U.S. SECURITIES AND EXCHANGE COMMISSIONWashington D.C.  20549

Form 10-Q/A

[X]
Quarterly report Pursuant to section 13 or 15(d) of the Securities and Exchange act of 1934
                                        For the quarter ended June 30, 2002[  ]
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
Sate or other jurisdiction of
incorporation or organization | 91-1529841
(IRS Employer 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, 2002:  3,769,272 shares

1

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COWLITZ BANCORPORATION
TABLE OF CONTENTS

|        |                                                                                                                                 | PAGE
|------- | ------------------------------------------------------------------------------------------------------------------------------- | ----
|Part I  | Financial Statements                                                                                                            |     
|        | Consolidated Statements of Condition -
     June 30, 2002 and December 31, 2001                                                 | 3   
|        | Consolidated Statements of Operations -
     Three months ended June 30, 2002 and June 30, 2001                                 | 4   
|        | Consolidated Statements of Changes in Shareholders' Equity
     Year ended December 31, 2001 and six months ended June 30, 2002 | 5   
|        | Consolidated Statements of Cash Flows
     Six months ended June 30, 2002 and June 30, 2001                                     | 6   
|        | Notes to Consolidated Financial Statements                                                                                      | 7-15
|        | Management's Discussion and Analysis of Financial Condition 
     And Results of Operations                                     | 16  
|Part II | Other                                                                                                                           |     
|        | Other information                                                                                                               | 32  
|        | Exhibits and Reports on Form 8-K                                                                                                | 32  
|        | Signatures                                                                                                                      | 33  
|        | Certification of Chief Executive Officer and Chief Financial Officer                                                            | 34  



2

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COWLITZ BANCORPORATION
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands of dollars, except number of shares)



|(unaudited)                                                           |                                                                                                     |         |         | June
    30, 2002 |         |         | December 31, 2001
|--------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------- | ------- | ----------------- | ------- | ------- | -----------------
|ASSETS                                                                |                                                                                                     |         |         |                   |         |         |                  
|Cash
    and cash equivalents                                         |                                                                                                     | $       | 22,646  |                   | $       | 50,177 
|Investment securities:                                                |                                                                                                     |         |         |                   |         |        
|                                                                      | Investments available-for-sale (at fair value,
    cost of $50,276 and                              |         |         |                   |         |        
|                                                                      | $30,172
    at June 30, 2002 and December 31, 2001,                                                 |         | 50,753  |                   |         | 30,188 
|                                                                      | Investments held-to-maturity (at amortized
    cost, fair value of                                  |         |         |                   |         |        
|                                                                      | $2,106 and
    $4,157 at June 30, 2002 and December 31, 2001,
                         respectively |         | 2,079   |                   |         | 4,115  
|                                                                      | Total investment securities                                                                         |         | 52,832  |                   |         | 34,303 
|                                                                      |                                                                                                     |         |         |                   |         |         |                  
|Federal Home Loan Bank stock, at cost                                 |                                                                                                     |         | 3,646   |                   |         | 3,531  
|                                                                      |                                                                                                     |         |         |                   |         |         |                  
|Loans held for sale                                                   |                                                                                                     | 20,559  |         |                   | 37,322 
|                                                                      |                                                                                                     |         |         |                   |         |         |                  
|Loans, net of deferred loan fees                                      |                                                                                                     | 226,441 |         |                   | 235,212
|Allowance for loan losses                                             |                                                                                                     | (5,525) |         |                   | (5,997)
|                                                                      | Loans, net                                                                                          |         | 220,916 |                   |         | 229,215
|Premises and equipment, net of accumulated
    depreciation of $4,323 |                                                                                                     |         |         |                   |         |        
|                                                                      | and $4,029 at June 30, 2002 and December 31,
    2001, respectively                                 |         | 4,896   |                   |         | 5,235  
|Goodwill                                                              |                                                                                                     | 2,352   |         |                   | 3,560  
|Intangible assets, net of accumulated
    amortization of $1,336 and  |                                                                                                     |         |         |                   |        
|                                                                      | $1,203 at June 30, 2002 and December 31, 2001,
    respectively                                     |         | 634     |                   |         | 767    
|Accrued interest receivable and other assets                          |                                                                                                     |         | 6,769   |                   |         | 6,550  
|                                                                      | Total assets                                                                                        | $       | 335,250 |                   | $       | 370,660
|                                                                      |                                                                                                     |         |         |                   |         |         |                  
|LIABILITIES                                                           |                                                                                                     |         |         |                   |         |         |                  
|Deposits:                                                             |                                                                                                     |         |         |                   |         |         |                  
|                                                                      | Non-interest-bearing demand                                                                         |         | $       | 44,851            |         | $       | 43,225           
|                                                                      | Savings and interest-bearing demand                                                                 |         |         | 103,445           |         |         | 96,587           
|                                                                      | Certificates of deposit                                                                             |         |         | 131,826           |         |         | 175,678          
|                                                                      | Total
    deposits                                                                                  |         |         | 280,122           |         |         | 315,490          
|Short-term borrowings                                                 |                                                                                                     |         | 4,100   |                   |         | 2,750  
|Long-term borrowings                                                  |                                                                                                     |         | 18,859  |                   |         | 19,009 
|Accrued interest payable and other liabilities                        |                                                                                                     |         | 2,209   |                   |         | 4,663  
|                                                                      | Total
    liabilities                                                                               |         | 305,290 |                   |         | 341,912
|                                                                      |                                                                                                     |         |         |                   |         |         |                  
|SHAREHOLDERS' EQUITY                                                  |                                                                                                     |         |         |                   |         |        
|Preferred stock, no par value; 5,000,000 shares authorized            |                                                                                                     |         |         |                   |         |        
|                                                                      | as of June 30, 2002 and December 31, 2001, no                                                       |         |         |                   |         |        
|                                                                      | shares issued and outstanding                                                                       |         | -       |                   |         | -      
|Common stock, no par value; 25,000,000
    authorized as of           |                                                                                                     |         |         |                   |         |        
|                                                                      | June 30, 2002 and December 31, 2001; 3,753,172                                                      |         |         |                   |         |        
|                                                                      | and 3,692,560 shares issued and outstanding at
    June 30, 2002                                    |         |         |                   |         |        
|                                                                      | and December 31, 2001, respectively                                                                 |         | 17,122  |                   |         | 16,802 
|Additional paid-in capital                                            |                                                                                                     | 1,538   |         |                   | 1,538  
|Retained earnings                                                     |                                                                                                     | 10,986  |         |                   | 10,398 
|Accumulated other comprehensive income, net of
    taxes              |                                                                                                     |         | 314     |                   |         | 10     
|                                                                      | Total
    shareholders' equity                                                                      |         |         | 29,960            |         |         | 28748            
|                                                                      | Total
    liabilities and shareholders' equity                                                      |         | $       | 335,250           |         |         | 370,660          
|                                                                      |                                                                                                     |         |         |                   |         |         |                  
|The accompanying notes are an integral part
    of these statements.  |                                                                                                     |         |         |                   |        
|                                                                      |                                                                                                     |         |         |                   |         |         |                  

3

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COWLITZ BANCORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)

|                                                                     |                                                          |      | Three
    months ended June 30, |   |      | Six
    months ended June 30,
|-------------------------------------------------------------------- | -------------------------------------------------------- | ---- | ------------------------------- | - | ---- | -----------------------------
|                                                                     |                                                          |      | 2002                            |   |      | 2001                         
|(unaudited)                                                          |                                                          |      |                                 |   |      |                              
|INTEREST
    INCOME                                                  |                                                          |      |                                 |   |      |                              
|                                                                     | Interest and fees on
    loans                           | $    | 4,891                           |   | $    | 6,501                        
|                                                                     | Interest on taxable
    investment securities            |      | 516                             |   |      | 155                          
|                                                                     | Interest on
    non-taxable investment securities        |      | 5                               |   |      | 2                            
|                                                                     | Other interest and
    dividend income                   |      | 148                             |   |      | 405                          
|                                                                     | Total interest income                                    |      | 5,560                           |   |      | 7,063                        
|                                                                     |                                                          |      |                                 |   |      |                              
|INTEREST
    EXPENSE                                                 |                                                          |      |                                 |   |      |                              
|                                                                     | Savings and
    interest-bearing demand                  |      | 441                             |   |      | 771                          
|                                                                     | Certificates of
    deposit                              |      | 1,543                           |   |      | 2,484                        
|                                                                     | Short-term borrowings                                    |      | 14                              |   |      | 30                           
|                                                                     | Long-term borrowings                                     |      | 234                             |   |      | 337                          
|                                                                     | Total interest
    expense                               |      | 2,232                           |   |      | 3,622                        
|                                                                     | Net interest income
    before provision for loan losses |      | 3,328                           |   |      | 3,441                        
|PROVISION
    FOR LOAN LOSSES                                        |                                                          | 355  |                                 |   | 355  |                              
|                                                                     | Net interest income
    after provision for loan losses  |      | 2,973                           |   |      | 3,086                        
|                                                                     |                                                          |      |                                 |   |      |                              
|NON-INTEREST INCOME                                                  |                                                          |      |                                 |   |      |                              
|                                                                     | Service charges on
    deposit accounts                  |      | 171                             |   |      | 183                          
|                                                                     | Gains on loans sold                                      |      | 998                             |   |      | 1,272                        
|                                                                     | Escrow fees                                              |      | 193                             |   |      | 206                          
|                                                                     | Fiduciary income                                         |      | 71                              |   |      | 59                           
|                                                                     | Credit card income                                       |      | 132                             |   |      | 135                          
|                                                                     | Brokerage Fees                                           |      | 706                             |   |      | 541                          
|                                                                     | Gain on sale of
    subsidiary                           |      | -                               |   |      | -                            
|                                                                     | Net gains (losses) on
    sale of repossessed assets     |      | 19                              |   |      | 2                            
|                                                                     | Other income                                             |      | 45                              |   |      | 39                           
|                                                                     | Net gains on sales of
    available-for-sale securities  |      | 39                              |   |      | 19                           
|                                                                     | Total non-interest
    income                            |      | 2,374                           |   |      | 2,456                        
|                                                                     |                                                          |      |                                 |   |      |                              
|NON-INTEREST EXPENSE                                                 |                                                          |      |                                 |   |      |                              
|                                                                     | Salaries and employee
    benefits                       |      | 2,604                           |   |      | 2,431                        
|                                                                     | Net occupancy and
    equipment expense                  |      | 545                             |   |      | 607                          
|                                                                     | Business taxes                                           |      | 137                             |   |      | 156                          
|                                                                     | Amortization of
    intangibles                          |      | 67                              |   |      | 148                          
|                                                                     | Net cost of operation
    of other real estate           |      | 47                              |   |      | 15                           
|                                                                     | Data processing and
    communications                   |      | 152                             |   |      | 165                          
|                                                                     | Professional fees                                        |      | 261                             |   |      | 134                          
|                                                                     | Postage and freight                                      |      | 116                             |   |      | 125                          
|                                                                     | Credit card expense                                      |      | 131                             |   |      | 106                          
|                                                                     | FDIC insurance                                           |      | 143                             |   |      | 69                           
|                                                                     | Other operating
    expense                              |      | 612                             |   |      | 833                          
|                                                                     | Total non-interest
    expense                           |      | 4,815                           |   |      | 4,789                        
|INCOME
    BEFORE INCOME TAX EXPENSE (BENEFIT)                       |                                                          | 532  |                                 |   | 753  |                              
|                                                                     | Income tax expense
    (benefit)                         |      | (184)                           |   |      | 337                          
|INCOME
    BEFORE CUMULATIVE EFFECT OF                               |                                                          |      |                                 |   |      |                              
|                                                                     | A CHANGE IN
    ACCOUNTING PRINCIPLE                     |      | 716                             |   |      | 416                          
|CUMULATIVE EFFECT ON PRIOR YEARS OF ACCTG                            |                                                          |      |                                 |   |      |                              
|                                                                     | CHANGE (Less
    applicable income taxes of $417,000)    |      | -                               |   |      | -                            
|NET
    INCOME                                                       | $                                                        | 716  |                                 | $ | 416  |                              
|                                                                     |                                                          |      |                                 |   |      |                              
|BASIC
    EARNINGS PER SHARE OF COMMON STOCK                         | $                                                        | 0.19 |                                 | $ | 0.11 |                              
|DILUTED
    EARNINGS PER SHARE-COMMON STOCK                          | $                                                        | 0.19 |                                 | $ | 0.11 |                              
|CUMULATIVE EFFECT OF ACCOUNTING CHANGE,                              |                                                          |      |                                 |   |      |                              
|NET OF
    TAX PER DILUTED SHARE OF COMMON STOCK                     | $                                                        | -    |                                 | $ | -    |                              
|                                                                     |                                                          |      |                                 |   |      |                              
|The
    accompanying notes are an integral part of these statements. |                                                          |      |                                 |   |      |                              
|                                                                     |                                                          |      |                                 |   |      |                              

4

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COWLITZ BANCORPORATION 
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands of dollars, except number of shares)



|                                                                     |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     | Accumulated
    Other 
    Comprehensive Income (loss) |        |                            |      |        |                             |     
|-------------------------------------------------------------------- | ----------------------------------- | ----------------------------------- | ------------ | ------ | --- | ------ | ----- | - | -------------------------- | ------ | ------- | ----------------- | --- | --- | ------------------------------------------------------ | ------ | -------------------------- | ---- | ------ | --------------------------- | ----
|                                                                     |                                     |                                     |              |        |     |        |       |   | Additional Paid-in Capital |        |         | Retained Earnings |     |     |                                                        |        | Total Shareholders' Equity |      |        | Comprehensive Income (loss)
|                                                                     |                                     |                                     | Common Stock |        |     |        |       |   |                            |        |         |                   |    
|                                                                     |                                     |                                     | Shares       |        |     | Amount |       |   |                            |        |         |                   |     |     |                                                        |       
|BALANCE AT DECEMBER 31, 2000                                         | 3,689,327                           |                                     | $            | 16,785 |     | $      | 1,538 |   | $                          | 12,048 |         | $                 | 38  |     | $                                                      | 30,409 |                            |      |       
|Comprehensive Income:                                                |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |       
|                                                                     | Net loss                            | -                                   |              |        | -   |        |       | - |                            |        | (1,450) |                   |     | -   |                                                        |        | (1,450)                    |      | $      | (1,450)                    
|                                                                     | Net change in unrealized gains on   |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |        |                            
|                                                                     |                                     | investments available-for-sale, net |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |        |                             |     
|                                                                     |                                     | of deferred taxes of $8             | -            |        |     | -      |       |   | -                          |        |         | -                 |     |     | (28)                                                   |        |                            | (28) |        |                             | (28)
|Comprehensive loss                                                   | -                                   |                                     |              | -      |     |        | -     |   |                            | -      |         |                   | -   |     |                                                        | -      |                            |      | (1478)
|Issuance of common stock for cash                                    | 3,233                               |                                     |              | 17     |     |        | -     |   |                            | -      |         |                   | -   |     |                                                        | 17     |                            |      |       
|Cash dividends paid ($.05 per share)                                 | -                                   |                                     |              | -      |     |        | -     |   |                            | (200)  |         |                   | -   |     |                                                        | (200)  |                            |      |       
|                                                                     |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |       
|BALANCE AT DECEMBER 31, 2001                                         | 3,692,560                           |                                     |              | 16,802 |     |        | 1,538 |   |                            | 10,398 |         |                   | 10  |     |                                                        | 28,748 |                            |      |       
|                                                                     | Comprehensive Income:               |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |        |                            
|                                                                     | Net income                          | -                                   |              |        | -   |        |       | - |                            |        | 588     |                   |     | -   |                                                        |        | 588                        |      | $      | 588                        
|                                                                     | Net change in unrealized gains on   |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |        |                            
|                                                                     | investments available-for-sale, net |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |        |                            
|                                                                     | of deferred taxes of $157           | -                                   |              |        | -   |        |       | - |                            |        | -       |                   |     | 304 |                                                        |        | 304                        |      |        | 304                        
|                                                                     | Comprehensive income                | -                                   |              |        | -   |        |       | - |                            |        | -       |                   |     | -   |                                                        |        | -                          |      | $      | 892                        
|                                                                     | Issuance of common stock for cash   | 60,612                              |              |        | 320 |        |       | - |                            |        | -       |                   |     | -   |                                                        |        | 320                        |      |        |                            
|                                                                     |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |        |                             |     
|BALANCE AT JUNE 30, 2002                                             | 3,753,172                           |                                     | $            | 17,122 |     | $      | 1,538 |   | $                          | 10,986 |         | $                 | 314 |     | $                                                      | 29,960 |                            |      |       
|(unaudited)                                                          |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |       
|                                                                     |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |     |     |                                                        |        |                            |      |       
|The accompanying notes are an integral
    part of these statements. |                                     |                                     |              |        |     |        |       |   |                            |        |         |                   |    

5

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



|                                                                     |                                                                        |   |          | Six months endedJune 30,
|-------------------------------------------------------------------- | ---------------------------------------------------------------------- | - | -------- | ------------------------
|                                                                     |                                                                        |   |         
|                                                                     |                                                                        |   |          | 2002                    
|(unaudited)                                                          |                                                                        |   |          |                         
|CASH FLOWS FROM OPERATING ACTIVITIES                                 |                                                                        |   |          |                         
|                                                                     | Net
    income                                                         |   | $        | 588                     
|                                                                     | Adjustments to reconcile net income to net cash provided by            |   |          |                         
|                                                                     | Operating
    activities:                                              |   |          |                         
|                                                                     | Deferred
    tax benefit                                               |   |          | (348)                   
|                                                                     | Depreciation and amortization                                          |   |          | 475                     
|                                                                     | Change in
    accounting principle                                     |   |          | 1,208                   
|                                                                     | Provision
    for loan losses                                          |   |          | 655                     
|                                                                     | Net gain
    on sale of subsidiary                                     |   |          | (423)                   
|                                                                     | Net gains
    on sales of investments available-for-sale               |   |          | (39)                    
|                                                                     | Net
    amortization of investment security premiums and accretion     |   |          |                         
|                                                                     | of discounts                                                           |   | 146      |                         
|                                                                     | Net
    losses (gains) on sales of foreclosed assets                   |   |          | (21)                    
|                                                                     | Gains on
    loans sold                                                |   |          | (2,172)                 
|                                                                     | Origination of loans held for sale                                     |   |          | (178,406)               
|                                                                     | Proceeds
    of loans sales                                            |   |          | 197,341                 
|                                                                     | Increase
    in accrued interest receivable and other assets           |   |          | (80)                    
|                                                                     | Increase
    (decrease) accrued interest payable and other liabilities |   |          | (2,241)                 
|                                                                     | Federal
    Home Loan Bank stock dividends                             |   |          | (119)                   
|                                                                     | Net
    cash from operating activities                                 |   | 16,564   |                         
|CASH FLOWS FROM INVESTING ACTIVITIES                                 |                                                                        |   |          |                         
|                                                                     | Proceeds
    from maturities of investment securities                  |   |          |                         
|                                                                     | held-to-maturity                                                       |   | 2,599    |                         
|                                                                     | Proceeds
    from sales and maturities of investment securities        |   |          |                         
|                                                                     | available-for-sale                                                     |   | 14,678   |                         
|                                                                     | Proceeds
    from sales of foreclosed assets                           |   |          | 320                     
|                                                                     | Purchases
    of investment securities:                                |   |          |                         
|                                                                     | Held-to-maturity                                                       |   | (559)    |                         
|                                                                     | Available-for-sale                                                     |   | (34,893) |                         
|                                                                     | Net
    (increase) decrease in loans                                   |   |          | 7,728                   
|                                                                     | Net cash
    paid from sale of subsidiary                              |   |          | (104)                   
|                                                                     | Purchases
    of premises and equipment                                |   |          | (16)                    
|                                                                     | Net cash
    from investment activities                                |   | (10,247) |                         
|CASH FLOWS FROM FINANCING ACTIVITIES                                 |                                                                        |   |          |                         
|                                                                     | Net
    increase in demand, savings, and interest bearing              |   |          |                         
|                                                                     | demand
    deposits                                                    |   | 8,484    |                         
|                                                                     | Net
    increase (decrease) in certificates of deposit                 |   |          | (43,852)                
|                                                                     | Dividends
    paid                                                     |   |          | -                       
|                                                                     | Net
    increase in short-term borrowings                              |   |          | 1,350                   
|                                                                     | Repayment
    of long-term borrowings                                  |   |          | (150)                   
|                                                                     | Issuance
    of common stock for cash, net of amount paid for          |   |          |                         
|                                                                     | fractional
    shares and offering costs                               |   | 320      |                         
|                                                                     | Net cash
    from financing activities                                 |   | (33,848) |                         
|                                                                     | Net
    increase (decrease) in cash and cash equivalents               |   | (27,531) |                         
|CASH AND CASH EQUIVALENTS AT BEGINNING
    OF YEAR                   |                                                                        |   | 50,177   |                         
|CASH AND CASH EQUIVALENTS AT END OF
    PERIOD                       |                                                                        | $ | 22,646   |                         
|                                                                     |                                                                        |   |          |                         
|                                                                     |                                                                        |   |          |                         
|The accompanying notes are an
    integral part of these statements. |                                                                        |   |          |                         
|                                                                     |                                                                        |   |          |                         

6

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COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)



1.   Nature of Operations        Cowlitz Bancorporation (the "Company") was organized in 1991 under Washington law to become the holding company for Cowlitz Bank (also the "Company" or 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 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, mortgage origination and trust services. From 1998 through 2001, the Company also provided asset-based lending services to companies throughout the Western United States through its subsidiary, Business Finance Corporation ("BFC"), which was sold in the first quarter of 2002. See footnote 9 for a detailed discussion of the sale of BFC.

The Company's goal is to maintain its position as a community-based provider of financial services. The Company's growth strategy is based on providing both exceptional personal service and a wide range of financial services to its customers. This is done by emphasizing personal service and developing strong community ties, offering financial products and services that are focused on small and medium-sized businesses, and increasing business volume in existing markets. In accordance with this strategy, during 1999 and 2000, the Company acquired or opened several mortgage and escrow branches. Bay Mortgage and Bay Escrow of Bellevue, Washington, Bay Mortgage and Bay Escrow of Seattle, Washington, Bay Mortgage of Silverdale, Washington, and Bay Mortgage of Vancouver, Washington (collectively "Bay Mortgage") have joined together with the Longview mortgage operations as a mortgage lending services branch of Cowlitz Bank. Bay Mortgage serves customers throughout the greater Bellevue/Seattle market area, Cowlitz County, and through the Vancouver office, the greater Portland, Oregon market. The Bank also expanded its commercial banking activities in the Seattle/Bellevue area with the September 1999 opening of a branch in Bellevue, Washington, which is doing business as Bay Bank. In mid-2000, the Company acquired Northern Bank of Commerce ("NBOC") of Portland, Oregon, which operates as a branch of the Bank doing business as Northern Bank of Commerce. NBOC operates its main office in downtown Portland, and has 11 limited service branches located within retirement centers in the Portland metropolitan area.

For the second quarter and first six months of 2001, the Company has reclassified certain income and expense items relating to the loans funded or processed by Bay Mortgage in order to conform with changes in the current period presentation. Fees collected on loans brokered, but not funded, by Bay Mortgage to outside lenders had been recorded as interest income but are now properly classified as non-interest income. Similarly, loan origination fees related to loans held-for-sale previously reported as interest income have been reclassified as non-interest income. Loan origination fees on loans held-for-sale, net of certain direct origination costs, are deferred and amortized as an adjustment of the yield on the related loan using the interest method. Such net deferred loan origination fees are recognized when the related loans are subsequently sold or repaid. These reclassifications have no effect on the Company's previously reported financial position, results of operations, or earnings per share.

2.   Principles of Consolidation        The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries.  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, 2002 are not necessarily indicative of results to be anticipated for the year ending December 31, 2002.

7

---

COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

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 cash equivalents" and include 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.  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 numerator and denominator of the basic and diluted earnings per share computations:



Net Income
    
    
    Weighted Avg. Shares
    
    
    Per Share AmountFor the
    three months ended June 30, 2002Basic earnings per
    share
    $
    716
    
    
    3,738,245
    
    $
    0.19Stock Options
    
    
    
    
    117,443Diluted earnings per
    share
    $
    716
    
    
    3,855,688
    
    $
    0.19For the
    three months ended June 30, 2001Basic earnings per
    share
    $
    416
    
    
    3,691,865
    
    $
    0.11Stock Options
    
    
    
    
    32,958Diluted earnings per
    share
    $
    416
    
    
    3,724,823
    
    $
    0.11For the
    six months ended June 30, 2002Basic earnings per
    share
    $
    588
    
    
    3,718,989
    
    $
    0.16Stock Options
    
    
    
    
    75,708Diluted earnings per
    share
    $
    588
    
    
    3,794,697
    
    $
    0.15For the
    six months ended June 30, 2001Basic earnings per
    share
    $
    873
    
    
    3,691,115
    
    $
    0.24Stock Options
    
    
    
    
    33,010Diluted earnings per
    share
    $
    873
    
    
    3,724,125
    
    $
    0.23


8

---



COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

Options to purchase 321,806 shares of common stock with exercise prices ranging from $6.19 to $12.00, with an average price of $10.42, were outstanding at June 30, 2002 but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares.  These options expire from 2008-2012.

6.   Recently Issued Accounting Standards        SFAS Nos. 142, 143, 145, and 146
        Statement of Financial Accounting Standard (SFAS) No. 142 - "Goodwill and Other Intangible Assets," addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No. 17, "Intangible Assets." It addresses how intangible assets that are acquired individually or with a group of other assets (but not those acquired in a business combination) should be accounted for in financial statements upon their acquisition. This Statement also addresses how goodwill and other intangible assets should be accounted for after they have been initially recognized in the financial statements. The provisions of this Statement are required to be applied starting with fiscal years beginning after December 15, 2001. The Company has adopted this standard effective January 1, 2002. Under the new rules, goodwill (and intangible assets deemed to have indefinite lives) will no longer be amortized but will be subject to annual impairment tests in accordance with the Statement. Other intangible assets will continue to be amortized over their useful lives.
 Acquired intangible assets consisted of the following at the periods indicated:

|                              |  |                                    | At June 30, 2002              |                         | At December 31, 2001               
|----------------------------- |  | ---------------------------------- | ----------------------------- | ----------------------- | -----------------------------------
|                              |  |                                    | Gross CarryingAmount          | AccumulatedAmortization |                                    
|                              |  |                                    |                              
|Amortized intangible assets   |  |                                    |                               |                         |                                    
|Core
    Deposits             |  | $                       
    1,970 | $               
    (1,336)  |                         | $                        
    1,970
|                              |  |                                    |                               |                         |                                    
|Unamortized intangible assets |  |                                    |                               |                         |                                    
|Goodwill                      |  | $                       
    2,840 | $                  
    (488) |                         | $                        
    4,048
|                              |  |                                    |                               |                         |                                    

9

---



COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

The changes in the carrying amount of goodwill for the periods indicated are as follows:



|                                                    |  | Three Months Ended June 30, 2002 |         
|--------------------------------------------------- |  | -------------------------------- | --------
|                                                    |  | Commercial                       | Mortgage
|                                                    |  | Banking                          | Banking 
|Balance beginning of period                         |  | 852                              | 1,500   
|Goodwill amortized during
    period                |  | -                                | -       
|Impairment losses recognized
    under SFAS No. 142 |  | -                                | -       
|Balance end of period                               |  | $ 852                            | $ 1,500 
|                                                    |  |                                  |         
|                                                    |  |                                  |         
|                                                    |  | Three Months Ended June 30, 2001 |         
|                                                    |  | Commercial                       | Mortgage
|                                                    |  | Banking                          | Banking 
|Balance beginning of period                         |  | 898                              | 2,057   
|Goodwill amortized during
    period                |  | (16)                             | (40)    
|Balance end of period                               |  | $ 882                            | $ 2,017 
|                                                    |  |                                  |         
|                                                    |  | Six Months Ended June 30, 2002   |         
|                                                    |  | Commercial                       | Mortgage
|                                                    |  | Banking                          | Banking 
|Balance beginning of period                         |  | 852                              | 2,708   
|Goodwill amortized during
    period                |  | -                                | -       
|Impairment losses recognized
    under SFAS No. 142 |  | -                                | (1,208) 
|Balance end of period                               |  | $ 852                            | $ 1,500 
|                                                    |  |                                  |         
|                                                    |  | Six Months Ended June 30, 2001   |         
|                                                    |  | Commercial                       | Mortgage
|                                                    |  | Banking                          | Banking 
|Balance beginning of period                         |  | 914                              | 2,097   
|Goodwill amortized during
    period                |  | (32)                             | (80)    
|Balance end of period                               |  | $ 882                            | $ 2,017 
|                                                    |  |                                  |         
|                                                    |  |                                  |         

Future estimated amortization expense for core deposit intangibles consist of
the following for the years ended December 31:

|2003       |  | 265  
|---------- |  | -----
|2004       |  | 236  
|2005       |  | -    
|2006       |  | -    
|2007       |  | -    
|Thereafter |  | -    
|Total      |  | $ 501
|           |  |      

The aggregate amortization expense for the quarter ended June 30, 2002 and 2001 amounted to $67,000 and $148,000, respectively.  Aggregate amortization expense for the quarter ended June 30, 2001 includes $81,000 of amortization expense attributed to Goodwill, which is no longer being amortized according to the provisions of SFAS No. 142. The aggregate amortization expense for the six months ended June 30, 2002 and 2001 amounted to $133,000 and $295,000, respectively.  Aggregate amortization expense for the six months ended June 30, 2001 includes $162,000 of amortization expense attributed to Goodwill, which is no longer being amortized according to the provisions of SFAS No. 142.

10

---

COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

The transitional disclosure requirements of SFAS No. 142 require presentation of income for all periods reported, adjusted for amortization expense for all goodwill and intangible assets.  The following adjusted income amounts are reconciled to reported net income:

|                                                |                                                           |                                   | (Pro
    forma)
|----------------------------------------------- | --------------------------------------------------------- | --------------------------------- | ---------------
|                                                |                                                           |                                   |                
|                                                |                                                           |                                   |                
|(unaudited)                                     |                                                           |                                   |                
|Reported net income                             |                                                           | $                                 | 716            
|Add
    back: Goodwill amortization, net of tax |                                                           | -                                 |                
|                                                |                                                           | Restated net
    income           | $              
|BASIC
    EARNINGS PER SHARE OF COMMON STOCK    |                                                           |                                   |                
|                                                | Reported net income per share                             | $                                 | 0.19           
|                                                | Add
    back: Goodwill amortization per share, net of tax |                                   | -              
|                                                |                                                           | Restated net
    income per share | $              
|DILUTED EARNINGS PER SHARE OF COMMON STOCK      |                                                           |                                   |                
|                                                | Reported net income per share                             | $                                 | 0.19           
|                                                | Add
    back: Goodwill amortization per share, net of tax |                                   | -              
|                                                |                                                           | Restated net
    income per share | $              
|                                                |                                                           |                                   |                
|                                                |                                                           |                                   |                



|                                                |                                                           |   |     | (Pro forma)     
|----------------------------------------------- | --------------------------------------------------------- | - | --- | ----------------
|                                                |                                                           |   |     | Six months ended
|                                                |                                                           |   |     | June 30,        
|(unaudited)                                     |                                                           |   |     | 2002            
|Reported net
    income                         |                                                           | $ | 588 |                 
|Add back: Goodwill
    amortization, net of tax |                                                           |   | -   |                 
|                                                | Restated net income                                       |   | $   | 588             
|BASIC EARNINGS PER
    SHARE OF COMMON STOCK    |                                                           |   |     |                 
|                                                | Reported net income per share                             |   | $   | 0.16            
|                                                | Add back: Goodwill
    amortization per share, net of tax |   |     | -               
|                                                | Restated net income per share                             |   | $   | 0.16            
|DILUTED EARNINGS
    PER SHARE OF COMMON STOCK  |                                                           |   |     |                 
|                                                | Reported net income per share                             |   | $   | 0.16            
|                                                | Add back: Goodwill
    amortization per share, net of tax |   |     | -               
|                                                | Restated net income per share                             |   | $   | 0.16            
|                                                |                                                           |   |     |                 

The Company has applied the new rules on accounting for goodwill and other intangible assets during 2002. Application of the non-amortization provisions of the Statement is expected to result in an increase in net income of $325,000 per year.  Amortization expense on intangible assets was $133,000 for the six months ended June 30, 2002 compared to $295,000 for the same period of 2001.  During the first quarter of 2002, upon adoption of SFAS 142, the Company performed a transitional impairment test of goodwill and indefinite lived intangible assets.  The effect of changing to this new accounting principle is a one-time charge of $791,000 net of tax, related to the Company's mortgage banking segment. The impairment test was performed using a market valuation approach, utilizing recent sales data of similar mortgage operations, combined with an estimate of the Company's current value. This combined valuation was below the segment's asset value, so the goodwill value was adjusted to reflect the impairment. The writedown is included in the Company's consolidated statement of operations as a separately captioned item entitled "Cumulative Effect on Prior Years of Accounting Change." The Company does not anticipate any additional future impairment charges related to the carrying value of its goodwill, and no adjustments will be made to the first quarter's final calculated impairment charge of $791,000.

11

---

COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

Statement of Financial Accounting Standard (SFAS) No. 143 - "Accounting for Asset Retirement Obligations," addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. This Statement applies to all entities. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development, and/or the normal operation of a long-lived asset, except for certain obligations of lessees. As used in this Statement, a legal obligation is an obligation that a party is required to settle as a result of an existing or enacted law, statute, ordinance, or written or oral contract or by legal construction of a contract under the doctrine of promissory estoppel. This Statement amends FASB Statement No. 19, "Financial Accounting and Reporting by Oil and Gas Producing Companies." This Statement is effective for financial statements issued for fiscal years beginning after June 15, 2002, so will become effective for the Company in the first quarter of 2003. The Company's management does not expect that the application of the provisions of this Statement will have a material impact on the Company's consolidated financial statements.

In April 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."  This Statement rescinds FASB Statement No. 4, "Reporting Gains and Losses from Extinguishment of Debt," and an amendment of that Statement, FASB Statement No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." This Statement also rescinds FASB Statement No. 44, "Accounting for Intangible Assets of Motor Carriers." This Statement amends FASB Statement No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The Company has adopted this standard, but management does not expect that the application of the provisions of this Statement will have a material impact on the Company's consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The Statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. The Company has not yet adopted this standard. Management does not expect that the application of the provisions of this Statement will have a material impact on the Company's consolidated financial statements.

7.   Comprehensive Income

For the Company, comprehensive income includes net income reported on the statements of income and changes in the fair value of its available-for-sale investments reported as a component of shareholders' equity.

The components of comprehensive income/(loss) for the periods ended June 30, 2002 and 2001 are as follows:



|                                                                |  |   | Three months
    ended |  |   | Six months ended
|--------------------------------------------------------------- |  | - | ---------------------- |  | - | ----------------
|                                                                |  |   | June 30,               |  |   | June 30,        
|                                                                |  |   | 2002                   |  |   | 2001            
|Unrealized gain (loss) arising
    during                       |  |   |                        |  |   |                 
|the period, net of tax of
    $236, $(31), $170, and $(16)      |  | $ | 458                    |  | $ | (60)            
|Reclassification adjustment
    for net realized gains on       |  |   |                        |  |   |                 
|securities
    available-for-sale included in net income during |  |   |                        |  |   |                 
|the year, net of tax of
    $13, $7, $13, and $13               |  |   | 26                     |  |   | 12              
|                                                                |  | $ | 432                    |  | $ | (72)            



12

---



COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

8.    Segments of an Enterprise and Related Information:

The Company is principally engaged in community banking activities through its branches and corporate offices.  The 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 Company provided asset based financing to companies throughout the western United States through its BFC subsidiary, until its sale in the first quarter of 2002.  Bay Mortgage specializes in all facets of residential lending including FHA and VA loans, construction loans and bridge loans.

The community banking, mortgage banking, and asset based financing activities are monitored and reported by Company management as separate operating segments.  The seven separate banking offices and 11 retirement center branches have been aggregated into a single reportable segment, "Banking," and Bay Mortgage is included as a segment, "Mortgage Banking."  The asset based financing segment, BFC, is reported as a separate segment in the following table below.  The BFC segment was sold during the first quarter of 2002. See footnote 9 for a detailed discussion of the sale of BFC.

The accounting policies for the Company's segment information provided below are the same as those described for the Company in the summary of significant accounting policies footnote included in the Company's 2001 annual report, except that some operating expenses are not allocated to segments.

Summarized financial information for the period ended June 30, 2002 and 2001 concerning the Company's reportable segments is shown in the following tables.

|Three months ended
    June 30, 2002                                                                                                          
|----------------------------------------------------------------------------------------------------------------------------------------------
|                                                                                                                                              
|                                                                                                                                              
|Interest income                                                                                                                               
|Interest expense                                                                                                                              
|Net interest income                                                                                                                           
|Provision for loan
    loss                                                                                                                   
|Non-interest
    income                                                                                                                       
|Non-interest
    expense                                                                                                                      
|Income (loss)
    before tax                                                                                                                  
|Income tax exp.
    (benefit)                                                                                                                 
|Net income(loss)                                                                                                                              
|Depreciation/amortization                                                                                                                     
|                                                                                                                                              
|                                                                                                                                              
|Three months ended
    June 30, 2001                                                                                                          
|                                                                                                                                              
|                                                                                                                                              
|Interest income                                                                                                                               
|Interest expense                                                                                                                              
|Net interest
    income                                                                                                                       
|Provision for loan
    loss                                                                                                                   
|Non-interest
    income                                                                                                                       
|Non-interest
    expense                                                                                                                      
|Income (loss)
    before tax                                                                                                                  
|Income tax exp.
    (benefit)                                                                                                                 
|Net income(loss)                                                                                                                              
|Depreciation/amortization                                                                                                                     
|                                                                                                                                              
|13
    COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)
|Six months ended
    June 30, 2002                                                                                                            
|                                                                                                                                              
|                                                                                                                                              
|Interest income                                                                                                                               
|Interest expense                                                                                                                              
|Net interest income                                                                                                                           
|Provision for loan
    loss                                                                                                                   
|Non-interest
    income                                                                                                                       
|Non-interest
    expense                                                                                                                      
|Income (loss)
    before tax                                                                                                                  
|Income tax exp.
    (benefit)                                                                                                                 
|Income
    (loss) before change                                                                                                               
|in accounting
    principle                                                                                                                   
|Change in
    accounting                                                                                                                      
|principle net of tax                                                                                                                          
|Net income(loss)                                                                                                                              
|Depreciation/amortization                                                                                                                     
|Total assets                                                                                                                                  
|                                                                                                                                              
|Six months ended
    June 30, 2001                                                                                                            
|                                                                                                                                              
|                                                                                                                                              
|Interest income                                                                                                                               
|Interest expense                                                                                                                              
|Net interest income                                                                                                                           
|Provision for loan
    loss                                                                                                                   
|Non-interest
    income                                                                                                                       
|Non-interest
    expense                                                                                                                      
|Income (loss)
    before tax                                                                                                                  
|Income tax exp.
    (benefit)                                                                                                                 
|Net income(loss)                                                                                                                              
|Depreciation/amortization                                                                                                                     
|Total assets                                                                                                                                  

9.   Business Acquisitions and Sales:

The current year to date net income also includes a gain on the sale of the Company's finance subsidiary, Business Finance Corp (BFC). BFC was purchased in August of 1998 in order to diversify the Company's holdings and to provide accounts receivable financing as an additional income source and an additional service to customers in the Western United States. However, during 2001, due to a poor return on investment, and a desire to focus its resources more fully on the core banking business, the Company began evaluating alternatives for this segment, including the possibility of selling the segment or reducing the level and scope of its operations. Charges taken in the fourth quarter of 2001 related to loan loss provisions and goodwill impairment, also contributed to the Company's decision to reduce its future commitment and investment in this segment. A formal plan of disposal for the segment was established in January of 2002. The only cost associated with the disposal of the BFC segment was for severance pay and this amount, which was recognized during the first quarter, was not significant.

On February 15, 2002, after a thorough evaluation of options had been considered by management, the Company completed its sale of BFC and recognized a pre-tax gain of $423,000 from the sale of remaining assets. The assets sold consisted primarily of the segment's collateralized factored receivable accounts that also possessed a positive credit and collection history. Because the final decision to sell BFC was not made until January 2002, the gain was not reported for the year ended December 31, 2001 in accordance with the provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", which was effective through December 31, 2001 until it was later superceded by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which became effective for the Company beginning January 1, 2002.



14

---



COWLITZ BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except number of shares and per share amounts)

The following table summarizes the sale transaction.

|(dollars in thousands)           |                                                      |      
|-------------------------------- | ---------------------------------------------------- | -----
|Net
    finance receivables sold | $                                                    | 2,511
|Other
    assets sold            |                                                      | 120  
|                                 | Total assets sold                                    |      
|Loans
    assumed                |                                                      | 2,800
|Other
    liabilities assumed    |                                                      | 213  
|Due
    from purchaser           |                                                      | 41   
|                                 | Total liabilities
    assumed and due from purchaser |      
|                                 | Pre-tax gain on
    sale                             | $    
|                                 |                                                      |      

10.   Commitments and Contingencies:

Certain of the Company's long-term borrowings have restrictive covenants that require the Company to maintain minimum levels of net income to required annual debt-service payments. At March 30, 2001, the Company was in violation of a covenant requiring the control of "overhead expenses, including salaries, in order to assure that quarterly net after-tax income less dividends to shareholders will exceed three times total loan payments of principal and interest." However, a waiver of the covenant violation for the quarter ended March 31, 2002 was received from the Company's lender on May 6th, 2002. Upon receipt of this waiver, the Company was in full compliance with the terms and conditions of this long-term borrowing and its covenants.  If the Company violates this debt covenant in future quarters, the lender has the discretion to require immediate repayment of the balance due, repossess the collateral for this note, or issue a waiver for the violation. The Company was not in violation at June 30, 2002, and does not anticipate a violation of this covenant in future quarters.

11.   Subsequent Events: None.

15

---



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 included elsewhere in this report.

This discussion and information in the accompanying financial statements contains certain 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 affect on the operations and future prospects of the company, and could render actual results different from those expressed in the forward-looking statement, include, without limitation: 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.

For the second quarter and first six months of 2001, the Company has reclassified certain income and expense items relating to the loans funded or processed by Bay Mortgage in order to conform with changes in the current period presentation. Fees collected on loans brokered, but not funded, by Bay Mortgage to outside lenders had been recorded as interest income but are now properly classified as non-interest income. Similarly, loan origination fees related to loans held-for-sale previously reported as interest income have been reclassified as non-interest income. Loan origination fees on loans held-for-sale, net of certain direct origination costs, are deferred and amortized as an adjustment of the yield on the related loan using the interest method. Such net deferred loan origination fees are recognized when the related loans are subsequently sold or repaid. These reclassifications have no effect on the Company's previously reported financial position, results of operations, or earnings per share.

Results of Operations

Three months ended June 30, 2002 and 2001

During the second quarter of 2002 the Company had net income of $716,000, or $0.19 per diluted share, compared to net income of $416,000, or $.11 per diluted share, in the second quarter of 2001. For the second quarter of 2002, the Company's revenues (net interest income before provision for loan losses plus non-interest income) were $5.7 million, a slight decrease from the revenues of $5.9 million during the same period in 2001.  Non-interest expenses were unchanged from period to period at $4.8 million. The current quarter income includes an income tax benefit of $375,000 or $.10 per diluted share. The deferred tax benefit results from a reduction in the Company's valuation allowance held against certain deferred tax assets, which were recorded in the first quarter of 2002 in connection with the sale of BFC.

16

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Under the adoption of SFAS No. 142 the Company is no longer recording amortization on unidentifiable intangible assets, specifically goodwill.  The following pro forma table restates prior period net income and earnings per share as if SFAS No. 142 had been in effect.

|                                                | (Pro forma)                                              
|----------------------------------------------- | ---------------------------------------------------------
|                                                | Three months
    ended                                   
|                                                | June 30,                                                 
|(unaudited)                                     |                                                          
|Reported net income                             |                                                          
|Add back: Goodwill
    amortization, net of tax |                                                          
|                                                | Restated net income                                      
|BASIC EARNINGS PER SHARE OF
    COMMON STOCK    |                                                          
|                                                | Reported net income per share                            
|                                                | Add back: Goodwill
    amortization per share, net of tax
|                                                |                                                          
|DILUTED EARNINGS PER SHARE OF
    COMMON STOCK  |                                                          
|                                                | Reported net income per share                            
|                                                | Add back: Goodwill
    amortization per share, net of tax
|                                                |                                                          
|                                                |                                                          

Six months ended June 30, 2002 and 2001

During the first quarter of 2002, the Company recorded a one-time impairment charge to the carrying amount of its goodwill from the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142).  The impairment charge is recognized as a result of a transitional goodwill impairment test required by SFAS No. 142.  The effect of this new accounting principle is a charge of $791,000 or $.21 per diluted share, net of tax of $417,000. This is a final calculation of the impairment charge, and the Company does not anticipate additional adjustments or charges related to the adoption of SFAS No. 142. The Company reported net income of $588,000 or $.16 per diluted share for the first six months of 2002 after adopting the provisions of SFAS No. 142, compared to net income of $873,000 or $0.23 per diluted share for the same period of 2001.

Under the adoption of SFAS No. 142 the Company is no longer recording amortization on unidentifiable intangible assets, specifically goodwill.  The following pro forma table restates prior period net income and earnings per share as if SFAS No. 142 had been in effect.

|(unaudited)                                     |                                                           |                  | (Pro forma)
|----------------------------------------------- | --------------------------------------------------------- | ---------------- | -----------
|                                                |                                                           | Six months ended |            
|                                                |                                                           | June 30,         |            
|                                                |                                                           | 2002             |            
|Reported net income                             |                                                           | $                | 588        
|Add back: Goodwill
    amortization, net of tax |                                                           | -                | -          
|                                                | Restated net income                                       |                  | $          
|BASIC EARNINGS PER SHARE OF
    COMMON STOCK    |                                                           |                  |            
|                                                | Reported net income per share                             |                  | $          
|                                                | Add back: Goodwill
    amortization per share, net of tax |                  |            
|                                                | Restated net income per share                             |                  | $          
|DILUTED EARNINGS PER SHARE OF
    COMMON STOCK  |                                                           |                  |            
|                                                | Reported net income per share                             |                  | $          
|                                                | Add back: Goodwill
    amortization per share, net of tax |                  |            
|                                                | Restated net income per share                             |                  | $          
|                                                |                                                           |                  |            



The current year to date net income also includes a gain on the sale of the Company's finance subsidiary, Business Finance Corp (BFC), of $284,000 after tax or $.08 per diluted share. BFC was purchased in August of 1998 in order to diversify the Company's holdings and to provide accounts receivable financing as an additional income source and an additional service to customers in the Western United States. However, during 2001, due to a poor return on investment, and a desire to focus its resources more fully on the core banking business, the Company began evaluating alternatives for this segment, including the possibility of selling the segment or reducing the level and scope of its operations. Charges taken in the fourth quarter of 2001 related to loan loss provisions and goodwill impairment, also contributed to the Company's decision to reduce its future commitment and investment in this segment. A formal plan of disposal for the segment was established in January of 2002. The only cost associated with the disposal of the BFC segment was for severance pay and this amount, which was recognized during the first quarter of 2002, was not significant.

17

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On February 15, 2002, after a thorough evaluation of options had been considered by management, the Company completed its sale of BFC and recognized a pre-tax gain of $423,000 from the sale of remaining assets. The assets sold consisted primarily of the segment's collateralized factored receivable accounts that also possessed a positive credit and collection history. Because the final decision to sell BFC was not made until January 2002, the gain was not reported for the year ending December 31, 2001 in accordance with the provisions of APB Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of Disposal of a Segment of Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions", which was effective through December 31, 2001 until it was later superceded by SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which became effective for the Company beginning January 1, 2002. The following table summarizes the sale transaction.

|(dollars in thousands)       |                                                      |      
|---------------------------- | ---------------------------------------------------- | -----
|Net finance receivables sold | $                                                    | 2,511
|Other assets sold            |                                                      | 120  
|                             | Total assets sold                                    |      
|Loans assumed                |                                                      | 2,800
|Other liabilities assumed    |                                                      | 213  
|Due from purchaser           |                                                      | 41   
|                             | Total liabilities assumed and
    due from purchaser |      
|                             | Pre-tax gain on sale                                 | $    
|                             |                                                      |      



For the first six months of 2002, the Company's revenues (net interest income before provision for loan losses plus non-interest income) were $11.7 million, a slight increase from the revenues of $11.1 million during the same period in 2001.  Non-interest expenses have also increased under the same comparison, from $9.0 to $9.5 million.

At June 30, 2002, total assets were $335.3 million and total liabilities were $305.3 million.  Assets have decreased $35.4 million or 9.5% from $370.7 million at December 31, 2001 and liabilities have decreased $36.6 million or 10.7% from $341.9 million at December 31, 2001.

The asset decline is due to a lower origination volume of loans held-for-sale, a decrease in cash and cash equivalents, and a reduction of net loans, offset by an increase in the Company's investment portfolio.  Loans held-for-sale have decreased $16.7 million since December 31, 2001 through a combination of lower demand for mortgage lending, and efficiencies developed in the process of originating and selling loans into the secondary market. Mortgage loan originations were down $49.3 million or 21% for the 6 months ending June 30, 2002 compared to the same period in 2001, from $227.7 million to $178.4 million. Loans, net of the allowance for loan losses, have decreased from $229.2 million at December 31, 2001 to $220.9 million at June 30, 2002.  The cash generated from the payoff of loans and loans held-for-sale has been used to increase the investment securities portfolio by $20.6 million, and to pay off the maturing certificates of deposit that were not renewed.

The decrease in liabilities from the year ended December 31, 2001 is primarily the maturity of brokered certificates of deposits purchased to fund the rapid growth of the mortgage segment during 2001.  These deposits were necessary to fund mortgage loans for 15-45 days before they are sold to the secondary market. As the volume of mortgage loan originations has declined during 2002, funding requirements have also declined, so most certificates of deposit have not been renewed as they mature.  At June 30, 2002, the Company had $32.2 million in broker deposits or 11.5% of the $280.1 million total deposits. Approximately $16.6 million of these broker deposits are scheduled to mature during the remainder of 2002. The Company has the ability to purchase deposits in the future if the demand for mortgage loans should again increase.

18

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Critical Accounting Policies

Cowlitz Bancorporation (the "Company") and its wholly owned subsidiary, Cowlitz Bank (also the "Company" or the "Bank") have identified one of their most critical accounting policy to be that 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 historical loss experience, recent delinquency and charge-off experience, changes in the levels of non-performing loans, portfolio size, and other known factors with specific loans. Qualitative factors include assessments of the types and quality of the loans within the loan portfolio as well as current local, regional, and national economic considerations. Changes in the above factors could have a significant affect on the determination of the allowance for loan losses. Therefore, a full analysis is performed by management on a quarterly basis 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 of the Company is that related to the carrying value of goodwill. During the first quarter of 2002, the Company has taken a one-time impairment charge to the carrying amount of its goodwill related to the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142).  The impairment charge is recognized as a result of a transitional goodwill impairment test required by SFAS No. 142. The Company adopted primarily a market approach in assessing goodwill impairment and will measure the carrying value at least annually under the new accounting rules. For further discussion of the adoption of SFAS No. 142 and its effects on the Company's operations, see note 6, "Recently Issued Accounting Statements."

Net Interest Income

For financial institutions, the primary component of earnings is net interest income.  Net interest income is the difference between interest income, principally from loans and the investment securities portfolio, and interest expense, principally on customer deposits and borrowings.  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.

Three months ended June 30, 2002 and 2001

Net interest income for the quarter ended June 30, 2002 was $3.3 million, a slight decrease from $3.4 million for the same period of 2001.  The overall tax-equivalent earning asset yield was 6.98% for the quarter ended June 30, 2002 compared to 8.54% for the quarter ended June 30, 2001. The decrease in asset yield is primarily due to eight cuts in the national fed funds rate and the Company's prime rate from April to December of 2001. Earning assets averaged $318.7 million for the three months ended June 30, 2002 compared to $330.8 million for the same period of 2001. The average volume of loans held-for-sale and net loans have declined from the second quarter of 2001 to the second quarter of 2002 by about $43.0 million, while the average volume of cash, investment securities and other earning assets have increased $30.9 million under the same comparison. As cash was increased by the payoff of loans and loans held-for-sale, the majority of it was either reinvested into the available-for-sale securities portfolio which has increased $20.6 million since year end, or used to pay for the run-off of broker certificates and other deposits as they have matured.

The average cost of interest bearing liabilities decreased to 3.35% for the quarter ended June 30, 2002 from 5.15% for the same period of 2001. Average interest bearing liabilities decreased $14.4 million from $281.4 million for the three months ended June 30, 2001 to $266.8 million for the three months ended June 30, 2002. The majority of the decrease in volume of interest bearing liabilities was the run-off of brokered certificates of deposit as they have matured.

Decreases in national and the Company's interest rates during 2001 have been the major contributor toward the decline in both the average yields earned on interest earning assets, and the average cost of interest bearing liabilities from the second quarter 2001 to the second quarter of 2002. The interest rate spread continues to improve as higher rate and longer term certificates of deposit mature and are replaced at the lower current rates. Excess cash on deposit with the Federal Home Loan Bank earning the federal funds rate has been used to pay-off some broker certificates as they matured.  The interest rate the Company is paying on these deposits is higher than the federal funds rate that is currently being earned, creating a negative interest rate spread. This imbalance has been, and will continue to be corrected as the broker certificates mature, helping to widen the overall interest rate spread.  Approximately $21.8 million of broker and out of area certificates of deposit are scheduled to mature during the rest of 2002. Depending on cash flow and liquidity needs, the Company may not renew many of these certificates as they mature, but retains the ability to purchase additional deposits if funding or liquidity needs arise. The Company may choose to purchase deposits in the future, despite some exposure to interest rate and liquidity risks.  Because broker certificates are extremely rate sensitive, they are potentially volatile deposits that will only renew at higher prices than core deposits. The interest rate risk associated with broker certificates is not as pronounced to the Company because of the deposit rate environment of its primary market, Cowlitz County.  This market has a very high concentration of credit unions, which offer higher than average deposit rates, so in order to compete for core deposits, the Company's rates are also somewhat higher than average.  During the time period funding was needed for the mortgage segment's growth, the cost to acquire broker certificates of deposit was lower than the Company's certificate rates.

19

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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.

|(unaudited)
 (in thousands of
    dollars) |   | Three months
    ended |   |   |          |   |   |            |  
|------------------------------------------ | - | ---------------------- | - | - | -------- | - | - | ---------- | -
|                                           |   | June 30,               |   |   | Increase |   |   |            |  
|                                           |   | 2002                   |   |   | 2001     |   |   | (Decrease) |  
|Interest income (1)                        | $ | 5,562                  |   | $ | 7,064    |   | $ | (1,502)    |  
|Interest expense                           |   | 2,232                  |   |   | 3,622    |   |   | (1,390)    |  
|Net interest income                        | $ | 3,330                  |   | $ | 3,442    |   | $ | (112)      |  
|                                           |   |                        |   |   |          |   |   |            |  
|Average interest earning
    assets        | $ | 318,741                |   | $ | 330,839  |   | $ | (12,098)   |  
|Average interest bearing
    liabilities   | $ | 266,848                |   | $ | 281,357  |   | $ | (14,509)   |  
|                                           |   |                        |   |   |          |   |   |            |  
|Average yields earned (2)                  |   | 6.98                   | % |   | 8.54     | % |   | (1.56)     | %
|Average rates paid (2)                     |   | 3.35                   | % |   | 5.15     | % |   | (1.80)     | %
|Net interest spread (2)                    |   | 3.63                   | % |   | 3.39     | % |   | 0.24       | %
|Net interest margin (2)                    |   | 4.18                   | % |   | 4.16     | % |   | 0.02       | %
|                                           |   |                        |   |   |          |   |   |            |  

(1)  Interest earned on non-taxable securities has been computed on a 34% tax equivalent basis.
(2)  Ratios for the three months ended June 30, 2002 and 2001 have been annualized.

Six months ended June 30, 2002 and 2001

Net interest income for the six months ended June 30, 2002 was $6.5 million, a $300,000 or 4.4% decrease from $6.8 million for the same period of 2001.  The overall tax-equivalent yield on earning assets was 6.86% for the first six months of 2002 compared to 8.87% for the six months ended June 30, 2001. The decrease in asset yield is primarily due to eleven cuts in the national fed funds rate and the Company's prime rate during 2001. Another factor is a change in the mix of earnings assets with a lower percentage of commercial and consumer loans, and a higher percentage of lower rate cash, mortgage loans held-for-sale, and securities. Earning assets averaged $328.0 million for the six months ended June 30, 2002 compared to $308.0 million for the same period of 2001. Commercial and consumer loans were 74.4% of total average earning assets for the first six months of 2002, and accounted for 87.9% under the same comparison for 2001. The shift in average earnings assets mix is an increase in the investment securities portfolio from $11.2 million for the first six months of 2001 to $47.3 million for the first six months of 2002. The growth in the mortgage lending segment didn't occur until late in the first quarter of 2001, which is why the average earning assets for the first half of 2001 is lower than for the first half of 2002.

20

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The average cost of interest bearing liabilities decreased to 3.46% for the six months ended June 30, 2002 from 5.30% for the same period of 2001. Average interest bearing liabilities have increased $17.2 million from $258.3 million for the first six months of June 30, 2001 to $275.5 million for the six months ended June 30, 2002. The prior year average is lower because the growth in the mortgage lending segment didn't occur until late in the first quarter of 2001, so the broker deposits used to fund the growth weren't purchased until that time. In addition, the current year average is higher because the broker deposits brought in last year have begun to mature late in the first quarter and during the second quarter of this year.

Decreases in national and the Company's interest rates during 2001 have been the major contributor toward the decline in both the average yields earned on interest earning assets, and the average cost of interest bearing liabilities from the first six months of 2001 to the same period of 2002. The interest rate spread continues to improve as higher rate and longer term certificates of deposit mature and are replaced at the lower current rates. Excess cash on deposit with the Federal Home Loan Bank earning the federal funds rate has been used to pay-off some broker certificates as they matured.  The interest rate the Company is paying on these deposits is higher than the federal funds rate that is currently being earned, creating a negative interest rate spread. This imbalance has been, and will continue to be corrected as the broker certificates mature, helping to widen the overall interest rate spread.  Approximately $21.8 million of broker and out of area certificates of deposit are scheduled to mature during the rest of 2002. Depending on cash flow and liquidity needs, the Company may not renew these certificates as they mature, but retains the ability to purchase additional deposits if funding or liquidity needs arise. The may choose to purchase deposits in the future, despite some exposure to interest rate and liquidity risks.  Because broker certificates are extremely rate sensitive, they are potentially volatile deposits that will only renew at higher prices than core deposits. The interest rate risk associated with broker certificates isn't as pronounced to the Company because of the deposit rate environment of its primary market, Cowlitz County.  This market has a very high concentration of credit unions, which offer higher than average deposit rates, so in order to compete for core deposits, the Company's rates are also somewhat higher than average.  During the time period funding was needed for the mortgage segment's growth, the cost to acquire broker certificates of deposit was lower than the Company's certificate rates.

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.

|(unaudited) 
    (in thousands of
    dollars) |   | Six months ended |   |   |          |   |   |            |  
|---------------------------------------------- | - | ---------------- | - | - | -------- | - | - | ---------- | -
|                                               |   | June 30,         |   |   | Increase |   |   |            |  
|                                               |   | 2002             |   |   | 2001     |   |   | (Decrease) |  
|Interest income (1)                            | $ | 11,251           |   | $ | 13,657   |   | $ | (2,406)    |  
|Interest expense                               |   | 4,767            |   |   | 6,842    |   |   | (2,075)    |  
|Net interest income                            | $ | 6,484            |   | $ | 6,815    |   | $ | (331)      |  
|                                               |   |                  |   |   |          |   |   |            |  
|Average interest earning
    assets            | $ | 327,977          |   | $ | 307,986  |   | $ | 19,991     |  
|Average interest bearing
    liabilities       | $ | 275,512          |   | $ | 258,259  |   | $ | 17,253     |  
|                                               |   |                  |   |   |          |   |   |            |  
|Average yields earned (2)                      |   | 6.86             | % |   | 8.87     | % |   | (0.02)     | %
|Average rates paid (2)                         |   | 3.46             | % |   | 5.30     | % |   | (1.84)     | %
|Net interest spread (2)                        |   | 3.40             | % |   | 3.57     | % |   | (0.17)     | %
|Net interest margin (2)                        |   | 3.95             | % |   | 4.43     | % |   | (0.48)     | %

(1)  Interest earned on non-taxable securities has been computed on a 34% tax equivalent basis.
(2)  Ratios for the six months ended June 30, 2002 and 2001 have been annualized.

21

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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 continued downturn in the economy or the real estate market or a rapid increase in interest rates could have a negative effect on collateral values 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 which are beyond the control of the Company's management, including general economic conditions, and the policies of various governmental and regulatory authorities. As interest rates change, net interest income is affected. With fixed rate assets (such as fixed rate loans) and liabilities (such as certificates of deposit), the effect on net interest income depends on the maturity of the asset and liability. 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.  In a falling rate environment, as experienced in 2001, 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 increase rate environment the Company's variable 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.  As experienced in the stable rate environment during the first six months of 2002, the interest rate spread has widened as long-term certificates of deposit have matured and re-priced at the current, lower rates.

22

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Non-Interest Income

Three months ended June 30, 2002 and 2001

Non-interest income consists of the following components:

|                                                   |   | Three months
    ended 
    June 30,
|-------------------------------------------------- | - | ------------------------------------
|                                                   |   | 2002                                
|Service charge on deposit
    accounts             | $ | 171                                 
|Gains on loans sold                                |   | 998                                 
|Brokerage fees                                     |   | 706                                 
|Fiduciary income                                   |   | 71                                  
|Escrow fees                                        |   | 193                                 
|Credit Card income                                 |   | 132                                 
|ATM income                                         |   | 37                                  
|Safe deposit box fees                              |   | 3                                   
|Gain on sale of repossessed
    assets             |   | 19                                  
|Gains on sale of
    available-for-sale securities |   | 39                                  
|Other miscellaneous fees and
    income            |   | 5                                   
|                                                   |   |                                     
|Total non-interest income                          | $ | 2,374                               
|                                                   |   |                                     

Non-interest income was $2.4 million for the quarter ended June 30, 2002, virtually unchanged from $2.5 million for the quarter ended June 30, 2001.  Non-interest income generated by the mortgage banking segment continued to account for the majority of the total non-interest income for the periods.  Gains on loans sold, brokerage fees, and escrow fees accounted for 79.9% of the total non-interest income for the second quarter of 2002, and 82.2% for the same period of 2001. Implementation of a program to charge for non-customer ATM usage has generated an additional $14,000 of ATM income for the second quarter of 2002.

Six months ended June 30, 2002 and 2001

Non-interest income consists of the following components:

|                                                   |   | Six months
    ended
 June 30, |  
|-------------------------------------------------- | - | ------------------------------ | -
|                                                   |   | 2002                           |  
|Service charge on deposit
    accounts             | $ | 349                            | $
|Gains on loans sold                                |   | 2,172                          |  
|Brokerage fees                                     |   | 1,311                          |  
|Fiduciary income                                   |   | 142                            |  
|Escrow fees                                        |   | 415                            |  
|Credit Card income                                 |   | 257                            |  
|ATM income                                         |   | 65                             |  
|Safe deposit box fees                              |   | 27                             |  
|Gain on sale of subsidiary                         |   | 423                            |  
|Gain (loss) on sale of
    repossessed assets      |   | 21                             |  
|Gains on sale of
    available-for-sale securities |   | 39                             |  
|Other miscellaneous fees and
    income            |   | 14                             |  
|                                                   |   |                                |  
|Total non-interest income                          | $ | 5,235                          | $

23

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Non-interest income increased to $5.2 million for the six months ended June 30, 2002 from $4.3 million in the corresponding period of 2001, a 20.9% increase.  Much of this increase is due to the gain of $423,000 on the sale of the Company's finance subsidiary, BFC during the first quarter of 2002.  The remaining increase is primarily due to non-interest income generated by the mortgage banking segment including gains on loans sold, brokerage fees, and escrow fees. Total mortgage related non-interest income was $3.9 million or 75.0% of total non-interest income for the first six months of 2002, and was $3.4 million or 79.1% of the total for the same period of 2001. Excluding the gain on sale of subsidiary in 2002, mortgage income accounted for 81.3% of the total non-interest income for the six month period of 2002. Implementation of a program to charge for non-customer ATM usage has generated an additional $19,000 of ATM income during 2002.

Non-Interest Expense

Three months ended June 30, 2002 and 2001

Non-interest expense consists of the following components:

|                                                     |   | Three months
    ended
 June 30,
|---------------------------------------------------- | - | --------------------------------
|                                                     |   | 2002                            
|Salaries and employee benefits                       | $ | 2,604                           
|Net occupancy and equipment                          |   | 545                             
|Amortization of intangible
    assets                |   | 67                              
|Net cost of operation of other
    real estate owned |   | 47                              
|Business taxes                                       |   | 137                             
|Data processing and
    communications               |   | 152                             
|Stationary and supplies                              |   | 92                              
|Credit card expense                                  |   | 131                             
|Parking, travel and education                        |   | 79                              
|Loan expense                                         |   | 156                             
|Advertising                                          |   | 43                              
|Professional fees                                    |   | 261                             
|Postage and freight                                  |   | 116                             
|FDIC insurance                                       |   | 143                             
|Other miscellaneous expenses                         |   | 242                             
|                                                     |   |                                 
|Total non-interest expense                           | $ | 4,815                           
|                                                     |   |                                 

Non-interest expenses were unchanged at $4.8 million for the quarter ended June 30, 2002 compared to the quarter ended June 30, 2001.

Salary expenses have increased from $2.4 million to $2.6 million from the second quarter 2001 to the second quarter of 2002. At June 30, 2002, the Company had 195 full-time equivalent employees compared to 211 at June 30, 2001. Recent changes in executive management have resulted in an overlap of executive salaries for several months.  Also contributing to higher salaries is ordinary annual wage increases for existing employees, generally ranging from three to six percent per year.

Net occupancy expenses consist of depreciation on premises, lease costs, equipment, maintenance and repair expenses, utilities and related expenses.  The Company's net occupancy expense for the quarter ended June 30, 2002 was $545,000 or 10.2% lower than $607,000 for the same period of 2001. The sale of BFC reduced this expense by approximately $13,000 per quarter.  In addition, depreciation expense has decreased by $46,000 comparing the two quarters as furniture and equipment has become fully depreciated.

24

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The FDIC insurance has increased because in the second quarter of 2001, the Bank was required to pay $.10 per $100 of domestic deposits, which has increased to $.17 per $100 during the second quarter of 2002. The FDIC issued 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. Under legislation enacted in 1996 to recapitalize the Savings Association Insurance Fund, the FDIC is authorized to collect assessments against insured deposits to be paid to the Financing Corporation ("FICO") to service FICO debt incurred in the 1980's. The current FICO assessment rate for BIF insured deposits is $0.0172 per $100 of deposits per year. Any increase in deposit insurance of FICO assessments could have an adverse effect on Cowlitz Bank's earnings.

Professional fees include exam and audit expenses, consulting and legal fees, and other professional fees. The increase in these expenses during the first three months of 2002 compared to the same period of 2001 is the result of higher legal fees relating to the repossession of assets on defaulted loans, legal and professional fees related to the changes in the Company's executive management, and consulting on strategic alternatives.

Other miscellaneous expenses are lower in the second quarter of 2002 when compared to the same period of 2001 primarily due to a charge of $137,000 in 2001 to write down the cash surrender value of a key man life insurance policy held on the Company's Chairman and CEO, Benjamin Namatinia.

Six months ended June 30, 2002 and 2001

Non-interest expense consists of the following components:

|                                                     |   | Six months
    ended June 30,
|---------------------------------------------------- | - | -----------------------------
|                                                     |   | 2002                         
|Salaries and employee benefits                       | $ | 5,050                        
|Net occupancy and equipment                          |   | 1,100                        
|Amortization of intangible
    assets                |   | 133                          
|Net cost of operation of other
    real estate owned |   | 131                          
|Business taxes                                       |   | 300                          
|Data processing and
    communications               |   | 255                          
|Stationary and supplies                              |   | 164                          
|Credit card expense                                  |   | 247                          
|Parking, travel and education                        |   | 162                          
|Loan expense                                         |   | 234                          
|Advertising                                          |   | 88                           
|Professional fees                                    |   | 562                          
|Postage and freight                                  |   | 241                          
|FDIC insurance                                       |   | 290                          
|Other miscellaneous expenses                         |   | 532                          
|                                                     |   |                              
|Total non-interest expense                           | $ | 9,489                        

Non-interest expenses increased 5.6% to $9.5 million for the six months ended June 30, 2002 compared to $9.0 million for the six months ended June 30, 2001.

Salary expenses have increased from $4.6 million to $5.1 million from the six months ended June 30, 2001 when compared to the same period of 2002. At June 30, 2002, the Company had 195 full-time equivalent employees compared to 211 at June 30, 2001. Recent changes in executive management have resulted in an overlap of executive salaries for several months. Also contributing to higher salaries is ordinary annual wage increases for existing employees, generally ranging from three to six percent per year.

25

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Net occupancy expenses consist of depreciation on premises, lease costs, equipment, maintenance and repair expenses, utilities and related expenses.  The Company's net occupancy expense for the six months ended June 30, 2002 was $1.1 million compared to $1.2 million for the same period of 2001. The sale of BFC reduced this expense by approximately $13,000 per quarter.  In addition, depreciation expense has decreased by $67,000 comparing the six month periods as furniture and equipment has become fully depreciated.

The net cost of operation of other real estate owned has increased $101,000 during the first six months of 2002 when compared to the net costs for the same period of 2001. As management has aggressively sought to decrease the volume of impaired and defaulted loans, the costs to repossess, carry, and resell the underlying collateral of these loans has increased.

Professional fees include exam and audit expenses, consulting and legal fees, and other professional fees. The increases in these expenses when comparing periods are higher legal fees relating to the repossession of assets on defaulted loans, legal and professional fees related to the changes in the Company's executive management, a broker commission related to the sale of BFC, and consulting on other strategic alternatives.

The FDIC insurance has increased because in the first half of 2001, the Bank was required to pay $.10 per $100 of domestic deposits, which has increased to $.17 per $100 for the first half of 2002. These premiums are set based on FDIC analysis of the Bank's capital position, rating, and other factors. As these factors improve or deteriorate, the assessment rates change. See the discussion of FDIC insurance under non-interest expenses for the three months ended June 30, 2002 and 2001 for additional information.

Other miscellaneous expenses appear lower for the six months ended June 30, 2002 because the first six months of 2001 includes a write down of $162,000 relating to the cash surrender value of a key man life insurance policy held on the Company's Chairman and CEO, Benjamin Namatinia.

Income Taxes

Three months ended June 30, 2002 and 2001

During the second quarter of 2002 an income tax benefit of $184,000 was recorded compared to a provision for income taxes of $337,000 for the second quarter of 2001.  The second quarter of 2002 includes a $375,000 tax benefit related to the sale of BFC in the first quarter of 2002. The sale of BFC generated a capital loss for tax purposes and a deferred tax asset on the Company's books which was fully reserved as of the end of the first quarter of 2002.  During the second quarter of 2002, the Company identified certain strategies for federal income tax purposes that resulted in the reversal of the valuation allowance with a corresponding income tax benefit of $375,000 for the period.  The effective tax rate for the second quarter of 2002, excluding the $375,000 benefit, was 35.9% compared to 44.8% for the three months ended June 30 2001.  The effective tax rate for the second quarter of 2001 is higher due to the non-tax deductible expense associated with the write down of the key man insurance policy.

Six months ended June 30, 2002 and 2001

The provision for income taxes was $194,000 and $623,000 for the six months ended June 30, 2002 and 2001, respectively.  These provisions resulted in an effective tax rate of 12.3% and 41.6% for the same periods of 2002 and 2001, respectively.  The effective tax rate for the year to date 2002, excluding the $375,000 tax benefit discussed above, was 36.2%.

26

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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 recorded into the allowance for loan losses is 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" disclosure for a more detailed discussion.

Three months ended June 30, 2002 and 2001

The Company's provision for loan losses was $355,000 for each of quarters ended June 30, 2002 and 2001.  Charge-offs, net of recoveries, were $447,000 for the three months ended June 30, 2002 compared to net charge-offs of $126,000 for the three months ended June 30, 2001 and $3.8 million for the year ended December 31, 2001. With the slow regional and national economic conditions experienced during 2001 and thus far in 2002, charge-offs have been relatively high. As the economy recovers, the Company expects to see declines in the level of impaired assets and charged off loans, and a corresponding decrease in the provision for loan losses. Management continuously monitors existing loans for signs of impairment, and strives to reduce the level of loans previously classified as impaired.

Six months ended June 30, 2002 and 2001

The Company's provision for loan losses was $655,000 and $607,000 for the six months ended June 30, 2002 and 2001, respectively.  Net charge-offs were $838,000 for the six months ended June 30, 2002 compared to net charge-offs of $1.8 million for the six months ended June 30, 2001 and $3.8 million for the year ended December 31, 2001. The Company recognized an adjustment to the allowance for loan losses of $289,000 related to the sale of BFC during the first quarter of 2002. At June 30, 2002, the allowance for loan losses as a percentage of total loans was 2.44%, down slightly from the level of 2.55% at December 31, 2001 and up from 1.41% at June 30, 2001.  With the slow regional and national economic conditions experienced during 2001 and thus far in 2002, charge-offs have been relatively high. As the economy recovers and loan related internal controls are strengthened, the Company expects to see declines in the level of impaired assets and charged off loans, and a corresponding decrease in the provision for loan losses.  Management continuously monitors existing loans for signs of impairment, and strives to reduce the level of loans previously classified as impaired.

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

|(unaudited)(in thousands of
    dollars)                         |                         |         | Six months Ended June 30, |     |         | Six months Ended June 30, |       |         | Year Ended December 31,
|---------------------------------------------------------------- | ----------------------- | ------- | ------------------------- | --- | ------- | ------------------------- | ----- | ------- | -----------------------
|                                                                 |                         |         | 2002                      |     |         | 2001                      |       |         | 2001                   
|Loans outstanding
    at end of period                           | $                       | 226,441 |                           | $   | 239,473 |                           | $     | 235,212
|Average loans
    outstanding during the period                  |                         | 227,908 |                           | $   | 240,392 |                           | $     | 239,678
|Allowance for loan
    losses, beginning of period               |                         | 5,997   |                           | $   | 4,561   |                           | $     | 4,561  
|Loans charged off:                                               |                         |         |                           |     |         |                           |       |         |                        
|                                                                 | Commercial              |         |                           | 842 |         |                           | 674   |         |                        
|                                                                 | Real Estate             |         |                           | 128 |         |                           | 1,130 |         |                        
|                                                                 | Consumer                |         |                           | 2   |         |                           | 12    |         |                        
|                                                                 | Credit Cards            |         |                           | 75  |         |                           | 39    |         |                        
|                                                                 | Total loans charged-off |         | 1,047                     |     |         | 1,855                     |       |         | 4,611                  
|                                                                 |                         |         |                           |     |         |                           |       |         |                        
|Recoveries:                                                      |                         |         |                           |     |         |                           |       |         |                        
|                                                                 | Commercial              |         |                           | 77  |         |                           | 19    |         |                        
|                                                                 | Real Estate             |         |                           | 116 |         |                           | 30    |         |                        
|                                                                 | Consumer                |         |                           | 1   |         |                           | 14    |         |                        
|                                                                 | Credit Cards            |         |                           | 15  |         |                           | 1     |         |                        
|                                                                 | Total recoveries        |         | 209                       |     |         | 64                        |       |         | 785                    
|Provision for loan
    losses                                    |                         | 655     |                           |     | 607     |                           |       | 5,262  
|Adjustment
    incident to sale of subsidiary                    |                         | (289)   |                           |     | -       |                           |       | -      
|Allowance for loan
    losses, end of period                     | $                       | 5,525   |                           | $   | 3,377   |                           | $     | 5,997  
|                                                                 |                         |         |                           |     |         |                           |       |         |                        
|Ratio of net loans charged-off
    to average loans outstanding  |                         | 0.37%   |                           |     | 0.75%   |                           |       | 1.60%  
|Ratio of allowance for loan
    losses to loans at end of period |                         | 2.44%   |                           |     | 1.41%   |                           |       | 2.55%  
|                                                                 |                         |         |                           |     |         |                           |       |         |                        

27

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Loans

Total loans outstanding were $226.4 million and $235.2 million at June 30, 2002 and December 31, 2001, respectively.  Loan commitments such as home equity and other lines of credit, unused available credit on credit cards, and letters of credit, were $46.0 million at June 30, 2002 and $53.7 million at December 31, 2001. In addition, the Company had $20.6 million of loans held for sale at June 30, 2002 compared to $37.3 million at December 31, 2001.  During the first six months of 2002, the Company funded $178.4 million of loans to be sold into the secondary market, and delivered $193.1 million to the market.  This compares to $227.7 million funded and $184.5 million delivered during the first six months of 2001.

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

|(unaudited)                   |   |               |         |                  
|----------------------------- | - | ------------- | ------- | -----------------
|(in
    thousands of dollars) |   | June 30, 2002 |         | December 31, 2001
|                              |   |               | Amount  |                  
|Commercial                    |   | $             | 52,734  |                  
|Real estate construction      |   |               | 38,386  |                  
|Real estate commercial        |   |               | 95,422  |                  
|Real estate mortgage          |   |               | 35,450  |                  
|Consumer and other            |   |               | 5,326   |                  
|                              |   |               | 227,318 |                  
|Deferred loan fees            |   |               | (877)   |                  
|Total loans                   |   | 226,441       |         |                  
|Allowance for loan losses     |   |               | (5,525) |                  
|Total loans, net              | $ | 220,916       |         |                  
|                              |   |               |         |                  

Allowance for Loan Losses

The allowance for loan losses represents management's estimate of probable losses which have occurred 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 an allowance for loan losses is an analysis of loans by loan rating categories. The risk of a credit is evaluated by the Company's management at inception of the loan using an established grading system. This grading system currently includes ten levels of risk. Risk gradings range from "1" for the strongest credits to "10" for the weakest; a "10" rated loan would normally represent a loss, and all loans rated 6-10 are collectively the Company's watch list. The specific gradings from 6-10 are "management attention", "special mention", "substandard", "doubtful", or "loss". When indicators such as operating losses, collateral impairment or delinquency problems show that a credit may have weakened, the credits will be downgraded as appropriate. Similarly, as borrowers bring loans current, show improved cash flows, or improve the collateral position of the loan, the credits may be upgraded. Management reviews all credits periodically for changes in such factors. There have been no changes to the Company's allowance for loan losses related to changes in methods or assumptions since December 31, 2001. Any adjustments or changes in the elements and components of the allowance since year end are primarily the result of loan quality assessments, and variations in total loan volumes.

The result is an allowance with two components:

Specific Reserves: Loans on the Company's watch list, as described above, are specifically reserved for by applying a separate reserve factor to the volume of loans within each risk grade. The reserve factors are determined on the basis of suggested regulatory guidelines. Management assesses each loan on the watch list to assure the reserve factor applied to each risk grade is sufficient for each individual loan within the pool. When significant conditions or circumstances exist on an individual loan indicating greater risk, additional specific reserves may be required. 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.

28

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General Allowance: Any loan that does not require a specific reserve is subject to a general reserve loss factor. Management determines this factor by analyzing the volume and mix of the existing loan portfolio, including the volume and severity of non-performing loans and adversely classified credits; analysis of net charge-offs experienced on previously classified loans; the nature and value of collateral securing the loans; the trend in loan growth, including any rapid increase in loan volume within a relatively short period of time; management's subjective evaluation of general and local economic and business conditions affecting the collectibility of the Company's loans; the relationship and trend over the past several years of recoveries in relation to charge-offs; and any changes in lending policies, lending management, or the loan review system. This decision also reflects management's attempt 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 and general loss components 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 and the general components 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. 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. In accordance with the Company's methodology for assessing the appropriate allowance for loan losses, the general portion of the allowance was $2.6 million at June 30, 2002 compared to $3.2 million at December 31, 2001. The reduction to the general allowance is a combination of a reduction in total loans to $226.4 million at June 30, 2002 from $235.2 million at December 31, 2001, and a migration of over $4.0 million in loans onto the Company's watch list. Once a loan is added to the watch list, as discussed above, a specific reserve is assigned to that loan rather than a general reserve allowance.

At June 30, 2002, approximately $2.9 million of the allowance for loan losses was allocated based on an estimate of the amount that was necessary to provide for potential losses related to the watch list and other specific loans, compared to $2.8 million at December 31, 2001.  Specific reserves decline as those loans requiring specific reserves are reduced by either principal payments, reclassification assessments, or have been charged off, and increase as additional loans requiring specific reserves are identified. During the first six months of 2002, $947,000 of loans requiring specific reserves were charged against the reserve. This reduction in specific reserve was offset by a migration of over $4.0 of loans onto the company's watch list from the general loan pool, keeping the specific reserve allowance relatively unchanged since December 31, 2001. Total loans on the Company's watch list increased from $27.1 million at December 31, 2001 to $30.4 million at June 30, 2002.

Management's evaluation of the factors above resulted in allowances for loan losses of $5.5 million and $6.0 million at June 30, 2002 and December 31, 2001, respectively.  The sale of BFC accounted for $289,000 of the reduction in the allowance from December 31, 2001 to June 30, 2002.  The allowance as a percentage of total loans was 2.44% at June 30, 2002 and 2.55% at December 31, 2001.

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 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, after considering economic and business conditions, collection efforts, and collateral position, that the borrower's financial condition is such that collection of principal is not probable.

29

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Generally, no interest is accrued on loans when factors indicate collection of interest is doubtful or when the 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.

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 non-performing assets:

|(unaudited)                                                           | June 30,
 2002 |       | December 31
 2001 |      
|--------------------------------------------------------------------- | -------------- | ----- | ----------------- | -----
|(in thousands
    of dollars)                                         |                |      
|Loans on non-accrual status                                           |                |       | 4,321             |      
|Loans past due greater than 90
    days but not on non-accrual status |                |       | 85                |      
|Other real estate owned                                               |                |       | 1,403             |      
|Other Assets                                                          |                |       | 5                 |      
|Total non-performing assets                                           |                | 5,814 |                   | 7,488
|Percentage of non-performing
    assets to total assets               |                |       | 1.73              | %    

At June 30, 2002 non-performing assets were $5.8 million or 1.73% of total assets compared to $7.5 million or 2.02% of total assets at December 31, 2001. The June 30, 2002 non-performing asset balance has declined from $6.2 million or 1.72% of total assets at March 31, 2002. Approximately $3.8 million of the $4.3 million of non-accrual loans at June 30, 2002 are primarily secured by real estate and the remainder consists of commercial and consumer loans with varying collateral. Any losses on non-accrual loans that are considered probable have been estimated by management in its regular quarterly assessment of the allowance for loan losses as discussed above.

The Company is actively working on identifying and reducing the level of non-performing assets, and has undertaken a more aggressive approach relating to the collection and ultimate reduction of non-performing assets. As these impaired loans are identified and brought current, charged-off, or the repossessed collateral sold, the level of non-performing assets is expected to decrease.

Other real estate owned declined from $1.5 million at December 31, 2001 to $1.4 million at June 30, 2002 as properties classified as other real estate have been sold or the valuations of the properties have been adjusted.

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 and the use of the federal funds market.

As of June 30, 2002, approximately $8.7 million of the securities portfolio matures within one year, and another $12.6 million is callable within one year. The maturities of mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the expected maturity of the underlying collateral. Mortgage-backed securities may mature earlier than their stated contractual maturities because of accelerated principal repayments of the underlying loans.

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 15% of the Bank's assets, subject to collateral limitations. Advances from the FHLB have maturity periods ranging from 1 through 15 years and at June 30, 2002, bear interest at rates ranging from 2.39% to 8.62%. At June 30, 2002, $15.9 million in advances were outstanding from the FHLB.

30

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During 2001, the Company experienced extremely rapid growth in its residential lending segment as consumers took advantage of relatively low housing market interest rates to refinance, build, or purchase homes. Although these residential mortgage loans are typically sold within 15-45 days after funding, the volume funded but unsold grew from $10.0 million at December 31, 2000 to over $55.0 million during the first quarter of 2001, and to over $68.0 million at the peak during the fourth quarter of 2001. In order to take advantage of the income generated by the increase in mortgage loan volume, the Company utilized the broker CD market to fund the growth. As origination volumes of loans held-for-sale began to taper off toward the end of 2001 and into the first half of 2002, the excess funds were deposited in the Company's cash account with the FHLB. Efficiencies developed late in 2001 in the process of loan origination and sale into the secondary market, combined with a decrease in demand in the mortgage lending market, make it unlikely the Company will experience a dramatic increase in loan volume as experienced during 2001.  If this assumption holds true during 2002, the Company anticipates a reduction in broker CD's as they mature, helping to reduce any excess liquidity. During the remainder of 2002, $21.8 million of broker and out-of-market certificates of deposit mature.

Capital

The Company and the Bank are required to maintain minimum amounts of capital to "risk weighted" assets, as defined by banking regulators.  The Company and the Bank are required to have a total risk-based capital and a tier 1 risk-based capital ratio of 8.0% and 4.0%, respectively.  In addition, the Bank is required to maintain a tier 1 leverage capital ratio of not less than 4%.  At June 30, 2002, the Company's total risk-based capital and tier 1 risk-based capital ratios were 11.57% and 10.31%, respectively; and at December 31, 2001, the Company's ratios were 10.10% and 8.84%, respectively. At June 30, 2002, the Bank's total risk-based capital, tier 1 risk-based capital, and tier 1 leverage capital ratios were 11.96%, 10.70%, and 8.08%, respectively, and at December 31, 2001 were 10.72%, 9.46%, and 6.99%, respectively. The Company's ratio of shareholders' equity to average assets was 8.56%, and 8.14% at June 30, 2002 and December 31, 2001, respectively. Average assets for the year to date June 30, 2002 were $349.9 million and for the year ended December 31, 2001 average assets were $353.2 million. To be considered "well capitalized" as defined by banking regulators, the Bank and the Company must maintain a total capital ratio of greater than 10%, a tier 1 capital ratio of greater than 6%, and the Bank must maintain a tier 1 leverage capital ratio of greater than 5%. At June 30, 2002 and at December 31, 2001, both the Company and the Bank exceeded the minimum requirements to be considered "well capitalized" under banking regulations.

31

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Part II. Other Information

Item 4

Submission of Matters to a Vote of Security Holders

| | (a) | Cowlitz Bancorporation Annual Shareholders' Meeting was held on May 24, 2002
..                                                                                                                                                                       
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Not Applicable.                                                                                                                                                                                                                                       
| | (c) | A brief description of each matter voted upon at the Annual Shareholders' meeting held on May 24, 2002 and number of votes cast for, against, or withheld, including a separate tabulation with respect to each nominee for office is presented below:
| |     | (1)    Election of (5) directors for the terms expiring in 2002                                                                                                                                                                                       



Directors:Mark F. Andrews, Jr.Votes cast for:
    2,902,359Votes cast against
    -Votes withheld
    182,392Paul L. CampbellVotes cast for:
    3,028,736Votes cast against
    -Votes withheld
    56,015John S. MaringVotes cast for:
    2,986,792Votes cast against
    -Votes withheld
    97,959Benjamin NamatiniaVotes cast for:
    2,708,129Votes cast against
    -Votes withheld
    376,622E Chris SearingVotes cast for:
    2,849,534Votes cast against
    -Votes withheld
    235,217




| | (d) | None
| | --- | ----

Item 5

Other Information

None

Item 6

| | (a) | Exhibits.  99.1 Certification of Chief Executive Officer and Chief Financial Officer
| | --- | ------------------------------------------------------------------------------------
|
| | (b) | Reports of Form 8-K                                                                 
|
| | 1.  | None.                                                                               

32

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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.

Dated: January 17, 2003

| | Cowlitz Bancorporation(Registrant) 
By:                                                                     
| | ------------------------------------------------------------------------------------------------------------
| | /s/Don P. KiserDon P. Kiser, Vice-President, Chief Financial Officer, and Secretary
Acting Officer-In-Charge

CERTIFICATIONS

Principal Executive Officer:

I, Don P. Kiser, certify that:

1.  I have reviewed this amended quarterly report on Form 10-Q/A of Cowlitz Bancorporation;
2.  Based on my knowledge, this amended 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 amended quarterly report;
3.  Based on my knowledge, the financial statements, and other financial information included in this amended 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 amended quarterly report;

Date: January 17, 2003

|                                                                                      | /s/Don P. Kiser
|------------------------------------------------------------------------------------- | ---------------
|Don P. Kiser, Chief Financial Officer Acting Officer-In-Charge
Cowlitz Bancorporation

Principal Accounting Officer:

I, Don P. Kiser, certify that:

1.  I have reviewed this amended quarterly report on Form 10-Q/A of Cowlitz Bancorporation;
2.  Based on my knowledge, this amended 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 amended quarterly report;
3.  Based on my knowledge, the financial statements, and other financial information included in this amended 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 amended quarterly report;

Date: January 17, 2003



|                                                             | /s/Don P. Kiser
|------------------------------------------------------------ | ---------------
|Don P. Kiser, Chief Financial Officer
Cowlitz Bancorporation

33

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Exhibit 99.1

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/A for the period ended June 30, 2002 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/Don P. Kiser

January 17, 2003

32

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