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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



FORM 10-Q



(mark one)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2003



OR



[  ] TRANSITION REPORT UNDER SECTION 13 or 15(d) 
OF THE SECURITIES EXCHANGE ACT OF 1934		#9;	#9;

For the transition period from _________ to _________



Commission File Number 0-24024



Venture Financial Group, Inc.



Washington
91 -1277503(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)


721 College Street. SE, P.O. Box 3800, Lacey, WA  98509
(Address of principal executive offices)

Issuer's telephone number:    (360) 459-1100



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 past 12 months (or for such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: 		XYes  No

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act)                                     __Yes X No

Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date.

Title of Class
Outstanding at October 27, 2003Common Stock
4,351,915




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Venture Financial Group, Inc.

Table of Contents



PART I - FINANCIAL INFORMATION
PageItem 1
Financial StatementsCondensed Consolidated Balance Sheets
3Condensed Consolidated Statements of Income and Comprehensive Income
4Condensed Consolidated Statement of Stockholders' Equity
5Condensed Consolidated Statements of Cash Flows
6Notes to Condensed Consolidated Financial Statements
7Item 2
Management's Discussion and Analysis of Financial Condition and Results of Operations
10Item 3
Quantitative and Qualitative Disclosures about Market Risk
17Item 4
Disclosure Controls and Procedures
18PART II - OTHER INFORMATIONItem 1
Legal Proceedings
19Item 6
Exhibits and Reports on Form 8-K
19SIGNATURES
20




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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIESCondensed Consolidated Balance Sheets



(Dollars in
      thousands)September 30
      
      December 312003
      
      2002(Unaudited)AssetsCash and due from
      banks
      $
      17,969
      $
      30,965Interest bearing
      deposits in banks
      
      985
      
      76Federal funds
      sold
      
      3,600
      
      7,000Securities
      available for sale
      
      86,646
      
      33,622Securities held
      to maturity
      
      504
      
      505FHLB Stock
      
      1,139
      
      877Loans held for
      sale
      
      6,141
      
      7,432Loans
      
      355,936
      
      362,132Allowance for
      credit losses
      
      7,787
      
      7,947Net loans
      
      348,149
      
      354,185Premises and
      equipment
      
      11,919
      
      11,141Foreclosed real
      estate
      
      2,256
      
      4,899Accrued interest
      receivable
      
      1,967
      
      1,884Cash surrender
      value of life insurance
      
      12,958
      
      8,863Intangible assets
      
      11,626
      
      11,708Other assets
      
      1,251
      
      1,293Total
      assets
      $
      507,110
      $
      474,450LiabilitiesDeposits:Demand
      $
      86,328
      $
      82,267Savings
      and interest bearing demand
      
      176,617
      
      156,031Time
      deposits
      
      122,143
      
      145,909Total
      deposits
      
      385,088
      
      384,207Short term
      borrowing
      
      24,821
      
      16,547Long term debt
      
      42,000
      
      24,000Accrued interest
      payable
      
      444
      
      315Other liabilities
      
      6,529
      
      5,172Total
      liabilities
      
      458,882
      
      430,241Stockholders'
      EquityCommon stock, (no
      par value); 10,000,000 shares authorized,
      
      26,458
      
      28,430shares
      issued: 2003 - 4,351,915; 2002 - 4,389,236Retained earnings
      
      21,534
      
      15,246Accumulated other
      comprehensive income, net of tax
      
      236
      
      533Total
      stockholders' equity
      
      48,228
      
      44,209Total
      liabilities and stockholders' equity
      $
      507,110
      $
      474,450See notes to
      condensed consolidated financial statements




3

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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES



(Dollars in
      thousands, except per share amounts)Three months ended
      
      Nine months endedSeptember 30
      
      September 302003
      
      2002
      
      2003
      
      2002Interest
      incomeLoans
      $
      6,944
      $
      6,987
      $
      22,615
      $
      20,305Federal
      funds sold and deposits in banks
      
      30
      
      17
      
      60
      
      21Investments
      
      545
      
      323
      
      1,244
      
      932Total
      interest income
      
      7,519
      
      7,327
      
      23,919
      
      21,258Interest
      ExpenseDeposits
      
      1,116
      
      1,403
      
      3,545
      
      4,431Other
      
      391
      
      229
      
      1,130
      
      381Total
      interest expense
      
      1,507
      
      1,632
      
      4,675
      
      4,812Provision for
      credit losses
      
      654
      
      623
      
      1,853
      
      1,608Net interest
      income after provisionFor
      credit losses
      
      5,358
      
      5,072
      
      17,391
      
      14,838Non-interest
      incomeService
      charges on deposit accounts
      
      932
      
      768
      
      2,787
      
      2,240Mortgage
      loans sold
      
      920
      
      662
      
      2,768
      
      1,715Other
      operating income
      
      3,303
      
      610
      
      4,615
      
      1,729Total
      non-interest income
      
      5,155
      
      2,040
      
      10,170
      
      5,684Non-interest
      expenseSalaries
      and employee benefits
      
      3,198
      
      2,451
      
      9,409
      
      7,086Occupancy
      and equipment
      
      813
      
      620
      
      2,531
      
      1,847Other
      expense
      
      1,636
      
      1,593
      
      5,338
      
      4,781Total
      non-interest expense
      
      5,647
      
      4,664
      
      17,278
      
      13,714Operating
      income before income taxes
      
      4,866
      
      2,448
      
      10,283
      
      6,808Income Taxes
      
      1,571
      
      799
      
      3,252
      
      2,169Net income
      $
      3,295
      $
      1,649
      $
      7,031
      $
      4,639Other
      comprehensive income, net of tax:Unrealized
      holding gains (losses) on securitiesarising
      during the period
      
      (443)
      
      274
      
      (297)
      
      (77)Comprehensive
      Income
      $
      2,852
      $
      1,923
      $
      6,734
      $
      4,562Earnings per
      Share DataBasic
      earnings per share
      $
      0.76
      $
      0.38
      $
      1.60
      $
      1.06Diluted
      earnings per share
      $
      0.72
      $
      0.37
      $
      1.53
      $
      1.04Dividends
      declared per share
      $
      0.07
      $
      0.05
      $
      0.17
      $
      0.15Weighted average
      number of common shares
      
      4,347,253
      
      4,381,902
      
      4,386,039
      
      4,377,210Weighted average
      number of common shares,Including
      dilutive stock options
      
      4,569,043
      
      4,490,330
      
      4,593,126
      
      4,445,626Return on average
      assets
      
      2.71%
      
      1.70%
      
      1.98%
      
      1.64%See notes to
      condensed consolidated financial statements




4

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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES



(Dollars in
      thousands)Nine Months Ended September 30, 2002 and 2003AccumulatedOther
      
      UnearnedCommon
      
      Retained
      
      Comprehensive
      
      KSOPStock
      
      Earnings
      
      Income (Loss)
      
      Shares
      
      TotalBalance,
      December 31, 2001
      $
      28,596
      $
      9,912
      $
      312
      $
      (25)
      $
      38,795Net income
      
      - -
      
      4,639
      
      - -
      
      - -
      
      4,639Stock options
      exercised
      
      707
      
      - -
      
      - -
      
      - -
      
      707Stock repurchased
      
      (950)
      
      - -
      
      - -
      
      - -
      
      (950)Cash dividend
      ($0.15 per share)
      
      - -
      
      (659)
      
      - -
      
      - -
      
      (659)Other
      comprehensive loss
      
      - -
      
      - -
      
      (77)
      
      - -
      
      (77)Net decrease in
      unearnedKSOP shares
      
      - -
      
      - -
      
      - -
      
      25
      
      25Balance,
      September 30, 2002
      $
      28,353
      $
      13,892
      $
      235
      $
      0
      $
      42,480Balance,
      December 31, 2002
      $
      28,430
      $
      15,246
      $
      533
      $
      0
      $
      44,209Net income
      
      - -
      
      7,031
      
      - -
      
      - -
      
      7,031Stock options
      exercised
      
      1,429
      
      - -
      
      - -
      
      - -
      
      1,429Stock repurchased
      
      (3,401)
      
      - -
      
      - -
      
      - -
      
      (3,401)Cash dividend
      ($0.17 per share)
      
      - -
      
      (743)
      
      - -
      
      - -
      
      (743)Other
      comprehensive loss
      
      - -
      
      - -
      
      (297)
      
      - -
      
      (297)Balance,
      September 30, 2003
      $
      26,458
      $
      21,534
      $
      236
      $
      0
      $
      48,228See notes to
      condensed consolidated financial statements




5

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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIESCondensed Consolidated Statements of Cash Flows (Unaudited)



(Dollars in
      thousands)Nine months ended September 302003
      
      2002Cash Flows
      from Operating ActivitiesNet Income
      $
      7,031
      $
      4,639Adjustments
      to reconcile net income to net cash providedby
      operating activities:Provision
      for credit losses
      
      1,853
      
      1,608Depreciation
      and amortization
      
      1,101
      
      861Amortization
      of other intangible assets
      
      82
      
      150Increase
      in cash surrender value of life insurance
      
      (4,095)
      
      (302)Income
      from mortgage loans sold
      
      (2,768)
      
      1,715Gain
      on sale of other real estate owned
      
      (2,606)
      
      - -Other
      - net
      
      1,533
      
      (1,417)Originations
      of loans held for sale
      
      (113,523)
      
      (66,979)Proceeds
      from sales of loans held for sale
      
      117,582
      
      62,226Net
      cash provided by operating activities
      
      6,190
      
      2,501Cash Flows
      from Investing ActivitiesNet
      (increase) decrease in interest bearing deposits in banks
      
      (909)
      
      2Net
      (increase) decrease in Federal funds sold
      
      3,400
      
      (3,000)Proceeds
      from maturities and prepayments of available-for-sale securities
      
      4,838
      
      5,658Purchase
      of securities available for sale
      
      (58,466)
      
      (12,279)Net
      (increase) decrease in loans
      
      2,796
      
      (15,446)Proceeds
      from sale of other real estate
      
      6,594
      
      325Additions
      to premises and equipment
      
      (1,879)
      
      (478)Net
      cash provided (used) by investing activities
      
      (43,626)
      
      (25,218)Cash Flows
      from Financing ActivitiesNet
      increase in deposits
      
      881
      
      8,357Net
      increase in short-term borrowings
      
      8,274
      
      3,362Sale
      of common stock
      
      1,429
      
      707Repurchase
      of common stock
      
      (3,401)
      
      (950)Increase
      in long-term borrowings
      
      18,000
      
      14,403Repayment
      of long-term borrowings
      
      - -
      
      (575)Payment
      of cash dividends
      
      (743)
      
      (659)Net
      cash provided (used) by financing activities
      
      24,440
      
      24,645Net
      change in cash and due from banks
      
      (12,996)
      
      1,928Cash and Due
      from Banks:Beginning
      of period
      
      30,965
      
      21,383End
      of period
      $
      17,969
      $
      23,311Supplemental
      Disclosures of Cash Flow Information:Cash
      payments for:Interest
      $
      4,546
      $
      4,794Taxes
      
      2,188
      
      2,215Supplemental
      Disclosures of Non-Cash Investing and Financing Activities:Other
      real estate acquired in settlement of loans
      $
      4,986
      $
      727Decrease
      in unearned KSOP shares
      
      - -
      
      (25)Fair
      value adjustment of securities available for sale, net
      
      (297)
      
      (77)See notes to
      condensed consolidated financial statements




6

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VENTURE FINANCIAL GROUP, INC. and SUBSIDIARIES

1.    	Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Rule 10-01 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.  In the opinion of management, adjustments considered necessary for a fair presentation (consisting of normally recurring accruals) have been included.  The interim condensed consolidated financial statements should be read in conjunction with the December 31, 2002 consolidated financial statements, including notes thereto, included in the Company's 2002 Annual Report to Shareholders.  Operating results for the nine months ended September 30, 2003 are not necessarily indicative of the results anticipated for the year ending December 31, 2003.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.

Stock Based Compensation

In December 2002, the Financial Accounting Standards Board issued FASB Statement No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.This Statement amends FASB Statement No. 123, Accounting for Stock-Based Compensation,and APB Opinion No. 28, Interim Financial Reporting,to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation.  This statement does not require any change from the method currently used by the Company to account for stock-based compensation, but does require more prominent disclosure in the annual and interim financial statements about the method of accounting for such compensation and the effect of the method used on reported results.  This statement was effective for fiscal years ending after December 15, 2002.  The Company has adopted the disclosure provisions of SFAS No. 148 in the accompanying financial statements, and accordingly, the required disclosures are set forth below.

The Company accounts for stock-based awards to employees and directors using the intrinsic value method, in accordance with APB No. 25, Accounting for Stock Issued to Employees.  Accordingly, no compensation expense has been recognized in the condensed consolidated financial statements for employee and director stock arrangements where the grant price is equal to market price.  However, the required pro forma disclosures of the effects of all options granted on or after January 1, 1995have been provided in accordance with SFAS No. 123, Accounting for Stock-Based Compensation.

At September 30, 2003, the Company has two stock-based employee and director compensation plans.  The following illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation,to stock-based compensation awards for the effects of all options granted on or after January 1, 1995 for the periods ended September 30:



2003
      
      2002Net income, as
      reported
      $
      7,031
      $
      4,639Less total
      stock-based compensation expense determinedunder fair
      value method for all qualifying awards
      
      95
      
      107Pro forma
      net income
      $
      6,936
      $
      4,532




7

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Earnings per ShareBasic:As reported
      $
      1.60
      $
      1.06Pro forma
      
      1.58
      
      1.04Diluted:As reported
      
      1.53
      
      1.04Pro forma
      
      1.51
      
      1.02




2.	Basic and Diluted Earnings per Share

Basic and diluted earnings per share are calculated by dividing net income by the weighted average number of common shares outstanding during the periods presented.  Diluted earnings per share assumes that all dilutive stock options outstanding are issued such that their dilutive effect is maximized.



Three Months Ended
September 30
Nine Months Ended
September 302003
2002
2003
2002Basic EPS computation
     Numerator - Net Income
$    3,295
$   1,649
$    7,031
$   4,639Denominator - Weighted Average
          common shares outstanding
4,347,253
4,381,902
4,386,039
4,377,210Basic EPS
$       .76
$    .38
$      1.60
$    1.06




Three Months Ended
September 30
Nine Months Ended
September 302003
2002
2003
2002Diluted EPS computation
     Numerator - Net Income
$    3,295
$   1,649
$    7,031
$   4,639Denominator - Weighted average
          common shares outstanding
4,347,253
4,381,902
4,386,039
4,377,210Effect of dilutive stock options
221,790
108,428
207,087
68,416Weighted average common shares
          and common stock equivalents
4,569,043
4,490,330
4,593,126
4,445,626Diluted EPS
$       .72
$        .37
$     1.53
$     1.04




8

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3.	Issuance of Trust Preferred Securities

On April 10, 2003, the Company completed an offering of trust preferred securities and received net proceeds of approximately $5,910.  The proceeds are being used for general Company purposes, including utilization in the stock repurchase program and potentially to provide additional capital to Venture Bank.  Trust preferred securities consist of the issuance of subordinated debt securities to a wholly owned subsidiary business trust, which then issues preferred stock to investors.  The wholly owned subsidiary trust is consolidated in the Consolidated Financial Statements.  The interest payments on the debt securities are approximately equal to the dividend payments on the preferred stock of the trust.  The Company will be able to recognize a deduction of the interest cost for income tax purposes, while the net proceeds, up to one-third of total capital adjusted for accumulated other comprehensive income, will qualify as Tier 1 capital.



4.	Recent Accounting Pronouncements

No new accounting pronouncements were issued in the third quarter 2003.



9

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Item 2                      Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains a review of the Company's and its subsidiaries operating results and financial condition for the first nine months of and period ended September 30, 2003.  When warranted, comparisons are made to the same period in 2002, and to the previous year ended December 31, 2002.  The discussion should be read in conjunction with the financial statements (unaudited) and related notes contained elsewhere in this report.  The reader is assumed to have access to the Company's Form 10-K for the year ended December 31, 2002, which contains additional statistics and explanations.  All dollars in tables, except per share data, are expressed in thousands.

Forward-Looking Information

In addition to historical information, statements appearing in this report which are not historical in nature, including the discussions of the adequacy of the Company's capital resources and allowance for credit losses, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PLSRA").  Any statements that expressly or implicitly predict future results, performance, or events should be considered forward-looking.  Forward-looking statements are subject to the risks and uncertainties that may cause actual future results to differ materially.  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report.  The Company does not undertake any obligation to publicly release any revisions to forward-looking statements contained in this Quarterly Report, with respect to events or circumstances after the date of this Report, or to reflect the occurrence of unanticipated events.

Such risks and uncertainties with respect to the Company include, among others, those related to the general economic environment, particularly in the region in which the Company operates, competitive products and pricing, that may lead to pricing pressures on rates the Bank charges on loans and pays on deposits, loss of customers of greatest value to the Bank, litigation or other losses, fiscal and monetary policies of the federal government, changes in government regulations affecting financial institutions and small loan practices, including regulatory fees and capital requirements, changes in prevailing interest rates that could lead to decreased net interest margin, acquisitions and the integration of acquired businesses, credit risk management and asset/liability management, the financial and securities markets, changes in technology or required investments in technology, and the availability of and costs associated with sources of liquidity.

Financial Condition

General

The Company's consolidated assets at September 30, 2003 totaling $507,110,000 represents a 6.88% increase from December 31, 2002 assets totaling $474,450,000.  The increase in assets was caused by an increase in securities available for sale of $53,024,000 and cash value of life insurance of $4,095,000, offset by a reduction in cash and due from banks in the amount of $12,996,000, loans in the amount of $6,196,000 and fed funds sold of $3,400,000.  Other assets were largely unchanged.

Loans

The composition of the loan portfolio was as follows (dollars in thousands):



September 30
2003
December 31
2002Commercial
$56,375
$64,716Real EstateCommercial
201,008
191,960Mortgage
10,068
15,386Construction
78,702
70,385Consumer
7,120
10,718Small Loans
2,663
8,967Total Loans
$355,936
$362,132


10

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The total non-performing loans, defined as those loans on non-accrual and accruing loans over 90-days past due, decreased since December 31, 2002 by $5,072,000 as shown in the following table of non-performing assets (dollars in thousands)



September 30
      
      December 312003
      
      2002Non-accrual loans
      $
      2,749
      $
      6,543Accruing loans past due 90
      days or more
      
      - -
      
      1,278Foreclosed real estate
      
      2,256
      
      4,899Other assets
      
      27
      
      55$
      5,032
      $
      12,775




The percentage of non-performing loans to total loans decreased to .77% on September 30, 2003 from 2.16% on December 31, 2002.  Non-accrual loans decreased $3,794,000 during the first nine months of 2003, while foreclosed real estate and other assets decreased $2,643,000 during the same period.  The reduction in foreclosed real estate is primarily attributed to one property the Company sold in July 2003.  The property had been acquired as a result of a failed loan identified in 1999.  The reduction in non-accrual loans is attributed to the Company's special credits team and the increased attention paid to the Company's non-accrual portfolio.



The Company has no loans past due 90 days or more continuing to accrue interest.

Allowance for Credit Losses

The allowance for credit losses reflects management's current estimate of the amount required to absorb losses on existing loans and commitments to extend credit.  Determination of the appropriate level of the allowance is based on an analysis of various factors including historical loss experience based on volumes and types of loans; volumes and trends in delinquencies and non-accrual loans; trends in portfolio volume; results of internal credit reviews; and economic conditions.  All commercial and real estate loans in the portfolio are assigned a grade indicating credit quality by the originating loan officer at the time of loan origination.  These grades are reviewed at regular intervals and, if performance concerns arise on an individual loan, the grade is lowered to the appropriate level.  Management reviews the composite changes in loan grades within the portfolio in its assessment of the adequacy of the allowance.  If a loan becomes impaired, the Company's loss exposure on that loan is measured based on expected cash flows or collateral values, and if necessary, a portion of the allowance for credit losses is allocated to that loan.   After reviewing the composition of the loan portfolio at September 30, 2003, the levels of classified loans, losses experienced during the period, and the changes in the economy, management has determined the allowance for credit losses to be adequate to cover the loss exposure in the loan portfolio at that date.  An analysis of the adequacy of the allowance is subject to quarterly review by the Board of Directors.   Various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses.  Such agencies may require the Bank to recognize changes to the allowance based on their judgments of information available at the time of their examination.



The allowance for credit losses decreased $160,000 for the first nine months of 2003, with the ratio of the allowance for credit losses to loans at 2.15% on September 30, 2003, compared to 2.19% on December 31, 2002.  During the first nine months, an additional $1,853,000 was reserved for potential losses, and net charge-offs were $2,013,000, or .56% of the loan portfolio.  The charge-offs were primarily in the Bank's small loan portfolio.  The allowance for credit losses to nonperforming loans was 283.27% on September 30, 2003, compared to 101.61% on December 31, 2002.  Management believes the allowance is at an appropriate level.



Investment Portfolio

Investment securities increased $53,024,000, or 157.71% during the first nine months of 2003 to a total of $86,646,000.    The increase in securities available for sale is primarily attributed to a large security transaction that occurred in the third quarter of 2003.  The securities were funded primarily out of due from accounts and fed funds sold with additional funding from the decrease in loan balances and borrowed funds.  Securities are typically purchased from time to time as either collateral for various operational purposes or for additional income in times of excess liquidity.



11

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Deposits and Borrowings

Total deposits increased $881,000, or .23% in the nine months ended September 30, 2003 to $385,088,000.  Savings and interest-bearing deposit accounts and non-interest bearing demand increased $20,586,000 and $4,061,000 respectively while time deposits decreased $23,766,000.  Short term and long term borrowings have also been used as a funding source due to their relatively low cost as compared to time deposits.  Short term borrowings increased in the first nine months by $8,274,000 to $24,821,000 while long term borrowings increased in the first nine months by $18,000,000 to $42,000,000.

Liquidity

Liquidity management involves the ability to meet cash flow requirements of customers who may be either depositors wanting to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs.  Liquidity is generated from both internal and external sources.  Internal sources are those assets that can be converted to cash with little or no risk of loss.  These include overnight investments in interest bearing deposits in banks and federal funds sold and investment securities, particularly those of shorter maturity, and are the principal source of asset liquidity.  At September 30, 2003, cash, deposits in banks, federal funds sold and securities available for sale totaled $109,200,000.  External sources refer to the ability to access new borrowings and capital.  They include increasing savings and demand deposits, federal funds purchased, borrowings, and the issuance of capital and debt securities.  At September 30, 2003, borrowing lines of credit totaled $48,553,000.  These credit facilities are being used regularly as a source of funds. At September 30, 2003, $10,000,000 was borrowed against these lines of credit in the form of long term advances.

Cash flows from operations contributed to liquidity as well as proceeds from maturities of securities, a net decrease in loans outstanding, net proceeds from the sale of other real estate, an increase in short-term and long-term borrowings and sale of common stock.  As indicated on the Company's Condensed Consolidated Statement of Cash Flows, net cash from operating activities for the nine months ended September 30, 2003 contributed $6,190,000 to liquidity compared to $2,501,000 for the nine months ended September 30, 2002.  Short-term and long-term borrowings provided $26,274,000 for the nine months ended September 30, 2003 compared to $17,765,000 for the nine months ended September 30, 2002.  For the nine months ended September 30, 2003 $3,401,000 of the funds provided were used to repurchase common stock of the Company compared to $950,000 for the same period in 2002.

The stock repurchase program authorizes the Company to make scheduled purchases over time in either privately negotiated transactions or through the open market.  On December 11, 2002, the Company's board of directors authorized the repurchase of 132,000 shares during the first quarter of 2003.  On February 19, 2003 and June 18, 2003 the Company's board of directors authorized 87,580 and 37,420 shares, respectively, be added to the stock repurchase program.  Under this program the Board authorized the purchase of a total of 257,000 of the Company's common stock or approximately 6% of the total common shares currently outstanding.  As of September 30, 2003 the Company had repurchased 179,421 shares at a cost of $3,401,000.  There are 15,151 shares left for repurchase.

Management believes the Bank's liquidity position at September 30, 2003, was adequate to meet its short term funding requirements.



Capital

Consolidated capital of the Company increased $4,019,000 or 9.1% during the first nine months of 2003.  The net income for the first nine months and its corresponding increase to retained earnings was the primary component of this increase along with the exercising of stock options, which added $1,429,000.  Capital decreases were the result of $3,401,000 in stock being repurchases, quarterly cash dividends paid to shareholders totaling $743,000 and a decrease in themarket value of securities available for sale of $297,000 on an after-tax basis.

There are regulatory constraints placed upon capital adequacy, and it is necessary to maintain an appropriate ratio between capital and assets.  Regulations require banks and holding companies to maintain a minimum "leverage" ratio (primary capital ratio) of total assets.  For the most highly rated holding companies this ratio must be at least 3%, and for others it must be 4 to 5%.  At September 30, 2003, the Company's leverage ratio was 11.03%, compared to 11.60% at year-end 2002.  In addition, banks and holding companies are required to meet minimum risk-based capital guidelines under which risk percentages are assigned to various categories of assets and off-balance-sheet items to calculate a risk-adjusted capital ratio.  Tier I capital generally consists of common stockholders' equity, less goodwill, while total capital includes the allowance for possible credit losses, subject to 1.25% limitation of risk-adjusted assets.  The rules require Tier I capital of 4% of risk-adjusted assets and total capital of 8%.  At September 30, 2003, the Company's Tier I capital ratio was 11.54%, and total capital was 13.46%.  At December 31, 2002 the Company's Tier I capital ratio was 10.23% and the total capital ratio was 11.49%.



12

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Issuance of Trust Preferred Securities

On April 10, 2003, the Company completed an offering of trust preferred securities and received net proceeds of approximately $5,910,000.  The proceeds are being used to repurchase stock and for general Company purposes; the proceeds may be used to provide additional capital to Venture Bank.  Trust preferred securities consist of the issuance of subordinated debt securities to a wholly owned subsidiary business trust, which then issues preferred stock to investors.  The wholly owned subsidiary trust is consolidated in the Consolidated Financial Statements.  The interest payments on the debt securities are approximately equal to the dividend payments on the preferred stock of the trust.  The Company will be able to recognize a deduction of the interest cost for income tax purposes, while the net proceeds, up to one-third of total capital adjusted for accumulated other comprehensive income, will qualify as Tier 1 capital.

Results of Operations

General

Net income for the nine months ended September 30, 2003 increased 51.56% to $7,031,000, compared to $4,639,000 for the same period in 2002. The increase in net income can be primarily attributed to increased interest income due to the loans acquired with the purchase of Harbor Bank in Gig Harbor in October 2002, increased fees earned on mortgage loans sold and a $1,386,000 gain on sale of assets recorded in July 2003.  Net income without the gain on sale of assets would have been $5,645,000 for the nine months ended September 30, 2003 a 22% increase over the same period in 2002.

Interest income for the nine months ended September 30, 2003 increased $2,661,000, or 12.52%, from the same period in the prior year.  Increased volume of earning assets provided an additional $9,922,000 of interest income for the first nine months, which was partially offset by a $4,261,000 reduction in interest income due to the reduced earnings rate of these assets.   Average earning assets for the first nine months of 2003 were $93,754,000 or 29.15% higher than in the same period of 2002.  The average rate earned on assets decreased to 7.70% in the first nine months of 2003 from 8.84% for the same period in 2002, a decrease of 114 basis points.

Total interest expense for the nine months ended September 30, 2003 decreased $137,000, or 2.85%, from the comparable period in the prior year.  The decrease in the interest rate paid on deposits and borrowings, which declined 56 basis points, to 1.79% in the first nine months of 2003 from 2.35% in the first nine months of 2002, resulted in a reduction to interest expense of $1,698,000.  This amount was offset by a $1,561,000 increase in the volume of these liabilities, which rose from an average of $273,590,000 in 2002 to $348,425,000 in 2003.   The increase in volumes is primarily attributed to the purchase of Harbor Bank in October 2002.

Net interest income increased $2,798,000, an increase of 17.01% for the nine months ended September 30, 2003 over the same period for 2002.  The increase in the Company's net interest income is primarily the result of increased loan volumes due to the acquisition of Harbor Bank and a reduction in interest rates causing a corresponding reduction in cost of funds.  The Company's small loan product also impacted the growth in net interest income for the period.    This product's contribution to net interest income decreased slightly to $3,462,000 in the first nine months of 2003 from $3,561,000 during the same period in 2002, a $99,000 or 2.78% decrease.   The decrease in the product's contribution to net interest income can be attributed to a modification in the Company's Advance America agreement related specifically to loan originations in Alabama.  Effective July 11, 2003 the Company discontinued the origination of small loans in Alabama; Advance America is paying the Company a fee equal to the loan fees that would have been received under its original agreement through October 31, 2003.  These fees are recorded as "Other Income", as opposed to loan fee income.

Interest income for the three months ended September 30, 2003 increased $192,000, or 2.62%, from the same period in the prior year.  Increased volume of earning assets provided an additional $7,615,000 of interest income for the period while rate differentials reduced income by $7,423,000.   Average earning assets for the three months ended September 30, 2003 were $102,305,000 or 31.40% higher than in the same period of 2002.  The average rate earned on assets decreased to 6.97% from 8.92% for the same period in 2002, a decrease of 95 basis points.   As noted above Alabama small loan fees are recorded as "Other Income", as opposed to loan fee income, thus reducing the Company's loan income and the average rate earned on loans.



13

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Total interest expense for the three months ended September 30, 2003 decreased $125,000, or 7.66%, from the comparable period in the prior year.  The decrease in the interest rate paid on deposits and borrowings, which declined 57 basis points, to 1.69% for the quarter ended September 30, 2003 from 2.26% for the same period in 2002, resulted in a reduction to interest expense of $1,650,000.  This amount was offset by a $1,525,000 increase in the volume of these liabilities, which rose from an average of $285,957,000 in 2002 to $353,666,000 in 2003.

Net interest margin, defined as net interest income as a percentage of average earning assets, decreased by 65 basis points to 6.19% from 6.84% in the first nine months of 2003 compared to the same period in 2002 and decreased by 137 basis points to 5.57% from 6.94% for the quarter ended September 30, 2003 compared to the same quarter in 2002.

The yield and cost of funds for earning assets and interest bearing liabilities were as follows as of and for the nine months ended September 30 (dollars in thousands):



2003


2002Average Balance
Interest Income (Expense)
Average Rates
Average Balance
Interest Income (Expense)
Average RatesEarning Assets:Loans (Interest and fees)a
$365,539
$22,615
8.27%
$298,027
$20,305
9.11%Federal funds sold
8,372
59
.94%
1,513
19
1.68%Investment securitiesb
41,522
1,245
4.01%
22,140
934
5.64%Total earning assetsand interest income
$415,433
$23,919
7.70%
$321,680
$21,258
8.84%Interest bearing liabilities:Deposits:Savings, NOW, andMoney Market Deposits
$164,811
$(1,109)
0.90%
$130,489
$(1,235)
1.27%Time deposits
134,497
(2,436)
2.42%
130,822
(3,196)
3.27%Total interest bearing deposits
$299,308
$(3,545)
1.58%
$261,311
$(4,431)
2.27%Other borrowings
49,117
(1,130)
3.08%
12,279
(381)
4.15%Total interest bearing liabilitiesand interest expense
$348,425
$(4,675)
1.79%
$273,590
$(4,812)
2.35%Net interest income

$19,244


$16,446Net interest margin as a percentof average earning assets:


6.19%


6.84%


An analysis of the change in net interest income is as follows for the nine months ended September 30 (dollars in thousands):



2003 compared
      to 2002Increase
      (decrease) due toVolume
      
      Rate
      
      NetInterest earned on:Loansc
      $
      5,193
      $
      (2,883)
      $
      2,310Federal funds sold and
      deposits in banks
      
      57
      
      (17)
      
      40Investment securities
      
      777
      
      (466)
      
      311Total interest
      income
      
      6,922
      
      (4,261)
      
      2,661




---

a   
Average loan balance includes nonaccrual loans.  Interest income on
nonaccrual loans has been included.b    The yield on investment securities is calculated
using historical cost basis.c    Balances of nonaccrual loans, if any, and related
income recognized have been included for computational purposes.



14

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Interest paid on:Savings, NOW and MMA
      
      395
      
      (521)
      
      (126)Time deposits
      
      142
      
      (902)
      
      (760)Other borrowings
      
      932
      
      (183)
      
      749Total Interest
      expense
      
      1,561
      
      (1,698)
      
      (137)Net interest income
      $
      5,361
      $
      (2,563)
      $
      2,798




The yield and cost of funds for earning assets and interest bearing liabilities were as follows as of and for the three months ended September 30 (dollars in thousands):



2003


2002Average Balance
Interest Income (Expense)
Average Rates
Average Balance
Interest Income (Expense)
Average RatesEarning Assets:Loans (Interest and fees)
$360,625
$6,944
7.64%
$299,491
$6,987
9.26%Federal funds sold
13,155
30
.90%
3,728
17
1.70%Investment securities
54,296
545
3.98%
22,552
323
5.70%Total earning assetsand interest income
$428,076
$7,519
6.97%
$325,771
$7,327
8.92%Interest bearing liabilities:Deposits:Savings, NOW, andMoney Market Deposits
$173,813
$(360)
0.82%
$131,702
$(408)
1.23%Time deposits
127,223
(756)
2.36%
133,751
(995)
2.95%Total interest bearing deposits
$301,036
$(1,116)
1.47%
$265,453
$(1,403)
2.10%Other borrowings
52,630
(391)
2.95%
20,504
(229)
4.43%Total interest bearing liabilitiesand interest expense
$355,666
$(1,507)
1.69%
$285,957
$(1,632)
2.26%Net interest income

$6,012


$5,695Net interest margin as a percentof average earning assets:


5.57%


6.94%




An analysis of the change in net interest income is as follows for the three months ended September 30 (dollars in thousands):



2003 compared
      to 2002Increase
      (decrease) due toVolume
      
      Rate
      
      NetInterest earned on:Loans
      $
      5,195
      $
      (5,238)
      $
      (43)Federal funds sold and
      deposits in banks
      
      62
      
      (49)
      
      13Investment securities
      
      820
      
      (598)
      
      222Total interest
      income
      
      7,615
      
      (7,423)
      
      192Interest paid on:Savings, NOW and MMA
      
      503
      
      (551)
      
      (48)Time deposits
      
      (47)
      
      (192)
      
      (239)Other borrowings
      
      635
      
      (473)
      
      162Total Interest
      expense
      
      1,525
      
      (1,650)
      
      (125)Net interest income
      $
      6,090
      $
      (5,773)
      $
      317




15

---



The change in interest, due to both rate and volume, has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

Non-interest income for the nine months ended September 30, 2003 was $4,486,000, or 78.92% greater than the same period for 2002.  Service charges increased $587,000, or 24.42%, over the first nine months of 2002.  Fees on mortgage loans sold increased by $1,063,000, or 61.40% over the same period in 2002.  Non-interest income for the quarter ended September 30, 2003 was $3,115,000, or 152.70% greater than the same period for 2002.  Service charges increased $164,000, or 21.35%, over the same period in 2002.  Fees on mortgage loans sold increased by $258,000, or 38.97% over the same period in 2002.  The year-to-date and quarter-to-date increase over the same period in 2002 can be attributed to the increased service charges primarily due to the increased relationships generated from the addition of Harbor Bank in the fourth quarter of 2002 and a continued strong performance in fees generated on mortgage loans sold.  In July 2003 the Company reflected a $2,100,000 gain on sale of assets not reflected in 2002.  Finally, as previously noted the Company, effective July 11, 2003 began recording fees earned on Alabama small loans as "Non-interest income".  The amount recorded in the third quarter approximated $581,000.

Non-interest expense for the nine months ended September 30, 2003 increased by $3,564,000 or 25.99% over the same period in 2002.  Non-interest expense for the quarter ended September 30, 2003 increased by $983,000 or 21.08% over the same period in 2002.  Salaries and employee benefits for the first nine months of 2003 increased by $2,323,000, or 32.78% over the same nine month period in 2002 and increased $747,000 or 30.48% for the quarter ended September 30, 2003 over the quarter ended September 30, 2002.  Both increases reflect the additional employees related to the Harbor Bank acquisition as well as increased commission compensation associated with the large increase in mortgage loan originations.  The change in occupancy expense which primarily reflects the operation of two additional Harbor Bank branches not in operation for the same period in 2002 increased $684,000, or 37.03% for the first nine months of 2003 and $193,000 or 31.13% for the quarter ended September 30, 2003 over the same period in 2002.  For the first nine months other expense increased by $557,000, or 11.65% compared to the prior year.  This fluctuation was due to increased asset size and costs associated with developing the Company's branding strategy, reduced by a business and occupation tax refund received in the second quarter of 2003.

Business Segment Reporting

The Company is managed along two major lines of business; community banking, its core business, and the small loan division, which began operations in the fourth quarter of 2000.  Community banking consists of all lending, deposit and administrative operations conducted through its 20 offices in Washington State.  The small loan division provides small, short-term consumer loans to customers in Arkansas and prior to July, in Alabama.  Effective July 14, 2003 the Company discontinued originating small loans in Alabama.  The Company continues to receive income comparable to the amount the Company would have received if it had continued to originate these loans in the State of Alabama.  This income will continue through October 31, 2003.

Prior to 2001, the Company was managed as a whole, not by discrete operating segments.  When the Company began offering small loans, its operating results were segregated in the General Ledger system to better manage financial performance.  The financial performance of the business lines is measured by the Company's profitability reporting process, which utilizes various management accounting techniques to more accurately reflect each business line's financial results.  Revenues and expenses are primarily assigned directly to business lines.

The organizational structure of the Company is not necessarily comparable with other companies.  As such, the Company's business line performance may not be directly comparable with similar information from other financial institutions.

Selected comparative financial information for community banking and the small loan division, which are included in the overall financial results, as of and for the nine months ended September 30, are as follows (dollars in thousands):



Nine months ended September 30, 2003

Community
Banking

Small
Loans

TotalNet Interest income after provision for credit losses
$
15,548
$
2,554
$
18,102Non-interest income

9,701

581

10,282Non-interest expense

16,945

316

17,261Income taxes

2,747

836

3,582Net Income
$
5,558
$
1,982
$
7,540Total assets
$
500,284
$
6,336
$
506,620Total Loans
$
359,401
$
2,663
$
362,064




16

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|Nine months ended September 30, 2002                  |   | Community
Banking |   | Small
Loans |   | Total  
|----------------------------------------------------- | - | ----------------- | - | ----------- | - | -------
|                                                      |   |                   |   |             |   |        
|Net Interest income after provision for credit losses | $ | 12,659            | $ | 2,403       | $ | 15,062 
|Non-Interest income                                   |   | 5,346             |   | (8)         |   | 5,338  
|Non-Interest expense                                  |   | 12,535            |   | 608         |   | 13,143 
|Income taxes                                          |   | 1,716             |   | 596         |   | 2,312  
|Net Income                                            | $ | 3,754             | $ | 1,191       | $ | 4,945  
|Total assets                                          | $ | 376,106           | $ | 17,529      | $ | 939,635
|Total Loans                                           | $ | 304,716           | $ | 7,574       | $ | 312,290



Regulatory Developments

Three recent legislative and regulatory developments may impact the operations and earnings generated by the small loan division.



The Alabama legislature recently enacted the Deferred Presentment Services Act.  The Act creates a regulatory framework within which licensed, non-bank lenders may now make small loans in Alabama.  Due to changes in Alabama law, the Bank and Advance America terminated the original Marketing and Servicing Agreement effective July 11, 2003.  The terms of the termination agreement include Advance America continuing to remit to the Bank a portion of the fees earned for the period July 11, 2003 through October 31, 2003, the termination date of the original agreement.  The fee structure was established to keep the Bank financially whole as if the Bank had continued in the small loan program in Alabama through the original agreement termination date.



The Washington State legislature recently passed amendments to the Check Cashers and Sellers Act, the law that authorizes small loans in Washington.  Among other changes, the amendments increase the maximum small loan amount from $500 to $700 (with lower fees allowed on any amounts over $500), allows borrowers to rescind a loan within one business day, and requires lenders to offer payment plans to certain repeat borrowers.  While the amendments may cause an increase in certain administrative expenses, we do not anticipate that they will have a material impact on our small loan operations.



The Federal Deposit Insurance Corporation (FDIC) recently issued Guidelines for state chartered, nonmember banks that participate in small loan programs with third party contractors.  The Guidelines cover safety and soundness considerations, including loan concentrations, capital adequacy, allowance for loan and lease losses, and loan classification guidelines.  Compliance considerations, such as Community Reinvestment Act performance, Truth in Lending, and consumer privacy are also covered.  The Guidelines allow examiners wide discretion to review and, where necessary, criticize a bank's loan program based upon these considerations.  Where serious deficiencies exist, the FDIC may order a bank to discontinue its small loan program.



The Guidelines will certainly increase the regulatory scrutiny of the Bank's small loan program.  While we do not believe that grounds exist for the FDIC to order the Bank to curtail or discontinue its small loan program, it is likely that the increased regulatory scrutiny will add to the Bank's compliance burdens and costs.  It may also cause the Bank to evaluate the extent of its continued participation in the small loan business.



The Company is taking steps to forestall any negative effect that may occur from these developments, including the discussions regarding providing small loan programs with Advance America and other small loan providers in other states and the introduction of replacement programs.  While the Company believes it will be able to minimize any negative impact on its earnings from these developments, there can be no assurance that its efforts will be wholly successful.  Because of the significance of the small loan division to the Company's earnings, unsuccessful or delayed substitution of other states, providers or programs could have a material adverse effect on the Company's earnings.



17

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Item 3     Quantitative and Qualitative Disclosure About Market Risk

The Company's results of operation are dependent upon its ability to manage interest rate risk. Management considers interest rate risk to be a risk that could have a material effect on the Company's financial condition and results of operations. The Company does not currently use derivatives to manage market and interest rate risk.

A number of measures are used to monitor and manage interest rate risk, including income simulations and interest sensitivity (gap) analyses.  An income simulation model is the primary tool used to assess the direction and magnitude of changes in net interest income resulting from changes in interest rates.  Key assumptions in the model include repayment speeds on certain assets, cash flows and maturities of other investment securities, loan and deposit volumes and pricing.  These assumptions are inherently uncertain and, as a result, the model cannot precisely estimate net interest income or precisely predict the impact of higher or lower interest rates on net interest income.

Actual results will differ from simulated results due to timing, magnitude and frequency of interest rate changes and changes in market conditions and management strategies, among other factors.  At September 30, 2003, based on the measures used to monitor and manage interest rate risk, there has not been a material change in the Company's interest rate risk since December 31, 2002.  For additional information, refer to the Company's annual report on Form 10-K for the year ended December 31, 2002.



Interest Rate Gap Analysis
September 30, 2003



(dollars in thousands)
Within
One Year
After One
But Within
Five Years
After
Five Years
TotalLoans
$   173,382
$136,376
$49,570
$359,328Securities:Available for sale
2,762
36,231
47,611
86,604Held to maturity
- -
504
- -
504Federal funds sold
Interest bearing deposits in banks
3,600
985
- -
- -
- -
- -
3,600
985Total Earning Assets
$   180,729
$ 173,111
$97,181
$451,021Deposits:Savings, NOW and money market
$ 176,617
$           - -
$          - -
$176,617Time deposits
85,370
36,770
3
122,143Short-term borrowings
24,821
- -
- -
24,821Long-term debt
- -
23,000
19,000
42,000Total Interest Bearing Liabilities
$ 286,808
$    59,770
19,003
$365,581Net Interest Rate Sensitivity Gap
($ 106,079)
$ 113,341
$ 78,178
$  85,440




Item 4	Disclosure Controls and Procedures



Management of the Company, including the Chief Executive Officer and the Chief Financial Officer, have conducted an evaluation of the Company's disclosure controls and procedures in accordance with Rule 13a-14 under the Securities Exchange Act of 1934 as of a date (the "evaluation date") within 90 days prior to the filing date of this report.  Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, as of the evaluation date, the Company's disclosure controls and procedures were effective in ensuring that all material information relating to the Company required to be filed in this quarterly report has been made known to them in a timely manner.

Since the evaluation date, there have been no changes to the Company's internal controls or in other factors that could significantly affect those controls.



18

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Venture Financial Group, Inc.

PART II - OTHER INFORMATION

Item 1          Legal Proceedings

> Due to the nature of the banking business, we are in involved in legal proceedings in the ordinary course of business.  At this time, we do not believe that there is pending litigation the outcome of which will have a material adverse affect on the financial condition, results of operations, or liquidity of the Company.

Item 6       
  Exhibits and Reports on Form 8-K

> (a)    Exhibits
>     The following exhibits are filed herewith, and this list constitutes the exhibit index:
> 3.1 Second Amended and Restated Articles of Incorporation
> 3.2 Bylaws (incorporated by reference to Exhibit 3(b) of the Registrant's
> Annual Report on Form 10-K for the fiscal year ending December 31, 2001, filed
> April 1, 2002)
> 31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
> 31.2  Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
> 32 Certification of CEO and Chief Financial Officer under Section 906 of Sarbanes-Oxley Act of 2002



> (b)    Reports on Form 8-K
>     Second Quarter 2003 Earnings Release furnished July 28, 2003
> 
> Second Quarter 2003 Cash Dividend Declared filed July 22, 2003



19

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Venture Financial Group, Inc.

SIGNATURES

Pursuant to the requirements 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.

VENTURE FINANCIAL GROUP, INC.(Registrant)Date: November 13, 2003
      By:
      /s/ Ken F. Parsons, Sr.Ken F. Parsons
      President, Chief Executive Officer


|Date: November 13, 2003 | By: | /s/
    Catherine M. Reines                    
|----------------------- | --- | -----------------------------------------------
|                        |     | Catherine M. Reines
    Chief Financial Officer



20

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EXHIBIT 3.1



SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
FIRST COMMUNITY FINANCIAL GROUP, INC.

* * * * *

ARTICLE I

The name of the
corporation shall be VENTURE FINANCIAL GROUP, INC.

ARTICLE II
Duration

The corporation's period of
duration shall be perpetual.

ARTICLE III
Purposes

The purposes for which the
corporation is organized are:

> Section 3.1To engage in business as a bank
>   holding company.
>   Section 3.2
>   To carry on any lawful business whatsoever in connection with the foregoing
>   for which corporations may be incorporated under the Washington Business
>   Corporation Act, including any amendments thereto or successor statutes that
>   may hereinafter be enacted.

ARTICLE IV
Capital

The aggregate number of shares
that the Corporation shall have authority to issue is 20,200,000 shares,
20,000,000 of which shall be common shares with no par value per share, and
200,000 shares of preferred stock with no par value per share. The preferred
stock will have such rights and preferences as may be determined by resolution
of the Board of Directors.

ARTICLE V
No Pre-Emptive Rights

No shareholder shall have the
pre-emptive right to acquire unissued shares of the corporation, or securities
convertible into shares of any class whatsoever, whether now or hereafter
authorized, and whether issued for cash, property, services or otherwise.



---



ARTICLE VI
No Cumulative Voting

Each shareholder entitled to vote
at any election for directors shall have the right to vote, in person or by
proxy, the number of shares owned by him/her for as many persons as there are
directors to be elected and for whose election he/she has a right to vote, and
no shareholder shall be entitled to cumulate his/her votes.

ARTICLE VII
Power to Amend Bylaws

The Board of Directors shall have
full power to adopt, alter, amend or repeal the Bylaws or adopt new Bylaws.
Nothing herein, however, shall deny the concurrent power of the shareholders to
adopt, alter, amend or repeal the Bylaws.

ARTICLE VIII
Right to Amend

The corporation reserves the right
to amend, alter, change or repeal any provision of its Articles of Incorporation
to the extent permitted by the laws of the State of Washington. All rights of
shareholders are granted subject to this reservation.

ARTICLE IX
Registered Office and Agent

The address of the
initial registered office of the corporation is 721 College Street S.E., P.O.
Box 3800, Lacey, Washington 98509-3800. The name of its initial registered agent
at that address is Ken F. Parsons.

ARTICLE X
Contracts

The corporation may enter into a
contract and otherwise transact business as vendor, purchaser or otherwise, with
its directors, officers and shareholders, and with corporations, associations,
firms and entities in which they are or may become interested as directors,
officers, shareholders, members or otherwise, as freely as though such adverse
interest did not exist, even though the vote, action or presence of such
director, officer or shareholder may be necessary to obligate the corporation
upon such contract or transaction; and in the absence of fraud, no such contract
or transaction shall be avoided and no such director, officer or shareholder
shall be held liable to account to the corporation, by reason of such adverse
interest or any fiduciary relationship to the corporation arising out of such
office or stock ownership, for any profit or benefit realized by him/her through
any such contract or transaction; provided that the nature of the interest of
such director, officer or shareholder though not necessarily the details or
extent thereof, be disclosed or known to the Board of Directors or shareholders
of the corporation, at the meeting thereof at which such contract or transaction
is authorized or confirmed. A general notice that a director, officer or
shareholder of the corporation is interested in any corporation, association,
firm or entity shall be sufficient disclosure as to such director, officer or
shareholder with respect to all contracts and transactions with that
corporation, association, firm or entity.



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ARTICLE XI
Capital Surplus

The corporation may use its
unreserved and unrestricted capital surplus to purchase its own shares and may,
from time to time, distribute to shareholders, cash or property out of its
capital surplus.

ARTICLE XII
Board Nominations

Nominations for election to the
Board of Directors may be made by the Board of Directors or by any shareholder
of any outstanding class of stock of the corporation entitled to vote for the
election of directors. Nominations, other than those made by the Board of
Directors, shall be made in writing and shall be delivered or mailed, U.S. mail,
postage prepaid, to the Chairman of the corporation not less than fourteen (14)
days nor more than fifty (50) days prior to any meeting of shareholders called
for the election of directors; provided, however, that if less than twenty-one
(21) days' notice of the meeting is given to shareholders, such nomination shall
be delivered or mailed, U.S. mail, postage prepaid, to the Chairman of the
corporation not later than the close of business on the seventh (7th) day
following the day on which the notice of meeting was mailed. Such notification
shall contain the following information to the extent known to the notifying
shareholder:



Nominations not made in accordance
herewith may, in his/her discretion, be disregarded by the Chairman of the
meeting, and upon his/her instructions, the vote teller may disregard all votes
cast for such nominee.



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ARTICLE XIII
Indemnification and Director Liability

Section 13.1    Definitions. As used in this Article:

(a)    The term "Egregious Conduct" by a person shall mean acts
or omissions that involve intentional misconduct or a knowing violation of law,
conduct violating Section 23B.08.310 of the Revised Code of Washington, as
amended, or participation in any transaction from which the person will
personally receive a benefit in money, property, or services to which the person
is not legally entitled.

(b)    The term "Finally Adjudged" shall mean stated in a
judgment based upon clear and convincing evidence by a court having
jurisdiction, from which there is no further right to appeal.

(c)    The term "Director" shall mean any person who is a
director of the corporation and any person who, while a director of the
corporation, is serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, limited liability company, partnership, joint venture, trust, or
other enterprise, or is a fiduciary or party in interest in relation to any
employee benefit plan covering any employee of the corporation or of any
employer in which it has an ownership interest; and "conduct as a Director"
shall include conduct while a Director is acting in any of such capacities.

(d)    The term "Officer-Director" shall mean any person who is
simultaneously both an officer and director of the corporation and any person
who, while simultaneously both an officer and director of the corporation, is
serving at the request of the corporation as a director, officer, manager,
partner, trustee, employee, or agent of another foreign or domestic corporation,
limited liability company, partnership, joint venture, trust, or other
enterprise, or is a fiduciary or party in interest in relation to any employee
benefit plan covering any employee of the corporation or of any employer in
which it has an ownership interest; and "conduct as an Officer-Director" shall
include conduct while such a person is acting as an officer of the corporation
or in any of such other capacities.

(e)    The term "Subsidiary Corporation" shall mean any
corporation or limited liability company at least eighty percent of the voting
interests of which is held beneficially by this corporation.

(f)    The term "Subsidiary Outside Director" shall mean any
person who, while not principally employed by this corporation or any Subsidiary
Corporation, is a director or manager of a Subsidiary Corporation and any such
person who, while a director or manager of a Subsidiary Corporation, is serving
at the request of such corporation as a director, officer, manager, partner,
trustee, employee, or agent of another foreign or domestic corporation, limited
liability company, partnership, joint venture, trust, or other enterprise, or is
a fiduciary or party in interest in relation to any employee benefit plan
covering any employee of such corporation or of any employer in which it has an
ownership interest; and "conduct as a Subsidiary Outside Director" shall include
conduct while such a person is acting in any of such capacities.



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Section 13.2    Liability of Directors. No Director, Officer-Director, former Director
or former Officer-Director shall be personally liable to the corporation or its
shareholders for monetary damages for conduct as a Director or Officer-Director
occurring after the effective date of this Article unless the conduct is Finally
Adjudged to have been Egregious Conduct.

Section 13.3   
Liability of Subsidiary Outside Directors.No Subsidiary Outside
Director or former Subsidiary Outside Director shall be personally liable in any
action brought directly by this corporation as a shareholder of the Subsidiary
Corporation or derivatively on behalf of the Subsidiary Corporation (or by any
shareholder of this corporation double-derivatively on behalf of this
corporation and the Subsidiary Corporation) for monetary damages for conduct as
a Subsidiary Outside Director occurring after the effective date of this Article
unless the conduct is Finally Adjudged to have been Egregious Conduct.

Section 13.4   
Mandatory Indemnification of Directors.Subject to Sections 13.7 and
13.8 of this Article, the corporation shall indemnify any person who is, or is
threatened to be made, a party to any action, suit, or proceeding, whether
civil, criminal, administrative, or investigative, and whether formal or
informal, and whether by or in the right of the corporation or its shareholders
or by any other party, by reason of the fact that the person is or was a
Director, Officer-Director, or Subsidiary Outside Director against judgments,
penalties or penalty taxes, fines, settlements (even if paid or payable to the
corporation or its shareholders or to a Subsidiary Corporation) and reasonable
expenses, including attorneys' fees, actually incurred in connection with such
action, suit or proceeding unless the liability and expenses were on account of
conduct Finally Adjudged to be Egregious Conduct.

Section 13.5   
Advancing Expenses.Except as prohibited by Sections 13.7 and 13.8 of
this Article, the reasonable expenses, including attorneys' fees, of a Director,
Officer-Director, Subsidiary Outside Director, or person formerly serving in any
such capacities, incurred in connection with an action, suit or proceeding in
which the individual is entitled to indemnification under Section 13.4 shall be
paid or reimbursed by the corporation, upon request of such person, in advance
of the final disposition of such action, suit or proceeding upon receipt by the
corporation of a written, unsecured promise by the person to repay such amount
if it shall be Finally Adjudged that the person is not eligible for
indemnification. All expenses incurred by such person in connection with such
action, suit or proceeding shall be considered reasonable unless Finally
Adjudged to be unreasonable.

Section 13.6   
Procedure.Except as required by Sections 13.7 and 13.8 of this
Article, no action by the Board of Directors, the shareholders, independent
counsel, or any other person or persons shall be necessary or appropriate to the
determination of the corporation's indemnification obligation under this Article
in any specific case, to the determination of the reasonableness of any expenses
incurred by a person entitled to indemnification under this Article, nor to the
authorization of indemnification in any specific case.



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Section 13.7   
Exception for Internal Claims.Notwithstanding anything else in these
Articles, the corporation shall not be obligated to indemnify any person for any
expenses, including attorneys' fees, incurred to assert any claim against the
corporation (except a claim to enforce rights to indemnification) or any person
related to or associated with it, including any person who would be entitled
hereby to indemnification in connection with the claim.

Section 13.8   
Exception for Regulatory Claims.

(a)    Regulatory Proceedings Generally. Notwithstanding
anything else in these Articles, indemnification of any Director,
Officer-Director or Subsidiary Outside Director, or any person formerly serving
in any such capacities, and advancement of expenses in connection with either an
administrative proceeding or a civil action instituted by a federal banking
agency ("Regulatory Proceedings") shall be governed by this Section.

(b)    Banking Regulations Defined. The term "Banking
Regulations" shall mean any state or federal laws or regulations applicable to
the corporation, or any formal policies adopted by a regulatory agency having
jurisdiction over the corporation.

(c)    Indemnification in Regulatory Proceedings. The
corporation shall provide indemnification and advancement of expenses in
connection with Regulatory Proceedings to the extent permitted, and in the
manner prescribed by Banking Regulations. Insurance and other means to ensure
payment of costs and expenses in Regulatory Proceedings may be obtained or
provided to the extent permitted and in the manner prescribed by Banking
Regulations.

(d)    Federal Deposit Insurance Corporation.
Notwithstanding anything else in these Articles, the Articles are subject to the
requirements and limitations set forth in state and federal laws, rules,
regulations, and orders regarding indemnification and prepayment of legal
expenses and liabilities, including Section 18(k) of the Federal Deposit
Insurance Act, as amended, and Part 359 of the Federal Deposit Insurance
Corporation's Rules and Regulations or any successor regulations. To the extent
of any conflict between state and federal law regarding the interpretation and
scope of the Articles, federal law shall supercede and control.

Section 13.9    Enforcement of Rights. The corporation shall indemnify any person
granted indemnification rights under this Article against any reasonable
expenses incurred by the person to enforce such rights.

Section 13.10   
Set-off of Claims.Any person granted indemnification rights herein
may directly assert such rights in set-off of any claim raised against the
person by or in the right of the corporation and shall be entitled to have the
same tribunal which adjudicates the corporation's claim adjudicate the person's
entitlement to indemnification by the corporation.



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Section 13.11   
Continuation of Rights.The indemnification rights provided in this
Article shall continue as to a person who has ceased to be a Director,
Officer-Director, or Subsidiary Outside Director and shall inure to the benefit
of the heirs, executors, and administrators of such person.

Section 13.12   
Effect of Amendment or Repeal.Any amendment or repeal of this
Article shall not adversely affect any right or protection of a Director,
Officer-Director, or Subsidiary Outside Director or person formerly serving in
any of such capacities existing at the time of such amendment or repeal with
respect to acts or omissions occurring prior to such amendment or repeal.

Section 13.13   
Severability of Provisions.Each of the substantive provisions of
this Article is separate and independent of the others, so that if any provision
hereof shall be held to be invalid or unenforceable for any reason, such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions.

Section 13.14    Application to Officers, Employees and Agents. By resolution, the Board
of Directors may extend the provisions of this Article 13 to any officers,
employees or agents of the corporation.

ARTICLE XIV
Directors

The board of directors shall be
divided into three classes: Class 1, Class 2, and Class 3, which shall be nearly
equal in number as possible. Each director shall serve for a term ending on the
date of the third annual meeting of the shareholders following the annual
meeting at which such director was elected; provided, however, that each initial
director in Class 1 shall hold office until the annual meeting of shareholders
in 1988, each initial director in Class 2 shall hold office until the annual
meeting of shareholders in 1989; and each initial director in Class 3 shall hold
office until the annual meeting of shareholders in 1990.

ARTICLE XV
Incorporator

The name and address of the incorporator is George W.
Bowen, 3033 Carpenter Loop S.E., Lacey, Washington 98503.

ARTICLE XVI
Evaluating Offers

The Board of Directors of the
corporation, when evaluating any offer of another party to (a) make a tender or
exchange offer for any equity security of the corporation, (b) merge or
consolidate the corporation with another corporation, or (c) purchase or
otherwise acquire all or substantially all of the properties and assets of the
corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the corporation and its
stockholders, give due consideration to all relevant factors, including without
limitation the social and economic effects on the community, employees,
customers, and other constituents of the corporation and its subsidiary.



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ARTICLE XVII
Fair Price Provision



Section 17.1In addition to the requirements of any applicable statute, and
notwithstanding any other provisions of any other articles of these Articles of
Incorporation, the affirmative vote of not less than 90% of the total shares
which are entitled to be voted in an election of directors shall be required for
the approval of any Business Combination (as defined below).

Section 17.2The approval requirements of Section 17.1 shall not apply if either:

(a)    The Business Combination is approved by at least 66 2/3%
of the Directors of the Corporation; or

(b)    Both of the following conditions are satisfied:

(i)    The cash or fair market value of the property, securities
or other consideration to be received per share in the Business Combination by
holders of the common stock of the corporation is not less than the highest
price per share (including brokerage commissions, soliciting dealers' fees and
dealer-management compensation) paid by such offeror in acquiring any of its
holdings of the corporation's common stock; and

(ii)    A proxy statement responsive to the requirements of the
Securities Exchange Act of 1934, whether or not the corporation is then subject
to such requirements, shall be mailed to the stockholders of the corporation for
the purpose of soliciting stockholder approval of such Business Combination.

Section 17.3For the purposes of this Article 17:

(a)    The term "Business Combination" shall mean (i) any merger
or consolidation of the corporation, (ii) any sale, lease, exchange, transfer or
other disposition, including without limitation a mortgage or any other security
device, of all or any Substantial Part (as defined below) of the assets of the
corporation (including without limitation any voting securities of a subsidiary)
or of a subsidiary, (iii) any merger or consolidation with or into a corporation
or its subsidiary, (iv) the issuance of any securities of the corporation or a
subsidiary of the corporation to any person or entity, or (v) any agreement,
contract or other arrangement providing for any of the transactions described in
this definition of Business Combination;

(b)    The term "Substantial Part" shall mean more than 10% of
the total assets of the corporation in question, as of the end of its most
recent fiscal year prior to the time determination is being made;



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(c)    Without limitation, any shares of common stock of the
corporation which any person has the right to acquire at any time pursuant to
any agreement, or upon exercise of conversion right, warrants or options, or
otherwise, shall be deemed outstanding and beneficially owned by such person for
purposes of this Article 17; and

(d)    For the purposes of Section 17.2(b)(i) of this Article,
the phrase "other consideration to be received" shall include, without
limitation, common stock of the corporation retained by its existing
stockholders in the event of a Business Combination in which the corporation is
the surviving corporation

Section 17.4For the purposes of this Article 17, a majority of the Directors shall have
the power and duty to determine on the basis of information known to them (a)
whether a proposed transaction is subject to the provisions of this Article 17,
(b) the amount of shares of the corporation Beneficially Owned by any person,
(c) whether a person is an Affiliate or Associate of another, and (d) such other
matters as to which a determination may be required by the provisions of this
Article 17.

Section 17.5The provisions set forth in this Article 17 may not be repealed or amended
in any respect or in any manner including any merger or consolidation of the
corporation with any other corporation unless the surviving corporation's
Articles of Incorporation contain an article to the same effect as this Article
17, except by the affirmative vote of the holders of not less than 90% of the
outstanding shares of common stock of the corporation.

ARTICLE XVIII
Special Meeting of Shareholders

Special meetings
of the shareholders may be called at any time by the President, a majority of
the Board of Directors, or by shareholders owning in the aggregate not less than
fifty percent (50%) of the shares entitled to vote at the special meeting.



DATED this ____ of May 2003.Ken F. Parsons, President and C.E.O.




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EXHIBIT 31.1





CERTIFICATION UNDER SECTION 302
OF SARBANES-OXLEY ACT OF 2002



I, Ken F. Parsons, Sr. certify that:







(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and



> (a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
> (b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
> 
>   Date: November 13, 2003
>         /s/ Ken F. Parsons, Sr.Ken F. Parsons
>         President, Chief Executive Officer





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EXHIBIT 31.2





CERTIFICATION UNDER SECTION 302
OF SARBANES-OXLEY ACT OF 2002







I, Catherine M. Reines, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Venture Financial Group, Inc. (the "registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

> (a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
> (b)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
> (c)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

1. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

> (a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
> (b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

> Date: November 13, 2003
>         /s/
>         Catherine M. ReinesCatherine M. Reines
>         Chief Financial Officer



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EXHIBIT 32



CERTIFICATION OF
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER



This certification is given by the undersigned Chief Executive Officer and Chief Financial Officer of Venture Financial Group, Inc. (the "Registrant") pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  Each of the undersigned hereby certifies, with respect to the Registrant's quarterly report of Form 10-Q for the period ended September 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), that:

(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Registrant.





/s/ Ken F. Parsons, Sr.Ken F. Parsons, Sr.
Chief Executive Officer



/s/ Catherine M. ReinesCatherine M. Reines
Chief Financial Officer

November 13, 2003



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