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Columbia Banking SystemB R A N C H L O C A T I O N S Old Town 2200 North 30th St. Tacoma, WA 98403 253.272.0412 104th & Canyon 10321 Canyon Road E Puyallup, WA 98373 253.539.7100 43rd & Meridian 4220 South Meridian Puyallup, WA 98373 253.770.0770 176th & Meridian 17208 Meridian E Puyallup, WA 98373 253.445.6748 South Hill Mall 3500 South Meridian Suite 503 Puyallup, WA 98373 253.770.8161 Spanaway 17502 Pacific Ave. S Spanaway, WA 98387 253.539.3094 Stadium 601 North 1st Tacoma, WA 98403 253.597.8811 Summit 10409 Canyon Road E Puyallup, WA 98373 253.770.9323 84th & Pacific 201 South 84th St. Tacoma, WA 98444 253.471.7000 Westgate 5727 North 21st St. Tacoma, WA 98406 253.761.8170 WASHINGTON PIERCE COUNTY 13th & A 1301 South A St. Suite 100 Tacoma, WA 98402 253.396.6900 Allenmore 1959 South Union Tacoma, WA 98405 253.627.6909 Bonney Lake 19925 State Rte. 410 E Bonney Lake, WA 98390 253.863.8500 Broadway Plaza 1102 Broadway Plaza Tacoma, WA 98402 253.305.1940 Edgewood/Milton 1250 Meridian E Milton, WA 98354 253.952.6646 Fife 1501 54th Ave. E Fife, WA 98424 253.922.7870 Fircrest 2401 Mildred St. W Fircrest, WA 98466 253.566.1172 Gig Harbor 5303 Point Fosdick Dr. NW Gig Harbor, WA 98335 253.858.5105 Downtown Gig Harbor 3006 Judson St. Suite 101 Gig Harbor, WA 98335 253.851.5551 Lakewood 6202 Mount Tacoma Dr. SW Lakewood, WA 98499 253.581.4232 Martin Luther King 1102 Martin Luther King Jr. Way Tacoma, WA 98405 253.597.8000 KING COUNTY Auburn 25 16th St. NE Auburn, WA 98002 253.939.9600 Bellevue Way 10350 NE 10th St. Bellevue, WA 98004 425.452.7323 Federal Way 33370 Pacific Highway S Federal Way, WA 98003 253.925.9323 Forest Villa 2749 Auburn Way S Auburn, WA 98002 253.887.1186 Kent 504 West Meeker Kent, WA 98032 253.852.0475 Redmond 8201 164th Ave. NW Suite 105 Redmond, WA 98052 425.558.7500 South Auburn 4101 A St. SE Auburn, WA 98002 253.939.9800 2nd & Columbia 721 Second Ave. Seattle, WA 98104 206.223.1000 COWLITZ COUNTY Commerce 1338 Commerce Ave. Longview, WA 98632 360.636.9200 30th Avenue 2207 30th Ave. Longview, WA 98632 360.423.8760 Woodland 782 Goerig St. Woodland, WA 98674 360.225.9421 KITSAP COUNTY Port Orchard 228 Bravo Terrace Port Orchard, WA 98367 360.876.8384 THURSTON COUNTY West Olympia 2820 Harrison Ave. NW Olympia, WA 98502 360.357.5800 OREGON CLATSOP COUNTY Astoria (Headquarters) 1122 Duane St. Astoria, OR 97103 503.325.2228 Warrenton 630 SE Marlin Ave. Warrenton, OR 97146 503.861.9753 Cannon Beach 107 Sunset Blvd. Cannon Beach, OR 97110 503.436.0727 Seaside 301 Ave. A Seaside, OR 97138 503.738.8445 TILLAMOOK COUNTY Manzanita 715 Laneda Ave. Manzanita, OR 97130 503.368.4284 WA OR 30 101 Clatsop County 26 Tillamook County 2004 ANNUAL REPORT Columbia Bank 1301 South A Street Tacoma, Washington 98402 253.305.1900/1.800.305.1905 www.columbiabank.com Moving Our Community Forward Together At Columbia Bank, our belief in strong communities is at the core of everything we do. We’ve applied our financial expertise and market savvy to our keen sense of community vitality to create some of the most innovative, progressive programs and services in the industry. Columbia Bank is all about smart people serving the individual needs and dreams of our customers, from online banking to investment services, business loans, personal loans, and much more. It’s hard, rewarding work. And, of course, it all starts with a smile. Consolidated Financials 2004 Net Income 2004 2003 Change $20000 $16000 $12000 $4000 $0 2000 2001 2002 2003 2004 COLB Stock Price 2004 ` $26 $16 $14 $12 $10 JAN MAR JUNE SEPT DEC Value of $1000 Investment $5000 $3500 $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 $71,943 995 22,244 61,326 22,513 $1.55 1.52 13.14 $1,919,573 1,769,470 1,186,506 552,742 1,690,513 1,238,536 169,853 4.19% 1.17% 13.25% 63.20% 8.85% $2,179,280 1,359,743 19,881 643,060 1,864,028 1,382,235 204,900 564 39 $63,867 2,850 22,784 55,960 19,522 $1.39 1.37 10.66 $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 13% -65% -2% 10% 15% 12% 11% 23% 13% 15% 5% 38% 14% 22% 20% 25% 26% -2% 23% 21% 26% 36% 5% 15% 95 96 97 98 99 00 01 02 03 04 All dollar figures above are in thousands. At Columbia Bank, we take pride in moving the community forward every day. Corporate Headquarters I n t e r n e t For information about Columbia Bank, 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 Bank’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 Bank’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 Columbia Banking System, Inc. 1301 South A Street, Suite 800 P.O. Box 2156 Tacoma, WA 98402-2156 253.305.1900 1.800.305.1905 Independent Auditors Deloitte & Touche, LLP Transfer Agent & Registrar American Stock Transfer & Trust Co. Market Makers D. A. Davidson and Co. Lime Brokerage LLC Knight Equity Markets LP Goldman Sachs Schwab Capital Markets Brut LLC RBC Capital Markets Regulatory & Securities Counsel Graham & Dunn PC Annual Meeting Greater Tacoma Convention & Trade Center 1500 Broadway Tacoma, Washington Wednesday, April 27, 2005 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. BOARD OF DIRECTORS Left to right: Frederick M. Goldberg, Managing Partner, Goldberg Investments; Daniel C. Regis, Managing Director, Digital Partners; Thomas L. Matson, President and Chief Executive Officer, Hulco, Inc. and Winsor Corporation; Donald Rodman, Owner and Executive Officer, Rodman Realty; John P. Folsom, President, Brown & Brown of Washington, Inc.; James M. Will, President, Titus-Will Enterprises; Melanie J. Dressel, President & Chief Executive Officer, Columbia Banking System and Columbia Bank; Thomas M. Hulbert, President and Chief Executive Officer, Hulco, Inc. and Winsor Corporation; William T. Weyerhaeuser, Chairman of the Board, Columbia Banking System. EXECUTIVE OFFICERS Andy McDonald, Executive Vice President and Chief Credit Officer; Melanie J. Dressel, President and Chief Executive Officer, Columbia Banking System, Inc. and Columbia Bank; Evans Q “Tex” Whitney, Executive Vice President, Human Resources; Mark W. Nelson, Executive Vice President, Chief Banking Officer; Gary R. Schminkey, Executive Vice President, Chief Financial Officer. To Our shareholders 2004 was a good year for Columbia Bank as we reached the milestone of $2 billion in assets and reported record profits. The improving economy and our strong branch network supported our growth in loans, deposits and credit quality. Through expanded customer relationships, we continued to leverage our broad base of branches, building greater market share. We increased value to the Company with a successful acquisition and new additions to our staff that provided significant contributions to our bottom line. In October 1, 2004 the acquisition of Bank of Astoria brought $170 million in assets, and most importantly, its very capable staff who share our culture and attitude about providing exceptional customer service. The bank is headquartered in Astoria, Oregon and has five branches, located in Astoria, Warrenton, Seaside, Cannon Beach and Manzanita. Led by Cheri Folk, President and Chief Executive Officer, Bank of Astoria is a high-performing organization, with 34% market share in Clatsop County. Bank of Astoria will continue to operate under its existing name and locations, with the same management and local board of directors. Melanie Dressell and Cheri Folk We are pleased to report record profits for the year 2004, the result of increased interest income, loan growth, rising short-term interest rates and our ongoing commitment to providing excellent service to our customers. Net income for 2004 was $22.5 million compared with $19.5 million in 2003, an increase of 15%. On a diluted per-share basis, net income for the year was $1.52, up 11% from $1.37 in 2003. Another important highlight for the year was our loan growth. Compared to 2003, our outstanding loans grew $281 million, up 26% to $1.4 billion at the end of 2004. Our 4th quarter showed the most loan growth, increasing over $194 million from the end of the 3rd quarter 2004. This increase is system wide. While the Bank of Astoria portfolio added over $100 million in loans, we generated the remainder through our loan production staff throughout our market areas. Our lenders stepped up their emphasis on calling on potential and current customers, and continued to provide the exceptional service for which we are known. These efforts have been rewarded with not only new relationships moving to Columbia Bank, but also expansion of existing relationships. We also expanded our King County team in 2004. We added nine experienced bankers who were formerly with Washington Mutual, which discontinued its business banking operation. These bankers had many other opportunities, but chose to come to Columbia Bank, and are making significant contributions to our loan portfolio. Our merchant services area is another of our success stories. The group continues to grow its fee income, which was $7.3 million for 2004, up 19% from 2003. In addition to healthy loan growth, we experienced improving trends in almost all of our nonperforming asset classes. In June of 2004, we welcomed Andy McDonald to our executive team as EVP and Chief Credit Officer. Andy has continued our efforts to improve our credit quality; in fact, we are seeing some of our strongest credit quality statistics. Our nonperforming loans to period-end loans ratio was 0.62%, nonperforming assets to period-end assets was 0.42% and our allowance for loan losses to nonperforming loans was 235% at December 31, 2004. While we have focused the last couple of years on maximizing the potential of our branch network and focusing on the strong base we have built in our current market area, we will always consider strategic new markets and branch locations. We will extend our footprint early this year by adding a branch in University Place, which is a thriving community just west of Tacoma, and will bring Columbia Bank’s total network to 35 branches in 5 counties. We continue to see progress in our objective of increased market share. In 2003, Columbia Bank was number 1 in deposits among commercial banks in Pierce County, and in 2004 we reached almost 18% share of the market. Our retail network is strong, with several branches having over $100 million in deposits, and yet there is plenty of room to grow—we believe we haven’t reached capacity in any of our markets. In summary, Columbia Bank had a good year. The seamless integration of Bank of Astoria, as well as the significant expansion in our lending staff in King County were certainly highlights of our year, and demonstrate our commitment to the strategy of quality growth. Our improved profitability reflects the success of our strategy to provide excellent service to our retail and commercial customers. Of course, this wouldn’t be possible without the efforts of our wonderful staff, who strive to exceed the expectations of our customers each and every day. As always, we will continue to emphasize our strong commitment to the hundreds of community activities we support not only financially, but also by volunteering our time. Although we will continue to grow, our strategy and heartfelt desire is to be the community bank in all the communities we serve. William T. Weyerhaeuser Melanie J. Dressel
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