (b)     except as otherwise provided below, the Corporation (jointly
                with any other indemnifying party similarly notified) is
                entitled to assume the defense of the action with counsel
                reasonably satisfactory to Indemnitee; and

        (c)     the Corporation is not liable to indemnify Indemnitee under this
                Agreement for any amounts paid in settlement of any action or
                claim that is effected without its written consent.

        After notice from the Corporation to Indemnitee of its election to
        assume the defense of the action, the Corporation will not be liable to
        Indemnitee under this Agreement for any legal or other expenses
        subsequently incurred by Indemnitee in connection with the defense of
        the action, other than reasonable costs of investigation or as otherwise
        provided below. Indemnitee may employ its counsel in such action but the
        fees and expenses of such counsel incurred after notice from the
        Corporation of its assumption of the defense will be at the expense of
        Indemnitee unless (i) Indemnitee's employment of counsel is authorized
        by the Corporation, (ii) Indemnitee reasonably concludes that there may
        be a conflict of interest between the Corporation and Indemnitee in the
        conduct of the defense of such action or (iii) the Corporation has not
        employed counsel to assume the defense of such action, in each of which
        cases the fees and expenses of Indemnitee's separate counsel will be at
        the expense of the Corporation. The Corporation is not entitled to
        assume the defense of any action, suit, or proceeding brought by or on
        behalf of the Corporation or as to which Indemnitee has made the
        conclusion provided for in (ii) above.

        The Corporation is permitted to settle any action except that it may not
        settle any action or claim in any manner which would impose any penalty
        or limitation on Indemnitee without Indemnitee's written consent.
        Neither the Corporation nor Indemnitee will unreasonably withhold its
        consent to any proposed settlement.

6.      ADVANCEMENT AND REPAYMENT OF EXPENSES.

        (a)     If Indemnitee employs his/her own counsel, the cost of which is
                to be indemnified by the Corporation under Section 5, the
                Corporation will advance to Indemnitee any and all reasonable
                expenses (including legal fees and expenses) incurred in
                investigating or defending any such action, suit or proceeding.
                These expenses must be advanced before any final disposition of
                any threatened or pending

<PAGE>   4

                action, suit or proceeding, whether civil, criminal,
                administrative or investigative and within 10 days after
                receiving copies of invoices presented to Indemnitee for such
                expenses.

        (b)     Indemnitee agrees that Indemnitee will reimburse the Corporation
                for all reasonable expenses paid by the Corporation in defending
                any civil or criminal action, suit or proceeding against
                Indemnitee if, and only to the extent that, it is ultimately
                determined by a final judicial decision (from which there is no
                right of appeal) that Indemnitee is not entitled to be
                indemnified by the Corporation for such expenses.

        (c)     The Corporation is not required to advance expenses to
                Indemnitee if Indemnitee (i) commences any action, suit or
                proceeding as a plaintiff, unless such advance is specifically
                approved by a majority of the Corporation's board of directors
                or (ii) is a party to an action, suit or proceeding brought by
                the Corporation and approved by a majority of the Corporation's
                board which alleges willful misappropriation of corporate assets
                by Indemnitee, disclosure of confidential information in
                violation of Indemnitee's fiduciary or contractual obligations
                to the Corporation, or any other willful and deliberate breach
                in faith of Indemnitee's duty to the Corporation, its
                affiliates, or its shareholders.

7.      ENFORCEMENT.

        (a)     The Corporation confirms that it has entered into this Agreement
                to induce Indemnitee to continue as a director or an officer of
                the Corporation or one or more of its affiliates, and
                acknowledges that Indemnitee is relying upon this Agreement in
                continuing in such capacity.

        (b)     If Indemnitee successfully brings any action to enforce rights
                or to collect moneys due under this Agreement, the Corporation
                will reimburse Indemnitee for all Indemnitee's reasonable fees
                and expenses in bringing and pursuing such action.

8.      SUBROGATION. If the Corporation pays Indemnitee under this Agreement,
        the Corporation will be subrogated to the extent of such payment to all
        of the rights of recovery of Indemnitee, who agrees to execute all
        documents required and to do all acts necessary to secure such rights
        and to enable the Corporation effectively to bring suit to enforce such
        rights.

9.      NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Indemnitee by this
        Agreement are not exclusive of any other right which Indemnitee may have
        or hereafter acquire under any statute, provision of the Articles,
        Bylaws, agreement, vote of shareholders or directors, or otherwise, both
        as to action in his/her official capacity and as to action in another
        capacity while holding office.

10.     SURVIVAL OF RIGHTS. The rights conferred on Indemnitee by this Agreement
        continue after Indemnitee ceases to be a director, officer, employee, or
        other agent of the Corporation and will inure to the benefit of
        Indemnitee's heirs, executors, and administrators.
<PAGE>   5

11.     SEPARABILITY. Each provision of this Agreement is a separate and
        distinct agreement independent of others. If any provision is held to be
        invalid or unenforceable for any reason, such invalidity or
        unenforceability will not affect the validity or enforceability of the
        other provisions or the obligation of the Corporation to indemnify the
        Indemnitee to the full extent provided by the Articles, Bylaws or the
        Act.

12.     GOVERNING LAW. This Agreement is interpreted and enforced in accordance
        with the laws of the State of Oregon.

13.     BINDING EFFECT. This Agreement is binding upon Indemnitee and upon the
        Corporation, its successors and assigns, and inures to the benefit of
        Indemnitee, his/her heirs, personal representatives, and assigns and to
        the benefit of the Corporation, its successors and assigns.

14.     AMENDMENT AND TERMINATION. No amendment, modification, termination, or
        cancellation of this Agreement is effective unless in writing signed by
        both parties.

Signed as of January 1, 2000:


                                            WEST COAST BANCORP



                                            By:    Gary D. Putnam
                                                   Chairman


                                            INDEMNITEE



                                            -----------------------------------
                                            Robert D. Sznewajs