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 1934

                       For the quarter ended June 30, 1998

          [ ] 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                                      91-152984
    (State or other jurisdiction of                     (IRS Employer
     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 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, 1998:         4,000,682

<PAGE>
                                TABLE OF CONTENTS

                                                                      Page
Part I
Financial Statements

         Consolidated Balance Sheets -
         June 30, 1998 and December 31, 1997                            3

         Consolidated Statements of Income -
         Three and Six months ended June 30, 1998 and June 30, 1997     4

         Consolidated Statements of Cash Flows
         Six months ended June 30, 1998 and June 30, 1997               5

         Consolidated Statements of Changes in Shareholders' Equity     6

         Notes to Consolidated Financial Statements                     7

         Management's Discussion and Analysis of Financial Condition
         And Results of Operations                                      11

Part II

Other

         Changes in Securities and Use of Proceeds                      18
         Other Information                                              18

         Exhibits and Reports on Form 8-K                               18

         Signatures                                                     19

<PAGE>

                             COWLITZ BANCORPORATION
                      CONSOLIDATED STATEMENTS OF CONDITION
                            (in thousand of dollars)

<TABLE>
<CAPTION>
                                                                        June 30,         December 31,
                                                                          1998                1997
                                                                        (unaudited)
<S>                                                                    <C>              <C>
ASSETS
Cash and due from banks...........................................     $  26,274        $  23,109
Investment securities:
   Investments  available-for-sale  (at fair value, cost of $6,994
     and $3,993 at June 30, 1998 and December 31, 1997,
     respectively)................................................         7,007            4,017
   Investments held-to-maturity (at amortized cost, fair value of
     $6,869 and $4,486 at June 30, 1998 and December 31, 1997,
     respectively)................................................         6,843            4,464
                                                                       ---------        ---------
     Total investment securities..................................        13,850            8,481
                                                                       ---------        ---------

Loans.............................................................       129,262          131,963
Allowance for loan losses.........................................        (1,923)          (1,970)
                                                                       ---------        ---------
   Loans, net.....................................................       127,339          129,993
                                                                       ---------        ---------
Premises and equipment, net of accumulated depreciation of $1,607
   and $1,354 at June 30, 1998 and December 31, 1997,
   respectively...................................................         5,937            5,653
Federal Home Loan Bank stock......................................         2,763            2,658
Intangible asset, net of accumulated amortization of $252 and $123
   at June 30, 1998 and December 31, 1997, respectively...........         1,708            1,847
Other assets......................................................         2,311            1,552
                                                                       ---------        ---------
     Total assets.................................................     $ 180,182        $ 173,293
                                                                       =========        =========

LIABILITIES
Deposits:
   Demand.........................................................     $  30,880        $  27,141
   Savings and interest-bearing demand............................        46,092           46,454
   Certificates of deposit........................................        50,813           62,614
                                                                       ---------        ---------
     Total deposits...............................................       127,785          136,209
Short-term borrowings.............................................         1,825              725
Long-term borrowings..............................................        20,190           21,900
Other liabilities.................................................           493              572
                                                                       ---------        ---------
     Total liabilities............................................     $ 150,293         $159,406
                                                                       ---------        ---------

SHAREHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000 and no shares authorized
   as of June 30, 1998 and December 31, 1997, respectively;
   no shares issued and outstanding at June 30, 1998 and
   December 31, 1997, respectively................................     $       -        $       -
Common stock, no par value; 25,000,000 and 3,937,500 authorized
   as of June 30, 1998 and December 31, 1997, respectively;
   4,000,291 and 2,604,543 shares issued and outstanding at
   June 30, 1998 and December 31, 1997, respectively..............        18,275            3,262
Additional paid in capital........................................         1,538            1,538
Retained earnings.................................................        10,068            9,071
Net unrealized gains on investments available-for-sale............             8               16
                                                                       ---------        ---------
     Total shareholders' equity...................................        29,889           13,887
                                                                       ---------        ---------
     Total liabilities and shareholders' equity...................     $ 180,182        $ 173,293
                                                                       =========        =========
</TABLE>
        The accompanying notes are an integral part of these statements.

<PAGE>
                      COWLITZ BANCORPORATION AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
     (in thousand of dollars, except number of shares and per share amounts)

<TABLE>
<CAPTION>
                                                          Three months ended            Six months ended
                                                                June 30,                     June 30,
                                                            1998       1997               1998       1997
                                                          --------   --------           ---------  ---------
                                                                            (unaudited)
<S>                                                       <C>        <C>                <C>        <C>
INTEREST INCOME
Interest and fees on loans.............................   $  3,444   $  3,386           $   6,788  $   6,650
Interest on taxable investment securities..............        257        159                 452        304
Interest on non-taxable investments securities.........          1          0                   1          0
Interest from other banks..............................        487         77                 729        262
                                                          --------   --------           ---------  ---------
   Total interest income...............................      4,189      3,622               7,970      7,216
                                                          --------   --------           ---------  ---------

INTEREST EXPENSE
Savings and interest-bearing demand....................        516        250                 918        516
Certificates of deposit................................        859      1,080               1,758      2,215
Short-term borrowings..................................         20         11                  37         22
Long-term borrowings...................................        327        335                 670        684
                                                          --------   --------           ---------  ---------
   Total interest expense..............................      1,722      1,676               3,383      3,437
                                                          --------   --------           ---------  ---------
   Net interest income before provision for loan losses      2,467      1,946               4,587      3,779

PROVISION FOR LOAN LOSSES..............................        (26)       (98)               (132)      (189)
                                                          --------   --------           ---------  ---------
   Net interest income after provision for loan losses.      2,441      1,848               4,455      3,590
                                                          --------   --------           ---------  ---------

NONINTEREST INCOME
   Service charges on deposit accounts.................        155        119                 319        224
   Other income........................................         76         42                 171         91
   Net gains on sales of available-for-sale securities.          -          -                   5          -
                                                          --------   --------           ---------  ---------
     Total noninterest income..........................        231        161                 495        315
                                                          --------   --------           ---------  ---------

NONINTEREST EXPENSE
   Salaries and employee benefits......................        912        676               1,850      1,297
   Net occupancy and equipment expense.................        229        161                 424        297
   Other operating expense.............................        540        377               1,026        736
                                                          --------   --------           ---------  ---------
     Total noninterest expense.........................      1,681      1,214               3,300      2,330
                                                          --------   --------           ---------  ---------
     Income before income tax expense..................        991        795               1,650      1,575

INCOME TAX EXPENSE.....................................        337        271                 561        536
                                                          --------   --------           ---------  ---------
     Net income........................................   $    654   $    524           $   1,089  $   1,039
                                                          ========   ========           =========  =========

BASIC EARNINGS PER SHARE...............................   $   0.16   $   0.20           $   .32    $     .40
DILUTED EARNINGS PER SHARE.............................   $   0.15   $   0.20           $   .30    $     .40

</TABLE>

        The accompanying notes are an integral part of these statements.




<PAGE>







                      COWLTIZ BANCORPORATION AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)

<TABLE>
<CAPTION>
                                                                            Six months ended
                                                                                 June 30,
                                                                          1998            1997
                                                                       ---------        ---------
                                                                              (unaudited)
<S>                                                                    <C>              <C>
 CASH FLOWS FROM OPERATING ACTIVITIES
   Net income.....................................................     $   1,089        $   1,039
   Adjustments to reconcile net income to net cash provided by
     Operating activities:
     Depreciation and amortization................................           391              166
     Provisions for loan losses...................................           132              189
     Net amortization of investment security premiums and accretion
       of discounts...............................................            (3)              (2)
     (Increase) in other assets...................................          (759)            (413)
     (Decrease) in other liabilities..............................           (79)            (142)
     Federal Home Loan Bank stock dividends.......................          (105)             (94)
                                                                       ---------        ---------
         Net cash provided by operating activities................           666              743
                                                                       ---------        ---------

CASH FLOWS FROM INVESTING ACTIVITIES
   Proceeds from maturities of investment securities
     held-to-maturity.............................................           892              788
   Proceeds from sales of investment securities
     available-for-sale...........................................         1,000                -
   Purchases of investment securities:
     Held-to-maturity.............................................        (3,268)            (987)
     Available-for-sale...........................................        (3,996)          (1,993)
   Net (increase) decrease in loans...............................         2,522           (4,384)
   Purchases of premises and equipment............................          (539)          (1,048)
                                                                       ---------        ---------
       Net cash (used in) provided by investment activities.......        (3,389)          (7,624)
                                                                       ---------        ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Net increase (decrease) in demand, savings, and interest-bearing
     demand deposits..............................................         3,377            3,461
   Net increase (decrease) in certificates of deposit.............       (11,801)          (3,672)
   Dividends paid.................................................           (92)             (60)
   Net increase (decrease) in short-term borrowings...............          1100              (25)
   Net proceeds (repayment) of long-term borrowings...............         (1710)            (550)
   Issuance of common stock for cash, net of amount paid for
       fractional shares..........................................        15,014               49
                                                                       ---------        ---------
       Net cash provided by shares financing activities...........         5,888             (797)
                                                                       ---------        ----------
       Net increase (decrease) in cash and due from banks.........         3,165           (7,678)

CASH AND DUE FROM BANKS AT BEGINNING OF YEAR......................        23,109           20,905
                                                                       ---------        ---------
CASH AND DUE FROM BANKS AT END OF PERIOD..........................     $  26,274        $  13,227
                                                                       =========        =========
</TABLE>

        The accompanying notes are an integral part of these statements.


<PAGE>





                      COWLITZ BANCORPORATION AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                            (in thousands of dollars)
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                                      Unrealized
                                                                                     Gains/losses
                                                       Additional                      on invest.   Total
                                             Common Stock        Paid-in    Retained   available- Shareholders'
                                         Shares       Amount     Capital    Earnings    for-sale     Equity
<S>                                      <C>          <C>        <C>        <C>          <C>       <C>
BALANCE AT DECEMBER 31, 1996              2,590,403   $  3,195   $  1,538   $   7,073    $    7    $  11,813
  Issuance of common stock for cash....      14,140         67          -          -          -           67
  Net income...........................           -          -          -      2,124          -        2,124
  Cash dividend paid ($.0143 per share)           -          -          -       (126)         -         (126)
  Net changes in unrealized gains on
     investments available-for-sale, net
     of deferred taxes of $5...........           -          -          -          -          9            9
                                         ----------   --------   --------   --------     ------    ---------

BALANCE AT DECEMBER 31, 1997...........   2,604,543      3,262      1,538      9,071         16       13,887
  Issuance of common stock for cash....   1,395,825     15,014          -          -          -       15,014
  Net income...........................           -          -          -      1,089          -        1,089
  Cash dividends paid ($.0125 per share)          -          -          -        (92)         -          (92)
  Net changes in unrealized gains on
     investments available-for-sale, net
     of deferred taxes of $4...........           -          -          -          -         (8)          (8)
Cash paid for fractional shares........         (77)        (1)         -          -          -           (1)
                                         -----------  ---------  --------   --------     ------    ---------

BALANCE AT JUNE 30, 1998                  4,000,291   $ 18,275    $1,538  $   10,068    $     8    $  29,889
                                          =========   ========    ======  ==========    =======    =========
</TABLE>

     The accompanying notes are an integral part of these statements.

<PAGE>

                      COWLITZ BANCORPORATION AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Nature of Operations

     Cowlitz  Bancorporation (the Company) is a one bank holding company located
in Southwest  Washington.  The Company's wholly owned  subsidiary,  Cowlitz Bank
(the Bank), a Washington  state-chartered commercial bank, is the only community
bank  headquartered  in Cowlitz County and offers  commercial  banking  services
primarily  to small  and  medium-sized  businesses,  professionals,  and  retail
customers.

2. Principles of Consolidation

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

     The interim  financial  statements  have been prepared in  accordance  with
generally  accepted  accounting  principles for interim  financial  information.
Accordingly,  they do not include all the information and footnotes  required by
generally accepted accounting principles for complete financial  statements.  In
the opinion of management, all adjustments,  including normal recurring accruals
necessary for fair presentation of results of operations for the interim periods
included  herein have been made.  The results of operations for the three months
and six months ended June 30, 1998 are not necessarily  indicative of results to
be anticipated for the year ending December 31, 1998.

3.   Supplemental Cash Flow Information

     For purposes of presentation in the statements of cash flows, cash and cash
equivalents  are defined as those amounts in the balance sheet caption "Cash and
due from banks" and  included  cash on hand,  amounts due from banks and federal
funds sold. Federal funds sold generally mature the day following purchase.

4.  Use of Estimates in the Preparation of Financial Statements

     The  preparation  of financial  statements  in  conformity  with  generally
accepted accounting principles requires management to make certain estimates and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and reported  amounts of revenues and expenses  during the reporting
period. Actual results could differ from those estimates.

<PAGE>

5.  Earnings Per Share

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

<TABLE>
<CAPTION>
                                                       Weighted       Per Share
                                      Net Income      Avg Shares       Amount
                                      ----------      ----------      ---------
                                       For the three months ended June 30, 1998
  <S>                                <C>               <C>              <C>
  Basic earnings per share           $   654           4,000,247        $ .16
  Stock Options                                          221,037
  Diluted earnings per share         $   654           4,221,284        $ .15

                                       For the three months ended June 30, 1997

  Basic earnings per share           $   524           2,601,428        $ .20
  Stock Options                                                0
  Diluted earnings per share         $   524           2,601,428        $ .20

                                       For the six months ended June 30, 1998

  Basic earnings per share           $ 1,089           3,425,537        $ .32
  Stock Options                                          209,930
  Diluted earnings per share         $1,089            3,635,467        $ .30

                                       For the six months ended June 30, 1997

  Basic earnings per share           $ 1,039           2,600,037        $ .40
  Stock Options                                                0
  Diluted earnings per share         $ 1,039           2,600,037        $ .40

</TABLE>

     For the periods  reported the Company had no reconciling  items between net
income and income available to common shareholders.

6.  Recently Issued Accounting Standards

SAB No. 98

     In February 1998, the Securities and Exchange Commission (SEC) issued Staff
Accounting  Bulletin (SAB) No. 98 on computations of earnings per share. SAB No.
98,  which was  effective  upon  issuance,  revised  the SEC's  guidance  on the
treatment of stock options  issued  shortly  before an Initial  Public  Offering
(IPO) in earnings per share  calculations.  Prior to the issuance of SAB No. 98,
the SEC  required  that  stock  options  issued  within  one year of an IPO with
exercise  prices below the IPO price be treated as outstanding for all reporting
periods for purposes of  calculating  earnings per share.  The Company  followed
this guidance for the stock options granted September 30, 1997 and,  accordingly
treated the options as  outstanding  for all periods in computing both basic and
diluted  earnings  per  share.  SAB  No.  98 now  requires  that  only  "nominal
issuances"  of stock or stock  options be  reflected  in all  earnings per share
calculations for all periods presented.  The Company's September 30, 1997, stock
options do not meet the SEC's definition of a nominal  issuance.  As required by
SAB No. 98, these stock options are now included in the  calculation  of diluted
earnings per share only for periods  subsequent  to their  issuance on September
30, 1997, and are not included in the basic earnings per share calculation.

<PAGE>

     As required by SAB No. 98, the Company has  restated its  historical  basic
and diluted earnings per share to conform with this new guidance.  The following
is a summary of the historical and restated earnings per share amounts:

<TABLE>
<CAPTION>
                                           Three months ended              Six months ended
                                               June 30, 1997                 June 30, 1997
                                          Basic         Diluted          Basic          Diluted
     <S>                                <C>            <C>             <C>            <C>
     Previously reported EPS........    $   .19        $  .19          $   .37        $   .37
     Restated EPS...................    $   .20        $  .20          $   .40        $   .40

</TABLE>

SFAS No. 133

     In June 1998, the Financial  Accounting Standards Board issued Statement of
Financial  Accounting  Standards No. 133, Accounting for Derivative  Instruments
and Hedging  Activities.  The  Statement  establishes  accounting  and reporting
standards  requiring  that  every  derivative   instrument   (including  certain
derivative  instruments  embedded in other contracts) be recorded in the balance
sheet as  either  an asset  or a  liability  measured  at its  fair  value.  The
Statement  requires  that changes in the  derivative's  fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gain and losses to offset
related results on the hedged item in the income statement,  and requires that a
company must  formally  document,  designate,  and assess the  effectiveness  of
transactions that receive hedge accounting.

     Statement 133 is effective for fiscal years  beginning after June 15, 1999.
A company may also  implement  the  Statement as of the  beginning of any fiscal
quarter after  issuance  (that is, fiscal  quarters  beginning June 16, 1998 and
thereafter).  Statement 133 cannot be applied retroactively.  Statement 133 must
be applied to (a) derivative  instruments and (b) certain derivative instruments
embedded  in  hybrid  contracts  that were  issued,  acquired,  or  substatively
modified after December 31, 1997 (and, at the company's election, before January
1, 1998).

     The  implementation  of this  statement  is not expected to have a material
impact on the Company's financial position or results of operation.

7.  Comprehensive Income

     The Company has adopted Statement of Financial Accounting Standards No. 130
"Reporting  Comprehensive  Income," for the period  ending June 30,  1998.  This
statement  establishes  standards for the reporting and display of comprehensive
income  and  it's  components  in the  financial  statements.  For the  Company,
comprehensive  income  includes net income  reported on the statements of income
and changes in the fair value of it's available-for-sale investments reported as
a component of  shareholders'  equity.  The following  table presents net income
adjusted by the unrealized gains or losses on available-for-sale securities as a
component of comprehensive income:

<TABLE>
<CAPTION>
                                              Three months ended        Six months ended
                                                     June 30,                 June 30,
                                                 1998       1997         1998       1997
                                                 ----       ----         ----       ----
   <S>                                         <C>        <C>          <C>        <C>
   Net income................................  $   654    $   524      $ 1,089    $ 1,039
   Net change in unrealized gain/loss on
     available for sale securities, net of tax      (2)        19           (8)        (4)
                                               -------    -------      -------     ------
   Comprehensive income......................  $   652    $   543      $ 1,081    $ 1,035
                                               =======    =======      =======    =======
</TABLE>


<PAGE>

8.  Subsequent Event

     On August 11, 1998,  the Company  entered into a stock  purchase  agreement
with Business  Finance  Corporation  (BFC), of Bellevue,  Washington.  Under the
agreement,  BFC will become a wholly-owned subsidiary of Cowlitz Bancorporation.
BFC provides factoring, leasing, and inventory financing services in Washington,
Oregon, California,  and Nevada. The acquisition,  to be accounted for under the
purchase method,  will include the initial issuance of common stock with a value
of $500,000,  cash  payments  totaling  approximately  $1.8 million  (subject to
adjustments based on final  determination of BFC's  shareholder's  equity) and a
future  contingent  issuance of common  stock valued at $500,000 if BFC achieves
certain  earnings targets for the twelve month period following the acquisition.
The acquisition, which is expected to close during the third quarter of 1998, is
subject to approval by the applicable regulatory agencies.


9.  Reclassifications

     Certain prior year amounts have been reclassified to conform to the current
year presentation.



<PAGE>

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITIONS AND RESULT OF OPERATIONS


     The following Management's  discussion and Analysis of Financial Conditions
and Results of Operations includes a discussion of certain significant  business
trends and  uncertainties as well as certain  forward-looking  statements and is
intended to be read in  conjunction  with and is  qualified  in its  entirety by
reference  to  the  consolidated   financial   statements  of  the  Company  and
accompanying notes include elsewhere herein.


Results of Operations

Net Income

     Three months ended June 30, 1998 and 1997

     The Company's net income of $654,000 at June 30, 1998, reflects an increase
of 24.8%  compared to net income of $524,000 at June 30,  1997.  The increase in
second  quarter  earnings  is  primarily  a result  of a 26.8%  increase  in net
interest  income for the quarter  ended June 30, 1998 as compared to the quarter
ended  June 30,  1997.  The  increase  is a result  of the  investment  of funds
received in the Company's March 1998 Initial Public Offering and from the growth
of non-interest  bearing deposits.  Earnings per diluted share were $.15 for the
three months ended June 30, 1998 compared to $.20 per diluted share for the same
period  in  1997,  this  decrease  was a result  of the  issuance  of  1,380,000
additional shares in the Company's IPO in March 1998. As discussed in footnote 6
to the interim financial statements, the Company has restated earnings per share
for the quarter  ended June 30, 1997, as required by the SEC's  recently  issued
SAB No.98.

     Six months ended June 30, 1998 and 1997

     Net income for the first six months of 1998 was $1.1  million  compared  to
$1.0  million  for the  comparable  period  in  1997.  Net  income  for 1998 has
increased  as the Company has  expanded  its  mortgage  and trust  services  and
benefited  from its branch  acquisitions  in the second half of 1997. Net income
for the six months  ended June 30, 1998 also  reflects  the increase in interest
income from the  investment of funds from the Company's IPO in the first quarter
of 1998.

Net Interest Income

     Three Months ended June 30, 1998 and 1997

     For  financial  institutions,  the  primary  component  of  earnings is net
interest income.  Net interest income is the difference between interest income,
principally  from  loans and  investment  securities  portfolios,  and  interest
expense, principally on customer deposits. Changes in net interest income result
from changes in "volume,"  "spread," and  "margin."  Volume refers to the dollar
level of interest-earning assets and interest-bearing liabilities. Spread refers
to the difference between the yield on  interest-earning  assets and the cost of
interest-bearing  liabilities.  Net interest margin is the ratio of net interest
income  to total  interest-earning  assets  and is  influenced  by the level and
relative mix of interest-earning assets and interest-bearing liabilities.

     Net interest  income for the quarter  ended June 30, 1998 was $2.5 million,
which was an increase of 26.8% from $1.9 million at June 30, 1997. One component
that  contributed to this increase was the increase in average  earning  assets,
the largest  element of which was an increase in the  interest  bearing due from
banks  resulting  from the investment of the Company's  Initial Public  Offering
proceeds.  The overall  tax-equivalent  earning asset yield of 9.87% at June 30,
1998  compared  to 10.01% at June 30,  1997.  The lower  yields  were  primarily
attributable  to lower interest rates on loans due to current market  conditions
and increased competition for loans in the Company's market area.

<PAGE>

     The average cost of interest-bearing liabilities was 5.41% at June 30, 1998
compared  to  5.38%  at June  30,  1997.  Average  interest-bearing  liabilities
increased to $127.4  million at June 30, 1998 as compared to $124.6  million for
the corresponding  period in 1997. Interest paid on savings and interest-bearing
demands  increased to $516,000 for the quarter ended June 30, 1998 from $250,000
for  the  quarter  ended  June  30,  1997.   This  increase  is  mainly  due  to
interest-bearing  deposits  added  in  connection  with  the  July  1997  branch
acquisition.  Interest paid on certificates of deposit decreased to $859,000 for
the quarter ended June 30, 1998 from $1.1 million for the like 1997 period.  The
Company has not aggressively priced certain of its higher yielding  certificates
of deposits  after  acquisition  of three  branch  deposits,  resulting in these
certificates of deposit  generally not renewing at maturity.  In accordance with
this strategy, approximately $7.1 million of higher rate certificates of deposit
matured and were not renewed during June 1998.


Analysis of Net Interest Income

     The following  table  presents  information  regarding  yields and interest
earning  assets,  expense on  interest  bearing  liabilities,  and net yields on
interest earning assets for periods indicated on a tax equivalent basis.

<TABLE>
<CAPTION>
                                     Three Months Ended
(unaudited)                                   June 30,             Increase
(in thousands of dollars)              1998         1997          (Decrease)            Change
                                    -------      -------          ---------             ------
<S>                                 <C>          <C>              <C>                     <C>
Interest  income(1)................ $  4,189     $   3,622        $      567              15.7 %
Interest expense...................    1,722         1,676                46               2.7 %
                                    --------     ---------        ----------

Net interest income................ $  2,467     $   1,946        $      521              26.8 %
                                    ========     =========        ==========

Average interest earning assets.... $169,684     $ 144,734            24,950              17.2 %
Average interest bearing
 liabilities....................... $127,390     $ 124,612              2,778              2.2 %

Average yields earned (2)..........     9.87%       10.01%               (.14)
Average rates paid (2).............     5.41%        5.38%                .03
Net interest spread (2)............     4.46%        4.63%               (.17)
Net interest margin (2)............     5.82%        5.38%                .44

     (1) Interest earned on nontaxable securities has been computed on a 34% tax
equivalent  basis.

     (2) Ratios  for the three  months  ended  June 30,  1998 and 1997 have been
annualized.

</TABLE>

     Six Months Ended June 30,1998 and 1997

     Total interest  earnings  assets averaged $164.4 million for the six months
ended June 30, 1998, compared to $145.7 million for the corresponding  period in
1997. The average yield on interest earning assets decreased to 9.70% during the
first six months of 1998 compared to 9.91% for the corresponding period in 1997,
as a result of lower yields on loans and investment securities.

     Interest  bearing  liabilities  averaged  $128.6 million and $126.9 million
during the first six months of 1998 and 1997, respectively.  The average cost of
these liabilities  decreased in the first six months of 1998 to 5.26% from 5.42%
in the first  six  months of 1997.  The  Company  has  replaced  certain  higher
interest rate  certificates of deposit with lower cost core deposits as a result
of the branch acquisitions in July 1997.


<PAGE>

Analysis of Net Interest Income

     The following  table  presents  information  regarding  yields and interest
earning  assets,  expense on  interest  bearing  liabilities,  and net yields on
interest earning assets for periods indicated on a tax equivalent basis.

<TABLE>
<CAPTION>
                                      Six Months Ended
(unaudited)                                   June 30,             Increase
(in thousands of dollars)              1998         1997          (Decrease)            Change
                                    -------      -------          ---------             ------
<S>                                 <C>          <C>              <C>                     <C>
Interest  income(1)................ $  7,970     $   7,216        $      754              10.4 %
Interest expense...................    3,383         3,437               (54)             (1.6)%
                                    --------     ---------        ----------
Net interest income................ $  4,587     $   3,779        $      808              21.4 %
                                    ========     =========        ==========

Average interest earning assets.... $164,394     $ 145,658             18,736             12.9 %
Average interest bearing
 liabilities......................  $128,617     $ 126,942              1,675              1.3 %

Average yields earned (2)..........     9.70%        9.91%               (.21)
Average rates paid (2).............     5.26%        5.42%               (.16)
Net interest spread (2)............     4.44%        4.49%               (.05)
Net interest margin (2)............     5.58%        5.19%                .39

     (1) Interest earned on nontaxable securities has been computed on a 34% tax
equivalent  basis.

     (2) Ratios  for the three  months  ended  June 30,  1998 and 1997 have been
annualized.

</TABLE>

Market Risk

     Interest rate risk and credit risks are the most  significant  market risks
impacting the Company's performance. The Company relies on loan reviews, prudent
loan  underwriting  standards  and an  adequate  allowance  for loan  losses  to
mitigate  credit risk.  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. 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. Management has assessed these risks
and feels that there has been no material change since December 31, 1997.

Provision for Loan Losses

     Three months ended June 30, 1998 and 1997

     The amount of the  allowance for loan losses is analyzed by management on a
regular  basis to ensure that it is  sufficient  to cover  potential  and future
losses.  When a provision  for loan losses is  recorded,  the amount is based on
past charge-off  experience,  a careful analysis of the current  portfolio,  the
level of nonperforming and impaired loans,  evaluation of future economic trends
in the Company's  market area,  and other relevant  factors  related to the loan
portfolio.

<PAGE>

     The  Company's  provision  for loan  losses was $26,000 and $98,000 for the
three months ended June 30, 1998 and 1997, respectively. Net charge-offs for the
three months ended June 30, 1998 were $61,000,  compared to net  charge-offs  of
$39,000 for the same period in 1997.  Nonaccrual loans were $1.5 million at June
30, 1998 and $592,000 at June 30, 1997.  While loans on non-accrual  status have
increased,  management  feels that the  allowance for loan losses is adequate to
absorb any exposure.  Management  continues to closely  monitor the loan quality
and existing relationships. For a more detailed disclosure please see Loans.


     Six months ended June 30, 1998 and 1997

     Provisions for loan losses  recorded for the six months ended June 30, 1998
were  $132,000 as compared to $189,000 at June 30, 1997.  Net  charge-offs  were
$179,000 and $132,000 at June 30, 1998 and 1997, respectively.  At June 30, 1998
the loan loss reserve was 1.49% of total loans outstanding.


Non-Interest Income

     Three months ended June 30, 1998 and 1997

     Non-interest  income,  primarily  consisting of service charges and related
fees,  was $231,000 for the three months ended June 30, 1998 and $161,000 in the
corresponding  period  in 1997.  As a result  of an  increase  in the  number of
accounts, service charges have increased to $155,000 from $119,000 for the three
months  ended June 30, 1998  compared to the three  months  ended June 30, 1997.
Other income has also increased to $76,000 from $42,000 in the second quarter of
1998 compared to the second  quarter of 1997 due to an increase in office rental
income.

     Six months ended June 30, 1998 and 1997

     Total non-interest income increased to $495,000 for the first six months of
1998  compared  to  $315,000  during the same  period in 1997.  The  increase in
non-interest  income of  $180,000  is a result of a 42.4%  increase  in  service
charge  income  after the  addition  of three  branches  in July  1997.  Another
component  of this  increase was the  expansion  of mortgage and trust  services
provided to the Cowlitz County area.

Non-Interest Expense

     Three months ended June 30, 1998 and 1997

     Non-interest  expense  consists  principally  of  employees'  salaries  and
benefits,  occupancy costs,  data processing and  communication  expenses,  FDIC
(Federal Deposit Insurance  Corporation)  insurance premium,  professional fees,
and other non-interest  expenses.  Non-interest expenses increased 38.5% to $1.7
million for the quarter  ended June 30,  1998  compared to $1.2  million for the
quarter  ended  June  30,  1997,  primarily  due to  increased  staffing  costs,
occupancy  expense and  amortization of the deposit premium from the acquisition
of three branches in July 1997.

     Six months ended June 30, 1998 and 1997

     For the six  months  ended  June 30,  1998  non-interest  expense  was $3.3
million as compared  to $2.3  million  for the six months  ended June 30,  1997.
Salaries  and  benefits  expense  of  $1.9  for the  first  six  months  of 1998
represents an increase of $553,000 from $1.3 million for the  comparable  period
in 1997.  At June 30,  1998 the Company had 96  full-time  equivalent  employees
compared to 75 at June 30, 1997.

     Net occupancy expenses consist of depreciation on premises,  lease costs of
buildings and equipment,  maintenance and repair expenses, utilities and related
expenses.  The Company's net occupancy  expense at June 30, 1998 was $424,000 or
42.8% higher than $297,000 at June 30, 1997.  The increase in occupancy  expense
in 1998 was due  primarily  to the addition of three  branches  purchased in the
third quarter of 1997.

<PAGE>

Income Taxes

     The provision for income taxes amounts to $561,000 and $536,000 at June 30,
1998 and 1997, respectively.  The provision resulted in an effective tax rate of
34% for both periods reported.

Loan Losses and Recoveries

     At June 30, 1998  management  considered  the  allowance for loan losses of
$1.9 million sufficient to absorb losses on loans which may become uncollectible
based on evaluations by management.  The amount of the allowance for loan losses
is assessed by  management on a regular basis to ensure that it is sufficient to
cover potential losses.  Specific reserves are assigned for sub-standard  assets
from the  classified  asset  report  and watch  list and then  combined  with an
assessment of the balance of the loan portfolio based upon historical charge-off
experience to arrive at a minimum, midpoint, and maximum range of potential loss
in  evaluating  the adequacy of the  allowance  for loan losses.  The  allowance
balance and amount of  provision  charged to  operations  is based  primarily on
management's  evaluation of the entire portfolio.  This analysis includes review
of the following  factors:  the volume and mix of the existing  loan  portfolio,
including  volume and severity of nonperforming  loans and adversely  classified
credits,  as well as  analysis  of net  charge-offs  experienced  on  previously
classified  loans;  the extent to which loan renewals and extensions are used to
maintain  loans on a current basis and the degree of risk  associated  with such
loans;  the nature and value of the  collateral  securing the loan; the trend in
loan growth,  including  any rapid  increase in loan volume  within a relatively
short  period of time;  general  and local  economic  conditions  affecting  the
collectibility  of the Company's loans; the relationship and trend over the past
several years of recoveries as a percentage of previous years' charge-offs;  and
available  outside  information  of  a  comparable  nature  regarding  the  loan
portfolios of other banks, including peer group banks.

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

<TABLE>
<CAPTION>
                                                                       Six months
                                                                        ending
(unaudited)                                                            June 30,       December 31,
(in thousands of dollars)                                                1998            1997
                                                                       ---------      -----------
<S>                                                                    <C>            <C>
Loans outstanding at end of period................................     $ 129,262      $ 131,963
Average loans outstanding during the period.......................     $ 130,670      $ 130,362

Allowance for loan losses, beginning of period....................     $   1,970      $   1,894
Loans charged off:
   Commercial.....................................................           164            186
   Real Estate....................................................             -              3
   Consumer.......................................................             2             23
   Credit Cards...................................................            26            112
                                                                       ---------      ---------
     Total loans charged-off......................................           192            324
                                                                       ---------      ---------

Recoveries:
   Commercial.....................................................             3              5
   Real Estate....................................................             -              -
   Consumer.......................................................             -             20
   Credit Cards...................................................            10              -
                                                                       ---------      ---------
     Total recoveries.............................................            13             25
                                                                       ---------      ---------
Provision for loan losses.........................................           132            375
                                                                       ---------      ---------

Allowance for loan losses, end of period..........................     $   1,923      $   1,970
                                                                       =========      =========

Ratio of net loans charged-off to average loans outstanding.......          .14%            .23%
Ratio of allowance for loan losses to loans at end of period......         1.49%           1.49%

</TABLE>

<PAGE>

   Loans

     Total loans outstanding were $129.3 million and $132.0 at June 30, 1998 and
December 31, 1997, respectively. Loan commitments were $19.1 million at June 30,
1998 and $16.6 million at December 31, 1997.

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

<TABLE>
<CAPTION>

(unaudited)                                             June 30, 1998                    December 31, 1997
(in thousands of dollars)                          Amount         Percentage           Amount      Percentage
                                                   -------------------------           ----------------------
<S>                                                <C>                   <C>        <C>                <C>
Commercial .................................       $   97,677         75.2%         $  93,829          70.8%
Real estate construction....................            2,053          1.6              3,495           2.6
Real estate commercial......................            4,913          3.8              5,475           4.1
Real estate mortgage........................           19,814         15.3             24,167          18.2
Consumer and other..........................            5,379          4.1              5,571           4.2
Contracts purchased.........................               46           *                  81            .1
                                                   ----------     --------          ---------    ----------
                                                      129,882        100.0%           132,618         100.0%
                                                                  ========                       ==========
Deferred loan fees..........................             (620)                           (655)
                                                   ----------                       ---------
     Total loans............................          129,262                         131,963
Allowance for loan losses...................           (1,923)                         (1,970)
                                                   ----------                       ---------
     Total loans, net.......................         $127,339                       $ 129,993
                                                   ==========                       =========
*Less than .1%

</TABLE>


     During its normal loan review  procedures,  the Company considers a loan to
be impaired  when it is probable  that the Company will be unable to collect all
amounts due according to the contractual terms of the loan agreement.  A loan is
not  considered  to be impaired  during a period of minimal  delay (less than 90
days).  The  Company  measures  impaired  loans  based on the  present  value of
expected future cash flows discounted at the loan's effective  interest rate, or
as a practical  expedient,  at the loan's  observable  market  price or the fair
market value of the  collateral  if the loan is collateral  dependent.  Impaired
loans are charged to the  allowance  for loan losses  when  management  believes
after considering  economic and business  conditions,  collection  efforts,  and
collateral  position,  that the  borrowers'  financial  condition  is such  that
collection of the principal is not probable.

     Generally, no interest is accrued on loans when factors indicate collection
of the interest is doubtful or when the principal or interest payment becomes 90
days past due,  unless  collection of the 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 the  collection  of the  remaining  recorded  principal  balance is
considered probable.

     The Company  manages the general  risks  inherent in the loan  portfolio by
following loan policies and underwriting practices designed to result in prudent
lending  activities.  The following table presents  information  with respect to
nonperforming assets:

<TABLE>
<CAPTION>
(unaudited)                                                            June 30,         December 31,
(in thousands of dollars)                                                1998             1997
                                                                       ---------        ----------
<S>                                                                        <C>              <C>
Loans on nonaccrual status                                                 1,509            1,897
Loans past due greater than 90 days but not on nonaccrual status             851              432
Other real estate owned                                                      600               88
Troubled debt restructuring                                                    -                -
                                                                       ---------        ---------
   Total nonperforming assets                                              2,960            2,417
                                                                       =========        =========
Percentage of nonperforming assets to total assets                         1.64%             1.39%

</TABLE>

     At June 30, 1998  nonperforming  assets were $3.0  million or 1.6% of total
assets.  Non-accruals of $1.5 million reflect a concentration of $1.3 million in
5 borrowers. Management has estimated the exposure on these 5 loans at $235,000.
This  estimated  exposure has been  considered in  management's  analysis of the
adequacy of the allowance for loan losses.

<PAGE>

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 are customers  deposits,
loan payments,  sales of assets, advances from the FHLB (Federal Home Loan Bank)
and the use of the federal funds market. As of June 30, 1998, approximately $2.0
million of the securities portfolio matures within one year.

     On March 12, 1998, the Company completed an initial public offering issuing
a total  of  1,380,000  shares  of  common  stock at  $12.00  per  share.  After
underwriting  discounts of $1.2 million and other offering  expenses of $472,000
net proceeds were $14.9 million. Of these proceeds $1.1 million has been used to
repay long-term debt and a subordinated note. The remainder of the proceeds will
be used for acquisitions and other business opportunities.

     Historically  the  Company  has  utilized  borrowings  from  the FHLB as an
important  source of funding  for its growth.  The  Company  has an  established
borrowing  line with the FHLB  that  permits  it to borrow up to 25% of  assets.
Advances  from the FHLB have terms  ranging  from 1 through 15 years and at June
30, 1998 bear  interest at rates from 4.48% to 8.62%.  At June 30,  1998,  $20.1
million  in  advances  were  outstanding  from  the  FHLB  and the  Company  had
additional  borrowing  capacity for cash advances of $24.9  million.  Due to the
acquisition  of three  branches  and the cash on deposit  with the bank from the
initial  public  offering  in  March  1998 the  need  for  FHLB  borrowings  has
decreased.  The Company may increase its percentage of borrowings  from the FHLB
in the future if circumstances warrant.

Capital

     The Company is required  to  maintain  minimum  amounts of capital to "risk
weighted" assets, as defined by banking  regulators.  The Company is required to
have Tier 1 and Total Capital ratios of 4.0% and 8.0%, respectively. At June 30,
1998, the Company's ratios were 22.94% and 24.20%, respectively. At December 31,
1997,  the  company's  ratios were 9.6% and 11.34%,  respectively.  The ratio of
shareholders' equity to average assets was 15.25% and 6.94% at June 30, 1998 and
December 31, 1997,  respectively.  June 30, 1998 ratios are significantly higher
than those at December  31,1997 due to the initial public  offering on March 12,
1998 in which $14.9 million was raised in additional capital.

Year 2000

     The Company  has an active Y2K plan and  committee  addressing  all systems
affected by the millennium  issue.  Assessment of the Company's systems has been
completed and all  hardware/software  as well as  non-hardware/software  systems
have been  identified.  The Company is currently in the validation  phase of the
project.  All mission  critical  systems  will be completed by December 31, 1998
with minor systems  completed by the end of the second quarter of 1999. A budget
has been approved and the  additional  costs to address the Year 2000 issues are
estimated to be $86,000.  The Company's  primary Y2K risk is associated with the
reliance  upon  outside  vendors  such  as  utility  companies,   communications
companies,  and the federal government.  A contingency plan is being established
that would be carried  out in the event that the  preventative  measures  put in
place have not been successful.

<PAGE>

                           Part II. Other Information

Item 2

Changes in Securities and Use of Proceeds

     On March 12, 1998, the Company completed an initial public offering issuing
a total  of  1,380,000  shares  of  common  stock at  $12.00  per  share.  After
underwriting  discounts of $1.2 million and other offering  expenses of $472,000
net proceeds were $14.9 million. The managing underwriters were Black & Company,
Inc. and Pacific Crest Securities,  Inc. Of these proceeds $1.1 million has been
used to repay  long-term  debt and a  subordinated  note.  The  remainder of the
proceeds has been invested in an interest bearing account at FHLB, Seattle.

Item 5

Other Information

     On August 11,  1998 the  Company  announced  its plans to acquire  Business
Finance  Corporation  (BFC), of Bellevue,  Washington.  BFC provides  factoring,
leasing, and inventory financing services in Washington, Oregon, California, and
Nevada.  The Company  will issue  common  stock with a value of  $500,000,  cash
payments totaling approximately $1.8 million and a future contingent issuance of
common stock valued at $500,000 if BFC achieves certain earnings targets for the
twelve month period  following the  acquisition.  The acquisition is expected to
close  during the third  quarter of 1998,  and is  subject  to  approval  by the
applicable regulatory agencies.

     A  shareholder  who  intends to present a proposal  at the  Company's  next
annual meeting,  other than pursuant to Rule 14a-8 under the Securities Exchange
Act of 1934,  must  provide the  Company  notice of such  intention  by at least
December 29, 1998 or  management of the Company will have  discretionary  voting
authority at the 1999 annual  meeting with respect to such proposal  without any
discussion of the matter in the Company's proxy statement.

Item 6

     (a)  Exhibits.  The list of  exhibits  is set  forth on the  Exhibit  Index
attached hereto.


     (b) On June 1, 1998,  the Company filed form 8-K announcing an agreement in
principle to merge with United Bancorp of Roseburg, Oregon.

     On June 8, 1998,  the Company filed form 8-K  announcing it had  terminated
discussions  with  respect to a proposed  merger of United  Bancorp of Roseburg,
Oregon.

<PAGE>

                                   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.


                         Cowlitz Bancorporation
                         (Registrant)


                         /s/ Charles W. Jarrett
Dated: 8/14/98           __________________________
                         Charles W. Jarrett
                         President and Chief Operating Officer


                         /s/ Donna P. Gardner
Dated: 8/14/98           __________________________
                         Donna P. Gardner
                         Vice-President/Secretary-Treasurer


<PAGE>

                                 EXHIBIT INDEX

Exhibit No.

  3.1*       Restated and Amended Articles of Incorporation of the Company.

  3.2*       Bylaws of the Company.

   27        Financial Data Schedule

     *Incorporated by reference to the Company's  Registration Statement on Form
S-1, File No. 333-44355.