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

FORM 10-Q

[X]    Quarterly report Pursuant to section 13 or 15(d) of the Securities and Exchange act of 1934 
    For the quarter ended June 30, 2004 
     
[ ]    Transition report pursuant to section 13 or 15(d) of the Securities and Exchange act of 1934 
    For the transition period from __________ to __________

Commission file number 0-23881

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

 

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

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

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

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

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

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, 2004: 3,917,975 shares

1

COWLITZ BANCORPORATION AND SUBSIDIARY
TABLE OF CONTENTS

        PAGE 
Part I    FINANCIAL INFORMATION     
         
Item 1.    Financial Statements     
         
    Consolidated Statements of Condition -    3 
    June 30, 2004 and December 31, 2003     
         
    Consolidated Statements of Income -    4 
    Three and six months ended June 30, 2004 and 2003     
         
    Consolidated Statements of Changes in Shareholders' Equity -    5 
    Year ended December 31, 2003 and six months ended June 30, 2004     
         
    Consolidated Statements of Cash Flows -    6 
    Six months ended June 30, 2004 and 2003     
         
    Notes to Consolidated Financial Statements    7-12 
         
Item 2.    Management's Discussion and Analysis of Financial Condition    13-23 
    And Results of Operations     
         
Item 3.    Quantitative and Qualitative Disclosures About Market Risk    24 
         
Item 4.    Controls and Procedures    24 
         
Part II    OTHER INFORMATION     
         
Item 1.    Legal Proceedings    25 
         
Item 2.    Changes in Securities and Use of Proceeds    25 
         
Item 3.    Defaults upon Senior Securities    25 
         
Item 4.    Submission of Matters to a Vote of Security Holders    25 
         
Item 5.    Other Information    26 
         
Item 6.    Exhibits and Reports on Form 8-K    26 
         
    Signatures    27 
         
    Certification of Chief Executive Officer and Chief Financial Officer    29-31 

Forward-Looking Statements

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

2

Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

COWLITZ BANCORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
(dollars in thousands)

        June 30,    December 31, 
ASSETS        2004    2003 
Cash and cash equivalents      $  16,650  $  24,527 
Investment securities:             
     Available-for-sale (at fair value, cost of $57,881 and $46,658 at             
          June 30, 2004 and December 31, 2003, respectively)        57,325    47,000 
     Held-to-maturity (at amortized cost, fair value of $100 and $8,270             
          at June 30, 2004 and December 31, 2003, respectively)        100    8,144 
                    Total investment securities        57,425    55,144 
 
Federal Home Loan Bank stock, at cost        1,133    1,974 
 
Loans held-for-sale        -    8,360 
 
Loans, net of deferred loan fees        170,177    163,490 
Allowance for loan losses        (4,042)    (3,968) 
          Total loans, net        166,135    159,522 
 
Cash surrender value of bank-owned life insurance        8,406    8,170 
Premises and equipment, net of accumulated depreciation of $4,538 and             
     $4,350 at June 30, 2004 and December 31, 2003, respectively        3,980    4,171 
Goodwill, net of impairment adjustments and accumulated amoritzation             
     of $1,987 at June 30, 2004 and December 31, 2003        852    852 
Intangible assets, net of accumulated amortization of $1,867 and             
     $1,734 at June 30, 2004 and December 31, 2003, respectively        103    236 
Accrued interest receivable and other assets        5,070    5,843 
TOTAL ASSETS      $  259,754  $  268,799 
 
LIABILITIES             
Deposits:             
     Non-interest-bearing demand      $  57,274  $  60,572 
     Savings and interest-bearing demand        89,584    86,375 
     Certificates of deposit        76,691    79,533 
          Total deposits        223,549    226,480 
 
Federal funds purchased        625    225 
Federal Home Loan Bank borrowings        563    5,653 
Other borrowings        1,394    2,739 
Accrued interest payable and other liabilities        1,474    1,900 
TOTAL LIABILITIES        227,605    236,997 
 
SHAREHOLDERS' EQUITY             
Preferred stock, no par value; 5,000,000 shares authorized; no shares             
     issued and outstanding at June 30, 2004 and December 31, 2003        -    - 
Common stock, no par value; 25,000,000 shares authorized; with 3,917,975             
     and 3,898,652 shares issued and outstanding at June 30, 2004 and             
     December 31, 2003, respectively        18,060    17,957 
Additional paid-in capital        1,609    1,609 
Retained earnings        12,847    12,011 
Accumulated other comprehensive (loss) income, net of taxes        (367)    225 
TOTAL SHAREHOLDERS' EQUITY        32,149    31,802 
 
          TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $ 259,754  $   268,799 


See accompanying notes

3

 

COWLITZ BANCORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)

        Three Months Ended        Six Months Ended 
        June 30,        June 30, 
        2004       2003        2004        2003 
INTEREST INCOME                                 
     Interest and fees on loans    $    3,070    $    3,779    $    6,128    $    8,012 
     Interest on taxable investment securities        458        204        919        454 
     Interest on non-taxable investment securities        85        6        165        9 
     Other interest and dividend income        71        162        92        335 
          Total interest income        3,684        4,151        7,304        8,810 
 
INTEREST EXPENSE                                 
     Savings and interest-bearing demand        206        315        390        639 
     Certificates of deposit        482        861        979        1,864 
     Federal funds purchased        2        5        5        12 
     Federal Home Loan Bank borrowings        11        114        30        254 
     Other borrowings        35        58        86        115 
          Total interest expense        736        1,353        1,490        2,884 
 
          Net interest income before provision for loan losses        2,948        2,798        5,814        5,926 
 
PROVISION FOR LOAN LOSSES        100        43        87        566 
          Net interest income after provision for loan losses        2,848        2,755        5,727        5,360 
 
NON-INTEREST INCOME                                 
     Service charges on deposit accounts        173        238        361        484 
     (Losses) gains on loans sold        (33)        1,247        139        2,996 
     Mortgage brokerage fees        149        651        254        1,494 
     Escrow fees        -        324        -        661 
     Credit card income        139        143        277        296 
     Fiduciary income        97        80        198        170 
     Increase in cash surrender value of bank-owned life insurance        103        -        236        - 
     Net gains (losses) on sale of repossessed assets        65        4        (15)        37 
     Other income        29        23        80        66 
          Total non-interest income        722        2,710        1,530        6,204 
 
NON-INTEREST EXPENSE                                 
     Salaries and employee benefits        1,571        2,465        3,233        5,089 
     Net occupancy and equipment expense        377        565        812        1,212 
     Professional fees        181        479        341        946 
     Business taxes        49        98        104        231 
     FDIC assessment        103        133        207        271 
     Credit card expense        136        151        266        306 
     Data processing and communications        76        108        154        237 
     Loan expense        12        240        27        353 
     Postage and freight        59        128        121        231 
     Travel and education        44        66        80        137 
     Stationery and supplies        30        54        67        115 
     Temporary help        2        159        6        293 
     Amortization of intangible assets        67        67        133        133 
     Expenses relating to other real estate owned        23        74        42        101 
     Other expenses        287        232        597        469 
          Total non-interest expense        3,017        5,019        6,190        10,124 
          Income before provision for income taxes        553        446        1,067        1,440 
INCOME TAX PROVISION        114        161        231        512 
NET INCOME    $    439    $    285    $    836    $    928 
 
BASIC EARNINGS PER SHARE OF COMMON STOCK    $    0.11    $    0.07    $    0.21    $    0.24 
DILUTED EARNINGS PER SHARE OF COMMON STOCK    $    0.11    $    0.07    $    0.20    $    0.24 
WEIGHTED-AVERAGE SHARES OUTSTANDING - BASIC        3,914,493        3,835,261        3,910,436        3,827,386 
WEIGHTED-AVERAGE SHARES OUTSTANDING - DILUTED        4,116,249        3,959,677        4,123,664        3,936,297