<PAGE>   1
 
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 25, 1998
    
   
                                                      REGISTRATION NO. 333-44355
    
   
--------------------------------------------------------------------------------
    
--------------------------------------------------------------------------------
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
   
                                AMENDMENT NO. 1
    
   
                                       TO
    
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                             COWLITZ BANCORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                               <C>                               <C>
            WASHINGTON                           6712                           91-1529841
 (STATE OR OTHER JURISDICTION OF     (PRIMARY STANDARD INDUSTRIAL            (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)     CLASSIFICATION CODE NUMBER)          IDENTIFICATION NUMBER)
</TABLE>
 
         927 COMMERCE AVENUE, LONGVIEW, WASHINGTON 98632 (360) 423-9800
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
           CHARLES W. JARRETT, PRESIDENT AND CHIEF OPERATING OFFICER
                             COWLITZ BANCORPORATION
         927 COMMERCE AVENUE, LONGVIEW, WASHINGTON 98632 (360) 423-9800
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
 
                                   COPIES TO:
 
<TABLE>
<S>                                                <C>
                  DAVID R. WILSON                                   STEPHEN M. KLEIN
                BERNARD L. RUSSELL                                  MARK C. LEWINGTON
          FOSTER PEPPER & SHEFELMAN PLLC                            GRAHAM & DUNN PC
           1111 THIRD AVENUE, SUITE 3400                      1420 FIFTH AVENUE, SUITE 3300
             SEATTLE, WASHINGTON 98101                          SEATTLE, WASHINGTON 98101
                  (206) 447-4400                                     (206) 624-8300
</TABLE>
 
        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
 
     If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
 
                        CALCULATION OF REGISTRATION FEE
 
   
<TABLE>
<CAPTION>
===========================================================================================================
                                                        PROPOSED MAXIMUM  PROPOSED MAXIMUM    AMOUNT OF
        TITLE OF EACH CLASS OF           AMOUNT TO BE    OFFERING PRICE  AGGREGATE OFFERING   REGISTRATION
      SECURITIES TO BE REGISTERED       REGISTERED(1)     PER SHARE(2)        PRICE(2)          FEE(3)
-----------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>               <C>               <C>
Common Stock, no par value............. 1,150,000 shares       $13.00       $14,950,000         $4,531
===========================================================================================================
</TABLE>
    
 
(1) Includes 150,000 shares that may be purchased by the Underwriters to cover
    over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee pursuant
    to Rule 457(a).
   
(3) Previously paid.
    
 
     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>   2
 
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
 
   
                 SUBJECT TO COMPLETION, DATED FEBRUARY 25, 1998
    
 
                                1,000,000 SHARES
 
                                      LOGO
                             COWLITZ BANCORPORATION
 
                                  COMMON STOCK
                            ------------------------
 
   
     All of the shares of Common Stock ("Common Stock") of Cowlitz
Bancorporation (the "Company") offered hereby (the "Offering") are being sold by
the Company. Prior to the Offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $11.00 and $13.00 per share of Common Stock. See
"Underwriting" for a discussion of the factors to be considered in determining
the initial public offering price. The Company's Common Stock has been approved
for quotation on the Nasdaq National Market under the symbol "CWLZ."
    
 
      SEE "RISK FACTORS" COMMENCING ON PAGE 6 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
     THE SHARES OFFERED HEREBY ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
  OBLIGATIONS OF A BANK AND ARE NOT INSURED BY THE BANK INSURANCE FUND OF THE
     FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
                            ------------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
<TABLE>
<S>                                  <C>                   <C>                   <C>
======================================================================================================
                                           PRICE TO            UNDERWRITING           PROCEEDS TO
                                            PUBLIC              DISCOUNT(1)           COMPANY(2)
------------------------------------------------------------------------------------------------------
Per Share...........................           $                     $                     $
------------------------------------------------------------------------------------------------------
Total(3)............................           $                     $                     $
======================================================================================================
</TABLE>
 
(1) See "Underwriting" for information concerning indemnification of the
    Underwriters and other matters.
 
(2) Before deducting expenses payable by the Company estimated at $300,000.
 
(3) The Company and the Selling Shareholders have granted to the Underwriters a
    30-day option to purchase up to 133,000 and 17,000 additional shares of
    Common Stock, respectively, on the same terms and conditions set forth above
    solely to cover over-allotments, if any. If the Underwriters exercise this
    option in full, the Price to Public will total $          , the Underwriting
    Discount will total $          , the Proceeds to Company will total
    $          and the Proceeds to Selling Shareholders will total $          .
    See "Underwriting."
 
     The shares of Common Stock are offered by the several Underwriters named
herein, when, as and if delivered and accepted by the Underwriters and subject
to their right to reject any order in whole or in part. It is expected that the
delivery of the certificates representing such shares will be made against
payment therefor at the offices of Black & Company, Inc. on or about
  , 1998.
                            ------------------------
 
BLACK & COMPANY, INC.                              PACIFIC CREST SECURITIES INC.
               The date of this Prospectus is             , 1998.
<PAGE>   3
 
                        [COWLITZ FINANCIAL CENTER LOGO]
 
                    [PHOTOGRAPH OF COWLITZ FINANCIAL CENTER]
 
   
 THE COWLITZ FINANCIAL CENTER PROVIDES CUSTOMERS ONE-STOP ACCESS TO A COMPLETE
LINE OF COMMERCIAL AND PERSONAL FINANCIAL SERVICES INCLUDING TRADITIONAL BANKING
     TRUST MANAGEMENT, ESTATE PLANNING, INSURANCE AND SECURITIES BROKERAGE.
    
 
     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING
TRANSACTIONS IN SUCH SECURITY, AND THE IMPOSITION OF A PENALTY BID, IN
CONNECTION WITH THE OFFERING. SUCH TRANSACTIONS MAY BE EFFECTED IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
 
                                        2
<PAGE>   4
 
                                    SUMMARY
 
     The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, included elsewhere in this
Prospectus. Except as otherwise noted, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option and (ii) reflects
an adjustment for all stock splits to the date of this Prospectus. Unless the
context requires otherwise, references to the "Company" mean Cowlitz
Bancorporation and its wholly-owned subsidiary, The Cowlitz Bank (the "Bank").
 
THE COMPANY
 
   
     With its five full-service offices, the Company has the largest market
share of deposits among commercial banks in Cowlitz County, Washington, and is
the only community bank headquartered in the county. The Company has grown from
one branch with assets of $39.4 million, deposits of $31.0 million and
shareholders' equity of $2.5 million at January 1, 1992 to five branches with
assets of $173.3 million, deposits of $136.2 million and shareholders' equity of
$13.9 million at December 31, 1997. The Company emphasizes personal service and
customer relationships and believes that such emphasis is the primary reason for
its rapid growth. The Bank was formed in 1977 and became a wholly-owned
subsidiary of the Company in 1992. The Company was formed in 1991 to act as a
holding company for the Bank.
    
 
     The Company offers or makes available a broad range of financial services
to its customers, primarily small and medium-sized businesses, professionals and
retail customers. In addition to its normal commercial and personal banking
services, which include commercial and real estate lending, consumer lending,
mortgage origination and trust services, the Company has developed relationships
with a securities brokerage firm and an insurance agency with an estate planner
to provide its customers access to a variety of financial services which are
generally not available in community banks. In 1997, the Company established a
trust department to offer trust services to individuals, corporations and
institutions. It is the only such trust department located in Cowlitz County. By
combining its array of traditional commercial banking products with these
enhanced customer services, the Company is able to provide its customers with
similar banking services offered by its larger competitors while retaining the
character of a community bank and the level of personal service which larger
banks generally no longer provide.
 
     Based on reports of the Federal Home Loan Bank of Seattle ("FHLB"), at June
30, 1996, the Company held approximately 25% of the deposits in commercial banks
in Cowlitz County, which was the largest share of deposits of any commercial
bank. Since June 30, 1996, the Company has taken several steps to increase its
market share in Cowlitz County. Historically, the Company operated from one
location in Longview. In November 1996, the Company opened a de novo branch in
neighboring Kelso, Washington. Two recent acquisitions of competitors in Cowlitz
County presented the Company with additional opportunities for in-market growth.
In 1996, Wells Fargo Bank acquired First Interstate Bank, which was a principal
competitor of the Company. The Company successfully bid for three Wells Fargo
branches in Cowlitz County and acquired those branches in July 1997. In the
second half of 1997, U.S. Bank was acquired by First Bank, which has recently
announced its intention to close the U.S. Bank branch in Kelso, Washington,
creating additional opportunities for the Company. The Company is aggressively
marketing to its new customers from the former Wells Fargo branches as well as
the customers of U.S. Bank in Kelso. The Company is introducing its full array
of financial products to these new customers while emphasizing personal service
as a way of increasing its market share within its existing market area.
Management believes that the Company's historical growth and recent successful
expansion activities strongly position the Company to continue to increase its
market share in Cowlitz County and to expand into other similar markets.
 
                                        3
<PAGE>   5
 
     The Company's expansion since 1992 has been marked by the following
highlights:
 
   
<TABLE>
        <S>      <C> <C>
        1992     -   Arranged $2 million in long-term debt for capital infusion into Cowlitz
                     Bank
                 -   Increased assets by 85% to $73.1 million
                 -   Initiated quarterly dividends
                 -   Began relationship with Robert Thomas Securities
        1993     -   Increased earnings per share by 96% over prior year
        1994     -   Increased loans by 35% over prior year
                 -   Established mortgage department
                 -   Sold $2.2 million of common stock in Regulation A offering
        1995     -   Increased loans by 40% over prior year
        1996     -   Opened Kelso branch
                 -   Remodeled and expanded main branch to become the Cowlitz Financial Center
        1997     -   Acquired three Wells Fargo branches
                 -   Opened trust department
                 -   Began relationship with Commerce Business and Estate Services
</TABLE>
    
 
BUSINESS STRATEGY
 
     The Company's goal is to maintain its position as the leading community
based provider of financial services in Cowlitz County and to become one of the
leading community based providers of financial services in other selected areas
of Washington and Oregon. The Company's growth strategy is based on providing
both exceptional personal service and a wide range of financial services to its
customers. The Company's strategy consists of the following:
 
     - Emphasize personal service and develop strong community ties. Based on
       its experience, the Company believes that providing a high level of
       personal service and customer attention attracts and retains customers.
       The Company's employees work with specific customers on an individual,
       personalized basis. As a result of this level of customer attention, the
       Company believes that it can make business decisions regarding its
       customers more quickly and efficiently than its competitors. The
       Company's philosophy is that of a true community bank -- to provide the
       highest level of service to its communities. The Company's "outstanding"
       Community Reinvestment Act ("CRA") rating is evidence of its commitment
       to serve all the citizens in its communities. The Company believes that
       its intense focus on customer service coupled with its deep community
       relationships serve to differentiate the Company from its competitors.
 
     - Provide a broad range of financial products and services. The Company
       believes that offering a wide range of financial products and services is
       an important competitive factor. In addition to deposit and loan products
       typically offered by commercial banks, the Company has developed a real
       estate loan division to originate mortgage loans and has established a
       trust department. To execute this strategy, the Company has hired
       experienced personnel to market and deliver these services. The Company
       leases space in its main financial center to a securities brokerage firm
       and an insurance agency in order to provide its customers with access to
       a wider range of financial services. This combination of products and
       services is designed to both increase its customer base and to enhance
       cross-selling opportunities to its customer base.
 
     - Increase business volume in existing market. The Company believes there
       is an opportunity to increase its business volume in its existing market
       area by promoting its complete array of financial products as well as
       emphasizing personal service, especially in relationships with new
       customers obtained in the acquisition of the Wells Fargo branches and by
       establishing new customer relationships as a result of the announced
       closure of a U.S. Bank branch in Kelso. The Company believes that
       additional opportunities for growth exist in Cowlitz County as a result
       of new business entrants such as
 
                                        4
<PAGE>   6
 
       BHP Coated Steel, Prudential Steel and Foster Farms. The Company
       presently has the largest share of deposits held by commercial banks in
       Cowlitz County and believes that its reputation for a high level of
       personal service will help it attract new customers as the larger banks
       continue their consolidation and reduction of personal service to their
       customers.
 
     - Explore opportunities for regional expansion through acquisition. The
       Company intends to explore the acquisition of other community banks and
       branches of larger banks in non-metropolitan communities in Washington
       and Oregon. The Company intends to retain the local character of
       institutions which it acquires and to promote deposit and asset growth in
       the acquired institutions through implementation of its customer service
       policies and product offerings. Although the Company is not presently
       engaged in any acquisition discussions, it believes that such
       opportunities are available and that its ability to consummate such
       acquisitions will be enhanced by completion of this Offering and the
       creation of a public market for the Company's Common Stock.
 
     The Company was organized in 1991 under Washington law to become the
holding company for the Bank, a Washington state chartered bank that commenced
operations in 1978. The principal executive offices of the Company are located
at 927 Commerce Avenue, Longview, Washington 98632, and its telephone number is
(360) 423-9800.
 
                                  THE OFFERING
 
   
<TABLE>
<S>                                                       <C>
Common Stock offered by the Company.....................  1,000,000 Shares
Common Stock to be outstanding after the Offering.......  3,619,796 Shares
Use of proceeds.........................................  To repay approximately $1.1 million
                                                          of outstanding indebtedness, and to
                                                          use approximately $9.6 million to
                                                          increase the capital of the Company
                                                          and for future acquisitions.
Directed Shares.........................................  100,000 shares, or 10.0% of the
                                                          Offering, have been reserved for
                                                          existing shareholders, employees
                                                          and customers and, subject to
                                                          availability, other residents of
                                                          Cowlitz County, consistent with the
                                                          local orientation of the Company.
Proposed Nasdaq National Market symbol..................  CWLZ
</TABLE>
    
 
                                        5
<PAGE>   7
 
                                  RISK FACTORS
 
     This Prospectus contains certain forward-looking statements. Actual results
could differ materially from those projected in these forward-looking statements
as a result of certain of the risk factors set forth below and elsewhere in this
Prospectus. Prospective investors should carefully consider and evaluate all of
the information set forth in this Prospectus, including the Risk Factors set
forth below. This list of risk factors may not be exhaustive.
 
EXPOSURE TO LOCAL ECONOMY
 
     The Company's performance is materially dependent upon and sensitive to the
economy of its market area consisting of Cowlitz County and the surrounding
areas in southwest Washington and northwest Oregon. Adverse economic
developments may affect loan demand and the collectibility of existing loans,
and have a negative effect on the Company's earnings and financial condition.
Historically, the economy of Cowlitz County depended primarily on the forest
products industry. Particularly in the 1980s, the Company's market area
experienced high unemployment as a result of the reduction in forest products
manufacturing jobs. While the forest products industry is still the leading
employer in Cowlitz County, the economy is becoming more diverse as
manufacturers enter the region and tourism centered around Mount St. Helens
expands. Subsequent developments have reduced the dependence of the local
economy on forest products manufacturing and have increased the number of
non-manufacturing jobs. There can be no assurance that future economic changes
will not have a significant adverse effect on the Company. See
"Business -- Market Area."
 
ABILITY TO EXPAND OPERATIONS
 
     An important element of the Company's business strategy is to expand its
market area through acquisitions. The Company has not identified any specific
acquisition candidates. Although the Company has not acquired any whole banks in
the past, it successfully bid for and acquired three branches from Wells Fargo
Bank and believes it has successfully integrated those branches into its
operations. No assurance can be given that the Company will be able to enter
into and consummate any acquisitions or the timing of any acquisitions that may
occur. The rate of growth of the Company will be directly affected by its
ability to identify and consummate acquisitions. If the Company is not able to
consummate one or more acquisitions, it has no other current intended use for a
substantial portion of the offering proceeds, and pending application of those
proceeds, the Company's return on equity and earnings per share would be
adversely affected. No assurance can be given that such funds will be
effectively deployed in the future.
 
COMPETITION
 
   
     In recent years, competition for deposits and loans has intensified. Two
super-regional banks in the Company's market area have been acquired by even
larger banks, although one has sold branches to the Company and the other has
announced it is closing one of its branches in Cowlitz County. These
institutions have competitive advantages over the Company in that they may have
higher public visibility and are able to maintain advertising and marketing
activities on a much larger scale than the Company can economically sustain.
Single-borrower lending limits imposed by law are dependent on the capital of
the financial institution, giving branches of larger banks an additional
competitive advantage with respect to loan applications which are in excess of
the Company's legal lending limits. Furthermore, competition from outside the
traditional banking system from credit unions, investment banking firms,
insurance companies and related industries offering bank-like products has
increased the competition for deposits and loans. In the Company's primary
market area, credit unions held approximately 51% of local deposits as of June
30, 1996, the latest date for which information is available. See
"Business -- Competition."
    
 
CREDIT RISK
 
     The Company, like other lenders, is subject to credit risk, which is the
risk of losing principal and interest due to customers' failure to repay loans
in accordance with their terms. Although the Company has established lending
criteria and most loans are secured by collateral, a downturn in the economy or
the real
 
                                        6
<PAGE>   8
 
   
estate market in Cowlitz County or a rapid increase in interest rates could have
a negative effect on collateral values and borrowers' ability to repay. In
addition, seven of the Company's eleven loan officers were hired by the Company
within the last twelve months. Although these seven recent hires are experienced
loan officers, the Company's experience with these loan officers' underwriting
abilities is limited.
    
 
   
     At December 31, 1997, the Company's nonperforming assets were $2.4 million,
an increase of $1.8 million from December 31, 1996. This increase is primarily
due to management's decision to classify loans with four borrowers with an
aggregate principal balance of $1.2 million as nonperforming. Although
management believes that its allowance for loan losses at December 31, 1997 is
adequate, no assurance can be given that an additional provision for loan losses
will not be required. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Loans."
    
 
INTEREST RATE RISK
 
     The Company's earnings are largely derived from net interest income, which
is interest income and fees earned on loans and investment income, less interest
expense paid on deposits and other borrowings. Interest rates are highly
sensitive to many factors which are beyond the control of the Company's
management, including general economic conditions, and the policies of various
governmental and regulatory authorities. As interest rates change, net interest
income is affected. With fixed rate assets (such as fixed rate loans) and
liabilities (such as certificates of deposit), the effect on net interest income
depends on the maturity of the asset or liability. Although the Company strives
to minimize interest rate risk through asset/liability management policies, from
time to time maturities are not balanced. Further, while rates have remained
stable in recent periods, an unanticipated rapid decrease or increase in
interest rates could have an adverse effect on the spreads between the interest
rates earned on assets and the rates of interest paid on liabilities, and
therefore on the level of net interest income.
 
   
     The Company historically used borrowings from the FHLB and, to a lesser
extent, higher interest rate certificates of deposits, as a means of achieving
faster asset growth than would have been possible through normal deposit growth.
As a result of the acquisition of the Wells Fargo branches in July 1997, the
Company at December 31, 1997 had reduced its dependence on FHLB borrowings and
higher interest rate certificates of deposits. The Company may increase its use
of FHLB borrowings and higher interest rate certificates of deposit in the
future if circumstances warrant. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation."
    
 
DEPENDENCE ON KEY PERSONNEL
 
     The Company's success is dependent on the services of Benjamin Namatinia,
Chairman and Chief Executive Officer, and Charles W. Jarrett, President and
Chief Operating Officer. The loss of services of either of these executives, or
of certain other key officers, could adversely affect the Company. No assurance
can be given that replacement officers of comparable abilities could be found.
The Company maintains key person life insurance on these individuals. See
"Management."
 
OFFERING PRICE
 
     The price of the shares being offered hereby will be determined by
negotiation between the Company and the representative of the Underwriters.
There can be no assurance that the market will sustain the offering price or
that the offering price necessarily indicates the fair value of the Common
Stock. See "Underwriting."
 
LIMITED MARKET FOR THE SHARES
 
   
     Although shares of Common Stock are traded between shareholders from time
to time, there is currently no market for the Company's shares. The Company's
Common Stock is presently held by 289 holders of record. One effect of the
Offering will be to establish a more liquid market for the shares of current
shareholders of the Company. The Company's Common Stock has been approved for
quotation on the Nasdaq National Market but no assurances can be made that an
active public market will develop or be maintained for the shares. Moreover, the
market price could be subject to significant fluctuations in
    
 
                                        7
<PAGE>   9
 
response to variations in the Company's quarterly operating results, general
conditions of the banking industry and other factors. In addition, the price of
the shares may fluctuate substantially due to the effect of supply and demand in
a limited market. Even if an active market for the shares does develop,
investors in this Offering cannot be assured of being able to resell shares
purchased in the Offering at or above the offering price.
 
REGULATION
 
     The Company is subject to extensive regulations under federal and state
laws. These laws and regulations are intended primarily to protect depositors
and the deposit insurance fund, rather than shareholders. The Bank is a state
chartered commercial bank which is not a member of the Federal Reserve System
and is subject to primary regulation and supervision by the Director of
Financial Institutions of the State of Washington (the "Washington Director")
and by the Federal Deposit Insurance Corporation (the "FDIC"), which also
insures bank deposits. The Company is also subject to regulation and supervision
by the Board of Governors of the Federal Reserve System (the "Federal Reserve").
Federal and state regulations place banks at a competitive disadvantage compared
to less regulated competitors such as finance companies, credit unions, mortgage
banking companies and leasing companies. Although the Company has been able to
compete effectively in its market area in the past, there can be no assurance
that it will be able to continue to do so. Further, future changes in federal
and state banking regulations could adversely affect the Company's operating
results and ability to continue to compete effectively. See
"Business -- Regulation and Supervision."
 
   
CONTROL BY EXISTING SHAREHOLDERS
    
 
   
     After consummation of the Offering, officers and directors of the Company
and their families will beneficially own in the aggregate approximately 38% of
the outstanding Common Stock (down from approximately 47% prior to the
Offering). As a result of such ownership, these shareholders as a practical
matter will be able to control many matters requiring shareholder approval under
Washington law, including the election of directors.
    
 
ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
 
   
     The Board of Directors and the shareholders of the Company have adopted an
amendment to the Company's Articles of Incorporation which gives the Board of
Directors the authority to issue up to 5,000,000 shares of Preferred Stock and
to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without any further vote or action by
the shareholders. The rights of the holders of Common Stock may be subject to,
and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change of control of the
Company without further action by shareholders and may adversely affect the
voting and other rights of the holders of Common Stock. The Company has no
present plans to issue shares of Preferred Stock. See "Description of Capital
Stock."
    
 
                                        8
<PAGE>   10
 
                                USE OF PROCEEDS
 
     The net proceeds to the Company from the Offering, after deducting the
underwriting discount and estimated Offering expenses of $300,000, are estimated
to be $10,860,000 (approximately $12,344,280 if the Underwriters' over-allotment
option is exercised in full), based on the assumed initial public offering price
of $12.00 per share.
 
   
     The net cash proceeds of the Offering will be used to repay approximately
$1,000,000 of outstanding subordinated notes which bear interest at 8.5% per
annum, to repay approximately $146,000 of bank debt which currently bears
interest at 9.5% per annum, with the remaining approximately $9.6 million
available to increase the capital of the Company and the Bank in order to expand
its existing business and for future acquisitions. The Company is not presently
a party to any acquisition discussions or agreements. Initially, the Company
plans to invest the proceeds in money-market accounts at the Bank, which in turn
will invest the funds in short-term investment securities.
    
 
     In the event that the Underwriters' over-allotment option is exercised, up
to 17,000 shares will be sold for the account of the Selling Shareholders. The
Company will not receive any proceeds from the sale of Shares by the Selling
Shareholders.
 
                                DIVIDEND POLICY
 
     The Company has paid the following annual amounts on a per share basis as
dividends to its shareholders since 1993:
 
<TABLE>
<CAPTION>
                                        YEAR                              AMOUNT
            ------------------------------------------------------------  ------
            <S>                                                           <C>
            1993........................................................  $.029
            1994........................................................   .029
            1995........................................................   .033
            1996........................................................   .039
            1997........................................................   .048
</TABLE>
 
     The Board of Directors' dividend policy is to review the Company's
financial performance, capital adequacy, regulatory compliance and cash
resources, and if such review is favorable, to declare and pay a cash dividend
to shareholders quarterly. Although the Company anticipates payment of a regular
quarterly cash dividend, future dividends are subject to these limitations and
to the discretion of the Board of Directors, and could be reduced or eliminated.
The Company's ability to pay cash dividends to its shareholders is dependent on
earnings generated by the Bank. Washington and federal banking laws and
regulations place restrictions on the payment of dividends by a bank to its
shareholders. See "Business -- Regulation and Supervision."
 
                                        9
<PAGE>   11
 
                                 CAPITALIZATION
 
   
     The following table sets forth, as of December 31, 1997, the total
capitalization of the Company on an actual basis and as adjusted to give effect
to the sale of Common Stock offered by the Company at an assumed initial public
offering price of $12.00 per share and the application of the estimated net
proceeds to the Company therefrom. This table should be read in conjunction with
the historical financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. See "Use of Proceeds" and "Selected
Historical Financial Information and Other Data."
    
 
   
<TABLE>
<CAPTION>
                                                                            AS OF DECEMBER 31,
                                                                                   1997
                                                                           --------------------
                                                                                          AS
                                                                           ACTUAL      ADJUSTED
                                                                           -------     --------
                                                                               (DOLLARS IN
                                                                                THOUSANDS)
<S>                                                                        <C>         <C>
Shareholders' equity:
  Preferred Stock, no par value; no shares authorized; no shares issued
     and outstanding or as adjusted......................................  $    --     $     --
  Common Stock, no par value; 3,937,500 shares
     authorized; 2,604,543 shares issued and
     outstanding; 3,604,543 shares issued and
     outstanding as adjusted(1)..........................................    3,262       14,122
  Additional paid-in capital.............................................    1,538        1,538
  Net unrealized gain on available-for-sale securities...................       16           16
  Retained earnings......................................................    9,071        9,071
                                                                           -------      -------
  Total shareholders' equity.............................................  $13,887     $ 24,747
                                                                           =======      =======
Capital ratios(2):
  Tier 1 capital ratio
  (Regulatory minimum: 4.00%)............................................     9.61%       17.97%
  Total risk-based capital ratio
  (Regulatory minimum: 8.00%)............................................    11.34%       19.70%
  Leverage capital ratio
  (General regulatory minimum: 4.00-5.00%)...............................     6.86%       12.31%
</TABLE>
    
 
---------------
 
(1) Does not include 525,000 shares of Common Stock authorized for issuance
    under the Company's stock option plan. See "Management -- 1997 Stock Option
    Plan."
 
(2) Minimum ratios for the Company are established by Federal Reserve
    regulations. See "Business -- Regulation and Supervision."
 
                                       10
<PAGE>   12
 
                                    DILUTION
 
   
     The net tangible book value of the Company at December 31, 1997 was
approximately $12.0 million, or $4.62 per share of Common Stock. Net tangible
book value per share represents the Company's total tangible assets less its
total liabilities, divided by the total number of outstanding shares of Common
Stock. After giving effect to the sale of 1,000,000 shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$12.00 per share and the application of the estimated net proceeds therefrom,
the pro forma net tangible book value of the Company at December 31, 1997 would
have been approximately $22.9 million or $6.35 per share of Common Stock. This
represents an immediate increase in such net tangible book value of $1.73 per
share to the existing shareholders of the Company and an immediate dilution in
net tangible book value of $5.65 per share to purchasers of Common Stock in the
Offering. The following table illustrates this dilution on a per share basis:
    
 
   
<TABLE>
    <S>                                                                     <C>     <C>
    Assumed initial public offering price per share.......................          $12.00
         Net tangible book value per share before the Offering............  $4.62
         Increase per share attributable to new investors.................   1.73
                                                                            -----
    Pro forma net tangible book value per share after the Offering........            6.35
                                                                                    ------
    Dilution per share to new investors...................................          $ 5.65
                                                                                    ======
</TABLE>
    
 
   
     The following table sets forth, as of December 31, 1997, the number of
shares of Common Stock purchased, the total consideration paid therefor and the
average price paid per share by the existing shareholders of the Company and the
purchasers of Common Stock in the Offering, at an assumed initial public
offering price of $12.00 per share (before deducting the estimated underwriting
discount and offering expenses payable by the Company). The following table does
not include 133,000 shares of Common Stock which the Underwriters may purchase
from the Company pursuant to their over-allotment option. See "Underwriting."
    
 
   
<TABLE>
<CAPTION>
                                                                                TOTAL
                                                     SHARES PURCHASED       CONSIDERATION      AVERAGE
                                                   --------------------   -----------------     PRICE
                                                    NUMBER     PERCENT    AMOUNT    PERCENT   PER SHARE
                                                   ---------   --------   -------   -------   ---------
<S>                                                <C>         <C>        <C>       <C>       <C>
Existing shareholders............................  2,604,543      72.3%   $ 4,801      28.6%   $  1.84
New investors(1).................................  1,000,000      27.7     12,000      71.4    $ 12.00
                                                   ---------     -----    -------     -----
  Total..........................................  3,604,543     100.0%   $16,801     100.0%   $  4.66
                                                   =========     =====    =======     =====
</TABLE>
    
 
---------------
 
(1) Purchasers of Common Stock in the Offering.
 
                                       11
<PAGE>   13
 
            SELECTED HISTORICAL FINANCIAL INFORMATION AND OTHER DATA
 
   
     The following table sets forth certain information concerning the
consolidated financial condition, operating results, and key operating ratios
for the Company at the dates and for the periods indicated. This information
does not purport to be complete, and should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and the Consolidated Financial Statements of the Company and Notes
thereto included in this Prospectus.
    
 
   
<TABLE>
<CAPTION>
                                                                                  YEAR ENDED DECEMBER 31,
                                                           ----------------------------------------------------------------------
                                                              1993           1994           1995           1996           1997
                                                           ----------     ----------     ----------     ----------     ----------
                                                           (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                        <C>            <C>            <C>            <C>            <C>
INCOME STATEMENT DATA
Interest income..........................................  $    6,015     $    7,492     $   10,644     $   13,633     $   15,086
Interest expense.........................................       2,720          2,841          4,548          6,174          6,943
                                                           ----------     ----------     ----------     ----------     ----------
Net interest income......................................       3,295          4,651          6,096          7,459          8,143
Provision for loan loss..................................         310            533            694            281            375
                                                           ----------     ----------     ----------     ----------     ----------
Net interest income after provision for loan loss........       2,985          4,118          5,402          7,178          7,768
Non-interest income......................................         449            287            877            296            749
Non-interest expense.....................................       2,016          2,363          3,093          3,682          5,284
                                                           ----------     ----------     ----------     ----------     ----------
Income before provision for income taxes.................       1,418          2,042          3,186          3,792          3,233
Provision for income taxes...............................         442            697          1,088          1,295          1,109
                                                           ----------     ----------     ----------     ----------     ----------
Net income...............................................  $      976     $    1,345     $    2,098     $    2,497     $    2,124
                                                           ==========     ==========     ==========     ==========     ==========
DIVIDENDS
Cash.....................................................  $       49     $       49     $       80     $      101     $      126
Ratio of dividends to net income.........................        5.02%          3.64%          3.81%          4.04%          5.93%
PER SHARE DATA(1)
Diluted earnings per share...............................  $     0.51     $     0.70     $     0.77     $     0.90     $     0.76
Cash dividends per common share..........................  $     0.03     $     0.03     $     0.03     $     0.04     $     0.05
Weighted average shares outstanding......................   1,925,399      1,925,399      2,714,074      2,788,365      2,796,906
BALANCE SHEET DATA (AT PERIOD END)
Investment securities....................................  $    6,726     $    3,565     $    3,263     $    5,391     $    8,481
Trading assets...........................................       3,986          2,781          2,016             --             --
Loans, net...............................................      55,887         75,564        105,900        124,657        129,993
Total assets.............................................      76,383         94,728        131,348        159,157        173,293
Total deposits...........................................      64,340         81,083        106,371        123,297        136,209
Total short-term borrowings..............................       4,525          1,350          2,625            550            725
Total long-term borrowings...............................       3,255          6,811         12,393         22,842         21,900
Total shareholders' equity...............................       3,886          5,182          9,391         11,813         13,887
SELECTED RATIOS
Return on average total assets...........................        1.26%          1.57%          1.90%          1.75%          1.28%
Return on average shareholders' equity...................       28.93%         30.21%         26.06%         23.93%         16.65%
Net interest margin......................................        4.67%          5.94%          5.91%          5.56%          5.33%
Efficiency ratio(2)......................................       53.85%         47.85%         44.36%         47.48%         59.42%
ASSET QUALITY RATIOS
Allowance for loan losses to:
  Ending total loans.....................................        1.33%          1.50%          1.64%          1.50%          1.49%
  Nonperforming assets(3)................................    1,831.71%        548.57%        540.80%        328.82%         81.51%
Nonperforming assets to ending total assets..............        0.05%          0.22%          0.25%          0.36%          1.39%
Net loan charge-offs to average loans....................        0.31%          0.20%          0.09%          0.13%          0.23%
CAPITAL RATIOS
Average shareholders' equity to average assets...........        4.36%          5.21%          7.30%          7.31%          7.69%
Tier 1 capital ratio(4)..................................        7.80%          7.68%          9.86%         10.11%          9.61%
Total risk based capital ratio(5)........................       11.06%         10.42%         11.96%         11.88%         11.34%
</TABLE>
    
 
---------------
 
   
(1) Per share data has been adjusted to reflect all stock dividends and stock
    splits to the date of the Prospectus. The Company had a 5 for 1 stock split
    effective on October 17, 1997 and a 3.5 for 1 stock split effective on
    January 12, 1998.
    
 
   
(2) Efficiency ratio is noninterest expense divided by the sum of net interest
    income plus noninterest income.
    
 
   
(3) Nonperforming assets consist of nonaccrual loans, loans contractually past
    due 90 days or more and other real estate owned.
    
 
   
(4) Tier 1 capital divided by risk-weighted assets.
    
 
   
(5) Total risk-based capital divided by risk-weighted assets.
    
 
                                       12
<PAGE>   14
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following Management's Discussion and Analysis of Financial Condition
and Results of Operations includes a discussion of certain significant business
trends and uncertainties as well as other forward-looking statements and is
intended to be read in conjunction with and is qualified in its entirety by
reference to the consolidated financial statements of the Company and
accompanying notes included elsewhere in this Prospectus. For a discussion of
important factors that could cause actual results to differ materially from such
forward-looking statements, see "Risk Factors."
 
INTRODUCTION
 
   
     The Company has grown from assets of $39.4 million and deposits of $31.0
million at January 1, 1992 to assets of $173.3 million and deposits of $136.2
million at December 31, 1997. Until November 1996, the Company had only one
location in Longview, Washington. The Company has operated very efficiently
during this period of rapid growth, in part due to operating from one location.
    
 
   
     The Company has recently undertaken significant business changes to
strengthen its position as the leading bank in Cowlitz County. Beginning in
November 1996, the Company expanded its operating base by opening a branch in
Kelso, Washington. In July 1997, the Company acquired three Wells Fargo Bank
branches, located in Castle Rock, Kalama and Longview, Washington (the "Branch
Acquisition"). In this acquisition, the Company acquired the branch sites,
retained the existing employees and assumed approximately $25.2 million in
deposit liabilities, but did not acquire any loans or other revenue producing
assets. During 1997, the Company also established a trust department at its main
office in Longview. As a result of the recent expansion of the Company and the
associated increased staff costs and amortization of the core deposit premium
from the Branch Acquisition, non-interest expense for the year ended 1997 is
substantially higher as a percentage of revenue than in prior periods. Although
the higher non-interest expense is partially offset by a lower cost of funds due
to increased deposits resulting from the establishment and acquisition of
branches, diluted earnings per share are lower for 1997 than for 1996. In
addition, certain of the Company's performance ratios, such as ROE and return on
assets ("ROA"), are lower in 1997 than in prior years as a result of the
investment of cash received in the Branch Acquisition in lower yielding
short-term investments pending utilization of these funds by the Company,
coupled with the increased noninterest expense described above. As a result of
the Branch Acquisition, however, the Company's reliance on borrowings from the
FHLB has decreased from 14.5% of total liabilities at December 31, 1996 to 12.9%
of total liabilities at December 31, 1997.
    
 
RESULTS OF OPERATIONS
 
     NET INTEREST INCOME
 
     For financial institutions, 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. 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. Net interest margin is the ratio of net interest
income to total interest-earning assets and is influenced by the level and
relative mix of interest-earning assets and interest-bearing liabilities.
 
   
     Net interest income for the year ended December 31, 1997 was $8.1 million,
which was an increase of 9.2% from $7.5 million in 1996, which was $1.4 million
higher than 1995. The year to year increase was due primarily to the increase in
average earning assets during each year, the largest component of which was an
increase in the volume of loans. The overall tax-equivalent earning asset yield
was 9.87% in 1997 compared to 10.16% in 1996 and 10.31% in 1995. During the same
periods, average yields on loans were 10.51% in 1997, 10.69% in 1996 and 10.86%
in 1995. The lower yields were primarily attributable to lower interest rates on
loans due to current market conditions and increased competition for loans in
the Company's market area.
    
 
                                       13
<PAGE>   15
 
   
     Interest expense as a percentage of earning assets decreased to 4.54% in
1997, compared to 4.60% in 1996 and 4.41% in 1995. The average cost of interest
bearing liabilities declined to 5.30% for the year ended December 31, 1997
compared to 5.35% for 1996 and 5.21% for 1995. The Company did not aggressively
price certain higher interest rate certificates of deposit following the Branch
Acquisition. The net interest spread decreased to 4.57% for the year ended
December 31, 1997 from 4.81% for the year ended December 31, 1996 and 5.10% for
the year ended December 31, 1995. Local competitive pricing conditions and
funding needs for the Company's investments and loans were the primary
determinants of rates paid for deposits during 1997, 1996 and 1995.
    
 
     Average Balances and Average Rates Earned and Paid. The following table
sets forth, for the periods indicated, information with regard to (i) average
balances of assets and liabilities, (ii) the total dollar amounts of interest
income on interest earning assets and interest expense on interest bearing
liabilities, (iii) resulting yields or costs, (iv) net interest income and (v)
net interest spread. Nonaccrual loans have been included in the tables as loans
carrying a zero yield. Loan fees are recognized as income using the interest
method over the life of the loan.
 
   
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
               ------------------------------------------------------------------------------------------------------------------
                               1995                                   1996                                   1997
               ------------------------------------   ------------------------------------   ------------------------------------
                 AVERAGE                                AVERAGE                                AVERAGE
               OUTSTANDING   INTEREST                 OUTSTANDING   INTEREST                 OUTSTANDING   INTEREST
                 BALANCE    EARNED/PAID  YIELD/RATE     BALANCE    EARNED/PAID  YIELD/RATE     BALANCE    EARNED/PAID  YIELD/RATE
               -----------  -----------  ----------   -----------  -----------  ----------   -----------  -----------  ----------
                                                             (DOLLARS IN THOUSANDS)
<S>            <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>          <C>
ASSETS:
Loans.........  $  91,616     $ 9,954       10.86%     $ 118,957     $12,721       10.69%     $ 130,362     $13,700       10.51%
Taxable
 securities...      5,570         269        4.83%         6,890         386        5.60%        10,261         577        5.62%
Nontaxable
securities(1)...         42         5       11.90%            36           3        8.33%            --          --        0.00%
Trading
  assets......      2,454         129        5.26%           589          34        5.77%            --          --        0.00%
Federal funds
  sold........         23          --        0.00%            --          --        0.00%            --          --        0.00%
Interest
  earning
  balances due
  from
  banks.......      3,534         289        8.18%         7,777         490        6.30%        12,259         809        6.60%
                 --------     -------                   --------     -------                    -------      ------
  Total
    interest
    earning
    assets....  $ 103,239     $10,646       10.31%     $ 134,249     $13,634       10.16%     $ 152,882     $15,086        9.87%
Cash and due
  from
  banks.......      5,728                                  6,021                                  7,553
Premises and
  equipment,
  net.........      1,696                                  2,309                                  5,064
Allowance for
  loan
  losses......     (1,399)                                (1,801)                                (1,935)
Net
Intangibles...                                                                                      580
Other
  assets......      1,010                                  1,861                                  1,846
                 --------                               --------                                -------
  Total
    assets....  $ 110,274                              $ 142,639                              $ 165,990
                 ========                               ========                                =======
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings and
interest-bearing
  demand
  deposits....  $  31,215     $ 1,061        3.40%     $  30,834     $ 1,031        3.34%     $  37,568     $ 1,253        3.34%
Certificates
  of
  deposit.....     43,521       2,657        6.11%        64,863       3,960        6.11%        70,641       4,246        6.01%
Long-term
 borrowings...      9,186         653        7.11%        17,315       1,073        6.20%        21,773       1,401        6.43%
Short-term
 borrowings...      3,418         177        5.18%         2,359         110        4.66%           955          43        4.50%
                 --------     -------                   --------     -------                    -------      ------
  Total
  interest-bearing
    liabilities...  $  87,340   $ 4,548      5.21%     $ 115,371     $ 6,174        5.35%     $ 130,937     $ 6,943        5.30%
Non-interest
  bearing
  deposits....     14,396                                 16,196                                 21,621
Other
liabilities...        488                                    639                                    675
                 --------                               --------                                -------
  Total
liabilities...    102,224                                132,206                                153,233
Shareholders'
  equity......      8,050                                 10,433                                 12,757
                 --------                               --------                                -------
  Total
   liabilities
    and
 shareholders'
    equity....  $ 110,274                              $ 142,639                              $ 165,990
                 ========                               ========                                =======
Net interest
  income......                $ 6,098                                $ 7,460                                $ 8,143
                              =======                                =======                                 ======
Net interest
  spread......                               5.10%                                  4.81%                                  4.57%
Average yield
  on earning
  assets......                              10.31%                                 10.16%                                  9.87%
Interest
  expense to
  earning
  assets......                               4.41%                                  4.60%                                  4.54%
Net interest
  income to
  earning
  assets......                               5.91%                                  5.56%                                  5.33%
</TABLE>
    
 
---------------
 
(1) Interest earned on nontaxable securities has been computed on a 34 percent
    tax equivalent basis.
 
                                       14
<PAGE>   16
 
     Analysis of Changes in Interest Differential. The following table shows the
dollar amount of the increase (decrease) in the Company's net interest income
and expense and attributes such dollar amounts to changes in volume as well as
changes in rates. Rate/volume variance have been allocated to volume changes:
 
   
<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                      ----------------------------------------------------------------
                                            1996 VERSUS 1995                   1997 VERSUS 1996
                                      -----------------------------     ------------------------------
                                         INCREASE                           INCREASE
                                      (DECREASE) DUE                     (DECREASE) DUE
                                            TO             TOTAL               TO             TOTAL
                                      ---------------    INCREASE/      ----------------    INCREASE/
                                      VOLUME    RATE     (DECREASE)     VOLUME     RATE     (DECREASE)
                                      ------    -----    ----------     ------     -----    ----------
                                                           (DOLLARS IN THOUSANDS)
<S>                                   <C>       <C>      <C>            <C>        <C>      <C>
Interest income:
  Interest earning balances due from
     banks........................... $  267    $ (66)     $  201       $  296     $  23      $  319
  Trading account income.............   (108)      13         (95)         (34)       --         (34)
Investment security income:
  Taxable securities.................     74       43         117          190         1         191
  Nontaxable securities(1)...........     (1)      (1)         (2)          (3)       --          (3)
  Loans, including fees on loans.....  2,923     (156)      2,767        1,193      (214)        979
                                      ------    -----      ------       ------     -----      ------
          Total interest income(1)...  3,155     (167)      2,988        1,642      (190)      1,452
                                      ------    -----      ------       ------     -----      ------
Interest expense:
  Savings and interest bearing
     demand..........................    (11)     (19)        (30)         222        --         222
  Certificates of deposit............  1,303       --       1,303          351       (65)        286
  Short-term borrowings..............    (49)     (18)        (67)         (63)       (4)        (67)
  Long-term borrowings...............    504      (84)        420          288        40         328
                                      ------    -----      ------       ------     -----      ------
          Total interest expense.....  1,747     (121)      1,626          798       (29)        769
                                      ------    -----      ------       ------     -----      ------
Net interest spread(1)............... $1,408    $ (46)     $1,362       $  844     $(161)     $  683
                                      ======    =====      ======       ======     =====      ======
</TABLE>
    
 
---------------
 
(1) Interest earned on nontaxable securities has been computed on a 34 percent
    tax equivalent basis.
 
     PROVISION FOR LOAN LOSSES
 
   
     The Company's provision for loan losses was $375,000 for the year ended
December 31, 1997, which increased the allowance for loan losses to $2.0 million
compared to $1.9 million at December 31, 1996 and $1.8 million at December 31,
1995. The provision for loan losses was higher in 1997 than in 1996 due to
increased growth in the loan portfolio and increased levels of net charge-offs
and nonperforming assets in 1997. The Company's ratio of allowance for loan
losses to total loans was 1.49% at December 31, 1997, 1.50% at December 31, 1996
and 1.64% at December 31, 1995. See "-- Financial Condition -- loans."
    
 
   
     Recoveries have been minimal over the past three-year period. Net
chargeoffs for 1997 were approximately $299,000 which compares to net
charge-offs of approximately $150,000 in 1996 and $83,000 in 1995. At December
31, 1997 nonaccrual loans totaled $1.9 million compared to $407,000 at December
31, 1996 and $237,000 at December 31, 1995. The increase in nonaccrual loans
from 1996 to 1997 is primarily the result of loans to four borrowers with an
aggregate principal balance of $1.2 million going on nonaccrual status. When a
provision for loan losses is recorded, the amount is based on past charge-off
experience, a careful analysis of the current portfolio, and evaluation of
future economic trends in the Company's market area. Management continues to
closely monitor the loan quality of new and existing relationships.
    
 
     NON-INTEREST INCOME
 
   
     Non-interest income, primarily consisting of service charges and related
fees, has ranged from $749,000 in 1997 to $296,000 for 1996 and $877,000 for
1995. Service charges on deposit accounts increased to $563,000 for 1997,
compared to $387,000 for 1996 and $367,000 for 1995, largely as a result of an
increase in the amount of deposits. The differences in income between periods
primarily reflects the results of the Company's trading account which had a gain
of $258,000 in 1995 and a loss of $309,000 in 1996. The Company did not conduct
any trading activity during 1997. The loss and gain were due primarily to the
volatility of interest rates during these periods.
    
 
                                       15
<PAGE>   17
 
     NON-INTEREST EXPENSE
 
   
     Non-interest expense consists principally of employees' salaries and
benefits, occupancy costs, data processing and communication expenses, FDIC
insurance premiums, professional fees, and other non-interest expenses.
Non-interest expense increased 43.5% to $5.3 million for the year ended December
31, 1997 compared to $3.7 million for the year ended December 31, 1996,
primarily due to staffing costs, as well as increases in other operating costs
such as occupancy expense and amortization of the deposit premium from the
Branch Acquisition in July 1997. Non-interest expense increased $589,000 or
19.0% to $3.7 million for the year ended December 31, 1996 from $3.1 million for
the year ended December 31, 1995. The increase is primarily attributable to an
increase in staff costs due to the opening of a new branch in Kelso in November
1996 which required hiring additional employees beginning in April 1996.
    
 
   
     A measure of the Company's ability to contain non-interest expenses is the
efficiency ratio. This statistic is derived by dividing total non-interest
expenses by total net interest income and non-interest income. The Company's
efficiency ratio increased to 59.42% for the year ended December 31, 1997
compared to 47.48% for the corresponding period of 1996 and 44.36% for the year
ended December 31, 1995, largely as a result of the Company's expansion
activities in late 1996 and in 1997.
    
 
   
     Salaries and benefits expense of $2.8 million in 1997 represented an
increase of $641,000 from the $2.1 million reported in 1996 which was $428,000
or 25.0% higher than the $1.7 million reported in 1995. At December 31, 1997,
the Company had 99 full-time equivalent employees compared to 63 and 54 at
December 31, 1996 and 1995, respectively.
    
 
   
     Net occupancy expenses consist of depreciation on premises, lease costs and
equipment, maintenance and repair expenses, utilities and related expenses. The
Company's net occupancy expense in 1997 of $724,000 was $331,000 or 84.2% higher
than the $393,000 reported in 1996, which was $83,000 or 26.8% higher than the
$310,000 reported in 1995. The increase in occupancy expense in 1997 and 1996
was due primarily to an expansion of the Company's main office facility in
Longview and the opening of a branch in Kelso and the addition of three branches
in the Branch Acquisition.
    
 
     INCOME TAXES
 
   
     The provision for income taxes amounted to $1.1 million, $1.3 million, and
$1.1 million for 1997, 1996, and 1995, respectively. The provision resulted in
an effective tax rate of 34.3% in 1997, 34.2% in 1996 and of 34.1% in 1995.
    
 
     LOAN LOSSES AND RECOVERIES
 
   
     Management recorded a provision for loan losses of $375,000 in 1997 to
support loan portfolio growth. At December 31, 1997, management considered the
allowance for loan losses of $2.0 million sufficient to absorb possible losses
on loans which may become uncollectible based on evaluations by management.
    
 
   
     The amount of the allowance for loan losses is assessed by management on a
regular basis to ensure that it is sufficient to cover potential future loan
losses. Percentages are assigned for each class of specifically identified
problem loans and then combined with an assessment of the balance of the loan
portfolio based upon historical charge-off experience to arrive at a minimum,
midpoint, and maximum range of potential loss in evaluating the adequacy of the
allowance for loan losses. The allowance balance and amount of provision charged
to operations is based primarily on management's evaluation of the entire
portfolio. This analysis includes review of the following factors: (a) the
volume and mix of the existing loan portfolio, including the volume and severity
of nonperforming loans and adversely classified credits, as well as analysis of
net charge-offs experienced on previously classified loans; (b) the extent to
which loan renewals and extensions are used to maintain loans on a current basis
and the degree of risk associated with such loans; (c) the nature and value of
the collateral securing a loan; (d) the trend in loan growth, including any
rapid increase in loan volume within a relatively short period of time; (e)
general and local economic conditions affecting the collectibility of the
Company's loans; (f) the relationship and trend over the past several years of
recoveries as a percentage of previous years' charge-offs; and (g) available
outside information of a comparable nature regarding the loan portfolios of
other banks, including peer group banks.
    
 
                                       16
<PAGE>   18
 
     The following table shows the Company's loan loss performance for the
periods indicated:
 
   
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31,
                                                             ----------------------------------
                                                               1995         1996         1997
                                                             --------     --------     --------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                                          <C>          <C>          <C>
Loans outstanding at end of period.........................  $107,633     $126,551     $131,963
Average loans outstanding during the period................  $ 91,616     $118,957     $130,362
Allowance for loan losses, beginning of period.............  $  1,152     $  1,763     $  1,894
Loans charged off:
  Commercial...............................................         5           36          186
  Real estate..............................................        --           30            3
  Consumer.................................................         9           22           23
  Credit cards.............................................        99           70          112
                                                             --------     --------     --------
     Total loans charged-off...............................       113          158          324
                                                             --------     --------     --------
Recoveries:
  Commercial...............................................        24            5            5
  Real estate..............................................        --           --           --
  Consumer.................................................         2            1           20
  Credit cards.............................................         4            2           --
                                                             --------     --------     --------
     Total recoveries......................................        30            8           25
                                                             --------     --------     --------
Provision for loan losses..................................       694          281          375
                                                             --------     --------     --------
Allowance for loan losses, end of period...................  $  1,763     $  1,894     $  1,970
                                                             ========     ========     ========
Ratio of net loans charged-off to average loans
  outstanding..............................................      0.12%        0.13%        0.25%
Ratio of allowance for loan losses to loans at year end....      1.64%        1.50%        1.49%
</TABLE>
    
 
FINANCIAL CONDITION
 
                             SUMMARY BALANCE SHEETS
 
   
<TABLE>
<CAPTION>
                                                DECEMBER 31,
                                       ------------------------------
                                         1995       1996       1997
                                       --------   --------   --------                INCREASE (DECREASE)
                                                                        ---------------------------------------------
                                                                          12/31/95-12/31/96       12/31/96-12/31/97
                                                                        ---------------------    --------------------
                                                                        (DOLLARS)   (PERCENT)    (DOLLARS)  (PERCENT)
                                                                   (DOLLARS IN THOUSANDS)
<S>                                    <C>        <C>        <C>        <C>         <C>          <C>        <C>
ASSETS
  Cash and due from banks............  $ 14,702   $ 20,905   $ 23,109    $ 6,203        42.2%     $ 2,204       10.5%
  Investment securities..............     3,263      5,391      8,481      2,128        65.2%       3,090       57.3%
  Trading assets.....................     2,016         --         --     (2,016)     (100.0)%         --         --
  Loans, net.........................   105,900    124,657    129,993     18,757        17.7%       5,336        4.3%
  Other assets.......................     5,467      8,204     11,710      2,737        50.1%       3,506       42.7%
                                       --------   --------   --------    -------                 --------
    Total assets.....................  $131,348   $159,157   $173,293    $27,809        21.2%     $14,136        8.9%
                                       ========   ========   ========    =======                 ========
LIABILITIES
  Non-interest-bearing
    deposits.........................  $ 17,099   $ 16,821   $ 27,141    $  (278)       (1.6)%    $10,320       61.4%
  Interest-bearing deposits..........    89,272    106,476    109,068     17,204        19.3%       2,592        2.4%
  Total deposits.....................   106,371    123,297    136,209     16,926        15.9%      12,912       10.5%
  Other liabilities..................    15,586     24,047     23,197      8,461        54.3%        (850)      (3.5)%
SHAREHOLDERS' EQUITY.................     9,391     11,813     13,887      2,422        25.8%       2,074       17.6%
                                       --------   --------   --------    -------                 --------
  Total liabilities and shareholders'
    equity...........................  $131,348   $159,157   $173,293    $27,809        21.2%     $14,136        8.9%
                                       ========   ========   ========    =======                 ========
</TABLE>
    
 
                                       17
<PAGE>   19
 
     INVESTMENT SECURITIES
 
   
     At December 31, 1997, the Company's portfolio of investment securities
totaled $8.5 million, a 57.3% increase when compared to a securities portfolio
of $5.4 million at December 31, 1996. Investment in FHLB stock was $2.7 million
at December 31, 1997.
    
 
   
     Investment securities held at December 31, 1996, totaled $5.4 million
representing a 65.2% increase when compared to $3.3 million at December 31,
1995. At December 31, 1995, the Company held $2.0 million of trading assets. The
Company ceased its trading activities during 1996 and had no trading assets at
December 31, 1997 and 1996.
    
 
   
     The Company follows a financial accounting principle which requires the
identification of investment securities as held-to-maturity, available-for-sale
or trading assets. Securities designated as held-to-maturity are those that the
Company has the intent and ability to hold until they mature or are called.
Available-for-sale securities are those that management may sell if liquidity
requirements dictate or alternative investment opportunities arise. Trading
assets are purchased and held principally for the purpose of reselling them
within a short period of time. The mix of available-for-sale and
held-to-maturity investment securities is considered in the context of the
Company's overall asset-liability policy and illustrates management's assessment
of the relative liquidity of the Company. At December 31, 1997, the investment
portfolio consisted of 47.4% available-for-sale securities and 52.6%
held-to-maturity investments. At December 31, 1996, available-for-sale
securities were 37.3% and held-to-maturity investments were 62.7% of the
investment portfolio. At December 31, 1995, the Company had 100%
held-to-maturity investments. See Note 2 to the Consolidated Financial
Statements.
    
 
   
     At December 31, 1997, the Company's investment portfolio had total net
unrealized gains of approximately $46,000. This compares to net unrealized gains
of approximately $18,000 at December 31, 1996, and $38,000 at December 31, 1995.
Unrealized gains and losses reflect changes in market conditions and do not
represent the amount of actual profits or losses the Company may ultimately
realize. Actual realized gains and losses occur at the time investment
securities are sold or redeemed.
    
 
   
     In 1991, the Company became a member and shareholder in the Federal Home
Loan Bank of Seattle. The Company's relationship and stock investment with the
FHLB provides a borrowing source for meeting liquidity requirements, in addition
to dividend earnings.
    
 
   
     The following table provides the book value of the Company's portfolio of
investment securities as of December 31, 1995, 1996 and 1997:
    
 
   
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                          --------------------------------------------------------------
                                                 1995                 1996                   1997
                                          ------------------   ------------------     ------------------
                                          AMORTIZED    FAIR    AMORTIZED    FAIR      AMORTIZED    FAIR
                                            COST      VALUE      COST      VALUE        COST      VALUE
                                          ---------   ------   ---------   ------     ---------   ------
                                                              (DOLLARS IN THOUSANDS)
<S>                                       <C>         <C>      <C>         <C>        <C>         <C>
AVAILABLE-FOR-SALE
U.S. Treasury securities................   $    --    $   --    $ 2,001    $2,011      $ 3,993    $4,017
                                            ------    ------     ------    ------       ------    ------
          Total.........................   $    --    $   --    $ 2,001    $2,011      $ 3,993    $4,017
                                            ======    ======     ======    ======       ======    ======
HELD-TO-MATURITY
U.S. Treasury securities................   $ 1,996    $2,034    $ 1,998    $2,006      $ 2,978    $3,000
Municipal bond..........................        80        80         --        --           --        --
Certificates of deposit.................     1,187     1,187      1,382     1,382        1,486     1,486
                                            ------    ------     ------    ------       ------    ------
          Total.........................   $ 3,263    $3,301    $ 3,380    $3,388      $ 4,464    $4,486
                                            ======    ======     ======    ======       ======    ======
</TABLE>
    
 
   
     At December 31, 1997, net unrealized gains on available-for-sale securities
were $24,000 representing .28% of the total portfolio. Management has no current
plans to sell any of these securities.
    
 
                                       18
<PAGE>   20
 
   
     The following table summarizes the contractual maturities and weighted
average yields of investment securities at December 31, 1997:
    
 
   
<TABLE>
<CAPTION>
                                                                                DUE
                                                              ONE             THROUGH
                                         ONE YEAR           THROUGH             10
                                         OR LESS    YIELD   5 YEARS   YIELD    YEARS    YIELD   TOTAL    YIELD
                                         --------   -----   -------   -----   -------   -----   ------   -----
<S>                                      <C>        <C>     <C>       <C>     <C>       <C>     <C>      <C>
U.S Treasury securities................   $1,001    5.88%   $ 4,014   6.06%   $    --     --    $5,015   6.02% 
Other securities(1)....................    1,486    5.99%     1,980   6.15%        --     --     3,466   6.08% 
                                          ------             ------            ------           ------
          Total(2).....................   $2,487    5.95%   $ 5,994   6.09%   $    --     --    $8,481   6.05% 
                                          ======             ======            ======           ======
</TABLE>
    
 
---------------
 
(1) Does not reflect anticipated maturity from prepayments on mortgage-based and
    asset-based securities. Anticipated lives are shorter than contractual
    maturities.
 
   
(2) There was no interest earned on nontaxable securities.
    
 
     LOANS
 
   
     Net outstanding loans totaled $130.0 million at December 31, 1997,
representing an increase of 4.3% compared to $124.7 million at December 31,
1996. Loan commitments were $16.6 million at December 31, 1997. Loan commitments
amounted to $19.7 million at December 31, 1996.
    
 
     The following table presents the composition of the Company's loan
portfolio at the dates indicated:
 
   
<TABLE>
<CAPTION>
                                                                          YEAR ENDED DECEMBER 31,
                                                            ---------------------------------------------------
                                                                     1996                        1997
                                                             AMOUNT      PERCENTAGE      AMOUNT      PERCENTAGE
                                                            --------     ----------     --------     ----------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                                         <C>          <C>            <C>          <C>
Commercial..............................................    $ 86,161         67.7%      $ 93,829          70.8%
Real estate construction................................       3,584          2.8          3,495           2.6
Real estate commercial..................................       2,721          2.1          5,475           4.1
Real estate mortgage....................................      28,766         22.6         24,167          18.2
Consumer and other......................................       6,016          4.7          5,571           4.2
Contracts purchased.....................................         116          0.1             81            .1
                                                            --------        -----       --------         -----
                                                             127,364        100.0%       132,618         100.0%
                                                                            =====                        =====
Deferred loan fees......................................        (813)                       (655)
                                                            --------                    --------
         Total loans....................................     126,551                     131,963
Allowance for loan losses...............................      (1,894)                     (1,970)
                                                            --------                    --------
         Total loans, net...............................    $124,657                    $129,993
                                                            ========                    ========
</TABLE>
    
 
     The following table shows the maturities and sensitivity of the Company's
loans to changes in interest rates at the dates indicated:
 
   
<TABLE>
<CAPTION>
                                                                     DECEMBER 31, 1997
                                                ------------------------------------------------------------
                                                                     DUE
                                                                  AFTER ONE
                                                 DUE IN ONE       THROUGH 5      DUE AFTER 5
                                                YEAR OR LESS        YEARS           YEARS        TOTAL LOANS
                                                ------------     -----------     -----------     -----------
                                                                   (DOLLARS IN THOUSANDS)
<S>                                             <C>              <C>             <C>             <C>
Commercial loans..............................    $ 35,113         $50,376         $ 8,340        $  93,829
Real estate construction......................       1,308           1,876             311            3,495
Real estate commercial........................       2,048           2,940             487            5,475
Real estate mortgage..........................       9,044          12,975           2,148           24,167
Consumer and other............................       2,085           2,991             495            5,571
Contracts purchased...........................          30              44               7               81
                                                   -------         -------          ------         --------
                                                  $ 49,628         $71,202         $11,788        $ 132,618
                                                   =======         =======          ======         ========
Loans with fixed interest rates...............                                                    $  98,739
Loans with floating interest rates............                                                       33,879
                                                                                                   --------
          Total...............................                                                    $ 132,618
                                                                                                   ========
</TABLE>
    
 
                                       19
<PAGE>   21
 
   
\In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS No.
114, "Accounting by Creditors for Impairment of a Loan" and in October 1996
issued SFAS No. 118, "Accounting by Creditors for Impairment of a Loan-Income
Recognition Disclosures, an amendment to SFAS No. 114." The adoption of SFAS
Nos. 114 and 118 did not have a material impact on the comparability of the
tables provided herein. The Company, during its normal loan review procedures,
considers a loan to be impaired when it is probable that the Company will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. A loan is not considered to be impaired during a period of minimal
delay (less than 90 days). The Company measures impaired loans based on the
present value of expected future cash flows discounted at the loan's effective
interest rate or, as a practical expedient, at the loan's observable market
price or the fair market value of the collateral if the loan is collateral
dependent. Impaired loans are charged to the allowance when management believes,
after considering economic and business conditions, collection efforts, and
collateral position, that the borrowers financial condition is such that
collection of principal is not probable.
    
 
   
     At December 31, 1997 and 1996, the Company's recorded investment in certain
loans that were considered to be impaired was $2,270 and $446, respectively. Of
these impaired loans, $302 and $232 have related valuation allowances of $199
and $122, while $1,968 and $214 did not require a valuation allowance. The
balance of the allowance for loan losses in excess of these specific reserves is
available to absorb losses from all loans. The average recorded investment in
impaired loans for the years ended December 31, 1997, 1996 and 1995, was
approximately $1,300, $342, and $261, respectively. The Company's policy is to
disclose as impaired loans all loans that are past due 90 days or more as to
either principal or interest, except for loans that are currently measured at
fair value or at lower of cost or fair value and residential mortgage and credit
card receivables, which are considered large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. Interest
payments received on impaired loans are recorded as interest income, unless
collection of the remaining recorded investment is not probable, in which case
payments received are recorded as a reduction of principal. For the years ended
December 31, 1997, 1996 and 1995, interest income recognized on impaired loans
totaled $36, $14 and $9 respectively, all of which was recognized on a cash
basis.
    
 
   
     Generally, no interest is accrued on loans when factors indicate collection
of interest is doubtful or when the principal or interest payment becomes 90
days past due, unless collection of principal and interest are anticipated
within a reasonable period of time and the loans are well secured. For such
loans, previously accrued but uncollected interest is charged against current
earnings, and income is only recognized to the extent payments are subsequently
received and collection of the remaining recorded principal balance is
considered probable.
    
 
     The Company manages the general risks inherent in the loan portfolio by
following loan policies and underwriting practices designed to result in prudent
lending activities. The following table presents information with respect to
nonperforming assets:
 
   
<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                          ---------------
                                                                          1996      1997
                                                                          ----     ------
    <S>                                                                   <C>      <C>
    Loans on nonaccrual status..........................................  $407     $1,897
    Loans past due greater than 90 days but not on nonaccrual status....   169        432
    Other real estate owned.............................................    --         88
    Troubled debt restructurings........................................    --         --
                                                                          ----     ------
              Total nonperforming assets................................  $576     $2,417
                                                                          ====     ======
    Percentage of nonperforming assets to total assets..................  0.36%      1.39%
</TABLE>
    
 
   
     The increase in nonperforming loans from December 31, 1996 to December 31,
1997 is primarily the result of management's decision to classify loans with
four borrowers with an aggregate principal balance of $1.2 million as
nonperforming. Each of these loans is secured by real estate and management
believes that in each case the value of the collateral exceeds the principal
balance of the loan. Management does not believe that it will incur any loss
with respect to any of these four borrowers.
    
 
                                       20
<PAGE>   22
 
     DEPOSITS
 
     The following table sets forth the average balances of the Company's
interest bearing liabilities, interest expense and average rates paid for the
periods indicated:
 
   
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31,
                                   ------------------------------------------------------------------------------------------
                                               1995                           1996                           1997
                                   ----------------------------   ----------------------------   ----------------------------
                                   AVERAGE    INTEREST  AVERAGE   AVERAGE    INTEREST  AVERAGE   AVERAGE    INTEREST  AVERAGE
                                   BALANCE    EXPENSE    RATE     BALANCE    EXPENSE    RATE     BALANCE    EXPENSE    RATE
                                   --------   -------   -------   --------   -------   -------   --------   -------   -------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                <C>        <C>       <C>       <C>        <C>       <C>       <C>        <C>       <C>
Interest-bearing checking........  $ 13,897   $  457      3.29%   $ 16,209   $  533      3.29%   $ 21,956   $  766      3.49%
Savings..........................    17,318      604      3.49%     14,625      498      3.41%     15,612      487      3.12%
Certificates of deposit..........    43,521    2,657      6.11%     64,863    3,960      6.11%     70,641    4,246      6.01%
Long-term borrowings.............     9,186      653      7.11%     17,315    1,073      6.20%     21,773    1,401      6.43%
Short-term borrowings............     3,418      177      5.18%      2,359      110      4.66%        955       43      4.50%
                                   --------    -----              --------   ------              --------   ------
        Total interest-bearing
          liabilities............  $ 87,340   $4,548      5.21%   $115,371   $6,174      5.35%   $130,937   $6,943      5.30%
                                               =====                         ======                         ======
Total noninterest-bearing
  liabilities....................    14,884                         16,835                         22,296
                                   --------                       --------                       --------
        Total interest and
          noninterest-bearing
          liabilities............  $102,224                       $132,206                       $153,233
                                   ========                       ========                       ========
</TABLE>
    
 
   
     Deposits grew to $136.2 million at December 31, 1997, an increase of 10.5%
from $123.3 million at December 31, 1996, primarily as a result of the Branch
Acquisition in July 1997 which added $25.2 million in deposits. Deposits in 1996
grew 15.9% from $106.4 million at December 31, 1995. Deposit growth is due to
management's decision to promote an attractive pricing strategy, increased
marketing and increased emphasis on implementing a sales culture within the
Company. The growth in deposits has primarily been in time deposits.
Nonvolatile, non-interest bearing demand deposits, also referred to as core
deposits, however, represent a significant percentage of the Company's deposit
base. To the extent that the Company is able to fund operations with
non-interest bearing core deposits, net interest spread, the difference between
interest income and interest expense, will improve. At December 31, 1997,
non-interest bearing demand deposits accounted for 19.9% of total deposits,
compared to 13.6% of total deposits at December 31, 1996 and 16.1% at December
31, 1995.
    
 
   
     Interest bearing deposits consist of NOW, money market, savings and time
certificate accounts. By their nature, interest bearing account balances will
tend to grow or decline as the Company reacts to changes in competitors' pricing
and interest payment strategies. At December 31, 1997, total interest bearing
deposit accounts of $109.1 million increased $2.6 million or 2.4% from December
31, 1996. Deposit growth was primarily concentrated in interest bearing checking
accounts.
    
 
   
     The Company has from time to time funded its growth with higher interest
rate certificates of deposit over $100,000. At December 31, 1997, time
certificates of deposits in excess of $100,000 totaled $18.6 million or 29.7% of
total outstanding time deposits, compared to $26.0 million or 34.3% of total
outstanding time deposits at December 31, 1996, and 32.3% at December 31, 1995.
The lower percentage at December 31, 1997 reflects management's decision to
allow these deposits to run-off following the Branch Acquisition in July 1997.
    
 
   
     The following table sets forth, by time remaining to maturity, all time
certificates of deposit accounts outstanding at December 31, 1997:
    
 
   
<TABLE>
<CAPTION>
                                                         TIME DEPOSITS
                                                     OF $100,000 OR MORE(1)    ALL OTHER TIME DEPOSITS(2)
                                                     ----------------------   ----------------------------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                  <C>          <C>         <C>            <C>
Reprice/Mature in three months or less.............   $  4,306         23.1%    $  8,695            19.8%
Reprice/Mature after three months through six
  months...........................................      5,498         29.5       13,546            30.8
Reprice/Mature after six months through one year...      4,413         23.7       13,310            30.3
Reprice/Mature after one year through five years...      4,196         22.5        8,325            18.9
Reprice/Mature after five years....................        220          1.2          105              .2
                                                       -------      -------      -------         -------
     Total.........................................   $ 18,633       100.00%    $ 43,981          100.00%
                                                       =======      =======      =======         =======
</TABLE>
    
 
                                       21
<PAGE>   23
 
---------------
 
   
(1) Time deposits of $100,000 or more represent 13.7% of total deposits at
    December 31, 1997.
    
 
   
(2) All other time deposits represent 32.3% of total deposits at December 31,
    1997.
    
 
   
     At December 31, 1997, other borrowings have the following times remaining
to maturity:
    
 
   
<TABLE>
<CAPTION>
                                                        DUE
                                                       AFTER
                                          DUE IN      3 MONTHS     DUE AFTER ONE       DUE
                                         3 MONTHS     THROUGH      YEAR THROUGH       AFTER
                                         OR LESS      ONE YEAR        5 YEARS        5 YEARS      TOTAL
                                         --------     --------     -------------     -------     -------
                                                             (DOLLARS IN THOUSANDS)
<S>                                      <C>          <C>          <C>               <C>         <C>
Short-term borrowings..................    $725        $   --         $    --        $    --     $   725
Long-term borrowings...................      --         3,000          15,103          3,797      21,900
                                           ----        ------         -------         ------     -------
     Total borrowings..................    $725        $3,000         $15,103        $ 3,797     $22,625
                                           ====        ======         =======         ======     =======
</TABLE>
    
 
     ASSET-LIABILITY MANAGEMENT/INTEREST RATE SENSITIVITY
 
   
     The principal purpose of asset-liability management is to manage the
Company's sources and uses of funds to maximize net interest income under
different interest rate conditions with minimal risk. A part of asset-liability
management involves interest rate sensitivity, the difference between repricing
assets and repricing liabilities in a specific time period. The policy of the
Company is to control the exposure of the Company's earnings to changing
interest rates by generally maintaining a position within a narrow range around
an "earnings neutral" or "balanced" position. The Board of Directors has
established guidelines for maintaining the Company's earnings risk due to future
interest rate changes. This analysis provides an indication of the Company's
earnings risk due to future interest rate changes. At December 31, 1997, the
analysis indicated that the earnings risk was within the Company's policy
guidelines.
    
 
     A key component of the asset-liability management is the measurement of
interest-rate sensitivity. Interest-rate sensitivity refers to the volatility in
earnings resulting from fluctuations in interest rates, variability in spread
relationships, and the mismatch of repricing intervals between assets and
liabilities. Interest-rate sensitivity management attempts to maximize earnings
growth by minimizing the effects of changing market rates, asset and liability
mix, and prepayment trends.
 
                                       22
<PAGE>   24
 
   
     The following table presents interest-rate sensitivity data at December 31,
1997. The interest rate gaps reported in the table arise when assets are funded
with liabilities having different repricing intervals. Since these gaps are
actively managed and change daily as adjustments are made in interest rate views
and market outlook, positions at the end of any period may not be reflective of
the Company's interest rate view in subsequent periods. Active management
dictates that longer-term economic views are balanced against the prospects of
short-term interest rate changes in all repricing intervals.
    
 
   
<TABLE>
<CAPTION>
                                            ESTIMATED MATURITY OR REPRICING AT DECEMBER 31, 1997
                                 ---------------------------------------------------------------------------
                                 0-3 MONTHS   3-6 MONTHS   6-12 MONTHS   1-5 YEARS   OVER 5 YEARS    TOTAL
                                 ----------   ----------   -----------   ---------   ------------   --------
                                                           (DOLLARS IN THOUSANDS)
<S>                              <C>          <C>          <C>           <C>         <C>            <C>
Interest Earning Assets:
  Interest earning balances due
     from banks................   $ 13,450     $     --     $      --     $    --      $     --     $ 13,450
  Investments available for
     sale(1)...................         --        1,001            --       3,016            --        4,017
  Investments held to
     maturity..................        694          198           594       2,978            --        4,464
  Federal Home Loan Bank
     Stock(1)..................      2,658           --            --          --            --        2,658
  Loans, including fees........     40,539        2,704         6,385      71,202        11,133      131,963
                                   -------     --------      --------     -------       -------     --------
          Total interest
            earning assets.....   $ 57,341     $  3,903     $   6,979     $77,196      $ 11,133     $156,552
                                   =======     ========      ========     =======       =======
Allowance for loan losses......                                                                       (1,970)
Cash and due from banks........                                                                        9,659
Other assets...................                                                                        9,052
                                                                                                    --------
          Total assets.........                                                                     $173,293
                                                                                                    ========
Interest Bearing Liabilities:
  Savings and interest demand
     deposits..................   $ 28,070     $     --     $      --     $18,384      $     --     $ 46,454
  Certificates of deposit......     13,001       19,044        17,723      12,521           325       62,614
  Borrowings...................     15,794           --         3,000       2,034         1,797       22,625
                                   -------     --------      --------     -------       -------     --------
          Total interest
            bearing
            liabilities........     56,865       19,044        20,723      32,939         2,122     $131,693
                                   =======     ========      ========     =======       =======
Other liabilities..............                                                                       27,713
Shareholders' equity...........                                                                       13,887
                                                                                                    --------
          Total liabilities &
            shareholders'
            equity.............                                                                     $173,293
                                                                                                    ========
Interest sensitivity gap.......        476      (15,141)      (13,744)     44,257         9,011     $ 24,859
                                                                                                    ========
                                   -------     --------      --------     -------       -------
Cumulative interest sensitivity
  gap..........................   $    476     $(14,665)    $ (28,409)    $15,848      $ 24,859
                                   =======     ========      ========     =======       =======
</TABLE>
    
 
---------------
 
(1) Equity investments have been placed in the 0-3 month category
 
   
     The table illustrates that the Company is asset-sensitive 0-3 months,
liability-sensitive from 3 months through 12 months and asset-sensitive
thereafter. In an environment of increasing interest rates, the theoretical net
interest margins of the Company would be adversely affected for the 12 months
following December 31, 1997, and favorably affected thereafter. Conversely, in a
declining interest-rate environment, the Company's theoretical net interest
margins would be favorably affected for the 12 month period following December
31, 1997, and adversely thereafter.
    
 
   
MARKET RISK
    
 
   
     Interest rate and credit risks are the most significant market risks
impacting the Company's performance. Other types of market risk, such as foreign
currency exchange rate risk and commodity price risk, do not arise in the normal
course of the Company's business activities. The Company relies on loan reviews,
prudent loan underwriting standards and an adequate allowance for loan losses to
mitigate credit risk.
    
 
                                       23
<PAGE>   25
 
   
     Interest rate risk is managed through the monitoring of the Company's gap
position (see Asset-Liability Management/Interest Rate Sensitivity) and
sensitivity to interest rate risk by subjecting the Company's balance sheet to
hypothetical interest rate shocks. The Company's primary objective in managing
interest rate risk is to minimize the adverse impact of changes in interest
rates on the Company's net interest income and capital, while structuring the
Company's asset/liability position to obtain the maximum yield-cost spread on
that structure.
    
 
   
     Rate shock is an instantaneous and complete adjustment in market rates of
various magnitudes on a static or level balance sheet to determine the effect
such a change in rates would have on the Company's net interest income for the
succeeding twelve months, and the fair values of financial instruments.
    
 
   
     The Company utilizes asset/liability-modeling software to determine the
effect of a shift in market interest rates, with scenarios of interest rates
increasing 100 and 200 basis points and decreasing 100 and 200 basis points. The
model utilized to create the table presented below is based on the concept that
all rates do not move by the same amount or at the same time. Although certain
assets and liabilities may have similar maturities or periods to repricing, they
may not react correspondingly to changes in market interest rates. In addition,
interest rates on certain types of assets and liabilities may fluctuate with
changes in market interest rates, while interest rates on other types of assets
may lag behind changes in market rates. Further, in the event of a change in
interest rates, prepayment and early withdrawal levels would likely deviate from
those assumed in the table. The ability of certain borrowers to make scheduled
payments on their adjustable rate loans may decrease in the event of an interest
rate increase due to adjustments in the amount of the payments.
    
 
   
     The model attempts to account for such limitations by imposing weights on
the gaps between assets and liabilities. These weights are based on the ratio
between the amount of rate change of each category of asset/liability, and the
amount of any change in the federal funds rate. Local conditions and the
strategy of the Company determine the weights for loan and core deposits; the
others are set by national markets. In addition, a timing factor has been used
as (a) fixed rate instruments do not reprice immediately; (b) renewals may have
a different term than original maturities; and (c) there is a timing factor
between rates on different instruments (i.e. core deposits usually reprice well
after there has been a change in the federal funds rate). Due to the various
assumptions used for this simulation analysis, no assurance can be given that
actual results will correspond with projected results.
    
 
   
     The following table shows the estimated impact of the interest rate shock
on net interest income and the fair values of financial instruments at December
31, 1997:
    
 
   
<TABLE>
<CAPTION>
                                                            FAIR VALUES OF FINANCIAL INSTRUMENTS
                                                       -----------------------------------------------
                               NET INTEREST INCOME            ASSETS                  LIABILITIES
                               -------------------     ---------------------     ---------------------
                               AMOUNT     % CHANGE      AMOUNT      % CHANGE      AMOUNT      % CHANGE
                               ------     --------     --------     --------     --------     --------
                                                     (ALL AMOUNTS IN THOUSANDS)
<S>                            <C>        <C>          <C>          <C>          <C>          <C>
+200 basis points............  $7,825        0.7%      $160,628       (2.3)%     $157,467       (0.8)%
+100 basis points............  $7,817        0.6%      $161,499       (1.7)%     $157,994       (0.4)%
Static.......................  $7,768        0.0%      $164,363        0.0%      $158,668        0.0%
-100 basis points............  $7,719       (0.6)%     $169,394        3.1%      $159,230        0.4%
-200 basis points............  $7,711       (0.7)%     $172,607        5.0%      $159,791        0.7%
</TABLE>
    
 
   
     Loans and certificates of deposit represent the majority of interest rate
exposure. Investments only represent 5.4% of interest earning assets and
therefore, the impact of the investments on net interest income of moving
interest rates would not be significant. Historically, savings and
interest-bearing checking accounts have not repriced in proportion to changes in
overall market interest rates. The change in net interest income can be
attributed to the balances of loans and certificates of deposit
maturing/repricing in the next year. The Company's variable rate loans reprice
faster than certificates of deposit. As a result, in an increasing/decreasing
interest rate environment net interest income would increase/decrease.
    
 
   
     The change in fair values of financial assets is mainly a result of total
loans representing 84.3% of total interest-earning assets. Of these loans 74.5%
have fixed interest rates, which decline in value during a period of rising
interest rates.
    
 
                                       24
<PAGE>   26
 
   
     While asset/liability models have become a main focus of risk management,
the Company believes that statistical models alone do not provide a reliable
method for monitoring and controlling risk. The quantitative risk information
provided is limited by the parameters established in creating the related
models. Therefore, the Company uses these models only as a supplement to other
risk management tools.
    
 
     RETURN ON EQUITY AND ASSETS
 
   
     Net income for the year ended December 31, 1997, totaled $2.1 million for a
return on average shareholders' equity of 16.65% and a return on average total
assets of 1.28%. These returns compare to a 23.93% return on average equity and
1.75% return on average total assets for the corresponding period in 1996. These
declines reflect lower income and increased assets for the year ended December
31, 1997 due to the Company's expansion activities.
    
 
     Return on daily average assets and equity and certain other ratios for the
periods indicated are presented below:
 
   
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                   ------------------------------------
                                                     1995           1996         1997
                                                   --------       --------     --------
                                                     (DOLLARS IN THOUSANDS EXCEPT PER
                                                               SHARE DATA)
        <S>                                        <C>            <C>          <C>
        Net income...............................  $  2,098       $  2,497     $  2,124
        Average assets...........................  $110,274       $142,639     $165,990
        Return on average assets.................      1.90%          1.75%        1.28%
        Net income...............................  $  2,098       $  2,497     $  2,124
        Average equity...........................  $  8,050       $ 10,433     $ 12,757
        Return on average equity.................     26.06%         23.93%       16.65%
        Cash dividends paid per share............  $   0.03       $   0.04     $   0.05
        Diluted earnings per share...............  $   0.77       $   0.90     $   0.76
        Dividend payout ratio....................      3.90%          4.44%        6.58%
        Average equity...........................  $  8,050       $ 10,433     $ 12,757
        Average assets...........................  $110,274       $142,639     $165,990
        Average equity to asset ratio............      7.30%          7.31%        7.69%
</TABLE>
    
 
     LIQUIDITY
 
   
     Liquidity represents the ability to meet deposit withdrawals to fund loan
demand, while retaining the flexibility to take advantage of business
opportunities. The Company's primary sources of funds are customer deposits,
loan payments, sales of assets, advances from the FHLB and the use of the
federal funds market. As of December 31, 1997, approximately $2.5 million or
29.3% of the securities portfolio matures within one year.
    
 
   
     Historically, unlike many commercial banking institutions, the Company has
utilized borrowings from the FHLB as an important source of funding for its
growth. The Company has borrowing lines established with the FHLB that permit it
to borrow up to 25% of qualified assets. Loans from the FHLB have terms ranging
from 1 through 15 years and at December 31, 1997 bear interest at rates from
4.48% to 8.62%. At December 31, 1997, $20.5 million in advances were outstanding
from the FHLB and the Company had additional borrowing capacity for cash
advances of $22.8 million. One effect of the Branch Acquisition in July 1997 is
that the Company was able to reduce its borrowings from the FHLB as a percentage
of total liabilities. The Company may increase its percentage of borrowings from
the FHLB in the future if circumstances warrant.
    
 
                                       25
<PAGE>   27
 
     CAPITAL
 
     The primary source of the Company's capital has historically been from the
retention of net profits. The Company's profitability has allowed it to enjoy a
strong capital position and to continue to grow its asset base.
 
   
     In 1989, banking regulators adopted risk-based capital guidelines under
which one of four risk weights is applied to balance sheet assets, each with
different capital requirements based on the credit risk of the asset. The
Company is required to maintain minimum amounts of capital to "risk weighted"
assets, as defined by banking regulators. The Company is required to have Tier 1
and Total Capital ratios of 4.0% and 8.0%, respectively. At December 31, 1997,
the Company's ratios were 9.61% and 11.34%, respectively.
    
 
   
     Management seeks to attain a level of capital consistent with appropriate
business risk and an ongoing need for financial flexibility. Adequacy of capital
depends on the assessment of a number of factors such as stability of earnings,
asset quality, liquidity and economic conditions. The ratio of average
shareholders' equity to average assets was 7.69% at December 31, 1997. With a
strong equity-to-assets ratio, the Company enjoys greater flexibility and less
dependence upon its deposit base to support loan and investment activities.
    
 
                                       26
<PAGE>   28
 
                                    BUSINESS
 
INTRODUCTION
 
   
     With its five full-service offices, the Company has the largest market
share of deposits among commercial banks in Cowlitz County, Washington, and The
Cowlitz Bank is the only community bank headquartered in the county. The Company
has grown from one branch with assets of $39.4 million, deposits of $31.0
million and shareholders' equity of $2.5 million at January 1, 1992 to five
branches with assets of $173.3 million, deposits of $136.2 million and
shareholders' equity of $13.9 million at December 31, 1997. The Company
emphasizes personal service and customer relationships and believes that such
emphasis is the primary reason for its rapid growth. The Bank was formed in 1977
and became a wholly-owned subsidiary of the Company in 1992. The Company was
formed in 1991 to act as a holding company for the Bank.
    
 
     The Company offers or makes available a broad range of financial services
to its customers, primarily small and medium-sized businesses, professionals and
retail customers. In addition to its normal commercial and personal banking
services, which include commercial and real estate lending, consumer lending,
mortgage origination and trust services, the Company has developed relationships
with a securities brokerage firm and an insurance agency with an estate planner
to provide its customers access to a variety of financial services which are
generally not available in community banks. In 1997, the Company established a
trust department to offer trust services to individuals, corporations and
institutions. It is the only such trust department located in Cowlitz County. By
combining its array of traditional commercial banking products with these
enhanced customer services, the Company is able to provide its customers with
similar banking services offered by its larger competitors while retaining the
character of a community bank and the level of personal service which larger
banks generally no longer provide.
 
     Based on reports of the FHLB, at June 30, 1996, the Company held
approximately 25% of the deposits in commercial banks in Cowlitz County, which
was the largest share of deposits of any commercial bank. Since June 30, 1996,
the Company has taken several steps to increase its market share in Cowlitz
County. Historically, the Company operated from one location in Longview. In
November 1996, the Company opened a de novo branch in neighboring Kelso,
Washington. Two recent acquisitions of competitors in Cowlitz County presented
the Company with additional opportunities for in-market growth. In 1996, Wells
Fargo Bank acquired First Interstate Bank, which was a principal competitor of
the Company. The Company successfully bid for three Wells Fargo branches in
Cowlitz County and acquired those branches in July 1997. In the second half of
1997, U.S. Bank was acquired by First Bank, which has recently announced its
intention to close the U.S. Bank branch in Kelso, Washington, creating
additional opportunities for the Company. The Company is aggressively marketing
to its new customers from the former Wells Fargo branches as well as the
customers of U.S. Bank in Kelso. The Company is introducing its full array of
financial products to these new customers while emphasizing personal service as
a way of increasing its market share within its existing market area. Management
believes that the Company's historical growth and recent successful expansion
activities strongly position the Company to continue to increase its market
share in Cowlitz County and to expand into other similar markets.
 
INDUSTRY OVERVIEW
 
     The commercial banking industry continues to experience increased
competition, consolidation and change. Non-insured financial service companies
such as mutual funds, brokerage firms, insurance companies, mortgage companies
and leasing companies are offering alternative investment opportunities for
customers' funds and, in many cases, alternative sources from which to borrow to
meet their needs. Banks have been granted extended powers to better compete,
including the limited right to sell annuities and securities products. Despite
the expanded products and services offered by banks, the percentage of financial
transactions handled by commercial banks has dropped steadily. In addition,
although the dollar amount of bank deposits has remained steady, such deposits
represent less than 20% of household financial assets compared to over 35% 25
years ago. This trend represents a continuing shift to investments in stocks,
bonds, mutual funds and retirement accounts. To improve competitiveness,
commercial banks are reducing costs through operating efficiencies gained by
consolidation and implementation of alternative ways of providing bank products.
Although new banks continue to be organized, bank mergers substantially
outnumber new
 
                                       27
<PAGE>   29
 
bank formations. In the last dozen years, the number of commercial banks
nationwide has dropped from 14,000 to 9,500. However, in recent years,
relatively stable interest rates and a growing economy have permitted the
remaining segments of the banking industry to improve net interest margins and
returns on assets, resulting in stronger balance sheets and earnings.
 
     To deliver more effectively and efficiently their products, banks are
opening branches located inside retail stores, installing more ATMs, and
investing in technology to facilitate telephone, personal computer and Internet
banking. While all banks are experiencing the effects of the changing
environment, the manner in which banks choose to compete is increasing the
differences between larger super-regional banks and community banks. The
super-regional banks are striving to become regional "brands" providing a broad
selection of products at low cost with advanced technology. Community banks
provide most of the same products, but with a greater commitment to personal
service and to maintaining local ties to the communities they serve.
 
BUSINESS STRATEGY
 
     The Company's goal is to maintain its position as the leading community
based provider of financial services in Cowlitz County and to become one of the
leading community based providers of financial services in other selected areas
of Washington and Oregon. The Company's growth strategy is based on providing
both exceptional personal service and a wide range of financial services to its
customers. The Company's strategy consists of the following:
 
     - Emphasize personal service and develop strong community ties. Based on
       its experience, the Company believes that providing a high level of
       personal service and customer attention attracts and retains customers.
       The Company's employees work with specific customers on an individual,
       personalized basis. As a result of this level of customer attention, the
       Company believes that it can make business decisions regarding its
       customers more quickly and efficiently than its competitors. The
       Company's philosophy is that of a true community bank -- to provide the
       highest level of service to its communities. The Company's "outstanding"
       Community Reinvestment Act ("CRA") rating is evidence of its commitment
       to serve all the citizens in its communities. The Company believes that
       its intense focus on customer service coupled with its deep community
       relationships serve to differentiate the Company from its competitors.
 
     - Provide a broad range of financial products and services. The Company
       believes that offering a wide range of financial products and services is
       an important competitive factor. In addition to deposit and loan products
       typically offered by commercial banks, the Company has developed a real
       estate loan division to originate mortgage loans and has established a
       trust department. To execute this strategy, the Company has hired
       experienced personnel to market and deliver these services. The Company
       leases space in its main financial center to a securities brokerage firm
       and an insurance agency in order to provide its customers with access to
       a wider range of financial services. This combination of products and
       services is designed to both increase its customer base and to enhance
       cross-selling opportunities to its customer base.
 
     - Increase business volume in existing market. The Company believes there
       is an opportunity to increase its business volume in its existing market
       area by promoting its complete array of financial products as well as
       emphasizing personal service, especially in relationships with new
       customers obtained in the acquisition of the Wells Fargo branches and by
       establishing new customer relationships as a result of the announced
       closure of a U.S. Bank branch in Kelso. The Company believes that
       additional opportunities for growth exist in Cowlitz County as a result
       of new business entrants such as BHP Coated Steel, Prudential Steel and
       Foster Farms. The Company presently has the largest share of deposits
       held by commercial banks in Cowlitz County and believes that its
       reputation for a high level of personal service will help it attract new
       customers as the larger banks continue their consolidation and reduction
       of personal service to their customers.
 
     - Explore opportunities for regional expansion through acquisition. The
       Company intends to explore the acquisition of other community banks and
       branches of larger banks in non-metropolitan communities in Washington
       and Oregon. The Company intends to retain the local character of
       institutions
 
                                       28
<PAGE>   30
 
       which it acquires and to promote deposit and asset growth in the acquired
       institutions through implementation of its customer service policies and
       product offerings. Although the Company is not presently engaged in any
       acquisition discussions, it believes that such opportunities are
       available and that its ability to consummate such acquisitions will be
       enhanced by completion of this Offering and the creation of a public
       market for the Company's Common Stock.
 
ACQUISITION OF WELLS FARGO BRANCHES
 
     On July 18, 1997, the Company completed the Branch Acquisition, which
included branches located in Castle Rock, Kalama and Longview, Washington. In
the acquisition, the Company purchased certain assets of the branches, including
cash on hand, owned real property, personal property, branch and tenant leases,
safe deposit agreements and records, assumed $25.2 million of deposit
liabilities and recorded a core deposit premium of $2.0 million. The Company did
not purchase any credit card relationships, loans or other revenue producing
assets. Management believes that it has successfully integrated these branches
into its operations and has begun an aggressive marketing campaign of its
products and services to the new customers obtained as a result of the Branch
Acquisition. Based on this success, the Company believes it is well positioned
to compete effectively for other branch acquisitions should the opportunity
arise.
 
PRODUCTS AND SERVICES
 
     The Company offers a broad portfolio of products and services tailored to
meet the banking requirements of targeted customers in its market area. It
believes this portfolio is generally competitive with the products and services
of its competitors, including major regional and national banks. These include:
 
     Deposit Products. The Company provides an array of deposit products for
customers, including non-interest-bearing checking accounts, interest-bearing
checking and savings accounts, money market accounts and certificates of
deposit. These accounts generally earn interest at rates established by
management based on competitive market factors and management's desire to
increase certain types or maturities of deposit liabilities. The Company does
not pay brokerage commissions to attract deposits. It strives to establish
customer relations to attract core deposits in non-interest-bearing
transactional accounts and thus to reduce its cost of funds.
 
     Loan Products. The Company offers a broad array of loan products to its
small to medium size business customers. The Company maintains sound loan
underwriting standards with written loan policies, conservative individual and
branch limits and reviews by the Loan Committee. Further, in the case of
particularly large loan commitments or loan participations, loans are reviewed
by 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 seeks to minimize
credit losses by closely monitoring the financial condition of its borrowers and
the value of collateral.
 
     Commercial Loans. The Company offers specialized loans for its business and
commercial customers, including equipment and inventory financing operating
lines of credit, and accounts receivable financing. Commercial lending is the
primary focus of the Company's lending activities, and a significant portion of
its loan portfolio consists of commercial loans. For regulatory reporting
purposes, a substantial portion of the Company's commercial loans are designated
as real estate loans, as the loans are secured by mortgages and trust deeds on
real property, although the loans may be made for purposes of financing
commercial activities, such as accounts receivable, equipment purchases and
inventory or other working capital needs. Lending decisions are based on careful
evaluation of the financial strength, management and credit history of the
borrower, and the quality of the collateral securing the loan. Commercial loans
secured by real property are limited to 70% of the value of the collateral. In
some cases, the Company may require personal guarantees and secondary sources of
repayment.
 
     Real Estate Loans. Real estate loans are available for construction,
purchasing and refinancing residential owner-occupied and rental properties.
Borrowers can choose from a variety of fixed and adjustable rate options and
terms. Real estate loans reflected in the loan portfolio also include loans made
to commercial customers that are secured by real property. The Company provides
customers access to long-term conventional real estate loans through its
mortgage loan department which makes FNMA-conforming loans
 
                                       29
<PAGE>   31
 
and sells them in the secondary market. The Company has been either the first or
second largest mortgage originator in Cowlitz County for each of the last four
years.
 
     Payments on loans are often dependent on the successful operation and
management of the properties securing the loans, and are therefore strongly
affected by the conditions of the local real estate market. Fluctuating land
values and local economic conditions make loans secured by real property
difficult to evaluate and monitor.
 
     Consumer Loans. The Company provides loans to individual borrowers for a
variety of purposes, including secured and unsecured personal loans, home equity
and personal lines of credit and motor vehicle loans. Consumer loans can carry
significantly greater risks than other loan products, even if secured, if the
collateral consists of rapidly depreciating assets such as automobiles and
equipment. Repossessed collateral securing a defaulted consumer loan may not
provide an adequate source of repayment of the loan. Consumer loan collections
are dependent on borrowers' continuing financial stability, and are sensitive to
job loss, illness and other personal factors. The Company attempts to manage the
risks inherent in consumer lending by following strict credit guidelines and
conservative underwriting practices. The Company also offers Visa and Mastercard
credit cards to its customers.
 
   
     The following table sets forth certain information about the Company's loan
portfolio at December 31, 1997, classified by distribution among type of
borrowers:
    
 
   
<TABLE>
<CAPTION>
                                                                      TOTAL         PERCENT OF
               BORROWER CLASSIFICATION         NUMBER OF LOANS     LOAN BALANCE     PORTFOLIO
        -------------------------------------  ---------------     ------------     ----------
                                                           (DOLLARS IN THOUSANDS)
        <S>                                    <C>                 <C>              <C>
        Real Estate..........................         313            $ 34,021           25.7
        Consumer.............................       2,136              31,457           23.7
        Services.............................          99              11,869            8.9
        Construction.........................         138              12,208            9.2
        Retail Trade.........................          90               7,243            5.5
        Transportation & Trucking............          70               6,753            5.1
        Forest and Timber....................          65               5,266            4.0
        Restaurants..........................          44               5,002            3.8
        Health Services......................          35               4,311            3.2
        Manufacturing........................          42               3,985            3.0
        Wholesale Trades.....................          45               2,461            1.9
        Education, Social Service, & Business
          Organization.......................          29               1,737            1.3
        Other................................          98               6,305            4.7
                                                    -----            --------         ------
                  Total......................       3,204            $132,618         100.00%
                                                    =====            ========         ======
</TABLE>
    
 
     Other Banking Products and Services. In support of its focus on
personalized service, the Company offers additional products and services for
the convenience of its customers. These include a recently introduced debit card
program, automated teller machines located at each of the Company's offices, and
an automated telephone banking service with 24-hour access to accounts that also
allows customers to speak directly with a customer service representative during
normal banking hours or leave a message after normal banking hours. The Company
does not currently charge fees for any of these services. The Company provides
drive-through facilities at three of its branches.
 
     Trust Services. The Company has recently established a trust department,
which is the only one located in Cowlitz County. The trust department provides
trust services to individuals, partnerships, corporations and institutions and
acts as fiduciary of estates and conservatorships and as a trustee under various
wills, trusts and other plans. The Company believes this service will attract
additional customers to the Bank.
 
     Other Financial Services. The Company believes that providing its customers
a full range of financial services is an important element of its strategy to
attract and retain customers. To this end, the Company has entered into lease
arrangements with Robert Thomas Securities, a securities broker affiliated with
Raymond James Securities, and Commerce Business & Estate Planning Services,
Inc., an insurance agency. Each of
 
                                       30
<PAGE>   32
 
these organizations maintains an office on the main floor of the Cowlitz
Financial Center where the main office of the Company is located and has access
to space in the Company's other branches. Representatives of these companies
meet with clients at each of the Bank's branches, thereby making these services
available to all of the Company's customers. The Company has no financial
interest in either of these companies. The Company believes that by making
available through these relationships brokerage and insurance services, it can
increase foot traffic through its branches and market more extensively its full
line of core banking products and services.
 
MARKET AREA
 
     The Company's primary market area from which it accepts deposits and makes
loans is Cowlitz County, Washington, and the surrounding counties in Washington
and Oregon, including the greater Portland area. As a community bank, the
Company has certain competitive advantages due to its local focus, but is also
more closely tied to the local economy than many of its competitors which serve
a number of geographic markets.
 
     Cowlitz County has a population of approximately 92,000 people. The
population is centered in the adjoining cities of Longview and Kelso, which
combined contain approximately one-half of the county's population. The rural
areas of Cowlitz County are growing at a somewhat faster rate than the urban
areas of the county as a result of the migration of people into the area from
urban areas in adjacent counties.
 
   
     Over the past 10 years, the employment base of Cowlitz County has undergone
significant change. The forest products industry has historically been the
dominant employer in the county and remains so. Weyerhauser Company and Longview
Fiber Co. have major facilities in Cowlitz County. Cowlitz County has three port
facilities along the Columbia River, which specialize in moving dry bulk,
agricultural and forest products. The ports have also acted as centers for
attracting new industry to the county. In recent years, Cowlitz County has
attracted diverse industries, including Sonoco Products, BHP Coated Steel, and
Prudential Steel. Foster Farms is currently constructing a processing plant in
Kelso which is expected to create in excess of 500 new jobs when it opens in
1998.
    
 
MANAGEMENT INFORMATION SYSTEMS
 
   
     The Company maintains an in-house system for processing all core banking
applications, including loan servicing and deposit accounts. The system utilizes
Information Technology Systems, Inc. ("ITI") software and Unisys hardware. In
addition, ITI software is utilized for 24-hour telephone banking, shareholder
information, accounts payable and optical disk storage. The Company also
maintains a Novell network in all branches. The Company maintains a Disaster
Recovery Plan and has a contract with Sungard Services to provide on-site
processing after a disaster.
    
 
   
     Management is presently evaluating its systems and software as well as
contacting software vendors and others with which it conducts business for
potential Year 2000 problems. This issue affects computer systems that have
time-sensitive programs that may not properly recognize the year 2000, which
could result in major system failures or miscalculations for companies that have
not successfully adapted their systems or applications. The Company's evaluation
is not complete and no final cost estimate for compliance is available at the
date hereof. The Company expects to incur internal staff costs as well as
consulting and other expenses during its evaluation and system testing. The
Company does not believe that it will incur any material expense in addressing
Year 2000 compliance issues.
    
 
COMPETITION
 
     Competition in the banking industry has intensified for deposits and loans
with decreased interest rates over the last one to two years. Furthermore,
competition from outside the traditional banking system from credit unions,
investment banking firms, insurance companies and related industries offering
bank-like products has widened the competition for deposits and loans. Based on
published reports, it is estimated that credit unions held approximately 51% of
deposits in the Company's market area as of June 30, 1996.
 
     The banking industry in the market area is generally characterized by well
established branches of large banks with headquarters located out of the market
area and in many cases, out of the state. These large multi-bank holding company
branches located in the Longview-Kelso area have transferred a number of their
 
                                       31
<PAGE>   33
 
banking functions outside the local area. There are also thrift institutions,
including a branch of the country's largest thrift institution, and credit
unions within the market area that are very competitive in the deposit and
consumer lending areas.
 
     The major competition for commercial banking services in Cowlitz County
comes from U.S. Bank, Key Bank, Bank of America (which does business in
Washington as Seafirst Bank) and Columbia State Bank. None of these competitors
are headquartered in Cowlitz County and many have relocated key functions (e.g.,
loan decisions) into regional offices outside of the area. Its local decision
making and strong community ties have allowed the Company to provide a level of
personal service and direct customer contact that management believes is
superior to that provided by other banks.
 
     The offices of the major financial institutions have competitive advantages
over the Company in that they have high public visibility, may offer a wider
variety of products and are able to maintain advertising and marketing
activities on a much larger scale than the Company can economically maintain.
Since single borrower lending limits imposed by law are dependent on the capital
of the institution, the branches of larger institutions with substantial capital
bases also have an advantage with respect to loan applications which are in
excess of the Company's legal lending limits.
 
     In competing for deposits, the Company is subject to certain limitations
not applicable to nonbank financial institution competitors. Previous laws
limiting the deposit instruments and lending activities of savings and loan
associations have been substantially eliminated, thus increasing the competition
from these institutions. See "Risk Factors -- Competition."
 
REGULATION AND SUPERVISION
 
     The Company and the Bank are subject to extensive regulation under federal
and state laws. These laws, together with the regulations promulgated under
them, significantly affect respective activities of the Company and the Bank and
the competitive environment in which they operate. The laws and regulations are
primarily intended to protect depositors and the deposit insurance fund, rather
than shareholders.
 
     The description of the laws and regulations applicable to the Company and
the Bank set forth in this prospectus does not purport to be a complete
description of the laws and regulations mentioned herein or of all such laws and
regulations. Any change in applicable laws or regulations may have a material
effect on the business and prospects of the Company and the Bank. The operations
of the Company and the Bank may be affected by legislative and regulatory
changes as well as by changes in the policies of various regulatory authorities.
The Company cannot accurately predict the nature or the extent of the effects
that such changes may have in the future on its business and earnings.
 
     Bank Holding Company Regulation. The Company is a bank holding company
within the meaning of the Bank Holding Company Act of 1956, as amended ("BHCA")
and, as such, is subject to the regulations of the Federal Reserve. Bank holding
companies are required to file periodic reports with and are subject to periodic
examination by the Federal Reserve. The Federal Reserve has issued regulations
under the BHCA requiring a bank holding company to serve as a source of
financial and managerial strength to its subsidiary banks. It is the policy of
the Federal Reserve that, pursuant to this requirement, a bank holding company
should stand ready to use its resources to provide adequate capital funds to its
subsidiary banks during periods of financial stress or adversity. Additionally,
under the Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA"), a bank holding company is required to guarantee the compliance of
any insured depository institution subsidiary that may become "undercapitalized"
(as defined in the statute) with the terms of any capital restoration plan filed
by such subsidiary with its appropriate federal banking agency up to the lesser
of (i) an amount equal to 5% of the institution's total assets at the time the
institution became undercapitalized, or (ii) the amount that is necessary (or
would have been necessary) to bring the institution into compliance with all
applicable capital standards as of the time the institution fails to comply with
such capital restoration plan. Under the BHCA, the Federal Reserve has the
authority to require a bank holding company to terminate any activity or
relinquish control of a nonbank subsidiary (other than a nonbank subsidiary of a
bank) upon the Federal Reserve's determination that such activity or control
constitutes a serious risk to the financial soundness and stability of any bank
subsidiary of the bank holding company.
 
                                       32
<PAGE>   34
 
     The Company is prohibited by the BHCA from acquiring direct or indirect
control of more than 5% of the outstanding shares of any class of voting stock
or substantially all of the assets of any bank or merging or consolidating with
another bank holding company without prior approval of the Federal Reserve.
Additionally, the Company is prohibited by the BHCA from engaging in or from
acquiring ownership or control of more than 5% of the outstanding shares of any
class of voting stock of any company engaged in a non-banking business unless
such business is determined by the Federal Reserve to be so closely related to
banking as to be a proper incident thereto. The BHCA does not place territorial
restrictions on the activities of such non-banking related activities.
 
   
     Capital Adequacy Guidelines for Bank Holding Companies. The Federal Reserve
is the federal regulatory and examining authority for bank holding companies.
The Federal Reserve has adopted capital adequacy guidelines for bank holding
companies. These guidelines are similar to, although not identical with, the
guidelines applicable to banks. See "-- Bank Capital Requirements." At December
31, 1997, the Company's Tier 1 leverage capital ratio was 6.86%, its Tier 1
risk-based capital ratio was 9.61% and its total risk-based capital ratio was
11.34%.
    
 
     Bank Regulation. The Bank is organized under the laws of the State of
Washington and is subject to the supervision of the Department of Financial
Institutions ("DFI"), whose examiners conduct periodic examinations of state
banks. The Bank is not a member of the Federal Reserve System, so its principal
federal regulator is the FDIC, which also conducts periodic examinations of the
Bank. The Bank's deposits are insured, to the maximum extent permitted by law,
by the Bank Insurance Fund ("BIF") administered by the FDIC and are subject to
the FDIC's rules and regulations respecting the insurance of deposits. See
"-- Deposit Insurance."
 
     Both federal and state laws extensively regulate various aspects of the
banking business such as reserve requirements, truth-in-lending and
truth-in-savings disclosures, equal credit opportunity, fair credit reporting,
trading in securities and other aspects of banking operations. Current federal
law also requires banks, among other things, to make deposited funds available
within specified time periods.
 
     Insured state-chartered banks are prohibited under FDICIA from engaging as
principal in activities that are not permitted for national banks, unless (i)
the FDIC determines that the activity would pose no significant risk to the
appropriate deposit insurance fund, and (ii) the bank is, and continues to be,
in compliance with all applicable capital standards. The Company does not
believe that these restrictions will have a material adverse effect on its
current operations.
 
     Bank Capital Requirements. The FDIC has adopted risk-based capital ratio
guidelines to which the Bank is subject. The guidelines establish a systematic
analytical framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations. Risk-based capital
ratios are determined by allocating assets and specified off-balance sheet
commitments to four risk weighted categories, with higher levels of capital
being required for the categories perceived as representing greater risk.
 
     These guidelines divide a bank's capital into two tiers. Tier 1 includes
common equity, certain noncumulative perpetual preferred stock (excluding
auction rate issues) and minority interest in equity accounts of consolidated
subsidiaries, less goodwill and certain other intangible assets (except mortgage
servicing rights and purchased credit card relationships, subject to certain
limitations). Supplementary (Tier 2) capital includes, among other items,
cumulative perpetual and long-term, limited-life, preferred stock, mandatory
convertible securities, certain hybrid capital instruments, term-subordinated
debt and the allowance for loan and lease losses, subject to certain
limitations, less required deductions. Banks are required to maintain a total
risk-based capital ratio of 8%, of which 4% must be Tier 1 capital. The FDIC
may, however, set higher capital requirements when a bank's particular
circumstances warrant. Banks experiencing or anticipating significant growth are
expected to maintain capital ratios, including tangible capital positions, well
above the minimum levels.
 
     In addition, the FDIC has established guidelines prescribing a minimum Tier
1 leverage ratio (Tier 1 capital to adjusted total assets as specified in the
guidelines). These guidelines provide for a minimum Tier 1 leverage ratio of 3%
for banks that meet certain specified criteria, including that they have the
highest
 
                                       33
<PAGE>   35
 
regulatory rating and are not experiencing or anticipating significant growth.
All other banks are required to maintain a Tier 1 leverage ratio of 3% plus an
additional cushion of at least 100 to 200 basis points.
 
   
     Certain regulatory capital ratios for the Company and the Bank at
December 31, 1997 are set forth below:
    
 
   
<TABLE>
<CAPTION>
                                                                     COMPANY     BANK
                                                                     -------     -----
        <S>                                                          <C>         <C>
        Tier 1 Capital to Risk-Weighted Assets.....................    9.61%      9.83%
        Total-Risk Based Capital to Risk-Weighted Assets...........   11.34%     11.09%
        Tier 1 Leverage Ratio......................................    6.86%      7.12%
</TABLE>
    
 
     Dividends. The principal source of the Company's cash revenues is dividends
from the Bank. Under Washington law, the Bank may not pay dividends in an amount
greater than its retained earnings as determined by generally accepted
accounting principles. In addition, the DFI has the authority to require a
state-chartered bank to suspend payment of dividends. The FDIC has the authority
to prohibit a bank from paying dividends if, in its opinion, the payment of
dividends would constitute an unsafe or unsound practice in light of the
financial condition of the bank or if it would cause a bank to become
undercapitalized.
 
     Lending Limits. Under Washington law, the total loans and extensions of
credit by a Washington-chartered bank to a borrower outstanding at one time may
not exceed 20% of such bank's capital and surplus. However, this limitation does
not apply to loans or extensions of credit which are fully secured by readily
marketable collateral having market value of at least 115% of the amount of the
loan or the extension of credit at all times.
 
     Branches and Affiliates. Establishment of bank branches is subject to
approval of the DFI and FDIC and geographic limits established by state laws.
Washington's branch banking law permits a bank having its principal place of
business in the State of Washington to establish branch offices in any county in
Washington without geographic restrictions. A bank may also merge with any
national or state chartered bank located anywhere in the State of Washington
without geographic restrictions.
 
     Under Oregon law, an out-of-state bank or bank holding company may merge
with or acquire an Oregon state chartered bank or bank holding company if the
Oregon bank, or in the case of a bank holding company, the subsidiary bank, has
been in existence for a minimum of three years, and the law of the state in
which the acquiring bank in located permits such merger. Branches may not be
acquired or opened separately, but once an out-of-state bank has acquired
branches in Oregon, either through a merger with or acquisition of substantially
all of the assets of an Oregon bank, the bank may open additional branches.
 
     The Bank is subject to Sections 22(h), 23A and 23B of the Federal Reserve
Act, which restrict financial transactions between banks and affiliated
companies. The statute limits credit transactions between a bank and its
executive officers and its affiliates, prescribes terms and conditions for bank
affiliate transactions deemed to be consistent with safe and sound banking
practices, and restricts the types of collateral security permitted in
connection with a bank's extension of credit to an affiliate.
 
     FDICIA. FDICIA required, among other things, federal bank regulatory
authorities to take "prompt corrective action" with respect to banks which do
not meet minimum capital requirements. For these purposes, FDICIA establishes
five capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.
 
     The FDIC has adopted regulations to implement the prompt corrective action
provisions of FDICIA. Among other things, the regulations define the relevant
capital measures for the five capital categories. An institution is deemed to be
"well capitalized" if it has a total, risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater, and a leverage
ratio of 5% or greater, and is not subject to a regulatory order, agreement or
directive to meet and maintain a specific capital level for any capital measure.
The Bank currently exceeds all of the ratios.
 
                                       34
<PAGE>   36
 
     FDICIA further directs that each federal banking agency prescribe standards
for depository institutions and depository institutions holding companies
relating to internal controls, information systems, internal audit systems, loan
documentation, credit underwriting, interest rate exposure, asset growth,
management compensation, a maximum ratio of classified assets to capital,
minimum earnings sufficient to absorb losses, a minimum ratio of market value to
book value of publicly traded shares and such other standards as the agency
deems appropriate.
 
     Deposit Insurance. The Bank's deposits are insured up to $100,000 per
insured account by the BIF. As an institution whose deposits are insured by BIF,
the Bank is required to pay deposit insurance premiums to BIF.
 
   
     FDICIA required the FDIC to issue regulations establishing a system for
setting deposit insurance premiums based upon the risks a particular bank or
savings association poses to the deposit insurance funds. This system bases an
institution's risk category partly upon whether the institution is well
capitalized, adequately capitalized or less than adequately capitalized. Each
insured depository institution is also assigned to one of three "supervisory"
categories based on reviews by regulators, statistical analysis of financial
statements and other relevant information. An institution's assessment rate
depends upon the capital category and supervisory category to which it is
assigned. Annual assessment rates currently range from zero for the highest
rated institution to $0.27 per $100 of domestic deposits for an institution in
the lowest category. The Bank is currently in the class of the highest rated
institutions and, accordingly, pays no assessment for deposit insurance. Under
legislation enacted in 1996 to recapitalize the Savings Association Insurance
Fund, the FDIC is authorized to collect assessments against insured deposits to
be paid to the Financing Corporation ("FICO") to service FICO debt incurred in
the 1980's. The current FICO assessment rate for BIF insured deposits is 1.256
cents per $100 of deposits per year. Any increase in deposit insurance or FICO
assessments could have an adverse effect on the Bank's earnings.
    
 
   
     Community Reinvestment Act. The Community Reinvestment Act ("CRA") requires
financial institutions regulated by the federal financial supervisory agencies
to ascertain and help meet the credit needs of their delineated communities,
including low-income and moderate-income neighborhoods within those communities,
while maintaining safe and sound banking practices. The regulatory agency
assigns one of four possible ratings to an institution's CRA performance and is
required to make public an institution's rating and written evaluation. The four
possible ratings are "outstanding," "satisfactory," "needs to improve" and
"substantial noncompliance."
    
 
   
     Under new regulations that apply to CRA performance ratings after July 1,
1997, many factors play a role in assessing a financial institution's CRA
performance. The institution's regulator must consider its financial capacity
and size, legal impediments, local economic conditions and demographics and the
competitive environment in which it operates. The evaluation does not rely on
absolute standards and financial institutions are not required to perform
specific activities or to provide specific amounts or types of credit.
    
 
   
     The Company's most recent rating under CRA (using the regulations
applicable prior to July 1, 1997) is "outstanding." This rating reflects the
Company's commitment to meeting the credit needs of the communities it serves.
No assurance can be given, however, that the Company will be able to maintain an
"outstanding" rating under the new regulations in the future.
    
 
     Additional Matters. In addition to the matters discussed above, the Company
and the Bank are subject to additional regulation of their activities, including
a variety of consumer protection regulations affecting their lending, deposit
and collection activities and regulations affecting secondary mortgage market
activities.
 
     The earnings of financial institutions, including the Company and the Bank,
are also affected by general economic conditions and prevailing interest rates,
both domestic and foreign and by the monetary and fiscal policies of the U.S.
Government and its various agencies, particularly the Federal Reserve.
 
     Additional legislation and administrative actions affecting the banking
industry may be considered by the United States Congress, the Washington
Legislature and various regulatory agencies, including those referred to above.
It cannot be predicted with certainty whether such legislation or administrative
action will be enacted or the extent to which the banking industry in general or
the Company and the Bank in particular would be affected thereby.
 
                                       35
<PAGE>   37
 
PROPERTIES
 
     The Company owns its main office space at the Cowlitz Financial Center, 927
Commerce Avenue, Longview, Washington 98632. The Bank occupies approximately
27,500 square feet of this facility. The Company leases space in the Cowlitz
Financial Center to Robert Thomas Securities and to Commerce Business & Estate
Services, Inc., both of which provide services to the Bank's customers. The
Company also owns branches in Kelso, Kalama and Castle Rock, and leases
facilities for a branch in the Triangle Mall in Longview. The Company intends to
sell its Castle Rock facility and move the existing branch to a leased new
building which is under construction. Each branch has automated teller machines
and each branch except Kalama and Castle Rock has a drive-up facility. The new
building at Castle Rock will have a drive-up facility.
 
EMPLOYEES
 
     At December 31, 1997, the Company employed 99 full-time equivalent
employees. None of the employees are parties to a collective bargaining
agreement. Management considers its relations with its employees to be good.
 
LEGAL PROCEEDINGS
 
     The Company may occasionally have pending routine litigation resulting from
the collection of the secured and unsecured indebtedness as part of its business
of providing financial services. In some cases, such litigation will involve
counterclaims or other claims against the Company. Such proceedings against
financial institutions sometimes also involve claims for punitive damages in
addition to other specific relief. Currently, the Company is not a party to any
litigation other than in the ordinary course of business. In the opinion of
management, the ultimate outcome of all pending legal proceedings will not
individually or in the aggregate have a material adverse effect on the financial
condition or the operations of the Bank.
 
                                       36
<PAGE>   38
 
                                   MANAGEMENT
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The directors and executive officers of the Company and the Bank, their
respective ages and their respective positions with the Company and the Bank are
listed below:
 
<TABLE>
<CAPTION>
             NAME                 AGE                            POSITION
------------------------------    ---     ------------------------------------------------------
<S>                               <C>     <C>
Benjamin Namatinia                54      Chairman & Chief Executive Officer, Cowlitz
                                          Bancorporation; Director, Cowlitz Bank
Charles W. Jarrett                56      President & Chief Operating Officer & Director,
                                          Cowlitz Bancorporation; President & Chief Executive
                                          Officer & Director, Cowlitz Bank
Larry M. Larson(1)(2)(3)          58      Director, Cowlitz Bancorporation; Chairman, Cowlitz
                                          Bank
Mark F. Andrews, Jr.(1)(2)(3)     65      Director, Cowlitz Bancorporation and Cowlitz Bank
E. Chris Searing(1)(2)            44      Director, Cowlitz Bancorporation & Cowlitz Bank
Donna P. Gardner                  49      Vice President & Secretary/Treasurer, Cowlitz
                                          Bancorporation; Executive Vice President & Chief
                                          Financial Officer, Cowlitz Bank
James A. Wills                    56      Vice President, Cowlitz Bancorporation; Executive Vice
                                          President & Chief Operating Officer, Cowlitz Bank
</TABLE>
 
---------------
 
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Board Development Committee.
 
     Benjamin Namatinia has served as Chairman of Cowlitz Bancorporation since
its incorporation in 1991 and was appointed Chief Executive Officer effective
November 1994. He has served as a director of Cowlitz Bank since 1991. Since
1990, Mr. Namatinia has been the President as well as bond trader for BMN, INC.,
a brokerage firm owned by Mr. Namatinia. Mr. Namatinia also owns a securities
brokerage franchise of Robert Thomas Securities, which leases space from the
Company in the Cowlitz Financial Center. From 1984 to 1989, he was Senior Vice
President and trader for Prudential Securities. From 1989 to 1990, he was Senior
Vice President and head of the investment department for Shearson Lehman.
 
     Charles W. Jarrett has served as a director of Cowlitz Bancorporation since
its incorporation in 1991. He held the position of President and Chief Executive
Officer of Cowlitz Bancorporation from 1992 until November 1994, at which time
he became President and Chief Operating Officer. Mr. Jarrett joined Cowlitz Bank
in 1986 and has served as President and Chief Executive Officer and as a
director since 1989.
 
     Larry M. Larson has served as a director of Cowlitz Bancorporation since
its incorporation in 1991. Mr. Larson has served as a director of Cowlitz Bank
since 1984. He served as Secretary of the Board from 1987 to 1988, Vice Chairman
from 1988 to 1990, and has served as Chairman since 1990. Mr. Larson's principal
occupation is his position as longshoreman for the Port of Longview. He also
serves in an elected position on the Port Commission for the Port of Longview.
He owns the Bridgeview Tobacco Shop located in Rainier, Oregon.
 
     Mark F. Andrews, Jr. has served as a director of Cowlitz Bancorporation
since its incorporation in 1991. He has served as a director of Cowlitz Bank
since 1988 and as Secretary of Cowlitz Bank since 1990. Mr. Andrews' principal
occupation is the management and operation of his tree farms. In addition, Mr.
Andrews serves as a court commissioner for Cowlitz County and he is also a
retired attorney.
 
     E. Chris Searing has served as a director of Cowlitz Bancorporation since
its incorporation in 1991. Mr. Searing has served as a Director of Cowlitz Bank
since 1986. He served as Secretary of the Board from 1988 to 1990 and has served
as Vice Chairman since 1990. Mr. Searing owns Searing Electric & Plumbing, Inc.
located in Longview, Washington.
 
     Donna P. Gardner has served as an executive officer for Cowlitz
Bancorporation since its incorporation in 1991 and currently holds the position
of Vice President and Secretary/Treasurer. Mrs. Gardner joined Cowlitz
 
                                       37
<PAGE>   39
 
Bank in 1981 and served as Cashier from 1989 to 1993, Vice President from 1993
to 1997 and is currently serving as Executive Vice President and Chief Financial
Officer.
 
     James A. Wills has served as Vice President of Cowlitz Bancorporation since
its incorporation in 1991. Mr. Wills joined Cowlitz Bank in 1988. He has served
as an executive officer of the Bank since 1989 and currently holds the position
of Executive Vice President and Chief Operating Officer.
 
     Each of the Company's directors is elected annually by the Company's
shareholders. All Directors hold office until the expiration of their terms and
the election and qualification of their successors.
 
COMMITTEES OF THE BOARD
 
     The Board has established an Audit Committee, a Compensation Committee and
a Board Development Committee. The Audit Committee recommends the selection of
the Company's independent auditors and consults with the independent auditors on
the Company's internal accounting controls. The Compensation Committee
recommends to the Board salaries and bonuses for the Company's executive
officers and administers the Company's Stock Option Plan and Employee Stock
Purchase Plan. The Board Development Committee identifies and recommends
potential candidates for both the Company's and the Bank's Boards of Directors.
 
DIRECTOR FEES
 
     Effective January 1, 1998, directors of the Company will receive a fee of
$900 per month except that Mr. Namatinia as Chairman of the Board will receive a
fee of $1,000 per month. Directors of the Bank receive a fee of $600 per month
and the Chairman, Mr. Larry Larson, receives a fee of $1,800 per month.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
 
     The Company's Articles of Incorporation provide that the liability of the
directors of the Company for monetary damages will be eliminated in an action
brought by or in the right of the Company for breach of a director's duties to
the Company or its shareholders except for liability in circumstances involving
(i) any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any unlawful
distribution to stockholders, or (iv) any transaction from which the director
derived an improper personal benefit. This provision does not limit or eliminate
the rights of the Company or any shareholder to seek non-monetary relief, such
as an injunction or rescission, in the event of a breach of a director's duty of
care. This provision also does not affect the director's responsibilities under
any other laws, such as the federal or state securities or environmental laws.
 
     The Articles of Incorporation also provide that the Company shall
indemnify, to the fullest extent permitted under Washington law, any person who
has been made, or is threatened to be made, a party to an action, suit or legal
proceeding by reason of the fact that the person is or was a director of the
Corporation. The Company may provide similar indemnification to officers,
employees and agents at the discretion of the Board. The Company intends to
enter into separate indemnification agreements with each of its directors. These
agreements will require the Company to indemnify its directors to the fullest
extent permitted by law, including circumstances in which indemnification would
otherwise be discretionary. Among other things, the agreements require the
Company to indemnify directors against certain liabilities that may arise by
reason of their status or service as a director and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified. The Company also has insurance on behalf of it executive officers
and directors for certain liabilities arising out of their actions in such
capacities. The Company believes that these contractual arrangements, the
provisions in its Articles of Incorporation and Bylaws and insurance coverage
are necessary to attract and retain qualified persons as directors and officers.
 
                                       38
<PAGE>   40
 
EXECUTIVE COMPENSATION
 
  Summary Compensation Table
 
     The following table sets forth the annual compensation earned during 1997
for the Company's chief executive officer and each of the Company's other
executive officers who earned in excess of $100,000 in salary and bonus during
the last fiscal year (the "Named Executive Officers").
 
<TABLE>
<CAPTION>
                                                     ANNUAL COMPENSATION
                                            --------------------------------------
                                                                     OTHER ANNUAL         ALL OTHER
       NAME AND PRINCIPAL POSITION           SALARY       BONUS      COMPENSATION      COMPENSATION(1)
------------------------------------------  --------     -------     -------------     ---------------
<S>                                         <C>          <C>         <C>               <C>
Benjamin Namatinia........................  $178,224     $20,000           --              $14,258
  Chairman and Chief Executive Officer
Charles W. Jarrett........................  $161,532     $40,975           --              $12,923
  President and Chief Operating Officer
James A. Wills............................  $ 98,556     $24,585           --              $ 7,884
  Vice President
</TABLE>
 
---------------
 
     (1) Company contribution to 401(k) Plan
 
STOCK OPTIONS
 
     The following table sets forth information concerning the award of stock
options to the Named Executive Officers during fiscal 1997:
 
                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
 
<TABLE>
<CAPTION>
                                                                                       POTENTIAL REALIZABLE
                                                                                         VALUE AT ASSUMED
                        NUMBER OF        % OF TOTAL                                    ANNUAL RATES OF STOCK
                        SECURITIES      OPTIONS/SARS                                  PRICE APPRECIATION FOR
                        UNDERLYING       GRANTED TO                                       OPTION TERM(1)
                       OPTIONS/SARS      EMPLOYEES       EXERCISE OR BASE   EXPIRATION -----------------------
        NAME           GRANTED (#)      FISCAL YEAR        PRICE ($/SH)       DATE      5%($)        10%($)
---------------------  ------------   ----------------   ----------------   --------  ----------   ----------
<S>                    <C>            <C>                <C>                <C>       <C>          <C>
Benjamin Namatinia...     192,500            50%              $ 5.71         9/30/07  $2,663,570   $4,892,370
Charles W. Jarrett...     192,500            50%              $ 5.71         9/30/07  $2,663,570   $4,892,370
James A. Wills.......          --            --                  n/a             n/a         n/a          n/a
</TABLE>
 
---------------
 
(1) Initial value of Common Stock equal to $12.00 per share, the assumed initial
    offering price of the Common Stock.
 
     The table below provides information on exercises of options during 1997 by
the Named Executive Officers and information with respect to unexercised options
held by the Named Executive Officers at December 31, 1997.
 
            AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
                       FISCAL YEAR-END OPTION/SAR VALUES
 
<TABLE>
<CAPTION>
                                                                                                 VALUE OF
                                                                     NUMBER OF SECURITIES      UNEXERCISED
                                                                          UNDERLYING           IN-THE-MONEY
                                                                         UNEXERCISED         OPTIONS/SARS AT
                                                                       OPTIONS/SARS AT       FISCAL YEAR-END
                                                                     FISCAL YEAR-END (#)           ($)
                              SHARES ACQUIRED                            EXERCISABLE/          EXERCISABLE/
            NAME              ON EXERCISE (#)    VALUE REALIZED($)      UNEXERCISABLE        UNEXERCISABLE(1)
----------------------------  ----------------   -----------------   --------------------   ------------------
<S>                           <C>                <C>                 <C>                    <C>
Benjamin Namatinia..........     --                 --                52,500/140,000        $330,225/$880,600
Charles W. Jarrett..........     --                 --                52,500/140,000        $330,225/$880,600
James A. Wills..............     --                 --                      --                      --
</TABLE>
 
---------------
 
(1) Fair market value of Common Stock equal to $12.00 per share, the assumed
    initial offering price of the Common Stock.
 
                                       39
<PAGE>   41
 
EMPLOYMENT AGREEMENTS
 
   
     Messrs. Namatinia and Jarrett will enter into employment agreements with
the Company prior to the Offering. Under the employment agreements, both Mr.
Namatinia and Mr. Jarrett will receive a base annual salary of $200,000. Mr.
Jarrett will also receive an annual cash bonus equal to the sum of five percent
(5%) of the Company's net profits in excess of a one percent (1%) Return on
Assets of the Bank ("ROA") for the calendar year and seven and one-half percent
(7.5%) of the Bank's net profits in excess of one and one-half percent (1.5%)
ROA for the calendar year. This formula was used by the Board of Directors to
determine Mr. Jarrett's bonus in 1996 and 1997. Mr. Namatinia's annual cash
bonus will be determined by the Company's Board of Directors based on the
growth, profitability and performance of the Company, the expansion of services
provided by the Company and the market value of the Company's Common Stock.
    
 
   
     The agreements will contain a covenant not to compete for a period of
eighteen months in the event of termination of employment for any reason. If
employment is terminated by the Company without cause or by death or disability,
the employee will receive a lump sum equal to three times the employee's annual
base salary for the calendar year in which such employment terminates plus the
amount of cash bonus earned prior to termination. Upon termination without
cause, the employee will receive such benefits to which he has become entitled
under the terms of the Company's 1997 Stock Option Plan and any other benefit
plan or program.
    
 
   
     Upon a change in control of the Company, if employment is terminated by the
Company without cause or by the employee for good reason within three years
after such change in control, the employee will be entitled to his full base
salary through the date of termination and a lump sum payment equal to three
times the employee's annual base salary in effect immediately prior to the
termination date. The employee will also receive such benefits to which he has
become entitled under the terms of the Company's 1997 Stock Option Plan and any
other benefit plan or program.
    
 
1997 STOCK OPTION PLAN
 
   
     The Board of Directors and the Company's shareholders have adopted the 1997
Stock Option Plan (the "1997 Plan") which authorizes up to 525,000 shares of
Common Stock for issuance thereunder. The 1997 Plan is administered by the
Compensation Committee. Under the 1997 Plan, options may be granted to the
Company's employees, directors and consultants. Only employees may receive
"incentive stock options," which are intended to qualify for certain tax
treatment; both employees and nonemployees, including nonemployee directors, may
receive "nonstatutory stock options," which do not qualify for such treatment.
The exercise price of incentive stock options under the 1997 Plan must at least
equal the fair market value of the Common Stock on the date of grant. The
exercise price of the nonstatutory options may be greater than or less than the
fair market value of the Common Stock on the date of grant at the discretion of
the Compensation Committee. All incentive stock options granted under the 1997
Plan will expire ten years from the date of grant unless terminated sooner
pursuant to the provisions of the 1997 Plan. The number of shares of Common
Stock authorized under the 1997 Plan may be adjusted upon subdivision or
consolidation of the Company including reclassification, stock split or reverse
stock split of the Company's Common Stock. In the event of a change of control
of the Company, including a merger or sale of substantially all of the Company's
assets, outstanding options and stock purchase rights must be assumed by any
successor corporation, or equivalent options or rights must be substituted, or
they will become fully vested and exercisable.
    
 
     At the date hereof, options to purchase 192,500 shares have been granted
under the 1997 Plan to each of Mr. Namatinia and Mr. Jarrett. Under the terms of
each grant, options to purchase 52,500 shares vested at the date of grant and
the remaining options vest ratably over a five year period.
 
   
EMPLOYEE STOCK PURCHASE PLAN
    
 
     The Board of Directors has adopted the Cowlitz Bancorporation Employee
Stock Purchase Plan (the "ESPP"). Commencing on July 10, 1996 and every three
months thereafter, all eligible employees are granted options to purchase shares
of the Company's Common Stock that, in the aggregate, have an exercise price
that does not exceed 15% of the employee's compensation during each Exercise
Period (a three month period that begins on the date the option is granted and
ends on the ninth day of the succeeding calendar quarter) or
 
                                       40
<PAGE>   42
 
   
$10,000 in each calendar year. The exercise price is determined by the
Compensation Committee of the Company's Board of Directors, but may not be less
than 100% of the fair market value of the Common Stock at the date of grant.
Each option not exercised during the Exercise Period expires and may not be
subsequently exercised. The maximum aggregate number of shares of Stock that may
be issued under the ESPP is 175,000 shares, subject to increases and adjustment
by the Board of Directors. At the date hereof, 33,565 shares of Common Stock
have been purchased under the ESPP.
    
 
                              CERTAIN TRANSACTIONS
 
   
     At December 31, 1997, the Company had outstanding loans to officers,
directors, their spouses, associates and related organizations in the principal
amount of $1,077,000. All such loans were made in the ordinary course of
business, have been made on substantially the same terms and conditions,
including collateral required, as comparable transactions with unaffiliated
parties and did not involve more than the normal risk of collectibility or
present other unfavorable features. Directors and executive officers are charged
the same rates of interest and loan fees as are charged to employees of the
Company, which interest rates and fees are slightly lower than charged to
non-employee borrowers. All such loans are presently in good standing and are
being paid in accordance with their terms.
    
 
                                       41
<PAGE>   43
 
                       PRINCIPAL AND SELLING SHAREHOLDERS
 
     The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company and as adjusted to reflect the sale
of shares offered hereby, with respect to (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each person who is a director or Named Executive Officer of the Company and
(iii) all directors and executive officers of the Company as a group. Each
beneficial owner has the sole power to vote and to dispose of all shares of
Common Stock owned by such beneficial owner.
 
   
<TABLE>
<CAPTION>
                                          BENEFICIAL OWNERSHIP                         BENEFICIAL OWNERSHIP
                                         PRIOR TO THE OFFERING    SHARES TO BE SOLD     AFTER THE OFFERING
                                         ----------------------        IN THE         ----------------------
       NAME OF BENEFICIAL OWNER           SHARES     PERCENTAGE      OFFERING(2)       SHARES     PERCENTAGE
---------------------------------------  ---------   ----------   -----------------   ---------   ----------
<S>                                      <C>         <C>          <C>                 <C>         <C>
Benjamin Namatinia(1)..................    580,282      21.7%              --           580,282      15.8%
Charles W. Jarrett(1)..................    264,127       9.9               --           264,127       7.2
Mark F. Andrews, Jr....................     37,065       1.4               --            37,065       1.0
Larry M. Larson........................    250,214       9.6               --           250,215       6.9
E. Chris Searing.......................     16,467         *               --            16,467         *
Donna P. Gardner.......................     44,268       1.7               --            44,268       1.2
James A. Wills.........................     99,630       3.8               --            99,631       2.8
All directors and executive officers as
  a group (7 persons)..................  1,292,053      47.4               --         1,292,053      34.7
Michael Namatinia......................    131,250       5.0%                           131,250       3.6%
Harry R. Calbom, Jr....................    122,500       4.7            8,500           114,000       3.1
Wallace C. Trotter.....................    126,105       4.8            8,500           117,605       3.2
</TABLE>
    
 
---------------
 
 *  Less than 1%.
 
(1) Includes presently exercisable options to purchase 52,500 shares each of
    Common Stock. Does not include options to purchase 140,000 shares each of
    Common Stock which vest ratably over a five year period commencing December
    31, 1998.
 
(2) The Selling Shareholders have granted the Underwriters a 30-day option to
    purchase these shares to cover over-allotments following the closing of the
    Offering.
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
   
     Upon completion of the Offering, the Company will have 3,619,796 shares of
Common Stock outstanding. The 1,000,000 shares sold in the Offering (1,150,000
shares if the Underwriters' over-allotment option is exercised in full) will be
freely tradable on the public market without restriction or further registration
under the Securities Act, except to the extent that such shares are held by an
affiliate of the Company. Of the remaining 2,619,796 outstanding shares of
Common Stock, 1,757,997 shares were issued and sold by the Company in private
transactions, and public sale thereof will be restricted except to the extent
such shares are registered under the Securities Act or sold in accordance with
an exemption from such registration. The 1,757,997 restricted shares of Common
Stock will be eligible for public sale pursuant to Rule 144 under the Securities
Act commencing 90 days after the date of this Prospectus. The holders of
1,681,605 shares have entered into agreements (the "Lock-Up Agreements") with
the Underwriters not to offer, sell or otherwise dispose of any equity
securities of the Company for 180 days after the date of this Prospectus (the
"lock-up period") without the prior written consent of Black & Company. Black &
Company may, in its sole discretion, at any time without notice, release all or
any part of the shares subject to the Lock-Up Agreements during the lock-up
period.
    
 
     In general, Rule 144, as currently in effect, provides that any person who
has beneficially owned shares for at least one year, including an "affiliate"
(as defined in Rule 144), is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) the average weekly
trading volume during the four calendar weeks preceding the sale or (ii) 1% of
the shares of Common Stock then outstanding. Sales under Rule 144 are subject to
certain manner of sale restrictions, notice requirements and availability of
current public information concerning the Company. A person who is not an
affiliate of the Company, and
 
                                       42
<PAGE>   44
 
who has not been an affiliate within three months prior to the sale, generally
may sell shares without regard to the limitations of Rule 144 provided that the
person has held such shares for a period of at least two years.
 
     Any employee, director or officer of the Company holding shares purchased
pursuant to a written compensatory plan or contract (including options) entered
into prior to the Offering is entitled to rely on the resale provisions of Rule
701, which permit nonaffiliates to sell such shares without having to comply
with the public information, holding period, volume limitations or notice
requirements of Rule 144 and permit affiliates to sell their Rule 701 shares
without having to comply with the holding period restrictions of Rule 144, in
each case commencing 90 days after the date of this Prospectus.
 
     Prior to the Offering, there has been no public market for the Common Stock
and no prediction can be made of the effect, if any, that the sale or
availability for sale of shares of Common Stock will have on the market price of
the Common Stock. Nevertheless, sales of substantial amounts of such shares in
the public market could adversely affect the market price of the Common Stock.
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The following summary description of the Company's capital stock and of
certain provisions of the Articles and Bylaws are summaries and do not purport
to be complete and are subject to and qualified in their entirety by reference
to the Articles and Bylaws, copies of which are filed as exhibits to the
Registration Statement of which this Prospectus is a part. Reference is made to
such exhibit for a detailed description of the provisions summarized below.
 
   
     The Company's authorized capital stock consists of 25,000,000 shares of
Common Stock, no par value per share, 5,000,000 shares of preferred stock, no
par value per share (the "Preferred Stock").
    
 
   
     On the date of this Prospectus, there were 2,619,796 shares of Common Stock
outstanding. Upon the closing of the Offering, there will be 3,619,796 shares of
Common Stock outstanding and no shares of Preferred Stock outstanding.
    
 
COMMON STOCK
 
     Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by the shareholders. There are no cumulative voting rights.
Accordingly, the holders of a majority of the shares of Common Stock voting for
the election of directors can elect all the directors if they choose to do so.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of the
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in all assets remaining after payment of the
Company's liabilities. Holders of Common Stock have no preemptive rights and the
Common Stock is neither redeemable nor convertible into any other securities. As
of December 31, 1997, there were 289 record holders of the Common Stock.
 
PREFERRED STOCK
 
   
     The Company is authorized to issue "blank check" Preferred Stock, which may
be issued from time to time in one or more series upon authorization by the
Company's Board of Directors. The Board of Directors, without further approval
of the shareholders, will be authorized to fix the dividend rights and terms,
conversion rights, voting rights, redemption rights and terms, liquidation
preferences, and any other rights, preferences, privileges and restrictions and
applicable to each series of the Preferred Stock. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, among other things, could adversely affect the voting
power of the holders of Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of the Company, discourage bids
for the Company's Common Stock at a premium to the prevailing market price or
otherwise adversely affect the market price of the Common Stock.
    
 
                                       43
<PAGE>   45
 
ANTITAKEOVER RESTRICTIONS
 
  STATUTORY PROVISIONS
 
     Washington law contains certain provisions that may have the effect of
delaying, deterring or preventing a change in control of the Company. Chapter
23B.19 of the WBCA prohibits the Company, with certain exceptions, from engaging
in certain significant business transactions with an "acquiring person" (defined
as a person who acquires 10% or more of the Company's voting securities without
the prior approval of the Company's Board of Directors) for a period of five
years after such acquisition. The prohibited transactions include, among others,
a merger with, disposition of assets to, or issuance or redemption of stock to
or from, the acquiring person, or otherwise allowing the acquiring person to
receive any disproportionate benefit as a shareholder. The Company may not
exempt itself from coverage of this statute. These statutory provisions may have
the effect of delaying, deterring or preventing a change in control of the
Company.
 
  ARTICLE PROVISIONS
 
   
     The Board of Directors has the authority to issue up to 5,000,000 shares of
Preferred Stock with such rights and preferences as the Board of Directors may
determine. The issuance of such shares may have the effect of delaying,
deterring or preventing a change in control of the Company. See "-- Preferred
Stock."
    
 
     The Articles do not provide for cumulative voting in the election of
directors. The Articles provide that a director may only be removed "for cause"
and only with the approval of holders of at least 75% of the Company's voting
stock. The Articles prohibit shareholders from calling a special meeting of
shareholders. A special meeting of shareholders may be called only by a majority
of the Board of Directors, the Chairman of the Board or the President.
 
     These provisions in the Articles described above make it more difficult for
shareholders, including those holding a majority of the outstanding shares to
effect an immediate change in a majority of the members of the Board of
Directors.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
     Article VII of the Articles limits the personal liability of directors to
the Company or its shareholders for monetary damages for conduct as a director
in circumstances involving (i) any breach of the director's duty of loyalty to
the Company or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) any
unlawful distribution to stockholders, or (iv) any transaction from which the
director derived an improper personal benefit. Article X of the Articles
provides that the Company shall to the full extent permitted by Washington law,
indemnify and advance or reimburse the reasonable expenses incurred by any
person made a party to a proceeding because that person is or was a director of
the Company. In addition, permits the Company's Board of Directors to indemnify
the Company's officers, employees and agents to the full extent permitted by
Washington law.
 
     The Company plans to enter indemnification agreements with its directors.
The Company has insurance on behalf of its executive officers and directors for
certain liabilities arising out of their actions in such capacities.
 
TRANSFER AGENT AND REGISTRAR
 
   
     The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
    
 
                                       44
<PAGE>   46
 
                                  UNDERWRITING
 
     The underwriters named below (the "Underwriters"), for which Black &
Company, Inc. and Pacific Crest Securities Inc. are acting as representatives
(the "Representatives"), have severally agreed, subject to the terms and
conditions set forth in the Underwriting Agreement, to purchase from the Company
the number of shares of Common Stock indicated below opposite their respective
names:
 
<TABLE>
<CAPTION>
                                                                            NUMBER OF
        UNDERWRITER                                                          SHARES
        ------------------------------------------------------------------  ---------
        <S>                                                                 <C>
        Black & Company, Inc..............................................
        Pacific Crest Securities Inc......................................
                                                                              ------
 
             Total........................................................
                                                                              ======
</TABLE>
 
     The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Common Stock listed above are subject to
the approval of certain legal matters by counsel and various other conditions.
The Underwriting Agreement also provides that the Underwriters are committed to
purchase all of the shares of Common Stock offered hereby, if any are purchased
(except for any shares that may be purchased through exercise of the
Underwriters' over-allotment option which may be exercised by the Underwriters
in whole or in part).
 
     The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the public offering price
set forth on the cover of this Prospectus and to certain dealers at such price
less a concession not in excess of $          per share. After the Offering, the
public offering price and other selling terms may be changed by the
Representatives. The Common Stock is offered subject to receipt and acceptance
by the Underwriters, and to certain other conditions, including the right to
reject orders in whole or in part.
 
     Prior to this Offering, there has been only a limited public market for the
Common Stock. Accordingly, the public offering price has been determined by
negotiation between the Company and the Representatives. Among the factors
considered in determining the public offering price were the recent bid prices
quoted by market makers in the Common Stock, the Company present and historical
results of operations, the Company's current financial condition, estimates of
the business potential and prospects of the Company, economic conditions in the
Company's market area, the experience of the Company's management, the economics
of the industry in general, the general condition of the equity markets at the
time of the Offering and other relevant factors. There can be no assurance that
an active trading market will develop for the Common Stock, that purchasers in
the Offering will be able to sell their shares at or above the Offering price,
or as to the price at which the Common Stock may trade in the public market from
time to time subsequent to the Offering.
 
     The Company and the Selling Shareholders have granted the Underwriters an
option, exercisable during the 30-day period after the date of this Prospectus,
to purchase up to 133,000 and 17,000 additional shares of Common Stock,
respectively, at the public offering price set forth on the cover page of this
Prospectus, less underwriting discounts and commissions. To the extent the
Underwriters exercise the option, each Underwriter will have a firm commitment,
subject to certain conditions, to purchase such number of additional shares of
Common Stock as is proportionate to such Underwriter's initial commitment to
purchase shares from the Company. The Underwriters may exercise such option
solely to cover over-allotments, if any, incurred in connection with the sale of
shares of Common Stock offered hereby.
 
     The Underwriting Agreement provides that the Company (and the Selling
Shareholders to the extent the Underwriters exercise the overallotment option)
has agreed to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act"),
or to contribute to payments that the Underwriters may be required to make in
respect thereof.
 
                                       45
<PAGE>   47
 
     All of the executive officers and directors of the Company and the Bank
have agreed, that, for a period of 180 days after the day on which the
Registration Statement becomes effective by order of the Commission, they will
not, without the prior written consent of Black & Company, Inc. directly or
indirectly, offer for sale, sell, contract to sell, or grant any option to sell
(including, without limitation, any short sale), pledge, establish an open
"put-equivalent position" within the meaning of Rule 16a-1(h) under the Exchange
Act, transfer, assign or otherwise dispose of any shares of the Common Stock or
securities exchangeable for or convertible into shares of the Common Stock, or
any option, warrant or other right to acquire such shares, or publicly announce
the intention to do any of the foregoing.
 
   
     During and after the offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Common Stock; and syndicate share positions involve
the sale of the Underwriters of a greater number of shares of Common Stock than
they are required to purchase from the Company in the offering. The Underwriters
also may impose a penalty bid, whereby selling concessions allowed to syndicate
members or other broker-dealers in respect of the Common Stock sold in the
offering for their account may be reclaimed by the syndicate if such securities
are repurchased by the syndicate in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Common Stock which may be higher than the price that might otherwise prevail in
the open market, and these activities, if commenced, may be discontinued at any
time. These transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise.
    
 
     Mr. Benjamin Namatinia, Chairman of the Board and Chief Executive Officer
of the Company, is the sole shareholder of Robert Thomas Securities, which is a
member of the selling group for this Offering.
 
     The Representatives have advised the Company that the Underwriters do not
intend to confirm sales of Common Stock offered by this Prospectus to any
accounts over which they exercise discretionary authority.
 
   
     The Company's Common Stock has been approved for quotation on the Nasdaq
National Market under the symbol "CWLZ."
    
 
     The foregoing is a brief summary of the provisions of the Underwriting
Agreement and does not purport to be a complete statement of its terms and
conditions. A copy of the form of Underwriting Agreement has been filed as an
exhibit to the Registration Statement.
 
                                    EXPERTS
 
   
     The consolidated financial statements of the Company as of December 31,
1997 and 1996, and for each of the years in the three year period ended December
31, 1997, included in this Prospectus and in the Registration Statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing
in giving said report.
    
 
                                 LEGAL MATTERS
 
     The validity of the Company's Common Stock being offered hereby will be
passed upon for the Company to Foster Pepper & Shefelman PLLC, Seattle,
Washington. Certain legal matters will be passed upon for the Underwriters by
Graham & Dunn PC, Seattle, Washington.
 
                                       46
<PAGE>   48
 
                             ADDITIONAL INFORMATION
 
   
     The Company has filed a registration statement on Form S-1 (together with
all amendments and exhibits thereto, the "Registration Statement") with the
Commission under the Securities Act with respect to the Common Stock being
offered hereby. This Prospectus is part of the Registration Statement. As
permitted by the rules and regulations of the Commission, this Prospectus does
not contain all of the information set forth in the Registration Statement. For
further information with respect to the Company and the Common Stock offered
hereby, reference is made to the Registration Statement. A copy of the
Registration Statement may be examined without charge at the Commission's
principal offices at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at 7 World Trade Center, Suite 1300,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of all or any part thereof may be obtained from the
Public Reference Section of the Commission upon payment of certain fees
prescribed by the Commission. Copies of such materials may also be obtained from
the website that the Commission maintains at http://www.sec.gov. Although the
Prospectus contains a discussion of the material aspects of the documents filed
as exhibits to the Registration Statement, statements contained in this
Prospectus as to the contents of any contract or other document are not
necessarily complete and, in such instance, reference is made to the copy of
such contract or document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference.
    
 
     The Company intends to furnish its shareholders with annual reports
containing financial statements audited by an independent public accounting
firm.
 
                                       47
<PAGE>   49
 
                         INDEX TO FINANCIAL STATEMENTS
 
                             COWLITZ BANCORPORATION
 
<TABLE>
<CAPTION>
                                                                                        PAGE
                                                                                        ----
<S>                                                                                     <C>
Report of Independent Public Accountants..............................................  F-2
Consolidated Balance Sheets...........................................................  F-3
Consolidated Statements of Income.....................................................  F-4
Consolidated Statements of Shareholders' Equity.......................................  F-5
Consolidated Statements of Cash Flows.................................................  F-6
Notes to Consolidated Financial Statements............................................  F-7
</TABLE>
 
                                       F-1
<PAGE>   50
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Shareholders and Board of Directors
of Cowlitz Bancorporation:
 
     We have audited the accompanying consolidated balance sheets of Cowlitz
Bancorporation (a Washington corporation) and Subsidiary as of December 31, 1997
and 1996, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cowlitz Bancorporation and
Subsidiary as of December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.
 
                                          ARTHUR ANDERSEN LLP
 
Portland, Oregon,
January 15, 1998
 
                                       F-2
<PAGE>   51
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
                          CONSOLIDATED BALANCE SHEETS
   
                           DECEMBER 31, 1996 AND 1997
    
 
   
<TABLE>
<CAPTION>
                                                                           1996         1997
                                                                         --------     --------
                                                                           (IN THOUSANDS OF
                                                                               DOLLARS)
<S>                                                                      <C>          <C>
                                            ASSETS
ASSETS:
  Cash and due from banks..............................................  $ 20,905     $ 23,109
  Investment securities:
     Investments available-for-sale (at fair value, cost of $2,001 and
      $3,993 at December 31, 1996 and 1997, respectively)..............     2,011        4,017
     Investments held-to-maturity (at amortized cost, fair value of
      $3,388 and $4,486 at December 31, 1996 and 1997, respectively)...     3,380        4,464
                                                                         --------     --------
          Total investment securities..................................     5,391        8,481
                                                                         --------     --------
  Loans................................................................   126,551      131,963
  Allowance for loan losses............................................    (1,894)      (1,970)
                                                                         --------     --------
          Loans, net...................................................   124,657      129,993
                                                                         --------     --------
  Premises and equipment, net of accumulated depreciation of $1,189 and
     $1,354 at December 31, 1996 and 1997, respectively................     4,437        5,653
  Federal Home Loan Bank stock.........................................     2,463        2,658
  Intangible asset, net of accumulated amortization of $0 and $123 at
     December 31, 1996 and 1997, respectively..........................        --        1,847
  Other assets.........................................................     1,304        1,552
                                                                         --------     --------
          Total assets.................................................  $159,157     $173,293
                                                                         ========     ========
 
                             LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
  Deposits:
     Demand............................................................  $ 16,821     $ 27,141
     Savings and interest-bearing demand...............................    30,768       46,454
     Certificates of deposit...........................................    75,708       62,614
                                                                         --------     --------
          Total deposits...............................................   123,297      136,209
  Short-term borrowings................................................       550          725
  Other liabilities....................................................       655          572
  Long-term borrowings.................................................    22,842       21,900
                                                                         --------     --------
          Total liabilities............................................   147,344      159,406
                                                                         --------     --------
 
SHAREHOLDERS' EQUITY:
  Common stock, no par value; 3,937,500 authorized; 2,590,403 and
     2,604,543 shares issued and outstanding at December 31, 1996 and
     1997, respectively................................................     3,195        3,262
  Additional paid-in capital...........................................     1,538        1,538
  Retained earnings....................................................     7,073        9,071
  Net unrealized gains on investments available-for-sale...............         7           16
                                                                         --------     --------
          Total shareholders' equity...................................    11,813       13,887
                                                                         --------     --------
          Total liabilities and shareholders' equity...................  $159,157     $173,293
                                                                         ========     ========
</TABLE>
    
 
        The accompanying notes are an integral part of these statements.
 
                                       F-3
<PAGE>   52
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
                       CONSOLIDATED STATEMENTS OF INCOME
   
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
    
 
   
<TABLE>
<CAPTION>
                                                              1995          1996          1997
                                                            ---------     ---------     ---------
                                                              (IN THOUSANDS OF DOLLARS, EXCEPT
                                                               NUMBER OF SHARES AND PER SHARE
                                                                          AMOUNTS)
<S>                                                         <C>           <C>           <C>
INTEREST INCOME:
  Interest and fees on loans..............................  $   9,954     $  12,721     $  13,700
  Interest on taxable investment securities...............        269           386           577
  Interest on nontaxable investment securities............          3             2            --
  Trading account interest................................        129            34            --
  Interest from other banks...............................        289           490           809
                                                            ---------     ---------     ---------
          Total interest income...........................     10,644        13,633        15,086
                                                            ---------     ---------     ---------
INTEREST EXPENSE:
  Savings and interest-bearing demand.....................      1,061         1,031         1,253
  Certificates of deposit.................................      2,657         3,960         4,246
  Short-term borrowings...................................        177           110            43
  Long-term borrowings....................................        653         1,073         1,401
                                                            ---------     ---------     ---------
          Total interest expense..........................      4,548         6,174         6,943
                                                            ---------     ---------     ---------
          Net interest income before provision for loan
            losses........................................      6,096         7,459         8,143
PROVISION FOR LOAN LOSSES.................................       (694)         (281)         (375)
                                                            ---------     ---------     ---------
          Net interest income after provision for loan
            losses........................................      5,402         7,178         7,768
                                                            ---------     ---------     ---------
NONINTEREST INCOME:
  Service charges on deposit accounts.....................        367           387           563
  Other income............................................        252           218           186
  Net gains (losses) on sales of securities...............        258          (309)           --
                                                            ---------     ---------     ---------
          Total noninterest income........................        877           296           749
                                                            ---------     ---------     ---------
NONINTEREST EXPENSE:
  Salaries and employee benefits..........................      1,709         2,137         2,778
  Net occupancy and equipment expense.....................        310           393           724
  Other operating expense.................................      1,074         1,152         1,782
                                                            ---------     ---------     ---------
          Total noninterest expense.......................      3,093         3,682         5,284
                                                            ---------     ---------     ---------
          Income before income tax expense................      3,186         3,792         3,233
INCOME TAX EXPENSE........................................      1,088         1,295         1,109
                                                            ---------     ---------     ---------
          Net income......................................  $   2,098     $   2,497     $   2,124
                                                            =========     =========     =========
BASIC EARNINGS PER SHARE..................................  $    0.77     $    0.90     $    0.76
DILUTED EARNINGS PER SHARE................................  $    0.77     $    0.90     $    0.76
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING.............  2,714,074     2,788,365     2,796,906
</TABLE>
    
 
        The accompanying notes are an integral part of these statements.
 
                                       F-4
<PAGE>   53
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
   
             FOR THE YEARS ENDED DECEMBER 31, 1995, 1996, AND 1997
    
 
<TABLE>
<CAPTION>
                                                                                   UNREALIZED
                                                                                    GAINS ON
                                         COMMON STOCK      ADDITIONAL              INVESTMENTS       TOTAL
                                      ------------------    PAID-IN     RETAINED   AVAILABLE-    SHAREHOLDERS'
                                       SHARES     AMOUNT    CAPITAL     EARNINGS    FOR-SALE        EQUITY
                                      ---------   ------   ----------   --------   -----------   -------------
                                      (IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
<S>                                   <C>         <C>      <C>          <C>        <C>           <C>
BALANCE AT DECEMBER 31, 1994........  1,723,733   $  985     $1,538      $2,659        $--          $ 5,182
  Issuance of common stock for
     cash...........................    861,875    2,191         --          --         --            2,191
  Net income........................         --       --         --       2,098         --            2,098
  Cash dividends paid ($.03 per
     share).........................         --       --         --         (80)        --              (80)
                                      ---------   ------     ------      ------        ---          -------
BALANCE AT DECEMBER 31, 1995........  2,585,608    3,176      1,538       4,677         --            9,391
  Issuance of common stock for
     cash...........................      4,795       19         --          --         --               19
  Net income........................         --       --         --       2,497         --            2,497
  Cash dividends paid ($.04 per
     share).........................         --       --         --        (101)        --             (101)
  Net changes in unrealized gains on
     investments available-for-sale,
     net of deferred taxes of $3....         --       --         --          --          7                7
                                      ---------   ------     ------      ------        ---          -------
BALANCE AT DECEMBER 31, 1996........  2,590,403    3,195      1,538       7,073          7           11,813
  Issuance of common stock for
     cash...........................     14,140       67         --          --         --               67
  Net income........................         --       --         --       2,124         --            2,124
  Cash dividends paid ($.05 per
     share).........................         --       --         --        (126)        --             (126)
  Net changes in unrealized gains on
     investments available-for-sale,
     net of deferred taxes of $5....         --       --         --          --          9                9
                                      ---------   ------     ------      ------        ---          -------
BALANCE AT DECEMBER 31, 1997........  2,604,543   $3,262     $1,538      $9,071        $16          $13,887
                                      =========   ======     ======      ======        ===          =======
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                       F-5
<PAGE>   54
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
   
                    FOR THE YEARS ENDED 1995, 1996 AND 1997
    
 
   
<TABLE>
<CAPTION>
                                                               1995         1996         1997
                                                             --------     --------     --------
                                                                 (IN THOUSANDS OF DOLLARS)
<S>                                                          <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income.............................................    $  2,098     $  2,497     $  2,124
  Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation and amortization.......................         152          191          557
     Provision for loan losses...........................         694          281          375
     Net losses (gains) on sales of trading securities           (258)         309           --
     Net amortization of investment security premiums and
       accretion of discounts ...........................          (4)          (3)          (2)
     (Increase) decrease in other assets.................        (446)          49         (248)
     Increase (decrease) in other liabilities............         266           87          (83)
     Federal Home Loan Bank stock dividends..............        (138)        (180)        (195)
     Purchases of trading securities.....................     (40,305)     (64,500)          --
     Sales of trading securities.........................      41,328       66,204           --
                                                               ------       ------       ------
          Net cash provided by operating activities......       3,387        4,935        2,528
                                                               ------       ------       ------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturities of investment securities
     held-to-maturity ...................................       1,970        2,860        3,784
  Purchases of investment securities:
     Available-for-sale..................................          --       (2,006)      (1,994)
     Held-to-maturity....................................      (1,663)      (2,969)      (4,857)
  Proceeds from assumption of deposit liabilities........          --           --       22,885
  Net increase in loans..................................     (31,030)     (19,038)      (5,711)
  Purchases of premises and equipment....................        (291)      (2,797)      (1,300)
                                                               ------       ------       ------
          Net cash (used in) provided by investing
            activities...................................     (31,014)     (23,950)      12,807
                                                               ------       ------       ------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase (decrease) in demand, savings and
     interest-bearing demand deposits ...................         114       (1,207)       5,536
  Net increase (decrease) in certificates of deposit.....      25,174       18,133      (17,841)
  Dividends paid.........................................         (80)        (101)        (126)
  Net increase (decrease) in short-term borrowings.......       1,275       (2,075)         175
  Net proceeds (repayment) of long-term borrowings.......       5,582       10,449         (942)
  Issuance of common stock for cash......................       2,191           19           67
                                                               ------       ------       ------
          Net cash provided by (used in) financing
            activities...................................      34,256       25,218      (13,131)
                                                               ------       ------       ------
          Net increase in cash and due from banks........       6,629        6,203        2,204
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR.............       8,073       14,702       20,905
                                                               ------       ------       ------
CASH AND DUE FROM BANKS AT END OF YEAR...................    $ 14,702     $ 20,905     $ 23,109
                                                               ======       ======       ======
CASH PAID FOR INTEREST...................................    $  4,533     $  6,143     $  6,990
                                                               ======       ======       ======
CASH PAID FOR INCOME TAXES...............................    $  1,138     $  1,245     $  1,068
                                                               ======       ======       ======
</TABLE>
    
 
        The accompanying notes are an integral part of these statements.
 
                                       F-6
<PAGE>   55
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  NATURE OF OPERATIONS
 
     Cowlitz Bancorporation (the Company) is a single bank holding company
located in southwest Washington. The Company's wholly owned subsidiary, Cowlitz
Bank (the Bank), a Washington state-chartered commercial bank, is the only
locally owned community bank in Cowlitz County and offers commercial banking
services primarily to small and medium-sized businesses, professionals and
retail customers.
 
  PRINCIPLES OF CONSOLIDATION
 
     The accompanying consolidated financial statements include the accounts of
the Company and its subsidiary, the Bank. All significant intercompany
transactions and balances have been eliminated.
 
  INVESTMENT SECURITIES
 
     Investment securities are classified as either trading, available-for-sale
or held-to-maturity. Securities are classified as held-to-maturity when the
Company has the positive intent and ability to hold those securities to
maturity. Securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities. Securities
not classified as either held-to-maturity or trading are classified as
available-for sale. Trading securities are carried at fair value. Net unrealized
gains and losses on trading securities are included in the consolidated
statements of income. Available-for-sale securities are carried at fair value
with unrealized gains and losses, net of any tax effect, added to or deducted
from shareholders' equity. Held-to-maturity securities are carried at amortized
cost.
 
  LOANS
 
   
     Interest income on simple interest loans is accrued daily on the principal
balance outstanding. Generally, no interest is accrued on loans when factors
indicate that collection of interest is doubtful or when principal or interest
payments become 90 days past due, unless collection of principal and interest is
anticipated within a reasonable period of time and the loans are well secured.
For such loans, previously accrued but uncollected interest is charged against
current earnings, and income is only recognized to the extent that payments are
subsequently received and collection of the remaining recorded investment is
probable. Loan fees are offset against operating expense to the extent that
these fees cover the direct expense of originating loans. Fees in excess of
origination costs are deferred and amortized to income over the related loan
period.
    
 
  STOCK-BASED COMPENSATION
 
   
     Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," requires disclosures about stock-based compensation
arrangements regardless of the method used to account for them. As permitted by
SFAS No. 123, the Company has opted to continue to apply the accounting
provisions of Accounting Principles Board (APB) Opinion No. 25, and therefore
discloses the difference between compensation cost included in net income and
the related cost measured by the fair-value-based method defined by SFAS No.
123, including tax effects, that would have been recognized in the income
statement if the fair-value method had been used.
    
 
  ALLOWANCE FOR LOAN LOSSES
 
     The allowance for loan losses is based on management's estimates.
Management determines the adequacy of the allowance based upon reviews of
individual loans, recent loss experience, current economic conditions, the risk
characteristics of the various categories of loans and other pertinent factors.
Actual losses may vary from the current estimates. These estimates are reviewed
periodically and are adjusted as deemed
 
                                       F-7
<PAGE>   56
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
necessary. Loans deemed uncollectible are charged to the allowance. Provisions
for loan losses and recoveries on loans previously charged off are added to the
allowance.
 
   
     A loan is impaired when, based on current information and events, it is
probable that the Company will be unable to collect all amounts due according to
the contractual terms of the loan agreement. The Company's policy is to disclose
as impaired loans all loans that are past due 90 days or more as to either
principal or interest, except for loans that are currently measured at fair
value or at the lower of cost or fair value, and residential mortgage and credit
card receivables, which are considered large groups of smaller balance
homogeneous loans that are collectively evaluated for impairment. The Company
measures impairment based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient,
impairment may be measured based on the loan's observable market price or the
fair value of the collateral if the loan is collateral dependent. Impaired loans
are charged to the allowance when management believes, after considering
economic and business conditions, collection efforts, and collateral position,
that the borrowers' financial condition is such that collection of principal is
not probable.
    
 
  PREMISES AND EQUIPMENT
 
     Premises and equipment are stated at cost less accumulated depreciation.
The provision for depreciation is computed on the straight-line method over the
estimated useful lives for the majority of the assets, which range from 3 to
39.5 years.
 
     Improvements are capitalized and depreciated over the lesser of their
estimated useful lives or the life of the lease. When property is replaced or
otherwise disposed of, the cost of such assets and the related accumulated
depreciation are removed from their respective accounts.
 
  INTANGIBLE ASSET
 
     The intangible asset is a deposit premium that is being amortized using an
accelerated method over a ten-year life.
 
  OTHER BORROWINGS
 
     Federal funds purchased and securities sold under agreements to repurchase
generally mature within one to four days from the transaction date. Other
short-term borrowed funds mature within one year from the transaction date.
Other long-term borrowed funds extend beyond one year.
 
  INCOME TAXES
 
     Income taxes are accounted for using the asset and liability method. Under
this method, a deferred tax asset or liability is determined based on the
enacted tax rates, which will be in effect when the differences between the
financial statement carrying amounts and tax bases of existing assets and
liabilities are expected to be reported in the Company's income tax returns. The
deferred tax provision for the year is equal to the net change in the deferred
tax asset or liability from the beginning to the end of the year, less amounts
applicable to the change in value related to investments available-for-sale. The
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
 
  EARNINGS PER SHARE
 
     Earnings per share computations are computed using the weighted average
number of common and dilutive common equivalent shares (stock options) assumed
to be outstanding during the period using the treasury stock method. Stock
options granted under the Company's 1997 Stock Option Plan have been
 
                                       F-8
<PAGE>   57
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
considered outstanding for all periods presented for purposes of calculating
both basic and diluted earnings per share.
 
  SUPPLEMENTAL CASH FLOW INFORMATION
 
     For the purpose of presentation in the statements of cash flows, cash and
cash equivalents are defined as those amounts in the balance sheet caption "Cash
and due from banks" and include cash on hand, amounts due from banks and federal
funds sold. Federal funds sold generally mature the day following purchase.
 
  USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS
 
     In the ordinary course of business, the Bank has entered into
off-balance-sheet financial instruments consisting of commitments to extend
credit, commitments under credit card arrangements and standby letters of
credit. Such financial instruments are recorded in the financial statements when
they become payable.
 
  RECENTLY ISSUED ACCOUNTING STANDARDS
 
     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which the Company is required to adopt for years beginning after
December 15, 1997. This statement establishes standards for reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. When adopted,
the unrealized gain or loss on available-for-sale securities will be recognized
as a component of comprehensive income.
 
  PRIOR YEAR RECLASSIFICATIONS
 
   
     Certain prior year amounts have been reclassified to conform to the current
    
year presentation.
 
                                       F-9
<PAGE>   58
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
   
2. INVESTMENT SECURITIES:
    
 
   
     The amortized cost and estimated fair values of investment securities at
December 31 are shown below:
    
 
   
<TABLE>
<CAPTION>
                                                                AVAILABLE-FOR-SALE
                                               -----------------------------------------------------
                                                                              GROSS        ESTIMATED
                                               AMORTIZED                    UNREALIZED       FAIR
                DECEMBER 31, 1997                COST                         LOSSES         VALUE
                                               ---------                    ----------     ---------
                                                               GROSS
                                                             UNREALIZED
                                                               GAINS
                                                             ----------
    <S>                                        <C>           <C>            <C>            <C>
    U.S. government and agency securities....   $ 3,993         $ 24           $ --         $ 4,017
                                                 ------         ----           ----          ------
              Total..........................   $ 3,993         $ 24           $ --         $ 4,017
                                                 ======         ====           ====          ======
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                 HELD-TO-MATURITY
                                               -----------------------------------------------------
                                                               GROSS          GROSS        ESTIMATED
                                               AMORTIZED     UNREALIZED     UNREALIZED       FAIR
                                                 COST          GAINS          LOSSES         VALUE
                                               ---------     ----------     ----------     ---------
    <S>                                        <C>           <C>            <C>            <C>
    U.S. government and agency securities....   $ 2,978         $ 22           $ --         $ 3,000
    Certificates of deposit..................     1,486           --             --           1,486
                                                 ------         ----           ----          ------
              Total..........................   $ 4,464         $ 22           $ --         $ 4,486
                                                 ======         ====           ====          ======
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                AVAILABLE-FOR-SALE
                                               -----------------------------------------------------
                                                                              GROSS        ESTIMATED
                                               AMORTIZED                    UNREALIZED       FAIR
                DECEMBER 31, 1996                COST                         LOSSES         VALUE
                                               ---------                    ----------     ---------
                                                               GROSS
                                                             UNREALIZED
                                                               GAINS
                                                             ----------
    <S>                                        <C>           <C>            <C>            <C>
    U.S. government and agency securities....   $ 2,001         $ 10           $ --         $ 2,011
                                               ---------         ---            ---        ---------
              Total..........................   $ 2,001         $ 10           $ --         $ 2,011
                                                =======      ========       ========        =======
</TABLE>
    
 
<TABLE>
<CAPTION>
                                                                 HELD-TO-MATURITY
                                               -----------------------------------------------------
                                                               GROSS          GROSS        ESTIMATED
                                               AMORTIZED     UNREALIZED     UNREALIZED       FAIR
                                                 COST          GAINS          LOSSES         VALUE
                                               ---------     ----------     ----------     ---------
    <S>                                        <C>           <C>            <C>            <C>
    U.S. government and agency securities....   $ 1,998         $  8           $ --         $ 2,006
    Certificates of deposit..................     1,382           --             --           1,382
                                                 ------         ----           ----          ------
              Total..........................   $ 3,380         $  8           $ --         $ 3,388
                                                 ======         ====           ====          ======
</TABLE>
 
   
     Gross gains of $0, $379 and $397 and gross losses of $0, $688 and $139 were
realized on sales of trading securities in 1997, 1996 and 1995, respectively.
There were no sales of available-for-sale or held-to-maturity securities.
    
 
MATURITIES OF INVESTMENTS
 
     The carrying amount and estimated fair value of debt securities by
contractual maturity at December 31, 1997, are shown below. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations.
 
   
<TABLE>
<CAPTION>
                                                     AVAILABLE-FOR-SALE          HELD-TO-MATURITY
                                                   ----------------------     ----------------------
                                                   AMORTIZED   ESTIMATED      AMORTIZED   ESTIMATED
                                                     COST      FAIR VALUE       COST      FAIR VALUE
                                                   ---------   ----------     ---------   ----------
    <S>                                            <C>         <C>            <C>         <C>
    Due in one year or less......................   $   999      $1,001        $ 1,486      $1,486
    Due after one year through five years........     2,994       3,016          2,978       3,000
                                                     ------      ------         ------      ------
              Total..............................   $ 3,993      $4,017        $ 4,464      $4,486
                                                     ======      ======         ======      ======
</TABLE>
    
 
     At December 31, 1997 and 1996, a security with a par value of $1 million
was pledged to secure the treasury, tax and loan account with the Federal
Reserve.
 
                                      F-10
<PAGE>   59
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
 3. LOANS AND ALLOWANCE FOR LOAN LOSSES:
 
     The loan portfolio as of December 31 consists of the following:
 
   
<TABLE>
<CAPTION>
                                                                       1996         1997
                                                                     --------     --------
    <S>                                                              <C>          <C>
    Commercial loans.............................................    $ 86,161     $ 93,829
    Real estate:
      Construction...............................................       3,584        3,495
      Mortgage...................................................      28,766       24,167
      Commercial.................................................       2,721        5,475
    Installment and other consumer...............................       6,016        5,571
    Contracts purchased..........................................         116           81
                                                                     --------     --------
                                                                      127,364      132,618
    Less:
      Deferred loan fees.........................................        (813)        (655)
      Allowance for loan losses..................................      (1,894)      (1,970)
                                                                     --------     --------
              Total loans, net...................................    $124,657     $129,993
                                                                     ========     ========
</TABLE>
    
 
     An analysis of the change in the allowance for loan losses for the years
ended December 31 is as follows:
 
   
<TABLE>
<CAPTION>
                                                                1995       1996       1997
                                                               ------     ------     ------
    <S>                                                        <C>        <C>        <C>
    Balance, beginning of year...............................  $1,152     $1,763     $1,894
      Provision for loan losses..............................     694        281        375
      Loans charged to the allowance.........................    (114)      (158)      (324)
      Recoveries credited to the allowance...................      31          8         25
                                                               ------     ------     ------
    Balance, end of year.....................................  $1,763     $1,894     $1,970
                                                               ======     ======     ======
</TABLE>
    
 
   
     Loans on which the accrual of interest has been discontinued amounted to
approximately $1,897, $407 and $237 at December 31, 1997, 1996 and 1995,
respectively. Interest income forgone on nonaccrual loans was approximately
$177, $41 and $1 in 1997, 1996 and 1995, respectively.
    
 
   
     At December 31, 1997 and 1996, the Company's recorded investment in certain
loans that were considered to be impaired was $2,270 and $446, respectively. Of
these impaired loans, $302 and $232 have related valuation allowances of $199
and $122, while $1,968 and $214 did not require a valuation allowance. The
balance of the allowance for loan losses in excess of these specific reserves is
available to absorb losses from all loans. The average recorded investment in
impaired loans for the years ended December 31, 1997, 1996 and 1995, was
approximately $1,300, $342, and $261, respectively. The Company's policy is to
disclose as impaired loans all loans that are past due 90 days or more as to
either principal or interest, except for loans that are currently measured at
fair value or at lower of cost or fair value, and residential mortgage and
credit card receivables, which are considered large groups of smaller
homogeneous loans and are collectively evaluated for impairment. Interest
payments received on impaired loans are recorded as interest income, unless
collection of the remaining recorded investment is not probable, in which case
payments received are recorded as a reduction of principal. For the years ended
December 31, 1997, 1996, and 1995 interest income recognized on impaired loans
totaled $36, $14, and $9, respectively, all of which was recognized on a cash
basis.
    
 
                                      F-11
<PAGE>   60
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
  4. PREMISES AND EQUIPMENT:
 
     Premises and equipment consist of the following at December 31:
 
   
<TABLE>
<CAPTION>
                                                                    1996        1997
                                                                   -------     -------
        <S>                                                        <C>         <C>
        Land.....................................................  $   583     $   633
        Buildings and improvements...............................    3,445       4,208
        Furniture and equipment..................................    1,417       2,157
        Construction in process..................................      181           9
                                                                    ------      ------
                                                                     5,626       7,007
        Accumulated depreciation.................................   (1,189)     (1,354)
                                                                    ------      ------
                  Total..........................................  $ 4,437     $ 5,653
                                                                    ======      ======
</TABLE>
    
 
     Depreciation included in net occupancy and equipment expense amounted to
$432, $191 and $152 for the years ended December 31, 1997, 1996 and 1995,
respectively.
 
  5. BORROWINGS:
 
     Short-term borrowings consist of Federal Funds purchased of $725 and $550
at December 31, 1997 and 1996, respectively.
 
     Long-term borrowings consist of the following at December 31:
 
   
<TABLE>
<CAPTION>
                                                                        1996        1997
                                                                       -------     -------
    <S>                                                                <C>         <C>
    Notes payable of the Bank to Federal Home Loan Bank; interest
      from 4.48 percent to 8.62 percent at December 31, 1997, payable
      in monthly installments plus interest, due 1998 to 2009,
      secured by certain investment securities and mortgage loans....  $21,297     $20,517
    Note payable to a bank, due January 1999; interest at prime plus
      1 percent; interest not to fall below 8.5 percent or to exceed
      14 percent (9.25 percent at December 31, 1997); principal
      payable in annual installments from $146 to $173; interest
      payable in quarterly installments, secured by bank stock.......      478         319
    Subordinated promissory notes of the Company, due February 2000;
      interest at 8.5 percent; interest payable semiannually on June
      30 and December 31.............................................    1,000       1,000
    Contract payable of the Bank to private party; interest at 9.0
      percent, payable in monthly installments plus interest through
      October 2010...................................................       67          64
                                                                       -------     -------
                                                                       $22,842     $21,900
                                                                       =======     =======
</TABLE>
    
 
     The aggregate maturities of notes payable subsequent to December 31, 1997,
are as follows:
 
<TABLE>
                    <S>                                          <C>
                    1998.......................................  $ 3,956
                    1999.......................................    2,663
                    2000.......................................    6,933
                    2001.......................................    7,283
                    2002.......................................      183
                    Thereafter.................................      882
                                                                 -------
                                                                 $21,900
                                                                 =======
</TABLE>
 
     Provisions of the note payable to a bank require maintenance of certain
operating ratios such as Tier 2 risk-based capital of not less than 2 percent
above the minimum set by the banking regulators and allowance
 
                                      F-12
<PAGE>   61
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
for loan losses of at least 1.1 percent of total loans. The note agreement also
places limitations on the Company's indebtedness and capital expenditures. The
Company was in compliance with these covenants as of December 31, 1997.
 
     The Company in whole or in part under certain circumstances may prepay the
subordinated promissory notes at any time after December 15, 1997.
 
 6. INCOME TAXES:
 
     The components of the provision for income taxes for the years ended
December 31 were as follows:
 
   
<TABLE>
<CAPTION>
                                                            1995       1996       1997
                                                           ------     ------     ------
        <S>                                                <C>        <C>        <C>
        Current........................................    $1,158     $1,274     $1,044
        Deferred.......................................       (70)        21         65
                                                           ------     ------     ------
                  Total provision for income taxes.....    $1,088     $1,295     $1,109
                                                           ======     ======     ======
</TABLE>
    
 
   
     The statutory federal income tax rate and effective tax rate of the
provision do not vary substantially.
    
 
     The tax effect of temporary differences that give rise to deferred tax
assets and deferred tax liabilities at December 31 was as follows:
 
   
<TABLE>
<CAPTION>
                                                                      1996      1997
                                                                      -----     -----
        <S>                                                           <C>       <C>
        Deferred tax assets:
          Allowance for loan losses.................................  $ 607     $ 596
          Amortization of intangible assets.........................     --        23
          Loan origination fees.....................................     56        31
          Other.....................................................      2        --
                                                                      -----     -----
                                                                        665       650
                                                                      -----     -----
        Deferred tax liabilities:
          Cash-basis adjustments....................................    (58)      (29)
          Accumulated depreciation..................................    (53)      (67)
          Federal Home Loan Bank stock dividends....................   (330)     (396)
          Unrealized gains on available-for-sale securities.........     (3)       (8)
          Other.....................................................     (2)       (1)
                                                                      -----     -----
                                                                       (446)     (501)
                                                                      -----     -----
                  Net deferred tax asset............................  $ 219     $ 149
                                                                      =====     =====
</TABLE>
    
 
 7. CERTIFICATES OF DEPOSIT:
 
     Included in certificates of deposit are certificates in denominations of
$100 or greater totaling $18,633 and $26,003 at December 31, 1997 and 1996,
respectively. Interest expense relating to certificates of deposit in
denominations of $100 or greater was $1,297, $1,360 and $719 for the years ended
December 31, 1997, 1996 and 1995, respectively.
 
 8. SHAREHOLDERS' EQUITY AND REGULATORY CAPITAL:
 
     Dividends are paid by the Company from its retained earnings, which are
principally provided through dividends and income from its subsidiary. However,
state agencies restrict the amount of funds the Company's subsidiary may
transfer to the Company in the form of cash dividends, loans or advances.
Transfers are limited by the subsidiary's retained earnings, which were $7,879
at December 31, 1997.
 
                                      F-13
<PAGE>   62
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
     The Company and the Bank are subject to various regulatory capital
requirements as established by the applicable federal or state banking
regulatory authorities. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities and certain off-balance-sheet items. The quantitative
measures for capital adequacy require the Company and the Bank to maintain
minimum amounts and ratios of total and Tier 1 capital to risk weighted assets
and of Tier 1 capital to average assets (leverage). The Company's capital
components, classification, risk weightings and other factors are also subject
to qualitative judgments by regulators. Failure to meet minimum capital
requirements can initiate certain actions by regulators that, if undertaken,
could have a material effect on the Company's financial statements. Management
believes that as of December 31, 1997, the Company and the Bank meet all minimum
capital adequacy requirements to which they are subject. The most recent
notification from the Federal Deposit Insurance Corporation categorized the Bank
as well-capitalized under the regulatory framework for prompt corrective action.
Management believes that no events or changes in conditions have occurred
subsequent to such notification to change the Bank's category.
 
     The following table presents selected capital information for the Company
(consolidated) and the Bank as of December 31, 1997 and 1996:
 
<TABLE>
<CAPTION>
                                                                                       TO BE WELL
                                                                                       CAPITALIZED
                                                                                          UNDER
                                                                                         PROMPT
                                                                   FOR CAPITAL         CORRECTIVE
                                                                    ADEQUACY             ACTION
                                                 ACTUAL             PURPOSES           PROVISIONS
                                             ---------------     ---------------     ---------------
                                             AMOUNT    RATIO     AMOUNT    RATIO     AMOUNT    RATIO
                                             -------   -----     -------   -----     -------   -----
<S>                                          <C>       <C>       <C>       <C>       <C>       <C>
As of December 31, 1997:
  Total risk-based capital:
     Consolidated..........................  $14,194   11.34%    $10,007    8.00%    $12,503   10.00%
     Bank..................................   13,852   11.09       9,994    8.00      12,993   10.00
  Tier 1 risk-based capital:
     Consolidated..........................   12,025    9.61       5,003    4.00       7,505    6.00
     Bank..................................   12,285    9.83       4,997    4.00       7,496    6.00
  Tier 1 (leverage) capital:
     Consolidated..........................   12,025    6.86       7,002    4.00       8,752    5.00
     Bank..................................   12,285    7.12       6,898    4.00       8,623    5.00
As of December 31, 1996:
  Total risk-based capital:
     Consolidated..........................   13,872   11.88       9,345    8.00      11,682   10.00
     Bank..................................   13,693   11.72       9,345    8.00      11,681   10.00
  Tier 1 risk-based capital:
     Consolidated..........................   11,806   10.11       4,673    4.00       7,009    6.00
     Bank..................................   12,228   10.47       4,672    4.00       7,008    6.00
  Tier 1 (leverage) capital:
     Consolidated..........................   11,806    7.75       6,097    4.00       7,621    5.00
     Bank..................................   12,228    8.05       6,075    4.00       7,593    5.00
</TABLE>
 
9. STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:
 
     During 1997, the Company adopted the 1997 Stock Option Plan (the 1997
Plan), which authorized up to 525,000 shares of common stock for issuance
thereunder. Under the 1997 Plan, options may be granted to the Company's
employees, directors and consultants. The exercise price of incentive stock
options under the 1997
 
                                      F-14
<PAGE>   63
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
Plan must be at least equal to the fair value of the common stock on the date of
grant. Options granted under the 1997 Plan will generally vest over a five-year
period, at the discretion of the compensation committee. All incentive stock
options granted under the 1997 Plan will expire ten years from the date of grant
unless terminated sooner pursuant to the provisions of the 1997 Plan. At
December 31, 1997, options to purchase a total of 385,000 shares have been
granted under the 1997 Plan to two executives of the Company and the Bank.
 
     The Company adopted an employee stock purchase plan during 1996. The
Company may sell up to 175,000 shares of common stock to its eligible employees
under the plan. During 1997, the Company sold 13,441 shares of stock under the
plan. The employee is granted the right to purchase the stock at a price equal
to fair value at the date of grant, as determined by the Board of Directors.
These grants are made to qualified employees each quarter and expire after 90
days, and they are therefore treated as stock options.
 
     A summary of option activity for the years ended December 31, 1997 and
1996, is as follows:
 
   
<TABLE>
<CAPTION>
                                  1996                 1996         1997                 1997
                                 COMMON              WEIGHTED      COMMON              WEIGHTED
                                 SHARES            AVERAGE PRICE   SHARES            AVERAGE PRICE
                                 -------           -------------   -------           -------------
        <S>                      <C>       <C>     <C>             <C>       <C>     <C>
        Balance, beginning of
          year.................       --               $  --        13,945               $4.29
          Granted..............   29,594                4.16       428,732                5.63
          Exercised............   (4,795)               4.06       (13,441)               4.43
          Forfeited............  (10,854)               4.06       (29,028)               4.67
        Balance, end of year...   13,945                4.29       400,208                5.69
        Exercisable, end of
          year.................   13,945                4.29       111,458                5.64
        Fair value of options
          granted..............            $0.06                             $1.49
</TABLE>
    
 
     The Company accounts for both the 1997 Plan and the Employee Stock Purchase
Plan under APB Opinion No. 25, under which no compensation cost has been
recognized. Had compensation cost for these plans been determined consistently
with FASB Statement No. 123 and recognized over the vesting period, the
Company's net income and earnings per share would have been reduced to the
following pro forma amounts:
 
   
<TABLE>
<CAPTION>
                                                                      1996       1997
                                                                     ------     ------
        <S>                                                          <C>        <C>
        Net income:
          As reported..............................................  $2,497     $2,124
          Pro forma................................................  $2,496     $2,024
        Basic earnings per share:
          As reported..............................................  $ 0.90     $ 0.76
          Pro forma................................................  $ 0.90     $ 0.72
        Diluted earnings per share:
          As reported..............................................  $ 0.90     $ 0.76
          Pro forma................................................  $ 0.90     $ 0.72
</TABLE>
    
 
   
     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model, with the following weighted-average
assumptions used for grants in 1997 and 1996: risk-free interest rate of 7.0
percent; expected dividend yield of .93 percent; and an expected volatility of
2.24 percent. Expected lives for options granted in 1997 and 1996 were 6 years
and .25 years, respectively. Due to the discretionary nature of stock option
grants, the compensation cost included in the 1997 pro forma net income per SFAS
No. 123 may not be representative of that expected in future years.
    
 
                                      F-15
<PAGE>   64
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
10. CONTINGENT LIABILITIES AND COMMITMENTS WITH OFF-BALANCE-SHEET RISK:
 
     The Company's consolidated financial statements do not reflect various
commitments and contingent liabilities of the Bank that arise in the normal
course of business and that involve elements of credit risk, interest rate risk
and liquidity risk. These commitments and contingent liabilities are commitments
to extend credit, credit card arrangements and standby letters of credit. A
summary of the Bank's undisbursed commitments and contingent liabilities at
December 31, 1997, is as follows:
 
<TABLE>
        <S>                                                                  <C>
        Commitments to extend credit.......................................  $13,362
        Credit card commitments............................................    2,748
        Standby letters of credit..........................................      479
                                                                             -------
                  Total....................................................  $16,589
                                                                             =======
</TABLE>
 
     Commitments to extend credit, credit card arrangements and standby letters
of credit all include exposure to some credit loss in the event of
nonperformance of the customer. The Bank's credit policies and procedures for
credit commitments and financial guarantees are the same as those for extension
of credit that are recorded on the consolidated balance sheets. Because these
instruments have fixed maturity dates and many of them expire without being
drawn upon, they do not generally present any significant liquidity risk to the
Bank.
 
     Most of the Bank's lending activity is with customers located in Cowlitz
County, Washington. An economic downturn in Cowlitz County would likely have a
negative impact on the Bank's results of operations, depending on the severity
of the downturn. The Bank maintains a diversified portfolio and does not have
significant on- or off-balance-sheet concentrations of credit risk in any one
industry.
 
11. BALANCES WITH THE FEDERAL RESERVE BANK:
 
     The Bank is required to maintain reserves in cash or with the Federal
Reserve Bank equal to a percentage of its reservable deposits. Required reserves
were approximately $929, $580 and $581 as of December 31, 1997, 1996 and 1995,
respectively.
 
12. RELATED-PARTY TRANSACTIONS:
 
   
     Certain directors, executive officers and their spouses, associates and
related organizations, had banking transactions with the Bank in the ordinary
course of business. All loans and commitments to loan were made on substantially
the same terms and conditions, including collateral required, as comparable
transactions with unaffiliated parties. Directors and executive officers are
charged the same rates of interest and loan fees as are charged to employees of
the Company, which interest rates and fees are slightly lower than charged to
nonemployee borrowers. The amounts of loans outstanding to directors, executive
officers, principal shareholders, and companies with which they are associated
was as follows:
    
 
   
<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                     -----------------
                                                                      1996       1997
                                                                     ------     ------
        <S>                                                          <C>        <C>
        Beginning balance..........................................  $1,393     $1,318
        Loans made.................................................     656        704
        Loan repayments made.......................................    (731)      (698)
        Other......................................................      --       (247)
                                                                     ------     ------
        Ending balance.............................................  $1,318     $1,077
                                                                     ======     ======
</TABLE>
    
 
   
     Certain directors at December 31, 1996 were no longer directors at December
31, 1997. Balances outstanding to such persons are reflected in the Other
category above.
    
 
                                      F-16
<PAGE>   65
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
     The chairman of the Company owns a securities brokerage franchise of Robert
Thomas Securities, which leases space from the Company.
 
13. EMPLOYEE BENEFIT PLAN:
 
     The Bank has a contributory retirement savings plan covering substantially
all full-time and part-time employees. The amount of the Bank's annual
contribution is at the discretion of the Board of Directors. The Bank
contributed $115 and $97 for the years ended December 31, 1997 and 1996,
respectively.
 
14. FAIR VALUES OF FINANCIAL INSTRUMENTS:
 
     SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires the disclosure of the fair value of financial instruments. A financial
instrument is defined as cash, evidence of an ownership interest in an entity,
or a contract that conveys or imposes the contractual right or obligation to
either receive or deliver cash or another financial instrument. Examples of
financial instruments included in the Company's balance sheets are cash, federal
funds sold or purchased; debt and equity securities; loans; demand, savings and
other interest-bearing deposits; notes and debentures. Examples of financial
instruments, which are not included in the Company's balance sheets, are
commitments to extend credit and standby letters of credit.
 
     Fair value is defined as the amount at which a financial instrument could
be exchanged in a current transaction between willing parties, other than in a
forced sale or liquidation, and is best evidenced by a quoted market price if
one exists.
 
     The statement requires the fair value of deposit liabilities with no stated
maturity, such as demand deposits, NOW and money market accounts, to equal the
carrying value of these financial instruments and does not allow for the
recognition of the inherent value of core deposit relationships when determining
fair value. While the statement does not require disclosure of the fair value of
nonfinancial instruments, such as the Company's premises and equipment, its
banking and trust franchises and its core deposit relationships, the Company
believes that these nonfinancial instruments have significant fair value.
 
     The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value:
 
     - Cash and due from banks -- For these short-term instruments, the carrying
       amount is a reasonable estimate of fair value.
 
     - Investment securities -- For securities held for investment purposes,
       fair values are based on quoted market prices or dealer quotes. For other
       securities, fair value equals quoted market price, if available. If a
       quoted market price is not available, fair value is estimated using
       quoted market prices for similar securities.
 
     - Loans -- For certain variable rate loans, fair value is estimated at
       carrying value, as these loans reprice to market frequently. The fair
       value of other types of loans is estimated by discounting the future cash
       flows, using the current rates at which similar loans would be made to
       borrowers with similar credit ratings and for the same remaining
       maturities.
 
     - Deposit liabilities -- The fair value of demand deposits, savings
       accounts and certain money market deposits is the amount payable on
       demand at the reporting date. The fair value of fixed-maturity
       certificates of deposit is estimated by discounting the future cash
       flows, using the rates currently offered for deposits of similar
       remaining maturities.
 
     - Short-term borrowings -- The carrying amounts of borrowings under
       repurchase agreements and short-term borrowings approximate their fair
       values.
 
                                      F-17
<PAGE>   66
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
     - Long-term borrowings -- Rates currently available to the Bank for debt
       with similar terms and remaining maturities are used to estimate the fair
       value of existing debt.
 
     - Commitments to extend credit, credit card commitments and standby letters
       of credit -- The fair values of commitments to extend credit, credit card
       commitments and standby letters of credit were not material as of
       December 31, 1997 and 1996.
 
     The estimated fair values of the Bank's financial instruments at December
31 were as follows:
 
   
<TABLE>
<CAPTION>
                                                         1996                    1997
                                                  -------------------     -------------------
                                                  CARRYING     FAIR       CARRYING     FAIR
                                                   AMOUNT     VALUE        AMOUNT     VALUE
                                                  --------   --------     --------   --------
    <S>                                           <C>        <C>          <C>        <C>
    Financial assets:
      Cash and due from banks                     $ 20,905   $20,905..    $ 23,109   $ 23,109
      Investment securities                          5,391   5,399...        8,481      8,503
      Loans, net of allowance for loan losses      124,657   124,202..     129,993    130,093
      Federal Home Loan Bank stock                   2,463   2,463...        2,658      2,658
    Financial liabilities:
      Demand                                        16,821   16,821..       27,141     27,141
      Savings and interest-bearing deposits         30,768   30,768..       46,454     46,454
      Certificates of deposit                       75,708   76,032..       62,614     62,524
      Short-term borrowings                            550   550.....          725        725
      Long-term borrowings                          22,842   22,544..       21,900     21,824
</TABLE>
    
 
15. PARENT-COMPANY-ONLY FINANCIAL DATA:
 
     The following sets forth the condensed financial information of the Company
on a stand-alone basis:
 
                             STATEMENT OF CONDITION
                                (UNCONSOLIDATED)
 
   
<TABLE>
<CAPTION>
                                                                           DECEMBER 31
                                                                       -------------------
                                                                        1996        1997
                                                                       -------     -------
    <S>                                                                <C>         <C>
    Assets:
      Cash and due from depository institutions......................  $ 1,061     $   937
      Investment in bank subsidiary..................................   12,234      14,147
      Other assets...................................................        7         156
                                                                       -------     -------
              Total assets...........................................  $13,302     $15,240
                                                                       =======     =======
    Liabilities and shareholders' equity:
      Liabilities:
         Long-term borrowings........................................  $ 1,478     $ 1,319
         Other liabilities...........................................       11          34
                                                                       -------     -------
              Total liabilities......................................    1,489       1,353
      Shareholders' equity...........................................   11,813      13,887
                                                                       -------     -------
              Total liabilities and shareholders' equity.............  $13,302     $15,240
                                                                       =======     =======
</TABLE>
    
 
                                      F-18
<PAGE>   67
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
                              STATEMENT OF INCOME
                                (UNCONSOLIDATED)
 
   
<TABLE>
<CAPTION>
                                                                  YEAR ENDED DECEMBER 31
                                                               ----------------------------
                                                                1995       1996       1997
                                                               ------     ------     ------
    <S>                                                        <C>        <C>        <C>
    Income:
      Income from subsidiaries...............................  $  238     $   56     $   54
                                                               ------     ------     ------
              Total income...................................     238         56         54
                                                               ------     ------     ------
    Expenses:
      Interest expense.......................................     148        130        116
      Other expense..........................................     245        334        353
                                                               ------     ------     ------
              Total expenses.................................     393        464        469
                                                               ------     ------     ------
              Loss before income tax benefit and equity in
                undistributed earnings of bank...............    (155)      (408)      (415)
    Income tax benefit.......................................     108        138        135
                                                               ------     ------     ------
              Net loss before equity in undistributed
                earnings of bank.............................     (47)      (270)      (280)
    Equity in undistributed earnings of bank.................   2,145      2,767      2,404
                                                               ------     ------     ------
              Net income.....................................  $2,098     $2,497     $2,124
                                                               ======     ======     ======
</TABLE>
    
 
                            STATEMENT OF CASH FLOWS
                                (UNCONSOLIDATED)
 
   
<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                                -------------------------------
                                                                 1995        1996        1997
                                                                -------     -------     -------
<S>                                                             <C>         <C>         <C>
Cash flows from operating activities:
  Net income..................................................  $ 2,098     $ 2,497     $ 2,124
  Adjustments to reconcile net income to net cash provided by
     operating activities:
       Undistributed earnings of the bank.....................   (2,145)     (2,767)     (2,404)
       Decrease (increase) in other assets....................       29          39        (149)
       Increase (decrease) in other liabilities...............       13          (5)         23
                                                                -------     -------     -------
          Net cash used by operating activities...............       (5)       (236)       (406)
                                                                -------     -------     -------
Cash flows from investing activities:
  Capital contributions to bank...............................     (500)         --          --
  Capital payments from bank..................................       --          --         500
                                                                -------     -------     -------
          Net cash (used for) provided by investing
            activities........................................     (500)         --         500
                                                                -------     -------     -------
Cash flows from financing activities:
  Net payments from long-term borrowings......................     (134)       (146)       (159)
  Proceeds from issuance of common stock......................    2,191          19          67
  Dividends paid..............................................      (80)       (101)       (126)
                                                                -------     -------     -------
          Net cash provided by (used for) financing
            activities........................................    1,977        (228)       (218)
                                                                -------     -------     -------
Net increase (decrease) in cash and cash equivalents..........    1,472        (464)       (124)
Cash and cash equivalents at beginning of year................       53       1,525       1,061
                                                                -------     -------     -------
Cash and cash equivalents at end of year......................  $ 1,525     $ 1,061     $   937
                                                                =======     =======     =======
</TABLE>
    
 
                                      F-19
<PAGE>   68
 
                     COWLITZ BANCORPORATION AND SUBSIDIARY
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   
(AMOUNTS IN THOUSANDS OF DOLLARS, EXCEPT NUMBER OF SHARES AND PER SHARE AMOUNTS)
    
 
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED):
 
<TABLE>
<CAPTION>
                                                       MARCH 31   JUNE 30   SEPTEMBER 30   DECEMBER 31
                                                       --------   -------   ------------   -----------
<S>                                                    <C>        <C>       <C>            <C>
1997
Interest income......................................   $3,594    $ 3,622      $3,919        $ 3,951
Interest expense.....................................    1,761      1,676       1,796          1,709
                                                        ------     ------      ------         ------
          Net interest income........................    1,833      1,946       2,123          2,242
Provision for loan losses............................      (91)       (98)       (111)           (75)
Noninterest income...................................      154        161         219            215
Noninterest expense..................................    1,116      1,214       1,509          1,446
                                                        ------     ------      ------         ------
          Income before income taxes.................      780        795         722            936
Provision for income taxes...........................      265        271         245            328
                                                        ------     ------      ------         ------
          Net income.................................   $  515    $   524      $  477        $   608
                                                        ======     ======      ======         ======
Basic earnings per share.............................   $  .18    $   .19      $  .17        $   .22
                                                        ======     ======      ======         ======
Diluted earnings per share...........................   $  .18    $   .19      $  .17        $   .22
                                                        ======     ======      ======         ======
1996
Interest income......................................   $3,219    $ 3,342      $3,491        $ 3,581
Interest expense.....................................    1,425      1,465       1,613          1,671
                                                        ------     ------      ------         ------
          Net interest income........................    1,794      1,877       1,878          1,910
Provision for loan losses............................      (16)       (77)        (82)          (106)
Noninterest income...................................     (138)       133         141            160
Noninterest expense..................................      907        917         931            927
                                                        ------     ------      ------         ------
          Income before income taxes.................      733      1,016       1,006          1,037
Provision for income taxes...........................      249        346         342            358
                                                        ------     ------      ------         ------
          Net income.................................   $  484    $   670      $  664        $   679
                                                        ======     ======      ======         ======
Basic earnings per share.............................   $  .17    $   .25      $  .24        $   .24
                                                        ======     ======      ======         ======
Diluted earnings per share...........................   $  .17    $   .25      $  .24        $   .24
                                                        ======     ======      ======         ======
</TABLE>
 
17. SUBSEQUENT EVENTS:
 
   
     On January 12, 1998, the Company had a 3.5-for-1 stock split. All share and
per share amounts have been restated to retroactively reflect the stock split as
well as all previous stock splits.
    
 
                                      F-20
<PAGE>   69
 
   
     IN ADDITION TO THE COWLITZ FINANCIAL CENTER LOCATED IN LONGVIEW,
WASHINGTON, COWLITZ BANK HAS FOUR FULL-SERVICE BRANCHES CONVENIENTLY LOCATED
THROUGHOUT COWLITZ COUNTY.
    
 
MAP OF WASHINGTON WITH COWLITZ COUNTY HIGHLIGHTED SHOWING THE LOCATION OF THE
COMPANY'S BRANCHES
 
   
    LIST OF COWLITZ BANK LOCATIONS: LONGVIEW (2) KELSO, KALAMA, CASTLE ROCK
    
<PAGE>   70
 
======================================================
 
  NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATING THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
 
                            ------------------------
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        -----
<S>                                     <C>
Summary...............................      3
Risk Factors..........................      6
Use of Proceeds.......................      9
Dividend Policy.......................      9
Capitalization........................     10
Dilution..............................     11
Selected Historical Financial
  Information and Other Data..........     12
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................     13
Business..............................     27
Management............................     37
Certain Transactions..................     41
Principal and Selling Shareholders....     42
Shares Eligible for Future Sale.......     42
Description of Capital Stock..........     43
Underwriting..........................     45
Experts...............................     46
Legal Matters.........................     46
Additional Information................     47
Index to Financial Statements.........    F-1
</TABLE>
    
 
                            ------------------------
 
UNTIL           , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
======================================================
======================================================
 
                                1,000,000 SHARES
 
                                      LOGO
 
                                    COWLITZ
                                 BANCORPORATION
                                  COMMON STOCK
                            ------------------------
                                   PROSPECTUS
                            ------------------------
                             BLACK & COMPANY, INC.
                         PACIFIC CREST SECURITIES INC.
                                           , 1998
======================================================
<PAGE>   71
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock offered hereby.
 
<TABLE>
        <S>                                                                 <C>
        Securities and Exchange Commission Registration Fee...............  $  4,531
        NASD Filing Fee...................................................     1,995
        Nasdaq National Market Listing Fee................................    27,500
        *Printing and Engraving Expenses..................................    40,000
        *Legal Fees and Expenses..........................................   100,000
        *Accounting Fees and Expenses.....................................   100,000
        Blue Sky Fees and Expenses (including fees of counsel)............     5,000
        Transfer Agent and Registrar Fee..................................     5,000
        Miscellaneous Expenses............................................    15,974
                                                                            --------
                  Total...................................................  $300,000
                                                                            ========
</TABLE>
 
---------------
 
* Estimated
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Article X of the Registrant's Amended and Restated Articles
of Incorporation (Exhibit 3.1 hereto) provides for indemnification of the
Registrant's directors to the maximum extent permitted by Washington law, and
also permits the Registrant's board of directors to indemnify the Registrant's
officers, employees and agents. The directors and officers of the Registrant
also may be indemnified against liability they may incur for serving in such
capacity pursuant to a liability insurance policy maintained by the Company for
such purpose.
 
     Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
Shareholders for monetary damages for acts or omissions as a director. Article
VII of the Registrant's Amended and Restated Articles of Incorporation contains
provisions implementing such limitations on a director's liability to the
Registrant and its Shareholders, except in certain circumstances involving (i)
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) any unlawful distribution to stockholders,
or (iv) any transaction from which the director derived an improper personal
benefit.
 
     The proposed form of Underwriting Agreement (Exhibit 1.1 hereto) contains
certain provisions regarding the indemnification of officers and directors of
the Registrant by the Underwriters.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion
 
                                      II-1
<PAGE>   72
 
of its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     On January 31, 1995, the Registrant sold 49,250 shares of its Common Stock
(861,875 shares post-split) to 47 individuals that were then shareholders of the
Registrant. The Registrant received $2,229,547 in the offering. These sales were
exempt under Regulation A of the Securities Act.
 
     Between October 9, 1996 and the date hereof, the Registrant has sold 33,565
shares post-split to 50 employees of the Registrant pursuant to the Cowlitz
Bancorporation Employee Stock Purchase Plan. The Registrant has received
$157,814 in this offering. The sales are exempt under Section 4(2) and Section
3(a)(11) of the Securities Act.
 
     On September 30, 1997, the Company granted to each of Benjamin Namatinia
and Charles Jarrett, executive officers of the Company, options to acquire
192,500 shares of common stock of the Company at a price of $5.71 per share. The
grant was exempt under Section 4(2) of the Securities Act.
 
     In December 1997, the Company sold 350 shares (post-split) each to two
directors of the Bank at a price of $5.71 per share. The sales were exempt under
Section 4(2) of the Securities Act.
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a) EXHIBITS
 
   
<TABLE>
<C>        <S>
 1.1       Form of Underwriting Agreement among the Registrant, the Selling Shareholders and
           the Underwriters.
 3.1*      Form of Restated and Amended Articles of Incorporation of Registrant.
 3.2*      Bylaws of Registrant.
 5.1*      Opinion of Foster Pepper & Shefelman PLLC.
10.1*      Advances Security and Deposit Agreement dated March 29, 1991 between Federal Home
           Loan Bank of Seattle and Cowlitz Bank.
10.2*      Federal Home Loan Bank of Seattle Form of Promissory Note (Credit Line Fixed Rate
           Advance).
10.3*      Federal Home Loan Bank of Seattle Promissory Note No. 75494 dated May 7, 1997
           (Cash Management Advance Credit Line).
10.4*      Promissory Note dated January 15, 1992 between Key Bank of Washington and Cowlitz
           Bancorporation.
10.5*      Form of 8 1/2% Subordinated Promissory Note due February 15, 2000.
10.6*      Purchase and Assumption Agreement dated as of March 5, 1997 between Wells Fargo
           Bank, N.A. and Cowlitz Bank.
10.7*      Lease Agreement dated October 7, 1963 between Twin City Development Co. and Bank
           of Cowlitz County.
10.8*      Assignment of Lease dated March 4, 1976 between Bank of the West and Old National
           Bank of Washington.
10.9*      Assignment of Lease dated March 30, 1979 between Old National Bank of Washington
           and Pacific National Bank of Washington.
10.10*     Extension of Lease dated April 1, 1989 between Triangle Development Company and
           First Interstate Bank of Washington, N.A.
10.11*     Employment Agreement dated January 1, 1998 between Cowlitz Bancorporation and
           Charles W. Jarrett.
</TABLE>
    
 
                                      II-2
<PAGE>   73
 
   
<TABLE>
<C>        <S>
10.12*     Employment Agreement dated January 1, 1998 between Cowlitz Bancorporation and Ben
           Namatinia.
10.13*     (Deleted)
10.14*     Cowlitz Bancorporation 1997 Stock Option Plan.
10.15*     Form of Stock Option Agreement.
10.16*     Cowlitz Bancorporation Employee Stock Purchase Plan.
11.1       Computation of Per Share Earnings.
21.1*      List of all Subsidiaries of the Registrant.
23.1       Consent of Foster Pepper & Shefelman PLLC (contained in Exhibit 5.1).
23.2       Consent of Arthur Andersen LLP.
24.1*      Power of Attorney from officers and directors (contained on signature page).
27         Financial Data Schedule.
</TABLE>
    
 
---------------
 
   
* Previously filed
    
 
ITEM 17. UNDERTAKINGS
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
     The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
 
     The undersigned Registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities
     Act, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A and contained in a
     form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     Registration Statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
                                      II-3
<PAGE>   74
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Longview, State of
Washington, on February 24, 1998.
    
 
                                          COWLITZ BANCORPORATION
 
                                          By     /s/ CHARLES W. JARRETT
                                            ------------------------------------
                                               Charles W. Jarrett, President
 
   
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
    
 
   
<TABLE>
<CAPTION>
                  SIGNATURE                                 TITLE                       DATE
---------------------------------------------  --------------------------------  ------------------
<S>                                            <C>                               <C>
 
/s/ BENJAMIN NAMATINIA*                        Chairman, Chief Executive         February 24, 1998
---------------------------------------------  Officer and Director
Benjamin Namatinia
 
/s/ CHARLES W. JARRETT                         President, Chief Operating        February 24, 1998
---------------------------------------------  Officer and Director
Charles W. Jarrett
 
/s/ DONNA P. GARDNER*                          Vice President --                 February 24, 1998
---------------------------------------------  Secretary/Treasurer (Chief
Donna P. Gardner                               Financial Officer and Principal
                                               Accounting Officer,
 
/s/ MARK F. ANDREWS, JR.*                      Director                          February 24, 1998
---------------------------------------------
Mark F. Andrews, Jr.
 
/s/ LARRY M. LARSON*                           Director                          February 24, 1998
---------------------------------------------
Larry M. Larson
 
/s/ E. CHRIS SEARING*                          Director                          February 24, 1998
---------------------------------------------
E. Chris Searing
 
         *By /s/ CHARLES W. JARRETT
---------------------------------------------
             Charles W. Jarrett
              Attorney-in-fact
</TABLE>
    
 
                                      II-4
<PAGE>   75
 
                                 EXHIBIT INDEX
 
   
<TABLE>
<CAPTION>
                                                                                     SEQUENTIALLY
EXHIBIT                                                                                NUMBERED
NUMBER                                  DESCRIPTION                                      PAGE
------   --------------------------------------------------------------------------  ------------
<C>      <S>                                                                         <C>
 1.1     Form of Underwriting Agreement among the Registrant, the Selling
         Shareholders and the Underwriters.
 3.1*    Form of Restated and Amended Articles of Incorporation of Registrant.
 3.2*    Bylaws of Registrant.
 5.1*    Opinion of Foster Pepper & Shefelman PLLC.
10.1*    Advances Security and Deposit Agreement dated March 29, 1991 between
         Federal Home Loan Bank of Seattle and Cowlitz Bank.
10.2*    Federal Home Loan Bank of Seattle Form of Promissory Note (Credit Line
         Fixed Rate Advance).
10.3*    Federal Home Loan Bank of Seattle Promissory Note No. 75494 dated May 7,
         1997 (Cash Management Advance Credit Line).
10.4*    Promissory Note dated January 15, 1992 between Key Bank of Washington and
         Cowlitz Bancorporation.
10.5*    Form of 8 1/2% Subordinated Promissory Note due February 15, 2000.
10.6*    Purchase and Assumption Agreement dated as of March 5, 1997 between Wells
         Fargo Bank, N.A. and Cowlitz Bank.
10.7*    Lease Agreement dated October 7, 1963 between Twin City Development Co.
         and Bank of Cowlitz County.
10.8*    Assignment of Lease dated March 4, 1976 between Bank of the West and Old
         National Bank of Washington.
10.9*    Assignment of Lease dated March 30, 1979 between Old National Bank of
         Washington and Pacific National Bank of Washington.
10.10*   Extension of Lease dated April 1, 1989 between Triangle Development
         Company and First Interstate Bank of Washington, N.A.
10.11*   Employment Agreement dated January 1, 1998 between Cowlitz Bancorporation
         and Charles W. Jarrett.
10.12*   Employment Agreement dated January 1, 1998 between Cowlitz Bancorporation
         and Ben Namatinia.
10.13*   (Deleted)
10.14*   Cowlitz Bancorporation 1997 Stock Option Plan.
10.15*   Form of Stock Option Agreement.
10.16*   Cowlitz Bancorporation Employee Stock Purchase Plan.
11.1     Computation of Per Share Earnings.
21.1*    List of all Subsidiaries of the Registrant.
23.1*    Consent of Foster Pepper & Shefelman PLLC (contained in Exhibit 5.1).
23.2     Consent of Arthur Andersen LLP.
24.1*    Power of Attorney from officers and directors (contained on signature
         page).
27       Financial Data Schedule.
</TABLE>
    
 
---------------
 
   
* Previously filed