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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2003

For the transition period from                          to                         .

Commission File Number 0-20288

COLUMBIA BANKING SYSTEM, INC.

(Exact name of issuer as specified in its charter)

(253) 305-1900

(Issuer’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

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

The number of shares of the issuer’s Common Stock outstanding at April 30, 2003 was 13,362,367.

TABLE OF CONTENTS

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Item 1: CONSOLIDATED CONDENSED UNAUDITED FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Columbia Banking System, Inc.

(Unaudited)

See accompanying notes to consolidated condensed financial statements.

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CONSOLIDATED CONDENSED BALANCE SHEETS

Columbia Banking System, Inc.

(in thousands)

(Unaudited)

See accompanying notes to consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY

Columbia Banking System, Inc.

(Unaudited)

See accompanying notes to consolidated condensed financial statements.

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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

Columbia Banking System, Inc.

(Unaudited)

See accompanying notes to consolidated condensed financial statements.

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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Columbia Banking System, Inc.

Columbia Banking System, Inc. (the “Company”) is a registered bank holding company whose wholly owned subsidiary, Columbia State Bank (“Columbia Bank”), conducts a full-service commercial banking business. Headquartered in Tacoma, Washington, the Company provides a full range of banking services to small and medium-sized businesses, professionals and other individuals through 36 banking offices located in the Tacoma metropolitan area and contiguous parts of the Puget Sound region of Washington, as well as the Longview and Woodland communities in southwestern Washington. Substantially all of the Company’s loans, loan commitments and core deposits are geographically concentrated in its service areas.

1. Basis of Presentation

The interim unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for condensed interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting only of normal recurring accruals necessary for a fair presentation of the financial condition and the results of operations for the interim periods included herein have been made. The results of operations for the three months ended March 31, 2003 are not necessarily indicative of results to be anticipated for the year ending December 31, 2003. For additional information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2002.

2. Earnings Per Share

Earnings per share (“EPS”) are computed using the weighted average number of common and diluted common shares outstanding during the period. Basic EPS is computed by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. The only reconciling item affecting the calculation of earnings per share are the inclusion of stock options and restricted stock awards increasing the shares outstanding in diluted earnings per share by 111,000 and 152,000 for the three months ended March 31, 2003 and 2002, respectively.

3. Subsequent Event: Cash Dividend

On April 23, 2003, the Company declared its first cash dividend of $0.05 per share payable on May 21, 2003 to shareholders of record at the close of business May 7, 2003.

4. New Accounting Pronouncements

In August 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Standards (SFAS) No. 143, “Accounting for Asset Retirement Obligations”, which takes effect for fiscal years beginning after June 15, 2002. SFAS No. 143 establishes the initial and subsequent accounting for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or normal operation of a long-lived asset. The Company adopted SFAS No. 143 on January 1, 2003. The adoption of SFAS No. 143 did not materially impact the Company’s consolidated results of operations, financial position, or cash flows.

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In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This statement requires recording costs associated with exit or disposal activities when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management’s commitment to an exit plan, which is generally before an actual liability has been incurred. The new standard is effective for transactions initiated after December 31, 2002. The Company adopted SFAS No. 146 as of January 1, 2003. The adoption of SFAS No. 146 did not materially impact the Company’s consolidated results of operations, financial position, or cash flows.

In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” This interpretation clarifies the requirements of SFAS No. 5, “Accounting for Contingencies” relating to a guarantor’s accounting for, and disclosure of, the issuance of certain types of guarantees. This interpretation requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The initial recognition and measurement provisions of this interpretation are to be applied on a prospective basis to guarantees issued or modified subsequent to December 31, 2002, and are not expected to have a material impact on the Company’s financial condition or results of operations. The disclosure requirements of this interpretation are effective for financial statements issued for periods that end after December 15, 2002.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock Based Compensation—Transition and Disclosure—an amendment of FASB Statement No. 123” to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. The Statement also amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The new standard is generally effective for fiscal years ending after December 15, 2002. SFAS No. 148 did not impact the Company’s consolidated results of operations, financial position, or cash flows, since the Company continues to account for stock compensation in accordance with Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees.”

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities.” This interpretation requires a variable interest entity to be consolidated by the primary beneficiary of that entity. The consolidation requirements of this interpretation apply immediately to variable interest entities created after January 31, 2003, and apply to existing entities for the first fiscal year or interim period beginning after June 15, 2003. Certain disclosure requirements apply in all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. This Statement did not have a material impact on the Company’s financial condition or results of operations.

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5. Business Segment Information

The Company is managed along three major lines of business: commercial banking, retail banking, and real estate lending. The treasury function of the Company, although not considered a line of business, is responsible for the management of investments and interest rate risk.

The principal activities conducted by commercial banking are the origination of commercial business loans and private banking services. Retail banking includes all deposit products, with their related fee income, and all consumer loan products as well as commercial loan products offered in the Company’s branch offices. Real estate lending offers single-family residential, multi-family residential, and commercial real estate loans, and the associated loan servicing activities.

The Company generates segment results that include balances directly attributable to business line activities. The financial results of each segment are derived from the Company’s general ledger system. Overhead, including sales and back office support functions, and other indirect expenses are not allocated to the major lines of business. Since the Company is not specifically organized around lines of business, most reportable segments comprise more than one operating activity.

SFAS No. 131, “Disclosures About Segments of an Enterprise and Related Information” does not provide segmentation or methodology standardization; therefore, the organizational structure of the Company and its business line financial results are not necessarily comparable across companies. As such, the Company’s business line performance may not be directly comparable with similar information from other financial institutions. Financial highlights by lines of business are as follows:

Condensed Statements of Operations:

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Columbia Banking System, Inc.

This discussion should be read in conjunction with the unaudited consolidated condensed financial statements of Columbia Banking System, Inc. (the “Company”) and notes thereto presented elsewhere in this report. In the following discussion, unless otherwise noted, references to increases or decreases in average balances in items of income and expense for a particular period and balances at a particular date refer to the comparison with corresponding amounts for the period or date one year earlier.

This Form 10-Q may be deemed to include forward looking statements, which management believes are a benefit to shareholders. These forward looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia’s style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia’s filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which Columbia is engaged, and (7) the Company’s ability to realize the efficiencies it expects to receive from its investments in personnel and infrastructure.

General

Columbia Banking System, Inc. is a registered bank holding company whose wholly owned subsidiary, Columbia State Bank (“Columbia Bank”), conducts a full-service commercial banking business. Headquartered in Tacoma, Washington, the Company provides a full range of banking services to small and medium-sized businesses, professionals and other individuals through 36 banking offices located in the Tacoma metropolitan area and contiguous parts of the Puget Sound region of Washington, as well as the Longview and Woodland communities in southwestern Washington. Substantially all of the Company’s loans, loan commitments and core deposits are geographically concentrated in its service areas. Columbia Bank is a Washington state-chartered commercial bank, the deposits of which are insured by the Federal Deposit Insurance Corporation (the “FDIC”). Columbia Bank is subject to regulation by the FDIC and the Washington State Department of Financial Institutions Division of Banks. Although Columbia Bank is not a member of the Federal Reserve System, the Board of Governors of the Federal Reserve System has certain supervisory authority over the Company, which can also affect Columbia Bank.

Business Overview

The Company’s goal is to be a leading community bank headquartered in the Pacific Northwest and to consistently increase earnings and shareholder value. The Company continues to build on its reputation for excellent customer service in order to be recognized in all markets it serves as the bank of choice for retail deposit customers, small to medium-sized businesses, and affluent households. Strategic business combinations may augment this internal growth.

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Management believes consolidation among financial institutions in its market area has created significant gaps in the ability of large banks to serve certain customers, particularly the Company’s target customer base of small and medium-sized businesses, professionals and other individuals. The Company’s business strategy is to provide its customers with the financial sophistication and breadth of products of a regional banking company while retaining the appeal and service level of a community bank. Management believes that as a result of the Company’s strong commitment to highly personalized relationship-oriented customer service, its varied products, its strategic branch locations and the long-standing community presence of its managers, lending officers and branch personnel, it is well positioned to attract new customers and to increase its market share of loans, deposits, and other financial services in the markets it now serves.

Business Strategy

The Company’s strategy to improve earnings and shareholder value is to leverage its branch network to grow market share by meeting the needs of current and prospective customers with its wide range of financial products and services and outstanding customer service. In addition, the Company will continue to focus on asset quality, expanding revenue, and expense control. The Company evaluates its business processes to benefit customers, create cost efficiencies, and increase profitability.

The Company has established a network of 36 branches as of March 31, 2003 from which it intends to grow market share. Twenty-one branches are located in Pierce County, ten in King County, three in Cowlitz County, and one each in Kitsap and Thurston Counties. New branches normally do not contribute to net income for many months after opening. Given the current softness in the Pacific Northwest economy, the Company has moderated its geographical expansion and does not have any additional branches planned in 2003.

Products & Services

The Company continuously reviews new products and services to meet its customers’ financial services needs. New technologies and services are reviewed for business development and cost saving purposes. Some of the products and services available include tailored loan products, Cash Management Services, Columbia On-Line^™, International Services, Merchant Services and Investment Services.

Market Area

The economy of the Company’s principal market areas, while primarily dependent upon aerospace, foreign trade and natural resources, including agriculture and timber, has become more diversified over the past decade as a result of the success of software companies such as Microsoft and the establishment of numerous research and biotechnology firms. Additionally, several military bases are located in the Company’s market areas. The Washington economy and that of the Puget Sound region continued the slowdown started in 2001 through the first quarter of 2003. Commercial airline and aerospace industries continued to contract in the Puget Sound region, as the Boeing Company and many local companies that supply the industry reduced their production and employment levels. The full impact and timing of airline and aerospace industry job reductions on the Puget Sound economy are not yet known; however, economic activity in many areas served by the Company has weakened.

Federal military and defense spending is expected to have a positive economic impact on the area in light of the large military bases located in the area. Boeing has won additional defense contracts; however, only limited job creation from these contracts is anticipated. It is unknown to what extent the war with Iraq will impact the market areas the Company serves. Through the first quarter of 2003, nationwide consumer confidence has declined, and consumer spending has dropped in a similar manner. However, state economists have predicted Pierce County will lead the state in economic activity in 2003, although the Puget Sound economy is expected to range from flat to slight growth in 2003.

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RESULTS OF OPERATIONS

The results of operations of the Company are dependent to a large degree on the Company’s net interest income. The Company also generates noninterest income through service charges and fees, merchant services fees, and income from mortgage banking operations. The Company’s operating expenses consist primarily of compensation and employee benefits expense, and occupancy expense. Like most financial institutions, the Company’s interest income and cost of funds are affected significantly by general economic conditions, particularly changes in market interest rates, and by government policies and actions of regulatory authorities.

Critical Accounting Policies

Various elements of the Company’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, management has identified several accounting policies that, due to the judgments, estimates and assumptions inherent in those policies, are critical to an understanding of the Company’s financial statements. These policies relate to the methodology for the determination of the allowance for loan losses and the valuation of real estate owned. These policies and the judgments, estimates and assumptions are described in greater detail in subsequent sections of Management’s Discussion and Analysis and in the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2002. Management believes that the judgments, estimates and assumptions used in the preparation of the financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of the financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the results of operations or financial condition.

Net Income

Net income for the first quarter of 2003 was $4.4 million, or $0.33 per diluted share, compared to a net loss of $428,000, or $(0.03) per diluted share, for the first quarter of 2002. The increase in net income as compared to the prior year is due primarily to a significantly lower contribution to the loan loss allowance in the first quarter of 2003 as well as increased noninterest income and improved efficiencies. The net loss in the prior year was primarily due to a large provision for loan losses leading to a loss in the first quarter 2002.

Total Revenue

During the first quarter of 2003, total revenue (net interest income plus noninterest income), was $21.6 million, an increase of $1.9 million, or 10% from the first quarter of 2002. The increase was primarily due to increased noninterest income during the first quarter 2003 compared to the same period a year ago. Noninterest income grew in residential lending, service charges and other fees, and merchant services.

Net Interest Income

Net interest income for the first quarter of 2003 increased 3% to $16.0 million, from $15.6 million in the first quarter of 2002. The Company’s management of its deposit costs and increased core deposits in the first three months of 2003 provided improved net interest income as compared to the first three months of 2002.

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Net interest margin (net interest income divided by average interest-earning assets) decreased to 4.37% in the first quarter of 2003 from 4.54% in the first quarter of 2002. The net interest margin was impacted by a 50 basis point decrease in the prime rate in the fourth quarter of 2002. Average interest-earning assets grew to $1.52 billion, or 7%, during the first quarter of 2003, compared with $1.42 billion for the same period in 2002. The yield on average interest-earning assets decreased 80 basis points (a basis point is 1/100^th of 1 percent, alternatively 100 basis points equals 1.00%) to 5.91% during the first quarter of 2003 compared with 6.71% during the same period of 2002. In comparison, average interest-bearing liabilities grew to $1.24 billion, or 6%, compared with $1.18 billion for the same period in 2002, and the average cost of interest-bearing liabilities decreased 74 basis points to 1.88% during the first quarter of 2003 from 2.62% in the same period of 2002.

CONSOLIDATED AVERAGE BALANCES—NET CHANGES

Columbia Banking System, Inc.

Noninterest Income

Noninterest income increased $1.5 million, or 37% in the first quarter of 2003 as compared with the same periods in 2002. Increases in noninterest income during the first quarter of 2003 were in residential mortgage loan originations resulting from the effect of low long-term interest rates, service charges and other fees resulting from the growth in core deposits and merchant services income. Income from mortgage banking increased by $485,000, or 81%, compared to first quarter 2002. Service charges and other fees increased $453,000, or 23%, and merchant service fees increased $245,000, or 23%, in the first quarter 2003 compared to first quarter 2002. In accordance with the Company’s investment strategy, management monitors market conditions with a view to realizing gains on its available for sale securities portfolio as market conditions allow. During the first quarter of 2003 and the first quarter of 2002, there were no sales of securities.

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Noninterest Expense

Total noninterest expense was unchanged at $13.7 million for the first quarter of 2003, and the same period in 2002. The Company has placed emphasis on controlling its costs. Noninterest expense in the first quarter of 2003 increased by $359,000, or 3% from the fourth quarter 2002. The fourth quarter 2002 had a gain on Real Estate Owned that decreased that quarter’s total noninterest expense by $372,000. Excluding that fourth quarter gain, noninterest expense for the first quarter 2003 was unchanged.

The Company’s efficiency ratio (noninterest expense less nonrecurring expenses divided by the sum of net interest income plus noninterest income less nonrecurring income) was 63.48% for the first quarter 2003, compared to 69.78% for the same period in 2002. The improvement in the efficiency ratio in the first quarter 2003 compared to a year ago was due to increased noninterest revenues with unchanged noninterest expense levels.

The first quarter 2003 efficiency ratio of 63.48% increased from the fourth quarter 2002 efficiency ratio of 61.66% (adjusted for nonrecurring gains on REO and sales of securities). This increase in the efficiency ratio from the fourth quarter 2002 was due to a decline in revenue from the full effect of the 50 basis point drop in the prime rate during the fourth quarter of last year. In addition, decreases in revenue from service charges on deposit accounts and mortgage banking in the first quarter of 2003 also contributed to the increase in the first quarter efficiency ratio.

Income Taxes

The Company recorded income tax provisions of $1.8 million for the first quarter of 2003, compared with a benefit of $707,000 for the first quarter 2002. The effective tax rate for the first quarter 2003 was 29%, and was 27% for the year-ended December 31, 2002. The Company’s effective tax rate is less than the statutory rate primarily due to earnings on tax-exempt municipal securities and bank owned life insurance. For additional information, refer to the Company’s annual report on Form 10-K for the year ended December 31, 2002.

Credit Risk Management

The extension of credit in the form of loans or other credit products to individuals and businesses is one of the Company’s principal business activities. Company policies and applicable laws and regulations require risk analysis as well as ongoing portfolio and credit management. The Company manages its credit risk through lending limit constraints, credit review, approval policies, and extensive, ongoing internal monitoring. The Company also manages credit risk through diversification of the loan portfolio by type of loan, type of industry, type of borrower and by limiting the aggregation of debt limits to a single borrower.

In analyzing its existing portfolio, the Company reviews its consumer and residential loan portfolios by their performance as a pool of loans since no single loan is individually significant or judged by its risk rating, size, or potential risk of loss. In contrast, the monitoring process for the commercial business, private banking, real estate construction, and commercial real estate portfolios includes periodic reviews of individual loans with risk ratings assigned to each loan and performance judged on a loan by loan basis. The Company reviews these loans to assess the ability of the borrower to service all of its interest and principal obligations and, as a result, the risk rating may be adjusted accordingly. In the event that full collection of principal and interest is not reasonably assured, the loan is appropriately downgraded and, if warranted, placed on nonaccrual status even though the loan may be current as to principal and interest payments.

Additionally, the Company assesses whether an impairment of a loan as provided in SFAS No. 114, “Accounting by Creditors for Impairment of a Loan”, warrants specific reserves or a write-down of the loan. See “Provision and Allowance For Loan Losses” on page 16.

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Loan policies, credit quality criteria, portfolio guidelines and other controls are established under the guidance of the Company’s Senior Credit Officer and approved, as appropriate, by the Board. Credit Administration, together with the loan committee, has the responsibility for administering the credit approval process. As another part of its control process, the Company uses an independent internal credit review and examination function to provide assurance that loans and commitments are made and maintained as prescribed by its credit policies. This includes a review of documentation when the loan is initially extended and subsequent on-site examination to ensure continued performance and proper risk assessment.

Loan Portfolio Analysis

The Company is a full service commercial bank, which originates a wide variety of loans, and concentrates its lending efforts on originating commercial business and commercial real estate loans. The following table sets forth the Company’s loan portfolio by type of loan for the dates indicated:

Total loans (excluding loans held for sale) at March 31, 2003 decreased $29.3 million, to $1.15 billion from $1.18 billion at year-end 2002 due to decreases in its major loan categories.

Commercial Loans: As of March 31, 2003, commercial loans decreased $13.9 million, or 3%, to $446.3 million from $460.2 million at year-end 2002, representing 38.9% of total loans at March 31, 2003 as compared with 39.1% of total loans at December 31, 2002. The Company is committed to providing competitive commercial lending in its market areas. Management believes the slowdown in commercial lending in 2001 and continuing through the first quarter of 2003 was primarily due to the slow economy as businesses reduced inventories and paid down debt. The Company plans to remain competitive yet cautious with its commercial lending products due to the current state of the economy and will continue to emphasize in particular its relationship banking with businesses, and business owners.

Real Estate Loans: Residential one-to-four family loans decreased $4.6 million, or 9%, to $45.5 million at March 31, 2003, representing 4.0% of total loans, compared with $50.1 million, or 4.3% of total loans at December 31, 2002. These loans are used by the Company to collateralize advances from the FHLB. Generally, the Company’s policy is to originate for sale to third parties residential loans secured by properties located within the Company’s primary market areas, and are typically 80% or less loan to value. However, the loan amounts may exceed 80% with private mortgage insurance.

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Commercial and five or more family residential real estate lending increased $2.0 million, or 0.4%, to $449.7 million at March 31, 2003, representing 39.2% of total loans, from $447.7 million, or 38.1% of total loans at December 31, 2002. Generally, commercial and five or more family residential real estate loans are made to borrowers who have existing banking relationships with the Company. The Company’s underwriting standards generally require that the loan-to-value ratio for these loans not exceed 75% of appraised value, cost, or discounted cash flow value, as appropriate, and that commercial properties maintain debt coverage ratios (net operating income divided by annual debt servicing) of 1.2 or better. However, underwriting standards can be influenced by competition and other factors. The Company endeavors to maintain the highest practical underwriting standards while balancing the need to remain competitive in its lending practices.

Real Estate Construction Loans: The Company originates a variety of real estate construction loans. One-to-four family residential construction loans are originated for the construction of custom homes (where the home buyer is the borrower) and provide financing to builders for the construction of pre-sold homes and speculative residential construction. Construction loans on one-to-four family residences increased $3.3 million, or 18%, to $21.3 million at March 31, 2003, representing 1.9% of total loans, from $18.0 million, or 1.5% of total loans at December 31, 2002. Commercial and five or more family real estate construction loans decreased $10.5 million, or 11%, to $82.9 million at March 31, 2003, representing 7.2% of total loans, from $93.5 million, or 7.9% of total loans at December 31, 2002.

The Company endeavors to limit its construction lending risk through adherence to sound underwriting and monitoring procedures.

Consumer Loans: At March 31, 2003, the Company had $103.6 million of consumer loans outstanding, representing 9.0% of total loans, a decrease of $5.4 million, or 5%, compared with $109.1 million, at December 31, 2002. Consumer loans made by the Company include automobile loans, boat and recreational vehicle financing, home equity and home improvement loans and miscellaneous personal loans.

Foreign Loans: Columbia Bank is not involved with loans to foreign companies or foreign countries.

Nonperforming Assets

Nonperforming assets consist of: (i) nonaccrual loans, which generally are loans placed on a nonaccrual basis when the loan becomes past due 90 days or when there are otherwise serious doubts about the collectibility of principal or interest; (ii) in most cases restructured loans, for which concessions, including the reduction of interest rates below a rate otherwise available to that borrower or the deferral of interest or principal, have been granted due to the borrower’s weakened financial condition (interest on restructured loans is accrued at the restructured rates when it is anticipated that no loss of original principal will occur); (iii) real estate owned; and (iv) personal property owned.

Total nonperforming assets decreased 23% to $14.0 million, or 0.80% of period-end assets at March 31, 2003 from $18.2 million, or 1.07% of period-end assets at December 31, 2002. Total nonperforming assets decreased 43% in the past twelve months, from $24.6 million and 1.54% of period-end assets at March 31, 2002.

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The following tables set forth, at the dates indicated, information with respect to nonaccrual loans, restructured loans, total nonperforming loans (nonaccrual loans plus restructured loans), real estate owned, other personal property owned, and total nonperforming assets of the Company: