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                                                                    EXHIBIT 10.7

                               BANK OF THE PACIFIC

                           INCENTIVE STOCK OPTION PLAN

     1. PURPOSE: The purpose of the Bank of the Pacific Incentive Stock Option
Plan (the "Plan") is to encourage the long-term success of Bank of the Pacific
(the "Bank") by: (1) providing a means through which the Bank can attract,
motivate and retain officers and other key employees who can contribute
materially to that success; and (2) encouraging stock ownership by these
employees so that they have a proprietary interest in the Bank's growth and
success. These goals shall be achieved under the Plan by the grant of
stock-based awards ("Incentive Stock Options" ("ISOs"), "Nonqualified Stock
Grants" ("NQGs"), or a combination thereof, (hereinafter collectively referred
to as "Awards") to designated employees under the two methods that compose the
Plan (the "Incentive Stock Option Plan" and the "Nonqualified Stock Grant
Plan").

     2. ADMINISTRATION: The Plan shall be administered by an Awards Committee
(the "Committee") of the Board of Directors of the Bank (the "Board"). The
Committee shall at all times consist of at least three members of the Board. The
members of the Committee shall be appointed by the Board and shall serve at the
pleasure of the Board. All members of the Committee shall be "disinterested
persons," within the meaning of regulation 240.16b-3(d)(3) under the Securities
Exchange Act of 1934. A majority of the Committee members shall constitute a
quorum. Any action approved by a majority of the Committee members who are
present during a meeting in which a quorum is present, or any action approved in
writing by all the Committee members, shall be considered actions approved by
the Committee. Subject to the provisions of the Plan described in the following,
the Committee may adopt such rules and regulations pertaining to the
administration of the Plan as it deems proper and necessary. The Committee shall
interpret, construe and implement the provisions of the Plan. All determinations
of the Committee shall be final and conclusive.

     3. STOCK SUBJECT TO AWARDS: The shares of stock which may be made subject
to Awards under the Plan shall be shares of the Bank's Common Stock, $2.50 par
value ("Stock"). Awards made under the Plan will not exceed 10% of the
outstanding shares of the Bank (subject to adjustment as provided in Section 9),
and will be authorized and unissued shares or Stock. If an Award is cancelled or
expires for any reason without having been exercised or matured in full, all
shares of Stock covered by such cancelled or expired Award shall be made
available for future Awards.

     4. ELIGIBILITY: Officers (including officers who are also directors) and
other key employees of the bank and its subsidiaries, as may be selected from
time to time by the Committee, may be granted Awards pursuant to the Plan. In
general, Awards will be made to those employees who, in the Committee's
judgment, are (or will be) contributors to the long-term success of the Bank
and/or its subsidiaries ("Participants"). However, Awards shall not be granted
to any member of the Committee nor to any individual who is not, at the time of
the Award, an employee of the Bank. The Committee may grant additional Awards to
Participants who have previously received Awards under the Plan.


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     Initially, it is the intention of the Committee to grant Awards to the
Chief Executive Officer and the Vice President and Cashier.

     5. INCENTIVE STOCK OPTION PLAN (THE "ISO PLAN"): Under the ISO Plan, ISOs
meeting the requirements of Internal Revenue Code ("Code") Section 422A to
purchase one or more shares of Stock may be awarded to Participants. Each ISO
shall be evidenced by an Incentive Stock Option Agreement ("ISO Agreement")
between the Bank and the Participant. ISO Agreements shall be in such form or
forms as the Committee shall prescribe from time to time, and need not be
identical to each other. However, all ISO Agreements shall comply with and be
subject to the following terms and conditions:

          A. OPTION PRICE: The option price per share of stock subject to an ISO
     shall be set by the Committee (based upon a stock evaluation within the
     last 12 months by an independent appraiser) and shall in no instance be
     less than the fair market value of the Stock ISOs awarded to any otherwise
     eligible employee who, at the time the ISO is awarded, owns Stock
     possessing more than 10 percent of the total combined voting power of all
     classes of stock of the Bank (a "10 percent Shareholder"), the option price
     per share shall not be less than 110 percent of fair market value of the
     Stock on the date of award.

          B. ANNUAL LIMITATION ON AWARD OF ISOS: The aggregate fair market value
     of shares of Stock (determined as of the date an ISO is awarded) that may
     be awarded (whether under the ISO Plan or under any other plan of the Bank
     within the meaning of Code Sections 425(e) and (f), in the first year of
     the Plan shall not exceed the sum of one hundred thousand dollars
     ($100,000). There shall not be any such annual aggregate limitation in
     subsequent years.

          C. DURATION OF ISOS: No ISO shall be exercisable after the expiration
     ("Expiration Date") specified by the Committee at the time the ISO is
     awarded. The Expiration Date of each ISO shall not be later than the tenth
     anniversary (or, or any ISO awarded to a 10 percent shareholder, the fifth
     anniversary) of the date of awarding such ISO, but may be any earlier date
     established by the Committee. The Expiration Date of each ISO shall be set
     forth in the ISO Agreement.

          D. EXERCISABILITY OF ISOS: Except as provided in Section 8, ISOs shall
     be exercisable only while the Participant of the Bank or an Affiliate of
     the Bank. Subject to such restriction, and except for such additional
     restrictions as may be imposed by the Committee, any ISO awarded under the
     ISO Plan shall be exercisable, in full or in part, at any time or on or
     after the first anniversary of the date of award of the ISO that the ISO
     shall not become exercisable, in whole or in part, for such additional
     period or periods of time as the Committee shall provide. Such additional
     restrictions shall be set forth in the ISO Agreement. The Committee may at
     any time accelerate the exercisability of outstanding ISOs.

          E. SEQUENTIAL EXERCISE OF ISOS: In accordance with Code Section
     422A(b)(7), no ISO awarded under the ISO Plan shall be exercisable while
     there is still outstanding any Incentive Stock Option which was awarded,
     whether or not under the


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     ISO Plan, to the Participant to purchase Stock (or any stock of the Company
     or of any corporation which, at the time of the award of such ISO, was an
     Affiliate of the Bank or any such Affiliate) before the awarding of such
     ISO under the ISO Plan.

          F. METHOD OF EXERCISE OF AN ISO: A Participant holding an exercisable
     ISO may exercise it in accordance with its terms, by delivering to the
     Secretary of the Bank at its executive offices written notice specifying
     the number of shares with respect to which ISO is being exercised, together
     with payment in full of the option price of such shares. Such payment shall
     be made either (1) in cash or by certified check or bank draft to the order
     of the Bank, or (2) at the Committee's discretion, in whole or in part in
     any other form, including payment by personal check or by the delivery to
     the Bank of shares of Stock previously acquired by the participant, or a
     combination of Stock and cash having a total fair market value on the date
     of exercise equal to the option price.

          G. OTHER CONDITIONS: The Committee may also make the award of an ISO
     subject to any other conditions which, in the opinion of the Committee,
     should be imposed in order for an ISO to comply with the requirements of
     relevant Code sections (including Section 422A) and any applicable
     regulations and revenue rulings of the Treasury Department, or which the
     Committee deems desirable and which do not disqualify the ISO as an
     "incentive stock option" under the Code.

     6. THE NONQUALIFIED STOCK GRANT PLAN (THE "NQG PLAN"): Under the NQG Plan,
one or more nonqualified stock grants ("NQGs") which DO NOT meet the
requirements of Code Sections 422 or 422A may be awarded to Participants. Each
NQG so awarded shall be evidenced by a Nonqualified Stock Grant Agreement (the
"NQG Agreement") between the Bank and the Participant. NQG Agreements shall be
in such form or forms as the Committee shall prescribe from time to time, and
need not be identical to each other. However, all NQG Agreements shall be
subject to the following terms and conditions:

          A. MATURITY OR DELIVERY OF SHARES PURSUANT TO NQGS: Subject to Section
     7 hereof, Stock shall be delivered to a Participant pursuant to an
     outstanding NQG only as long as the Participant is an employee of the Bank
     or an Affiliate of the Bank. Subject to such restriction, and except for
     such additional restrictions as may be imposed by the Committee and set
     forth in the NQG Agreement, Stock awarded pursuant to an NQG shall be
     delivered to the Participant on anniversaries of the date of award of the
     NQG as determined by the Committee. The Committee may at any time
     accelerate the delivery of Stock pursuant to an outstanding NQG.

     7. TERMINATION OF EMPLOYMENT:

          NQGs: Any outstanding NQG shall immediately expire, and no further
stock shall be delivered pursuant to the NQG, at the time of the Participant's
termination of employment with the Bank or an Affiliate of the Bank
("Termination"), regardless of the reason, including death, for Termination.


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     ISOs: Any outstanding ISO may be exercised after a Participant's
Termination only to the extent that the ISO was exercisable immediately prior to
Termination pursuant to the ISO Agreement, and then only subject to the
following limitations:

          A. In the event of a Participant's Termination either: (1) for any
     cause (other than those specified in paragraphs 2-4 of this Section 7; (2)
     upon discharge by the Bank; or (3) voluntarily on the part of the
     Participant prior to Regular Retirement (as defined in paragraph C of this
     Section 7); and without the written consent of the Bank, any ISO held by
     the Participant and any right thereunder shall immediately terminate and
     expire as of the date of Termination (see final paragraph of this Section
     7).

          B. In the event of a Participant's Termination on account of
     disability as defined in Code Section 106(d)(4) ("Disability"), any
     theretofore unexercised ISO, to the extent that such ISO was exercisable on
     the date of Termination (see final paragraph of this Section 7), shall
     remain exercisable according to its terms until the earlier of: (1) six
     months after the data of Termination; or (2) the Expiration Date of the
     ISO.

          C. In the event of a Participant's Termination voluntarily pursuant to
     "Regular Retirement" (defined as retirement pursuant to the terms of any
     pension, employee benefit or retirement plan maintained by the Bank in
     which the Participant participates), an ISO, to the extent such ISO was
     exercisable immediately prior to the date of Regular Retirement (see final
     paragraph of this Section 7) shall remain exercisable according to its
     terms until the earlier of (1) six months; or (2) the Expiration Date of
     the ISO.

          D. In the event of the death of a Participant while he or she is
     employed by the Bank or an Affiliate of the Bank or during any period after
     Termination during which an ISO remains exercisable pursuant to the
     provisions of paragraphs B or C of this Section 7, any ISO, to the extent
     that the ISO was exercisable on the date of the Participant's death, shall
     remain exercisable according to its terms by the Participant's estate,
     personal representative, heir or beneficiary until the earlier of: (1) six
     months after the date of the Participant's death; or (2) the Expiration
     Date of the ISO.

     The Committee shall determine in each case the effective date of a
Participant's Termination or Regular Retirement ("date of Termination" or "date
of Regular Retirement," respectively). The Committee shall also decide whether
an authorized leave of absence, for military service or otherwise, shall
constitute a Termination. With respect to ISOs only, the Committee in its
discretion may elect to treat a Participant's retirement prior to regular
Retirement (see paragraph A(3) of this Section 7) as Regular Retirement, and may
also, in its discretion, extend the six month period during which an ISO remains
exercisable after the date of Regular Retirement to such longer period as the
Committee shall determine, which longer period shall not exceed three years and
shall in no event be longer than the expiration date set forth in the applicable
ISO Agreement.

     8. NONTRANSFERABILITY: No Award made under this Plan shall be assignable or
transferable except, in the case of an ISO, by will or the laws of descent and
distribution.


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During a Participant's lifetime, an ISO shall be exercisable only by the
Participant (or the Participant's guardian or legal representative).

     9. ADJUSTMENTS: Appropriate adjustments in the number of shares of Stock
subject to Awards and in option price per share will be made by the Committee to
give effect to changes made in the number of outstanding shares of Stock
resulting from any recapitalization, reclassification, stock dividend, stock
split, reverse stock split or other similar change.

     10. MERGERS, CONSOLIDATIONS, ETC.: In the event that the Board approves a
proposal for a merger or consolidation in which the Bank is not the resulting or
surviving corporation but becomes a subsidiary of another corporation (or in
which the Bank is the resulting or surviving corporation but becomes a
subsidiary of another corporation) or for transfer of all or substantially all
of the assets of the Bank ("Transaction"), the Committee shall notify in writing
each Participant holding an ISO of the proposed Transaction (the "Proposal
Notice"). Such Proposal Notice shall be sent to Participants at least 30 days
prior to the effective date of the proposed Transaction (as fixed by the
Committee) and shall advise the Participant that he or she has the right to
exercise any theretofore unexercised ISO awarded to the Participant, including
those, in any which, pursuant to the terms of the Plan or the relevant ISO
Agreement, have not then otherwise become exercisable. Each Participant, by
written notice to the Bank, may exercise such ISO and, in so exercising, may
condition such exercise upon, and provide that such exercise shall become
effective immediately prior to, the consummation of the Transaction, in which
event such Participant need not make payment for the Stock to be purchased until
five days after written notice by the Bank to the Participant that the
Transaction has been consummated (the "Transaction Notice"). If the Transaction
is consummated, each ISO, to the extent not previously exercised prior to the
consummation of the Transaction, shall terminate and cease being exercisable as
of the effective date of the Transaction unless by the terms of the Agreement
for the Transaction, the surviving corporation or in the event that the Bank is
the surviving corporation but becomes the subsidiary of another corporation, its
parent agrees to assume all of the obligations of the Bank under this Incentive
Stock Option Plan, in which event such Participant may at his option exercise
the ISO at any time up to and including the date upon which the ISO would have
expired had the Transaction not occurred. If the Transaction is abandoned, then
(1) any ISO not exercised shall continue to be exercisable to the extent that
such ISO was exercisable prior to the date of the Proposal Notice, and in
accordance with the other provisions of the Plan and the relevant ISO Agreement,
and (2) to the extent that any ISO not exercised prior to such abandonment shall
become exercisable solely by operation of this Section 10, such exercisability
shall be deemed null, and the exercisability provisions set forth in the Plan
and the relevant ISO Agreement shall be reinstated as of the date of such
abandonment.

     Any NQG Agreement in effect immediately prior to the Transaction shall
carry forward as an obligation of the surviving corporation to the same extent
as if the Transaction had not taken place.

     11. MISCELLANEOUS:

          A. EFFECTIVE DATE AND DURATION: The Plan and the ISO and NQG Plans
     contained therein will become effective on the date the Plan is approved by
     the Board and


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     shall terminate on, and no Awards shall be made after, the tenth
     anniversary of the Effective Date of the Plan. The provisions of the Plan,
     however, shall continue to govern all Awards theretofore made until the
     exercise, expiration, or cancellation of such Awards.

          B. AMENDMENT AND TERMINATION OF THE PLAN: The board at any time may
     terminate the Plan or amend it from time to time in such respect as it
     deems desirable; provided that, without the further approval of the holders
     of majority of the outstanding Common Stuck, no amendment shall (except
     for adjustments pursuant to Section 9): (1) increase the maximum number
     of shares of Stock which may be made the subject of Awards under the Plan;
     (2) decrease the option price for ISOs; (3) increase the option price for
     ISOs; or (4) materially change the eligibility provisions hereof; and
     provided further that no termination of or amendment of the Plan shall
     adversely affect the rights of a Participant holding an Award
     theretofore made, without the consent of such Participant.

          C. ISSUANCE OF SHARES - RESTRICTIONS: Subject to the conditions and
     restrictions provided in this paragraph C of Section 11, the Bank shall, as
     soon as practicable after an ISO has been exercise in whole or in part, or
     an NQG has matured so that shares of Stock are deliverable to the
     Participant pursuant to the relevant NQG Agreement, deliver to the
     Participant, for the appropriate number of shares of Stock.

          D. RIGHTS AS SHAREHOLDER AND EMPLOYEE: No participant holding an Award
     shall have any rights as a shareholder of the Bank with respect to any
     Stock, including the right to vote the Stock, prior to the date of issuance
     to him or her of the certificate for such stock. Neither the Plan nor any
     Award made under the Plan shall confer upon a Participant any right to
     continue in the employment of the Bank.

          E. CONSTRUCTION: The Plan and the ISO and NQG Agreements issued
     thereunder shall be interpreted and administered under the laws of the
     State of Washington.

     Approved this _____ day of _____________________________, 1997 by the Board
of Directors of ______________________________.


_________________________________       ________________________________________
Chairman                                Secretary of the Board


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