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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


FORM 10-K

[X] Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934


For the fiscal year ended December 31, 2003

Commission file number 0-10997

WEST COAST BANCORP

(Exact name of registrant as specified in its charter)


|                                                                      |  |                                                
|--------------------------------------------------------------------- |  | -----------------------------------------------
|Oregon
(State or other jurisdiction of
incorporation or organization) |  | 93-0810577
(I.R.S. Employer
Identification No.)

|                                                                                           |  |                 
|------------------------------------------------------------------------------------------ |  | ----------------
|5335 Meadows Road  Suite 201
Lake Oswego, Oregon
(Address of principal executive offices) |  | 97035
(Zip Code)

Registrants telephone number, including area code: (503) 684-0884

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, No Par Value

(Title of Class)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

The approximate aggregate market value of Registrants Common Stock held
by non-affiliates of the Registrant on June 30, 2003, was $273,064,000.

The number of shares of Registrants Common Stock outstanding on January
31, 2004, was 15,076,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the West Coast Bancorp Definitive Proxy Statement for the 2004
annual meeting of shareholders are incorporated by reference into Part III of
this Form 10-K.





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|                                     |                                                                                                          |  |  |  |  |  |  | 
|------------------------------------ | -------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Forward Looking Statement Disclosure
|PART I                              
|                                     | ITEM 1. BUSINESS                                                                                        
|                                     | ITEM 2. PROPERTIES                                                                                      
|                                     | ITEM 3. LEGAL PROCEEDINGS                                                                               
|                                     | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                             
|PART II                             
|                                     | ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                       
|                                     | ITEM 6. SELECTED FINANCIAL DATA                                                                         
|                                     | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS           
|                                     | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                     
|                                     | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                     
|                                     | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE            
|                                     | ITEM 9A. CONTROLS AND PROCEDURES                                                                        
|PART III                            
|                                     | ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                             
|                                     | ITEM 11. EXECUTIVE COMPENSATION                                                                         
|                                     | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK HOLDER MATTERS
|                                     | ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                 
|                                     | ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES                                                         
|PART IV                             
|                                     | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                               
|SIGNATURES                          
|INDEX TO EXHIBITS                   
|EXHIBIT 3.1                         
|EXHIBIT 3.2                         
|EXHIBIT 10.2                        
|EXHIBIT 10.3                        
|EXHIBIT 10.4                        
|EXHIBIT 10.5                        
|EXHIBIT 10.6                        
|EXHIBIT 10.18                       
|EXHIBIT 10.19                       
|EXHIBIT 10.20                       
|EXHIBIT 10.21                       
|EXHIBIT 10.22                       
|EXHIBIT 21                          
|EXHIBIT 23                          
|EXHIBIT 31.1                        
|EXHIBIT 31.2                        
|EXHIBIT 32                          



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Table of Contents

|                  |  |                                                                                                |    |  |    |      |  | 
|----------------- |  | ---------------------------------------------------------------------------------------------- | -- |  | -- | ---- |  | 
|                  |  |                                                                                                |    |  |    | PAGE
|                  |  |                                                                                                |    |  |    |     
|PART I            |  |                                                                                                |    |  |    |      |  | 
|                  |  | Forward Looking Statement Disclosure                                                           |    |  | 2  |     
|Item 1.           |  | Business                                                                                       |    |  | 3  |     
|Item 2.           |  | Properties                                                                                     |    |  | 9  |     
|Item 3.           |  | Legal Proceedings                                                                              |    |  | 9  |     
|Item 4.           |  | Submission of Matters to a Vote of Security Holders                                            |    |  | 9  |     
|PART II           |  |                                                                                                |    |  |    |      |  | 
|Item 5.           |  | Market for the Registrant's Common Equity and Related Stockholder Matters                      |    |  | 10 |     
|Item 6.           |  | Selected Financial Data                                                                        |    |  | 11 |     
|Item 7.           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations          |    |  | 13 |     
|Item 7A.          |  | Quantitative and Qualitative Disclosures about Market Risk                                     |    |  | 29 |     
|Item 8.           |  | Financial Statements and Supplementary Data                                                    |    |  | 31 |     
|Item 9.           |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |    |  | 61 |     
|Item 9A.          |  | Controls and Procedures                                                                        |    |  | 61 |     
|PART III          |  |                                                                                                |    |  |    |      |  | 
|Item 10.          |  | Directors and Executive Officers of the Registrant                                             |    |  | 61 |     
|Item 11.          |  | Executive Compensation                                                                         |    |  | 61 |     
|Item 12.          |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |    |  | 62 |     
|Item 13.          |  | Certain Relationships and Related Transactions                                                 |    |  | 62 |     
|Item 14.          |  | Principal Accountant Fees and Services                                                         |    |  | 62 |     
|PART IV           |  |                                                                                                |    |  |    |      |  | 
|Item 15.          |  | Exhibits, Financial Statement Schedules and Reports on Form 8-K                                |    |  | 63 |     
|Signatures        |  |                                                                                                | 64 | 
|Index to Exhibits |  |                                                                                                | 65 | 

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Forward Looking Statement Disclosure

Statements in this Annual Report regarding future events or performance
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (PSLRA) and are made pursuant to the safe
harbors of the PSLRA. Actual results of West Coast Bancorp (Bancorp or the
Company) could be quite different from those expressed or implied by the
forward-looking statements. Any statements that expressly or implicitly
predict future results, performance, or events should be considered
forward-looking. Factors that could cause results to differ from
forward-looking statements include, among others, risks discussed in the text
of this Annual Report as well as the following specific items: general
economic conditions, whether national or regional, that could affect the demand
for loans or lead to increased loan losses; evolving banking industry
standards; legal developments; competitive factors, including increased
competition with community, regional, and national financial institutions that
may lead to pricing pressures on Bancorps loan yield and rates paid on
deposits; loss of customers of greatest value to Bancorp, changing customer
investment, deposit and lending behaviors; credit policies of regulatory
authorities, increasing or decreasing interest rate environments, including the
shape and the level of the yield curve, that could lead to decreased net
interest margin, net interest income and fee income, including lower gains on
sales of loans; changing business conditions in the banking industry; changes
in the regulatory environment or new legislation affecting the financial
services industry; changes in government funding of Small Business
Administration (SBA) loans; and changes in technology or required investments
in technology.

Furthermore, the forward-looking statements are subject to risks and
uncertainties related to the Companys ability to: attract and retain
additional lending officers and other key personnel; close loans in the
pipeline; generate loan and deposit balances at projected spreads; sustain fee
generation, including lower gains on sales of loans; maintain asset quality;
control the level of net charge-offs; increase productivity; generate retail
investments; control expense growth; monitor and manage the Companys internal
operating and disclosure control environments; and other matters.

Readers are cautioned not to place undue reliance on forward-looking
statements, which reflect managements analysis only as of the date of the
statements. Readers should carefully review the disclosures we file from time
to time with the Securities and Exchange Commission (SEC). Bancorp
undertakes no obligation to publicly revise or update forward-looking
statements to reflect events or circumstances that arise after the date of this
report.

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PART I
ITEM 1. BUSINESS

General

Bancorp is a bank holding company, originally organized under the laws of
the state of Oregon in 1981 under the name Commercial Bancorp. Commercial
Bancorp merged with West Coast Bancorp, a one-bank holding company based in
Newport, Oregon, on February 28, 1995. The combined corporation retained the
name West Coast Bancorp, and moved its headquarters to Lake Oswego, Oregon.
References in this report to we, us, or our refer to Bancorp.

Bancorps principal business activities are conducted through its
full-service, commercial bank subsidiary West Coast Bank (the Bank), an
Oregon state-chartered bank with deposits insured by the Federal Deposit
Insurance Corporation (FDIC). At December 31, 2003, the Bank had facilities
in 36 cities and towns in western Oregon and western Washington, operating a
total of 44 full-service and three limited-service branches and a mortgage
office in Bend, Oregon. Bancorp also owns West Coast Trust Company, Inc.
(WCT or West Coast Trust), an Oregon trust company that provides agency,
fiduciary and other related trust services. The market value of assets managed
for others at December 31, 2003 totaled $294.6 million.

Bancorps net income for 2003 was $19.8 million, or $1.26 per diluted
share, and its consolidated equity at December 31, 2003, was $140.1 million,
with 15.1 million common shares outstanding and a book value of $9.29 per
share. Net loans of $1.2 billion at December 31, 2003, represented
approximately 72.3% of total assets of $1.7 billion. Bancorp had deposits
totaling $1.4 billion at December 31, 2003. For more information regarding
Bancorps financial results, see Managements Discussion and Analysis of
Financial Condition and Results of Operations and Financial Statements and
Supplementary Data, contained in this report.

Bancorp is committed to community banking and intends West Coast Bank to
remain community-focused. Bancorps strategic vision includes greater
commercial banking market penetration, as well as expanded distribution
capability in the Pacific Northwest. The Bank intends to grow its distribution
and reach through development of new branch locations in key growth markets.
Consistent with that strategy, we opened 2 new branches in Portland, Oregon and
one branch in Eugene, Oregon, during 2003. We also opened a mortgage office in
Bend, Oregon. In addition to internal growth, Bancorp will continue to seek
acquisition opportunities with other community banks that share its business
philosophies.

Bancorps filings with the SEC, including its annual report on Form 10-K,
quarterly reports on Form 10-Q, periodic reports on Form 8-K and amendments to
these reports, are accessible free of charge at our website at
http://www.wcb.com as soon as reasonably practicable after filing with the SEC.
By making this reference to our website, we do not intend to incorporate into
this report all information contained in the website. The website should not
be considered part of this report.

The SEC maintains a website at http://www.sec.gov that contains reports,
proxy and information statements, and other information regarding issuers
including the Company that file electronically with the SEC.

Subsidiaries

West Coast Bank

The Bank was organized in 1925 under the name The Bank of Newport, and
its head office is currently located in Lake Oswego, Oregon. The Bank resulted
from the merger on December 31, 1998, of the Bank of Newport of Newport,
Oregon, The Commercial Bank of Salem, Oregon, Bank of Vancouver of Vancouver,
Washington, and Centennial Bank of Olympia, Washington, into a single entity,
which was named West Coast Bank.

The Bank conducts business through 47 branches located in western Oregon
and southwestern Washington. The Oregon branches are located in the following
cities and towns: Beaverton, Canby, Clackamas, Dallas, Depoe Bay, Eugene,
Forest Grove, Hillsboro (2), Keizer (3), King City, Lake Oswego, Lincoln City,
McMinnville, Molalla, Monmouth, Newberg, Newport (2), North Plains, Portland
(4), Salem (4), Silverton, Stayton, Sublimity, Tigard, Toledo, Waldport,
Wilsonville, and Woodburn. The Banks Washington branches are located in
Centralia, Chehalis, Hoodsport, Lacey, Olympia (2), Shelton, and Vancouver (2).

The primary business strategy of the Bank is to provide comprehensive
banking and related financial services tailored to individuals, professionals,
and small to medium-sized businesses. The Bank emphasizes the diversity of its
product lines and convenient access typically associated with larger financial
organizations, while maintaining the local decision making authority, market
knowledge, and customer service orientation of a community bank. The Bank has
significant focus on four targeted segments: 1) high value consumers
(including the mature market), 2) smaller businesses with credit needs under
$250,000, 3) medium-sized commercial businesses with credit needs over $250,000
up to $20 million, and 4) commercial real estate and construction-related
businesses.

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For consumer banking customers, the Bank offers a variety of flexible
checking and savings plans, as well as competitive borrowing products,
including lines of credit, home equity loans, mortgages, credit cards, and
other types of consumer loans. Customers have access to the Banks products
through a variety of convenient channels such as 24 hour a day, 7 days a week
automated phone or Internet access, and through ATMs (both shared and
proprietary networks), and our 47 branch locations.

For business banking customers, the Bank offers tailored deposit plans,
packaged checking with sophisticated, Internet-based cash management and a full
array of investment services all with online and/or CD-ROM information
reporting. Customized financing packages for commercial, commercial real
estate and construction purposes are developed from a suite of loan offerings,
including: Short-to-intermediate term loans, receivable and inventory
financing, equipment leasing, revolving lines-of-credit, SBA loans, business
VISA credit cards, and other types of credit. The Banks portfolio has some
concentration in real estate-secured loans, construction loans, and
agricultural and light manufacturing-related businesses.

The principal office of the Bank is at 5335 Meadows Road, Suite 201, Lake
Oswego, OR 97035 (503) 684-0884.

West Coast Trust

West Coast Trust provides trust services to individuals, partnerships,
corporations, and institutions. WCT acts as fiduciary of estates and
conservatorships, and as a trustee under various wills, trusts, and pension and
profit-sharing plans. Annuity products and services are available and offered
through a third party broker-dealer with offices at certain bank branches. The
main office of WCT is located at 301 Church Street, Salem, OR 97301 (503)
399-2993.

Totten, Inc.

Totten, Inc., a Washington corporation, serves as trustee under deeds of
trust and holds certain real estate licenses.

Centennial Funding Corporation

Centennial Funding Corporation, a Washington corporation, is an
FHA-approved mortgage lender that can make home loans and residential
development loans.

ELD, Inc.

ELD, Inc, a Washington corporation incorporated by Centennial Bank in
October, 1990, conducts real estate reconveyances.

West Coast Statutory Trusts I, II, and III

West Coast Statutory Trusts I, II and III are wholly-owned subsidiary
trusts of Bancorp formed to facilitate the issuance of Pooled Trust Preferred
Securities (trust preferred securities). The trusts were organized November
27, 2001, June 26, 2002, and September 17, 2003, respectively, in connection
with three offerings of trust preferred securities. For more information
regarding Bancorps issuance of trust preferred securities, see Footnote 7
Junior Subordinated debentures and mandatorily redeemable trust preferred
securities, included in this report.

Employees

At December 31, 2003, Bancorp and its subsidiaries had approximately 658
employees. None of these employees are represented by labor unions and
management believes that Bancorps relationship with its employees is good. A
number of benefit programs are available to eligible employees, including group
medical plans, paid sick leave, paid vacation, group life insurance, a 401(k)
plan and a stock incentive plan. Employees are also eligible to purchase
Bancorps common stock through direct payroll deductions under the Companys
dividend reinvestment plan. In addition, bank owned life insurance, a deferred
compensation plan and supplemental retirement benefits are available to certain
officers and executives in Bancorp.

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Competition

Commercial banking in the state of Oregon and southwest Washington is
highly competitive with respect to providing banking services, including
making loans and attracting deposits. The Bank competes with other banks, as
well as with savings and loan associations, savings banks, credit unions,
mortgage companies, investment banks, insurance companies, securities
brokerages, and other financial institutions. Banking in Oregon and Washington
is dominated by several significant banking institutions, including U.S. Bank,
Wells Fargo Bank, Bank of America, and Washington Mutual Bank, which together
account for a majority of the total commercial and savings bank deposits in
Oregon and Washington. These competitors have significantly greater financial
resources and offer a greater number of branch locations (with statewide branch
networks), higher lending limits, and a variety of services not offered by the
Bank. Bancorp has attempted to offset some of the advantages of the larger
competitors by arranging participations with other banks for loans above its
legal lending limits, as well as leveraging technology and third party
arrangements to better compete in targeted customer segments. Bancorp has
positioned itself successfully as a local alternative to banking conglomerates
that may be perceived by customers or potential customers to be impersonal,
out-of-touch with the community, or simply not interested in providing banking
services to some of Bancorps target customers.

In addition to larger institutions, numerous community banks have been
formed or moved into Bancorps market areas and have developed a similar focus
to Bancorp. These institutions have further increased competition,
particularly in the Portland metropolitan area where Bancorp has enjoyed
significant recent growth and focused much of its expansion efforts. This
growing number of similar banks and an increased focus by larger institutions
on the Banks market segments in response to declining market perception and/or
market share has led to intensified competition in all aspects of Bancorps
business.

The adoption of the Gramm-Leach-Bliley Act of 1999 (the Financial
Services Modernization Act) has led to further intensification of competition
in the banking industry. The Financial Services Modernization Act has
eliminated many of the barriers to affiliation among providers of various types
of financial services and has permitted business combinations among financial
service providers such as banks, insurance companies, securities or brokerage
firms, and other financial service providers. Additionally, the rapid adoption
of financial services through the Internet has reduced or even eliminated many
barriers to entry by financial services providers physically located outside
our market area. Although Bancorp has been able to compete effectively in the
financial services business in its markets to date, there can be no assurance
that it will be able to continue to do so in the future.

The financial services industry has experienced widespread consolidation
over the last decade. Bancorp anticipates that consolidation among financial
institutions in its market area will continue. As noted, Bancorp seeks
acquisition opportunities in its core markets from time to time. However,
other financial institutions aggressively compete against Bancorp in the
acquisition market. Some of these institutions have greater access to capital
markets, larger cash reserves and a more liquid currency than Bancorp.

Supervision and Regulation

Introduction

We are subject to extensive regulation under federal and state law. These
laws and regulations are primarily intended to protect depositors, not
shareholders. Changes in applicable laws or regulations or in the policies of
banking and other government regulators may have a material effect on our
business and prospects. The following is a brief description of the
significant laws and regulations that govern our activities.

Bank Holding Company Regulation

General.As a bank holding company, Bancorp is subject to the Bank Holding
Company Act of 1956, as amended (the BHCA), which places Bancorp under the
supervision of the Board of Governors of the Federal Reserve System (the
Federal Reserve). Bancorp must file annual reports with the Federal Reserve
and must provide it with such additional information as it may require. In
addition, the Federal Reserve periodically examines Bancorp and its
subsidiaries, including the Bank.

The BHCA, among other things, requires that bank holding companies obtain
prior Federal Reserve approval before they: (1) acquire direct or indirect
ownership or control of any voting shares of any bank that results in total
ownership or control, directly or indirectly, of more than 5% of the voting
shares of such bank; (2) merge or consolidate with another bank holding
company; or (3) acquire substantially all of the assets of another bank or bank
holding company. Furthermore, under the BHCA, bank holding companies are, with
narrow exceptions, limited to owning or controlling banks and engaging in
banking-related activities.

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Control of Nonbanks. With some exceptions, the BHCA also prohibits bank
holding companies from acquiring direct or indirect ownership or control of
more than 5% of the voting shares in any company that is not a bank or a bank
holding company unless the Federal Reserve determines that the activities of
such company are incidental or closely related to the business of banking. If
a bank holding company is well-capitalized and meets certain criteria specified
by the Federal Reserve, it may engage in certain permissible nonbanking
activities without prior Federal Reserve approval.

Support of Subsidiary Banks.Bank holding companies must act as a source
of financial and managerial strength to subsidiary banks. This means that
Bancorp is required to commit, as necessary, resources to support the Bank.
Under certain conditions, the Federal Reserve may conclude that certain actions
of a bank holding company, such as payment of cash dividends, would constitute
unsafe and unsound banking practices. Also, capital loans from a bank holding
company to its subsidiary banks are subordinate to deposits and to certain
other indebtedness of the banks.

Financial Services Modernization Act. The Gramm-Leach-Bliley Act of 1999
(the Financial Services Modernization Act) came into effect in March 2000.
The Financial Services Modernization Act established a comprehensive framework
to enable previously prohibited affiliations among bank holding companies,
securities firms and insurance companies. The law allows bank holding
companies to elect financial holding company status and, after approval
thereof, to affiliate with insurance companies, securities firms, and other
financial service providers engaged in activities that are financial in
nature. To date, we have not elected to become a financial holding company.

The Financial Services Modernization Act and related regulations also:

     Broadened the activities that may be conducted by national banks, and by
banking subsidiaries of bank holding companies and their financial
subsidiaries;

     Created an enhanced framework for protecting the privacy of consumer
information and limited the ability of banks and other financial institutions
to disclose nonpublic information about consumers to nonaffiliated third
parties; and

     Modified certain laws and regulations relating to the Community
Reinvestment Act (the CRA).

We do not believe that the Financial Services Modernization Act has
negatively affected our operations in the near-term. However, to the extent
that the financial services industry further consolidates, we may face
increased competition from larger institutions with substantially greater
resources and a wider variety of financial product offerings than we have.

Transactions with Affiliates.Subsidiary banks of a bank holding company
are subject to certain restrictions under the Federal Reserve Act on
transactions with affiliates generally and in particular on extensions of
credit to the parent holding company or any affiliate, investments in the
securities of the parent, and on the use of such securities as collateral for
loans to any borrower. Regulation W, which codified many existing
interpretations of provisions of the Federal Reserve Act, became effective in
April 2003. The regulation restricts loans, asset purchases and other
transactions between a depository institution and its affiliated entities. The
various regulations and restrictions that apply may limit our ability to obtain
funds from the Bank for our cash needs, including funds for payment of
dividends and operational expenses.

Bank Regulation

General.The Bank is an Oregon commercial bank operating in Oregon and
Washington with deposits insured by the FDIC in an amount up to $100,000 per
customer. As a result, the Bank is subject to supervision and regulation by
the Oregon Department of Consumer and Business Services, the Washington
Department of Financial Institutions, and the FDIC. These agencies have the
authority to prohibit banks from engaging in what they believe to be unsafe or
unsound banking practices.

Insider Credit Transactions.Banks are subject to certain restrictions
imposed by the Federal Reserve Act on extensions of credit to executive
officers, directors, principal stockholders or any related interests of such
persons. Extensions of credit (1) must be made on substantially the same
terms, including interest rates and collateral, as, and follow credit
underwriting procedures that are not less stringent than, those prevailing at
the time for comparable transactions with persons not listed above and who are
not employees, and (2) must not involve more than the normal risk of repayment
or present other unfavorable features. Banks are also subject to certain
lending limits and restrictions on overdrafts to insiders. A violation of
these restrictions may result in the assessment of substantial civil monetary
penalties, the imposition of a cease and desist order, and other regulatory
sanctions. The prohibition contained in the Sarbanes-Oxley Act of 2002 on
loans to directors, executive officers and major stockholders of pubic
companies does not apply to loans by FDIC insured depository institutions, such
as the Bank.

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Regulation of Management.Federal law (1) sets forth circumstances under
which officers or directors of a bank may be removed by the institutions
federal supervisory agency; (2) places restraints on lending by a bank to its
executive officers, directors, principal stockholders, and their related
interests; and (3) prohibits management personnel of a bank from serving as a
director or in other management positions of another financial institution
whose assets exceed a specified amount or which has an office within a
specified geographic area.

Premiums for Deposit Insurance.The Bank is required to pay quarterly
deposit insurance premiums to the FDIC. Premiums are based on how much risk a
particular institution presents to the Bank Insurance Fund. Banks with higher
levels of capital and a low degree of supervisory concern are assessed lower
premiums than banks with lower levels of capital or a higher degree of
supervisory concern. The Bank presently qualifies for the lowest premium
level.

Community Reinvestment Act and Fair Lending and Reporting Requirements.
We are subject to the CRA and to certain fair lending and reporting
requirements that relate primarily to home mortgage lending operations. The
CRA generally requires the federal banking agencies to evaluate the record of a
financial institution in meeting the credit needs of its local communities,
including low- and moderate-income neighborhoods, consistent with the safe and
sound operation of the institution. The federal banking agencies may take into
account compliance with the CRA when regulating and supervising other
activities, such as evaluating mergers, acquisitions and applications to open a
branch or facility. In connection with its assessment of CRA performance, the
FDIC assigns a rating of outstanding, satisfactory, needs to improve or
substantial noncompliance.

There are several rules and regulations governing fair lending and
reporting practices by financial institutions. A bank may be subject to
substantial damages, penalties and corrective measures for any violation of
fair lending and reporting, including credit reporting, laws and regulations.

FDICIA.Under the Federal Deposit Insurance Corporation Improvement Act
(FDICIA), each federal banking agency has prescribed, by regulation,
non-capital safety and soundness standards for institutions under its
authority. These standards cover internal controls, information systems and
internal audit systems, loan documentation, credit underwriting, interest rate
exposure, asset growth, compensation, fees and benefits, such other operational
and managerial standards as the agency determines to be appropriate, and
standards for asset quality, earnings and stock valuation. An institution
which fails to meet these standards must develop a plan acceptable to the
agency, specifying the steps that the institution will take to meet the
standards. Failure to submit or implement such a plan may subject the
institution to regulatory sanctions. Management believes that the Bank
currently satisfies all such standards.

Capital Adequacy

Federal bank regulatory agencies use capital adequacy guidelines in the
examination and regulation of bank holding companies and banks. If capital
falls below minimum guideline levels, the bank holding company or bank may be
denied approval to acquire or establish additional banks or non-bank businesses
or to open new facilities.

The FDIC and Federal Reserve use risk-based capital guidelines for banks
and bank holding companies. Risk-based guidelines are designed to make capital
requirements more sensitive to differences in risk profiles among banks and
bank holding companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Assets and off-balance sheet
items are assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items. The guidelines are minimums,
and the Federal Reserve may require that a banking organization maintain ratios
in excess of the minimums, particularly organizations contemplating significant
expansion. Current guidelines require all bank holding companies and
federally-regulated banks to maintain a minimum risk-based total capital ratio
equal to 8%, of which at least 4% must be Tier I capital. Tier I capital for
bank holding companies includes common stockholders equity, qualifying
preferred stock and minority interests in equity accounts of consolidated
subsidiaries, minus specified intangibles and accumulated other comprehensive
income (loss).

The Federal Reserve also employs a leverage ratio, which is Tier I capital
as a percentage of total assets minus intangibles, to be used as a supplement
to risk-based guidelines. The principal objective of the leverage ratio is to
constrain the maximum degree to which a bank holding company may leverage its
equity capital base. The Federal Reserve requires a minimum leverage ratio of
3%. However, for all but the most highly rated bank holding companies and for
bank holding companies seeking to expand, the Federal Reserve expects an
additional cushion of at least 1% to 2%.

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FDICIA, among other things, created a statutory framework of supervisory
actions indexed to the capital level of the individual institution. Under
regulations adopted by the FDIC, an institution is assigned to one of five
capital categories  well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized  depending on its total risk-based capital ratio, Tier I
risk-based capital ratio, and leverage ratio, together with certain subjective
factors. Institutions which are deemed to be undercapitalized depending on
the category to which they are assigned are subject to certain mandatory
supervisory corrective actions. Under current regulations, a
well-capitalized institution must have a Tier 1 risk-based capital ratio of
at least 6%, a total risk-based capital ratio of at least 10%, and a leverage
ratio of at least 5% and not be subject to a capital directive order. Under
these guidelines, Bancorp is considered well capitalized as of the end of the
fiscal year.

Dividends

The principal source of Bancorps cash reserves is dividends received from
the Bank. The banking regulators may prohibit banks and bank holding companies
from paying dividends that would constitute an unsafe or unsound banking
practice. In addition, banks and bank holding companies may not pay cash
dividends if doing so would reduce the amount of its capital below that
necessary to meet minimum applicable regulatory capital requirements. Oregon
law also limits the ability of Bancorp and the Bank to pay dividends. Under
the restrictions of maintaining adequate minimum capital, as of December 31,
2003, the Bank could have declared dividends totaling $45.2 million without
obtaining prior regulatory approval.

Stock Repurchases

A bank holding company, except for certain well-capitalized and highly
rated bank holding companies, is required to give the Federal Reserve prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of its consolidated net
worth. The Federal Reserve may disapprove such a purchase or redemption if it
determines that the proposal would constitute an unsafe or unsound practice or
would violate any law, regulation, Federal Reserve order, or any condition
imposed by, or written agreement with, the Federal Reserve. We have in place a
stock repurchase program that complies with current banking regulations. See
Management Discussion and Analysis  Capital Resources. Our stock repurchase
program is highly dependent upon our ability to issue trust preferred
securities which are used to fund stock repurchases. See Management
Discussion and Analysis  Liquidity and Sources of Funds.

Interstate Banking and Branching

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the Interstate Act) generally authorizes interstate branching and relaxes
federal law restrictions on interstate banking. Currently, bank holding
companies may purchase banks in any state, and states may not prohibit these
purchases. Additionally, banks are permitted to merge with banks in other
states, as long as the home state of neither merging bank has opted out under
the legislation. Oregon and Washington each enacted opting in legislation in
accordance with the Interstate Act. The Interstate Act requires regulators to
consult with community organizations before permitting an interstate
institution to close a branch in a low-income area.

The USA Patriot Act

The USA Patriot Act was signed into law on October 26, 2001. The USA
Patriot Act gives the federal government new powers to address terrorist
threats through enhanced domestic security measures, expanded surveillance
powers, increased information sharing, and broadened anti-money laundering
requirements. By way of amendments to the Bank Secrecy Act, the USA Patriot
Act takes measures intended to encourage information sharing among bank
regulatory agencies and law enforcement bodies. Among other requirements, the
USA Patriot Act requires banks to establish anti-money laundering programs, to
adopt procedures and controls to detect and report money laundering, and to
comply with certain enhanced recordkeeping obligations with respect to
correspondent accounts of foreign banks. Compliance with these new
requirements has not had a material effect on our operations.

Monetary and Fiscal Policy Effects on Interest Rates

The earnings and growth of Bancorp, the Bank and Bancorps other
subsidiaries, as well as their existing and future business activities, are
affected not only by general economic conditions, but also by the fiscal and
monetary policies of the Federal Reserve. The Federal Reserve implements
national monetary policies (intended to curb inflation and combat recession) by
its open-market operations in United States government securities, by adjusting
the required level of reserves for financial institutions subject to its
reserve requirements, and by varying the discount rates applicable to
borrowings by banks from the Federal Reserve Bank. The actions of the Federal
Reserve in these areas influence the growth of bank loans, investments and
deposits, and also affect interest rates charged on loans and paid on deposits.

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In addition, community banking is generally a business which depends on
interest rate differentials. In general, the differences between the interest
paid by a bank on its deposits and its other borrowings and the interest
received by a bank on loans extended to its customers and securities held in
its investment portfolio constitute the major portion of a banks earnings.
Thus, our earnings and growth are constantly subject to the influence of
economic conditions generally, both domestic and foreign, and also to the
monetary and fiscal policies of the United States and its agencies,
particularly the Federal Reserve. The nature and timing of changes in such
policies and their impact cannot be predicted.

Future Legislation

Various legislation ranging from consumer protection legislation to
additional legislation proposing to substantially change the financial
institution regulatory system is considered by Congress from time to time.
Future legislation may change banking statutes and our operating environment in
substantial and unpredictable ways. For instance, new legislation could
increase or decrease the cost of doing business, limit or expand permissible
activities, or change the competitive balance among various types of financial
institutions. We cannot predict whether any legislation will be enacted that
would have a material effect on our business.




ITEM 2. PROPERTIES

The principal properties owned by the Bank include a 40,000-square-foot
office and branch facility in downtown Salem, Oregon, a 15,600-square-foot
office and branch facility in Newport, Oregon, and a 12,000-square-foot branch
and office facility in Lacey, Washington. In total, we own 27 buildings,
primarily to house branch offices. We lease the land under 5 buildings and own
the land under 22 buildings. In addition, Bancorp leases 20 office spaces and
buildings for branch locations.

Other non-branch office facilities are located in leased office space,
including the Banks headquarters office in Lake Oswego, Oregon, office and
processing space in Salem, Oregon, where the Banks data center is located,
Wilsonville, Oregon, where its servicing and operations center is located, and
Bend, Oregon, where we have a residential mortgage office. In addition, we
lease 2 smaller office spaces for lending personnel in Lake Oswego and Downtown
Portland, Oregon.

The aggregate approximate monthly rental on 31 leased properties is
approximately $201,000.




ITEM 3. LEGAL PROCEEDINGS

On August 22, 2003, the lawsuit against the Company entitled Walter L.
West, dba Walter West Construction Co. v. Jeffrey Teeny, Stephen L. Stoelk,
Shauna L. Stoelk, B.A.S.S. Construction Co., Inc., and West Coast Bancorp was
dismissed by the plaintiff voluntarily. In doing so, the plaintiff indicated
that the action would be re-filed in another county. The plaintiff has not yet
re-filed.

Bancorp is periodically party to other litigation arising in the ordinary
course of business. Based on information currently known to management,
although there are uncertainties inherent in litigation, we do not believe
there is any legal action to which Bancorp or any of its subsidiaries is a
party that, individually or in the aggregate, will have a materially adverse
effect on Bancorps financial condition and results of operations.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

NONE.

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PART II




ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Stock Price and Dividends

West Coast Bancorp common stock trades on the National Market tier of The
Nasdaq Stock Market under the symbol WCBO. The high and low closing sale
prices per share of our common stock for each quarter during the last two years
are shown in the table below, together with dividend information for each
period. The prices below do not include retail mark-ups, mark-downs or
commissions, and may not represent actual transactions. As of December 31,
2003, we had approximately 1,545 holders of record.

|            |  |              |       |               |  |          |       |               |  |     |        |          |  |   |       |  |  |   |       |  |  |   |        | 
|----------- |  | ------------ | ----- | ------------- |  | -------- | ----- | ------------- |  | --- | ------ | -------- |  | - | ----- |  |  | - | ----- |  |  | - | ------ | 
|            |  | 2003         |       | 2002         
|            |  |              |       |              
|            |  | Market Price |       |               |  |          |       | Market Price  |  |     |        |         
|            |  |              |       | Cash dividend |  |          |       | Cash dividend
|            |  | High         |       | Low           |  | declared |       | High          |  | Low |        | declared
|            |  |              |       |               |  |          |       |               |  |     |        |         
|1st Quarter |  | $            | 16.52 |               |  | $        | 14.01 |               |  | $   | 0.0775 |          |  | $ | 15.85 |  |  | $ | 13.02 |  |  | $ | 0.0725 | 
|2nd Quarter |  | $            | 18.24 |               |  | $        | 14.20 |               |  | $   | 0.0775 |          |  | $ | 17.15 |  |  | $ | 14.15 |  |  | $ | 0.0725 | 
|3rd Quarter |  | $            | 21.02 |               |  | $        | 17.50 |               |  | $   | 0.0850 |          |  | $ | 17.09 |  |  | $ | 13.91 |  |  | $ | 0.0775 | 
|4th Quarter |  | $            | 22.05 |               |  | $        | 19.50 |               |  | $   | 0.0850 |          |  | $ | 16.59 |  |  | $ | 13.67 |  |  | $ | 0.0775 | 

Dividends are limited under federal and Oregon laws and regulations
pertaining to Bancorps financial condition. Payment of dividends may also be
subject to direct regulation by state banking regulators. See Business 
Supervision and Regulation.

Information regarding securities authorized for issuance under equity
compensation plans has been incorporated by reference into Item 12 of this
report.

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ITEM 6. SELECTED FINANCIAL DATA

Consolidated five year financial data

The following selected consolidated five year financial data should be
read in conjunction with Bancorps consolidated financial statements and the
accompanying notes presented in this report. The per share information has
been adjusted retroactively for all stock dividends and splits.

|                                                  |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |        |  
|------------------------------------------------- | --------------------------------------------------- | ---- | ----------------------------------------- | ------ | - | ---- | --------- | ------ | - | ---- | --------- | ------ | - | - | --------- | ------ | - | - | --------- | ------ | -
|                                                  |                                                     |      | As of and For the Year ended December 31,
|                                                  |                                                     |      |                                          
|(Dollars in thousands, except per share data)     |                                                     | 2003 |                                           | 2002   |   | 2001 |           | 2000   |   | 1999
|                                                  |                                                     |      |                                           |        |   |      |           |        |   |     
|Interest income                                   |                                                     | $    | 89,678                                    |        |   | $    | 96,028    |        |   | $    | 100,277   |        |   | $ | 107,913   |        |   | $ | 97,363    |       
|Interest expense                                  |                                                     |      | 20,639                                    |        |   |      | 28,532    |        |   |      | 40,572    |        |   |   | 48,082    |        |   |   | 36,890    |       
|                                                  |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|Net interest income                               |                                                     |      | 69,039                                    |        |   |      | 67,496    |        |   |      | 59,705    |        |   |   | 59,831    |        |   |   | 60,473    |       
|Provision for loan loss                           |                                                     |      | 3,800                                     |        |   |      | 4,979     |        |   |      | 3,282     |        |   |   | 2,068     |        |   |   | 2,190     |       
|                                                  |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|Net interest income after provision for loan loss |                                                     |      | 65,239                                    |        |   |      | 62,517    |        |   |      | 56,423    |        |   |   | 57,763    |        |   |   | 58,283    |       
|Noninterest income                                |                                                     |      | 22,046                                    |        |   |      | 18,694    |        |   |      | 17,031    |        |   |   | 13,873    |        |   |   | 16,234    |       
|Noninterest expense                               |                                                     |      | 58,150                                    |        |   |      | 54,018    |        |   |      | 51,999    |        |   |   | 54,573    |        |   |   | 49,271    |       
|                                                  |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|Income before income taxes                        |                                                     |      | 29,135                                    |        |   |      | 27,193    |        |   |      | 21,455    |        |   |   | 17,063    |        |   |   | 25,246    |       
|Provision for income taxes                        |                                                     |      | 9,338                                     |        |   |      | 8,990     |        |   |      | 6,695     |        |   |   | 5,443     |        |   |   | 7,914     |       
|                                                  |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|Net income                                        |                                                     | $    | 19,797                                    |        |   | $    | 18,203    |        |   | $    | 14,760    |        |   | $ | 11,620    |        |   | $ | 17,332    |       
|                                                  |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|Per share data:                                   |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|                                                  | Basic earnings per share                            |      | $                                         | 1.31   |   |      | $         | 1.17   |   |      | $         | 0.92   |   |   | $         | 0.70   |   |   | $         | 1.02   |  
|                                                  | Diluted earnings per share                          |      | $                                         | 1.26   |   |      | $         | 1.13   |   |      | $         | 0.90   |   |   | $         | 0.69   |   |   | $         | 1.00   |  
|                                                  | Cash dividends                                      |      | $                                         | 0.32   |   |      | $         | 0.30   |   |      | $         | 0.28   |   |   | $         | 0.25   |   |   | $         | 0.21   |  
|                                                  | Period end book value                               |      | $                                         | 9.29   |   |      | $         | 8.70   |   |      | $         | 8.04   |   |   | $         | 7.39   |   |   | $         | 6.92   |  
|                                                  | Weighted average common shares outstanding          |      |                                           | 15,077 |   |      |           | 15,575 |   |      |           | 16,126 |   |   |           | 16,711 |   |   |           | 16,987 |  
|                                                  | Weighted average diluted shares outstanding         |      |                                           | 15,674 |   |      |           | 16,069 |   |      |           | 16,453 |   |   |           | 16,834 |   |   |           | 17,370 |  
|Total assets                                      |                                                     | $    | 1,662,882                                 |        |   | $    | 1,532,327 |        |   | $    | 1,435,701 |        |   | $ | 1,354,961 |        |   | $ | 1,354,687 |       
|Total deposits                                    |                                                     | $    | 1,404,859                                 |        |   | $    | 1,266,453 |        |   | $    | 1,171,433 |        |   | $ | 1,076,608 |        |   | $ | 1,080,798 |       
|Total long-term borrowings                        |                                                     | $    | 78,000                                    |        |   | $    | 98,000    |        |   | $    | 90,500    |        |   | $ | 45,022    |        |   | $ | 65,689    |       
|Net loans                                         |                                                     | $    | 1,202,750                                 |        |   | $    | 1,143,077 |        |   | $    | 1,069,798 |        |   | $ | 985,968   |        |   | $ | 962,817   |       
|Stockholders equity                              |                                                     | $    | 140,053                                   |        |   | $    | 133,387   |        |   | $    | 128,790   |        |   | $ | 121,269   |        |   | $ | 116,793   |       
|Financial ratios:                                 |                                                     |      |                                           |        |   |      |           |        |   |      |           |        |   |   |           |        |   |   |           |       
|                                                  | Return on average assets                            |      |                                           | 1.24   | % |      |           | 1.22   | % |      |           | 1.08   | % |   |           | 0.86   | % |   |           | 1.37   | %
|                                                  | Return on average equity                            |      |                                           | 14.52  | % |      |           | 13.96  | % |      |           | 11.72  | % |   |           | 9.86   | % |   |           | 14.86  | %
|                                                  | Average equity to average assets                    |      |                                           | 8.57   | % |      |           | 8.76   | % |      |           | 9.21   | % |   |           | 8.72   | % |   |           | 9.24   | %
|                                                  | Dividend payout ratio                               |      |                                           | 25.73  | % |      |           | 26.55  | % |      |           | 29.89  | % |   |           | 35.80  | % |   |           | 20.49  | %
|                                                  | Efficiency ratio (1)                                |      |                                           | 62.64  | % |      |           | 61.32  | % |      |           | 65.98  | % |   |           | 71.63  | % |   |           | 62.37  | %
|                                                  | Net loans to assets                                 |      |                                           | 72.33  | % |      |           | 74.60  | % |      |           | 74.51  | % |   |           | 72.77  | % |   |           | 71.07  | %
|                                                  | Average yields earned (2)                           |      |                                           | 6.08   | % |      |           | 6.99   | % |      |           | 8.00   | % |   |           | 8.76   | % |   |           | 8.54   | %
|                                                  | Average rates paid                                  |      |                                           | 1.78   | % |      |           | 2.56   | % |      |           | 3.90   | % |   |           | 4.65   | % |   |           | 3.91   | %
|                                                  | Net interest spread (2)                             |      |                                           | 4.29   | % |      |           | 4.43   | % |      |           | 4.10   | % |   |           | 4.11   | % |   |           | 4.63   | %
|                                                  | Net interest margin (2)                             |      |                                           | 4.70   | % |      |           | 4.95   | % |      |           | 4.83   | % |   |           | 4.94   | % |   |           | 5.38   | %
|                                                  | Nonperforming assets to total assets (3)            |      |                                           | 0.27   | % |      |           | 0.44   | % |      |           | 0.54   | % |   |           | 0.52   | % |   |           | 0.34   | %
|                                                  | Allowance for loan loss to total loans              |      |                                           | 1.49   | % |      |           | 1.45   | % |      |           | 1.41   | % |   |           | 1.42   | % |   |           | 1.38   | %
|                                                  | Allowance for loan loss to
nonperforming assets (3) |      |                                           | 411.08 | % |      |           | 248.81 | % |      |           | 198.00 | % |   |           | 203.32 | % |   |           | 289.95 | %



|(1) |  | The efficiency ratio has been computed as noninterest expense divided
by the sum of net interest income on a taxable-equivalent basis and noninterest
income.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Interest earned on nontaxable securities has been computed on a 35% tax
equivalent basis.                                                                    
|   
|(3) |  | Nonperforming assets include litigation settlement property in certain
periods.                                                                              

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##### Table of Contents



Consolidated quarterly financial data

The following table presents selected consolidated quarterly financial
data for each quarter of 2003 and 2002. The financial information contained in
this table reflects all adjustments, which, in the opinion of management, are
necessary for a fair presentation of the results of the interim periods.

|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | ------------------- | ------ | -------- |  | --------- | ------ | -------- |  | - | ------ | - |  | - | ------ | -
|                                                  |  | 2003 Quarters ended
|                                                  |  |                    
|(Dollars in thousands, except per share data)     |  | March 31,           |        | June 30, |  | Sept. 30, |        | Dec. 31,
|                                                  |  |                     |        |          |  |           |        |         
|Interest income                                   |  | $                   | 22,548 |          |  | $         | 22,523 |          |  | $ | 22,209 |   |  | $ | 22,399 |  
|Interest expense                                  |  |                     | 5,850  |          |  |           | 5,289  |          |  |   | 4,874  |   |  |   | 4,627  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Net interest income                               |  |                     | 16,698 |          |  |           | 17,234 |          |  |   | 17,335 |   |  |   | 17,772 |  
|Provision for loan loss                           |  |                     | 850    |          |  |           | 850    |          |  |   | 875    |   |  |   | 1,225  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Net interest income after provision for loan loss |  |                     | 15,848 |          |  |           | 16,384 |          |  |   | 16,460 |   |  |   | 16,547 |  
|Noninterest income                                |  |                     | 4,982  |          |  |           | 5,840  |          |  |   | 5,794  |   |  |   | 5,429  |  
|Noninterest expense                               |  |                     | 13,684 |          |  |           | 14,827 |          |  |   | 14,847 |   |  |   | 14,792 |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Income before income taxes                        |  |                     | 7,146  |          |  |           | 7,397  |          |  |   | 7,407  |   |  |   | 7,184  |  
|Provision for income taxes                        |  |                     | 2,427  |          |  |           | 2,398  |          |  |   | 2,362  |   |  |   | 2,150  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Net income                                        |  | $                   | 4,719  |          |  | $         | 4,999  |          |  | $ | 5,045  |   |  | $ | 5,034  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Basic earnings per share                          |  | $                   | 0.31   |          |  | $         | 0.33   |          |  | $ | 0.33   |   |  | $ | 0.34   |  
|Diluted earnings per share                        |  | $                   | 0.30   |          |  | $         | 0.32   |          |  | $ | 0.32   |   |  | $ | 0.32   |  
|Return on average assets                          |  |                     | 1.25   | %        |  |           | 1.29   | %        |  |   | 1.24   | % |  |   | 1.20   | %
|Return on average equity                          |  |                     | 14.35  | %        |  |           | 14.76  | %        |  |   | 14.59  | % |  |   | 14.39  | %

|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|------------------------------------------------- |  | ------------------- | ------ | -------- |  | --------- | ------ | -------- |  | - | ------ | - |  | - | ------ | -
|                                                  |  | 2002 Quarters ended
|                                                  |  |                    
|(Dollars in thousands, except per share data)     |  | March 31,           |        | June 30, |  | Sept. 30, |        | Dec. 31,
|                                                  |  |                     |        |          |  |           |        |         
|Interest income                                   |  | $                   | 23,658 |          |  | $         | 23,859 |          |  | $ | 24,882 |   |  | $ | 23,629 |  
|Interest expense                                  |  |                     | 7,599  |          |  |           | 7,013  |          |  |   | 7,504  |   |  |   | 6,416  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Net interest income                               |  |                     | 16,059 |          |  |           | 16,846 |          |  |   | 17,378 |   |  |   | 17,213 |  
|Provision for loan loss                           |  |                     | 878    |          |  |           | 1,442  |          |  |   | 1,467  |   |  |   | 1,192  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Net interest income after provision for loan loss |  |                     | 15,181 |          |  |           | 15,404 |          |  |   | 15,911 |   |  |   | 16,021 |  
|Noninterest income                                |  |                     | 5,215  |          |  |           | 4,510  |          |  |   | 4,264  |   |  |   | 4,705  |  
|Noninterest expense                               |  |                     | 13,964 |          |  |           | 13,087 |          |  |   | 13,183 |   |  |   | 13,784 |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Income before income taxes                        |  |                     | 6,432  |          |  |           | 6,827  |          |  |   | 6,992  |   |  |   | 6,942  |  
|Provision for income taxes                        |  |                     | 2,189  |          |  |           | 2,303  |          |  |   | 2,339  |   |  |   | 2,159  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Net income                                        |  | $                   | 4,243  |          |  | $         | 4,524  |          |  | $ | 4,653  |   |  | $ | 4,783  |  
|                                                  |  |                     |        |          |  |           |        |          |  |   |        |   |  |   |        |  
|Basic earnings per share                          |  | $                   | 0.27   |          |  | $         | 0.29   |          |  | $ | 0.30   |   |  | $ | 0.31   |  
|Diluted earnings per share                        |  | $                   | 0.26   |          |  | $         | 0.28   |          |  | $ | 0.29   |   |  | $ | 0.30   |  
|Return on average assets                          |  |                     | 1.20   | %        |  |           | 1.24   | %        |  |   | 1.22   | % |  |   | 1.24   | %
|Return on average equity                          |  |                     | 13.30  | %        |  |           | 14.11  | %        |  |   | 14.16  | % |  |   | 14.26  | %

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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our audited
consolidated financial statements and related notes to those statements as of
December 31, 2003 and 2002 and for each of the three years in the period ended
December 31, 2003, that appear under the heading Financial Statements and
Supplementary Data of this report.

Forward Looking Statement Disclosure

Statements in this Annual Report regarding future events or performance
are forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (PSLRA) and are made pursuant to the safe
harbors of the PSLRA. Actual results of West Coast Bancorp (Bancorp or the
Company) could be quite different from those expressed or implied by the
forward-looking statements. Any statements that expressly or implicitly
predict future results, performance, or events should be considered
forward-looking. Factors that could cause results to differ from
forward-looking statements include, among others, risks discussed in the text
of this Annual Report as well as the following specific items: general
economic conditions, whether national or regional, that could affect the demand
for loans or lead to increased loan losses; evolving banking industry
standards; legal developments; competitive factors, including increased
competition with community, regional, and national financial institutions that
may lead to pricing pressures on Bancorps loan yield and rates paid on
deposits; loss of customers of greatest value to Bancorp, changing customer
investment, deposit and lending behaviors; credit policies of regulatory
authorities, increasing or decreasing interest rate environments, including the
shape and the level of the yield curve, that could lead to decreased net
interest margin, net interest income and fee income, including lower gains on
sales of loans; changing business conditions in the banking industry; changes
in the regulatory environment or new legislation affecting the financial
services industry; changes in government funding of Small Business
Administration (SBA) loans; and changes in technology or required investments
in technology.

Furthermore, the forward-looking statements are subject to risks and
uncertainties related to the Companys ability to: attract and retain
additional lending officers and other key personnel; close loans in the
pipeline; generate loan and deposit balances at projected spreads; sustain fee
generation, including lower gains on sales of loans; maintain asset quality;
control the level of net charge-offs; increase productivity; generate retail
investments; control expense growth; monitor and manage the Companys internal
operating and disclosure control environments; and other matters.

Readers are cautioned not to place undue reliance on forward-looking
statements, which reflect managements analysis only as of the date of the
statements. Readers should carefully review the disclosures we file from time
to time with the Securities and Exchange Commission (SEC). Bancorp
undertakes no obligation to publicly revise or update forward-looking
statements to reflect events or circumstances that arise after the date of this
report.

West Coast Bancorp

West Coast Bancorp is a Northwest bank holding company with $1.7 billion
in assets, operating 47 branches and a mortgage loan office in Oregon and
Washington. West Coast Bancorp, the parent company of West Coast Bank and West
Coast Trust, is headquartered in Lake Oswego, Oregon. West Coast Bank serves
clients who seek the resources, sophisticated products and expertise of larger
financial institutions, along with the local decision making, market knowledge,
and customer service orientation of a community bank. It is our mission to
consistently produce superior earnings, meet the financial needs of the
communities we serve, provide excellent service to our customers, and provide a
rewarding environment for our employees.

At West Coast Bancorp, we have a proven management team committed to
enhancing earnings per share and long-term stockholder value. We have
recruited first class sales teams, supported by a contemporary full service
product line, that take advantage of new growth opportunities in local markets
we serve. We maintain and value local decision making and a community bank
culture to distinguish our brand. We offer a broad range of banking,
investment, fiduciary and trust services to the markets we serve. For more
information, please visit the Companys web site at www.wcb.com.

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##### Table of Contents



Critical Accounting Policies

We have identified our most critical accounting policy to be that related
to the allowance for loan loss. Bancorps allowance for loan loss methodology
incorporates a variety of risk considerations, both quantitative and
qualitative, in establishing an allowance for loan loss that management
believes is appropriate at each reporting date. Quantitative factors include
our historical loss experience, delinquency and charge-off trends, collateral
values, changes in non-performing loans, and other factors. Qualitative factors
include the general economic environment in our markets and, in particular, the
state of certain industries. Size and complexity of individual loans in
relation to the lending officers background and experience levels, loan
structure, extent and nature of waivers of existing loan policies and pace of
portfolio growth are other qualitative factors that are considered in our
methodology. As we add new products, increase complexity of the portfolio, and
expand our geographic coverage, we intend to enhance and adapt our methodology
to keep pace with the size and complexity of the loan portfolio. Changes in any
of the above factors could have a significant effect on the calculation of the
allowance for loan loss in any given period. Management believes that our
systematic methodology continues to be appropriate given our size and level of
complexity. This discussion and analysis should be read in conjunction with
our consolidated financial statements and related notes included elsewhere in
this report, including the section Loan Loss Allowance and Provision.

Financial Overview

Years Ended December 31, 2003, 2002 and 2001.

The Companys financial objectives are focused on earnings per diluted
share growth and return on average equity. Over the last two years, our
compounded annual earnings per diluted share growth has been 18%, while our
return on average equity improved from 11.7% in 2001 to 14.5% in 2003. The
compounded annual growth rate for period end loans and deposits for the last
two years were 6% and 10%, respectively. To sustain future growth and
accomplish our financial objectives, we have defined five strategies:



| |  |  | Focus on profitable customer segments    
| | - |  | -----------------------------------------
|
| |  |  | Improve franchise performance levels     
|
| |  |  | Leverage technology                      
|
| |  |  | Expand branch distribution               
|
| |  |  | Maintain community and customer ownership

Our strategies are designed to direct our tactical investment decisions
supporting our financial objectives. Our most significant revenue source
continues to be net interest income, defined as total interest income less
interest expense, which in 2003 accounted for approximately 76% of our total
revenue. To produce net interest income and consistent earnings growth over
the long-term, we must generate loan and deposit growth at acceptable economic
spreads within its market of operation. To generate and grow loans and
deposits, the company must focus on a number of areas including, but not
limited to, the economy, branch expansion, sales practices, customer and
employee satisfaction and retention, competition, evolving customer behavior,
technology, product innovation, interest rates, credit performance of its
customers, and vendor relationships.

We also consider non-interest income important to our continued financial
success. Fee income generation is partly related to the loan and deposit
operations, such as deposit service charges, as well as selling financial
products including residential mortgages, trust services, and investment
products. To limit the risks associated with doing business and growing
revenues, the Company has put in place numerous policies, processes, and
controls.

While we review and manage all customer segments we have focused increased
efforts on four targeted segments: 1) high value consumers (including the
mature market), 2) smaller businesses with credit needs under $250,000, 3)
medium-sized commercial businesses with credit needs over $250,000 up to $20
million, and 4) commercial real estate and construction-related businesses.
These efforts have resulted in material growth in our commercial and home
equity loan portfolios as well as core deposits over the last two years.

We have made a concerted effort to improve the measurement and tracking of
business line and overall Company performance levels. Improved information
systems, a result of leveraging new technology, have increased our ability to
track key indicators and enhance corporate performance levels. Better
measurement against goals and objectives and increased accountability have
resulted in desired loan, deposit and fee income production through both branch
and non-branch sales channels. To support growth in targeted customer
segments, we have opened eight branches over the last three years. The results
produced by these branches have met our expectations. With all new and
existing branches, the Company has strived to maintain a local community
management based philosophy. We have emphasized hiring local branch and
lending personnel with strong ties to the specific local communities we enter
and serve.

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##### Table of Contents



Income Statement Overview

Our net income for 2003 was $19.8 million, compared with $18.2 million in
2002 and $14.8 million in 2001. Diluted earnings per share for the years ended
2003, 2002, and 2001 were $1.26, $1.13, and $.90, respectively. Our return on
equity for the years ended 2003, 2002, and 2001 was 14.5%, 14.0%, and 11.7%,
respectively.

Net Interest Income. The following table displays information on the
yields on average interest earning assets, expense on interest bearing
liabilities, and average yields earned, rates paid as well as net interest
spread and margin information for the periods indicated on a tax equivalent
basis. This information can be used to follow the changes in our yields and
rates and the changes in our earning assets and liabilities over the past three
years:

|                                                                      |  |                         |           |                     |  |        |           |       |  |       |           |       |  |       |         |   |  |    |         |   |  |  |        |   |  |  |        |  
|--------------------------------------------------------------------- |  | ----------------------- | --------- | ------------------- |  | ------ | --------- | ----- |  | ----- | --------- | ----- |  | ----- | ------- | - |  | -- | ------- | - |  |  | ------ | - |  |  | ------ | -
|                                                                      |  | Year Ended December 31, |           | Increase (Decrease) |  | Change
|                                                                      |  |                         |           |                     |  |       
|(Dollars in thousands)                                                |  | 2003                    |           | 2002                |  | 2001   |           | 03-02 |  | 02-01 |           | 03-02 |  | 02-01
|                                                                      |  |                         |           |                     |  |        |           |       |  |       |           |       |  |      
|Interest and fee income (1)                                           |  | $                       | 91,432    |                     |  | $      | 97,934    |       |  | $     | 102,346   |       |  | ($    | 6,502   | ) |  | ($ | 4,412   | ) |  |  | -6.64  | % |  |  | -4.31  | %
|Interest expense                                                      |  | $                       | 20,639    |                     |  | $      | 28,532    |       |  | $     | 40,572    |       |  | ($    | 7,893   | ) |  | ($ | 12,040  | ) |  |  | -27.66 | % |  |  | -29.68 | %
|                                                                      |  |                         |           |                     |  |        |           |       |  |       |           |       |  |       |         |   |  |    |         |   |  |  |        |   |  |  |        |  
|Net interest income (1)                                               |  | $                       | 70,793    |                     |  | $      | 69,402    |       |  | $     | 61,774    |       |  | $     | 1,391   |   |  | $  | 7,628   |   |  |  | 2.00   | % |  |  | 12.35  | %
|Average interest earning assets                                       |  | $                       | 1,504,949 |                     |  | $      | 1,401,525 |       |  | $     | 1,279,953 |       |  | $     | 103,424 |   |  | $  | 121,572 |   |  |  | 7.38   | % |  |  | 9.50   | %
|Average interest bearing liabilities                                  |  | $                       | 1,158,755 |                     |  | $      | 1,113,308 |       |  | $     | 1,039,933 |       |  | $     | 45,447  |   |  | $  | 73,375  |   |  |  | 4.08   | % |  |  | 7.06   | %
|Average interest earning assets/
Average interest bearing liabilities |  |                         | 129.88    | %                   |  |        | 125.89    | %     |  |       | 123.08    | %     |  |       | 3.99    | % |  |    | 2.81    | % |  |  |        |   |  |  |        |  
|Average yields earned (1)                                             |  |                         | 6.08      | %                   |  |        | 6.99      | %     |  |       | 8.00      | %     |  |       | -0.91   | % |  |    | -1.01   | % |  |  |        |   |  |  |        |  
|Average rates paid                                                    |  |                         | 1.78      | %                   |  |        | 2.56      | %     |  |       | 3.90      | %     |  |       | -0.78   | % |  |    | -1.34   | % |  |  |        |   |  |  |        |  
|Net interest spread (1)                                               |  |                         | 4.29      | %                   |  |        | 4.43      | %     |  |       | 4.10      | %     |  |       | -0.14   | % |  |    | 0.33    | % |  |  |        |   |  |  |        |  
|Net interest margin (1)                                               |  |                         | 4.70      | %                   |  |        | 4.95      | %     |  |       | 4.83      | %     |  |       | -0.25   | % |  |    | 0.12    | % |  |  |        |   |  |  |        |  

(1)  Interest earned on nontaxable securities has been computed on a 35% tax
equivalent basis.

Net interest income on a tax equivalent basis totaled $70.8 million for
the year ended December 31, 2003, an increase of $1.4 million, or 2.0%, from
$69.4 million for 2002, which was up $7.6 million from the year ended 2001. The
increase in net interest income from 2002 to 2003 was due to increased earning
asset volumes and lower cost of funds, offset in part by lower interest income
on earning assets. Average total loans grew $69 million or 6% in 2003 compared
to 2002. Despite having experienced margin compression from 4.95% in 2002 to
4.70% in 2003, we have increased net interest income with interest earning
asset volume increases particularly in commercial lending and home equity
loans. The net interest margin was compressed from declining yields on
investments and loans, which were only partly offset by lower deposit and
borrowing rates, as well as from the low interest rate environment which
reduced the value of investing non-interest bearing deposits.

During 2003, we had an increase of $103 million or 8% in average total
deposits over 2002. In 2003s low interest rate environment, consumers were
willing to hold more bank deposits in demand, interest checking, and money
market accounts. These three categories increased materially with average
demand deposits up $49 million, average interest checking up $32 million, and
average money market deposits up $46 million. Conversely consumers and
businesses were unwilling to invest in certificates of deposits (CD) at
historically low rates, and CD balances declined by $24 million. With the
strong overall deposit growth, total borrowings declined.

The volume increase in deposits over that of loans led to higher
investments in securities. Additional investments in securities were
concentrated in US Agency related securities and mortgage backed securities
(MBS). Prepayments on MBS and the resulting acceleration of premium
amortization negatively impacted the yields on the investment portfolio. The
yields on MBS began to improve late in 2003 as prepayments slowed down.

During 2003, we invested $16 million in bank owned life insurance
(BOLI). This investment shifted interest earning assets to assets that
produce non-interest BOLI income. We also issued additional trust preferred
securities in 2003 to fund stock repurchases and balance sheet growth while we
lowered our long term Federal Home Loan Bank of Seattle (FHLB) debt
outstanding. Decreases in rates on our long term debt helped increase our net
interest income.

The $7.6 million increase in net interest income from 2001 to 2002 was due
to increased earning asset volumes and lower cost of funds offset in part by
lower interest income on earning assets. Our net interest spread increased 33
basis points in 2002 compared to 2001. This increase was due to a lower cost of
funds partly offset by lower yields earned on earning assets. The average rate
paid on interest bearing liabilities declined 134 basis points while the
average yield earned decreased 101 basis points in 2002, primarily as a
function of being able to reprice deposit rates down faster than loans
repriced.

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##### Table of Contents



Average Balances and Average Rates Earned and Paid.The following table
sets forth, for the periods indicated, information with regard to (1) average
balances of assets and liabilities, (2) the total dollar amounts of interest
income on interest earning assets and interest expense on interest bearing
liabilities, (3) resulting yields or costs, (4) net interest income, and (5)
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.

|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |      |      |  
|------------------------------------- | -------------------------------------------- | ------------------------------------------ | - | ----------------------- | --------- | -------- | - | ------- | ------ | ------------ |  | -------- | ---- | ------- | - | ------------ | --------- | -------- | - | ------ | ------ |  |  | ------- | ---- | - | - | --------- | --------- |  | - | ------ | ------- |  |  | ---- | ---- | -
|                                      |                                              |                                            |   | Year Ended December 31,
|                                      |                                              |                                            |   |                        
|                                      |                                              |                                            |   | 2003                    |           | 2002     |   | 2001   
|                                      |                                              |                                            |   |                         |           |          |   |        
|                                      |                                              |                                            |   | Average                 |           |          |   |         |        |              |  |          |      | Average |   |              |           |          |   |        |        |  |  | Average |      |   |   |           |           |  |   |       
|                                      |                                              |                                            |   | Outstanding             |           | Interest |   | Yield/  |        | Outstanding  |  | Interest |      | Yield/  |   | Outstanding  |           | Interest |   | Yield/
|(Dollars in thousands)                |                                              | Balance                                    |   | Earned/ Paid            |           | Rate (1) |   | Balance |        | Earned/ Paid |  | Rate (1) |      | Balance |   | Earned/ Paid |           | Rate (1)
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |         
|ASSETS:                               |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      | Interest earning balances
due from banks     |                                            | $ | 8,307                   |           |          | $ | 76      |        |              |  | 0.91     | %    |         | $ | 7,618        |           |          | $ | 110    |        |  |  | 1.44    | %    |   | $ | 6,288     |           |  | $ | 247    |         |  |  | 3.93 | %   
|                                      | Federal funds sold                           |                                            |   | 13,959                  |           |          |   | 133     |        |              |  | 0.95     | %    |         |   | 8,313        |           |          |   | 144    |        |  |  | 1.73    | %    |   |   | 2,311     |           |  |   | 92     |         |  |  | 3.96 | %   
|                                      | Taxable securities                           |                                            |   | 207,620                 |           |          |   | 8,891   |        |              |  | 4.28     | %    |         |   | 175,969      |           |          |   | 9,245  |        |  |  | 5.25    | %    |   |   | 166,669   |           |  |   | 10,014 |         |  |  | 6.01 | %   
|                                      | Nontaxable securities(2)                     |                                            |   | 72,409                  |           |          |   | 5,011   |        |              |  | 6.92     | %    |         |   | 75,760       |           |          |   | 5,446  |        |  |  | 7.19    | %    |   |   | 80,228    |           |  |   | 5,910  |         |  |  | 7.37 | %   
|                                      | Loans, including fees(3)                     |                                            |   | 1,202,655               |           |          |   | 77,321  |        |              |  | 6.43     | %    |         |   | 1,133,865    |           |          |   | 82,989 |        |  |  | 7.32    | %    |   |   | 1,024,457 |           |  |   | 86,083 |         |  |  | 8.40 | %   
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      |                                              | Total interest earning assets              |   |                         | 1,504,950 |          |   |         | 91,432 |              |  |          | 6.08 | %       |   |              | 1,401,525 |          |   |        | 97,934 |  |  |         | 6.99 | % |   |           | 1,279,953 |  |   |        | 102,346 |  |  |      | 8.00 | %
|                                      | Allowance for loan loss                      |                                            |   | (17,868                 | )         |          |   |         |        |              |  |          |      |         |   | (16,219      | )         |          |   |        |        |  |  |         |      |   |   | (14,588   | )         |  |   |        |         |  |  |      |     
|                                      | Premises and equipment                       |                                            |   | 26,682                  |           |          |   |         |        |              |  |          |      |         |   | 27,837       |           |          |   |        |        |  |  |         |      |   |   | 29,101    |           |  |   |        |         |  |  |      |     
|                                      | Other assets                                 |                                            |   | 76,478                  |           |          |   |         |        |              |  |          |      |         |   | 74,421       |           |          |   |        |        |  |  |         |      |   |   | 72,853    |           |  |   |        |         |  |  |      |     
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      |                                              | Total assets                               |   | $                       | 1,590,242 |          |   |         |        |              |  |          |      |         |   | $            | 1,487,564 |          |   |        |        |  |  |         |      |   |   | $         | 1,367,319 |  |   |        |         |  |  |      |      |  
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|LIABILITIES AND
STOCKHOLDERS EQUITY: |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      | Savings and interest bearing
demand deposits |                                            | $ | 669,689                 |           |          | $ | 4,492   |        |              |  | 0.67     | %    |         | $ | 592,150      |           |          | $ | 7,076  |        |  |  | 1.19    | %    |   | $ | 542,945   |           |  | $ | 13,516 |         |  |  | 2.49 | %   
|                                      | Certificates of deposit                      |                                            |   | 371,533                 |           |          |   | 10,639  |        |              |  | 2.86     | %    |         |   | 395,161      |           |          |   | 14,243 |        |  |  | 3.60    | %    |   |   | 382,865   |           |  |   | 20,647 |         |  |  | 5.39 | %   
|                                      | Short-term borrowings                        |                                            |   | 17,799                  |           |          |   | 277     |        |              |  | 1.56     | %    |         |   | 15,401       |           |          |   | 329    |        |  |  | 2.14    | %    |   |   | 43,458    |           |  |   | 2,109  |         |  |  | 4.85 | %   
|                                      | Long-term borrowings (4)                     |                                            |   | 99,734                  |           |          |   | 5,231   |        |              |  | 5.24     | %    |         |   | 110,596      |           |          |   | 6,884  |        |  |  | 6.22    | %    |   |   | 70,665    |           |  |   | 4,300  |         |  |  | 6.09 | %   
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      |                                              | Total interest bearing
liabilities         |   |                         | 1,158,755 |          |   |         | 20,639 |              |  |          | 1.78 | %       |   |              | 1,113,308 |          |   |        | 28,532 |  |  |         | 2.56 | % |   |           | 1,039,933 |  |   |        | 40,572  |  |  |      | 3.90 | %
|                                      | Demand deposits                              |                                            |   | 283,504                 |           |          |   |         |        |              |  |          |      |         |   | 234,189      |           |          |   |        |        |  |  |         |      |   |   | 192,709   |           |  |   |        |         |  |  |      |     
|                                      | Other liabilities                            |                                            |   | 11,666                  |           |          |   |         |        |              |  |          |      |         |   | 9,692        |           |          |   |        |        |  |  |         |      |   |   | 8,689     |           |  |   |        |         |  |  |      |     
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      |                                              | Total liabilities                          |   |                         | 1,453,925 |          |   |         |        |              |  |          |      |         |   |              | 1,357,189 |          |   |        |        |  |  |         |      |   |   |           | 1,241,331 |  |   |        |         |  |  |      |      |  
|                                      | Stockholders equity                         |                                            |   | 136,317                 |           |          |   |         |        |              |  |          |      |         |   | 130,375      |           |          |   |        |        |  |  |         |      |   |   | 125,988   |           |  |   |        |         |  |  |      |     
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      |                                              | Total liabilities and
stockholders equity |   | $                       | 1,590,242 |          |   |         |        |              |  |          |      |         |   | $            | 1,487,564 |          |   |        |        |  |  |         |      |   |   | $         | 1,367,319 |  |   |        |         |  |  |      |      |  
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      | Net interest income                          |                                            |   |                         |           |          | $ | 70,793  |        |              |  |          |      |         |   |              |           |          | $ | 69,402 |        |  |  |         |      |   |   |           |           |  | $ | 61,774 |         |  |  |      |     
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      | Net interest spread                          |                                            |   |                         |           |          |   |         |        |              |  | 4.29     | %    |         |   |              |           |          |   |        |        |  |  | 4.43    | %    |   |   |           |           |  |   |        |         |  |  | 4.10 | %   
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     
|                                      | Net interest margin                          |                                            |   |                         |           |          |   |         |        |              |  | 4.70     | %    |         |   |              |           |          |   |        |        |  |  | 4.95    | %    |   |   |           |           |  |   |        |         |  |  | 4.83 | %   
|                                      |                                              |                                            |   |                         |           |          |   |         |        |              |  |          |      |         |   |              |           |          |   |        |        |  |  |         |      |   |   |           |           |  |   |        |         |  |  |     



|(1) |  | Yield/rate calculations have been based on more detailed information and
therefore may not recompute exactly due to rounding.                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Interest earned on nontaxable securities has been computed on a 35 % tax
equivalent basis.                                                                                           
|   
|(3) |  | Includes balances for loans held for sale.                                                                                                                                           
|   
|(4) |  | Includes junior subordinated debentures and mandatorily redeemable trust
preferred securities with average balances of $15.1 million and $8.9
million in 2003 and 2002, respectively.

16



---



##### Table of Contents



Net interest income  Changes due to Rate and Volume.The following table
sets forth the dollar amounts of the changes in consolidated net interest
income attributable to changes in volume and to changes in interest rates.
Changes not due solely to volume or rate and changes due to new product lines,
are allocated to volume.

|                                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |         |  
|---------------------------------------------- | ------------------------------------- | ------ | --------------------------- | ---------- | --------------------- | ---------- | ------ | ------- | --------------------------- | ---------- | ------ | ---------- | - | - | ----- | ----- | - | - | ------- | ------- | - | - | ------ | ------- | -
|                                               |                                       |        | Year Ended December 31,    
|                                               |                                       |        |                            
|                                               |                                       |        | 2003 compared to 2002       |            | 2002 compared to 2001
|                                               |                                       |        |                             |            |                      
|                                               |                                       |        | Increase (Decrease) due to: |            |                       |            |        |         | Increase (Decrease) due to: |            |        |            |  
|                                               |                                       |        |                             |            | Total Increase        |            |        |         | Total Increase             
|(Dollars in thousands)                         |                                       | Volume |                             | Yield/Rate |                       | (Decrease) |        | Volume  |                             | Yield/Rate |        | (Decrease)
|                                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |           
|Interest income:                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        
|Interest earning balances due
from banks       |                                       | $      | 6                           |            |                       | $          | (40    | )       |                             | $          | (34    | )          |   | $ | 17    |       |   | $ | (154    | )       |   | $ | (137   | )      
|Federal funds sold                             |                                       |        | 54                          |            |                       |            | (64    | )       |                             |            | (10    | )          |   |   | 103   |       |   |   | (51     | )       |   |   | 52     |        
|Investment security income:                    |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        
|                                               | Interest on taxable securities        |        |                             | 1,262      |                       |            |        | (1,616  | )                           |            |        | (354       | ) |   |       | 504   |   |   |         | (1,273  | ) |   |        | (769    | )
|                                               | Interest on nontaxable securities (1) |        |                             | (232       | )                     |            |        | (204    | )                           |            |        | (436       | ) |   |       | (322  | ) |   |         | (142    | ) |   |        | (464    | )
|Loans, including fees on loans                 |                                       |        | 3,644                       |            |                       |            | (9,312 | )       |                             |            | (5,668 | )          |   |   | 7,598 |       |   |   | (10,692 | )       |   |   | (3,094 | )      
|                                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        
|                                               | Total interest income (1)             |        |                             | 4,734      |                       |            |        | (11,236 | )                           |            |        | (6,502     | ) |   |       | 7,900 |   |   |         | (12,312 | ) |   |        | (4,412  | )
|Interest expense:                              |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        
|Savings and interest bearing demand            |                                       |        | 569                         |            |                       |            | (3,154 | )       |                             |            | (2,585 | )          |   |   | 612   |       |   |   | (7,052  | )       |   |   | (6,440 | )      
|Certificates of deposit                        |                                       |        | (651                        | )          |                       |            | (2,952 | )       |                             |            | (3,603 | )          |   |   | 330   |       |   |   | (6,734  | )       |   |   | (6,404 | )      
|Short-term borrowings                          |                                       |        | (99                         | )          |                       |            | 47     |         |                             |            | (52    | )          |   |   | (603  | )     |   |   | (1,177  | )       |   |   | (1,780 | )      
|Long-term borrowings (2)                       |                                       |        | (121                        | )          |                       |            | (1,532 | )       |                             |            | (1,653 | )          |   |   | 2,495 |       |   |   | 89      |         |   |   | 2,584  |        
|                                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        
|                                               | Total interest expense                |        |                             | (302       | )                     |            |        | (7,591  | )                           |            |        | (7,893     | ) |   |       | 2,834 |   |   |         | (14,874 | ) |   |        | (12,040 | )
|                                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        
|Increase (decrease) in net interest income (1) |                                       | $      | 5,036                       |            |                       | $          | (3,645 | )       |                             | $          | 1,391  |            |   | $ | 5,066 |       |   | $ | 2,562   |         |   | $ | 7,628  |        
|                                               |                                       |        |                             |            |                       |            |        |         |                             |            |        |            |   |   |       |       |   |   |         |         |   |   |        |        



|(1) |  | Tax-exempt income has been adjusted to a tax-equivalent basis using a 35
% tax equivalent basis.                  
|--- |  | ------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Long-term borrowings include junior subordinated debentures and
mandatorily redeemable trust preferred securities.

17



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##### Table of Contents



Provision for Loan Losses. The provision for loan losses is recorded to
bring the allowance for loan losses to an amount considered appropriate by
management based on factors which are described in the Lending and Credit
Management and Allowance for Loan Losses sections of this report.
Provisions for loan losses of $3.8 million, $5.0 million, and $3.3 million were
recorded for the years ended December 31, 2003, 2002 and 2001, respectively.
Net charge-offs of $2.5 million, $3.4 million, and $2.3 million, were recorded
in 2003, 2002 and 2001, respectively. The provision for loan losses decreased
$1.2 million in 2003 compared to 2002 due to a lower loan volume growth in 2003
and lower net charge-offs.

Noninterest Income. Noninterest income remains a key focus for Bancorp.
Our noninterest income for the year ended December 31, 2003, was $22.0 million,
up 18%, compared to $18.7 million in 2002 and up from $17.0 million in 2001.
Combined service charges on deposit accounts and other service charges,
commissions and fees were up 18% in 2003. This is indicative of our strong
deposit growth, increased investment sales from branch referrals, and a
significant increase in merchant bankcard income. In 2003, gains on sales of
loans increased $1.1 million or 27% over 2002. The increase was driven by
continued strong demand for single family residential loans, which was
influenced by lower interest rates. We also maintain a strategy of selling
certain originated SBA loans. The national SBA loan program is subject to
government funding changes that could influence our ability to generate future
fees on the sale of SBA loans. Gains on the sales of SBA loans, at $.9
million, remained flat in 2003 compared to 2002. During 2003, we invested $16
million in bank owned life insurance which contributed $.8 million to
noninterest income, compared to $.2 million in 2002.

Noninterest Expense. Noninterest expenses during the last three years
were $58.1 million in 2003, $54.0 million in 2002 and $52.0 million in 2001.
Noninterest expense increased $4.1 million in 2003 compared to 2002, with
approximately 70% of the increase centered in salaries and employee benefits
expense growth. Investments in our commercial banking sales teams, new
branches and higher performance-based compensation were the key drivers of
increased personnel expense. Overall, we increased our full-time equivalent
employees from 555 in 2002 to 588 in 2003.

Equipment expense was stable in 2003 at $5.1 million as we continue to
leverage technology, specifically software and other internet product delivery
tools. Occupancy expenses were $4.9 million, $4.6 million and $4.4 million for
2003, 2002, and 2001, respectively. Our occupancy expense increased in 2003
primarily due to the addition of three new Oregon branches (Raleigh Hills and
Airport Way in Portland, and Eugene), the new mortgage office in Bend, and from
the full year impact of our Beaverton and Pearl district branches added in
2002, as well as from lease rate increases. We expect to continue to grow
through strategically placed offices in 2004 and beyond. In general, opening a
new branch results in higher costs, which are not offset until a certain level
of deposits and loans is achieved. Check and other transaction processing fess
increased in 2003 over 2002, due mainly to increased deposit volumes and
expenses associated with processing higher volumes of ATM transactions.

Income Taxes. Our income tax expense for 2003 was $9.3 million, or 32.1%
of income before income taxes, compared to $9.0 million or 33.1% of income
before income taxes in 2002. Income tax expense in 2001 was $6.7 million or
31.2% of income before income taxes. Bancorps income tax expense over the
last three years has increased due to increased pre-tax income. Our effective
tax rate decreased in 2003 primarily due to our increase nontaxable income
generated from investments in bank owned life insurance. In addition to bank
owned life insurance, we have also invested in housing tax credits which
increased in 2003 over both 2002 and 2001. Nontaxable interest income from
municipal securities decreased $.3 million in 2003 compared to 2002. We
continue to evaluate strategies to manage our income tax expense, including
additional investments in tax credits or other non taxable income.

18



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##### Table of Contents



Balance Sheet overview

Period end total assets increased 8.5% to $1.66 billion as of December 31,
2003, from $1.53 billion at December 31, 2002, while period end investment
securities and loans increased 21% and 5%, respectively, in 2003. Period end
total deposits increased approximately 11% in 2003 compared to December 31,
2002. Our balance sheet has been focused on growth in targeted areas that
support our corporate objectives and include:



| |  |  | Small business and middle market commercial lending
| | - |  | ---------------------------------------------------
|
| |  |  | Home equity lending                                
|
| |  |  | Core deposit production                            

During 2003, our year to date average commercial loans were up 16%, or $33
million over 2002, while average home equity loans were up $34 million, or 35%
over the same time period.

In addition to focusing on certain targeted loan segments, we increased
our investments in securities in 2003, mainly due to the strong deposit
production. Our strategy of opening additional branches has continued to
assist us in generating meaningful core deposit growth.

Investment Portfolio

The following table shows the amortized cost and fair value of Bancorps
investment portfolio. At December 31, 2003 Bancorp had no securities
classified as held to maturity.

|                                                |       |           |         |            |      |      |         |            |  |   |         |         |  |   |         |         | 
|----------------------------------------------- | ----- | --------- | ------- | ---------- | ---- | ---- | ------- | ---------- |  | - | ------- | ------- |  | - | ------- | ------- | 
|                                                |       |           | 2003    |            | 2002
|                                                |       |           |         |            |     
|(Dollars in thousands                           |       | Amortized |         |            |      |      |         | Amortized  |  |   |         |        
|Available for sale                              |       | Cost      |         | Fair value |      | Cost |         | Fair value
|                                                |       |           |         |            |      |      |         |           
|U.S. Treasury securities                        |       | $         |        |            |      | $    |        |            |  | $ | 5,500   |         |  | $ | 5,583   |        
|U.S. Agency securities                          |       |           | 107,339 |            |      |      | 108,282 |            |  |   | 64,461  |         |  |   | 66,483  |        
|Obligations of state and political subdivisions |       |           | 76,202  |            |      |      | 80,082  |            |  |   | 83,372  |         |  |   | 87,592  |        
|Other securities                                |       |           | 132,695 |            |      |      | 133,606 |            |  |   | 104,621 |         |  |   | 106,749 |        
|                                                |       |           |         |            |      |      |         |            |  |   |         |         |  |   |         |        
|                                                | Total |           | $       | 316,236    |      |      | $       | 321,970    |  |   | $       | 257,954 |  |   | $       | 266,407 | 
|                                                |       |           |         |            |      |      |         |            |  |   |         |         |  |   |         |        

Bancorps investment portfolio increased by $55.6 million, or 20.9%, from
December 31, 2002 to December 31, 2003.

At December 31, 2003 the net unrealized gain on the investment portfolio
was $5.7 million representing 1.78% of the total portfolio. Management will
consider realizing gains and or losses on the Companys investment portfolio on
an on-going basis as part of Bancorps overall business strategy. The
following table summarizes the contractual maturities and weighted average
yields of investment securities.

|                                                    |           |         |          |        |  |            |      |       |             |           |        |         |  |           |              |       |       |       |        |        |           |  |      |      |   |   |         |         |  |  |      |      |   |   |         |         |  |  |      |      |  
|--------------------------------------------------- | --------- | ------- | -------- | ------ |  | ---------- | ---- | ----- | ----------- | --------- | ------ | ------- |  | --------- | ------------ | ----- | ----- | ----- | ------ | ------ | --------- |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | - | - | ------- | ------- |  |  | ---- | ---- | -
|                                                    |           |         |          |        |  |            |      |       |             |           | After  |         |  |           |              |       | After |       |        |        |           |  |      |      |   |   |         |         |  |  |      |      |   |   |         |         | 
|                                                    |           |         | One year |        |  |            |      |       | One through |           |        |         |  |           | Five through |       |       |       |        |        | Due after |  |      |      |   |   |         |         |  |  |      |      |  
|(Dollars in thousands)                              |           | or less |          | Yield  |  | five years |      | Yield |             | ten years |        | Yield   |  | ten years |              | Yield |       | Total |        | Yield 
|                                                    |           |         |          |        |  |            |      |       |             |           |        |         |  |           |              |       |       |       |        |       
|U.S. Agency securities                              |           | $       | 6,093    |        |  |            | 7.25 | %     |             | $         | 76,656 |         |  |           | 3.99         | %     |       | $     | 25,533 |        |           |  | 4.60 | %    |   | $ |        |         |  |  | 0.00 | %    |   | $ | 108,282 |         |  |  | 4.32 | %   
|Obligations of state and
political subdivisions (1) |           |         | 8,525    |        |  |            | 5.25 | %     |             |           | 36,565 |         |  |           | 4.84         | %     |       |       | 31,858 |        |           |  | 4.57 | %    |   |   | 3,134   |         |  |  | 3.48 | %    |   |   | 80,082  |         |  |  | 4.72 | %   
|Other securities (2)                                |           |         | 5,140    |        |  |            | 7.06 | %     |             |           | 6,668  |         |  |           | 5.07         | %     |       |       | 21,651 |        |           |  | 4.62 | %    |   |   | 100,147 |         |  |  | 3.81 | %    |   |   | 133,606 |         |  |  | 4.13 | %   
|                                                    |           |         |          |        |  |            |      |       |             |           |        |         |  |           |              |       |       |       |        |        |           |  |      |      |   |   |         |         |  |  |      |      |   |   |         |         |  |  |      |     
|                                                    | Total (1) |         | $        | 19,758 |  |            |      | 6.34  | %           |           | $      | 119,889 |  |           |              | 4.31  | %     |       | $      | 79,042 |           |  |      | 4.60 | % |   | $       | 103,281 |  |  |      | 3.80 | % |   | $       | 321,970 |  |  |      | 4.34 | %
|                                                    |           |         |          |        |  |            |      |       |             |           |        |         |  |           |              |       |       |       |        |        |           |  |      |      |   |   |         |         |  |  |      |      |   |   |         |         |  |  |      |     



|(1) |  | Yields are stated on a federal tax equivalent basis at 35%.                                                                                                                  
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Does not reflect anticipated maturity from prepayments on mortgage-based and asset-based securities.
Anticipated lives are significantly shorter than contractual maturities.

The average life of Bancorps investment portfolio increased from 2.9
years at December 31, 2002 to 3.3 years at December 31, 2003 as investments
were made in medium term bonds and as prepayments decelerated on the mortgage
backed securities.

19



---



##### Table of Contents



Loan Portfolio and Credit Management

Interest and fees earned on the loan portfolio is our primary source of
revenue. Loans represented 73% of total assets, or $1.22 billion as of
December 31, 2003, compared to 76% or $1.16 billion at December 31, 2002. A
certain degree of credit risk is inherent in our lending activities. The Bank
manages the general risks inherent in the loan portfolio by following loan
policies and underwriting practices designed to result in prudent lending
activities. In addition, we attempt to manage our risk through our credit
administration and credit review functions, which are designed to help ensure
compliance with our credit standards. Through the Credit Review function the
Bank is able to monitor all credit-related policies and practices on a post
approval basis, ensuring uniform application. The findings of these reviews
are communicated with senior management and the Loan, Investment, and Asset
Liability Committee, which is made up of certain directors. As part of our
ongoing lending process, internal risk ratings are assigned to each Commercial
and Commercial Real Estate credit before the funds are extended to the
customer. Credit risk ratings are based on apparent credit worthiness of the
borrower at the time the loan is made. Large balance accounts have the credit
risk rating reviewed on at least an annual basis. Credit files are examined
periodically on a sample test basis, by internal and external auditors, as well
as regulatory examiners.

Although a risk of nonpayment exists with respect to all loans, certain
specific types of risks are associated with different types of loans. As a
result of the nature of our customer base and the growth experienced in the
market areas served, real estate is frequently a material component of
collateral for the Banks loans. The expected source of repayment of these
loans is generally the cash flow of the project, operations of the borrowers
business, or personal income. Risks associated with real estate loans include
decreasing land values, material increases in interest rates, deterioration in
local economic conditions, changes in tax policies, and a concentration of
loans within any one area.

Loans held for sale at December 31, 2003 were $4.7 million compared to
$10.9 million at December 31, 2002. Bancorp periodically sells all types of
loans to generate fee income and to manage interest rate risk and credit risk.
The majority of Bancorps loan sales are residential real estate mortgage
loans and the guaranteed portion of SBA loans. These loans are sold on an
individual basis. Real estate mortgage loans have been generally sold without
recourse and without retaining servicing rights or obligations. The guaranteed
part of SBA loans have been sold from time to time with servicing rights and
obligations usually retained. Gains on sales of loans totaled $5.1 million in
2003 compared to $4.0 million in 2002 and $3.7 million in 2001. Increases in
gains on the sales in the past three years are due to increased demand for
single family home loans which was influenced by lower interest rates.

As of December 31, 2003 and 2002, we had $5.9 million and $5.4 million,
respectively, in outstanding loans to persons serving as directors, officers,
principal stockholders and their related interests. These loans were made
substantially on the same terms, including interest rates, maturities and
collateral, as those made to other customers of the Bank. At December 31, 2003
and 2002, the Bank had no bankers acceptances.

As part of our strategic efforts, we have placed an emphasis on increasing
the commercial and home equity loan segments of our portfolio. Real estate
commercial loans continue to be the largest portion of our loan portfolio at
54%, down from 58% at the end of 2000. We believe our focus on commercial
business loans is a key contributor to our strategy of core deposit growth.

The following table is the composition of the loan portfolio and allowance
for loan loss as of December 31:

|                               |                  |        |                         |           |      |        |      |         |      |        |         |           |  |        |      |         |   |        |         |           |  |  |      |     |   |   |         |           |  |  |      |     |   |   |         |         |  |  |      |     |  
|------------------------------ | ---------------- | ------ | ----------------------- | --------- | ---- | ------ | ---- | ------- | ---- | ------ | ------- | --------- |  | ------ | ---- | ------- | - | ------ | ------- | --------- |  |  | ---- | --- | - | - | ------- | --------- |  |  | ---- | --- | - | - | ------- | ------- |  |  | ---- | --- | -
|                               |                  |        | Year Ended December 31,
|                               |                  |        |                        
|                               |                  |        | 2003                    |           | 2002 |        | 2001 |         | 2000 |        | 1999   
|                               |                  |        |                         |           |      |        |      |         |      |        |        
|(Dollars in thousands)         |                  | Amount |                         | Percent   |      | Amount |      | Percent |      | Amount |         | Percent   |  | Amount |      | Percent |   | Amount |         | Percent  
|                               |                  |        |                         |           |      |        |      |         |      |        |         |           |  |        |      |         |   |        |         |          
|Commercial loans               |                  | $      | 236,949                 |           |      |        | 19.4 | %       |      | $      | 205,725 |           |  |        | 17.7 | %       |   | $      | 198,252 |           |  |  | 18.3 | %   |   | $ | 159,861 |           |  |  | 16.0 | %   |   | $ | 157,912 |         |  |  | 16.2 | %  
|Real estate construction       |                  |        | 112,732                 |           |      |        | 9.2  | %       |      |        | 121,711 |           |  |        | 10.5 | %       |   |        | 94,470  |           |  |  | 8.7  | %   |   |   | 105,219 |           |  |  | 10.5 | %   |   |   | 124,102 |         |  |  | 12.7 | %  
|Real estate-mortgage           |                  |        | 179,331                 |           |      |        | 14.7 | %       |      |        | 148,350 |           |  |        | 12.8 | %       |   |        | 113,462 |           |  |  | 10.5 | %   |   |   | 97,377  |           |  |  | 9.7  | %   |   |   | 101,579 |         |  |  | 10.4 | %  
|Real estate-commercial         |                  |        | 652,882                 |           |      |        | 53.5 | %       |      |        | 637,978 |           |  |        | 55.0 | %       |   |        | 633,216 |           |  |  | 58.4 | %   |   |   | 583,971 |           |  |  | 58.4 | %   |   |   | 531,600 |         |  |  | 54.5 | %  
|Installment and other
consumer |                  |        | 38,987                  |           |      |        | 3.2  | %       |      |        | 46,151  |           |  |        | 4.0  | %       |   |        | 45,650  |           |  |  | 4.2  | %   |   |   | 53,784  |           |  |  | 5.4  | %   |   |   | 61,104  |         |  |  | 6.3  | %  
|                               |                  |        |                         |           |      |        |      |         |      |        |         |           |  |        |      |         |   |        |         |           |  |  |      |     |   |   |         |           |  |  |      |     |   |   |         |         |  |  |      |    
|                               | Total loans      |        |                         | 1,220,881 |      |        |      | 100     | %    |        |         | 1,159,915 |  |        |      | 100     | % |        |         | 1,085,050 |  |  |      | 100 | % |   |         | 1,000,212 |  |  |      | 100 | % |   |         | 976,297 |  |  |      | 100 | %
|Allowance for loan loss        |                  |        | (18,131                 | )         |      |        | 1.49 | %       |      |        | (16,838 | )         |  |        | 1.45 | %       |   |        | (15,252 | )         |  |  | 1.41 | %   |   |   | (14,244 | )         |  |  | 1.42 | %   |   |   | (13,480 | )       |  |  | 1.38 | %  
|                               |                  |        |                         |           |      |        |      |         |      |        |         |           |  |        |      |         |   |        |         |           |  |  |      |     |   |   |         |           |  |  |      |     |   |   |         |         |  |  |      |    
|                               | Total loans, net |        | $                       | 1,202,750 |      |        |      |         |      |        | $       | 1,143,077 |  |        |      |         |   |        | $       | 1,069,798 |  |  |      |     |   |   | $       | 985,968   |  |  |      |     |   |   | $       | 962,817 |  |  |      |     |  
|                               |                  |        |                         |           |      |        |      |         |      |        |         |           |  |        |      |         |   |        |         |           |  |  |      |     |   |   |         |           |  |  |      |     |   |   |         |         |  |  |      |    

20



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The composition of commercial real estate loan types based on collateral is as
follows:

|                                    |  |              |         |         |  |        |       |         |  |   |         |  |  |  |       |  
|----------------------------------- |  | ------------ | ------- | ------- |  | ------ | ----- | ------- |  | - | ------- |  |  |  | ----- | -
|                                    |  | December 31,
|                                    |  |             
|                                    |  | 2003         |         | 2002   
|                                    |  |              |         |        
|(Dollars in thousands)              |  | Amount       |         | Percent |  | Amount |       | Percent
|                                    |  |              |         |         |  |        |       |        
|Office Buildings                    |  | $            | 153,900 |         |  |        | 23.7  | %       |  | $ | 138,700 |  |  |  | 21.7  | %
|Retail Facilities                   |  |              | 80,600  |         |  |        | 12.3  | %       |  |   | 73,000  |  |  |  | 11.4  | %
|Hotels/Motels                       |  |              | 66,100  |         |  |        | 10.1  | %       |  |   | 72,200  |  |  |  | 11.3  | %
|Multi-Family - 5+ Residential       |  |              | 65,000  |         |  |        | 10.0  | %       |  |   | 66,900  |  |  |  | 10.5  | %
|Assisted Living                     |  |              | 42,100  |         |  |        | 6.4   | %       |  |   | 39,600  |  |  |  | 6.2   | %
|Medical Offices                     |  |              | 29,000  |         |  |        | 4.4   | %       |  |   | 32,100  |  |  |  | 5.0   | %
|Industrial parks and related        |  |              | 28,000  |         |  |        | 4.3   | %       |  |   | 18,600  |  |  |  | 2.9   | %
|Health spa and gym                  |  |              | 19,900  |         |  |        | 3.0   | %       |  |   | 11,400  |  |  |  | 1.8   | %
|Mini Storage                        |  |              | 17,500  |         |  |        | 2.7   | %       |  |   | 18,000  |  |  |  | 2.8   | %
|Food Establishments                 |  |              | 17,300  |         |  |        | 2.6   | %       |  |   | 15,200  |  |  |  | 2.4   | %
|Manufacturing Plants                |  |              | 16,500  |         |  |        | 2.5   | %       |  |   | 15,900  |  |  |  | 2.5   | %
|Land Development and Raw Land       |  |              | 13,400  |         |  |        | 2.1   | %       |  |   | 11,200  |  |  |  | 1.8   | %
|Church, Civic, Nonprofit facilities |  |              | 10,100  |         |  |        | 1.5   | %       |  |   | 14,400  |  |  |  | 2.3   | %
|RV Parks, Marinas, related          |  |              | 7,600   |         |  |        | 1.2   | %       |  |   | 10,800  |  |  |  | 1.7   | %
|Commercial/Agricultural             |  |              | 6,700   |         |  |        | 1.0   | %       |  |   | 13,000  |  |  |  | 2.0   | %
|Other                               |  |              | 79,200  |         |  |        | 12.2  | %       |  |   | 86,900  |  |  |  | 13.6  | %
|                                    |  |              |         |         |  |        |       |         |  |   |         |  |  |  |       |  
|Total real estate commercial loans  |  | $            | 652,900 |         |  |        | 100.0 | %       |  | $ | 637,900 |  |  |  | 100.0 | %
|                                    |  |              |         |         |  |        |       |         |  |   |         |  |  |  |       |  

The maturity distribution of the categories of Bancorps loan portfolio at
December 31, 2003 and the interest sensitivity are estimated in the following
table.

|                       |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |           |           | 
|---------------------- | --------------------------------------------- | ----- | - | ------------ | ------- | ----------- | - | ----------- | ------- | ----------- | - | ----------- | ------- |  | - | ------- | ------- |  | - | ------ | ------ |  | - | --------- | --------- | 
|                       |                                               |       |   | Commercial   |         | Real Estate |   | Real Estate |         | Real Estate |   | Installment |         |  |   |        
|(Dollars in thousands) |                                               | Loans |   | Construction |         | Mortgage    |   | Commercial  |         | and other   |   | Total      
|                       |                                               |       |   |              |         |             |   |             |         |             |   |            
|Maturity distribution: |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |          
|                       | Due within one year                           |       | $ | 93,048       |         |             | $ | 96,256      |         |             | $ | 5,656       |         |  | $ | 52,989  |         |  | $ | 2,887  |        |  | $ | 250,836   |          
|                       | Due after one through five years              |       |   | 106,156      |         |             |   | 13,042      |         |             |   | 6,394       |         |  |   | 102,742 |         |  |   | 22,165 |        |  |   | 250,499   |          
|                       | Due after five years                          |       |   | 37,745       |         |             |   | 3,434       |         |             |   | 167,281     |         |  |   | 497,151 |         |  |   | 13,935 |        |  |   | 719,546   |          
|                       |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |          
|                       |                                               | Total |   | $            | 236,949 |             |   | $           | 112,732 |             |   | $           | 179,331 |  |   | $       | 652,882 |  |   | $      | 38,987 |  |   | $         | 1,220,881 | 
|                       |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |          
|Interest sensitivity:  |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |          
|                       | Fixed-interest rate loans                     |       | $ | 49,182       |         |             | $ | 17,229      |         |             | $ | 25,692      |         |  | $ | 67,796  |         |  | $ | 19,982 |        |  | $ | 179,881   |          
|                       | Floating or adjustable interest rate loans(1) |       |   | 187,767      |         |             |   | 95,503      |         |             |   | 153,639     |         |  |   | 585,086 |         |  |   | 19,005 |        |  |   | 1,041,000 |          
|                       |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |          
|                       |                                               | Total |   | $            | 236,949 |             |   | $           | 112,732 |             |   | $           | 179,331 |  |   | $       | 652,882 |  |   | $      | 38,987 |  |   | $         | 1,220,881 | 
|                       |                                               |       |   |              |         |             |   |             |         |             |   |             |         |  |   |         |         |  |   |        |        |  |   |          



|(1) |  | Certain loans contain provisions which place maximum or minimum limits on interest rate changes, as well as loans where interest
rates change less frequently than annually. Table based on stated maturity.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loan Loss Allowance and Provision

A loan loss allowance has been established to absorb losses inherent in
the loan portfolio. The allowance is based on ongoing, quarterly assessments
of the probable estimated losses inherent in the loan portfolio. Our
methodology for assessing the appropriateness of the allowance consists of
several key elements, which are:



| |  |  | Specific allowances for identified problem loans and portfolio segments,
| | - |  | ------------------------------------------------------------------------
|
| |  |  | The formula allowance, and                                              
|
| |  |  | The unallocated allowance.                                              

The evaluation of each element and the overall allowance is based on a
continuing assessment of problem loans, related off-balance sheet items, recent
and historical loss experience, and other factors, including regulatory
guidance and economic factors. Management believes that the allowance for loan
losses is adequate at December 31, 2003.

Our allowance incorporates the results of measuring impaired loans as
provided in: Statement of Financial Accounting Standards (SFAS) No. 114,
Accounting by Creditors for Impairment of a Loan, and SFAS No. 118,
Accounting by Creditors for Impairment of a Loan  Income Recognition and
Disclosures. These accounting standards prescribe the measurement, income
recognition and guidelines concerning impaired loans.

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Specific allowances are established where management has identified
significant conditions or circumstances related to a credit that management
believes indicate the probability that a loss may be incurred in an amount
different than the amount determined by the application of the formula
allowance.

The formula allowance is calculated by applying loss factors to
outstanding loans, in each case based on the internal risk grade of those loans
or pools of loans. Changes in risk grades of both performing and nonperforming
loans affect the amount of the formula allowance. Loss factors are based on
our historical loss experience and other such pertinent data and may be
adjusted for significant factors that, in managements judgement, affect the
collectibility of the portfolio as of the evaluation date. Management believes
that Commercial and Commercial Real Estate loans have in the industry produced
significant losses in brief periods at particular points in economic cycles.
Therefore, management believes it is appropriate to use a reserve higher than
recent charge-off experience would suggest in these categories of loans. This
decision is supported by what management perceives to be industry practices for
minimum reserve levels and is intended to prevent an understatement of reserves
based upon over-reliance on recent economic conditions.

Loss factors used in the formula allowance are described as follows:



| |  |  | Problem graded loan loss factors are obtained from historical
loss experience, and other relevant factors including trends in past
dues, non-accruals, and risk rating changes.                                                                                                                     
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Pooled loan loss factors, not individually graded loans, are
based on expected net charge-offs and other factors including trends
in past dues and collateral values. Pooled loans are loans and
leases that are homogeneous in nature, such as consumer installment
and residential mortgage loans.

The unallocated allowance uses a more subjective method and considers such factors as the following:



| |  |  | Existing general economic and business conditions affecting our key lending areas,                         
| | - |  | -----------------------------------------------------------------------------------------------------------
|
| |  |  | Credit quality trends, including trends in nonperforming loans expected to result from existing conditions,
|
| |  |  | Loan growth rates and concentrations,                                                                      
|
| |  |  | Specific industry conditions within portfolio segments,                                                    
|
| |  |  | Recent loss experience in particular segments of the portfolio,                                            
|
| |  |  | Interest rate environment,                                                                                 
|
| |  |  | Duration of the current business cycle, and                                                                
|
| |  |  | Bank regulatory examination results and findings of our internal credit examiners.                         

Executive credit management reviews these conditions quarterly in
discussion with our senior credit officers and credit review. If any of these
conditions is evidenced by a specifically identifiable problem credit or
portfolio segment as of the evaluation date, managements estimate of the
effect of this condition may be reflected as a specific allowance applicable to
this credit or portfolio segment. Where any of these conditions is not
evidenced by a specifically identifiable problem credit or portfolio segment as
of the evaluation date, managements evaluation of the probable loss concerning
this condition is reflected in the unallocated allowance.

The allowance for loan losses is based upon estimates of probable losses
inherent in the loan portfolio. The amount actually observed for these losses
can vary significantly from the estimated amounts. Our methodology includes
several features that are intended to reduce the differences between estimated
and actual losses. By assessing the probable estimated losses inherent in the
loan portfolio on a quarterly basis, we are able to adjust specific and
inherent loss estimates based upon the most recent information available.

At December 31, 2003, our allowance for loan losses was $18.1 million, or
1.49% of total loans, and 411% of total non-performing assets, compared with an
allowance for loan losses at December 31, 2002 of $16.8 million, or 1.45% of
total loans, and 249% of total non-performing assets.

At December 31, 2003, the allowance for loan losses of $18.1 million,
consisted of a $17.0 million formula allowance, a $95,000 specific allowance
and a $1.0 million unallocated allowance. At December 31, 2002, the allowance
for loan losses of $16.8 million consisted of a $15.5 million formula
allowance, a $90,000 specific allowance and a $1.2 million unallocated
allowance. The increase in allowance for loan losses from 2002, despite a
lower provision in 2003, reflects continued loan portfolio growth and the level
of classified and watch credits impacted by the soft economies in Oregon and
Washington.

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The following table presents the composition of the allowance for loan
loss.

|                       |                               |        |              |        |      |        |                   |       |   |   |       |        |                   |  |      |       |  
|---------------------- | ----------------------------- | ------ | ------------ | ------ | ---- | ------ | ----------------- | ----- | - | - | ----- | ------ | ----------------- |  | ---- | ----- | -
|                       |                               |        | December 31,
|                       |                               |        |             
|                       |                               |        | 2003         |        | 2002
|                       |                               |        |              |        |     
|                       |                               |        |              |        |      |        | Percentage of     |       |   |   |       |        | Percentage of    
|                       |                               |        |              |        |      |        | loans in each     |       |   |   |       |        | loans in each    
|                       |                               |        |              |        |      |        | category to total |       |   |   |       |        | category to total
|(Dollars in thousands) |                               | Amount |              | loans  |      | Amount |                   | loans
|                       |                               |        |              |        |      |        |                   |      
|Commercial loans       |                               | $      | 5,433        |        |      |        | 19.4              | %     |   | $ | 5,104 |        |                   |  | 17.7 | %    
|Real estate-commercial |                               |        | 9,787        |        |      |        | 62.7              | %     |   |   | 8,710 |        |                   |  | 65.5 | %    
|Real estate-mortagage  |                               |        | 1,232        |        |      |        | 14.7              | %     |   |   | 948   |        |                   |  | 12.8 | %    
|Installment and other  |                               |        | 688          |        |      |        | 3.2               | %     |   |   | 843   |        |                   |  | 4.0  | %    
|Unallocated            |                               |        | 991          |        |      |        |                  |       |   |   | 1,233 |        |                   |  |     |      
|                       |                               |        |              |        |      |        |                   |       |   |   |       |        |                   |  |      |      
|                       | Total allowance for loan loss |        | $            | 18,131 |      |        |                   | 100.0 | % |   | $     | 16,838 |                   |  |      | 100.0 | %
|                       |                               |        |              |        |      |        |                   |       |   |   |       |        |                   |  |      |      

The unallocated reserve decreased to $1.0 million in 2003 from $1.2
million in 2002. The slight decrease was due to lower nonaccrual loans,
reduced delinquencies and a reduction in watch and classified loans.

Asset Quality

Interest income on loans is accrued daily on the principal balance
outstanding. Generally, no interest is accrued on loans when factors indicate
collection of interest or principal is doubtful or when the principal or
interest payment becomes 90 days past due. Increases in nonaccrual loans in
recent years are due primarily to growth in the loan portfolio. The nonaccrual
loans consist of a number of loans in different categories and are largely
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 the loan comes out of nonaccrual status.
Interest income foregone on nonaccrual loans was approximately $231,000 during
2003 and $314,000 in 2002.

During our normal loan review procedures, a loan is considered to be
impaired when it is probable that we will be unable to collect all amounts due
according to the contractual terms of the loan agreement. A loan is usually
not considered to be impaired during a period of minimal delay (less than 90
days). Impaired loans are measured 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 currently measured at lower of cost or fair value. Leases and certain large
groups of smaller balance homogeneous loans, that are collectively measured for
impairment, are excluded. Impaired loans are charged to the allowance when
management believes, after considering economic and business conditions,
collection efforts and collateral position that the borrowers financial
condition is such that collection of principal is not probable.

At December 31, 2003 and 2002, Bancorps recorded investment in certain
loans that were considered to be impaired was $2.6 million and $4.9 million,
respectively, all of which was classified as non-performing. Of these impaired
loans, $181,000 and $0 had a specific related valuation allowance of $95,000
and $0, respectively, while $2.4 million and $4.9 million did not require a
specific valuation allowance. The balance of the allowance for loan loss in
excess of these specific reserves is available to absorb the inherent losses
from all loans in the portfolio. The average recorded investment in impaired
loans for the years ended December 31, 2003, 2002, and 2001 was approximately
$4.0 million, $5.2 million and $6.2 million, respectively. For the years ended
December 31, 2003, 2002 and 2001, interest income recognized on impaired loans
totaled $193,000, $17,000 and $12,000, respectively, all of which was
recognized on a cash basis.

23



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The following table presents information with respect to the change in the
allowance for loan loss and other loan information.

|                                                            |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |       | 
|----------------------------------------------------------- | ------------------------ | ---- | ------------ | ----- |  | ---- | --------- | ----- |  | ---- | --------- | ----- |  | - | --------- | ----- |  | - | ------- | ----- | 
|                                                            |                          |      | December 31,
|                                                            |                          |      |             
|(Dollars in thousands)                                      |                          | 2003 |              | 2002  |  | 2001 |           | 2000  |  | 1999
|                                                            |                          |      |              |       |  |      |           |       |  |     
|Loans outstanding at end of period                          |                          | $    | 1,220,881    |       |  | $    | 1,159,915 |       |  | $    | 1,085,050 |       |  | $ | 1,000,212 |       |  | $ | 976,297 |      
|Average loans outstanding during the period                 |                          | $    | 1,196,962    |       |  | $    | 1,127,761 |       |  | $    | 1,017,536 |       |  | $ | 1,000,992 |       |  | $ | 904,931 |      
|Allowance for loan loss, beginning of period                |                          | $    | 16,838       |       |  | $    | 15,252    |       |  | $    | 14,244    |       |  | $ | 13,480    |       |  | $ | 12,453  |      
|Loans charged off:                                          |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |      
|                                                            | Commercial               |      |              | 1,494 |  |      |           | 1,878 |  |      |           | 1,542 |  |   |           | 934   |  |   |         | 450   | 
|                                                            | Real estate              |      |              | 844   |  |      |           | 526   |  |      |           | 310   |  |   |           | 82    |  |   |         | 487   | 
|                                                            | Installment and consumer |      |              | 760   |  |      |           | 1,276 |  |      |           | 698   |  |   |           | 658   |  |   |         | 490   | 
|                                                            |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |      
|                                                            | Total loans charged off  |      |              | 3,098 |  |      |           | 3,680 |  |      |           | 2,550 |  |   |           | 1,674 |  |   |         | 1,427 | 
|Recoveries:                                                 |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |      
|                                                            | Commercial               |      |              | 380   |  |      |           | 160   |  |      |           | 205   |  |   |           | 61    |  |   |         | 129   | 
|                                                            | Real estate              |      |              | 70    |  |      |           | 25    |  |      |           | 7     |  |   |           | 266   |  |   |         | 58    | 
|                                                            | Installment and consumer |      |              | 141   |  |      |           | 102   |  |      |           | 64    |  |   |           | 43    |  |   |         | 77    | 
|                                                            |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |      
|                                                            | Total recoveries         |      |              | 591   |  |      |           | 287   |  |      |           | 276   |  |   |           | 370   |  |   |         | 264   | 
|Net loans charged off                                       |                          |      | (2,507       | )     |  |      | (3,393    | )     |  |      | (2,274    | )     |  |   | (1,304    | )     |  |   | (1,163  | )    
|Provision for loan loss                                     |                          |      | 3,800        |       |  |      | 4,979     |       |  |      | 3,282     |       |  |   | 2,068     |       |  |   | 2,190   |      
|                                                            |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |      
|Allowance for loan loss, end of period                      |                          | $    | 18,131       |       |  | $    | 16,838    |       |  | $    | 15,252    |       |  | $ | 14,244    |       |  | $ | 13,480  |      
|                                                            |                          |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |         |      
|Ratio of net loans charged off to average
loans outstanding |                          |      | 0.21         | %     |  |      | 0.30      | %     |  |      | 0.22      | %     |  |   | 0.13      | %     |  |   | 0.13    | %    
|Ratio of allowance for loan losses to end of
period loans   |                          |      | 1.49         | %     |  |      | 1.45      | %     |  |      | 1.41      | %     |  |   | 1.42      | %     |  |   | 1.38    | %    

During 2003, net loans charged off were $2.5 million, compared to $3.4
million during 2002. The percentage of net loans charged off to average loans
outstanding was 0.21% during 2003, compared to 0.30% and 0.22% for the years
ended December 31, 2002 and 2001, respectively. Charge-offs of loans generally
reflect the realization of losses in the portfolio that were recognized
previously through provisions for loan losses. Recoveries are comprised of
balances previously charged off that were collected in the period. The
provision for loan loss exceeded the net loans charged off during 2003,
reflecting continued loan growth and managements belief, based on the
foregoing analysis, that there are additional losses inherent in the portfolio.

The following table presents information with respect to nonperforming
assets.

|                                                            |                            |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |           |       | 
|----------------------------------------------------------- | -------------------------- | ---- | ------------ | ----- |  | ---- | --------- | ----- |  | ---- | --------- | ----- |  | - | --------- | ----- |  | - | --------- | ----- | 
|                                                            |                            |      | December 31,
|                                                            |                            |      |             
|(Dollars in thousands)                                      |                            | 2003 |              | 2002  |  | 2001 |           | 2000  |  | 1999
|                                                            |                            |      |              |       |  |      |           |       |  |     
|Commercial                                                  |                            | $    | 403          |       |  | $    | 780       |       |  | $    | 1,918     |       |  | $ | 1,678     |       |  | $ | 1,386     |      
|Real estate construction                                    |                            |      |             |       |  |      | 1,653     |       |  |      | 329       |       |  |   | 429       |       |  |   | 513       |      
|Real estate mortgage                                        |                            |      | 498          |       |  |      |          |       |  |      | 210       |       |  |   | 540       |       |  |   | 756       |      
|Real estate commercial                                      |                            |      | 1,689        |       |  |      | 2,486     |       |  |      | 3,790     |       |  |   | 2,927     |       |  |   | 1,463     |      
|Installment and other consumer                              |                            |      | 79           |       |  |      | 161       |       |  |      | 144       |       |  |   | 152       |       |  |   | 198       |      
|                                                            |                            |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |           |      
|Loans on nonaccrual status                                  |                            |      | 2,669        |       |  |      | 5,080     |       |  |      | 6,391     |       |  |   | 5,726     |       |  |   | 4,316     |      
|Loans past due 90 days or more but not on
nonaccrual status |                            |      |             |       |  |      | 15        |       |  |      | 4         |       |  |   | 270       |       |  |   | 8         |      
|Other real estate owned (1)                                 |                            |      | 1,741        |       |  |      | 1,672     |       |  |      | 1,308     |       |  |   | 1,009     |       |  |   | 325       |      
|                                                            |                            |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |           |      
|                                                            | Total nonperforming assets |      | $            | 4,410 |  |      | $         | 6,767 |  |      | $         | 7,703 |  |   | $         | 7,005 |  |   | $         | 4,649 | 
|                                                            |                            |      |              |       |  |      |           |       |  |      |           |       |  |   |           |       |  |   |           |      
|Percentage of nonperforming assets to
total assets          |                            |      | 0.27         | %     |  |      | 0.44      | %     |  |      | 0.54      | %     |  |   | 0.52      | %     |  |   | 0.34      | %    
|Total assets                                                |                            | $    | 1,662,882    |       |  | $    | 1,532,327 |       |  | $    | 1,435,701 |       |  | $ | 1,354,961 |       |  | $ | 1,354,687 |      

(1)  Nonperforming assets include litigation settlement property in
2001 and 2000.

The other real estate owned total, while increasing slightly over 2002,
represents an almost complete turnover of properties for the year. The largest
single property is an RV park representing $1.2 million of the $1.7 million
total.

24



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##### Table of Contents



Deposits and Borrowings

The following table summarizes the average amount of, and the average rate
paid on, each of the deposit and borrowing categories for the periods shown.

|                                                  |  |                 |           |           |  |                 |      |           |  |                 |           |           |  |  |      |   |  |   |           |  |  |  |      |  
|------------------------------------------------- |  | --------------- | --------- | --------- |  | --------------- | ---- | --------- |  | --------------- | --------- | --------- |  |  | ---- | - |  | - | --------- |  |  |  | ---- | -
|                                                  |  | 2003            |           | 2002      |  | 2001           
|                                                  |  |                 |           |           |  |                
|(Dollars in thousands)                            |  | Average Balance |           | Rate Paid |  | Average Balance |      | Rate Paid |  | Average Balance |           | Rate Paid
|                                                  |  |                 |           |           |  |                 |      |           |  |                 |           |          
|Demand                                            |  | $               | 283,504   |           |  |                 |     |           |  | $               | 234,189   |           |  |  |     |   |  | $ | 192,709   |  |  |  |     |  
|Savings, money market
and interest bearing demand |  |                 | 669,689   |           |  |                 | 0.67 | %         |  |                 | 592,150   |           |  |  | 1.19 | % |  |   | 542,945   |  |  |  | 2.49 | %
|Certificates of deposit                           |  |                 | 371,533   |           |  |                 | 2.86 | %         |  |                 | 395,161   |           |  |  | 3.60 | % |  |   | 382,865   |  |  |  | 5.39 | %
|Short-term borrowings                             |  |                 | 17,799    |           |  |                 | 1.56 | %         |  |                 | 15,401    |           |  |  | 2.14 | % |  |   | 43,458    |  |  |  | 4.85 | %
|Long-term borrowings (1)                          |  |                 | 99,734    |           |  |                 | 5.24 | %         |  |                 | 110,596   |           |  |  | 6.22 | % |  |   | 70,665    |  |  |  | 6.09 | %
|                                                  |  |                 |           |           |  |                 |      |           |  |                 |           |           |  |  |      |   |  |   |           |  |  |  |      |  
|Total deposits and borrowings                     |  | $               | 1,442,259 |           |  |                 | 1.78 | %         |  | $               | 1,347,497 |           |  |  | 2.56 | % |  | $ | 1,232,642 |  |  |  | 3.90 | %
|                                                  |  |                 |           |           |  |                 |      |           |  |                 |           |           |  |  |      |   |  |   |           |  |  |  |      |  



|(1) |  | Long-term borrowings include junior subordinated debentures and
mandatorily redeemable trust preferred securities.
|--- |  | ------------------------------------------------------------------------------------------------------------------

Average core deposits consisting of demand and savings, money market and
interest bearing demand increased 15% in 2003 compared to 2002. Our core
deposit increase was mainly due to:



| |  |  | Improved sales practices by the branches and commercial teams resulting in both consumer and business core deposit growth
| | - |  | -------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Businesses maintaining higher balances to avoid service charges                                                          
|
| |  |  | Minimal, if any, yield differences between non-insured investments and similar FDIC insured deposit products             
|
| |  |  | Higher escrow deposits                                                                                                   

Average time deposits declined $23.6 million in 2003 compared to 2002, or
6.0%, as customers likely viewed the rates offered on such deposits
unattractive relative to historical rates. Although a significant amount of
time deposits will mature and reprice in the next twelve months, we expect to
retain the majority of these deposits. A continued decrease in time deposits
is unlikely to affect our liquidity or short term operations. These deposits
can generally be retained with increases in rates paid which would increase our
cost of funds. As of December 31, 2003, time deposit liabilities are presented
below at the earlier of the next repricing date or maturity.

|                                                 |       |        |                     |         |                     |        |                     |         |   |        |        |         |  |  |       |        |   |   |         |         |  |  |       |        |  
|------------------------------------------------ | ----- | ------ | ------------------- | ------- | ------------------- | ------ | ------------------- | ------- | - | ------ | ------ | ------- |  |  | ----- | ------ | - | - | ------- | ------- |  |  | ----- | ------ | -
|                                                 |       |        | Time Deposits       |         |                     |        |                     |         |   |        |        |         |  |  |       |        |   |   |        
|                                                 |       |        | of $100,000 or More |         | Other Time Deposits |        | Total time deposits
|                                                 |       |        |                     |         |                     |        |                    
|(Dollars in thousands)                           |       | Amount |                     | Percent |                     | Amount |                     | Percent |   | Amount |        | Percent
|                                                 |       |        |                     |         |                     |        |                     |         |   |        |        |        
|Reprice/mature in 3 months or less               |       | $      | 66,547              |         |                     |        | 47.75               | %       |   | $      | 70,307 |         |  |  | 34.03 | %      |   | $ | 136,854 |         |  |  | 39.56 | %     
|Reprice/mature after 3 months through 6 months   |       |        | 20,895              |         |                     |        | 14.99               | %       |   |        | 30,880 |         |  |  | 14.95 | %      |   |   | 51,775  |         |  |  | 14.97 | %     
|Reprice/mature after 6 months through one year   |       |        | 17,313              |         |                     |        | 12.42               | %       |   |        | 44,992 |         |  |  | 21.78 | %      |   |   | 62,305  |         |  |  | 18.01 | %     
|Reprice/mature after one year through five years |       |        | 34,366              |         |                     |        | 24.66               | %       |   |        | 60,398 |         |  |  | 29.23 | %      |   |   | 94,764  |         |  |  | 27.39 | %     
|Reprice/mature after five years                  |       |        | 236                 |         |                     |        | 0.18                | %       |   |        | 34     |         |  |  | 0.01  | %      |   |   | 270     |         |  |  | 0.08  | %     
|                                                 |       |        |                     |         |                     |        |                     |         |   |        |        |         |  |  |       |        |   |   |         |         |  |  |       |       
|                                                 | Total |        | $                   | 139,357 |                     |        |                     | 100.00  | % |        | $      | 206,611 |  |  |       | 100.00 | % |   | $       | 345,968 |  |  |       | 100.00 | %
|                                                 |       |        |                     |         |                     |        |                     |         |   |        |        |         |  |  |       |        |   |   |         |         |  |  |       |       

As of December 31, 2003, long term and short term borrowings had the
following items remaining to contractual maturity.

|                              |                  |                |              |                  |              |                    |                    |            |           |       |        |        |  |   |   |   |  |   |        |        | 
|----------------------------- | ---------------- | -------------- | ------------ | ---------------- | ------------ | ------------------ | ------------------ | ---------- | --------- | ----- | ------ | ------ |  | - | - | - |  | - | ------ | ------ | 
|                              |                  |                |              |                  |              |                    | Due after          |            |           |       |        |        |  |   |   |   |  |   |       
|                              |                  |                | Due in three |                  | three months |                    | Due after one year |            | Due after |       |        |        | 
|(Dollars in thousands)        |                  | months or less |              | through one year |              | through five years |                    | five years |           | Total
|                              |                  |                |              |                  |              |                    |                    |            |           |      
|Reverse repurchase agreements |                  | $              |             |                  |              | $                  | 5,027              |            |           | $     |       |        |  | $ |  |   |  | $ | 5,027  |       
|Long-term borrowings (1)      |                  |                |             |                  |              |                    | 12,500             |            |           |       | 65,500 |        |  |   |  |   |  |   | 78,000 |       
|                              |                  |                |              |                  |              |                    |                    |            |           |       |        |        |  |   |   |   |  |   |        |       
|                              | Total borrowings |                | $            |                 |              |                    | $                  | 17,527     |           |       | $      | 65,500 |  |   | $ |  |  |   | $      | 83,027 | 
|                              |                  |                |              |                  |              |                    |                    |            |           |       |        |        |  |   |   |   |  |   |        |       

(1)  Based on contractual maturities, and may vary based on possible call dates.

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##### Table of Contents



Capital Resources

The Federal Reserve and FDIC have established minimum requirements for
capital adequacy for bank holding companies and member banks. The requirements
address both risk-based capital and leveraged capital. The regulatory agencies
may establish higher minimum requirements if, for example, a corporation has
previously received special attention or has a high susceptibility to interest
rate risk. The Federal Reserve and FDIC risk-based capital guidelines require
banks and bank holding companies to have a ratio of tier one capital to total
risk-weighted assets of at least 4% and a ratio of total capital to total
risk-weighted assets of 8% or greater. In addition, the leverage ratio of tier
one capital to total assets less intangibles is required to be at least 3%.
See Liquidity and Sources of Funds for further discussion on impact of trust
preferred securities on capital adequacy requirements. As of December 31,
2003, Bancorp and the Bank are considered Well Capitalized under the
regulatory risk based capital guidelines.

Stockholders equity was $140.1 million at December 31, 2003, compared to
$133.4 million at December 31, 2002, an increase of $6.7 million, or 5%, over
that period of time. At December 31, 2003, stockholders equity, as a
percentage of total assets, was 8.42%, compared to 8.70% at December 31, 2002.
The change in equity to assets was primarily a result of asset growth and
stockholders equity increasing slightly less due to the net effect of income
recognition, plus cash from the exercise of stock options, less dividends and
stock repurchased, and the change in net value of the available for sale
investment portfolio.

As the following table indicates, Bancorp currently exceeds the regulatory
minimum capital ratio requirements.

|                                   |  |                   |           |       |  |  |       |  
|---------------------------------- |  | ----------------- | --------- | ----- |  |  | ----- | -
|                                   |  | December 31, 2003
|                                   |  |                  
|(Dollars in thousands)             |  | Amount            |           | Ratio
|                                   |  |                   |           |      
|Tier 1 capital                     |  | $                 | 156,116   |       |  |  | 10.62 | %
|Tier 1 capital minimum requirement |  |                   | 58,824    |       |  |  | 4.00  | %
|                                   |  |                   |           |       |  |  |       |  
|Excess Tier 1 capital              |  | $                 | 97,292    |       |  |  | 6.62  | %
|                                   |  |                   |           |       |  |  |       |  
|Total capital                      |  | $                 | 174,246   |       |  |  | 11.85 | %
|Total capital minimum requirement  |  |                   | 117,648   |       |  |  | 8.00  | %
|                                   |  |                   |           |       |  |  |       |  
|Excess total capital               |  | $                 | 56,598    |       |  |  | 3.85  | %
|                                   |  |                   |           |       |  |  |       |  
|Risk-adjusted assets               |  | $                 | 1,470,601 |       |  |  |       |  
|                                   |  |                   |           |       |  |  |       |  
|Leverage ratio                     |  |                   |           |       |  |  | 9.45  | %
|Minimum leverage requirement       |  |                   |           |       |  |  | 3.00  | %
|                                   |  |                   |           |       |  |  |       |  
|Excess leverage ratio              |  |                   |           |       |  |  | 6.45  | %
|                                   |  |                   |           |       |  |  |       |  
|Adjusted total assets              |  | $                 | 1,651,518 |       |  |  |       |  
|                                   |  |                   |           |       |  |  |       |  

In December 1998, Bancorp announced a stock repurchase program associated
with its stock option plans. Under this plan the Company repurchased .9
million shares for $12.8 million or $13.86 per share through July of 2000, when
activity under this plan was discontinued. This stock repurchase plan was
formally cancelled in September 2002.

In July 2000, Bancorp announced a stock repurchase program that was
expanded in September 2000, June 2001, and again in September 2002. Under this
plan, the Company can buy up to 2.88 million shares of the Companys common
stock, including completed purchases. The Company intends to use existing
funds and/or long-term borrowings to finance the repurchases. Total shares
available for repurchase under this plan were approximately 320,000 at December
31, 2003. The following table presents information with respect to Bancorps
July 2000 stock repurchase program.

|                                  |                    |                              |     |                            |  |       |        |        |  |   |                  |       | 
|--------------------------------- | ------------------ | ---------------------------- | --- | -------------------------- |  | ----- | ------ | ------ |  | - | ---------------- | ----- | 
|                                  |                    |                              |     |                            |  |       |        |        |  |   | Average cost per
|(Shares and dollars in thousands) |                    | Shares repurchased in period |     | Cost of shares repurchased |  | share
|                                  |                    |                              |     |                            |  |      
|Year ended 2000                   |                    |                              | 573 |                            |  | $     | 5,264  |        |  | $ | 9.19             |      
|Year ended 2001                   |                    |                              | 534 |                            |  |       | 6,597  |        |  |   | 12.35            |      
|Year ended 2002                   |                    |                              | 866 |                            |  |       | 13,081 |        |  |   | 15.11            |      
|Year ended 2003                   |                    |                              | 587 |                            |  |       | 10,461 |        |  |   | 17.81            |      
|                                  |                    |                              |     |                            |  |       |        |        |  |   |                  |      
|                                  | Plan to date total |                              |     | 2,560                      |  |       | $      | 35,403 |  |   | $                | 13.83 | 

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##### Table of Contents



Liquidity and Sources of Funds

The Banks primary sources of funds are customer deposits, maturities of
investment securities, sales of Available for Sale securities, loan sales,
loan repayments, net income, advances from the FHLB, and the use of Federal
Funds markets. The holding company specifically relies on dividends from the
Bank and proceeds from the issuance of trust preferred securities to fund
dividends to stockholders and stock repurchases.

At December 31, 2003, three wholly-owned subsidiary grantor trusts
established by Bancorp had issued $20 million of pooled trust preferred
securities. Trust preferred securities accrue and pay distributions
periodically at specified annual rates as provided in the indentures. The
trusts use the net proceeds from the offering to purchase a like amount of
Junior Subordinated Debentures (the Debentures) of the Company. The
Debentures are the sole assets of the trusts. The Companys obligations under
the Junior Subordinated Debentures and related documents, taken together,
constitute a full and unconditional guarantee by the Company of the obligations
of the trusts. The trust preferred securities are mandatorily redeemable upon
the maturity of the Debentures, or upon earlier redemption as provided in the
indentures. The Company has the right to redeem the Debentures in whole (but
not in part) on or after specific dates, at a redemption price specified in the
indentures plus any accrued but unpaid interest to the redemption date.

The following table is a summary of current trust preferred securities at
December 31, 2003.

(Dollars in thousands)

|                               |  |                |  |        |       |               |  |              |  |          |      |               |  |  |      |         |  |                |  |  |  |  |  | 
|------------------------------ |  | -------------- |  | ------ | ----- | ------------- |  | ------------ |  | -------- | ---- | ------------- |  |  | ---- | ------- |  | -------------- |  |  |  |  |  | 
|                               |  |                |  |        |       | Preferred     |  |              |  |          |      |               |  |  |      |         |  |                |  |  |  | 
|                               |  |                |  |        |       | security      |  |              |  |          |      |               |  |  |      | Rate at |  |                |  | 
|Issuance Trust                 |  | Issuance date  |  | amount |       | Rate type (1) |  | Initial rate |  | 12/31/03 |      | Maturity date
|                               |  |                |  |        |       |               |  |              |  |          |      |              
|West Coast Statutory Trust I   |  | December 2001  |  | $      | 5,000 |               |  | Variable     |  |          | 5.60 | %             |  |  | 4.77 | %       |  | December 2031 
|West Coast Statutory Trust II  |  | June 2002      |  | $      | 7,500 |               |  | Variable     |  |          | 5.34 | %             |  |  | 4.62 | %       |  | June 2032     
|West Coast Statutory Trust III |  | September 2003 |  | $      | 7,500 |               |  | Fixed        |  |          | 6.75 | %             |  |  | 6.75 | %       |  | September 2033

(1)  The variable rate preferred securities reprice quarterly.

The total amount of trust preferred securities outstanding at December 31,
2003, and 2002, was $20 million and $12.5 million, respectively. The interest
rates on the trust preferred securities issued in December 2001, and June 2002
reset quarterly and are tied to the London Interbank Offered Rate (LIBOR)
rate. In connection with these two variable rate offerings, Bancorp entered
into swap agreements that will result in a fixed interest rate on the
securities for five years, equal to 8.62% and 8.14%, respectively. The Company
has the right to redeem the debentures of the December 2001 issuance in
December 2006; the June 2002 issuance in June 2007 and the September 2003
issuance in September 2008.

On July 2, 2003, the Federal Reserve Bank issued Supervisory Letter SR
03-13 clarifying that Bank Holding Companies should continue to report trust
preferred securities in accordance with current Federal Reserve Bank
instructions which allows trust preferred securities to be counted in Tier 1
capital subject to certain limitations. The Federal Reserve has indicated it
will review the implications of any accounting treatment changes and, if
necessary or warranted, will provide appropriate guidance. For additional
information regarding trust preferred securities, this discussion and analysis
should be read in conjunction with our consolidated financial statements and
related notes included elsewhere in this report including the Footnote 7,
Junior Subordinated debentures and mandatorily redeemable trust preferred
securities.

Scheduled loan repayments are a relatively stable sources of funds, while
deposit inflows and unscheduled loan prepayments are not. Deposit inflows and
unscheduled loan prepayments are influenced by general interest rate levels,
interest rates available on other investments, competition, economic
conditions, and other factors.

Deposits are the primary source of new funds. Total deposits were $1.4
billion at December 31, 2003, up from $1.3 billion at December 31, 2002.
Brokered deposits are generally not accepted, and we have none outstanding at

December 31, 2003. We have attempted to attract deposits in our market areas
through competitive pricing and delivery of quality products.

Management expects to continue relying on customer deposits, maturity of
investment securities, sales of Available for Sale securities, loan sales,
loan repayments, net income, Federal Funds markets, advances from the FHLB, and
other borrowings to provide liquidity. Management may also consider engaging
in further offerings of trust preferred securities if the opportunity presents
an attractive means of raising funds in the future. Although deposit balances
at times have shown historical growth, such balances may be influenced by
changes in the financial services industry, interest rates available on other
investments, general economic conditions, competition, customer management of
cash resources and other factors. Borrowings may be used on a short-term and
long-term basis to compensate for reductions in other sources of funds.
Borrowings may also be used on a long-term basis to support expanded lending
activities and to match maturities or repricing intervals of assets. The
sources of such funds will include Federal Funds purchased, reverse repurchase
agreements and borrowings from the FHLB.

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##### Table of Contents



Bancorp is party to many contractual financial obligations, including
repayment of borrowings, operating lease payments and commitments to extend
credit. The table below presents certain future financial obligations.

|                               |       |             |                                                      |           |  |           |        |        |  |       |        |        |  |   |                |        |  |   |        |         | 
|------------------------------ | ----- | ----------- | ---------------------------------------------------- | --------- |  | --------- | ------ | ------ |  | ----- | ------ | ------ |  | - | -------------- | ------ |  | - | ------ | ------- | 
|                               |       |             | Payments due within time period at December 31, 2003
|                               |       |             |                                                     
|                               |       |             |                                                      |           |  |           |        |        |  |       |        |        |  |   | Due After Five |        |  |   |       
|(Dollars in thousands)         |       | 0-12 Months |                                                      | 1-3 Years |  | 4-5 Years |        | Years  |  | Total
|                               |       |             |                                                      |           |  |           |        |        |  |      
|Reverse repurchase agreements  |       | $           | 5,027                                                |           |  | $         |       |        |  | $     |       |        |  | $ |               |        |  | $ | 5,027  |        
|Operating leases               |       |             | 2,151                                                |           |  |           | 3,579  |        |  |       | 3,158  |        |  |   | 10,932         |        |  |   | 19,820 |        
|Junior subordinated debentures |       |             |                                                     |           |  |           |       |        |  |       | 20,000 |        |  |   |               |        |  |   | 20,000 |        
|Long-term borrowings           |       |             | 12,500                                               |           |  |           | 45,500 |        |  |       | 20,000 |        |  |   |               |        |  |   | 78,000 |        
|                               |       |             |                                                      |           |  |           |        |        |  |       |        |        |  |   |                |        |  |   |        |        
|                               | Total |             | $                                                    | 19,678    |  |           | $      | 49,079 |  |       | $      | 43,158 |  |   | $              | 10,932 |  |   | $      | 122,847 | 
|                               |       |             |                                                      |           |  |           |        |        |  |       |        |        |  |   |                |        |  |   |        |        

At December 31, 2003, Bancorp had commitments to extend credit of $427
million compared to $343 million at December 31, 2002. For additional
information regarding future financial commitments, this discussion and
analysis should be read in conjunction with our consolidated financial
statements and related notes included elsewhere in this report including
Footnote 18 Financial instruments with off-balance sheet risk.

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##### Table of Contents






ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk.Interest rate, credit and operations risks are the most
significant market risks impacting our 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 our business activities. We rely on loan
reviews, prudent loan underwriting standards and an adequate allowance for loan
loss to mitigate credit risk. Interest rate risk is reviewed at least
quarterly by the Asset Liability Management Committee (ALCO) which includes
senior management representatives. The ALCO manages our balance sheet to
maintain the forecasted impact of interest rates on net interest income and
present value of equity within acceptable ranges despite unforeseeable changes
in interest rates.

Asset/liability management simulation models are used to measure interest
rate risk. The models quantify interest rate risk through simulating
forecasted net interest income over a 12-month time horizon under various rate
scenarios, as well as monitoring the change in the present value of equity
under the same rate scenarios. The present value of equity is defined as the
difference between the market value of current assets less current liabilities.
By measuring the change in the present value of equity under different rate
scenarios, management is able to identify interest rate risk that may not be
evident in simulating changes in forecasted net interest income.

The following tables show the approximate percentage change in forecasted
net interest income over a 12-month period and the percentage change in the
present value of equity under several rate scenarios. For the net interest
income analysis, three rate scenarios provided by Global Insight, an outside
economic service, are compared to a stable (flat) rate scenario:

|                                               |  |                       |      |                  |  |                  |      |                  |  |  |      |   |  |  |      |  
|---------------------------------------------- |  | --------------------- | ---- | ---------------- |  | ---------------- | ---- | ---------------- |  |  | ---- | - |  |  | ---- | -
|                                               |  | Actual rates December |      | Base Case        |  | Declining Rates  |      | Rising Rates    
|                                               |  | 2003                  |      | 2004 (average)   |  | 2004 (average)   |      | 2004 (average)  
|                                               |  |                       |      |                  |  |                  |      |                 
|Federal Funds Rate                             |  |                       | 1.00 | %                |  |                  | 1.30 | %                |  |  | .57  | % |  |  | 3.07 | %
|Prime Rate                                     |  |                       | 4.00 | %                |  |                  | 4.30 | %                |  |  | 3.57 | % |  |  | 6.06 | %
|Treasury Yield Curve
Spread 10-year to 3 month |  | 336 basis points      |      | 353 basis points |  | 281 basis points |      | 220 basis points

|                     |  |                     |      |  
|-------------------- |  | ------------------- | ---- | -
|Stable rate scenario |  | Percent Change in  
|compared to:         |  | Net Interest Income
|                     |  |                    
|Rising               |  |                     | +3.4 | %
|Base Case            |  |                     | +.5  | %
|Falling              |  |                     | -.8  | %

As illustrated in the above table, at December 31, 2003, we estimate our
balance sheet was slightly asset sensitive over a 12 month horizon, meaning
that interest earning assets mature or reprice more quickly than
interest-bearing liabilities in a given period. Therefore, a significant
decrease in market rates of interest could adversely affect net interest
income, while an increase in market rates may increase net interest income. We
attempt to limit our interest rate risk through managing the repricing
characteristics of our assets and liabilities.

For the present value of equity analysis, the results are compared to the
net present value of equity using the yield curve as of December 31, 2003.
This curve is then shifted up and down and the net present value of equity is
computed. In the 100 basis point scenarios, rates were not allowed to decline
below zero. This table does not include flattening or steepening yield curve
effects. Readers are referred to managements Forward Looking Statement
Disclosure in connection with this discussion of market risks faced by
Bancorp.

|                         |  |                         |       |  
|------------------------ |  | ----------------------- | ----- | -
|December 31, 2003        |  | Percent Change in      
|Change in Interest Rates |  | Present Value of Equity
|                         |  |                        
|Up 200 basis points      |  |                         | -11.4 | %
|Up 100 basis points      |  |                         | -5.5  | %
|Down 100 basis points    |  |                         | +3.0  | %

It should be noted that the simulation model does not take into account
future management actions that could be undertaken, should a change occur in
actual market interest rates during the year. Also, certain assumptions are
required to perform modeling simulations that may have a significant impact on
the results. These include important assumptions regarding the level of
interest rates and balance changes on deposit products that do not have stated
maturities, as well as the relationship between loan yields and deposit rates
relative to market interest rates. These assumptions have been developed
through a combination of industry standards and future expected pricing
behavior but could be significantly influenced by future competitor pricing
behavior. The model also includes assumptions about changes in the composition
or mix of the balance sheet. The results derived from the simulation model
could vary significantly due to external factors such as changes in the
prepayment assumptions, early withdrawals of deposits and competition. Any
merger activity will also have an impact on the asset/liability position as new
assets are acquired and added.

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Interest Rate Sensitivity (Gap) Table

The primary objective of our asset/liability management is to maximize net
interest income while maintaining acceptable levels of interest-rate
sensitivity. We seek to meet this objective through influencing the maturity
and repricing characteristics of our assets and liabilities.

The following table sets forth the estimated maturity and repricing and
the resulting interest rate gap between interest earning assets and interest
bearing liabilities at December 31, 2003. The amounts in the table are derived
from internal data from the Bank based on maturities and next repricing dates
including contractual repayments.

|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |           |           | 
|----------------------------- | ------------------------------------------------------------------- | ---------------------------------------- | - | ---------------------------------------------------- | ------- | --------- | - | ------- | ------- | ----- | - | ------- | ------- |  | - | -------------- | ------ |  | - | --------- | --------- | 
|                              |                                                                     |                                          |   | Estimated Maturity or Repricing at December 31, 2003
|                              |                                                                     |                                          |   |                                                     
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   | Due After Five |        |  |   |          
|(Dollars in thousands)        |                                                                     | 0-3 Months                               |   | 4-12 Months                                          |         | 1-5 Years |   | Years   |         | Total
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |      
|Interest Earning Assets:      |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              | Interest earning balances due from banks                            |                                          | $ | 38                                                   |         |           | $ |        |         |       | $ |        |         |  | $ |               |        |  | $ | 38        |          
|                              | Federal funds sold                                                  |                                          |   | 3,510                                                |         |           |   |        |         |       |   |        |         |  |   |               |        |  |   | 3,510     |          
|                              | Trading assets                                                      |                                          |   | 991                                                  |         |           |   |        |         |       |   |        |         |  |   |               |        |  |   | 991       |          
|                              | Investments available for sale(1)(2)                                |                                          |   | 27,031                                               |         |           |   | 85,748  |         |       |   | 167,912 |         |  |   | 41,279         |        |  |   | 321,970   |          
|                              | Loans held for sale                                                 |                                          |   | 4,729                                                |         |           |   |        |         |       |   |        |         |  |   |               |        |  |   | 4,729     |          
|                              | Loans, including fees                                               |                                          |   | 331,342                                              |         |           |   | 379,978 |         |       |   | 456,048 |         |  |   | 53,513         |        |  |   | 1,220,881 |          
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              |                                                                     | Total interest earning assets            |   | $                                                    | 367,641 |           |   | $       | 465,726 |       |   | $       | 623,960 |  |   | $              | 94,792 |  |   |           | 1,552,119 | 
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              | Allowance for loan loss                                             |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | (18,131   | )        
|                              | Cash and due from banks                                             |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | 59,956    |          
|                              | Other assets                                                        |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | 68,938    |          
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              |                                                                     | Total assets                             |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | $         | 1,662,882 | 
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|Interest Bearing Liabilities: |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              | Savings and interest bearing demand deposits(3)                     |                                          | $ | 82,940                                               |         |           | $ | 247,768 |         |       | $ | 372,583 |         |  | $ | 38,989         |        |  | $ | 742,280   |          
|                              | Certificates of deposit                                             |                                          |   | 136,854                                              |         |           |   | 114,080 |         |       |   | 94,764  |         |  |   | 270            |        |  |   | 345,968   |          
|                              | Borrowings (2)                                                      |                                          |   | 5,027                                                |         |           |   | 12,500  |         |       |   | 65,500  |         |  |   |               |        |  |   | 83,027    |          
|                              | Junior subordinated debentures                                      |                                          |   |                                                     |         |           |   |        |         |       |   | 20,000  |         |  |   |               |        |  |   | 20,000    |          
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              |                                                                     | Total interest bearing liabilities       |   | $                                                    | 224,821 |           |   | $       | 374,348 |       |   | $       | 552,847 |  |   | $              | 39,259 |  |   |           | 1,191,275 | 
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              | Other liabilities                                                   |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | 331,554   |          
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              | Total liabilities                                                   |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | 1,522,829 |          
|                              | Stockholders equity                                                |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | 140,053   |          
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              |                                                                     | Total liabilities & stockholders equity |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   | $         | 1,662,882 | 
|                              |                                                                     |                                          |   |                                                      |         |           |   |         |         |       |   |         |         |  |   |                |        |  |   |          
|                              | Interest sensitivity gap                                            |                                          | $ | 142,820                                              |         |           | $ | 91,378  |         |       | $ | 71,113  |         |  | $ | 55,533         |        |  | $ | 360,844   |          
|                              | Cumulative interest sensitivity gap                                 |                                          | $ | 142,820                                              |         |           | $ | 234,198 |         |       | $ | 305,311 |         |  | $ | 360,844        |        |  |   |           |          
|                              | Cumulative interest sensitivity gap
as a percentage of total assets |                                          |   | 9                                                    | %       |           |   | 14      | %       |       |   | 18      | %       |  |   | 22             | %      |  |   |           |          



|(1) |  | Equity investments have been placed in the 0-3 month category.                         
|--- |  | ---------------------------------------------------------------------------------------
|   
|(2) |  | Repricing is based on anticipated call dates, and may vary from contractual
maturities.
|   
|(3) |  | Repricing is based on estimated average lives.                                         

Certain shortcomings are inherent in the method of analysis presented in
the foregoing table. For example, although certain assets and liabilities may
have similar maturities and periods of repricing, they may react differently to
changes in market interest rates. Also, interest rates on assets and
liabilities may fluctuate in advance of changes in market interest rates, while
interest rates on other assets and liabilities may follow changes in market
interest rates. Given these shortcomings, management believes that rate risk
is best measured by simulation modeling as opposed to measuring interest rate
risk through interest rate gap measurement.

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##### Table of Contents






ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following audited consolidated financial statements and related
documents are set forth in this Annual Report on Form 10-K on the pages
indicated:

|                                                           |  |  |    | 
|---------------------------------------------------------- |  |  | -- | 
|Independent Auditors Report                               |  |  | 32 | 
|Consolidated Balance Sheets                                |  |  | 33 | 
|Consolidated Statements of Income                          |  |  | 34 | 
|Consolidated Statements of Cash Flows                      |  |  | 35 | 
|Consolidated Statements of Changes in Stockholders Equity |  |  | 36 | 
|Notes to Consolidated Financial Statements                 |  |  | 37 | 

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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders of West Coast Bancorp
Lake Oswego, Oregon

We have audited the accompanying consolidated balance sheets of West Coast
Bancorp and subsidiaries (the Company) as of December 31, 2003 and 2002, and
the related consolidated statements of income, cash flows, and changes in
stockholders equity for each of the three years in the period ended December
31, 2003. 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 auditing standards generally
accepted in the United States of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of West Coast Bancorp and
Subsidiaries as of December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2003 in conformity with accounting principles generally accepted
in the United States of America.

DELOITTE & TOUCHE LLP

Portland, Oregon
February 23, 2004

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WEST COAST BANCORP
CONSOLIDATED BALANCE SHEETS

|                                                                                                                                |                            |                                          |                                            |         |         |           |           |         |         |           | 
|------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ---------------------------------------- | ------------------------------------------ | ------- | ------- | --------- | --------- | ------- | ------- | --------- | 
|As of December 31 (Dollars in thousands)                                                                                        |                            | 2003                                     |                                            | 2002   
|                                                                                                                                |                            |                                          |                                            |        
|ASSETS:                                                                                                                         |                            |                                          |                                            |         |         |           |           |        
|Cash and cash equivalents:                                                                                                      |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            | Cash and due from banks                  |                                            | $       | 59,956  |           |           | $       | 55,026  |          
|                                                                                                                                |                            | Interest-bearing deposits in other banks |                                            |         | 38      |           |           |         | 2,316   |          
|                                                                                                                                |                            | Federal funds sold                       |                                            |         | 3,510   |           |           |         | 391     |          
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            |                                          | Total cash and cash equivalents            |         |         | 63,504    |           |         |         | 57,733    | 
|Trading assets                                                                                                                  |                            |                                          | 991                                        |         |         |           | 967       |        
|Investment securities available for sale, at fair value
(amortized cost: $316,237 and $257,954)                                 |                            |                                          | 321,970                                    |         |         |           | 266,407   |        
|Loans held for sale                                                                                                             |                            |                                          | 4,729                                      |         |         |           | 10,924    |        
|Loans                                                                                                                           |                            |                                          | 1,220,881                                  |         |         |           | 1,159,915 |        
|Allowance for loan loss                                                                                                         |                            |                                          | (18,131                                    | )       |         |           | (16,838   | )      
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |         |         |          
|                                                                                                                                |                            |                                          | Loans, net                                 |         |         | 1,202,750 |           |         |         | 1,143,077 | 
|Premises and equipment, net                                                                                                     |                            |                                          | 27,176                                     |         |         |           | 26,609    |        
|Intangible assets                                                                                                               |                            |                                          | 865                                        |         |         |           | 1,218     |        
|Bank owned life insurance                                                                                                       |                            |                                          | 18,062                                     |         |         |           | 1,757     |        
|Other assets                                                                                                                    |                            |                                          | 22,835                                     |         |         |           | 23,635    |        
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            |                                          | Total assets                               |         | $       | 1,662,882 |           |         | $       | 1,532,327 | 
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |         |         |          
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                            |                            |                                          |                                            |         |         |           |           |        
|Deposits:                                                                                                                       |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            | Demand                                   |                                            | $       | 316,611 |           |           | $       | 275,724 |          
|                                                                                                                                |                            | Savings and interest-bearing demand      |                                            |         | 742,280 |           |           |         | 619,502 |          
|                                                                                                                                |                            | Certificates of deposit                  |                                            |         | 345,968 |           |           |         | 371,227 |          
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            |                                          | Total deposits                             |         |         | 1,404,859 |           |         |         | 1,266,453 | 
|Short-term borrowings                                                                                                           |                            |                                          | 5,027                                      |         |         |           | 9,902     |        
|Long-term borrowings                                                                                                            |                            |                                          | 78,000                                     |         |         |           | 98,000    |        
|Junior subordinated debentures                                                                                                  |                            |                                          | 20,000                                     |         |         |           |          |        
|Mandatorily redeemable trust preferred securities                                                                               |                            |                                          |                                           |         |         |           | 12,500    |        
|Other liabilities                                                                                                               |                            |                                          | 14,943                                     |         |         |           | 12,085    |        
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            |                                          | Total liabilities                          |         |         | 1,522,829 |           |         |         | 1,398,940 | 
|Commitments and contingent liabilities (Note 8)                                                                                 |                            |                                          |                                            |         |         |           |           |        
|STOCKHOLDERS EQUITY:                                                                                                           |                            |                                          |                                            |         |         |           |           |        
|Preferred stock: no par value, none issued;
10,000,000 shares authorized                                                        |                            |                                          |                                           |         |         |           |          |        
|Common stock: no par value, 55,000,000 shares
authorized; 15,075,875 and 15,325,937 shares issued
and outstanding, respectively |                            |                                          | 18,845                                     |         |         |           | 19,158    |        
|Additional paid-in capital                                                                                                      |                            |                                          | 66,462                                     |         |         |           | 72,279    |        
|Retained earnings                                                                                                               |                            |                                          | 52,916                                     |         |         |           | 38,047    |        
|Deferred compensation                                                                                                           |                            |                                          | (1,242                                     | )       |         |           | (671      | )      
|Accumulated other comprehensive income                                                                                          |                            |                                          | 3,072                                      |         |         |           | 4,574     |        
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                | Total stockholders equity |                                          |                                            | 140,053 |         |           |           | 133,387 |        
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |        
|                                                                                                                                |                            |                                          | Total liabilities and stockholders equity |         | $       | 1,662,882 |           |         | $       | 1,532,327 | 
|                                                                                                                                |                            |                                          |                                            |         |         |           |           |         |         |          

See notes to consolidated financial statements

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WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF INCOME

|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |        |         | 
|------------------------------------------------------------------------------------ | ------------------------------- | ------------------------ | ------ | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------- | 
|Year ended December 31 (In thousands, except per share amounts)                      |                                 | 2003                     |        | 2002   |        | 2001
|                                                                                     |                                 |                          |        |        |        |     
|INTEREST INCOME:                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|Interest and fees on loans                                                           |                                 | $                        | 77,321 |        |        | $    | 82,989 |        |        | $ | 86,083 |       
|Interest on taxable investment securities                                            |                                 |                          | 8,891  |        |        |      | 9,245  |        |        |   | 10,014 |       
|Interest on nontaxable investment securities                                         |                                 |                          | 3,257  |        |        |      | 3,540  |        |        |   | 3,841  |       
|Interest on deposits in other banks                                                  |                                 |                          | 76     |        |        |      | 110    |        |        |   | 247    |       
|Interest on federal funds sold                                                       |                                 |                          | 133    |        |        |      | 144    |        |        |   | 92     |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                     |                                 | Total interest income    |        |        | 89,678 |      |        |        | 96,028 |   |        |        | 100,277 | 
|INTEREST EXPENSE:                                                                    |                                 |                          |        |        |        |      |        |        |        |   |        |       
|Savings and interest-bearing demand                                                  |                                 |                          | 4,492  |        |        |      | 7,076  |        |        |   | 13,516 |       
|Certificates of deposit                                                              |                                 |                          | 10,639 |        |        |      | 14,243 |        |        |   | 20,647 |       
|Short-term borrowings                                                                |                                 |                          | 277    |        |        |      | 329    |        |        |   | 2,109  |       
|Long-term borrowings                                                                 |                                 |                          | 4,023  |        |        |      | 6,122  |        |        |   | 4,285  |       
|Mandatorily redeemable trust preferred securities and junior subordinated debentures |                                 |                          | 1,208  |        |        |      | 762    |        |        |   | 15     |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                     | Total interest expense          |                          |        | 20,639 |        |      |        | 28,532 |        |   |        | 40,572 |        
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|NET INTEREST INCOME                                                                  |                                 |                          | 69,039 |        |        |      | 67,496 |        |        |   | 59,705 |       
|Provision for loan loss                                                              |                                 |                          | 3,800  |        |        |      | 4,979  |        |        |   | 3,282  |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|Net interest income after provision for loan loss                                    |                                 |                          | 65,239 |        |        |      | 62,517 |        |        |   | 56,423 |       
|NONINTEREST INCOME:                                                                  |                                 |                          |        |        |        |      |        |        |        |   |        |       
|Service charges on deposit accounts                                                  |                                 |                          | 6,960  |        |        |      | 6,352  |        |        |   | 6,094  |       
|Other service charges, commissions and fees                                          |                                 |                          | 6,577  |        |        |      | 5,099  |        |        |   | 4,731  |       
|Trust revenue                                                                        |                                 |                          | 1,776  |        |        |      | 1,683  |        |        |   | 1,742  |       
|Gains on sales of loans                                                              |                                 |                          | 5,124  |        |        |      | 4,024  |        |        |   | 3,671  |       
|Bank owned life insurance                                                            |                                 |                          | 827    |        |        |      | 227    |        |        |   |       |       
|Other                                                                                |                                 |                          | 590    |        |        |      | 1,309  |        |        |   | 793    |       
|Net gains on sales of securities                                                     |                                 |                          | 192    |        |        |      |       |        |        |   |       |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                     |                                 | Total noninterest income |        |        | 22,046 |      |        |        | 18,694 |   |        |        | 17,031  | 
|NONINTEREST EXPENSE:                                                                 |                                 |                          |        |        |        |      |        |        |        |   |        |       
|Salaries and employee benefits                                                       |                                 |                          | 32,487 |        |        |      | 29,499 |        |        |   | 26,070 |       
|Equipment                                                                            |                                 |                          | 5,139  |        |        |      | 5,100  |        |        |   | 5,470  |       
|Occupancy                                                                            |                                 |                          | 4,901  |        |        |      | 4,642  |        |        |   | 4,388  |       
|Check and other transaction processing                                               |                                 |                          | 2,778  |        |        |      | 2,572  |        |        |   | 2,583  |       
|Professional fees                                                                    |                                 |                          | 2,314  |        |        |      | 1,834  |        |        |   | 1,738  |       
|Courier and postage                                                                  |                                 |                          | 1,953  |        |        |      | 1,948  |        |        |   | 1,908  |       
|Marketing                                                                            |                                 |                          | 2,047  |        |        |      | 2,018  |        |        |   | 1,757  |       
|Other loan expense                                                                   |                                 |                          | 1,624  |        |        |      | 1,276  |        |        |   |        |       
|Communications                                                                       |                                 |                          | 1,166  |        |        |      | 1,100  |        |        |   | 1,282  |       
|Other taxes and insurance                                                            |                                 |                          | 700    |        |        |      | 721    |        |        |   | 837    |       
|Printing and office supplies                                                         |                                 |                          | 637    |        |        |      | 710    |        |        |   | 770    |       
|Kiting charge                                                                        |                                 |                          |       |        |        |      |       |        |        |   | 1,945  |       
|Other noninterest expense                                                            |                                 |                          | 2,404  |        |        |      | 2,598  |        |        |   | 3,251  |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                     | Total noninterest expense       |                          |        | 58,150 |        |      |        | 54,018 |        |   |        | 51,999 |        
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|INCOME BEFORE INCOME TAXES                                                           |                                 |                          | 29,135 |        |        |      | 27,193 |        |        |   | 21,455 |       
|PROVISION FOR INCOME TAXES                                                           |                                 |                          | 9,338  |        |        |      | 8,990  |        |        |   | 6,695  |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|NET INCOME                                                                           |                                 | $                        | 19,797 |        |        | $    | 18,203 |        |        | $ | 14,760 |       
|                                                                                     |                                 |                          |        |        |        |      |        |        |        |   |        |       
|                                                                                     | Basic earnings per share        |                          | $      | 1.31   |        |      | $      | 1.17   |        |   | $      | 0.92   |        
|                                                                                     | Diluted earnings per share      |                          | $      | 1.26   |        |      | $      | 1.13   |        |   | $      | 0.90   |        
|                                                                                     | Weighted average common shares  |                          |        | 15,077 |        |      |        | 15,575 |        |   |        | 16,126 |        
|                                                                                     | Weighted average diluted shares |                          |        | 15,674 |        |      |        | 16,069 |        |   |        | 16,453 |        

See notes to consolidated financial statements

34



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##### Table of Contents



WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |   |        |         |  
|--------------------------------------------------------------------------------- | -------------------------- | ------------ | ----------------------------------------- | ---- | ------ | -------- | -------- | - | ------ | ------- | -------- | - | ------ | ------- | -
|Year ended December 31 (Dollars in thousands)                                     |                            | 2003         |                                           | 2002 |        | 2001    
|                                                                                  |                            |              |                                           |      |        |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                            |              |                                           |      |        |          |          |   |        |         |          |  
|Net income                                                                        |                            | $            | 19,797                                    |      |        | $        | 18,203   |   |        | $       | 14,760   |  
|Adjustments to reconcile net income to net cash
provided by operating activities: |                            |              |                                           |      |        |          |          |   |        |         |          |  
|Depreciation of premises and equipment                                            |                            |              | 2,831                                     |      |        |          | 3,226    |   |        |         | 3,702    |  
|(Increase) decrease in net deferred tax assets                                    |                            |              | (1,681                                    | )    |        |          | 1,148    |   |        |         | 1,110    |  
|Write-down of buildings/equipment                                                 |                            |              |                                          |      |        |          | 613      |   |        |         |         |  
|Amortization of intangibles                                                       |                            |              | 353                                       |      |        |          | 357      |   |        |         | 375      |  
|Net gains on sales of available for sale securities                               |                            |              | (192                                      | )    |        |          |         |   |        |         |         |  
|Provision for loan loss                                                           |                            |              | 3,800                                     |      |        |          | 4,979    |   |        |         | 3,282    |  
|(Increase) decrease in interest receivable                                        |                            |              | (38                                       | )    |        |          | 735      |   |        |         | 1,578    |  
|(Increase) decrease in other assets                                               |                            |              | 2,519                                     |      |        |          | (4,830   | ) |        |         | 420      |  
|Gain on sale of loans                                                             |                            |              | 5,124                                     |      |        |          | 4,024    |   |        |         | 3,671    |  
|Origination of loans held for sale                                                |                            |              | (188,825                                  | )    |        |          | (135,590 | ) |        |         | (91,396  | )
|Proceeds from sales of loans held for sale                                        |                            |              | 189,896                                   |      |        |          | 134,665  |   |        |         | 77,123   |  
|Decrease in interest payable                                                      |                            |              | (342                                      | )    |        |          | (219     | ) |        |         | (658     | )
|Increase (decrease) in other liabilities                                          |                            |              | 3,200                                     |      |        |          | (985     | ) |        |         | 3,312    |  
|Increase in cash surrender value of bank owned life insurance                     |                            |              | (743                                      | )    |        |          |         |   |        |         |         |  
|Gain on benefit of proceeds from bank owned life insurance                        |                            |              | (202                                      | )    |        |          |         |   |        |         |         |  
|Stock based compensation expense                                                  |                            |              | 679                                       |      |        |          | 566      |   |        |         | 582      |  
|Tax benefit associated with stock options                                         |                            |              | 732                                       |      |        |          | 301      |   |        |         | 185      |  
|(Increase) decrease in trading assets                                             |                            |              | (24                                       | )    |        |          | 125      |   |        |         | (213     | )
|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |  
|                                                                                  |                            |              | Net cash provided by operating activities |      |        | 36,884   |          |   |        | 27,318  |          |   |        | 17,833  |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                             |                            |              |                                           |      |        |          |          |   |        |         |          |  
|Proceeds from maturities of available for sale securities                         |                            |              | 118,188                                   |      |        |          | 71,138   |   |        |         | 119,364  |  
|Proceeds from sales of available for sale securities                              |                            |              | 4,158                                     |      |        |          |         |   |        |         |         |  
|Purchase of available for sale securities                                         |                            |              | (179,219                                  | )    |        |          | (90,695  | ) |        |         | (113,994 | )
|Purchase of bank owned life insurance                                             |                            |              | (16,000                                   | )    |        |          |         |   |        |         |         |  
|Proceeds from death benefit paid on bank owned life insurance                     |                            |              | 640                                       |      |        |          |         |   |        |         |         |  
|Loans made to customers greater than principal collected on loans                 |                            |              | (63,473                                   | )    |        |          | (78,258  | ) |        |         | (87,112  | )
|Net capital expenditures                                                          |                            |              | (3,398                                    | )    |        |          | (1,332   | ) |        |         | (4,280   | )
|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |  
|                                                                                  |                            |              | Net cash used in investing activities     |      |        | (139,104 | )        |   |        | (99,147 | )        |   |        | (86,022 | )
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                            |              |                                           |      |        |          |          |   |        |         |          |  
|Net increase in demand, savings and interest
bearing transaction accounts         |                            |              | 163,665                                   |      |        |          | 100,711  |   |        |         | 98,638   |  
|Net decrease in certificates of deposit                                           |                            |              | (25,259                                   | )    |        |          | (5,691   | ) |        |         | (3,813   | )
|Proceeds from issuance of junior subordinated debentures                          |                            |              | 7,500                                     |      |        |          | 7,500    |   |        |         | 5,000    |  
|Proceeds from issuance of long-term borrowings                                    |                            |              | 5,000                                     |      |        |          | 60,000   |   |        |         | 80,500   |  
|Repayment of long-term borrowings                                                 |                            |              | (25,000                                   | )    |        |          | (52,500  | ) |        |         | (35,022  | )
|Net decrease in short-term borrowings                                             |                            |              | (4,875                                    | )    |        |          | (16,786  | ) |        |         | (74,738  | )
|Repurchase of common stock                                                        |                            |              | (10,461                                   | )    |        |          | (13,081  | ) |        |         | (6,597   | )
|Net proceeds from issuance of common stock                                        |                            |              | 2,349                                     |      |        |          | 1,147    |   |        |         | 813      |  
|Dividends paid and cash paid for fractional shares                                |                            |              | (4,928                                    | )    |        |          | (4,699   | ) |        |         | (4,465   | )
|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |  
|                                                                                  |                            |              | Net cash provided by financing activities |      |        | 107,991  |          |   |        | 76,601  |          |   |        | 60,316  |  
|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |  
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                              |                            |              | 5,771                                     |      |        |          | 4,772    |   |        |         | (7,873   | )
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                    |                            |              | 57,733                                    |      |        |          | 52,961   |   |        |         | 60,834   |  
|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |  
|CASH AND CASH EQUIVALENTS AT END OF YEAR                                          |                            | $            | 63,504                                    |      |        | $        | 57,733   |   |        | $       | 52,961   |  
|                                                                                  |                            |              |                                           |      |        |          |          |   |        |         |          |  
|Supplemental cash flow information:                                               |                            |              |                                           |      |        |          |          |   |        |         |          |  
|                                                                                  | Cash paid in the year for: |              |                                           |      |        |          |          |   |        |         |          |   |       
|                                                                                  |                            | Interest     |                                           | $    | 20,981 |          |          | $ | 28,750 |         |          | $ | 41,230 |        
|                                                                                  |                            | Income taxes |                                           | $    | 9,158  |          |          | $ | 6,070  |         |          | $ | 8,989  |        

See notes to consolidated financial statements.

35



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##### Table of Contents



WEST COAST BANCORP
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   |        |        |  
|----------------------------------------------------------- |  | --------------------------------------- | ------------------------------------------- | ------ | ------------ | ------- | ------- | -------- | -------- | ------------ | -------- | ------------- | ------------- | ----- | ------ | - | ------ | - | ------ | - | - | - | ----- |  | ----------- | ------ | ------- | - | ------ | ------ | -
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  | Accumulated |        |         |   |       
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               | Additional    |       |        |   |        |   |        |   |   |   | Other |  |             |        |        
|                                                            |  |                                         |                                             |        | Common Stock |         | Paid-In |          | Retained |              | Deferred |               | Comprehensive |       |        |   |       
|(Shares and Dollars in thousands)                           |  | Shares                                  |                                             | Amount |              | Capital |         | Earnings |          | Compensation |          | Income (Loss) |               | Total
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |      
|BALANCE, January 1, 2001                                    |  |                                         | 16,415                                      |        |              | $       | 20,518  |          |          | $            | 87,364   |               |               | $     | 14,248 |   |        | $ | (1,032 | ) |   | $ | 171   |  |             | $      | 121,269 |  
|Comprehensive income:                                       |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|                                                            |  | Net income                              |                                             |        |             |         |         |          |         |              |          |               |              |       |        |   | 14,760 |   |        |   |  |   |       |  |            |        |         | $ | 14,760 |       
|                                                            |  | Other comprehensive income, net of tax: |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   |        |       
|                                                            |  |                                         | Net unrealized investment gains             |        |              |        |         |          |          |             |          |               |               |      |        |   |        |  |        |   |   |  |       |  |             | 2,243  |         |   |        | 2,243  |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|                                                            |  | Other comprehensive income, net of tax  |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   | 2,243  |       
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|Comprehensive income                                        |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             | $      | 17,003  |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|Cash dividends, $.28 per common share                       |  |                                         |                                            |        |              |         |        |          |          |              |         |               |               |       | (4,465 | ) |        |   |       |   |   |   |      |  |             |        | (4,465  | )
|Issuance of common stock pursuant to
option plans           |  |                                         | 138                                         |        |              |         | 172     |          |          |              | 923      |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 1,095   |  
|Redemption of stock pursuant stock plans                    |  |                                         | (28                                         | )      |              |         | (32     | )        |          |              | (250     | )             |               |       |       |   |        |   |       |   |   |   |      |  |             |        | (282    | )
|Issuance of common stock pursuant to
restricted stock plans |  |                                         | 34                                          |        |              |         | 42      |          |          |              | 386      |               |               |       |       |   |        |   | (428   | ) |   |   |      |  |             |        |        |  
|Amortization of deferred compensation
restricted stock      |  |                                         |                                            |        |              |         |        |          |          |              |         |               |               |       |       |   |        |   | 582    |   |   |   |      |  |             |        | 582     |  
|Common stock repurchased and retired                        |  |                                         | (534                                        | )      |              |         | (668    | )        |          |              | (5,929   | )             |               |       |        |   |        |   |       |   |   |   |      |  |             |        | (6,597  | )
|Tax benefit associated with stock options                   |  |                                         |                                            |        |              |         |        |          |          |              | 185      |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 185     |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|BALANCE, December 31, 2001                                  |  |                                         | 16,025                                      |        |              |         | 20,032  |          |          |              | 82,679   |               |               |       | 24,543 |   |        |   | (878   | ) |   |   | 2,414 |  |             |        | 128,790 |  
|Comprehensive income:                                       |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|                                                            |  | Net income                              |                                             |        |             |         |         |          |         |              |          |               |              |       |        |   | 18,203 |   |        |   |  |   |       |  |            |        |         | $ | 18,203 |       
|                                                            |  | Other comprehensive income, net of tax: |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   |        |       
|                                                            |  |                                         | Net unrealized investment/derivative
gains  |        |              |        |         |          |          |             |          |               |               |      |        |   |        |  |        |   |   |  |       |  |             | 2,160  |         |   |        | 2,160  |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|                                                            |  | Other comprehensive income, net of tax  |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   | 2,160  |       
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|Comprehensive income                                        |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             | $      | 20,363  |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|Cash dividends, $.30 per common share                       |  |                                         |                                            |        |              |         |        |          |          |              |         |               |               |       | (4,699 | ) |        |   |       |   |   |   |      |  |             |        | (4,699  | )
|Issuance of common stock pursuant to option
plans           |  |                                         | 164                                         |        |              |         | 205     |          |          |              | 1,272    |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 1,477   |  
|Redemption of stock pursuant to stock plans                 |  |                                         | (35                                         | )      |              |         | (44     | )        |          |              | (464     | )             |               |       |       |   |        |   | 18     |   |   |   |      |  |             |        | (490    | )
|Activity in Deferred Compensation Plan                      |  |                                         | 13                                          |        |              |         | 16      |          |          |              | 144      |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 160     |  
|Issuance of common stock pursuant to
restricted stock plans |  |                                         | 25                                          |        |              |         | 31      |          |          |              | 346      |               |               |       |       |   |        |   | (377   | ) |   |   |      |  |             |        |        |  
|Amortization of deferred compensation
restricted stock      |  |                                         |                                            |        |              |         |        |          |          |              |         |               |               |       |       |   |        |   | 566    |   |   |   |      |  |             |        | 566     |  
|Common stock repurchased and retired                        |  |                                         | (866                                        | )      |              |         | (1,082  | )        |          |              | (11,999  | )             |               |       |        |   |        |   |       |   |   |   |      |  |             |        | (13,081 | )
|Tax benefit associated with stock options                   |  |                                         |                                            |        |              |         |        |          |          |              | 301      |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 301     |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|BALANCE, December 31, 2002                                  |  |                                         | 15,326                                      |        |              |         | 19,158  |          |          |              | 72,279   |               |               |       | 38,047 |   |        |   | (671   | ) |   |   | 4,574 |  |             |        | 133,387 |  
|Comprehensive income:                                       |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|                                                            |  | Net income                              |                                             |        |             |         |         |          |         |              |          |               |              |       |        |   | 19,797 |   |        |   |  |   |       |  |            |        |         | $ | 19,797 |       
|                                                            |  | Other comprehensive income, net of tax: |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   |        |       
|                                                            |  |                                         | Net unrealized investment/derivative
losses |        |              |        |         |          |          |             |          |               |               |      |        |   |        |  |        |   |   |  |       |  |             | (1,502 | )       |   |        | (1,502 | )
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|                                                            |  | Other comprehensive income, net of tax  |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |   | (1,502 | )     
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|Comprehensive income                                        |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             | $      | 18,295  |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|Cash dividends, $.32 per common share                       |  |                                         |                                            |        |              |         |        |          |          |              |         |               |               |       | (4,928 | ) |        |   |       |   |   |   |      |  |             |        | (4,928  | )
|Issuance of common stock pursuant to option
plans           |  |                                         | 291                                         |        |              |         | 363     |          |          |              | 2,500    |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 2,863   |  
|Redemption of stock pursuant to stock plans                 |  |                                         | (29                                         | )      |              |         | (36     | )        |          |              | (457     | )             |               |       |       |   |        |   | 27     |   |   |   |      |  |             |        | (466    | )
|Activity in Deferred Compensation Plan                      |  |                                         | (3                                          | )      |              |         | (3      | )        |          |              | (45      | )             |               |       |       |   |        |   |       |   |   |   |      |  |             |        | (48     | )
|Issuance of common stock pursuant to
restricted stock plans |  |                                         | 78                                          |        |              |         | 97      |          |          |              | 1,180    |               |               |       |       |   |        |   | (1,277 | ) |   |   |      |  |             |        |        |  
|Amortization of deferred compensation
restricted stock      |  |                                         |                                            |        |              |         |        |          |          |              |         |               |               |       |       |   |        |   | 679    |   |   |   |      |  |             |        | 679     |  
|Common stock repurchased and retired                        |  |                                         | (587                                        | )      |              |         | (734    | )        |          |              | (9,727   | )             |               |       |       |   |        |   |       |   |   |   |      |  |             |        | (10,461 | )
|Tax benefit associated with stock options                   |  |                                         |                                            |        |              |         |        |          |          |              | 732      |               |               |       |       |   |        |   |       |   |   |   |      |  |             |        | 732     |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  
|BALANCE, December 31, 2003                                  |  |                                         | 15,076                                      |        |              | $       | 18,845  |          |          | $            | 66,462   |               |               | $     | 52,916 |   |        | $ | (1,242 | ) |   | $ | 3,072 |  |             | $      | 140,053 |  
|                                                            |  |                                         |                                             |        |              |         |         |          |          |              |          |               |               |       |        |   |        |   |        |   |   |   |       |  |             |        |         |  

See notes to consolidated financial statements

36



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##### Table of Contents



WEST COAST BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation. The accompanying consolidated financial
statements include the accounts of West Coast Bancorp (Bancorp or the
Company), which operates its wholly-owned subsidiaries, West Coast Bank (the
Bank), West Coast Trust, Centennial Funding Corporation, Eld, Inc., and
Totten, Inc., after elimination of intercompany transactions and balances. In
accordance with Financial Accounting Standards Board Interpretation No. 46,
Consolidation of Variable Interest Entities, West Coast Statutory Trust I,
II, and III are considered related parties to West Coast Bancorp and their
financial results are not consolidated in West Coast Bancorps financial
statements effective December 31, 2003. Certain reclassifications of prior
year amounts have been made to conform to current classifications.

Nature of Operations. West Coast Bancorps activities include offering a
full range of financial services through 48 branch and mortgage offices in
western Oregon and Washington. West Coast Trust provides agency, trust and
related services.

Trading Assets.Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term are classified as
trading securities and reported at fair value, with unrealized gains and losses
included in earnings. Trading assets held at December 31, 2003 and 2002 are
related solely to assets held in a Rabbi Trust for benefit of the Companys
deferred compensation plans.

Investment Securities. Investment securities are classified as either
available for sale or held to maturity. For purposes of computing gains and
losses, cost of securities sold is determined using the specific identification
method. Available for sale securities are carried at fair value with
unrealized gains and losses, net of any tax effect, added to or deducted
directly from stockholders equity. Held to maturity securities are carried at
amortized cost. The Company does not have any held to maturity securities as
of December 31, 2003 or 2002.

Loans Held for Sale. Loans held for sale are carried at the lower of cost
or market. Market value is determined in the aggregate. When a loan is sold,
the gain is recognized in the consolidated statement of income as the proceeds
less the book value of the loan including unamortized fees and capitalized
direct costs. In addition, we originate loans to customers under Small Business
Administration (SBA) programs that generally provide for SBA guarantees of
70% to 90% of each loan. We periodically sell the guaranteed portion of certain
SBA loans to investors and retain the unguaranteed portion and servicing rights
in our loan portfolio. Gains on these sales are earned through the sale of the
guaranteed portion of the loan for an amount in excess of the adjusted carrying
value of the portion of the loan sold. We allocate the carrying value of such
loans between the portion sold, the portion retained and a value assigned to
the right to service the loan. The difference between the adjusted carrying
value of the portion retained and the face amount of the portion retained is
amortized to interest income over the life of the related loan using a
straight-line method over the anticipated lives of the pool of SBA loans.

Loans. Loans are reported net of unearned income. Interest income on
loans is accrued daily on the principal balance outstanding. Loan and
commitment fees and the direct cost of originating a loan are deferred and
recognized over the life of the loan and/or commitment period as yield
adjustments. 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. 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.

Impaired loans are measured 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. Loans that are currently
measured at fair value or at lower of cost or fair value, leases and certain
large groups of smaller balance homogeneous loans that are collectively
measured for impairment are excluded.

Allowance for Loan Loss. The allowance for loan loss is based on
managements estimates. Management determines the adequacy of the allowance for
loan loss based on evaluations of the loan portfolio, recent loss experience,
and other factors, including economic conditions. The Company determines the
amount of the allowance for loan loss required for certain sectors based on
relative risk characteristics of the loan portfolio and other financial
instruments with credit exposure. Actual losses may vary from current
estimates. These estimates are reviewed periodically and, as adjustments
become necessary, are reported in earnings in the periods in which they become
known. The allowance for
loan loss is increased by provisions for loan losses in operating
earnings. Losses are charged to the allowance while recoveries are credited to
the allowance.

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1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 of the related assets,
which range from 3 to 40 years. Improvements are capitalized and depreciated
over their estimated useful lives. Minor repairs, maintenance, and
improvements are charged to operations as incurred. When property is replaced
or otherwise disposed of, the cost of such assets and the related accumulated
depreciation are removed from their respective accounts. Related gain or loss,
if any, is recorded in current operations.

Servicing of Financial Assets.Bancorp originates loans under SBA loan
programs. Bancorp periodically sells such loans, and retains servicing rights
on the loans originated and sold. The fair value of the servicing rights are
determined based upon discounted cash flow analysis and such servicing rights
are being amortized in proportion to, and over the period of, estimated future
net servicing income. The servicing rights are periodically evaluated for
impairment. No impairment was recognized during 2003, 2002, or 2001.

Intangible Assets.Intangible assets are composed of deposit premiums of
$.9 million and $1.2 million (net of accumulated amortization of $2.4 million
and $2.1 million) at December 31, 2003 and 2002, respectively. These deposit
premiums are being amortized over a ten-year period.

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 that will be in effect when the
differences between the financial statement carrying amounts and tax basis of
existing assets and liabilities are expected to be reported in Bancorps income
tax returns. The deferred tax provision for the year is equal to the net
change in the net deferred tax asset from the beginning to the end of the year,
less amounts applicable to the change in value related to investments available
for sale as well as value changes in interest rate swaps accounted for as
hedges. The effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.

Trust Department Assets. Assets (other than cash deposits) held by West
Coast Trust in fiduciary or agency capacities for its trust customers are not
included in the accompanying consolidated balance sheets, since such items are
not assets of West Coast Trust.

Supplemental Cash Flow Information.For purposes of reporting cash flows,
cash and cash equivalents include cash on hand, amounts due from banks, and
federal funds sold. Generally, federal funds are purchased and sold for
one-day periods.

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 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.

New Accounting Pronouncements.

In December 2002, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS No. 148 amends SFAS
No. 123, Accounting for Stock-Based Compensation to provide alternative methods
of transition for an entity that voluntarily changes to the fair value based
method of accounting for stock-based employee compensation. This statement is
effective for fiscal years ending after December 15, 2002. The provisions of
SFAS No. 148 have not impacted our results of operations or financial
condition.

In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities. SFAS No. 149 amends SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities, for certain
decisions made by the FASB and to incorporate clarifications of the definition
of a derivative. Management does not expect that the provisions of SFAS No. 149
will impact our results of operations or financial condition.

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1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity.
This statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. It requires that an issuer classify a financial instrument that is
within its scope as a liability or an asset in some circumstances. Many of
those instruments were previously classified as equity. This statement is
effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003. The adoption of SFAS No. 150 did not impact our
results of operations or financial condition.

In November 2002, the FASB issued FASB Interpretation (FIN) No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others. FIN No. 45 is an interpretation
of FASB Statements No. 5, 57 and 107 and rescinds FIN No. 35. This
Interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. The disclosure requirements in this
Interpretation were effective for financial statements of interim or annual
periods ending after December 15, 2002. The Company has adopted the provisions
of FIN No. 45. The provisions of FIN 45 did not materially impact our results
of operations or financial condition.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. This interpretation requires a variable interest entity to
be consolidated by the primary beneficiary of that entity. The consolidation
requirements of this interpretation apply immediately to variable interest
entities created after January 31, 2003, and apply to existing entities for the
first fiscal year or interim period beginning after June 15, 2003. Certain
disclosure requirements apply in all financial statements issued after January
31, 2003, regardless of when the variable interest entity was established. The
Company has adopted the provisions of FIN No. 46. In accordance with FIN No.
46, West Coast Statutory Trust I, II, and III are considered related parties to
West Coast Bancorp and their financial results are not consolidated in West
Coast Bancorps financial statements.

Accounting for Stock-Based Compensation. At December 31, 2003, Bancorp
has multiple stock option plans, which are described in Note 16. Bancorp
accounts for its stock option plans using the intrinsic value method under
Accounting Principles Board (APB) Opinion 25, under which no compensation
cost has been recognized in the periods presented. All options granted under
our stock option plans had an exercise price equal to the market value of the
underlying common stock on the date of grant. The following table illustrates
the effect on net income and earnings per share if the fair value based method
established in SFAS No. 123, Accounting for Stock-Based Compensation had been
applied to all outstanding and unvested awards in each period.

|                                                                                                                                    |                     |      |                        |      |  |      |        |      |  |   |        |      | 
|----------------------------------------------------------------------------------------------------------------------------------- | ------------------- | ---- | ---------------------- | ---- |  | ---- | ------ | ---- |  | - | ------ | ---- | 
|                                                                                                                                    |                     |      | Year ended December 31
|                                                                                                                                    |                     |      |                       
|(Dollars in thousands, except per share data)                                                                                       |                     | 2003 |                        | 2002 |  | 2001
|                                                                                                                                    |                     |      |                        |      |  |     
|Net income, as reported                                                                                                             |                     | $    | 19,797                 |      |  | $    | 18,203 |      |  | $ | 14,760 |     
|Deduct: Total stock-based compensation expense
determined under fair value based method for all
options, net of related tax effects |                     |      | (793                   | )    |  |      | (773   | )    |  |   | (633   | )   
|                                                                                                                                    |                     |      |                        |      |  |      |        |      |  |   |        |     
|Pro forma net income                                                                                                                |                     | $    | 19,004                 |      |  | $    | 17,430 |      |  | $ | 14,127 |     
|                                                                                                                                    |                     |      |                        |      |  |      |        |      |  |   |        |     
|Earnings per share:                                                                                                                 |                     |      |                        |      |  |      |        |      |  |   |        |     
|                                                                                                                                    | Basic-as reported   |      | $                      | 1.31 |  |      | $      | 1.17 |  |   | $      | 0.92 | 
|                                                                                                                                    | Basic-proforma      |      | $                      | 1.26 |  |      | $      | 1.12 |  |   | $      | 0.88 | 
|                                                                                                                                    | Diluted-as reported |      | $                      | 1.26 |  |      | $      | 1.13 |  |   | $      | 0.90 | 
|                                                                                                                                    | Diluted-proforma    |      | $                      | 1.21 |  |      | $      | 1.08 |  |   | $      | 0.86 | 

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2.     INVESTMENT SECURITIES

The following table presents the investment portfolio as of December 31,
2003 and 2002:

|                                                |       |           |                    |             |  |              |       |            |  |   |      |      |   |   |         |         | 
|----------------------------------------------- | ----- | --------- | ------------------ | ----------- |  | ------------ | ----- | ---------- |  | - | ---- | ---- | - | - | ------- | ------- | 
|                                                |       |           | AVAILABLE FOR SALE
|                                                |       |           |                   
|(Dollars in thousands)                          |       | Amortized |                    | Unrealized  |  | Unrealized   |       |            |  |  
|December 31, 2003                               |       | Cost      |                    | Gross Gains |  | Gross Losses |       | Fair Value
|                                                |       |           |                    |             |  |              |       |           
|U.S. Government agency securities               |       | $         | 107,339            |             |  | $            | 1,345 |            |  | $ | (402 | )    |   | $ | 108,282 |        
|Corporate securities                            |       |           | 23,552             |             |  |              | 549   |            |  |   |     |      |   |   | 24,101  |        
|Mortgage-backed securities                      |       |           | 94,497             |             |  |              | 547   |            |  |   | (236 | )    |   |   | 94,808  |        
|Obligations of state and political subdivisions |       |           | 76,202             |             |  |              | 3,935 |            |  |   | (55  | )    |   |   | 80,082  |        
|Equity and other securities                     |       |           | 14,647             |             |  |              | 50    |            |  |   |     |      |   |   | 14,697  |        
|                                                |       |           |                    |             |  |              |       |            |  |   |      |      |   |   |         |        
|                                                | Total |           | $                  | 316,237     |  |              | $     | 6,426      |  |   | $    | (693 | ) |   | $       | 321,970 | 
|                                                |       |           |                    |             |  |              |       |            |  |   |      |      |   |   |         |        

|                                                |       |           |                    |             |  |              |       |            |  |   |     |     |   |   |        |         | 
|----------------------------------------------- | ----- | --------- | ------------------ | ----------- |  | ------------ | ----- | ---------- |  | - | --- | --- | - | - | ------ | ------- | 
|                                                |       |           | AVAILABLE FOR SALE
|                                                |       |           |                   
|(Dollars in thousands)                          |       | Amortized |                    | Unrealized  |  | Unrealized   |       |            |  |  
|December 31, 2002                               |       | Cost      |                    | Gross Gains |  | Gross Losses |       | Fair Value
|                                                |       |           |                    |             |  |              |       |           
|U.S. Treasury securities                        |       | $         | 5,500              |             |  | $            | 83    |            |  | $ |    |     |   | $ | 5,583  |        
|U.S. Government agency securities               |       |           | 64,461             |             |  |              | 2,051 |            |  |   | (29 | )   |   |   | 66,483 |        
|Corporate securities                            |       |           | 21,682             |             |  |              | 815   |            |  |   |    |     |   |   | 22,497 |        
|Mortgage-backed securities                      |       |           | 67,921             |             |  |              | 1,317 |            |  |   | (4  | )   |   |   | 69,234 |        
|Obligations of state and political subdivisions |       |           | 83,372             |             |  |              | 4,243 |            |  |   | (23 | )   |   |   | 87,592 |        
|Equity and other securities                     |       |           | 15,018             |             |  |              |      |            |  |   |    |     |   |   | 15,018 |        
|                                                |       |           |                    |             |  |              |       |            |  |   |     |     |   |   |        |        
|                                                | Total |           | $                  | 257,954     |  |              | $     | 8,509      |  |   | $   | (56 | ) |   | $      | 266,407 | 
|                                                |       |           |                    |             |  |              |       |            |  |   |     |     |   |   |        |        

Gross realized gains in 2003, 2002 and 2001 were $192,000, $0, and $0,
respectively. There were no gross realized losses in 2003, 2002, or 2001.
Securities with a fair value of approximately $38.8 million and $34.3 million
were pledged to secure public deposits at December 31, 2003 and 2002,
respectively. In addition, Bancorp pledged $5.1 million and $10.1 million of
U.S. government agency securities at December 31, 2003 and 2002, respectively,
to secure borrowings under reverse repurchase agreements. Under regulatory
guidelines, no outstanding mortgage-backed securities were classified as high
risk at December 31, 2003 or 2002.

The following table provides information on unrealized losses in the
investment securities portfolio at December 31, 2003:

|                                                |       |                           |                    |                           |                    |              |        |        |  |   |      |      |  
|----------------------------------------------- | ----- | ------------------------- | ------------------ | ------------------------- | ------------------ | ------------ | ------ | ------ |  | - | ---- | ---- | -
|                                                |       |                           | Amortized cost of  |                           | Fair value of      |              |        |        | 
|                                                |       |                           | securities with an |                           | securities with an |              |        |        | 
|(Dollars in thousands)                          |       | unrealized loss less than |                    | unrealized loss less than |                    | Unrealized  
|December 31, 2003                               |       | 12 continuous months      |                    | 12 continuous months      |                    | Gross Losses
|                                                |       |                           |                    |                           |                    |             
|U.S. Government agency securities               |       | $                         | 28,437             |                           |                    | $            | 28,035 |        |  | $ | (402 | )   
|Mortgage-backed securities                      |       |                           | 52,799             |                           |                    |              | 52,563 |        |  |   | (236 | )   
|Obligations of state and political subdivisions |       |                           | 4,141              |                           |                    |              | 4,086  |        |  |   | (55  | )   
|                                                |       |                           |                    |                           |                    |              |        |        |  |   |      |     
|                                                | Total |                           | $                  | 85,377                    |                    |              | $      | 84,684 |  |   | $    | (693 | )
|                                                |       |                           |                    |                           |                    |              |        |        |  |   |      |     

There are no investment securities with a 12 month or greater continuous
unrealized loss in the investment portfolio at December 31, 2003. At December
31, 2003 there were approximately 40 securities with an unrealized loss of $.7
million, or an average loss of $18,000 per security. The impairment on these
fixed income securities is due to an increase in interest rates subsequent to
their purchase. The fair value of these securities will fluctuate as market
interest rates change.

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3.     MATURITIES OF INVESTMENT SECURITIES

The follow table presents the maturities of the investment portfolio at
December 31, 2003:

|                                                 |                                   |                    |         |            |         |  |         |        |         | 
|------------------------------------------------ | --------------------------------- | ------------------ | ------- | ---------- | ------- |  | ------- | ------ | ------- | 
|(Dollars in thousands)                           |                                   | Available for sale
|                                                 |                                   |                   
|December 31, 2003                                |                                   | Amortized cost     |         | Fair value
|                                                 |                                   |                    |         |           
|U.S. Government agency securities:               |                                   |                    |         |            |         |  |         |       
|                                                 | One year or less                  |                    | $       | 6,880      |         |  | $       | 7,149  |        
|                                                 | After one year through five years |                    |         | 74,975     |         |  |         | 75,600 |        
|                                                 | After five through ten years      |                    |         | 25,484     |         |  |         | 25,533 |        
|                                                 |                                   |                    |         |            |         |  |         |       
|                                                 |                                   |                    | 107,339 |            |         |  | 108,282 |       
|Corporate Securities:                            |                                   |                    |         |            |         |  |         |       
|                                                 | One year or less                  |                    |         | 5,003      |         |  |         | 5,132  |        
|                                                 | After one year through five years |                    |         | 6,307      |         |  |         | 6,666  |        
|                                                 | After five through ten years      |                    |         | 4,242      |         |  |         | 4,303  |        
|                                                 | Due after ten years               |                    |         | 8,000      |         |  |         | 8,000  |        
|                                                 |                                   |                    |         |            |         |  |         |       
|                                                 |                                   | Total              |         |            | 23,552  |  |         |        | 24,101  | 
|Obligations of state and political subdivisions: |                                   |                    |         |            |         |  |         |       
|                                                 | One year or less                  |                    |         | 8,367      |         |  |         | 8,525  |        
|                                                 | After one year through five years |                    |         | 34,435     |         |  |         | 36,565 |        
|                                                 | After five through ten years      |                    |         | 30,251     |         |  |         | 31,858 |        
|                                                 | Due after ten years               |                    |         | 3,149      |         |  |         | 3,134  |        
|                                                 |                                   |                    |         |            |         |  |         |       
|                                                 |                                   | Total              |         |            | 76,202  |  |         |        | 80,082  | 
|                                                 |                                   |                    |         |            |         |  |         |       
|                                                 |                                   | Sub-total          |         |            | 207,093 |  |         |        | 212,465 | 
|Mortgage-backed securities                       |                                   |                    | 94,497  |            |         |  | 94,808  |       
|Equity investments and other securities          |                                   |                    | 14,647  |            |         |  | 14,697  |       
|                                                 |                                   |                    |         |            |         |  |         |       
|                                                 |                                   | Total securities   |         | $          | 316,237 |  |         | $      | 321,970 | 
|                                                 |                                   |                    |         |            |         |  |         |       

4.     LOANS AND ALLOWANCE FOR LOAN LOSS

The following table presents the loan portfolio as of December 31, 2003
and 2002:

|                               |                  |      |              |           |  |   |         |           | 
|------------------------------ | ---------------- | ---- | ------------ | --------- |  | - | ------- | --------- | 
|                               |                  |      | December 31,
|                               |                  |      |             
|(Dollars in thousands)         |                  | 2003 |              | 2002     
|                               |                  |      |              |          
|Commercial loans               |                  | $    | 236,949      |           |  | $ | 205,725 |          
|Real estate  construction     |                  |      | 112,732      |           |  |   | 121,711 |          
|Real estate  mortgage         |                  |      | 179,331      |           |  |   | 148,350 |          
|Real estate  commercial       |                  |      | 652,882      |           |  |   | 637,978 |          
|Installment and other consumer |                  |      | 38,987       |           |  |   | 46,151  |          
|                               |                  |      |              |           |  |   |         |          
|                               | Total loans      |      |              | 1,220,881 |  |   |         | 1,159,915 | 
|Allowance for loan loss        |                  |      | (18,131      | )         |  |   | (16,838 | )        
|                               |                  |      |              |           |  |   |         |          
|                               | Total loans, net |      | $            | 1,202,750 |  |   | $       | 1,143,077 | 
|                               |                  |      |              |           |  |   |         |          

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4. LOANS AND ALLOWANCE FOR LOAN LOSS (Continued)

The following is an analysis of the changes in the allowance for loan
loss:

|                                     |  |                          |        |      |  |      |        |   |  |   |        |  
|------------------------------------ |  | ------------------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                     |  | Year Ending December 31,
|                                     |  |                         
|(Dollars in thousands)               |  | 2003                     |        | 2002 |  | 2001
|                                     |  |                          |        |      |  |     
|Balance, beginning of period         |  | $                        | 16,838 |      |  | $    | 15,252 |   |  | $ | 14,244 |  
|Provision for loan loss              |  |                          | 3,800  |      |  |      | 4,979  |   |  |   | 3,282  |  
|Losses charged to the allowance      |  |                          | (3,098 | )    |  |      | (3,680 | ) |  |   | (2,550 | )
|Recoveries credited to the allowance |  |                          | 591    |      |  |      | 287    |   |  |   | 276    |  
|                                     |  |                          |        |      |  |      |        |   |  |   |        |  
|Balance, end of period               |  | $                        | 18,131 |      |  | $    | 16,838 |   |  | $ | 15,252 |  
|                                     |  |                          |        |      |  |      |        |   |  |   |        |  

Loans on which the accrual of interest has been discontinued, amounted to
approximately $2.7 million, $5.1 million and $6.4 million at December 31, 2003,
2002, and 2001, respectively. Interest income foregone on non-accrual loans
was approximately $231,000, $314,000 and $533,000 in 2003, 2002, and 2001,
respectively.

At December 31, 2003 and 2002, Bancorps recorded investment in certain
loans that were considered to be impaired was $2.6 million and $4.9 million,
respectively, all of which was classified as non-performing. Of these impaired
loans, $181,000 and $0 had a specific related valuation allowance of $95,000
and $0, respectively, while $2.4 million and $4.9 million did not require a
specific valuation allowance. The balance of the allowance for loan loss in
excess of these specific reserves is available to absorb the inherent losses
from all loans in the portfolio. The average recorded investment in impaired
loans for the years ended December 31, 2003, 2002, and 2001 was approximately,
$4.0 million, $5.2 million and $6.2 million, respectively. For the years ended
December 31, 2003, 2002 and 2001, interest income recognized on impaired loans
totaled $193,000, $17,000 and $12,000, respectively, all of which was
recognized on a cash basis.

The Bank makes commercial and residential loans to customers primarily
throughout Oregon and Washington. Although the Bank has a diversified loan
portfolio, a substantial portion of the portfolio belongs to debtors whose
ability to honor their contracts is dependent upon the economies of Oregon
and/or Washington.

As of December 31, 2003 and 2002, the Bank had loans to persons serving as
directors, officers, principal stockholders and their related interests
totaling $5.9 million and $5.4 million, respectively. These loans were made
substantially on the same terms, including interest rates, maturities and
collateral as those made to other customers of the Bank.

The following table presents a summary of loans made to directors,
officers, principal stockholders and their related interests, of the Company:

|                               |  |              |        |      |  |   |         |  
|------------------------------ |  | ------------ | ------ | ---- |  | - | ------- | -
|                               |  | December 31,
|                               |  |             
|(Dollars in thousands)         |  | 2003         |        | 2002
|                               |  |              |        |     
|Balance, beginning of period   |  | $            | 5,440  |      |  | $ | 13,968  |  
|New loans and advances         |  |              | 4,208  |      |  |   | 1,627   |  
|Principal payments and payoffs |  |              | (3,715 | )    |  |   | (10,155 | )
|                               |  |              |        |      |  |   |         |  
|Balance, end of period         |  | $            | 5,933  |      |  | $ | 5,440   |  
|                               |  |              |        |      |  |   |         |  

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5.     PREMISES AND EQUIPMENT

Premises and equipment consists of the following:

|                           |  |              |         |      |  |   |         |  
|-------------------------- |  | ------------ | ------- | ---- |  | - | ------- | -
|                           |  | December 31,
|                           |  |             
|(Dollars in thousands)     |  | 2003         |         | 2002
|                           |  |              |         |     
|Land                       |  | $            | 4,796   |      |  | $ | 4,796   |  
|Buildings and improvements |  |              | 23,523  |      |  |   | 22,881  |  
|Furniture and equipment    |  |              | 24,103  |      |  |   | 22,432  |  
|Construction in progress   |  |              | 80      |      |  |   | 37      |  
|                           |  |              |         |      |  |   |         |  
|                           |  |              | 52,502  |      |  |   | 50,146  |  
|Accumulated depreciation   |  |              | (25,326 | )    |  |   | (23,537 | )
|                           |  |              |         |      |  |   |         |  
|Total                      |  | $            | 27,176  |      |  | $ | 26,609  |  
|                           |  |              |         |      |  |   |         |  

Depreciation included in net occupancy and equipment expense amounted to
$2.8 million, $3.2 million and $3.7 million for the years ended December 31,
2003, 2002, and 2001, respectively. The Company periodically reviews the
recorded value of its long-lived assets, specifically premises and equipment,
to determine whether impairment exists. During the first quarter of 2002, the
Company disposed of antiquated computer and printer related equipment with a
net book value of $258,000. In 2002, the Company also sold a house and an
administration building in Shelton, Washington. A branch location in Lincoln
County, Oregon was also examined and found to be impaired under the guidance
provided in SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The amount of impairment loss relating to this building was
$355,000. The Company recognized a total of $613,000 of expenses in other
noninterest expense related to these fixed asset write-offs and impairment
charges in 2002. The fair value of the properties was based on pending sale
prices and independent appraisals. No impairment write-downs occurred in 2003
or 2001.

6. BORROWINGS

Borrowings consist of the following:

|                                               |  |              |        |      |  |   |         | 
|---------------------------------------------- |  | ------------ | ------ | ---- |  | - | ------- | 
|                                               |  | December 31,
|                                               |  |             
|(Dollars in thousands)                         |  | 2003         |        | 2002
|                                               |  |              |        |     
|Short-term borrowings:                         |  |              |        |      |  |   |         | 
|Securities sold under agreements to repurchase |  | $            | 5,027  |      |  | $ | 9,902   | 
|Long-term borrowings:                          |  |              |        |      |  |   |         | 
|FHLB advances                                  |  |              | 78,000 |      |  |   | 98,000  | 
|                                               |  |              |        |      |  |   |         | 
|Total borrowings                               |  | $            | 83,027 |      |  | $ | 107,902 | 
|                                               |  |              |        |      |  |   |         | 

Short-term borrowings generally consist of Federal Home Loan Bank of
Seattle (FHLB) borrowings, security reverse repurchase agreements and Federal
Funds Purchased overnight from correspondent banks. At December 31, 2003,
Bancorp had $5.0 million in reverse repurchase agreements maturing in March
2004, with a rate of 1.12%. Bancorp had no outstanding Federal Funds purchased
at December 31, 2003 and 2002.

Securities sold under agreements to repurchase with an amortized cost of
$5.0 million and $9.9 million at December 31, 2003 and 2002 were collateralized
by available for sale securities held in Bancorps portfolio.

Long-term borrowings at December 31, 2003 consist of notes with fixed
maturities, balloon payments and putable advances with the FHLB totaling $78.0
million. Total long-term borrowings with fixed maturities were $68.0 million
with rates ranging from 2.21% to 5.63%. Bancorps putable advances total $10.0
million with an original term of five years and quarterly put options and final
maturity in June 2005; the rate on this advance is currently 6.84%. Principal
payments due on Bancorps long-term borrowings at December 31, 2003 are $12.5
million in 2004, $25 million in 2005, $20.5 million in 2006, and $20 million in
2007, with no balances due thereafter.

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6.     BORROWINGS (Continued)

Long-term borrowings at December 31, 2002 consisted of notes with fixed
maturities, balloon payments and putable advances with the FHLB totaling $98.0
million. Total long-term borrowings with fixed maturities were $88.0 million
with rates ranging from 1.82% to 5.63%. Bancorps putable advances totaled
$10.0 million with an original term of five years with quarterly put options
and final maturity in June 2005.

FHLB advances are collateralized as provided for in the advance, pledge
and security agreements with the FHLB, by certain investment and
mortgage-backed securities, stock owned by Bancorp including deposits at the
FHLB and certain loans. At December 31, 2003 the Company had additional
borrowing capacity available of $172.1 million at the FHLB.

7.     JUNIOR SUBORDINATED DEBENTURES AND MANDATORILY REDEEMABLE TRUST PREFERRED
SECURITIES

At December 31, 2003, three wholly-owned subsidiary grantor trusts
established by Bancorp had issued $20 million of pooled Trust Preferred
Securities (trust preferred securities). Trust preferred securities accrue
and pay distributions periodically at specified annual rates as provided in the
indentures. The trusts used the net proceeds from the offering to purchase a
like amount of Junior Subordinated Debentures (the Debentures) of the
Company. The Debentures are the sole assets of the trusts. The Companys
obligations under the Junior Subordinated Debentures and related documents,
taken together, constitute a full and unconditional guarantee by the Company of
the obligations of the trusts. The trust preferred securities are mandatorily
redeemable upon the maturity of the Debentures, or upon earlier redemption as
provided in the indentures. The Company has the right to redeem the Debentures
in whole (but not in part) on or after specific dates, at a redemption price
specified in the indentures plus any accrued but unpaid interest to the
redemption date.

The following table is a summary of current trust preferred securities at
December 31, 2003:

(Dollars in thousands)

|                               |  |                |  |        |       |              |  |              |  |          |      |               |  |  |      |         |  |                |  |  |  |  |  | 
|------------------------------ |  | -------------- |  | ------ | ----- | ------------ |  | ------------ |  | -------- | ---- | ------------- |  |  | ---- | ------- |  | -------------- |  |  |  |  |  | 
|                               |  |                |  |        |       | Preferred    |  |              |  |          |      |               |  |  |      |         |  |                |  |  |  | 
|                               |  |                |  |        |       | security     |  |              |  |          |      |               |  |  |      | Rate at |  |                |  | 
|Issuance Trust                 |  | Issuance date  |  | amount |       | Rate type(1) |  | Initial rate |  | 12/31/03 |      | Maturity date
|                               |  |                |  |        |       |              |  |              |  |          |      |              
|West Coast Statutory Trust I   |  | December 2001  |  | $      | 5,000 |              |  | Variable     |  |          | 5.60 | %             |  |  | 4.77 | %       |  | December 2031 
|West Coast Statutory Trust II  |  | June 2002      |  | $      | 7,500 |              |  | Variable     |  |          | 5.34 | %             |  |  | 4.62 | %       |  | June 2032     
|West Coast Statutory Trust III |  | September 2003 |  | $      | 7,500 |              |  | Fixed        |  |          | 6.75 | %             |  |  | 6.75 | %       |  | September 2033



|(1) |  | The variable rate preferred securities reprice quarterly.
|--- |  | ---------------------------------------------------------

The total amount of trust preferred securities outstanding at December 31,
2003, and 2002, was $20 million and $12.5 million, respectively. The interest
rates on the trust preferred securities issued in December 2001, and June 2002
reset quarterly and are tied to the LIBOR rate. In connection with the
variable rate offerings, Bancorp entered into swap agreements that will result
in a fixed interest rate on the securities for five years, equal to 8.62% and
8.14%, respectively. The Company has the right to redeem the debentures issued
in the December 2001 offering in December 2006; the June 2002 offering in June
2007 and the September 2003 offering in September 2008.

Prior to the issuance of FIN No. 46, the three wholly-owned grantor trusts
were considered consolidated subsidiaries of Bancorp; the $12.5 million of
preferred securities as of December 31, 2002 were included in West Coast
Bancorps consolidated balance sheet in the Liabilities section, under the
caption Mandatorily redeemable trust preferred securities, and the retained
common capital securities of the grantor trusts were eliminated against
Bancorps investment in the issuer trusts. Distributions on the preferred
securities were recorded as interest expense on the consolidated statement of
income.

With the adoption of FIN No. 46, Bancorp deconsolidated the three grantor
trusts as of December 31, 2003. As a result, the junior subordinated
debentures issued by Bancorp to the grantor trusts, totaling $20 million, are
reflected in our consolidated balance sheet in the liabilities section at
December 31, 2003, under the caption junior subordinated debentures. We will
record interest expense on the corresponding junior subordinated debentures in
the consolidated statements of income. Bancorp also recorded $.6 million in
other assets in the consolidated balance sheet at December 31, 2003 for the
common capital securities issued by the issuer trusts.

On July 2, 2003, the Federal Reserve Bank issued Supervisory Letter SR
03-13 clarifying that Bank Holding Companies should continue to report trust
preferred securities in accordance with current Federal Reserve Bank
instructions which allows trust preferred securities to be counted in Tier 1
capital subject to certain limitations. The Federal Reserve has indicated it
will review the implications of any accounting treatment changes and, if
necessary or warranted, will provide appropriate guidance.

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8.     COMMITMENTS AND CONTINGENT LIABILITIES

The Company leases land and office space under 31 leases, of which 28 are
long-term noncancellable operating leases that expire between 2004 and 2021.
At the end of the respective lease terms, Bancorp may renew the leases at fair
rental value. At December 31, 2003, minimum future lease payments under these
leases and other operating leases were:

|                       |            |                |        |        | 
|---------------------- | ---------- | -------------- | ------ | ------ | 
|(Dollars in thousands) |            | Minimum Future
|Year                   |            | Lease Payments
|                       |            |               
|2004                   |            | $              | 2,151  |       
|2005                   |            |                | 1,829  |       
|2006                   |            |                | 1,750  |       
|2007                   |            |                | 1,690  |       
|2008                   |            |                | 1,468  |       
|                       | Thereafter |                |        | 10,932 | 
|                       |            |                |        |       
|Total                  |            | $              | 19,820 |       
|                       |            |                |        |       

Rental expense for all operating leases was $2,143,000, $1,969,000, and
$1,712,000 for the years ended December 31, 2003, 2002, and 2001, respectively.

On August 22, 2003, the lawsuit against the Company entitled Walter L.
West, dba Walter West Construction Co. v. Jeffrey Teeny, Stephen L. Stoelk,
Shauna L. Stoelk, B.A.S.S. Construction Co., Inc., and West Coast Bancorp was
dismissed by the plaintiff voluntarily. In doing so, the plaintiff indicated
that the action would be re-filed in another county. The plaintiff has not yet
re-filed.

Bancorp is periodically party to other litigation arising in the ordinary
course of business. Based on information currently known to management,
although there are uncertainties inherent in litigation, we do not believe
there is any legal action to which Bancorp or any of its subsidiaries is a
party that, individually or in the aggregate, will have a materially adverse
effect on Bancorps financial condition and results of operations.

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9.     INCOME TAXES

The provision (benefit) for income taxes for the last three years
consisted of the following:

|                       |         |      |                         |       |   |      |       |       |   |   |       |       |  
|---------------------- | ------- | ---- | ----------------------- | ----- | - | ---- | ----- | ----- | - | - | ----- | ----- | -
|                       |         |      | Year ended December 31,
|                       |         |      |                        
|(Dollars in thousands) |         | 2003 |                         | 2002  |   | 2001
|                       |         |      |                         |       |   |     
|Current                |         |      |                         |       |   |      |       |       |   |   |       |      
|                       | Federal |      | $                       | 8,348 |   |      | $     | 7,255 |   |   | $     | 5,979 |  
|                       | State   |      |                         | 1,699 |   |      |       | 1,484 |   |   |       | 1,058 |  
|                       |         |      |                         |       |   |      |       |       |   |   |       |       |  
|                       |         |      | 10,047                  |       |   |      | 8,739 |       |   |   | 7,037 |      
|Deferred               |         |      |                         |       |   |      |       |       |   |   |       |      
|                       | Federal |      |                         | (591  | ) |      |       | (208  | ) |   |       | (291  | )
|                       | State   |      |                         | (118  | ) |      |       | (43   | ) |   |       | (51   | )
|                       |         |      |                         |       |   |      |       |       |   |   |       |       |  
|                       |         |      | (709                    | )     |   |      | (251  | )     |   |   | (342  | )    
|Total                  |         |      |                         |       |   |      |       |       |   |   |       |      
|                       | Federal |      |                         | 7,757 |   |      |       | 7,463 |   |   |       | 5,688 |  
|                       | State   |      |                         | 1,581 |   |      |       | 1,527 |   |   |       | 1,007 |  
|                       |         |      |                         |       |   |      |       |       |   |   |       |       |  
|Total                  |         | $    | 9,338                   |       |   | $    | 8,990 |       |   | $ | 6,695 |      
|                       |         |      |                         |       |   |      |       |       |   |   |       |       |  

Net deferred taxes are included in other assets on the Companys balance
sheet. The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities as of December 31,
2003 and 2002 are presented below:

|                          |                                                        |                                |     |              |       |  |     |       |       | 
|------------------------- | ------------------------------------------------------ | ------------------------------ | --- | ------------ | ----- |  | --- | ----- | ----- | 
|                          |                                                        |                                |     | December 31,
|                          |                                                        |                                |     |             
|(Dollars in thousands)    |                                                        | 2003                           |     | 2002        
|                          |                                                        |                                |     |             
|Deferred tax assets:      |                                                        |                                |     |              |       |  |     |      
|                          | Allowance for loan loss                                |                                | $   | 7,124        |       |  | $   | 6,486 |      
|                          | Net unrealized loss on
derivatives-Swap                |                                |     | 264          |       |  |     | 361   |      
|                          | Deferred employee benefits                             |                                |     | 878          |       |  |     | 484   |      
|                          | Other                                                  |                                |     | 128          |       |  |     |      |      
|                          |                                                        |                                |     |              |       |  |     |       |      
|                          |                                                        | Total deferred tax assets      |     |              | 8,394 |  |     |       | 7,331 | 
|Deferred tax liabilities: |                                                        |                                |     |              |       |  |     |      
|                          | Accumulated depreciation                               |                                |     | 1,243        |       |  |     | 1,280 |      
|                          | Federal Home Loan Bank stock dividends                 |                                |     | 1,987        |       |  |     | 1,247 |      
|                          | Net unrealized gains on investments
available for sale |                                |     | 2,253        |       |  |     | 3,322 |      
|Intangible assets         |                                                        |                                | 162 |              |       |  | 280 |      
|Other                     |                                                        |                                | 303 |              |       |  | 437 |      
|                          |                                                        |                                |     |              |       |  |     |       |      
|                          |                                                        | Total deferred tax liabilities |     |              | 5,948 |  |     |       | 6,566 | 
|                          |                                                        |                                |     |              |       |  |     |       |      
|                          | Net deferred tax assets                                |                                | $   | 2,446        |       |  | $   | 765   |      
|                          |                                                        |                                |     |              |       |  |     |       |      

The effective tax rate varies from the federal income tax statutory rate.
The reasons for the variance are as follows:

|                                                                                    |       |      |                         |       |  |      |        |       |  |   |        |       | 
|----------------------------------------------------------------------------------- | ----- | ---- | ----------------------- | ----- |  | ---- | ------ | ----- |  | - | ------ | ----- | 
|                                                                                    |       |      | Year ended December 31,
|                                                                                    |       |      |                        
|(Dollars in thousands)                                                              |       | 2003 |                         | 2002  |  | 2001
|                                                                                    |       |      |                         |       |  |     
|Expected federal income tax provision (1)                                           |       | $    | 10,197                  |       |  | $    | 9,518  |       |  | $ | 7,509  |      
|State income tax, net of federal income tax effect                                  |       |      | 1,029                   |       |  |      | 992    |       |  |   | 920    |      
|Interest on obligations of state and political subdivisions
exempt from federal tax |       |      | (1,144                  | )     |  |      | (1,293 | )     |  |   | (1,200 | )    
|Investment tax credits                                                              |       |      | (520                    | )     |  |      | (480   | )     |  |   | (171   | )    
|Bank owned life insurance                                                           |       |      | (285                    | )     |  |      |       |       |  |   |       |      
|Other, net                                                                          |       |      | 61                      |       |  |      | 253    |       |  |   | (363   | )    
|                                                                                    |       |      |                         |       |  |      |        |       |  |   |        |      
|                                                                                    | Total |      | $                       | 9,338 |  |      | $      | 8,990 |  |   | $      | 6,695 | 
|                                                                                    |       |      |                         |       |  |      |        |       |  |   |        |      



|(1) |  | Federal income tax provision applied at 35%.
|--- |  | --------------------------------------------

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10.     STOCKHOLDERS EQUITY AND REGULATORY REQUIREMENTS

Authorized capital of Bancorp includes 10,000,000 shares of Preferred
Stock no par value, none of which were issued at December 31, 2003, or 2002.
No stock dividend was declared in 2003, 2002, or 2001.

In July 2000, Bancorp announced a stock repurchase program that was
expanded in September 2000, June 2001, and again in September of 2002. Under
this plan, the Company can buy up to 2.88 million shares of the Companys
common stock. The Company intends to use existing funds and/or long-term
borrowings to finance the repurchases. Total shares available for repurchase
under this plan are 320,000 at December 31, 2003. The following table presents
information with respect to Bancorps July 2002 stock repurchase program.

|                                  |                    |                              |     |                            |  |       |        |        |  |   |                  |       | 
|--------------------------------- | ------------------ | ---------------------------- | --- | -------------------------- |  | ----- | ------ | ------ |  | - | ---------------- | ----- | 
|                                  |                    |                              |     |                            |  |       |        |        |  |   | Average cost per
|(Shares and dollars in thousands) |                    | Shares repurchased in period |     | Cost of shares repurchased |  | share
|                                  |                    |                              |     |                            |  |      
|Year ended 2000                   |                    |                              | 573 |                            |  | $     | 5,264  |        |  | $ | 9.19             |      
|Year ended 2001                   |                    |                              | 534 |                            |  |       | 6,597  |        |  |   | 12.35            |      
|Year ended 2002                   |                    |                              | 866 |                            |  |       | 13,081 |        |  |   | 15.11            |      
|Year ended 2003                   |                    |                              | 587 |                            |  |       | 10,461 |        |  |   | 17.81            |      
|                                  |                    |                              |     |                            |  |       |        |        |  |   |                  |      
|                                  | Plan to date total |                              |     | 2,560                      |  |       | $      | 35,403 |  |   | $                | 13.83 | 

The Federal Reserve and FDIC have established minimum requirements for
capital adequacy for bank holding companies and member banks. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
Bancorp and its significant bank subsidiaries must meet specific capital
guidelines that involve quantitative measures of assets, liabilities and
certain off-balance sheet items. The Federal Reserve and FDIC risk based
capital guidelines require banks and bank holding companies to have a ratio of
tier one capital to total risk weighted assets of at least 4%, and a ratio of
total capital to total risk weighted assets of 8% or greater. In addition, the
leverage ratio of tier one capital to total average assets less intangibles is
required to be at least 3%. Well capitalized guidelines require banks and bank
holding companies to maintain tier one capital of at least 6%, total risk based
capital of at least 10% and a leverage ratio of at least 5%. Bancorp and its
bank subsidiarys capital components, classification, risk weightings and other
factors are also subject to qualitative judgements by regulators. Failure to
meet minimum capital requirements can initiate certain action by regulators
that, if undertaken, could have a material effect on Bancorps financial
statements. As of December 31, 2003, Bancorp and its subsidiary bank are
considered Well Capitalized under current risk based capital regulatory
guidelines. Management believes that no events or changes in conditions have
subsequently occurred which would significantly change Bancorps capital
position. Under the restrictions of maintaining adequate minimum capital, as
of December 31, 2003, the Bank could have declared dividends totaling $45.2
million without obtaining prior regulatory approval.

The following table presents selected risk adjusted capital information as
of December 31, 2003 and 2002:

|                       |  |        |         |       |  |        |       |          |  |              |         |              |  |       |   |        |  |          |         |          |  |              |       |              |  |   |         |  |  |  |   |  
|---------------------- |  | ------ | ------- | ----- |  | ------ | ----- | -------- |  | ------------ | ------- | ------------ |  | ----- | - | ------ |  | -------- | ------- | -------- |  | ------------ | ----- | ------------ |  | - | ------- |  |  |  | - | -
|                       |  | 2003   |         | 2002 
|                       |  |        |         |      
|                       |  |        |         |       |  |        |       |          |  | Amount       |         | Percent      |  |       |   |        |  |          |         |          |  | Amount       |       | Percent     
|                       |  |        |         |       |  |        |       |          |  | Required For |         | Required For |  |       |   |        |  |          |         |          |  | Required For |       | Required For
|                       |  |        |         |       |  |        |       |          |  | Minimum      |         | Minimum      |  |       |   |        |  |          |         |          |  | Minimum      |       | Minimum     
|                       |  |        |         |       |  |        |       |          |  | Capital      |         | Capital      |  |       |   |        |  |          |         |          |  | Capital      |       | Capital     
|                       |  | Actual |         |       |  |        |       | Adequacy |  | Adequacy     |         | Actual       |  |       |   |        |  | Adequacy |         | Adequacy
|                       |  |        |         |       |  |        |       |          |  |              |         |              |  |       |   |        |  |          |         |         
|(Dollars in thousands) |  | Amount |         | Ratio |  | Amount |       |          |  |              |         | Amount       |  | Ratio |   | Amount |  |          |         |         
|                       |  |        |         |       |  |        |       |          |  |              |         |              |  |       |   |        |  |          |         |         
|Tier 1 Capital         |  |        |         |       |  |        |       |          |  |              |         |              |  |       |   |        |  |          |         |          |  |              |       |              |  |   |         |  |  |  |   |  
|West Coast Bancorp     |  | $      | 156,116 |       |  |        | 10.62 | %        |  | $            | 58,824  |              |  |       | 4 | %      |  | $        | 140,095 |          |  |              | 10.10 | %            |  | $ | 55,474  |  |  |  | 4 | %
|West Coast Bank        |  |        | 144,583 |       |  |        | 9.84  | %        |  |              | 58,768  |              |  |       | 4 | %      |  |          | 133,958 |          |  |              | 9.66  | %            |  |   | 55,467  |  |  |  | 4 | %
|Total Capital          |  |        |         |       |  |        |       |          |  |              |         |              |  |       |   |        |  |          |         |          |  |              |       |              |  |   |         |  |  |  |   |  
|West Coast Bancorp     |  | $      | 174,246 |       |  |        | 11.85 | %        |  | $            | 117,648 |              |  |       | 8 | %      |  | $        | 156,933 |          |  |              | 11.32 | %            |  | $ | 110,947 |  |  |  | 8 | %
|West Coast Bank        |  |        | 162,713 |       |  |        | 11.07 | %        |  |              | 117,536 |              |  |       | 8 | %      |  |          | 150,796 |          |  |              | 10.87 | %            |  |   | 110,933 |  |  |  | 8 | %
|Leverage Ratio         |  |        |         |       |  |        |       |          |  |              |         |              |  |       |   |        |  |          |         |          |  |              |       |              |  |   |         |  |  |  |   |  
|West Coast Bancorp     |  | $      | 156,116 |       |  |        | 9.45  | %        |  | $            | 49,546  |              |  |       | 3 | %      |  | $        | 140,095 |          |  |              | 9.19  | %            |  | $ | 45,725  |  |  |  | 3 | %
|West Coast Bank        |  |        | 144,583 |       |  |        | 8.75  | %        |  |              | 49,544  |              |  |       | 3 | %      |  |          | 133,958 |          |  |              | 8.78  | %            |  |   | 45,748  |  |  |  | 3 | %

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11.     BALANCES WITH THE FEDERAL RESERVE BANK

The Bank is required to maintain cash reserves or deposits with the
Federal Reserve Bank equal to a percentage of reservable deposits. The average
required reserves for the Bank were $6.7 million during 2003 and $8.8 million
in 2002.

12.     EARNINGS PER SHARE



| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | The following table reconciles the numerator and denominator of the basic
and diluted earnings per share computations:

|                                  |                  |                                      |            |  |        |  |                  |     |  |   |      |  | 
|--------------------------------- | ---------------- | ------------------------------------ | ---------- |  | ------ |  | ---------------- | --- |  | - | ---- |  | 
|                                  |                  |                                      |            |  |        |  | Weighted Average |     |  |   |     
|                                  |                  |                                      | Net Income |  | Shares |  | Per Share Amount
|(Dollars and shares in thousands) |                  | For the year ended December 31, 2003
|                                  |                  |                                     
|Basic earnings                    |                  | $                                    | 19,797     |  |        |  | 15,077           |     |  | $ | 1.31 | 
|                                  | Stock options    |                                      |            |  |        |  |                  | 561 |  |   |      |  | 
|                                  | Restricted stock |                                      |            |  |        |  |                  | 36  |  |   |      |  | 
|                                  |                  |                                      |            |  |        |  |                  |     |  |   |      | 
|Diluted earnings                  |                  | $                                    | 19,797     |  |        |  | 15,674           |     |  | $ | 1.26 | 
|                                  |                  |                                      |            |  |        |  |                  |     |  |   |      | 

|                 |                  |   |                                      |  |  |  |        |     |  |   |      |  | 
|---------------- | ---------------- | - | ------------------------------------ |  |  |  | ------ | --- |  | - | ---- |  | 
|                 |                  |   | For the
year ended December 31, 2002
|                 |                  |   |                                     
|Basic earnings   |                  | $ | 18,203                               |  |  |  | 15,575 |     |  | $ | 1.17 | 
|                 | Stock options    |   |                                      |  |  |  |        | 450 |  |   |      |  | 
|                 | Restricted stock |   |                                      |  |  |  |        | 44  |  |   |      |  | 
|                 |                  |   |                                      |  |  |  |        |     |  |   |      | 
|Diluted earnings |                  | $ | 18,203                               |  |  |  | 16,069 |     |  | $ | 1.13 | 
|                 |                  |   |                                      |  |  |  |        |     |  |   |      | 

|                 |                  |   |                                      |  |  |  |        |     |  |   |      |  | 
|---------------- | ---------------- | - | ------------------------------------ |  |  |  | ------ | --- |  | - | ---- |  | 
|                 |                  |   | For the year ended December 31, 2001
|                 |                  |   |                                     
|Basic earnings   |                  | $ | 14,760                               |  |  |  | 16,126 |     |  | $ | 0.92 | 
|                 | Stock options    |   |                                      |  |  |  |        | 280 |  |   |      |  | 
|                 | Restricted stock |   |                                      |  |  |  |        | 47  |  |   |      |  | 
|                 |                  |   |                                      |  |  |  |        |     |  |   |      | 
|Diluted earnings |                  | $ | 14,760                               |  |  |  | 16,453 |     |  | $ | 0.90 | 
|                 |                  |   |                                      |  |  |  |        |     |  |   |      | 

Bancorp, for the periods reported, had no reconciling items between net
income and income available to common stockholders. Shares of 0, 171,000, and
572,000 having an antidilutive effect on earnings per share have been excluded
from calculations in 2003, 2002 and 2001, respectively.

13.     COMPREHENSIVE INCOME

The following table displays the components of other comprehensive income
for the last three years:

|                                                                      |  |                         |        |      |  |      |        |   |  |   |        |  
|--------------------------------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                      |  | Year ended December 31,
|                                                                      |  |                        
|(Dollars in thousands)                                                |  | 2003                    |        | 2002 |  | 2001
|                                                                      |  |                         |        |      |  |     
|Net income as reported                                                |  | $                       | 19,797 |      |  | $    | 18,203 |   |  | $ | 14,760 |  
|Unrealized gains (losses) on securities:                              |  |                         |        |      |  |      |        |   |  |   |        |  
|Unrealized holding (losses) gains arising during the year             |  |                         | (2,528 | )    |  |      | 4,477  |   |  |   | 3,695  |  
|Tax benefit (provision)                                               |  |                         | 994    |      |  |      | (1,759 | ) |  |   | (1,452 | )
|                                                                      |  |                         |        |      |  |      |        |   |  |   |        |  
|Unrealized holding (losses) gains arising during the year, net of tax |  |                         | (1,534 | )    |  |      | 2,718  |   |  |   | 2,243  |  
|Unrealized gains (losses) on derivative- cash flow hedges             |  |                         | 246    |      |  |      | (919   | ) |  |   |       |  
|Tax (provision) benefit                                               |  |                         | (97    | )    |  |      | 361    |   |  |   |       |  
|                                                                      |  |                         |        |      |  |      |        |   |  |   |        |  
|Unrealized gains (losses) on derivative- cash flow hedges, net of tax |  |                         | 149    |      |  |      | (558   | ) |  |   |       |  
|Less: Reclassification adjustment for gains on sales of securities    |  |                         | (192   | )    |  |      |       |   |  |   |       |  
|Tax provision                                                         |  |                         | 75     |      |  |      |       |   |  |   |       |  
|                                                                      |  |                         |        |      |  |      |        |   |  |   |        |  
|Net realized gains, net of tax                                        |  |                         | (117   | )    |  |      |       |   |  |   |       |  
|                                                                      |  |                         |        |      |  |      |        |   |  |   |        |  
|Total comprehensive income                                            |  | $                       | 18,295 |      |  | $    | 20,363 |   |  | $ | 17,003 |  
|                                                                      |  |                         |        |      |  |      |        |   |  |   |        |  

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14.     CERTIFICATES OF DEPOSIT

Included in certificates of deposit are certificates in denominations of
$100,000 or greater, totaling $130.6 million and $133.3 million at December 31,
2003 and 2002, respectively. Interest expense relating to certificates of
deposit in denominations of $100,000 or greater was $4.7 million, $6.8 million
and $6.2 million for the years ended December 31, 2003, 2002 and 2001,
respectively. Maturity amounts on Bancorps certificates of deposit include
$226.2 million in 2003, $103.0 million in 2004, $26.1 million in 2005, $4.0 in
2006, and $11.3 million in 2007, with $.7 million due thereafter. Included in
the maturity amounts are $7 million in variable rate certificates of deposit
that reprice monthly with maturities in the first quarter of 2004.

15.     EMPLOYEE BENEFIT PLANS

West Coast Bancorp employee benefits include a plan established under
section 401(k) of the Internal Revenue Code for certain qualified employees
(the 401(k) plan). Employee contributions up to 15 percent of salaries under
the Internal Revenue Code guidelines can be made under the 401(k) plan, of
which Bancorp matches 50 percent of the employees contributions up to a
maximum of 6 percent of the employees salary. Bancorp may also elect to make
discretionary contributions to the plan. Employees vest immediately in their
own contributions and earnings thereon and vest in Bancorps contributions over
five years of eligible service. Bancorp has merged previously acquired
companies plans into its own plan. Bancorps expenses totaled $523,000,
$491,000 and $395,000 for 2003, 2002, and 2001, respectively, none of which
were discretionary.

Bancorp provides a non-qualified Deferred Compensation Plan for Directors
and a non-qualified Deferred Compensation Plan for Executive Officers
(Deferred Compensation Plans) as supplemental benefit plans which permit
directors and selected officers to elect to defer receipt of all or any portion
of their future salary, bonus or directors fees. In addition, the Deferred
Compensation Plans restore benefits lost by employees under the 401(k) plan due
to specified Internal Revenue Code restrictions on the maximum benefits that
may be paid under those plans. All contributions are invested at the
participants direction among a variety of investment alternatives. Amounts
contributed to these plans to restore benefits otherwise limited by the
Internal Revenue Code restrictions have been included in the 401(k) plan
contribution expense reported in the previous paragraph. A deferred
compensation liability of $1.9 million and $1.4 million was accrued as of
December 31, 2003 and 2002, respectively.

Bancorp has multiple deferred compensation contracts and supplemental
executive retirement plans with former and current executives. The following
table reconciles the accumulated liability for the benefit obligation of these
contracts:

|                       |  |                         |      |      |  |   |      |  
|---------------------- |  | ----------------------- | ---- | ---- |  | - | ---- | -
|                       |  | Year ended December 31,
|                       |  |                        
|(Dollars in thousands) |  | 2003                    |      | 2002
|                       |  |                         |      |     
|Beginning balance      |  | $                       | 448  |      |  | $ | 391  |  
|Benefit expense        |  |                         | 172  |      |  |   | 201  |  
|Benefit payments       |  |                         | (193 | )    |  |   | (144 | )
|                       |  |                         |      |      |  |   |      |  
|Ending balance         |  | $                       | 427  |      |  | $ | 448  |  
|                       |  |                         |      |      |  |   |      |  

Bancorps deferred compensation contracts and supplemental executive
retirement plans are unfunded plans and have no plan assets. The benefit
obligation represents the vested net present value of future payments to
individuals under the deferred compensation contracts. Bancorps deferred
compensation benefit expense, as specified in the plans, for the entire year
2004 is expected to be $407,000. The benefits expected to be paid are
presented in the following table:

|                       |  |                   |     | 
|---------------------- |  | ----------------- | --- | 
|                       |  | Benefits expected
|(Dollars in thousands) |  | to be paid       
|                       |  |                  
|2004                   |  | $                 | 96  | 
|2005                   |  |                   | 36  | 
|2006                   |  |                   | 36  | 
|2007                   |  |                   | 36  | 
|2008                   |  |                   | 89  | 
|2009 through 2013      |  |                   | 799 | 

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16.     STOCK PLANS

Bancorps stock option plans include the 2002 Stock Incentive Plan (2002
Plan), 1999 Stock Option Plan (1999 Plan), the Combined 1991 Employee Stock
Option Plan and Non-Qualified Stock Option Plan (1991 Plan), the 1995 Directors
Stock Option Plan (1995 Plan), the 1989 and 1985 Non-Qualified Stock Option
Plans and the 1989 and 1985 Qualified Stock Option Plans (1985 and 1989 Plans).
At December 31, 2003, the 2002 Plan had 972,000 shares available for future
grants. No additional grants may be made under plans other than the 2002 Plan.

All stock options have an exercise price that is equal to the fair market
value of Bancorps stock on the date the options were granted. Options granted
under the 2002 Plan are generally exercisable over a three-year period.
Options previously issued under the 1999 or prior plans are fully vested.

|                                   |           |  |             |          |                |   |             |       |                |  |             |          |          |   |       |       |          |  |           |          |   |   |       |       | 
|---------------------------------- | --------- |  | ----------- | -------- | -------------- | - | ----------- | ----- | -------------- |  | ----------- | -------- | -------- | - | ----- | ----- | -------- |  | --------- | -------- | - | - | ----- | ----- | 
|                                   |           |  |             |          |                |   |             |       |                |  |             |          |          |   |       |       |          |  |           |          |   |   | 2001 
|                                   |           |  |             |          | 2003           |   |             |       |                |  | 2002        |          |          |   |       |       | Weighted
|                                   |           |  | 2003 Common |          | Weighted       |   | 2002 Common |       | Weighted       |  | 2001 Common |          | Avg. Ex.
|                                   |           |  | Shares      |          | Avg. Ex. Price |   | Shares      |       | Avg. Ex. Price |  | Shares      |          | Price   
|                                   |           |  |             |          |                |   |             |       |                |  |             |          |         
|Balance, beginning of year         |           |  | 1,935,937   |          |                | $ | 11.53       |       |                |  | 1,768,126   |          |          | $ | 10.65 |       |          |  | 1,591,980 |          |   | $ | 10.55 |      
|                                   | Granted   |  |             | 277,530  |                |   |             | 16.47 |                |  |             | 364,895  |          |   |       | 14.71 |          |  |           | 500,890  |   |   |       | 10.45 | 
|                                   | Exercised |  |             | (290,920 | )              |   |             | 9.84  |                |  |             | (164,159 | )        |   |       | 8.82  |          |  |           | (137,587 | ) |   |       | 7.96  | 
|                                   | Forfeited |  |             | (53,749  | )              |   |             | 13.20 |                |  |             | (32,925  | )        |   |       | 12.80 |          |  |           | (187,157 | ) |   |       | 11.34 | 
|                                   |           |  |             |          |                |   |             |       |                |  |             |          |          |   |       |       |          |  |           |          |   |   |       |      
|Balance, end of year               |           |  | 1,868,798   |          |                | $ | 12.48       |       |                |  | 1,935,937   |          |          | $ | 11.53 |       |          |  | 1,768,126 |          |   | $ | 10.65 |      
|                                   |           |  |             |          |                |   |             |       |                |  |             |          |          |   |       |       |          |  |           |          |   |   |       |      
|Exercisable, end of year           |           |  | 1,279,856   |          |                |   |             |       |                |  | 1,179,215   |          |          |   |       |       |          |  | 1,048,653 |          |   |   |       |      
|Avg. fair value of options granted |           |  |             |          |                | $ | 3.40        |       |                |  |             |          |          | $ | 3.25  |       |          |  |           |          |   | $ | 3.75  |      

As of December 31, 2003, outstanding stock options consist of the
following:

|                     |  |             |         |                |  |                |       |             |  |                |           |               |  |               |       |         |  |               |      |  |  |  |           |  |  |   |       | 
|-------------------- |  | ----------- | ------- | -------------- |  | -------------- | ----- | ----------- |  | -------------- | --------- | ------------- |  | ------------- | ----- | ------- |  | ------------- | ---- |  |  |  | --------- |  |  | - | ----- | 
|                     |  |             |         |                |  |                |       |             |  | Options        |           | Weighted Avg. |  | Weighted Avg. |       | Options |  | Weighted Avg.
|Exercise Price Range |  | Outstanding |         | Exercise Price |  | Remaining Life |       | Exercisable |  | Exercise Price
|                     |  |             |         |                |  |                |       |             |  |               
|$                    |  |             | 4.42 -  |                |  | $              | 9.20  |             |  |                | 428,273   |               |  | $             | 8.77  |         |  |               | 5.60 |  |  |  | 425,918   |  |  | $ | 8.77  | 
|                     |  |             | 9.26 -  |                |  |                | 10.28 |             |  |                | 394,380   |               |  |               | 10.18 |         |  |               | 7.15 |  |  |  | 266,194   |  |  |   | 10.14 | 
|                     |  |             | 10.71 - |                |  |                | 14.60 |             |  |                | 322,371   |               |  |               | 12.79 |         |  |               | 5.21 |  |  |  | 318,857   |  |  |   | 12.78 | 
|                     |  |             | 14.67 - |                |  |                | 15.64 |             |  |                | 367,220   |               |  |               | 14.80 |         |  |               | 8.00 |  |  |  | 154,113   |  |  |   | 14.93 | 
|                     |  |             | 16.24 - |                |  |                | 21.18 |             |  |                | 356,554   |               |  |               | 16.81 |         |  |               | 8.14 |  |  |  | 114,774   |  |  |   | 17.39 | 
|                     |  |             |         |                |  |                |       |             |  |                |           |               |  |               |       |         |  |               |      |  |  |  |           |  |  |   |       | 
|Total                |  |             |         |                |  |                |       |             |  |                | 1,868,798 |               |  | $             | 12.48 |         |  |               | 6.82 |  |  |  | 1,279,856 |  |  | $ | 11.57 | 

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16.     STOCK PLANS, (Continued)

Bancorp accounts for these plans under APB Opinion No. 25, under which no
compensation cost has been recognized. See footnote 1,  Summary of
significant accounting policies, for further information.

The average fair value of options granted is estimated on the date of
grant using the Black-Scholes option-pricing model. The following table
presents the assumptions used in the fair value calculation:

|                         |  |                                |      |                  |  |      |      |      |  |      |      |      |  |  |            |   |  |  |            |   |  |  |            |  
|------------------------ |  | ------------------------------ | ---- | ---------------- |  | ---- | ---- | ---- |  | ---- | ---- | ---- |  |  | ---------- | - |  |  | ---------- | - |  |  | ---------- | -
|                         |  | Non-Qualified Director Options |      | Employee Options
|                         |  |                                |      |                 
|                         |  | 2003                           |      | 2002             |  | 2001 |      | 2003 |  | 2002 |      | 2001
|                         |  |                                |      |                  |  |      |      |      |  |      |      |     
|Risk Free interest rates |  |                                | 2.95 | %                |  |      | 4.52 | %    |  |      | 4.74 | %    |  |  | 2.32%-3.21 | % |  |  | 2.70%-4.77 | % |  |  | 4.02%-5.09 | %
|Expected dividend        |  |                                | 1.80 | %                |  |      | 2.25 | %    |  |      | 1.99 | %    |  |  | 1.80       | % |  |  | 2.25       | % |  |  | 1.99       | %
|Expected lives, in years |  |                                | 5    |                  |  |      | 5    |      |  |      | 5    |      |  |  | 5          |   |  |  | 5          |   |  |  | 5          |  
|Expected volatility      |  |                                | 23   | %                |  |      | 23   | %    |  |      | 41   | %    |  |  | 23         | % |  |  | 23         | % |  |  | 41         | %

Bancorp grants restricted stock periodically as a part of the 2002 Plan
for the benefit of employees and directors. At December 31, 2003, there were
113,000 shares authorized for restricted stock grants under this plan and
11,597 shares remained available for restricted stock grants. Restricted stock
grants are made at the discretion of the Board of Directors, except with regard
to grants to Bancorps Section 16 officers, which are made at the discretion of
the Boards Compensation and Personnel Committee. Restricted shares issued
currently vest over three years. Compensation expense for restricted stock is
based on the market price of the Company stock at the time of the grant and
amortized on a straight-line basis over the vesting period which is currently
three years for all grants issued. Recipients of restricted stock do not pay
any cash consideration to the Company for the shares, and have the right to
vote all shares subject to such grant, and receive all dividends with respect
to such shares, whether or not the shares have vested. The restriction is
based upon continuous service. Restricted stock consists of the following for
the years ended December 31, 2003, 2002 and 2001:

|                           |                  |  |                 |         |              |  |                 |       |              |  |                 |         |              |  |   |       |  |  |         |         |   |  |   |       | 
|-------------------------- | ---------------- |  | --------------- | ------- | ------------ |  | --------------- | ----- | ------------ |  | --------------- | ------- | ------------ |  | - | ----- |  |  | ------- | ------- | - |  | - | ----- | 
|                           |                  |  |                 |         |              |  | Average         |       |              |  |                 |         | Average      |  |   |       |  |  | Average
|                           |                  |  | 2003 Restricted |         | Market Price |  | 2002 Restricted |       | Market Price |  | 2001 Restricted |         | Market Price
|                           |                  |  | Shares          |         | at Grant     |  | Shares          |       | at Grant     |  | Shares          |         | at Grant    
|                           |                  |  |                 |         |              |  |                 |       |              |  |                 |         |             
|Balance, beginning of year |                  |  | 86,359          |         |              |  |                 |       |              |  | 115,166         |         |              |  |   |       |  |  | 140,598 |         |   |  |   |      
|                           | Granted          |  |                 | 77,650  |              |  | $               | 16.45 |              |  |                 | 24,700  |              |  | $ | 15.25 |  |  |         | 34,150  |   |  | $ | 12.50 | 
|                           | Forfeited/vested |  |                 | (59,759 | )            |  |                 |       |              |  |                 | (53,507 | )            |  |   |       |  |  |         | (59,582 | ) |  |   |       | 
|                           |                  |  |                 |         |              |  |                 |       |              |  |                 |         |              |  |   |       |  |  |         |         |   |  |   |      
|Balance, end of year       |                  |  | 104,250         |         |              |  |                 |       |              |  | 86,359          |         |              |  |   |       |  |  | 115,166 |         |   |  |   |      
|                           |                  |  |                 |         |              |  |                 |       |              |  |                 |         |              |  |   |       |  |  |         |         |   |  |   |      

The balance of unearned compensation related to these restricted shares as
of December 31, 2003 and 2002 was $1.24 million and $.7 million respectively.
Total compensation and professional expense recognized for the restricted
shares granted to employees and directors was $679,000, $566,000 and $582,000
in 2003, 2002 and 2001, respectively.

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17.     FAIR VALUES 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 Bancorps balance
sheet 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
Bancorp balance sheet 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.

Accounting standards require 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.

Bancorp has estimated fair value based on quoted market prices where
available. In cases where quoted market prices were not available, fair values
were based on the quoted market price of a financial instrument with similar
characteristics, the present value of expected future cash flows or other
valuation techniques that utilize assumptions which are highly subjective and
judgmental in nature. Subjective factors include, among other things,
estimates of cash flows, the timing of cash flows, risk and credit quality
characteristics and interest rates. Accordingly, the results may not be
precise, and modifying the assumptions may significantly affect the values
derived. In addition, fair values established utilizing alternative valuation
techniques may or may not be substantiated by comparison with independent
markets. Further, fair values may or may not be realized if a significant
portion of the financial instruments were sold in a bulk transaction or a
forced liquidation. Therefore, any aggregate unrealized gains or losses should
not be interpreted as a forecast of future earnings or cash flows.
Furthermore, the fair values disclosed should not be interpreted as the
aggregate current value of Bancorp.

The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:

Cash and Cash Equivalents  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. If a quoted market
price is not available, fair value is estimated using quoted market prices for
similar securities.

Loans  The fair value of loans is estimated by discounting the future
cash flows using the current rate at which similar loans would be made to
borrowers with similar credit ratings and for the same remaining maturities.

Bank owned life insurance  The carrying amount is the cash surrender
value of all policies.

Deposit Liabilities  The fair value of demand deposits, savings accounts
and other deposits is the amount payable on demand at the reporting date. The
fair value of certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.

Short-term borrowings  The carrying amount is a reasonable estimate of
fair value given the short-term nature of these financial instruments.

Long-term borrowings  The fair value of the long-term borrowings is
estimated by discounting the future cash flows using the current rate at which
similar borrowings with similar remaining maturities could be made.

Junior subordinated debentures and mandatorily redeemable trust preferred
securities  The carrying amount for the variable rate junior subordinated
debentures and trust preferred securities is a reasonable estimate of fair
value given the quarterly repricing characteristics. The fair value of the
fixed rate junior subordinated debentures and trust preferred securities
approximates the pricing of a preferred security offering at current market
prices.

Commitments to Extend Credit, Standby Letters of Credit and Financial
Guarantees  The majority of our commitments to extend credit carry current
market interest rates if converted to loans. Because these commitments are
generally unassignable by either the borrower or us, they only have value to
the borrower and us. The estimated fair value approximates the recorded
deferred fee amounts and is excluded from the following tables.

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17.     FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair values of financial instruments at December 31, 2003
are as follows:

|                                                                               |  |                |           |            |  |   |           | 
|------------------------------------------------------------------------------ |  | -------------- | --------- | ---------- |  | - | --------- | 
|(Dollars in thousands)                                                         |  | Carrying Value |           | Fair Value
|                                                                               |  |                |           |           
|FINANCIAL ASSETS:                                                              |  |                |           |            |  |   |           | 
|Cash and cash equivalents                                                      |  | $              | 63,504    |            |  | $ | 63,504    | 
|Trading assets                                                                 |  |                | 991       |            |  |   | 991       | 
|Investment securities                                                          |  |                | 321,970   |            |  |   | 321,970   | 
|Net Loans (net of allowance for loan losses
and including loans held for sale) |  |                | 1,207,479 |            |  |   | 1,226,483 | 
|Bank owned life insurance                                                      |  |                | 18,062    |            |  |   | 18,062    | 
|FINANCIAL LIABILITIES:                                                         |  |                |           |            |  |   |           | 
|Deposits                                                                       |  | $              | 1,404,859 |            |  | $ | 1,407,619 | 
|Short-term borrowings                                                          |  |                | 5,027     |            |  |   | 5,027     | 
|Long-term borrowings                                                           |  |                | 78,000    |            |  |   | 82,190    | 
|Junior subordinated debentures-variable                                        |  |                | 12,500    |            |  |   | 12,500    | 
|Junior subordinated debentures-fixed                                           |  |                | 7,500     |            |  |   | 7,542     | 
|Derivative instruments - Swaps                                                 |  |                | 748       |            |  |   | 748       | 

The estimated fair values of financial instruments at December 31, 2002
are as follows:

|                                                                               |  |                |           |            |  |   |           | 
|------------------------------------------------------------------------------ |  | -------------- | --------- | ---------- |  | - | --------- | 
|(Dollars in thousands)                                                         |  | Carrying Value |           | Fair Value
|                                                                               |  |                |           |           
|FINANCIAL ASSETS:                                                              |  |                |           |            |  |   |           | 
|Cash and cash equivalents                                                      |  | $              | 57,733    |            |  | $ | 57,733    | 
|Trading assets                                                                 |  |                | 967       |            |  |   | 967       | 
|Investment securities                                                          |  |                | 266,407   |            |  |   | 266,407   | 
|Net Loans (net of allowance for loan losses
and including loans held for sale) |  |                | 1,154,001 |            |  |   | 1,202,099 | 
|Bank owned life insurance                                                      |  |                | 1,757     |            |  |   | 1,757     | 
|FINANCIAL LIABILITIES:                                                         |  |                |           |            |  |   |           | 
|Deposits                                                                       |  | $              | 1,266,453 |            |  | $ | 1,272,281 | 
|Short-term borrowings                                                          |  |                | 9,902     |            |  |   | 9,902     | 
|Long-term borrowings                                                           |  |                | 98,000    |            |  |   | 103,392   | 
|Mandatorily redeemable trust preferred securities - variable                   |  |                | 12,500    |            |  |   | 12,500    | 
|Derivative instruments - Swaps                                                 |  |                | 957       |            |  |   | 957       | 

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18.     FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

Financial instruments held or issued for lending-related purposes.

The Bank has financial instruments with off-balance sheet risk in the
normal course of business to meet the financing needs of its customers. These
financial instruments include commitments to extend credit and standby letters
of credit. Those instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the Consolidated
Balance Sheets.

The Banks exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as for on-balance sheet instruments. As
of December 31, 2003, outstanding commitments consist of the following:

|                                                                    |                              |                 |                                                                       |   |             |         | 
|------------------------------------------------------------------- | ---------------------------- | --------------- | --------------------------------------------------------------------- | - | ----------- | ------- | 
|                                                                    |                              |                 |                                                                       |   | Contract or
|(Dollars in thousands)                                              |                              | Notional Amount
|                                                                    |                              |                
|Financial instruments whose contract amounts represent credit risk: |                              |                 |                                                                       |  
|                                                                    | Commitments to extend credit |                 |                                                                       |   |            
|                                                                    |                              |                 | Real estate secured for commercial construction or land development   |   | $           | 65,144  | 
|                                                                    |                              |                 | Revolving open-end lines secured by 1-4 family residential properties |   |             | 94,881  | 
|                                                                    |                              |                 | Credit card lines                                                     |   |             | 29,121  | 
|                                                                    |                              |                 | Other                                                                 |   |             | 233,237 | 
|Standby letters of credit and financial guarantees                  |                              |                 | 4,160                                                                 |  
|                                                                    |                              |                 |                                                                       |  
|                                                                    |                              | Total           |                                                                       | $ | 426,543     |        
|                                                                    |                              |                 |                                                                       |  

Commitments to extend credit are agreements to lend to a customer, as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Many of the commitments may expire without
being drawn upon, therefore the total commitment amounts do not necessarily
represent future cash requirements. Each customers creditworthiness is
evaluated on a case-by-case basis. The amount of collateral obtained, if
deemed necessary upon extension of credit, is based on managements credit
evaluation of the customer. Collateral held varies, but may include accounts
receivable, inventory, property, plant and equipment, and income-producing
commercial properties.

Standby letters of credit are conditional commitments issued to guarantee
a customers performance or payment to a third party. The credit risk involved
in issuing letters of credit is essentially the same as that involved in
extending loan facilities to customers.

Interest rates on residential one- to -four family mortgage loan
applications are typically rate locked during the application stage for periods
ranging from 15 to 45 days, the most typical period being 30 days. These loans
are locked with various qualified investors under a best-efforts delivery
program. The Company makes every effort to deliver these loans before their
rate locks expire. This arrangement generally requires the Bank to deliver the
loans prior to the expiration of the rate lock. Delays in funding the loans
can require a lock extension. The cost of a lock extension at times is borne
by the borrower and at times by the Bank. These lock extension costs paid by
the Company are not expected to have a material impact to operations. This
activity is managed daily.

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18.     FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK (continued)

Financial instruments held or issued for asset and liability management
purposes.

Bancorp currently uses single interest-rate swaps to convert its variable
rate trust preferred securities to fixed rates. These swaps have been entered
into concurrently with the issuance of the trust preferred securities. These
swaps are accounted for as cash flow hedges under SFAS No. 133. The swaps
possess a term equal to the non-callable term of the trust preferred
securities, with a fixed pay rate and a receive rate indexed to rates paid on
the trust preferred securities and a notional amount equal to the amount of the
trust preferred securities being hedged. The specific terms and notional
amount of the swaps exactly match those of the trust preferred securities being
hedged with the exception that the trust preferred securities have an interest
rate cap of 12.5%. As such the swaps are not considered to be 100% effective
and changes in the fair value of the hedge are recorded in other comprehensive
income and the measure of the ineffective portion is recorded in other expense
on the statement of income. For the years ended December 31, 2003 and 2002 the
expense recognized for hedge ineffectiveness was $37,000 and $39,000,
respectively. The floating rate combined with the cash flow hedge created a
synthetic fixed rate debt instrument. The unrealized loss on the cash flow
hedge approximated the unrealized loss the Company would have incurred if it
had issued a fixed rate debt instrument.

The notional amount of the swaps is $12.5 million at December 31, 2003.
These swaps have a term of 5 years expiring June 2007 and December 2006,
respectively. The Company intends to use the swaps as a hedge of the related
debt for 5 years. The periodic settlement date of the swap results in
reclassifying as earnings the gains or losses that are reported in accumulated
other comprehensive income. The estimated amount of existing unrealized gains
that will be reclassified into earnings in 2004 is approximately $277,000. The
fair value of Bancorps swaps recorded in other liabilities was $748,000 at
December 31, 2003 and $957,000 at December 31, 2002.

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19.     PARENT COMPANY ONLY FINANCIAL DATA

The following sets forth the condensed financial information of West Coast
Bancorp on a stand-alone basis:

WEST COAST BANCORP
UNCONSOLIDATED BALANCE SHEETS

|                                         |                                            |                            |                                |         |         |        |         |         |         |        | 
|---------------------------------------- | ------------------------------------------ | -------------------------- | ------------------------------ | ------- | ------- | ------ | ------- | ------- | ------- | ------ | 
|As of December 31 (Dollars in thousands) |                                            | 2003                       |                                | 2002   
|                                         |                                            |                            |                                |        
|Assets:                                  |                                            |                            |                                |         |         |        |         |        
|                                         |                                            | Cash and cash equivalents  |                                | $       | 10,514  |        |         | $       | 5,104   |       
|                                         |                                            | Investment in subsidiaries |                                |         | 151,796 |        |         |         | 142,815 |       
|                                         |                                            | Other assets               |                                |         | 619     |        |         |         |        |       
|                                         |                                            |                            |                                |         |         |        |         |        
|                                         | Total assets                               |                            | $                              | 162,929 |         |        | $       | 147,919 |        
|                                         |                                            |                            |                                |         |         |        |         |        
|Liabilities and stockholders equity:    |                                            |                            |                                |         |         |        |         |        
|                                         |                                            |                            | Junior subordinated debentures |         | $       | 20,000 |         |         | $       | 12,500 | 
|                                         |                                            |                            | Other liabilities              |         |         | 2,876  |         |         |         | 2,032  | 
|                                         |                                            |                            |                                |         |         |        |         |        
|                                         | Total liabilities                          |                            |                                | 22,876  |         |        |         | 14,532  |        
|Stockholders equity                     |                                            |                            | 140,053                        |         |         |        | 133,387 |        
|                                         |                                            |                            |                                |         |         |        |         |        
|                                         | Total liabilities and stockholders equity |                            | $                              | 162,929 |         |        | $       | 147,919 |        
|                                         |                                            |                            |                                |         |         |        |         |        

WEST COAST BANCORP
UNCONSOLIDATED STATEMENTS OF INCOME

|                                                                            |                                    |               |        |        |        |      |        |       |        |  |        |        |        | 
|--------------------------------------------------------------------------- | ---------------------------------- | ------------- | ------ | ------ | ------ | ---- | ------ | ----- | ------ |  | ------ | ------ | ------ | 
|Year ended December 31 (Dollars in thousands)                               |                                    | 2003          |        | 2002   |        | 2001
|                                                                            |                                    |               |        |        |        |     
|Income:                                                                     |                                    |               |        |        |        |      |        |       |        |  |        |       
|                                                                            | Cash dividends from subsidiaries   |               | $      | 10,000 |        |      | $      | 2,320 |        |  | $      | 12,384 |       
|                                                                            | Other income from the subsidiaries |               |        | 7      |        |      |        | 94    |        |  |        | 56     |       
|                                                                            | Other income                       |               |        | 10     |        |      |        | 10    |        |  |        | 1      |       
|                                                                            |                                    |               |        |        |        |      |        |       |        |  |        |       
|                                                                            |                                    | Total income  |        |        | 10,017 |      |        |       | 2,424  |  |        |        | 12,441 | 
|Expenses:                                                                   |                                    |               |        |        |        |      |        |       |        |  |        |       
|                                                                            | Interest expense                   |               |        | 758    |        |      |        | 497   |        |  |        | 9      |       
|                                                                            | Other expense                      |               |        |       |        |      |        | 2     |        |  |        | 7      |       
|                                                                            |                                    |               |        |        |        |      |        |       |        |  |        |       
|                                                                            |                                    | Total expense |        |        | 758    |      |        |       | 499    |  |        |        | 16     | 
|Income before income taxes and equity in undistributed
earnings of the bank |                                    |               | 9,259  |        |        |      | 1,925  |       |        |  | 12,425 |       
|Income tax expense (benefit)                                                |                                    |               | 286    |        |        |      | 158    |       |        |  | (16    | )     
|                                                                            |                                    |               |        |        |        |      |        |       |        |  |        |       
|Net income before equity in undistributed earnings
of the bank              |                                    |               | 9,545  |        |        |      | 2,083  |       |        |  | 12,409 |       
|Equity in undistributed earnings of the bank                                |                                    |               | 10,252 |        |        |      | 16,120 |       |        |  | 2,351  |       
|                                                                            |                                    |               |        |        |        |      |        |       |        |  |        |       
|                                                                            |                                    | Net income    |        | $      | 19,797 |      |        | $     | 18,203 |  |        | $      | 14,760 | 
|                                                                            |                                    |               |        |        |        |      |        |       |        |  |        |       

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19. PARENT COMPANY ONLY FINANCIAL DATA (Continued)

WEST COAST BANCORP
UNCONSOLIDATED STATEMENTS OF CASH FLOW

|                                                                                  |                                                              |                                           |        |         |        |      |        |         |        |   |        |        |        |  
|--------------------------------------------------------------------------------- | ------------------------------------------------------------ | ----------------------------------------- | ------ | ------- | ------ | ---- | ------ | ------- | ------ | - | ------ | ------ | ------ | -
|Year ended December 31 (Dollars in thousands)                                     |                                                              | 2003                                      |        | 2002    |        | 2001
|                                                                                  |                                                              |                                           |        |         |        |     
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |                                                              |                                           |        |         |        |      |        |         |        |   |        |       
|Net income                                                                        |                                                              | $                                         | 19,797 |         |        | $    | 18,203 |         |        | $ | 14,760 |       
|Adjustments to reconcile net income to net cash
provided by operating activities: |                                                              |                                           |        |         |        |      |        |         |        |   |        |       
|                                                                                  | Undistributed earnings of subsidiaries                       |                                           |        | (10,252 | )      |      |        | (16,120 | )      |   |        | (2,351 | )     
|                                                                                  | (Increase) decrease in other assets                          |                                           |        | (619    | )      |      |        | 3,211   |        |   |        | (2,730 | )     
|                                                                                  | Increase in other liabilities                                |                                           |        | 844     |        |      |        | 625     |        |   |        | 138    |       
|                                                                                  | Tax benefit associated with stock options                    |                                           |        | 732     |        |      |        | 301     |        |   |        | 185    |       
|                                                                                  |                                                              |                                           |        |         |        |      |        |         |        |   |        |       
|                                                                                  |                                                              | Net cash provided by operating activities |        |         | 10,502 |      |        |         | 6,220  |   |        |        | 10,002 |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |                                                              |                                           |        |         |        |      |        |         |        |   |        |       
|                                                                                  | Net proceeds from issuance of junior subordinated debentures |                                           |        | 7,500   |        |      |        | 7,500   |        |   |        | 5,000  |       
|                                                                                  | Net proceeds from issuance of common stock                   |                                           |        | 2,349   |        |      |        | 1,148   |        |   |        | 813    |       
|                                                                                  | Repurchase of common stock                                   |                                           |        | (10,461 | )      |      |        | (13,081 | )      |   |        | (6,597 | )     
|                                                                                  | Dividends paid and cash paid for fractional shares           |                                           |        | (4,928  | )      |      |        | (4,699  | )      |   |        | (4,465 | )     
|                                                                                  | Other, net                                                   |                                           |        | 448     |        |      |        | 565     |        |   |        | 306    |       
|                                                                                  |                                                              |                                           |        |         |        |      |        |         |        |   |        |       
|                                                                                  |                                                              | Net cash used in financing activities     |        |         | (5,092 | )    |        |         | (8,567 | ) |        |        | (4,943 | )
|Net increase (decrease) in cash and cash equivalents                              |                                                              |                                           | 5,410  |         |        |      | (2,347 | )       |        |   | 5,059  |       
|Cash and cash equivalents at beginning of year                                    |                                                              |                                           | 5,104  |         |        |      | 7,451  |         |        |   | 2,392  |       
|                                                                                  |                                                              |                                           |        |         |        |      |        |         |        |   |        |       
|Cash and cash equivalents at end of year                                          |                                                              | $                                         | 10,514 |         |        | $    | 5,104  |         |        | $ | 7,451  |       
|                                                                                  |                                                              |                                           |        |         |        |      |        |         |        |   |        |       

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20. SEGMENT AND RELATED INFORMATION

Bancorp accounts for intercompany fees and services at an estimated fair
value according to regulatory requirements for the service provided.
Intercompany items relate primarily to the use of accounting, human resources,
data processing and marketing services provided by the Parent Company. All
other accounting policies are the same as those described in the summary of
significant accounting policies.

Summarized financial information concerning Bancorps reportable segments
and the reconciliation to Bancorps consolidated results is shown in the
following table. The Other column includes Bancorps Trust operations and
corporate related items including support services such as accounting, human
resources, data processing and marketing. Investment in subsidiaries is netted
out of the presentations below. The Intersegment column identifies the
intersegment activities of revenues, expenses and other assets, between the
Banking and Other segment.

|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |        |        | 
|------------------------------------ | ----------------------------- | --------------------------------- | --------- | ---------------------------- | ------ | ------------ | ------ | ------------ | ---- | - | ------- | - | - | - | --------- | ------ | ------ | 
|                                     |                               |                                   |           | As of and for the year ended
|                                     |                               |                                   |           | December 31, 2003           
|                                     |                               |                                   |           |                             
|(Dollars in thousands)               |                               | Banking                           |           | Other                        |        | Intersegment |        | Consolidated
|                                     |                               |                                   |           |                              |        |              |        |             
|Interest income                      |                               | $                                 | 89,601    |                              |        | $            | 91     |              |      | $ | (14     | ) |   | $ | 89,678    |       
|Interest expense                     |                               |                                   | 19,895    |                              |        |              | 758    |              |      |   | (14     | ) |   |   | 20,639    |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|                                     | Net interest income (expense) |                                   |           | 69,706                       |        |              |        | (667         | )    |   |         |  |   |   |           | 69,039 |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|Provision for loan loss              |                               |                                   | 3,800     |                              |        |              |       |              |      |   |        |   |   |   | 3,800     |       
|Noninterest income                   |                               |                                   | 20,405    |                              |        |              | 1,886  |              |      |   | (245    | ) |   |   | 22,046    |       
|Noninterest expense                  |                               |                                   | 56,401    |                              |        |              | 1,994  |              |      |   | (245    | ) |   |   | 58,150    |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|                                     |                               | Income (loss) before income taxes |           |                              | 29,910 |              |        |              | (775 | ) |         |   |  |   |           |        | 29,135 | 
|Provision (benefit) for income taxes |                               |                                   | 9,637     |                              |        |              | (299   | )            |      |   |        |   |   |   | 9,338     |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|                                     |                               | Net income (loss)                 |           | $                            | 20,273 |              |        | $            | (476 | ) |         | $ |  |   |           | $      | 19,797 | 
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|Depreciation and amortization        |                               | $                                 | 3,180     |                              |        | $            | 4      |              |      | $ |        |   |   | $ | 3,184     |       
|Assets                               |                               | $                                 | 1,660,072 |                              |        | $            | 14,632 |              |      | $ | (11,822 | ) |   | $ | 1,662,882 |       
|Loans, net                           |                               | $                                 | 1,202,750 |                              |        | $            |       |              |      | $ |        |   |   | $ | 1,202,750 |       
|Deposits                             |                               | $                                 | 1,416,287 |                              |        | $            |       |              |      | $ | (11,428 | ) |   | $ | 1,404,859 |       
|Equity                               |                               | $                                 | 148,490   |                              |        | $            | (8,437 | )            |      | $ |        |   |   | $ | 140,053   |       

|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |        |        | 
|------------------------------------ | ----------------------------- | --------------------------------- | --------- | ---------------------------- | ------ | ------------ | ------ | ------------ | ---- | - | ------- | - | - | - | --------- | ------ | ------ | 
|                                     |                               |                                   |           | As of and for the year ended
|                                     |                               |                                   |           | December 31, 2002           
|                                     |                               |                                   |           |                             
|(Dollars in thousands)               |                               | Banking                           |           | Other                        |        | Intersegment |        | Consolidated
|                                     |                               |                                   |           |                              |        |              |        |             
|Interest income                      |                               | $                                 | 95,937    |                              |        | $            | 684    |              |      | $ | (593    | ) |   | $ | 96,028    |       
|Interest expense                     |                               |                                   | 28,139    |                              |        |              | 986    |              |      |   | (593    | ) |   |   | 28,532    |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|                                     | Net interest income (expense) |                                   |           | 67,798                       |        |              |        | (302         | )    |   |         |  |   |   |           | 67,496 |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|Provision for loan loss              |                               |                                   | 4,979     |                              |        |              |       |              |      |   |        |   |   |   | 4,979     |       
|Noninterest income                   |                               |                                   | 17,161    |                              |        |              | 1,688  |              |      |   | (155    | ) |   |   | 18,694    |       
|Noninterest expense                  |                               |                                   | 52,467    |                              |        |              | 1,706  |              |      |   | (155    | ) |   |   | 54,018    |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|                                     |                               | Income (loss) before income taxes |           |                              | 27,513 |              |        |              | (320 | ) |         |   |  |   |           |        | 27,193 | 
|Provision (benefit) for income taxes |                               |                                   | 9,120     |                              |        |              | (130   | )            |      |   |        |   |   |   | 8,990     |       
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|                                     |                               | Net income (loss)                 |           | $                            | 18,393 |              |        | $            | (190 | ) |         | $ |  |   |           | $      | 18,203 | 
|                                     |                               |                                   |           |                              |        |              |        |              |      |   |         |   |   |   |           |       
|Depreciation and amortization        |                               | $                                 | 3,582     |                              |        | $            | 1      |              |      | $ |        |   |   | $ | 3,583     |       
|Assets                               |                               | $                                 | 1,530,746 |                              |        | $            | 7,940  |              |      | $ | (6,359  | ) |   | $ | 1,532,327 |       
|Loans, net                           |                               | $                                 | 1,143,077 |                              |        | $            | 12,887 |              |      | $ | (12,887 | ) |   | $ | 1,143,077 |       
|Deposits                             |                               | $                                 | 1,272,467 |                              |        | $            |       |              |      | $ | (6,014  | ) |   | $ | 1,266,453 |       
|Equity                               |                               | $                                 | 139,702   |                              |        | $            | (6,315 | )            |      | $ |        |   |   | $ | 133,387   |       

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20. SEGMENT AND RELATED INFORMATION (Continued)

|                              |                     |                            |           |                              |        |              |        |              |     |   |        |   |   |   |           |        |        | 
|----------------------------- | ------------------- | -------------------------- | --------- | ---------------------------- | ------ | ------------ | ------ | ------------ | --- | - | ------ | - | - | - | --------- | ------ | ------ | 
|                              |                     |                            |           | As of and for the year ended
|                              |                     |                            |           | December 31, 2001           
|                              |                     |                            |           |                             
|(Dollars in thousands)        |                     | Banking                    |           | Other                        |        | Intersegment |        | Consolidated
|                              |                     |                            |           |                              |        |              |        |             
|Interest income               |                     | $                          | 100,179   |                              |        | $            | 164    |              |     | $ | (66    | ) |   | $ | 100,277   |       
|Interest expense              |                     |                            | 40,619    |                              |        |              | 19     |              |     |   | (66    | ) |   |   | 40,572    |       
|                              |                     |                            |           |                              |        |              |        |              |     |   |        |   |   |   |           |       
|                              | Net interest income |                            |           | 59,560                       |        |              |        | 145          |     |   |        |  |   |   |           | 59,705 |       
|                              |                     |                            |           |                              |        |              |        |              |     |   |        |   |   |   |           |       
|Provision for loan loss       |                     |                            | 3,282     |                              |        |              |       |              |     |   |       |   |   |   | 3,282     |       
|Noninterest income            |                     |                            | 15,431    |                              |        |              | 1,750  |              |     |   | (150   | ) |   |   | 17,031    |       
|Noninterest expense           |                     |                            | 50,515    |                              |        |              | 1,634  |              |     |   | (150   | ) |   |   | 51,999    |       
|                              |                     |                            |           |                              |        |              |        |              |     |   |        |   |   |   |           |       
|                              |                     | Income before income taxes |           |                              | 21,194 |              |        |              | 261 |   |        |   |  |   |           |        | 21,455 | 
|Provision for income taxes    |                     |                            | 6,594     |                              |        |              | 101    |              |     |   |       |   |   |   | 6,695     |       
|                              |                     |                            |           |                              |        |              |        |              |     |   |        |   |   |   |           |       
|                              |                     | Net income                 |           | $                            | 14,600 |              |        | $            | 160 |   |        | $ |  |   |           | $      | 14,760 | 
|                              |                     |                            |           |                              |        |              |        |              |     |   |        |   |   |   |           |       
|Depreciation and amortization |                     | $                          | 4,076     |                              |        | $            | 1      |              |     | $ |       |   |   | $ | 4,077     |       
|Assets                        |                     | $                          | 1,434,315 |                              |        | $            | 10,230 |              |     | $ | (8,844 | ) |   | $ | 1,435,701 |       
|Loans, net                    |                     | $                          | 1,069,798 |                              |        | $            | 5,155  |              |     | $ | (5,155 | ) |   | $ | 1,069,798 |       
|Deposits                      |                     | $                          | 1,179,772 |                              |        | $            |       |              |     | $ | (8,339 | ) |   | $ | 1,171,433 |       
|Equity                        |                     | $                          | 121,492   |                              |        | $            | 7,298  |              |     | $ |       |   |   | $ | 128,790   |       

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]

21. QUARTERLY FINANCIAL INFORMATION (unaudited)

|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |        |      | 
|--------------------------------------------- | -------------------------- | --------- | ------ | -------- | ---- | ------------- | ------ | ------------ | ---- | - | ------ | ------ | ---- | - | ------ | ------ | ---- | 
|(Dollars in thousands, except per share data) |                            | March 31, |        | June 30, |      | September 30, |        | December 31,
|                                              |                            |           |        |          |      |               |        |             
|2003                                          |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|Interest income                               |                            | $         | 22,548 |          |      | $             | 22,523 |              |      | $ | 22,209 |        |      | $ | 22,399 |       
|Interest expense                              |                            |           | 5,850  |          |      |               | 5,289  |              |      |   | 4,874  |        |      |   | 4,627  |       
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              | Net interest income        |           |        | 16,698   |      |               |        | 17,234       |      |   |        | 17,335 |      |   |        | 17,772 |     
|Provision for loan loss                       |                            |           | 850    |          |      |               | 850    |              |      |   | 875    |        |      |   | 1,225  |       
|Noninterest income                            |                            |           | 4,982  |          |      |               | 5,840  |              |      |   | 5,794  |        |      |   | 5,429  |       
|Noninterest expense                           |                            |           | 13,684 |          |      |               | 14,827 |              |      |   | 14,847 |        |      |   | 14,792 |       
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              | Income before income taxes |           |        | 7,146    |      |               |        | 7,397        |      |   |        | 7,407  |      |   |        | 7,184  |     
|Provision for income taxes                    |                            |           | 2,427  |          |      |               | 2,398  |              |      |   | 2,362  |        |      |   | 2,150  |       
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              | Net income                 |           | $      | 4,719    |      |               | $      | 4,999        |      |   | $      | 5,045  |      |   | $      | 5,034  |     
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|Earnings per common share:                    |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              |                            | Basic     |        | $        | 0.31 |               |        | $            | 0.33 |   |        | $      | 0.33 |   |        | $      | 0.34 | 
|                                              |                            | Diluted   |        | $        | 0.30 |               |        | $            | 0.32 |   |        | $      | 0.32 |   |        | $      | 0.32 | 

|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |        |      | 
|--------------------------------------------- | -------------------------- | --------- | ------ | -------- | ---- | ------------- | ------ | ------------ | ---- | - | ------ | ------ | ---- | - | ------ | ------ | ---- | 
|(Dollars in thousands, except per share data) |                            | March 31, |        | June 30, |      | September 30, |        | December 31,
|                                              |                            |           |        |          |      |               |        |             
|2002                                          |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|Interest income                               |                            | $         | 23,658 |          |      | $             | 23,859 |              |      | $ | 24,882 |        |      | $ | 23,629 |       
|Interest expense                              |                            |           | 7,599  |          |      |               | 7,013  |              |      |   | 7,504  |        |      |   | 6,416  |       
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              | Net interest income        |           |        | 16,059   |      |               |        | 16,846       |      |   |        | 17,378 |      |   |        | 17,213 |     
|Provision for loan loss                       |                            |           | 878    |          |      |               | 1,442  |              |      |   | 1,467  |        |      |   | 1,192  |       
|Noninterest income                            |                            |           | 5,215  |          |      |               | 4,510  |              |      |   | 4,264  |        |      |   | 4,705  |       
|Noninterest expense                           |                            |           | 13,964 |          |      |               | 13,087 |              |      |   | 13,183 |        |      |   | 13,784 |       
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              | Income before income taxes |           |        | 6,432    |      |               |        | 6,827        |      |   |        | 6,992  |      |   |        | 6,942  |     
|Provision for income taxes                    |                            |           | 2,189  |          |      |               | 2,303  |              |      |   | 2,339  |        |      |   | 2,159  |       
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              | Net income                 |           | $      | 4,243    |      |               | $      | 4,524        |      |   | $      | 4,653  |      |   | $      | 4,783  |     
|                                              |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|Earnings per common share:                    |                            |           |        |          |      |               |        |              |      |   |        |        |      |   |        |       
|                                              |                            | Basic     |        | $        | 0.27 |               |        | $            | 0.29 |   |        | $      | 0.30 |   |        | $      | 0.31 | 
|                                              |                            | Diluted   |        | $        | 0.26 |               |        | $            | 0.28 |   |        | $      | 0.29 |   |        | $      | 0.30 | 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.




ITEM 9A. CONTROLS AND PROCEDURES

Our disclosure controls and procedures are designed to ensure that
information the Company must disclose in its reports filed or submitted under
the Securities Exchange Act of 1934, as amended (the Exchange Act), is
recorded, processed, summarized, and reported on a timely basis. Our
management has evaluated, with the participation and under the supervision of
our chief executive officer (CEO) and chief financial officer (CFO), the
effectiveness of our disclosure controls and procedures (as defined in Rules
13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period
covered by this report. Based on this evaluation, our CEO and CFO have
concluded that, as of such date, the Companys disclosure controls and
procedures are effective in ensuring that information relating to the Company,
including its consolidated subsidiaries, required to be disclosed in reports
that it files under the Exchange Act is (1) recorded, processed, summarized and
reported within the time periods specified in the SECs rules and forms, and
(2) accumulated and communicated to our management, including our CEO and CFO,
as appropriate to allow timely decisions regarding required disclosure.

No change in the Companys internal control over financial reporting
occurred during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over
financial reporting.




PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning directors and executive officers of Bancorp
required to be included in this item is set forth under the headings Election
of Directors, Section 16(a) Beneficial Ownership Reporting Compliance, and
Management in Bancorps Proxy Statement for its 2004 Annual Meeting of
Stockholders to be filed within 120 days of Bancorps fiscal year end of
December 31, 2003 (the Proxy Statement), and is incorporated into this report
by reference.

Audit and Compliance Committee

Bancorp has a separately-designated standing Audit and Compliance
Committee established in accordance with Section 3(a)(58)(A) of the Exchange
Act. The members of the Audit and Compliance Committee are Steven Spence
(Chair), Lloyd D. Ankeny, Duane C. McDougall, J. F. Ouderkirk, and Nancy
Wilgenbusch, each of whom is independent as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act.

Audit Committee Financial Expert

Bancorps Board of Directors has determined that Duane C. McDougall, an
Audit and Compliance Committee member, is an audit committee financial expert
as defined in Item 401(h) of Regulation S-K of the Exchange Act and is
independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the
Exchange Act.

Code of Ethics

We have adopted a code of ethics (the Code of Ethics), for our CEO, CFO
principal accounting officer, and persons performing similar functions,
entitled the West Coast Bancorp Code of Ethics for Senior Financial Officers.
The Code of Ethics is available on our website at www.wcb.com under the tab for
investor relations. Stockholders may request a free copy of the Code of Ethics
from:



| | West Coast Bancorp
Attention: Secretary
5335 S.W. Meadows Road, Suite 201
Lake Oswego, Oregon 97035
(503) 684-0884
| | ------------------------------------------------------------------------------------------------------------------




ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive and director compensation required by
this item is set forth under the headings Executive Compensation,
Management and Election of Directors  Compensation of Directors in the
Proxy Statement and is incorporated into this report by reference.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCK HOLDER MATTERS


Information concerning the security ownership of certain beneficial owners
and management required by this item is set forth under the headings Security
Ownership of Certain Beneficial Owners and Management in the Proxy Statement
and is incorporated into this report by reference.

Equity Compensation Plan Information

Information concerning Bancorps equity compensation plans, including both
stockholder approved plans and non-stockholder approved plans, required by this
item is set forth under the heading Executive Compensation  Equity
Compensation Plan Information in the Proxy Statement and is incorporated into
this report by reference.




ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions
required by this item is set forth under the heading Transactions with
Management in the Proxy Statement and is incorporated into this report by
reference.




ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning fees paid to our accountants required by this item
is included under the heading Independent Auditors  Fees Paid to Independent
Auditors in the Proxy Statement and is incorporated into this report by
reference.

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PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K



| | (a)(1) |  | Financial Statements:
| | ------ |  | ---------------------



| |  | The financial statements and related documents listed in the Index set
forth in Item 8 of this report are filed as part of this report.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------



| | (2) |  | Financial Statements Schedules:
| | --- |  | -------------------------------



| |  | All other schedules to the consolidated financial statements are omitted
because they are not applicable or not material or because the information
is included in the consolidated financial statements or related notes in
Item 8 above.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) |  | Exhibits:
| | --- |  | ---------



| |  | Exhibits to this report are listed in the Index to Exhibits immediately
following the signature page.
| |  | -----------------------------------------------------------------------------------------------------



| | (b) |  | Reports on Form 8-K:
| | --- |  | --------------------



| |  | During the three months ended December 31, 2003, Bancorp filed a current
report on Form 8-K dated October 20, 2003, reporting a temporary
suspension of trading by employees related to a black-out period under
Bancorps 401(k) Plan.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) |  | Exhibits:
| | --- |  | ---------



| |  | The response to this portion of Item 15 is submitted as a separate section
of this report entitled Index to Exhibits.
| |  | -----------------------------------------------------------------------------------------------------------------------

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on the 24th day of
February, 2004.

WEST COAST BANCORP

(Registrant)

|    |  |                       
|--- |  | ----------------------
|By: |  | /s/ Robert D. Sznewajs
|    |  |                       
|    |  | President and CEO     

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on the 24th day of February, 2004.

|                                             |  |                                                     
|-------------------------------------------- |  | ----------------------------------------------------
|Principal Executive Officer:                 |  |                                                     
|/s/ Robert D. SznewajsRobert D. Sznewajs     |  | President and CEO and Director                      
|                                            
|Principal Financial Officer:                 |  |                                                     
|/s/ Anders GiltvedtAnders Giltvedt           |  | Executive Vice President and Chief Financial Officer
|                                            
|Principal Accounting Officer:                |  |                                                     
|/s/ Kevin M. McClungKevin M. McClung         |  | Vice President and Controller                       
|                                            
|Remaining Directors:                         |  |                                                     
|/s/ Lloyd D. AnkenyLloyd D. Ankeny, Chairman |  |                                                     
|                                            
|/s/ Michael J. BraggMichael J. Bragg         |  |                                                     
|                                            
|/s/ William B. LochWilliam B. Loch           |  |                                                     
|                                            
|/s/ Jack E. LongJack E. Long                 |  |                                                     
|                                            
|/s/ Duane C. McDougallDuane C. McDougall     |  |                                                     
|                                            
|/s/ Steven OlivaSteven Oliva                 |  |                                                     
|                                            
|/s/ J.F. OuderkirkJ.F. Ouderkirk             |  |                                                     
|                                            
|/s/ Steven SpenceSteven Spence               |  |                                                     
|                                            
|/s/ Nancy WilgenbuschNancy Wilgenbusch       |  |                                                     

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INDEX TO EXHIBITS

|            |  |                                                                                                                                                                                                                                                                                                      
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Exhibit                                                                                                                                                                                                                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                      
|3.1         |  | Restated Articles of Incorporation.                                                                                                                                                                                                                                                                  
|            |  |                                                                                                                                                                                                                                                                                                      
|3.2         |  | Restated Bylaws.                                                                                                                                                                                                                                                                                     
|            |  |                                                                                                                                                                                                                                                                                                      
|4           |  | The Company has incurred long-term indebtedness as to which the amount
involved is less than ten percent of the total assets of the Company and
its subsidiaries on a consolidated basis. The Company agrees to furnish
instruments relating to such indebtedness to the Commission upon its
request.
|            |  |                                                                                                                                                                                                                                                                                                      
|10.1        |  | Form of Indemnification Agreement for all directors and executive
officers. Incorporated by reference to Exhibit 10.1 to the Companys
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999.*                                                                                      
|            |  |                                                                                                                                                                                                                                                                                                      
|10.2        |  | Change in Control Agreement between the Company and Robert D. Sznewajs dated January 1, 2004.*                                                                                                                                                                                                       
|            |  |                                                                                                                                                                                                                                                                                                      
|10.3        |  | Change in Control Agreement between the Company and Anders Giltvedt dated January 1, 2004.*                                                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                      
|10.4        |  | Change in Control Agreement between the Company and Xandra McKeown dated January 1, 2004.*                                                                                                                                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                      
|10.5        |  | Change in Control Agreement between the Company and James D. Bygland dated January 1, 2004.*                                                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                      
|10.6        |  | Change in Control Agreement between the Company and David Prysock dated January 1, 2004.*                                                                                                                                                                                                            
|            |  |                                                                                                                                                                                                                                                                                                      
|10.7        |  | 401(k) Profit Sharing Plan. Incorporated by reference to Exhibit 99.1 to
the Companys Registration Statement on Form S-8 (Reg. No. 333-01649)
filed March 12, 1996.*                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                      
|10.8        |  | Directors Deferred Compensation Plan. Incorporated by reference to
Exhibit 4.3 to the Companys Registration Statement on Form S-8 (Reg. No.
333-104835) filed April 30, 2003 (the April 2003 S-8).*                                                                                              
|            |  |                                                                                                                                                                                                                                                                                                      
|10.9        |  | Executives Deferred Compensation Plan. Incorporated by reference to
Exhibit 4.4 to the April 2003 S-8.*                                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                      
|10.10       |  | Combined 1991 Incentive Stock Option Plan and 1991 Nonqualified Stock
Option Plan. Incorporated by reference to Exhibit 99.1 to the Companys
Registration Statement on Form S-8 (Reg. No. 333-01651) filed March 12,
1996.*                                                                         
|            |  |                                                                                                                                                                                                                                                                                                      
|10.11       |  | Directors Stock Option Plan and Form of Agreement. Incorporated by
reference to Exhibits 99.1 and 99.2 to the Companys Registration
Statement on Form S-8 (Reg. No. 033-60259) filed June 15, 1995 (the 1995
S-8).*                                                                              
|            |  |                                                                                                                                                                                                                                                                                                      
|10.12       |  | Incentive Stock Option Plan and Form of Agreement. Incorporated by
reference to Exhibits 99.3 and 99.4 to the 1995 S-8.*                                                                                                                                                                             
|            |  |                                                                                                                                                                                                                                                                                                      
|10.13       |  | Nonqualified Stock Option Plan and Form of Agreement. Incorporated by
reference to Exhibits 99.5 and 99.6 to the 1995 S-8.*                                                                                                                                                                          
|            |  |                                                                                                                                                                                                                                                                                                      
|10.14       |  | 1999 Stock Option Plan and Form of Agreement. Incorporated by reference
to Exhibits 99.1 and 99.2 to the Companys Registration Statement on Form
S-8 (Reg. No. 333-86113) filed August 30, 1999.*                                                                                                   
|            |  |                                                                                                                                                                                                                                                                                                      
|10.15       |  | 2000 Restricted Stock Plan. Incorporated by reference to Exhibit 99.2
to the Companys Registration Statement on Form S-8 (Reg. No. 333-35208)
filed April 20, 2000.*                                                                                                                                
|            |  |                                                                                                                                                                                                                                                                                                      
|10.16       |  | 1999 Director Stock Option Plan and Form of Agreement. Incorporated by
reference to Exhibits 99.1 and 99.2 to the Companys Registration
Statement on Form S-8 (Reg. No. 333-35318) filed April 21, 2000.*                                                                                           
|            |  |                                                                                                                                                                                                                                                                                                      
|10.17       |  | 2002 Stock Incentive Plan and Forms of Option Agreement and Restricted
Stock Agreement. Incorporated by reference to Exhibits 10.1, 10.2 and
10.3 to the Companys Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002.*                                                               
|            |  |                                                                                                                                                                                                                                                                                                      
|10.18       |  | Supplemental Executive Retirement Plan adopted by West Coast Bank, the
Company and Robert D. Sznewajs dated August 1, 2003.*                                                                                                                                                                         
|            |  |                                                                                                                                                                                                                                                                                                      
|10.19       |  | Supplemental Executive Retirement Plan adopted by West Coast Bank, the
Company and Anders Giltvedt dated August 1, 2003.*                                                                                                                                                                            

______________________________



|* |  | Indicates a management contract or compensatory plan, contract or arrangement.
|- |  | ------------------------------------------------------------------------------

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INDEX TO EXHIBITS (continued)

|      |  |                                                                                                                           
|----- |  | --------------------------------------------------------------------------------------------------------------------------
|10.20 |  | Supplemental Executive Retirement Plan adopted by West Coast Bank, the
Company and Xandra McKeown dated August 1, 2003.*  
|      |  |                                                                                                                           
|10.21 |  | Supplemental Executive Retirement Plan adopted by West Coast Bank, the
Company and James D. Bygland dated August 1, 2003.*
|      |  |                                                                                                                           
|10.22 |  | Supplemental Executive Retirement Plan adopted by West Coast Bank, the
Company and David Prysock dated August 1 2003.*    
|      |  |                                                                                                                           
|21    |  | Subsidiaries of the Company.                                                                                              
|      |  |                                                                                                                           
|23    |  | Consent of Deloitte & Touche LLP.                                                                                         
|      |  |                                                                                                                           
|31.1  |  | Certification of Chief Executive Officer under Rule 13(a) - 14(a).                                                        
|      |  |                                                                                                                           
|31.2  |  | Certification of Chief Financial Officer under Rule 13(a) - 14(a).                                                        
|      |  |                                                                                                                           
|32    |  | Certification of Chief Executive Officer and Chief Financial Officer under Section 18 U.S.C. Section 1350.                

______________________________



|* |  | Indicates a management contract or compensatory plan, contract or arrangement.
|- |  | ------------------------------------------------------------------------------

66