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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q[X]
	Quarterly report Pursuant to section 13 or 15(d) of the Securities and Exchange act of 1934For the quarter ended June 30, 2005[   ]
	Transition report pursuant to section 13 or 15(d) of the Securities and Exchange act of 1934 For the transition period from______
to ______


Commission file number 0-23881

COWLITZ BANCORPORATION(Exact name of registrant as specified in its charter)

Washington
	
	91-1529841(State or other jurisdiction
	
	(I.R.S. Employerof incorporation or organization)
	
	Identification No.)


927 Commerce Ave., Longview, Washington 98632(Address of principal executive offices) (Zip Code)

(360) 423-9800(Registrant's telephone number, including area code)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the 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.

Common Stock, no par value on July 31, 2005: 4,186,446 shares

1

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COWLITZ BANCORPORATION AND SUBSIDIARYTABLE OF CONTENTSPAGEPart I
	
	FINANCIAL INFORMATIONItem 1.
	
	Financial StatementsConsolidated Statements of Condition -
	
	3June 30, 2005, and December 31, 2004Consolidated Statements of Income -
	
	4Three and six months ended June 30, 2005 and June 30, 2004Consolidated Statements of Changes in Shareholders'
Equity -
	
	5Year ended December 31, 2004 and six months ended June 30, 2005Consolidated Statements of Cash Flows -
	
	6Six months ended June 30, 2005 and 2004Notes to Consolidated Financial Statements
	
	7-12Item 2.
	
	Management's Discussion and Analysis of Financial ConditionAnd Results of Operations
	
	12-21Item 3.
	
	Quantitative and Qualitative Disclosures About Market Risk
	
	21-22Item 4.
	
	Controls and Procedures
	
	22Part II
	
	OTHER INFORMATIONItem 1.
	
	Legal Proceedings
	
	22Item 2.
	
	Unregistered Sales of Equity Securities and Use of Proceeds
	
	22Item 3.
	
	Defaults upon Senior Securities
	
	22Item 4.
	
	Submission of Matters to a Vote of Security Holders
	
	22Item 5.
	
	Other Information
	
	23Item 6.
	
	Exhibits
	
	23Signatures
	
	24Certification of Chief Executive Officer and Chief Financial Officer
	
	25-27


Forward-Looking Statements

Management's discussion and the information in this document and the accompanying financial statements contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by words such as
"expect", "believe", "intend", "anticipate", "estimate" or similar expressions, and are subject to risks and uncertainties that could cause actual results to differ materially from those stated. Examples of such risks and uncertainties that
could have a material adverse effect on the operations and future prospects of the Company, and could render actual results different from those expressed in the forward-looking statements, include, without limitation: those set forth in our
most recent Form 10-K and other filings with the SEC, changes in general economic conditions, competition for financial services in the market area of the Company, the level of demand for loans, quality of the loan and investment portfolio,
deposit flows, legislative and regulatory initiatives, and monetary and fiscal policies of the U.S. Government affecting interest rates. The reader is advised that this list of risks is not exhaustive and should not be construed as any prediction by
the Company as to which risks would cause actual results to differ materially from those indicated by the forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements.

2

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|Part I. FINANCIAL INFORMATION                                            |  |   |  |          |  |              |  |        
|------------------------------------------------------------------------ |  | - |  | -------- |  | ------------ |  | -------
|                                                                        
|Item 1. Financial Statements                                             |  |   |  |          |  |              |  |        
|                                                                        
|                                                                        
|COWLITZ BANCORPORATION AND SUBSIDIARY                                    |  |   |  |         
|CONSOLIDATED STATEMENTS OF CONDITION                                     |  |   |  |         
|(dollars in thousands)                                                   |  |   |  |         
|                                                                        
|                                                                         |  |   |  | June 30, |  | December 31,
|ASSETS                                                                   |  |   |  | 2005     |  |              |  | 2004   
|                                                                         |  |   |  |         
|Cash and cash equivalents                                                |  | $ |  | 18,898   |  | $            |  | 8,332  
|Investment securities:                                                   |  |   |  |          |  |              |  |        
|Available-for-sale (at fair value, cost of $55,464 and $59,682 at        |  |   |  |          |  |              |  |        
|June 30, 2005 and December 31, 2004, respectively)                       |  |   |  | 55,634   |  |              |  | 60,005 
|                                                                         |  |   |  |         
|Total investment securities                                              |  |   |  | 55,634   |  |              |  | 60,005 
|                                                                        
|Federal Home Loan Bank stock, at cost                                    |  |   |  | 1,050    |  |              |  | 1,047  
|                                                                        
|Loans, net of deferred loan fees                                         |  |   |  | 208,731  |  |              |  | 189,346
|Allowance for loan losses                                                |  |   |  | (3,935)  |  |              |  | (3,796)
|                                                                         |  |   |  |         
|Total loans, net                                                         |  |   |  | 204,796  |  |              |  | 185,550
|                                                                        
|Cash surrender value of bank-owned life insurance                        |  |   |  | 11,250   |  |              |  | 8,585  
|Premises and equipment, net of accumulated depreciation of $4,865 and    |  |   |  |          |  |              |  |        
|$4,703 at June 30, 2005 and December 31, 2004, respectively              |  |   |  | 3,949    |  |              |  | 4,017  
|Goodwill                                                                 |  |   |  | 852      |  |              |  | 852    
|Accrued interest receivable and other assets                             |  |   |  | 5,402    |  |              |  | 4,898  
|                                                                         |  |   |  |         
|TOTAL ASSETS                                                             |  | $ |  | 301,831  |  | $            |  | 273,286
|                                                                         |  |   |  |         
|                                                                        
|LIABILITIES                                                              |  |   |  |          |  |              |  |        
|Deposits:                                                                |  |   |  |          |  |              |  |        
|Non-interest-bearing demand                                              |  | $ |  | 60,509   |  | $            |  | 51,982 
|Savings and interest-bearing demand                                      |  |   |  | 81,363   |  |              |  | 77,709 
|Certificates of deposit                                                  |  |   |  | 107,202  |  |              |  | 104,919
|                                                                         |  |   |  |         
|Total deposits                                                           |  |   |  | 249,074  |  |              |  | 234,610
|                                                                        
|Federal funds purchased                                                  |  |   |  | 450      |  |              |  | 475    
|Federal Home Loan Bank borrowings                                        |  |   |  | 400      |  |              |  | 473    
|Other borrowings                                                         |  |   |  | 35       |  |              |  | 38     
|Junior subordinated debentures                                           |  |   |  | 12,372   |  |              |  | -      
|Accrued interest payable and other liabilities                           |  |   |  | 2,349    |  |              |  | 1,992  
|                                                                         |  |   |  |         
|TOTAL LIABILITIES                                                        |  |   |  | 264,680  |  |              |  | 237,588
|                                                                        
|SHAREHOLDERS' EQUITY                                                     |  |   |  |          |  |              |  |        
|Preferred stock, no par value; 5,000,000 shares authorized; no shares    |  |   |  |          |  |              |  |        
|issued and outstanding at June 30, 2005 and December 31, 2004            |  |   |  | -        |  |              |  | -      
|Common stock, no par value; 25,000,000 shares authorized; with 4,186,446 |  |   |  |          |  |             
|and 4,173,552 shares issued and outstanding at June 30, 2005 and         |  |   |  |          |  |              |  |        
|December 31, 2004, respectively                                          |  |   |  | 19,624   |  |              |  | 19,511 
|Additional paid-in capital                                               |  |   |  | 2,022    |  |              |  | 2,022  
|Retained earnings                                                        |  |   |  | 15,280   |  |              |  | 13,951 
|Accumulated other comprehensive income, net of taxes                     |  |   |  | 225      |  |              |  | 214    
|                                                                         |  |   |  |         
|TOTAL SHAREHOLDERS' EQUITY                                               |  |   |  | 37,151   |  |              |  | 35,698 
|                                                                         |  |   |  |         
|                                                                        
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                               |  | $ |  | 301,831  |  | $            |  | 273,286
|                                                                         |  |   |  |         
|                                                                        
|See accompanying notes                                                   |  |   |  |          |  |              |  |        

3

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|COWLITZ BANCORPORATION AND SUBSIDIARY                        
|-------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF INCOME                            
|(dollars in thousands, except per share amounts)             
|                                                             
|                                                             
|                                                             
|                                                             
|                                                             
|INTEREST INCOME                                              
|Interest and fees on loans                                   
|Interest on taxable investment securities                    
|Interest on non-taxable investment securities                
|Other interest and dividend income                           
|                                                             
|Total interest income                                        
|                                                             
|                                                             
|INTEREST EXPENSE                                             
|Savings and interest-bearing demand                          
|Certificates of deposit                                      
|Federal funds purchased                                      
|Federal Home Loan Bank borrowings                            
|Subordinated Debt                                            
|Other borrowings                                             
|                                                             
|Total interest expense                                       
|                                                             
|                                                             
|Net interest income before provision for loan losses         
|                                                             
|PROVISION FOR LOAN LOSSES                                    
|                                                             
|Net interest income after provision for loan losses          
|                                                             
|                                                             
|NON-INTEREST INCOME                                          
|Service charges on deposit accounts                          
|(Losses) gains on loans sold                                 
|Mortgage brokerage fees                                      
|Credit card income                                           
|Fiduciary income                                             
|Increase in cash surrender value of bank-owned life insurance
|Net gains (losses) on sale of repossessed assets             
|Other income                                                 
|                                                             
|Total non-interest income                                    
|                                                             
|                                                             
|NON-INTEREST EXPENSE                                         
|Salaries and employee benefits                               
|Net occupancy and equipment expense                          
|Professional fees                                            
|Business taxes                                               
|Advertising                                                  
|FDIC assessment                                              
|Credit card expense                                          
|Data processing and communications                           
|Loan expense                                                 
|Postage and freight                                          
|Travel and education                                         
|Stationery and supplies                                      
|Temporary help                                               
|Amortization of intangible assets                            
|Insurance Premiums                                           
|Placement fees and other employee hiring expenses            
|Expenses relating to other real estate owned                 
|Other expenses                                               
|                                                             
|Total non-interest expense                                   
|                                                             
|Income before provision for income taxes                     
|INCOME TAX PROVISION                                         
|                                                             
|NET INCOME                                                   
|                                                             
|                                                             
|BASIC EARNINGS PER SHARE OF COMMON STOCK                     
|                                                             
|DILUTED EARNINGS PER SHARE OF COMMON STOCK                   
|                                                             
|WEIGHTED-AVERAGE SHARES OUTSTANDING  BASIC                  
|                                                             
|WEIGHTED-AVERAGE SHARES OUTSTANDING  DILUTED                
|                                                             
|See accompanying notes                                       

4

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|COWLITZ BANCORPORATION AND SUBSIDIARY                     
|----------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
|(dollars in thousands)                                    
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|                                                          
|BALANCE, December 31, 2003                                
|Comprehensive income:                                     
|Net income                                                
|Net unrealized gain on investments                        
|reclassified from held-to-maturity                        
|to available-for-sale, net of                             
|deferred taxes of $134                                    
|Net change in unrealized gains on                         
|investments available-for-sale,                           
|net of deferred taxes of $140                             
|                                                          
|Comprehensive income                                      
|                                                          
|Proceeds from the exercise of                             
|stock options                                             
|Tax benefit from the exercise                             
|of stock options                                          
|                                                          
|                                                          
|BALANCE, December 31, 2004                                
|                                                          
|Comprehensive income:                                     
|Net income                                                
|Net changes in unrealized gains on                        
|investments available-for-sale,                           
|net of deferred taxes of $5                               
|                                                          
|Comprehensive income                                      
|                                                          
|Proceeds from the exercise of stock                       
|options and employee                                      
|stock purchases                                           
|                                                          
|                                                          
|BALANCE, June 30, 2005                                    
|                                                          

5

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|COWLITZ BANCORPORATION AND SUBSIDIARY                                                       
|--------------------------------------------------------------------------------------------
|CONSOLIDATED STATEMENTS OF CASH FLOWS                                                       
|(dollars in thousands)                                                                      
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|                                                                                            
|CASH FLOWS FROM OPERATING ACTIVITIES                                                        
|Net income from operations                                                                  
|Adjustments to reconcile net income to net cash from operating activities:                  
|Depreciation and amortization                                                               
|Provision for loan losses                                                                   
|Increase in cash surrender value of bank-owned life insurance                               
|Federal Home Loan Bank stock dividends                                                      
|Net amortization of investment security premiums and accretion of discounts                 
|Net (gains) losses on sales of foreclosed assets                                            
|Net gains on the sale and disposal of premises and equipment                                
|Net gains on loans sold                                                                     
|Origination of loans held-for-sale                                                          
|Proceeds from loan sales                                                                    
|(Increase) decrease in accrued interest receivable and other assets                         
|Increase (decrease) in accrued interest payable and other liabilities                       
|                                                                                            
|Net cash from operating activities                                                          
|                                                                                            
|                                                                                            
|CASH FLOWS FROM INVESTING ACTIVITIES                                                        
|Proceeds from maturities and sales of investment securities available-for-sale              
|Purchases of available-for-sale investment securities                                       
|Investment in Subsidiary Trust                                                              
|Proceeds from redemption of Federal Home Loan Bank stock                                    
|Net increase in loans                                                                       
|Proceeds from sale of foreclosed assets                                                     
|Purchases in bank-owned life insurance                                                      
|Purchases of premises and equipment                                                         
|Proceeds from the sale of premises and equipment                                            
|                                                                                            
|Net cash from investment activities                                                         
|                                                                                            
|                                                                                            
|CASH FLOWS FROM FINANCING ACTIVITIES                                                        
|Net increase (decrease) in savings, noninterest-bearing and interest-bearing demand deposits
|Net increase (decrease) in certificates of deposit                                          
|Net (decrease) increase in federal funds purchased                                          
|Proceeds from Federal Home Loan Bank borrowings                                             
|Repayment of Federal Home Loan Bank borrowings                                              
|Proceeds from issuance of Junior Subordinated debentures                                    
|Repayment of other borrowings                                                               
|Proceeds from the exercise of stock options                                                 
|                                                                                            
|Net cash from financing activities                                                          
|                                                                                            
|                                                                                            
|Net (decrease) increase in cash and cash equivalents                                        
|CASH AND CASH EQUIVALENTS, beginning of period                                              
|                                                                                            
|CASH AND CASH EQUIVALENTS, end of period                                                    
|                                                                                            
|See accompanying notes                                                                      

6

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1.Nature of Operations

Cowlitz Bancorporation (the "Company") was organized in 1991 under Washington law to become the holding company for The Cowlitz Bank (the
"Bank"), a Washington state chartered bank that commenced
operations in 1978. The principal executive offices of the Company are located in Longview, Washington. The Cowlitz Bank operates four branches in Cowlitz County in southwest Washington. Outside of Cowlitz County, the Bank does business under the
name Bay Bank with branches in Bellevue, Washington, and Portland, Oregon, a loan production office in Vancouver, Washington, and a limited service branch in a retirement center in Wilsonville, Oregon. The Cowlitz Bank also provides mortgage banking
services through its Bay Mortgage division with offices in Longview, Castle Rock, Kalama, and Vancouver, Washington. During much of 2003, the Company also operated Bay Mortgage and Bay Escrow offices in Bellevue and Seattle, Washington. As part of a
strategy to consolidate resources into commercial banking, and reduce reliance on mortgage lending activities, those offices were closed during the fourth quarter of 2003 and the first quarter of 2004.

The Company offers or makes available a broad range of financial services to its customers, primarily small and medium-sized businesses, professionals, and retail customers. The Bank's commercial and personal
banking services include commercial and real estate lending, consumer lending, and trust services. The Company's goals are to offer exceptional customer service and to invest in the markets it serves through its business practices and community
service.

2.Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its subsidiary. All significant intercompany transactions and balances have been eliminated.

In April 2005, the Company formed Cowlitz Statutory Trust I (the Trust), a wholly-owned Delaware statutory business trust, for purposes of issuing guaranteed undivided beneficial interests in junior subordinated
debentures (Trust Preferred Securities). During April 2005, the Trust then issued $12 million in Trust Preferred Securities. In accordance with Financial Accounting Standards Board's Interpretation No. 46 (revised December 2003)
"Consolidation of Variable Interest Entities," the Company does not consolidate the Trust, as it is not the primary beneficiary.

The interim financial statements have been prepared without an audit and in accordance with the instructions to Form 10-Q, generally accepted accounting principals, and banking industry practices. Accordingly, they do
not include all 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, all adjustments, including normal recurring accruals
necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the six months ended June 30, 2005 are not necessarily indicative of results to be anticipated for the
year ending December 31, 2005.

3.Cash and Cash Equivalents

For the purpose of presentation in the statements of cash flows, cash and cash equivalents include cash on hand, amounts due from banks including certificates of deposit, and federal funds sold. Federal funds sold generally
mature the day following purchase.

4.Use of Estimates in the Preparation of Financial Statements

Preparation of the consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Significant estimates include the
allowance for loan losses and the carrying value of the Company's goodwill. Actual results could differ from those estimates.

5.Earnings Per Share

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

|                                              |  | Three Months Ended |  | Six Months Ended
|--------------------------------------------- |  | ------------------ |  | ----------------
|                                              |  | June 30,           |  | June 30,        
|                                              |  |                    |  |                 
|                                              |  | 2005               |  | 2004            
|                                              |  |                    |  |                 
|Weighted-average shares  basic               |  | 4,176,724          |  | 3,914,493       
|Effect of assumed conversion of stock options |  | 144,720            |  | 201,756         
|                                              |  |                    |  |                 
|                                             
|Weighted-average shares  diluted             |  | 4,321,444          |  | 4,116,249       
|                                              |  |                    |  |                 

7

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6.Recently Issued Accounting Standards

In December 2004, the FASB issued Statement No. 123(R),
"Share-Based Payment."  This statement replaces existing requirements under SFAS No. 123,
"Accounting for Stock-Based Compensation," and
eliminates the ability to account for share-based compensation transactions under APB Opinion No. 25,
"Accounting for Stock Issued to Employees." SFAS No. 123(R) requires stock-based transactions to be recognized as compensation
expense in the income statement based on their fair values at the date of grant. The fair value should be estimated using option-pricing
models such as the Black-Scholes model or a binomial model. This statement is effective for interim
and annual periods beginning after December 15, 2005. At this time, the Company does not believe the future impact on earnings to be materially different than what has historically been reported as the pro forma effect to income in Note 7. The
impact to operating and financing cash flows is not considered to be material to the consolidated financial statements.

In March 2004, the Financial Accounting Standards Board (FASB) ratified the consensuses reached by the Emerging Issues Task Force (EITF) regarding Issue 03-1,
"The Meaning of Other-Than-Temporary
Impairment and its Application to Certain Investments." Issue 03-1 provides guidance on recognition and measurement of other-than-temporary impairment and its application to certain investments, including all debt securities and
equity securities that are subject to the scope of SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."

On September 30, 2004, FASB issued a proposed Board-directed Staff Position, FSP EITF Issue 03-1-a, Implementation Guidance for the Application of Paragraph 16 of EITF Issue 03-1,
"The Meaning of
Other-Than-Temporary Impairment and Its Application to Certain Investments." The proposed FSP will provide implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads
and analyzed for other-than-temporary impairment under paragraph 16 of Issue 03-1. The Board has delayed the effective date to provide further implementation guidance. This delay does not suspend the requirement to recognize
other-than-temporary impairments as required by existing authoritative literature. The delay of the effective date for paragraphs 10 through 20 of Issue 03-1 will be superceded concurrent with the final issuance of FSB EITF Issue
03-1-a. The Company does not anticipate adoption of this Staff Position will have a material effect on its financial condition or results of operations.

In December 2003, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 03-3 (SOP 03-3),
"Accounting for Certain Loans or Debt
Securities Acquired in a Transfer," which addresses the accounting for certain loans acquired in a transfer when it is probable, at acquisition, that the investor will be unable to collect all contractually required payments receivable. SOP
03-3 is to be applied prospectively, effective for loans acquired in years beginning after December 15, 2004. SOP 03-3 requires acquired loans with evidence of credit deterioration to be recorded at fair value and prohibits recording any
valuation allowance related to such loans at the time of purchase. This SOP limits the yield that may be accreted on such loans to the excess of the investor's estimated cash flows over its initial investment in the loan. The excess of
contractual cash flows over cash flows expected to be collected is not to be recognized as an adjustment of yield. Subsequent increases in cash flows expected to be collected are recognized prospectively through adjustment of the loan's yield
over its remaining life. Decreases in cash flows expected to be collected are recognized as impairment. Loans carried at fair value, mortgage loans held-for-sale, and loans to borrowers in good standing under revolving credit agreements
are excluded from the scope of SOP 03-3. The Company does not anticipate adoption of this Statement of Position will have a material effect on its financial condition or results of operations.

7.Stock-Based Compensation

SFAS No. 123, "Accounting for Stock-Based Compensation," requires disclosure about stock-based compensation arrangements regardless of the method used to account for them. As permitted by SFAS No. 123,
the Company has decided to apply the accounting provisions of Accounting Principles Board (APB) Opinion No. 25, and therefore discloses the difference between compensation cost included in net income and the related cost measured by the fair
value-based method defined by SFAS No. 123, including tax effects, that would have been recognized in the statement of income if the fair value method had been used. Under APB Opinion No. 25, no compensation cost has been recognized for the
Company's stock option plans. Had compensation cost for these plans been determined consistent with SFAS No. 123 and recognized over the vesting period, the Company's net income and earnings per share would have been reduced to the
following pro forma amounts:

8

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|                           |  | Three Months Ended |  | Three Months Ended |  | Six Months Ended |  | Six Months Ended                                
|-------------------------- |  | ------------------ |  | ------------------ |  | ---------------- |  | ------------------------------------------------
|                           |  |                    |  | June 30, 2005      |  |                  |  | June 30, 2004                                   
|                           |  |                    |  |                    |  |                  |  |                                                 
|                           |  |                    |  | As                 |  | Pro              |  |                                                 
|                           |  | Reported           |  | Forma              |  | Reported         |  | Forma                                           
|                           |  |                    |  |                    |  |                  |  |                                                 
|                           |  |                    |  |                    |  |                  |  | (dollars in thousands, except for share amounts)
|Net income                 |  | $                  |  | 687                |  | $ 645            |  | $                                               
|                           |  |                    |  |                    |  |                  |  |                                                 
|Basic earnings per share   |  | $                  |  | 0.16               |  | $ 0.15           |  | $                                               
|                           |  |                    |  |                    |  |                  |  |                                                 
|Diluted earnings per share |  | $                  |  | 0.16               |  | $ 0.15           |  | $                                               
|                           |  |                    |  |                    |  |                  |  |                                                 

The fair value of each option granted is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for the periods ended June 30, 2005 and 2004.

|                      |  | Three Months Ended |  | Six Months Ended
|--------------------- |  | ------------------ |  | ----------------
|                      |  | June 30,           |  | June 30,        
|                      |  |                    |  |                 
|                      |  | 2005               |  | 2004            
|                      |  |                    |  |                 
|                     
|Dividend yield        |  | 0.00%              |  | 0.00%           
|Expected life (years) |  | 4.26               |  | 4.26            
|Expected volatility   |  | 35.12%             |  | 38.40%          
|Risk-free rate        |  | 2.95%              |  | 2.98%           
|                     

For the Company, comprehensive income primarily includes net income reported on the statements of income and changes in the fair value of available-for-sale investment securities. These amounts are included in
"Other Comprehensive Income" on the consolidated statement of changes in shareholders' equity.

| |  |                                                                     |  | Three Months Ended |  |          |  | Six Months Ended
| |  | ------------------------------------------------------------------- |  | ------------------ |  | -------- |  | ----------------
| |  |                                                                     |  |                    |  | June 30, |  |                 
| |  |                                                                     |  |                    |  |         
| |  |                                                                     |  |                    |  | 2005     |  |                 
| |  |                                                                     |  |                    |  |          |  |                 
|
|
| |  | Unrealized holding gains (losses) arising during the period, net of |  | $                  |  | 255      |  | $               
| |  | Less reclassification adjustment for net realized (gains) losses    |  |                    |  |          |  |                 
| |  | on securities available-for-sale included in net                    |  |                    |  |          |  |                 
| |  | income during the period, net of tax                                |  |                    |  | -        |  |                 
| |  |                                                                     |  |                    |  |          |  |                 
|
| |  | Net unrealized holding gains (losses) included in                   |  |                    |  |          |  |                 
| |  | other comprehensive income                                          |  | $                  |  | 255      |  | $               
| |  |                                                                     |  |                    |  |          |  |                 

9. Segments of an Enterprise and Related Information

The Company is principally engaged in community banking activities through its branches and corporate offices. Community banking activities include accepting deposits, providing loans and lines of credit to local
individuals, businesses and governmental entities, investing in investment securities and money market instruments, and holding or managing assets in a fiduciary agency capacity on behalf of its customers and their beneficiaries. The mortgage
banking segment, Bay Mortgage, offers a full line of residential lending products including FHA and VA loans, construction loans, and bridge loans.

The community banking and mortgage banking activities are monitored and reported by Company management as separate operating segments. Despite the closure of Bay Escrow and the Bellevue and Seattle offices of Bay Mortgage
during the fourth quarter of 2003, mortgage lending activities in the remaining locations will continue to be reported as a separate operating segment.

The accounting policies for the Company's segment information provided in the following tables are the same as those described for the Company in the summary of significant accounting policies footnote included in the
Company's 2004 annual report, except that some operating expenses are not allocated to segments.

Summarized financial information for the three months ended June 30, 2005 and six months ended June 30, 2005, concerning the Company's reportable segments is shown in the following tables:

9

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|                                     |  |   |  |         |  |          |  | Three Months Ended June 30, 2005 |  |              |  |             
|------------------------------------ |  | - |  | ------- |  | -------- |  | -------------------------------- |  | ------------ |  | ------------
|                                     |  |  
|                                     |  |   |  |         |  | Mortgage |  | Holding                          |  |              |  |             
|                                     |  |   |  | Banking |  | Banking  |  | Company                          |  | Intersegment |  | Consolidated
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Interest income                      |  | $ |  | 4,502   |  | $        |  | -                                |  | $            |  | 9           
|Interest expense                     |  |   |  | 1,012   |  |          |  | -                                |  |              |  | 108         
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Net interest income                  |  |   |  | 3,490   |  |          |  | -                                |  |              |  | (99)        
|Provision for loan losses            |  |   |  | 60      |  |          |  | -                                |  |              |  | -           
|Non-interest income                  |  |   |  | 486     |  |          |  | 55                               |  |              |  | -           
|Non-interest expense                 |  |   |  | 2,737   |  |          |  | 108                              |  |              |  | 93          
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Income (loss) before provision       |  |   |  |         |  |          |  |                                  |  |              |  |             
|(benefit) for income taxes           |  |   |  | 1,179   |  |          |  | (53)                             |  |              |  | (192)       
|                                     |  |   |  |         |  |          |  |                                  |  |              |  |             
|Provision (benefit) for income taxes |  |   |  | 332     |  |          |  | (18)                             |  |              |  | (92)        
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Net income (loss)                    |  | $ |  | 847     |  | $        |  | (35)                             |  | $            |  | (100)       
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Depreciation and amortization        |  | $ |  | 68      |  | $        |  | 12                               |  | $            |  | -           
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Total assets                         |  | $ |  | 301,161 |  | $        |  | 91                               |  | $            |  | 48,950      
|                                     |  |   |  |         |  |          |  |                                  |  |             
|                                     |  |   |  |         |  |          |  | Three Months Ended June 30, 2004 |  |              |  |             
|                                     |  |   |  |         |  |          |  |                                  |  |             
|                                     |  |   |  |         |  | Mortgage |  | Holding                          |  |              |  |             
|                                     |  |   |  | Banking |  | Banking  |  | Company                          |  | Intersegment |  | Consolidated
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Interest income                      |  | $ |  | 4,084   |  | $        |  | 22                               |  | $            |  | 2           
|Interest expense                     |  |   |  | 1,105   |  |          |  | 21                               |  |              |  | 34          
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Net interest income                  |  |   |  | 2,979   |  |          |  | 1                                |  |              |  | (32)        
|Provision (benefit) for loan losses  |  |   |  | 100     |  |          |  | -                                |  |              |  | -           
|Non-interest income                  |  |   |  | 604     |  |          |  | 118                              |  |              |  | -           
|Non-interest expense                 |  |   |  | 2,663   |  |          |  | 245                              |  |              |  | 109         
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Income (loss) before provision       |  |   |  |         |  |          |  |                                  |  |              |  |             
|(benefit) for income taxes           |  |   |  | 820     |  |          |  | (126)                            |  |              |  | (141)       
|                                     |  |   |  |         |  |          |  |                                  |  |              |  |             
|Provision (benefit) for income taxes |  |   |  | 207     |  |          |  | (44)                             |  |              |  | (49)        
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Net income (loss)                    |  | $ |  | 613     |  | $        |  | (82)                             |  | $            |  | (92)        
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Depreciation and amortization        |  | $ |  | 156     |  | $        |  | 15                               |  | $            |  | -           
|                                     |  |   |  |         |  |          |  |                                  |  |             
|Total assets                         |  | $ |  | 258,517 |  | $        |  | 1,128                            |  | $            |  | 33,562      
|                                     |  |   |  |         |  |          |  |                                  |  |             

10

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|                                     |  |   |  |         |  |          |  | Six Months Ended June 30, 2005 |  |              |  |             
|------------------------------------ |  | - |  | ------- |  | -------- |  | ------------------------------ |  | ------------ |  | ------------
|                                     |  |  
|                                     |  |   |  |         |  | Mortgage |  | Holding                        |  |              |  |             
|                                     |  |   |  | Banking |  | Banking  |  | Company                        |  | Intersegment |  | Consolidated
|                                     |  |   |  |         |  |          |  |                                |  |             
|Interest income                      |  | $ |  | 8,613   |  | $        |  | -                              |  | $            |  | 10          
|Interest expense                     |  |   |  | 1,965   |  |          |  | -                              |  |              |  | 108         
|                                     |  |   |  |         |  |          |  |                                |  |             
|Net interest income                  |  |   |  | 6,648   |  |          |  | -                              |  |              |  | (98)        
|Provision (benefit) for loan losses  |  |   |  | 60      |  |          |  | -                              |  |              |  | -           
|Non-interest income                  |  |   |  | 1,026   |  |          |  | 161                            |  |              |  | -           
|Non-interest expense                 |  |   |  | 5,458   |  |          |  | 225                            |  |              |  | 168         
|                                     |  |   |  |         |  |          |  |                                |  |             
|Income (loss) before provision       |  |   |  |         |  |          |  |                                |  |              |  |             
|(benefit) for income taxes           |  |   |  | 2,156   |  |          |  | (64)                           |  |              |  | (266)       
|Provision (benefit) for income taxes |  |   |  | 593     |  |          |  | (32)                           |  |              |  | (92)        
|                                     |  |   |  |         |  |          |  |                                |  |             
|Net income (loss)                    |  | $ |  | 1,563   |  | $        |  | (32)                           |  | $            |  | (174)       
|                                     |  |   |  |         |  |          |  |                                |  |             
|Depreciation and amortization        |  | $ |  | 138     |  | $        |  | 24                             |  | $            |  | -           
|                                     |  |   |  |         |  |          |  |                                |  |             
|Total assets                         |  | $ |  | 301,161 |  | $        |  | 91                             |  | $            |  | 48,950      
|                                     |  |   |  |         |  |          |  |                                |  |             
|                                     |  |   |  |         |  |          |  | Six Months Ended June 30, 2004 |  |              |  |             
|                                     |  |  
|                                     |  |   |  |         |  | Mortgage |  | Holding                        |  |              |  |             
|                                     |  |   |  | Banking |  | Banking  |  | Company                        |  | Intersegment |  | Consolidated
|                                     |  |   |  |         |  |          |  |                                |  |             
|Interest income                      |  | $ |  | 8,155   |  | $        |  | 129                            |  | $            |  | 5           
|Interest expense                     |  |   |  | 2,278   |  |          |  | 113                            |  |              |  | 84          
|                                     |  |   |  |         |  |          |  |                                |  |             
|Net interest income                  |  |   |  | 5,877   |  |          |  | 16                             |  |              |  | (79)        
|(Benefit) provision for loan losses  |  |   |  | 250     |  |          |  | -                              |  |              |  | (163)       
|Non-interest income                  |  |   |  | 1,135   |  |          |  | 395                            |  |              |  | -           
|Non-interest expense                 |  |   |  | 5,182   |  |          |  | 729                            |  |              |  | 279         
|                                     |  |   |  |         |  |          |  |                                |  |             
|Income (loss) before provision       |  |   |  |         |  |          |  |                                |  |              |  |             
|(benefit) for income taxes           |  |   |  | 1,580   |  |          |  | (318)                          |  |              |  | (195)       
|Provision (benefit) for income taxes |  |   |  | 407     |  |          |  | (110)                          |  |              |  | (66)        
|                                     |  |   |  |         |  |          |  |                                |  |             
|Net income (loss)                    |  | $ |  | 1,173   |  | $        |  | (208)                          |  | $            |  | (129)       
|                                     |  |   |  |         |  |          |  |                                |  |             
|Depreciation and amortization        |  | $ |  | 318     |  | $        |  | 32                             |  | $            |  | -           
|                                     |  |   |  |         |  |          |  |                                |  |             
|Total assets                         |  | $ |  | 258,517 |  | $        |  | 1,128                          |  | $            |  | 33,562      
|                                     |  |   |  |         |  |          |  |                                |  |             

Compared to segment information reported during the three months ended June 30, 2005, the mortgage banking segment experienced lower activity during the corresponding periods of 2004. In December 2003 and the first quarter
of 2004, the Company reduced the size of its mortgage banking operations by closing its Bay Mortgage offices in Bellevue and Seattle. Reduced demand for mortgage refinance loans and a desire to concentrate resources on the core banking segment were
significant factors leading to the decision to scale back the mortgage banking segment.

11

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Although mortgage operations have been significantly reduced, and have generated small losses, improved efficiencies and an increase in net interest income in the banking segment more than offset the losses. The banking
segment reported net income of approximately $847,000 and $1.56 million during the three and six month periods ended June 30, 2005, respectively, compared to $613,000 and $1.17 million during the same periods of 2004, increases of
$234,000 and $390,000, respectively.

10. Junior Subordinated Debentures

In April 2005, the Company formed a wholly-owned Delaware statutory business trust subsidiary, Cowlitz Statutory Trust I (the Trust), which issued $12,000,000 of guaranteed undivided beneficial interests in the
Company's Junior Subordinated Deferrable Interest Debentures (Trust Preferred Securities). These debentures qualify as Tier 1 capital under Federal Reserve Board guidelines. The Company owns all of the common securities of the Trust. The
proceeds from the issuance of the common securities and the Trust Preferred Securities were used by the Trust to purchase $12,372,000 of junior subordinated debentures of the Company. The debentures, which represent the sole asset of the Trust,
accrue and pay distributions quarterly at a variable rate of 90-day LIBOR plus 1.75% per annum of the stated liquidation value of $1,000 per capital security. The Company has entered into contractual arrangements which, taken collectively,
fully and unconditionally guarantee payment of: (1) accrued and unpaid distributions required to be paid on the Trust Preferred Securities, (2) the redemption price with respect to any Trust Preferred Securities called for redemption by the Trust,
and (3) payments due upon a voluntary or involuntary dissolution, winding up or liquidation of the Trust. The Trust Preferred Securities are mandatorily redeemable upon maturity of the debentures on April 29 2035 or upon earlier redemption as
provided in the indenture. The Company has the right to redeem the debentures purchased by the Trust in whole or in part, on or after April 29, 2010. As specified in the indenture, if the debentures are redeemed prior to maturity, the redemption
price will be the principal amount and any accrued but unpaid interest. For the three month period ended June 30, 2005, the Company recorded interest expense related to the Trust Preferred Securities of $108,000.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations for the Three and Six Months Ended June 30, 2005 and 2004

The Company's net income for the second quarter of 2005 was $687,000 or $0.16 per diluted share, compared to net income of $439,000, or $0.11 per diluted share for the second quarter of 2004. Net income
was $248,000 or 56% higher during the three months ended June 30, 2005 compared to the same period of 2004. The Company's net income for six months ended June 30, 2005 was $1,329,000 or $0.31 per diluted share, compared to net
income of $836,000 or $0.20 per diluted share for the same period of 2004. Net income for six months ended June 30, 2005 was 58.9% higher compared to the same period of 2004. Net interest income increased $443,000 the second quarter of
2005, compared to the same period in 2004. Average earning assets increased $32.9 million from $240.4 million in the second quarter of 2004 to $273.3 million for the period ending June 30, 2005. Average interest bearing liabilities
increased $15.3 million from $174.0 million to $189.3 million during the same period. Net interest income increased $738,000 during the six month period ended June 30, 2005, as compared to the same period of 2004. Average earning
assets for six months ended June 30, 2005 increased $32.7 million from $237.3 million to $270.0 million.

The banking segment recorded a provision for loan losses of $60,000 for the six months ended June 30, 2005.  This provision, coupled with $38,000 in charge-offs and by $117,000 in recoveries, led to the
increase in the allowance of $139,000 for the six months ended June 30, 2005.

Financial Condition as of June 30, 2005 and 2004

At June 30, 2005, total assets were $301.8 million, an increase of $28.6 million or 10.5% from December 31, 2004 and an increase of $42 million or 16.2% from June 30, 2004. Liabilities increased to $264.7 as
of June 30, 2005 from $237.6 as of December 31, 2004 and $227.7 million as of June 30, 2004.

The primary increase in assets is reflected in loans with an increase of $19.2 million from December 31, 2004 to June 30, 2005. Cash and cash equivalents increased $10.6 million from December 2004 to June 2005.
Bank-owned life insurance increased $2.7 million from December 2004 to June 2005. Total deposits increased $14.5 million of which $8.5 million was in non-interest bearing demand and $3.7 million was in the savings and
interest-bearing demand deposit.

Critical Accounting Policies

The Company's most critical accounting policy is related to the allowance for loan losses. The Company utilizes both quantitative and qualitative considerations in establishing an allowance for loan losses believed to
be appropriate as of each reporting date.

Quantitative factors include:

- the volume and severity of non-performing loans and adversely classified credits,

12

---

- the level of net charge-offs experienced on previously classified loans,
- the nature and value of collateral securing the loans,
- the trend in loan growth and the percentage of change,
- the level of geographic and/or industry concentration,
- the relationship and trend over the past several years of recoveries in relation to charge-offs, and
- other known factors regarding specific loans.

Qualitative factors include:

- the effectiveness of credit administration,
- the adequacy of loan review,
- the adequacy of loan operations personnel and processes,
- the effect of competitive issues that impact loan underwriting and structure,
- the impact of economic conditions, and
- the introduction of new loan products or specific marketing efforts.

Changes in the above factors could significantly affect the determination of the adequacy of the allowance for loan losses. Management performs a full analysis, no less often than quarterly, to ensure that changes in
estimated loan loss levels are adjusted on a timely basis. For further discussion of this significant management estimate, see
"Allowance for Loan Losses." Another critical accounting policy for the Company is that related to the carrying
value of goodwill. Goodwill was recognized as the excess of cost over the fair value of net assets acquired from the purchase of Bay Mortgage, and the Portland, Oregon branch of Bay Bank, formerly Northern Bank of Commerce. Goodwill was amortized
using the straight-line method over a 15-year period until December 31, 2001. Effective January 1, 2002, pursuant to Statement of Financial Accounting Standards (SFAS) No. 142,
"Goodwill and Other Intangible Assets," the Bank
ceased amortization of goodwill and completed its first of ongoing assessments of goodwill impairment in March 2002. The $852,000 current balance of goodwill is related entirely to the Northern Bank of Commerce purchase. Goodwill impairment will
be deemed to exist in the future if the net book value of a reporting unit, considered by the Bank to represent its operating segments, exceeds its estimated fair value.

Analysis of Net Interest Income

The primary component of the Company's earnings is net interest income. Net interest income is the difference between interest income, principally from loans and the investment securities portfolio, and interest
expense, principally on customer deposits and borrowings. Changes in net interest income, net interest spread, and net interest margin result from changes in asset and liability volume, mix, and changes to rates earned or paid. Net interest spread
refers to the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin is the ratio of net interest income to total interest-earning assets and is influenced by the
volume and relative mix of interest-earning assets and interest-bearing liabilities. Volume refers to the dollar level of interest-earning assets and interest-bearing liabilities.

Three months ended June 30, 2005 and 2004

Interest income from certain of the Company's earning assets is non-taxable. The following tables present interest income and expense, including adjustments for non-taxable interest income, and the resulting
tax adjusted yields earned, rates paid, interest rate spread, and net interest margin for the periods indicated.

13

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|                                          |  |   |  | Three Months Ended |  |   |  |         |  |         
|----------------------------------------- |  | - |  | ------------------ |  | - |  | ------- |  | --------
|                                          |  |   |  | June 30,           |  |   |  |         |  | Increase
|(dollars in thousands)                    |  |   |  | 2005               |  |   |  | 2004    |  |         
|                                          |  |   |  |                    |  |   |  |        
|Interest income                           |  | $ |  | 4,501              |  | $ |  | 3,684   |  | $       
|Tax effect of non-taxable interest income |  |   |  | 69                 |  |   |  | 39      |  |         
|                                          |  |   |  |                    |  |   |  |        
|Tax equivalent interest income            |  |   |  | 4,570              |  |   |  | 3,723   |  |         
|Interest expense                          |  |   |  | 1,110              |  |   |  | 736     |  |         
|                                          |  |   |  |                    |  |   |  |        
|Net interest income                       |  | $ |  | 3,460              |  | $ |  | 2,987   |  | $       
|                                          |  |   |  |                    |  |   |  |        
|                                         
|Average interest-earning assets           |  | $ |  | 273,350            |  | $ |  | 240,435 |  | $       
|Average interest-bearing liabilities      |  | $ |  | 189,286            |  | $ |  | 173,980 |  | $       

|Average yields earned (1)   |  | 6.69% |  | 6.19% |  | 50   |  | b.p. |  | (3)
|--------------------------- |  | ----- |  | ----- |  | ---- |  | ---- |  | ---
|Average rates paid (1)      |  | 2.35% |  | 1.69% |  | 66   |  | b.p. |  | (3)
|Net interest spread (1)     |  | 4.34% |  | 4.50% |  | (16) |  | b.p. |  | (3)
|Net interest margin (1) (2) |  | 5.06% |  | 4.97% |  | 9    |  | b.p. |  | (3)

|(1) | Ratios for the three months ended June 30, 2005 and 2004 have been annualized
|--- | -----------------------------------------------------------------------------
|(2) | Computed by dividing non-interest income by average interest-earning assets  
|(3) | b.p. stands for "basis points" (100 b.p. is equal to 1.0%)                   
|   

|                                          |  |   |  | Six Months Ended |  |   |  |         |  |         
|----------------------------------------- |  | - |  | ---------------- |  | - |  | ------- |  | --------
|                                          |  |   |  | June 30,         |  |   |  |         |  | Increase
|(dollars in thousands)                    |  |   |  | 2005             |  |   |  | 2004    |  |         
|                                          |  |   |  |                  |  |   |  |        
|Interest income                           |  | $ |  | 8,613            |  | $ |  | 7,304   |  | $       
|Tax effect of non-taxable interest income |  |   |  | 139              |  |   |  | 77      |  |         
|                                          |  |   |  |                  |  |   |  |        
|Tax equivalent interest income            |  |   |  | 8,752            |  |   |  | 7,381   |  |         
|Interest expense                          |  |   |  | 2,061            |  |   |  | 1,490   |  |         
|                                          |  |   |  |                  |  |   |  |        
|Net interest income                       |  | $ |  | 6,691            |  | $ |  | 5,891   |  | $       
|                                          |  |   |  |                  |  |   |  |        
|                                         
|Average interest-earning assets           |  | $ |  | 269,970          |  | $ |  | 237,254 |  | $       
|Average interest-bearing liabilities      |  | $ |  | 189,502          |  | $ |  | 171,759 |  | $       

|Average yields earned (1)   |  | 6.48% |  | 6.22% |  | 26   |  | b.p. |  | (3)
|--------------------------- |  | ----- |  | ----- |  | ---- |  | ---- |  | ---
|Average rates paid (1)      |  | 2.18% |  | 1.73% |  | 45   |  | b.p. |  | (3)
|Net interest spread (1)     |  | 4.30% |  | 4.49% |  | (19) |  | b.p. |  | (3)
|Net interest margin (1) (2) |  | 4.96% |  | 4.97% |  | (1)  |  | b.p. |  | (3)

|(1) | Ratios for the six months ended June 30, 2005 and 2004 have been annualized
|--- | ---------------------------------------------------------------------------
|(2) | Computed by dividing non-interest income by average interest-earning assets
|(3) | b.p. stands for "basis points" (100 b.p. is equal to 1.0%)                 
|   

Comparing the quarter ended June 30, 2005 to the quarter ended June 30, 2004, tax equivalent interest income was $847,000 higher, due to an increase of $32.9 million in average interest-earning assets. Interest
expense increased $374,000 as average interest-bearing liabilities increased $15.3 million. With increasing interest rates, the interest margin for the three-months ended June 30, 2005 was 5.06%, compared to 4.97% for the same
period in 2004. Prime rate has increased 100 basis points from 5.25% at December 31, 2004 to 6.25% as of June 30, 2005. For the six month period ended June 30, 2005, net interest margin decreased to 4.96% compared to 4.97% for the same period of
2004. The increase of 45 basis points in the average rates paid during the six month period ended June 30, 2005 is the primary contributor to the decrease in the net interest margin.

|Provision for Loan Losses
|-------------------------

The amount of the allowance for loan losses is analyzed by management on a regular basis to ensure that it is adequate to absorb losses inherent in the loan portfolio as of the reporting date. When a provision for loan
losses is recorded, the amount is based on past charge-off experience, a careful analysis of the current loan portfolio, the level of non-performing and impaired loans, evaluation of future economic trends in the Company's market
area, and other factors relevant to the loan portfolio. The quarterly provision

14

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recorded as an increase to the allowance for loan losses are based upon estimates of probable losses inherent in the loan portfolio. The loss amount actually realized for these loans can vary significantly from the
estimated amounts. See the "Allowance for Loan Losses" discussion for additional detail.

|Six months ended June 30, 2005 and 2004
|---------------------------------------

The banking segment recorded a $60,000 provision for loan losses during the first six months of 2005. This provision was taken to support the continued growth of the portfolio. During the first six months of 2005 the
Banking segment has recorded $117,000 in recoveries versus $38,000 in charge-offs.

During the first six months of 2004 the banking segment recorded a provision for loan losses of $87,000. 
	The banking segment recovered $163,000 form previously charged off loans.

|                                                              |  |                   
|------------------------------------------------------------- |  | ------------------
|                                                              |  |                   
|Non-Interest Income                                           |  |                   
|Three and Six months ended June 30, 2005 and 2004             |  |                   
|Non-interest income consists of the following components:     |  |                   
|                                                              |  | Three Months Ended
|                                                              |  |                   
|                                                              |  |                   
|(dollars in thousands)                                        |  | 2005              
|                                                              |  |                   
|Service charge on deposit accounts                            |  | $                 
|(Losses) gains on loans sold                                  |  |                   
|Mortgage brokerage fees                                       |  |                   
|Escrow fees                                                   |  |                   
|Credit Card income                                            |  |                   
|Fiduciary income                                              |  |                   
|Increase in cash surrender value of bank-owned life insurance |  |                   
|ATM income                                                    |  |                   
|Safe deposit box fees                                         |  |                   
|Gain (loss) on sale of repossessed assets                     |  |                   
|Other miscellaneous fees and income                           |  |                   
|                                                              |  |                   
|                                                             
|Total non-interest income                                     |  | $                 
|                                                              |  |                   

Total non-interest income declined $160,000 when comparing the quarters ending June 30, 2005, and 2004. Due to a slow down in home refinancing mortgage, brokerage fees for three months ended June 30, 2005 were
$55,000 compared to $149,000 for the same period in 2004. Credit Card income for the second quarter of 2005 was $79,000 compared to $139,000 during the same period. The decline in Credit Card income is a result of converting to a new
processor. This decline, as noted below, was more than offset by a decrease in Credit Card expenses to $57,000 for the three months ended June 30, 2005 from $136,000 for the same period in 2004. Fiduciary income increased $53,000 for the
three months ended June 30, 2005, compared the same period of 2004. This was the result of increased business development activities.

Total non-interest income declined $350,000 for the six month period ended June 30, 2005, compared to the same period of 2004. A decline of mortgage brokerage fees of $120,000 due to a slowdown in this business
segment accounts for 34% of the overall decline.  A decline of $80,000 in service charges on deposit accounts was the result of higher average balances maintained in customer accounts.  The decline of $139,000 in gains on loans sold was the
result of closing the mortgage company offices in Bellevue and Seattle. Increased business develop activities resulted in a $99,000 increase in Fiduciary income for the six month period ended June 30, 2005, compared to the same period of
2004.

Non-Interest Expense

Three and Six ended June 30, 2005 and 2004

Non-interest expense consists of the following components:

15

---

|                                                  |  |   |  | Three Months Ended |  |   |  | Six Months Ended
|------------------------------------------------- |  | - |  | ------------------ |  | - |  | ----------------
|(unaudited)                                       |  |   |  | June 30,           |  |   |  |                 
|                                                  |  |   |  |                   
|(dollars in thousands)                            |  |   |  | 2005               |  |   |  | 2004            
|                                                  |  |   |  |                    |  |   |  |                 
|Salaries and employee benefits                    |  | $ |  | 1,667              |  | $ |  | 1,571           
|Net occupancy and equipment                       |  |   |  | 346                |  |   |  | 377             
|Professional fees                                 |  |   |  | 191                |  |   |  | 181             
|Business taxes                                    |  |   |  | 55                 |  |   |  | 49              
|Advertising                                       |  |   |  | 73                 |  |   |  | 21              
|FDIC insurance                                    |  |   |  | 8                  |  |   |  | 103             
|Credit card expense                               |  |   |  | 57                 |  |   |  | 136             
|Data processing and communications                |  |   |  | 65                 |  |   |  | 76              
|Loan expense                                      |  |   |  | 10                 |  |   |  | 12              
|Postage and freight                               |  |   |  | 62                 |  |   |  | 59              
|Travel and education                              |  |   |  | 78                 |  |   |  | 44              
|Stationery and supplies                           |  |   |  | 42                 |  |   |  | 30              
|Temporary help                                    |  |   |  | 2                  |  |   |  | 2               
|Amortization of intangible assets                 |  |   |  | -                  |  |   |  | 67              
|Insurance Premiums                                |  |   |  | 44                 |  |   |  | 48              
|Placement fees and other employee hiring expenses |  |   |  | 3                  |  |   |  | 38              
|Expenses relating to other real estate owned      |  |   |  | 19                 |  |   |  | 23              
|Other miscellaneous expenses                      |  |   |  | 237                |  |   |  | 180             
|                                                  |  |   |  |                    |  |   |  |                 
|                                                 
|Total non-interest expense                        |  | $ |  | 2,959              |  | $ |  | 3,017           
|                                                  |  |   |  |                    |  |   |  |                 

At June 30, 2005, the Company had 114 full-time equivalent employees compared to 105 at June 30, 2004. Also included in salary expenses are ordinary annual wage increases for existing employees.

Net occupancy and equipment expenses consist of depreciation on premises and equipment, lease costs, parking, maintenance and repair expenses, utilities and related expenses. When compared to June 30, 2004, there was a
decrease of $31,000 due to less repair expenses.

The FDIC has regulations establishing a system for setting deposit insurance premiums based upon the risks a particular bank or savings association poses to the deposit insurance funds. This system bases an
institution's risk category partly upon whether the institution is well capitalized, adequately capitalized or less than adequately capitalized. Each insured depository institution is also assigned to one of three
"supervisory"
categories based on reviews by regulators, statistical analysis of financial statements and other relevant information. An institution's assessment rate depends upon the capital category and supervisory category to which it is assigned. Annual
assessment rates currently range from zero per $100 of domestic deposits for the highest rated institution to $0.27 per $100 of domestic deposits for an institution in the lowest category. During the first Six months of 2004, the Bank
paid an assessment rate of $0.17 per $100 of domestic deposits. The Bank was not required to pay an assessment rate during the last six months of 2004 and the first Six months of 2005, resulting in the lower expense during that period. In
addition, under legislation enacted in 1996 to recapitalize the Savings Association Insurance Fund, the FDIC is authorized to collect assessments against insured deposits to be paid to the Financing Corporation ("FICO") to service FICO
debt incurred in the 1980's. The current FICO assessment rate for insured deposits is $0.0144 per $100 of deposits per year. Any increase in deposit insurance premiums or FICO assessments could have an adverse effect on Cowlitz
Bank's earnings.

Advertising expense increased $81,000 for the six months ended June 30, 2005, compared to the same period of 2004. This was the result of increased advertising to attract deposits in the Company's market areas.

The full amortization in 2004 of the deposits purchased from Wells Fargo in 1997 resulted in the decrease in amortization of intangible assets expense of $133,000 during the six month period ended June 30, 2005,
compared to the same period of 2004. Costs related to the operation and disposition of other real estate owned has declined as the number and value of properties has decreased.

The increase in other miscellaneous expenses in the second quarter of 2005 is primarily due to an $80,000 provision for a potential operating loss that may result from accepting a questionable deposit.

|Income Taxes
|------------

|Three and Six months ended June 30, 2005 and 2004
|-------------------------------------------------

16

---

During the second quarter of 2005 the provision for income taxes was $247,000 compared to $114,000 for the second quarter of 2004. The average effective tax rate for the three months ended June 30, 2005 was 25.69%
compared to 20.64% during the same period in 2004.

For the six month period ended June 30, 2005 the provision for income taxes was $469,000 compared to $231,000 for the same period of 2004. The average effective tax rate for the six months of 2005 was 25.45%
compared to 20.58% for the same period in 2004. The increase in the effective rate is a result of overall stronger performance by the Company.

|Loans
|-----

Total loans outstanding were $208.7 million and $189.3 million at June 30, 2005 and December 31, 2004, respectively. Unfunded loan commitments such as home equity and other lines of credit, unused available credit
on credit cards, and letters of credit, were $68.4 million at June 30, 2005 and $53.6 million at December 31, 2004.

The following table presents the composition of the Company's loan portfolio at the dates indicated:

|                          |  |   |  | June 30, 2005 |  |         |  | December 31, 2004
|------------------------- |  | - |  | ------------- |  | ------- |  | -----------------
|                          |  |   |  |              
|(dollars in thousands)    |  |   |  | Amount        |  | Percent |  |                  
|                          |  |   |  |               |  |         |  |                  
|Commercial                |  | $ |  | 66,046        |  | 31.54%  |  | $                
|Real estate construction  |  |   |  | 28,031        |  | 13.38%  |  |                  
|Real estate commercial    |  |   |  | 83,154        |  | 39.71%  |  |                  
|Real estate mortgage      |  |   |  | 27,920        |  | 13.33%  |  |                  
|Consumer and other        |  |   |  | 4,281         |  | 2.04%   |  |                  
|                          |  |   |  |               |  |         |  |                  
|                          |  |   |  | 209,432       |  | 100.00% |  |                  
|                          |  |   |  |               |  |         |  |                  
|Deferred loan fees        |  |   |  | (701)         |  |         |  |                  
|                          |  |   |  |               |  |         |  |                  
|Total loans               |  |   |  | 208,731       |  |         |  |                  
|Allowance for loan losses |  |   |  | (3,935)       |  |         |  |                  
|                          |  |   |  |               |  |         |  |                  
|Total loan, net           |  | $ |  | 204,796       |  |         |  | $                
|                          |  |   |  |               |  |         |  |                  

|Allowance for Loan Losses
|-------------------------

The allowance for loan losses represents management's estimate of potential losses as of the date of the financial statements. The loan portfolio is regularly reviewed to evaluate the adequacy of the allowance for loan
losses. In determining the level of the allowance, the Company evaluates the amount necessary for specific non-performing loans and estimates losses inherent in other loans. An important element in determining the adequacy of the allowance for
loan losses is an analysis of loans by loan risk-rating categories. At a loan's inception, management evaluates the credit risk by using a risk-rating system. This grading system currently includes eleven levels of risk. Risk ratings
range from "1" for the strongest credits to "10" for the weakest. A "10" rated loan would normally represent a loss. All loans rated 7-10 are collectively the Company's
"Watch List". The specific
grades from 7-10 are "watch list" (risk-rating 7), "special mention" (risk-rating 7.5),
"substandard" (risk-rating 8), "doubtful" (risk-rating 9), and "loss"
(risk-rating 10). When indicators such as operating losses, collateral impairment or delinquency problems show that a credit may have weakened, the credit will be downgraded as appropriate. Similarly, as borrowers bring loans current, show
improved cash flows, or improves the collateral position of a loan, the credits may be upgraded. Management reviews all credits periodically for changes in such factors. The result is an allowance with four components, specific allowance, general
allowance, special allowance, and an unallocated allowance.

Specific Allowance.Loans on the Company's Watch List, as described above, are specifically reviewed and analyzed. Management considers in its analysis expected future cash
flows, the value of collateral and other factors that may impact the borrower's ability to pay. When significant conditions or circumstances exist on an individual loan indicating greater risk, specific reserves may be allocated in addition to
the general reserve percentage for that particular risk-rating.

General Allowance.All loans that do not require a specific allocation are subject to a general allocation based upon historic loss factors. Management determines these factors by
analyzing the volume and mix of the existing loan portfolio, in addition to other factors. Management also analyzes the following:

- the volume and severity of non-performing loans and adversely classified credits;
- the level of net charge-offs experienced on previously classified loans;
- the nature and value of collateral securing the loans; and
- the relationship and trend over the past several years of recoveries in relation to charge-offs.

17

---

Special Allowance.From time to time, special reserves will be established to facilitate a change in the Bank's strategy and other factors. Special allocations are to take into
consideration various factors that include, but are not limited to:

- Effectiveness of credit administration;
- Adequacy of loan review;
- Loan operations;
- The trend in loan growth and the percentage of change;
- Concentrations both geographic and industry-specific;
- Competitive issues that impact loan underwriting/structure;
- Economic conditions; and
- Any special marketing or introduction of various loan products.

Unallocated Allowance.Management also attempts to ensure that the overall allowance appropriately reflects a margin for the imprecision necessarily inherent in estimates of expected
loan losses.

The quarterly analysis of specific, general, and special allocations of the allowance is the principal method relied upon by management to ensure that changes in estimated loan loss levels are adjusted on a timely basis.
The inclusion of historical loss factors in the process of determining the general component of the allowance also acts as a self-correcting mechanism of management's estimation process, as loss experience more remote in time is replaced
by more recent experience. In its analysis of the specific, the general, and special allocations of the allowance, management also considers regulatory guidance in addition to the Company's own experience.

Loans and other extensions of credit deemed uncollectable are charged to the allowance. Subsequent recoveries, if any, are credited to the allowance. Actual losses may vary from current estimates and the amount of the
provision may be either greater than or less than actual net charge-offs when and if they occur. The related provision for loan losses that is charged to income is the amount necessary to adjust the allowance to the level determined through the
above process.

Management's evaluation of the loan portfolio resulted in total allowances for loan losses of $3.9 million at June 30, 2005 and $3.8 million December 31, 2004. The allowance, as a percentage of total loans,
declined from 2.00% to 1.89% at June 30, 2005. Management believes the allowance for loan losses at June 30, 2005 is adequate to absorb current potential or anticipated losses. The following table shows the components of the allowance for loan loss
for the periods indicated:

|(unaudited)            |  |   |  | June 30, 2005 |  |         |  | December 31, 2004
|---------------------- |  | - |  | ------------- |  | ------- |  | -----------------
|                       |  |   |  |              
|(dollars in thousands) |  |   |  | Amount        |  | Percent |  |                  
|                       |  |   |  |               |  |         |  |                  
|General                |  | $ |  | 2,016         |  | 51.23%  |  | $                
|Specific               |  |   |  | 237           |  | 6.02%   |  |                  
|Special                |  |   |  | 1,547         |  | 39.31%  |  |                  
|Unallocated            |  |   |  | 135           |  | 3.44%   |  |                  
|                       |  |   |  |               |  |         |  |                  
|                       |  | $ |  | 3,935         |  | 100.00% |  | $                
|                       |  |   |  |               |  |         |  |                  

Based on Management's assessment of the watch list loans, the unallocated amount of reserves has been decreased by $500,000 from December 31, 2004 to June 30, 2005 and reallocated to specific and special reserves.
The reserve for specific loans was increased from 0.00% to 6.02% . Management believes the local economic recovery, excluding new housing construction segments, is still behind the national trend. Coupled with the anticipation of an increasing
interest rate environment, additional special reserves have been allocated against potential cash flow strains of the Company's borrowers.

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. The following table
shows the Company's loan loss performance for the periods indicated.

18

---

|                                                             |  | Six Months Ended |  | Year Ended  
|------------------------------------------------------------ |  | ---------------- |  | ------------
|                                                             |  | June 30,         |  | December 31,
|                                                             |  |                  |  |             
|(dollars in thousands)                                       |  | 2005             |  |             
|                                                             |  |                  |  |             
|Loans outstanding at end of period, net of deferred fees (1) |  | $ 208,731        |  | $           
|Average loans outstanding during the period (1)              |  | $ 202,541        |  | $           
|Allowance for loan losses, beginning of period               |  | $ 3,796          |  | $           
|Loans charged off:                                           |  |                  |  |             
|Commercial                                                   |  | -                |  |             
|Real Estate                                                  |  | -                |  |             
|Consumer                                                     |  | 31               |  |             
|Credit Cards                                                 |  | 7                |  |             
|                                                             |  |                  |  |             
|Total loans charged-off                                      |  | 38               |  |             
|                                                             |  |                  |  |             
|                                                            
|Recoveries:                                                  |  |                  |  |             
|Commercial                                                   |  | 64               |  |             
|Real Estate                                                  |  | 38               |  |             
|Consumer                                                     |  | 9                |  |             
|Credit Cards                                                 |  | 6                |  |             
|                                                             |  |                  |  |             
|Total recoveries                                             |  | 117              |  |             
|Provision for loan losses                                    |  | 60               |  |             
|                                                             |  |                  |  |             
|Allowance for loan losses, end of period                     |  | $ 3,935          |  | $           
|                                                             |  |                  |  |             
|                                                            
|Net loans charged-off (recovered) during the period          |  | (79)             |  |             
|Ratio of net loans charged-off to average loans outstanding  |  | -0.04%           |  |             
|Ratio of allowance for loan losses to loans at end of period |  | 1.89%            |  |             
|                                                            
|(1) Excludes loans held-for-sale                             |  |                  |  |             

|Impaired Loans
|--------------

The Company, during its normal loan review procedures, considers a loan to be impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement.
A loan is not considered to be impaired during a period of minimal delay (less than 90 days) unless available information strongly suggests impairment. The Company measures impaired loans based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair market value of the collateral if the loan is collateral dependent. Impaired loans are charged to the
allowance when management believes that, after considering economic and business conditions, collection efforts, and collateral position, the borrower's financial condition indicates that collection of principal is not probable. Generally, no
interest is accrued on loans when factors indicate collection of interest is doubtful or when principal or interest payments become 90 days past due, unless collection of principal and interest are anticipated within a reasonable period of time and
the loans are well secured. For such loans, previously accrued but uncollected interest is charged against current earnings, and income is only recognized to the extent payments are subsequently received and collection of the remaining recorded
principal balance is considered probable.

|Non-Performing Assets
|---------------------

Non-performing loans include all loans greater than 90 days past due with respect to either principal or interest, and all loans to which the accrual of interest has been suspended. These loans, combined with
repossessed real estate and other repossessed assets, are collectively considered to be non-performing assets. The following table presents information on all non-performing assets:

19

---

|                                                                  |  |   |  | June 30, |  |   |  | December 31,
|----------------------------------------------------------------- |  | - |  | -------- |  | - |  | ------------
|(dollars in thousands)                                            |  |   |  | 2005     |  |   |  | 2004        
|                                                                  |  |   |  |         
|Loans on non-accrual status                                       |  | $ |  | 973      |  | $ |  | 84          
|Loans past due greater than 90 days but not on non-accrual status |  |   |  | -        |  |   |  | 1           
|Other real estate owned                                           |  |   |  | 643      |  |   |  | 733         
|Other repossessed assets                                          |  |   |  | -        |  |   |  | -           
|                                                                  |  |   |  |         
|Total non-performing assets                                       |  | $ |  | 1,616    |  | $ |  | 818         
|                                                                  |  |   |  |         
|                                                                 
|Total assets                                                      |  | $ |  | 301,831  |  | $ |  | 273,286     
|                                                                  |  |   |  |         
|                                                                 
|Percentage of non-performing assets to total assets               |  |   |  | 0.54%    |  |   |  | 0.30%       
|                                                                  |  |   |  |         

Total non-performing assets at June 30, 2005 increased to $1.6 million from $818,000 as of December 31, 2004, primarily due to a single loan of $973,000 being placed on non-accrual status; however,
this loan is fully guaranteed as to principal by an agency of the U.S. Government (USDA). This non-performing loan was paid in full in July.

|Liquidity
|---------

Liquidity represents the ability to meet deposit withdrawals and fund loan demand, while retaining the flexibility to take advantage of business opportunities. The Company's primary sources of funds have been customer
and brokered deposits, loan payments, sales or maturities of investments, sales of loans or other assets, borrowings, and the use of the federal funds market.

Brokered certificates of deposit are a funding source the Company utilizes to provide additional liquidity as necessary. At June 30, 2005, the Company's brokered certificate of deposit balance was $38.7 million
compared to $41.3 million at December 31, 2004. Overnight federal funds borrowing lines with correspondent banks provide access to an additional $42.5 million for short-term liquidity needs. In addition, the Company has an established
borrowing line with the FHLB that permits it to borrow up to 20% of the Bank's assets, or $57.2 million as of June 30, 2005, subject to collateral limitations. With the collateral available on June 30, 2005, the Company could borrow up to
$37.0 million, subject to purchase of additional FHLB stock. The line is available for overnight federal funds, or notes with other terms and maturities. At June 30, 2005, notes payable to the FHLB were $400,000 compared to $472,900 at
December 31, 2004. The notes payable at June 30, 2005 have original maturity periods ranging from 10 years through 15 years, bear interest at rates ranging from 6.11% to 8.62%, and mature from 2006 to 2009.

Investment in securities available-for-sale was $55.6 million at June 30, 2005 compared to $60.0 million at December 31, 2004.

|Regulatory Capital
|------------------

The Company and the Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory  and
possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on Cowlitz Bancorporation's and Cowlitz Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, Cowlitz Bancorporation and Cowlitz Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. Cowlitz Bancorporation's and Cowlitz Bank's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The following table presents selected capital information for the Company and the Bank as of June 30, 2005 and December 31, 2004:

20

---

|                           |  |          |  |          |  |                      |  |                   |  | To Be Well-Capitalized
|-------------------------- |  | -------- |  | -------- |  | -------------------- |  | ----------------- |  | ----------------------
|                           |  |          |  |          |  |                      |  |                   |  | Under Prompt          
|                           |  |          |  |          |  | For Capital Adequacy |  | Corrective Action
|                           |  | Actual   |  | Purposes |  | Provision           
|                           |  |          |  |          |  |                     
|                           |  | Amount   |  | Ratio    |  | Amount               |  | Ratio             |  | Amount                
|                           |  |          |  |          |  |                      |  |                   |  |                       
|                          
|June 30, 2005              |  |          |  |          |  |                      |  |                   |  |                       
|Total risk-based capital:  |  |          |  |          |  |                      |  |                   |  |                       
|Consolidated               |  | $ 50,842 |  | 21.27%   |  | $ 19,124             |  | >8.00%            |  | N/A                   
|Bank                       |  | $ 46,129 |  | 19.36%   |  | $ 19,062             |  | >8.00%            |  | $ 23,828              
|Tier 1 risk-based capital: |  |          |  |          |  |                      |  |                   |  |                       
|Consolidated               |  | $ 47,842 |  | 20.01%   |  | $ 9,562              |  | >4.00%            |  | N/A                   
|Bank                       |  | $ 43,139 |  | 18.10%   |  | $ 9,531              |  | >4.00%            |  | $ 14,297              
|Tier 1 (leverage) capital: |  |          |  |          |  |                      |  |                   |  |                       
|Consolidated               |  | $ 47,842 |  | 16.46%   |  | $ 11,668             |  | >4.00%            |  | N/A                   
|Bank                       |  | $ 43,139 |  | 14.88%   |  | $ 11,595             |  | >4.00%            |  | $ 14,494              
|                          
|December 31, 2004          |  |          |  |          |  |                      |  |                   |  |                       
|Total risk-based capital:  |  |          |  |          |  |                      |  |                   |  |                       
|Consolidated               |  | $ 37,068 |  | 17.26%   |  | $ 17,182             |  | >8.00%            |  | N/A                   
|Bank                       |  | $ 36,297 |  | 16.95%   |  | $ 17,136             |  | >8.00%            |  | $ 21,419              
|Tier 1 risk-based capital: |  |          |  |          |  |                      |  |                   |  |                       
|Consolidated               |  | $ 34,370 |  | 16.00%   |  | $ 8,591              |  | >4.00%            |  | N/A                   
|Bank                       |  | $ 33,606 |  | 15.69%   |  | $ 8,568              |  | >4.00%            |  | $ 12,852              
|Tier 1 (leverage) capital: |  |          |  |          |  |                      |  |                   |  |                       
|Consolidated               |  | $ 34,370 |  | 12.64%   |  | $ 10,879             |  | >4.00%            |  | N/A                   
|Bank                       |  | $ 33,606 |  | 12.38%   |  | $ 10,858             |  | >4.00%            |  | $ 13,572              

Quantitative measures established by regulation to ensure capital adequacy require Cowlitz Bancorporation and Cowlitz Bank to maintain minimum amounts and ratios (set forth in the tables above) of Tier 1 capital to average
assets, and Tier 1 and total risk-based capital to risk-weighted assets (all as defined in the regulations). Management believes that as of June 30, 2005 and December 31, 2004, Cowlitz Bancorporation and Cowlitz Bank substantially exceeded
all relevant capital adequacy requirements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

|Credit Risk
|-----------

The Company, like other lenders, is subject to credit risk, which is the risk of losing principal and interest due to customers' failure to repay loans in accordance with their terms. Although the Company has
established lending criteria and an adequate allowance for loan losses to help mitigate credit risk, a downturn in economic conditions or in the real estate market, or a rapid increase in interest rates could have a negative effect on collateral
values, cash flows, and borrowers' ability to repay. The Company's targeted customers are small to medium-size businesses, professionals and retail customers that may have limited capital resources to repay loans during a prolonged
economic downturn.

|Interest Rate Risk
|------------------

The Company's earnings are largely derived from net interest income, which is interest income and fees earned on loans and investment income, less interest expense paid on deposits and other borrowings. Interest rates
are highly sensitive to many factors that are beyond the control of the Company's management, including general economic conditions, and the policies of various governmental and regulatory authorities. As interest rates change, net interest
income is affected. With fixed rate assets (such as fixed rate loans) and liabilities (such as certificates of deposit), the effect on net interest income depends on the maturities of the assets and liabilities. The Company's primary objective
in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company's net interest income and capital, while structuring the Company's asset/liability position to obtain the maximum yield-cost
spread on that structure. Interest rate risk is managed through the monitoring of the Company's gap position and sensitivity to interest rate risk by subjecting the Company's balance sheet to hypothetical interest rate shocks using a
computer based model. In a falling rate environment, the spread between interest yields earned and interest rates paid, may narrow, depending on the relative level of fixed and variable rate assets and liabilities. In a stable or increasing rate
environment the Company's variable

21

---

rate loans will remain steady or increase immediately with changes in interest rates, while fixed rate liabilities, particularly certificates of deposit will only re-price as the liability matures. 
For the period ended June 30, 2005 the Company is slightly asset sensitive.

|Item 4. Controls and Procedures
|-------------------------------

As of June 30, 2005, the Company evaluated, under the supervision and the participation of Management, including the Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of
disclosure controls and procedures. Based on that evaluation, Management, including the Chief Executive Officer and Chief Financial Officer, concluded that disclosure controls and procedures were effective.

There were no changes in the Company's internal controls
over financial reporting during the second fiscal quarter that materially affected
or is reasonably likely to materially affect these controls.

|Part II. OTHER INFORMATION
|--------------------------

|Item 1. Legal Proceedings
|-------------------------

The Company from time to time enters into routine litigation resulting from the collection of secured and unsecured indebtedness as part of its business of providing financial services. In some cases, such litigation will
involve counterclaims or other claims against the Company. Such proceedings against financial institutions sometimes also involve claims for punitive damages in addition to other specific relief. The Company is not a party to any litigation other
than in the ordinary course of business. In the opinion of management, the ultimate outcome of all pending legal proceedings will not individually or in the aggregate have a material adverse effect on the financial condition or the results of
operations of the Company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

| | Not applicable
| | --------------

|Item 3. Defaults upon Senior Securities
|---------------------------------------

| | Not applicable
| | --------------

|Item 4. Submission of Matters to a Vote of Security Holders
|-----------------------------------------------------------

|(a) | Cowlitz Bancorporation Annual Shareholder's Meeting was held on May 27, 2005.                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) | All seven directors stood for election at the Annual Shareholder's Meeting and the seven individuals listed in Item 4(c) below were elected.                                                                                                    
|   
|(c) | A brief description of the only matter voted upon at the Annual Shareholders' meeting held on May 27, 2005 and number of votes cast for, against, or withheld, including a separate tabulations with respect to each
nominee is presented below:
|   

|Nominee                |  | Votes For |  | Percentage of Voted |  | Withheld  |  | Percentage of Voted
|---------------------- |  | --------- |  | ------------------- |  | --------- |  | -------------------
|                       |  |           |  |                     |  |           |  |                    
|Mark F. Andrews Jr.    |  | 1,664,308 |  | 54.27               |  | 1,402,457 |  | 45.73              
|Ernie D. Ballou        |  | 1,664,308 |  | 54.27               |  | 1,402,457 |  | 45.73              
|Richard J. Fitzpatrick |  | 1,664,308 |  | 54.27               |  | 1,402,457 |  | 45.73              
|John S. Maring         |  | 2,266,555 |  | 73.91               |  | 800,210   |  | 26.09              
|John M. Petersen       |  | 2,268,820 |  | 73.98               |  | 797,945   |  | 26.02              
|Phill S. Rowley        |  | 1,664,308 |  | 54.27               |  | 1,402,457 |  | 45.73              
|Linda M. Tubbs         |  | 2,268,890 |  | 73.98               |  | 797,875   |  | 26.02              

22

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(d)None.

Item 5. Other Information

None

Item 6. Exhibits and Reports on Form 8-K

(a)Exhibits. The following constitutes the exhibit index.

| |  | 2    | Agreement and Plan of Reorganization by and among the Company, Cowlitz Bank, AEA Bancshares, Inc. and Asia-Europe-Americas Bank dated May 3, 2005 (incorporated by
reference to Exhibit 2 to the Company's Form 8-K filed May 4, 2005)                                                                                                                                                                              
| |  | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 3.1  | Restated and Amended Articles of Incorporation (incorporated by reference to Exhibit 3.1 to the Company's Form 8-K filed June 9, 2005)                                                                                                                                                                                                                                                                              
|
| |  | 3.2  | Bylaws (incorporated by reference from the Company's Registration Statement on Form S-1, Reg. No. 333-44355)                                                                                                                                                                                                                                                                                                        
|
| |  | 10.1 | Employment Agreement with Randy Blake, Vice President and Chief Financial Officer, dated
June 20, 2005 (incorporated by reference to Exhibit 10.1 to the Company's Form 8-K filed
June 21, 2005)                                                                                                                                                                                                                    
|
| |  | 10.2 | Placement Agreement dated April 28, 2005, between the Company and its financing subsidiary Cowlitz Statutory Trust I, on the one hand, and FTN Financial Capital Markets and Keefe,
Bruyette & Woods, Inc., as placement agents, relating to the issuance of trust preferred securities (incorporated by reference to Exhibit 10.7 to the Company's Registration Statement on Form
S-4, Registration No. 333-126423)
|
| |  | 10.3 | Guarantee Agreement dated April 29, 2005 between the Company and Wilmington Trust
Company relating to the issuance of trust preferred securities (incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form S-4,
Registration No. 333-126423)                                                                                                                                       
|
| |  | 31.1 | Certification of Chief Executive Officer                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | 31.2 | Certification Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | 32   | Certification of Chief Executive Officer and Chief Financial Officer                                                                                                                                                                                                                                                                                                                                                
|

23

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SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

|Date: August 12, 2005 | 
|--------------------- | 

| | Cowlitz Bancorporation(Registrant)
| | ----------------------------------

| | By:
| | ---

| | /s/ Richard J. Fitzpatrick                                   
| | -------------------------------------------------------------
| | Richard J. Fitzpatrick, President and Chief Executive Officer
| |                                                              
| | By:                                                          
| | /s/ Randy V. Blake                                           
| | Randy V. Blake, Vice-President, Chief Financial Officer      
| |                                                              
| |                                                              

24

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Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Richard J. Fitzpatrick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cowlitz Bancorporation;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the
financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures 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 quarterly 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 quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is likely to materially affect the registrant's internal control over financial reporting;

5. The registrant's other certifying officers 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 registrant's board of directors (or persons performing the equivalent

functions):

a) all significant deficiencies in the
design or operation of internal controls 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: August 12, 2005

| | /s/ Richard J. FitzpatrickRichard J. Fitzpatrick, Chief Executive OfficerCowlitz Bancorporation
| | -----------------------------------------------------------------------------------------------

25

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Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Randy V. Blake, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cowlitz Bancorporation;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the
financial statements, and other financial information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures 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 quarterly 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 quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most
recent fiscal quarter that has materially affected, or is likely to materially affect the registrant's internal control over financial reporting;

5. The registrant's other certifying officers 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 registrant's board of directors (or persons performing the equivalent

functions):

a) all significant deficiencies in the
design or operation of internal controls 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: August 12, 2005

| | /s/ Randy V. BlakeRandy V. Blake, Chief Financial OfficerCowlitz Bancorporation
| | -------------------------------------------------------------------------------

26

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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 Cowlitz Bancorporation (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 June 30, 2005 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 Company.
|--------------------------

|/s/ Richard J. FitzpatrickRichard J. FitzpatrickChief Executive OfficerCowlitz Bancorporation
|---------------------------------------------------------------------------------------------

|/s/ Randy V. BlakeRandy V. BlakeChief Financial OfficerCowlitz Bancorporation
|-----------------------------------------------------------------------------

|August 12, 2005
|---------------

27

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