B R A N C H L O C A T I O N S PIERCE COUNTY 13th & A 1301 A Street Suite 100 Tacoma, WA 98402 253.396.6900 Debra Hochmuth Allenmore 1959 South Union Tacoma, WA 98405 253.627.6909 Nigel English Bonney Lake 19925 State Rte 410 E Bonney Lake, WA 98390 253.863.8500 Lillian McGinnis Broadway Plaza 1102 Broadway Plaza Tacoma, WA 98402 253.305.1940 Debra Hochmuth Edgewood/Milton 1250 Meridian E Milton, WA 98354 253.952.6646 Dolores Ehli Fife 1501 54th Ave. E Fife, WA 98424 253.922.7870 Todd LePique Fircrest 2401 Mildred St. W Fircrest, WA 98466 253.566.1172 Dan Patjens Gig Harbor 5303 Point Fosdick Dr. NW Gig Harbor, WA 98335 253.858.5105 Chris Thomas Downtown Gig Harbor 3006 Judson St. Suite 101 Gig Harbor, WA 98335 253.851.5551 Chris Thomas Lakewood 6202 Mount Tacoma Dr. SW Lakewood, WA 98499 253.581.4232 Jay Mayer Martin Luther King 1102 Martin Luther King Jr. Way Tacoma, WA 98405 253.597.8000 Calvin Pearson Old Town 2200 North 30th St. Tacoma, WA 98403 253.272.0412 Jennifer Caldier 104th & Canyon 10321 Canyon Road E Puyallup, WA 98373 253.539.7100 Toni Quinn 43rd & Meridian 4220 South Meridian Puyallup, WA 98373 253.770.0770 Michael Block 176th & Meridian 17208 Meridian E Puyallup, WA 98373 253.445.6748 Joe Urvina South Hill Mall 3500 South Meridian Suite 503 Puyallup, WA 98373 253.770.8161 Julie Borell Spanaway 17502 Pacific Ave. S Spanaway, WA 98387 253.539.3094 Teresa Jones Stadium 601 North 1st Tacoma, WA 98403 253.597.8811 Monica Stevens Summit 10409 Canyon Road E Puyallup, WA 98373 253.770.9323 Toni Quinn 84th & Pacific 201 South 84th Street Tacoma, WA 98444 253.471.7000 Keith Brown Westgate 5727 North 21st St. Tacoma, WA 98406 253.761.8170 Connie Pentecost KING COUNTY Auburn 25 16th St. NE Auburn, WA 98002 253.939.9600 Doug Hedger Bellevue Way 10350 NE 10th St. Bellevue, WA 98004 425.452.7323 Rebecca Holverson Federal Way 33370 Pacific Highway S Federal Way, WA 98003 253.925.9323 Mike Harris Forest Villa 2749 Auburn Way S Auburn, WA 98002 253.887.1186 Carol Long Kent 504 West Meeker Kent, WA 98032 253.852.0475 Shirley McGregor Redmond 8201 164th Ave. NW Suite 105 Redmond, WA 98052 425.558.7500 Judi Lindsay South Auburn 4101 A St. SE Auburn, WA 98002 253.939.9800 Rod Clemmer 2nd & Columbia 721 Second Avenue Seattle, WA 98104 206.223.1000 Kellie Warren COWLITZ COUNTY Commerce 1338 Commerce Ave. Longview, WA 98632 360.636.9200 Faith Pacheco 30th Avenue 2207 30th Ave. Longview, WA 98632 360.423.8760 Faith Pacheco Woodland 782 Goerig St. Woodland, WA 98674 360.225.9421 Carol Rounds KITSAP COUNTY Port Orchard 228 Bravo Terrace Port Orchard, WA 98367 360.876.8384 Rob Putaansuu THURSTON COUNTY West Olympia 2820 Harrison Ave. NW Olympia, WA 98502 360.357.5800 Diane Avery C O L U M B I A B A N K 1 3 0 1 S O U T H A S T R E E T, T A C O M A , W A S H I N G T O N 9 8 4 0 2 2 5 3 - 3 0 5 - 1 9 0 0 / 1 - 8 0 0 - 3 0 5 -1 9 0 5 W W W . C O L U M B I A B A N K . C O M L I S T E N I N G . L O O K I N G . L E A D I N G . L O C A L . C O L U M B I A B A N K I N G S Y S T E M , I N C . A N N U A L R E P O R T 2 0 0 3 LISTENING It starts with a good set of ears. Understanding customers’ needs is imperative in meeting their expectations. Surprisingly, this simple concept is often ignored by some banks. For us, however, it is always the most important first step. H O W C A N W E H E L P Y O U ? Five little words. Yet what a difference they make. Columbia Bank helps customers and communities in so many ways. OnLine Banking. Investment Services. Business Loans. International Banking. Cash Management. Residential Loans. Consumer Columbia Bank has carefully and purposefully recruited a staff of true difference-makers. People who understand and appreciate how important each customer really is. They are the ones who continually generate the kind of customer loyalty that helps to cement long-term Loans. Checking and Savings Accounts. banking relationships. CDs and Money Markets. And of course, So, no matter how we can help you, one by playing an integral role in the growth thing is for sure—it will be our pleasure. and improvement of communities we serve throughout Western Washington. As diverse as these products, services, and commitments are, a common thread ties them all together—the people who proudly and professionally serve our customers. They play the pivotal role in continuing to build a recognized and respected brand. LOOKING We’re constantly on the lookout for ways to improve products and services while staying ahead of customer demand. Spotting the right opportunities has also helped maintain growth for our shareholders. C O R P O R A T E D I R E C T O R Y S H A R E H O L D E R I N F O R M A T I O N CORPORATE HEADQUARTERS Columbia Banking System, Inc. 1301 South A Street, Suite 800 P.O. Box 2156 Tacoma, WA 98401-2156 253.305.1900 INDEPENDENT AUDITORS Deloitte & Touche, LLP TRANSFER AGENT & REGISTRAR American Stock Transfer & Trust Company MARKET MAKERS D.A. Davidson & Co. Goldman, Sachs & Co. Hoefer & Arnett, Inc. Knight Securities LP Morgan Stanley & Co., Inc. RBC Dain Rauscher, Inc. Schwab Capital Markets REGULATORY & SECURITIES COUNSEL Graham & Dunn PC ANNUAL MEETING Best Western Hotel & Conference Center 5700 Pacific Highway East Fife, Washington Wednesday, April 28, 2004 at 1 p.m. STOCK LISTING The Company’s common stock trades on the Nasdaq National Market tier of The Nasdaq Stock Markets under the symbol: COLB. FINANCIAL INFORMATION Columbia news and financial results are available through the Internet and mail. I N T E R N E T For information about Columbia, including news and financial results, product information and service locations, access our home page on the World Wide Web, at www.columbiabank.com. You can also view or retrieve copies of Columbia’s financial reports on the Internet by connecting to www.sec.gov. Immediate access to the Company’s quarterly earnings news release via the Internet is provided by Company News On Call at www.prnewswire.com M A I L At your request, we will mail you our quarterly earnings news release, quarterly financial data on Form 10-Q and additional annual reports. To be added to Columbia’s mailing list for quarterly earnings releases, or to request other information, please contact: Jo Anne Coy Vice President, Director of Marketing P.O. Box 2156, MS 8300 Tacoma, WA 98402-2156 Tel 253.305.1965 Fax 253.305.0317 E-mail jcoy@columbiabank.com LEADING Columbia Bank has set itself apart from big financial institutions and small banks. Now, firmly established as a respected resource and community leader, more people are turning to us for their long-term banking needs. C O N S O L I D A T E D F I N A N C I A L S 2 0 0 3 2003 2002 % CHANGE NET INCOME $20,000 $16,000 $12,000 $8,000 $4,000 $0 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1999 2000 2001 2002 2003 COLB STOCK PRICE 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72% Increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . JAN MAR JUNE SEPT DEC VALUE OF $1000 INVESTMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,445 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1994 95 96 97 98 99 00 01 02 03 $24 $22 $20 $18 $16 $14 $12 $10 $5000 $4500 $4000 $3500 $3000 $2500 $2000 $1500 $1000 FOR THE YEAR Net interest income Provision for loan losses Noninterest income Noninterest expense Net income PER SHARE Basic earnings Diluted earnings Book value AVERAGES Total assets Interest-earning assets Loans Securities Deposits Core deposits Shareholders’ equity FINANCIAL RATIOS Net interest margin Return on average assets Return on average equity Efficiency ratio Average equity to average assets AT YEAR-END Total assets Loans Allowance for loan losses Securities Deposits Core deposits Shareholders’ equity Full-time equivalent employees Banking offices $63,867 2,850 22,784 55,960 19,522 $1.46 1.44 11.19 $1,696,417 1,544,869 1,128,941 401,594 1,483,173 1,017,126 141,129 4.23% 1.15 13.83 62.86 8.32 $1,744,347 1,078,302 20,261 523,864 1,544,626 1,098,237 150,372 539 34 $64,289 15,780 20,050 53,653 10,885 $0.83 0.82 9.95 $1,601,061 1,454,714 1,183,922 246,995 1,360,968 885,008 124,096 4.50% 0.68 8.77 64.46 7.75 $1,699,613 1,175,853 19,171 337,412 1,487,153 980,709 132,384 525 36 -1% -82% 14% 4% 79% 76% 76% 12% 6% 6% -5% 63% 9% 15% 14% 3% -8% 6% 55% 4% 12% 14% 3% -6% All dollar figures above are in thousands. T O O U R S H A R E H O L D E R S 2003 marked the 10th anniversary We are pleased to report record profits In fact, we are proud to report that we of moving our headquarters to our for the year 2003 in spite of a challenging surveyed more than 800 customers last downtown Tacoma main office, and the economic environment. Net income for year in two separate customer satisfaction beginning of our rapid expansion. In 1993, 2003 was $19.5 million, compared with surveys. Columbia Bank’s combined average Columbia Bank had four branches in two $10.9 million in 2002, an increase of 79%. score was 4.76 out of 5; the average for counties and just over $211 million in On a diluted per-share basis, net income financial institutions is 4.2. While providing assets. Today, Columbia has 34 branches for the year was $1.44, up 76% from excellent service will always be an ongoing in five counties and our assets are over $0.82 in 2002. $1.7 billion. We began with the philosophy to provide a local, customer- focused approach to doing business, coupled with all the modern conveniences— including people. That philosophy continues to guide us today. This growth in profitability is due to a more normal contribution to our loan commitment, we’re pleased that our customers view their experience with Columbia as highly positive. loss allowance than last year, a notable Columbia’s improved profitability was increase in noninterest income, and our reflected in a significant increase in our continued emphasis on controlling stock price. On December 31, 2002, our expenses. Return on average assets and stock closed at $12.61 per share and equity for the year were 1.15% and by December 31, 2003 was trading at 13.83%, respectively, compared to 0.68% $21.66, an increase of almost 72%. and 8.77%, respectively, for 2002. An investment of $1,000 in Columbia As we focused on improving credit quality and operational processes, Columbia employees never lost sight of our commit- ment to exceptional customer service. Banking System, Inc. stock 10 years ago was worth almost $4,500 by the end of the year 2003. B O A R D O F D I R E C T O R S (Front row, left to right): Daniel C. Regis, Managing Director, Digital Partners; William T. Weyerhaeuser, Chairman of the Board, Melanie J. Dressel, President & Chief Executive Officer, Columbia Banking System and Columbia Bank; Donald Rodman, Owner and Executive Officer, Rodman Realty. (Middle row, left to right): John A. Halleran, private investor; Thomas L. Matson, Owner and President, Tom Matson Dodge, Inc.; Thomas M. Hulbert, President and Chief Executive Officer, Hulco, Inc. and Winsor Corporation. (Back row, left to right): Frederick M. Goldberg, Managing Partner, Goldberg Investments; John P. Folsom, President, Brown & Brown of Washington, Inc.; James M. Will, President, Titus-Will Enterprises; Jack Fabulich, Honorary Chairman, Parker Paint Manufacturing, Inc.; Commissioner, Port of Tacoma. LENDING ACTIVITY MARKET GROWTH our broad branch network and strong Total loans declined in 2003, because In 2003, Columbia Bank reached Number commercial banking activities. of a combination of lower line of credit 1 in deposits in Pierce County among usage, resolution of problem loans, and all FDIC-insured institutions. We are our commitment to manage the risks continuing to leverage the strong base associated with interest rates and the mix of branches we have built in our market of our loan portfolio. All these factors are areas. In November, we consolidated the important during a time of low interest operations of our two Bellevue branches rates and a slow economy. We are into the remodeled Bellevue Way location. beginning to see early signs of an While we have no immediate plans for improving economy, as total loans for the new branches, we are considering new fourth quarter reflected a slight increase markets and locations on an ongoing basis, from the third quarter 2003. Our overall and will take advantage of opportunities loan portfolio remains well diversified. as they arise. We were pleased to welcome Daniel C. In January 2004, Mark Nelson, EVP and Regis to the Board of Directors November 1, Chief Credit Officer, accepted the new 2003. Dan’s extensive financial background position of Chief Banking Officer. In this includes his position as Managing Partner new position, Mark will lead the bank’s at Price Waterhouse LLP, where he served commercial and consumer lending and As always, we want to acknowledge the role of our wonderful staff in our success. Our employees are the bank to our customers. On a daily basis, we ask our employees to deliver a level of service that exceeds our customers’ expectations. We firmly believe that this differentiates us from our competitors. That’s why our bank slogan is “You’ll Notice The Difference.” William T. Weyerhaeuser for 32 years before retiring in 1996. He is branch banking functions, as well as the Melanie J. Dressel currently a Managing Director of Digital Private Banking, Marketing, Cash Partners, a Bellevue, Washington-based Management, and International technology fund. He is serving as our departments. The Chief Banking Officer designated financial expert on our Audit position will help us enhance the delivery Committee, fulfilling a requirement under of our extensive mix of products and the Sarbanes Oxley regulations. services to our customers by leveraging E X E C U T I V E O F F I C E R S (Clockwise from upper left): Melanie J. Dressel, President and Chief Executive Officer, Columbia Banking System, Inc. and Columbia Bank; Mark W. Nelson, Executive Vice President, Chief Banking Officer; Gary R. Schminkey, Executive Vice President, Chief Financial Officer; Evans Q. “Tex” Whitney, Executive Vice President, Human Resources.