8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):

April 28, 2004

COLUMBIA BANKING SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Washington	0-20288	91-1422237
(State or other jurisdiction of incorporation)	(Commission File Number)	IRS Employer Identification No.

1301 A Street

Tacoma, WA 98402

(Address of principal executive offices) (zip code)

Registrant’s telephone number, including area code: (253) 305-1900

Item 12. RESULTS OF OPERATIONS AND FINANCIAL RESULTS

On April 28, 2004, we issued a press release announcing our first quarter 2004 financial results. A copy of the press release is attached as Exhibit 99.1 and is incorporated herein by reference in its entirety.

Exhibits
99.1	Press Release dated April 28, 2004 announcing First Quarter 2004 Financial Results.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: May 4, 2004	COLUMBIA BANKING SYSTEM, INC.
	By:	/s/    Melanie J. Dressel
		Melanie J. Dressel Chief Executive Officer

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EX-99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

April 28, 2004

Contacts:                         Melanie J. Dressel, President and

Chief Executive Officer

(253) 305-1911

Gary R. Schminkey, Executive Vice President

and Chief Financial Officer

(253) 305-1966

COLUMBIA BANKING SYSTEM ANNOUNCES

INCREASED FIRST QUARTER 2004 EARNINGS

HIGHLIGHTS

•    First quarter earnings of $5.2 million, up 16% from $4.4 million for 1^st quarter 2003.

•    Highest first quarter earnings in Columbia’s history.

•    1^st quarter earnings per diluted share of $0.38, up 15% from 1^st quarter 2003.

•    ROE and ROA improve to 13.37% and 1.17%, respectively, in 1^st quarter 2004.

•    Total loans increased $53.2 million, up 5% from 4^th quarter 2003

TACOMA, Washington—Columbia Banking System, Inc. (Nasdaq: COLB) today announced earnings for the first quarter 2004 of $5.2 million, up 16% from $4.4 million for the first quarter of 2003. For the same periods, earnings per share increased to $0.38 per diluted share, an increase of 15% from $0.33 per diluted share one year ago. Return on average assets and return on average equity for the first quarter 2004 were 1.17% and 13.37%, respectively, compared to 1.07% and 13.30%, respectively, for the first quarter of the prior year. First quarter 2004 earnings were impacted favorably by a lower provision for loan losses of $300,000, compared to $1.6 million for the first quarter of 2003, a decrease of 81%.

Melanie Dressel, President and Chief Executive Officer stated, “Our trend of improving earnings is a result of lower contributions to our loan loss allowance, as well as our commitment to exceptional

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customer service, which translates into expanded relationships and increased business. We have been able to manage our net interest margin through our growth in core deposits, consistently lowering our cost of funds.”

Ms. Dressel further noted, “I am also pleased to announce a subsequent event regarding the large credit that we reported had been moved to nonaccrual status during the fourth quarter of 2003. In early April, this $6.2 million loan was brought back into accrual status, reducing nonperforming loans by 49%.”

Ms. Dressel continued, “Columbia’s total loans for the first quarter reflected a $53.2 million increase, or 5%, from the fourth quarter of 2003, an encouraging development after nearly three years of soft loan demand. Our focus has been on increasing our share of the market by building full relationships with our customers, providing competitive products, a wide variety of delivery channels and striving to deliver the best possible service. In two independent surveys measuring customer satisfaction last year, Columbia Bank’s combined average score was 4.8 out of 5.0; the average for financial institutions is 4.2. We’re pleased that our customers view their experience with us as highly positive.”

“As part of our ongoing efforts to provide exceptional service and to increase market share, we have formed a new Equipment Finance division, scheduled to begin operations on May 1,” noted Ms. Dressel. “This department will offer commercial financing of equipment to businesses in the Northwest through a broker network and equipment vendor base and, in the near future, Columbia Bank branches. We were fortunate to hire a team very experienced in this line of business. We are excited about the potential to attract new businesses to the bank as well as meeting a need for our existing customers.”

At March 31, 2004, Columbia’s total assets were $1.80 billion, an increase of 3% from $1.74 billion at December 31, 2003. Total loans were $1.13 billion at March 31, 2004, up 5% from $1.08 billion at year-end 2003. Total deposits increased $58.8 million to $1.60 billion during the first quarter of 2004, an increase of 4% from December 31, 2003. Most of the growth occurred in core deposits.

First Quarter 2004 Operating Results

Net Interest Income

Net interest income increased $853,000, or 5%, in the first quarter 2004 compared to the first quarter 2003 due to a lower cost of funds and increased core deposits. The Company’s net interest margin decreased to 4.25% in the first quarter 2004, compared with 4.37% in the first quarter 2003.

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The net interest margin was impacted by a 25 basis point decrease (a basis point equals 1/100 of 1%) in the prime rate at the end of the second quarter 2003. Ms. Dressel stated, “Our net interest margin, however, increased to 4.25% from the third and fourth quarter 2003 levels of 4.16%, a positive development in this challenging interest rate environment.”

Average interest-earning assets increased to $1.64 billion, or 8%, during the first quarter of 2004, compared with $1.52 billion at the end of the first quarter 2003. The yield on average interest-earning assets decreased 61 basis points to 5.30% at March 31, 2004, from 5.91% at March 31, 2003. Average interest-bearing liabilities increased 4% to $1.29 billion from $1.24 billion last year. The cost of average interest-bearing liabilities decreased 56 basis points to 1.32% in the first quarter of 2004, compared to 1.88% in the first quarter of 2003.

Noninterest income

Total noninterest income decreased $439,000, or 8%, from a year ago. The decrease in noninterest income during the first quarter of 2004 as compared to first quarter 2003 was due to fewer residential mortgage loan originations resulting from the expected effect of rising long-term interest rates. This lower revenue was partially offset by merchant services income as well as service charges and other fees resulting from the growth in core deposits.

Noninterest expense

Noninterest expense for the first quarter of 2004 was $14.3 million, an increase of 4.8% from $13.7 million for the same period in 2003. This increase was primarily due to increased employee taxes, health insurance, other employment benefit expenses, and volume-related merchant services processing expenses. Compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 required additional expenditures beginning during the first quarter of 2004, and these expenses are expected to continue for the remainder of the year.

The Company’s efficiency ratio was 63.36% for the first quarter 2004 compared with 61.84% for the same period in 2003. This increase was due to lower revenues from mortgage banking and increases in employment benefit expenses. Ms. Dressel noted, “We continue to challenge ourselves to operate more efficiently and achieve in the longer term an efficiency ratio below 60%, while still keeping in mind our core value of customer service.”

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Nonperforming Assets and Loan Loss Provision

The Company made a loan loss provision of $300,000 for first quarter 2004, compared with $1.6 million for first quarter 2003. For the quarters ended March 31, 2004 and 2003, net loan charge-offs amounted to $603,000 and $1.5 million, respectively. As reported for the fourth quarter 2003, a large credit was moved to nonaccrual status as a result of adverse changes in the borrower’s financial condition. Subsequent to the first quarter ended March 31, 2004, this loan was brought back into accrual status in early April 2004, reducing nonperforming loans by $6.2 million, or 49%.

The allowance for loan losses as a percentage of loans (excluding loans held for sale at each date) decreased to 1.76% at March 31, 2004 as compared to 1.88% at year-end 2003, due to a $53.2 million increase in loan balances. At quarter-end, the allowance for loan losses to nonperforming loans increased to 157% compared to 153% at December 31, 2003. Ms. Dressel said, “We are maintaining a conservative approach to credit quality and will continue to prudently add to our loan loss allowance to ensure we maintain adequate reserves as our loan totals grow.”

Columbia Banking System, Inc. is a Tacoma-based bank holding company whose wholly owned bank subsidiary is Columbia Bank, a Washington state-chartered full-service commercial bank with 34 banking offices in Pierce, King, Cowlitz, Kitsap and Thurston counties. Columbia’s stock trades on the Nasdaq Stock Market^SM under the symbol COLB. Columbia Banking System’s Annual Meeting of Shareholders will be held at 1:00 PDT on April 28, 2004 at the Best Western Hotel & Conference Center, 5700 Pacific Highway East, Fife, Washington.

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Note Regarding Forward Looking Statements

This news release includes forward looking statements, which management believes are a benefit to shareholders. These forward looking statements describe Columbia’s 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

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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.

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FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

(in thousands, except per share amounts)

	Three Months Ended March 31,
	2004			2003
Earnings
Net interest income	$	16,872		$	16,019
Provision for loan loss		300			1,600
Noninterest income		5,114			5,553
Noninterest expense		14,349			13,694
Net income		5,151			4,431
Per Share
Net income (basic)	$	0.38		$	0.33
Net income (diluted)		0.38			0.33
Averages
Total assets	$	1,776,056		$	1,673,047
Interest-earning assets		1,642,635			1,520,782
Loans		1,126,363			1,175,935
Securities		510,756			335,432
Deposits		1,559,141			1,448,203
Core deposits		1,108,794			956,909
Shareholders’ Equity		154,981			135,160
Financial Ratios
Return on average assets		1.17	%		1.07	%
Return on average equity		13.37			13.30
Net interest margin		4.25			4.37
Efficiency ratio (tax equivalent) (1)		63.36			61.84
Average equity to average assets		8.73			8.08

	March 31,						December 31
	2004			2003			2003
Period end
Total assets	$	1,801,353		$	1,758,587		$	1,744,347
Loans		1,131,531			1,146,527			1,078,302
Allowance for loan losses		19,958			19,272			20,261
Securities		508,046			426,088			523,864
Deposits		1,603,378			1,489,039			1,544,626
Core deposits		1,147,246			1,006,121			1,098,237
Shareholders’ equity		163,016			137,594			150,372
Book value per share		12.02			10.32			11.19
Nonperforming assets
Nonaccrual loans	$	12,715		$	10,532		$	13,255
Restructured loans					130
Personal property owned		635			836			691
Real estate owned		1,056			2,500			1,452
Total nonperforming assets	$	14,406		$	13,998		$	15,398
Nonperforming loans to period-end loans		1.12	%		0.93	%		1.23	%
Nonperforming assets to period-end assets		0.80	%		0.80	%		0.88	%
Allowance for loan losses to period-end loans		1.76	%		1.68	%		1.88	%
Allowance for loan losses to nonperforming loans		156.96	%		180.75	%		152.86	%
Allowance for loan losses to nonperforming assets		138.54	%		137.68	%		131.58	%
Net loan charge-offs	$	603	(2)	$	1,499	(3)	$	1,760	(4)

⁽¹⁾ Noninterest expense divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding nonrecurring income and expense, such as gains/losses on investment securities and net cost (gain) of OREO.

⁽²⁾ For the three months ended March 31, 2004.

⁽³⁾ For the three months ended March 31, 2003.

⁽⁴⁾ For the twelve months ended December 31, 2003.

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QUARTERLY FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

(in thousands, except per share amounts)

	Three Months Ended
	Mar 31 2004			Dec 31 2003			Sept 30 2003			Jun 30 2003			Mar 31 2003
Earnings
Net interest income	$	16,872		$	16,245		$	15,489		$	16,114		$	16,019
Provision for loan loss		300						250			1,000			1,600
Noninterest income		5,114			5,464			6,032			5,735			5,553
Noninterest expense		14,349			13,931			14,291			14,044			13,694
Net income		5,151			5,431			4,895			4,765			4,431
Per Share
Net income [basic]		0.38			0.41			0.37			0.36			0.33
Net income [diluted]		0.38			0.40			0.36			0.35			0.33
Averages
Total assets	$	1,776,056		$	1,724,573		$	1,676,192		$	1,709,468		$	1,673,047
Interest-earning assets		1,642,635			1,588,762			1,514,584			1,554,936			1,520,782
Loans		1,126,363			1,081,513			1,115,637			1,143,862			1,175,935
Securities		510,756			497,380			367,246			404,914			335,432
Deposits		1,559,141			1,532,063			1,496,116			1,455,247			1,448,203
Core deposits		1,108,794			1,082,843			1,044,124			982,948			956,909
Shareholders’ Equity		154,981			145,593			143,208			140,417			135,160
Financial Ratios
Return on average assets		1.17	%		1.25	%		1.16	%		1.12	%		1.07	%
Return on average equity		13.37			14.80			13.56			13.61			13.30
Net interest margin		4.25			4.16			4.16			4.26			4.37
Efficiency ratio (tax equivalent)		63.36			62.84			64.36			62.43			61.84
Average equity to average assets		8.73			8.44			8.54			8.21			8.08
Period end
Total assets	$	1,801,353		$	1,744,347		$	1,698,956		$	1,724,798		$	1,758,587
Loans		1,131,531			1,078,302			1,071,201			1,098,675			1,146,527
Allowance for loan losses		19,958			20,261			20,331			19,994			19,272
Securities		508,046			523,864			433,460			385,971			426,088
Deposits		1,603,378			1,544,626			1,518,844			1,542,387			1,489,039
Core deposits		1,147,246			1,098,237			1,070,216			1,079,879			1,006,121
Shareholders’ equity		163,016			150,372			144,528			144,871			137,594
Book value per share		12.02			11.19			10.79			10.82			10.32
Nonperforming assets
Nonaccrual loans	$	12,715		$	13,255		$	6,806		$	6,165		$	10,532
Restructured loans											50			130
Personal property owned		635			691			700			769			836
Real estate owned		1,056			1,452			1,503			2,547			2,500
Total nonperforming assets	$	14,406		$	15,398		$	9,009		$	9,531		$	13,998
Nonperforming loans to period-end loans		1.12	%		1.23	%		0.64	%		0.57	%		0.93	%
Nonperforming assets to period-end assets		0.80	%		0.88	%		0.53	%		0.55	%		0.80	%
Allowance for loan losses to period-end loans		1.76	%		1.88	%		1.90	%		1.82	%		1.68	%
Allowance for loan losses to nonperforming loans		156.96	%		152.86	%		298.72	%		321.71	%		180.75	%
Allowance for loan losses to nonperforming assets		138.54	%		131.58	%		225.67	%		209.78	%		137.68	%
Net loan (recoveries) charge-offs	$	603		$	70		$	(87	)	$	278		$	1,499

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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Columbia Banking System, Inc.

	Three Months Ended March 31,
(Unaudited) (in thousands except per share)	2004			2003
Interest Income
Loans	$	16,049		$	18,612
Securities available for sale		5,039			3,097
Securities held to maturity		28			44
Deposits with banks		13			27
Total interest income		21,129			21,780
Interest Expense
Deposits		3,915			5,206
Federal Home Loan Bank advances		80			277
Long-term obligations		262			278
Total interest expense		4,257			5,761
Net Interest Income		16,872			16,019
Provision for loan losses		300			1,600
Net interest income after provision for loan losses		16,572			14,419
Noninterest Income
Service charges and other fees		2,527			2,395
Mortgage banking		503			1,081
Merchant services fees		1,562			1,291
Loss on sale of investment securities, net		(6	)
Bank owned life insurance (BOLI)		250			398
Other		278			388
Total noninterest income		5,114			5,553
Noninterest Expense
Compensation and employee benefits		7,786			7,172
Occupancy		2,086			2,187
Merchant processing		652			496
Advertising and promotion		271			507
Data processing		515			449
Legal & professional services		628			514
Taxes, licenses & fees		384			450
Net cost (gain) of other real estate owned		12			(5	)
Other		2,015			1,924
Total noninterest expense		14,349			13,694
Income before income taxes		7,337			6,278
Provision for income taxes		2,186			1,847
Net Income	$	5,151		$	4,431
Net income per common share:
Basic	$	0.38		$	0.33
Diluted		0.38			0.33
Dividends paid per common share	$	0.05
Average number of common shares outstanding		13,473			13,304
Average number of diluted common shares outstanding		13,706			13,415

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CONSOLIDATED CONDENSED BALANCE SHEETS Columbia Banking System, Inc. (Unaudited) (in thousands)			March 31, 2004		December 31, 2003
Assets
Cash and due from banks			$	46,889	$	49,685
Interest-earning deposits with banks				21,189		949
Total cash and cash equivalents				68,078		50,634
Securities available for sale at fair value (amortized cost of $484,681 and $509,989 respectively)				493,516		509,200
Securities held to maturity (fair value of $4,510 and $4,708 respectively)				4,353		4,548
Federal Home Loan Bank stock				10,177		10,116
Loans held for sale				15,738		10,640
Loans, net of unearned income of ($2,461) and ($2,437) respectively				1,131,531		1,078,302
Less: allowance for loan losses				19,958		20,261
Loans, net				1,111,573		1,058,041
Interest receivable				7,378		6,640
Premises and equipment, net				50,007		50,692
Real estate owned				1,056		1,452
Other				39,477		42,384
Total Assets			$	1,801,353	$	1,744,347
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing			$	326,818	$	317,721
Interest-bearing				1,276,560		1,226,905
Total deposits				1,603,378		1,544,626
Federal Home Loan Bank advances						16,500
Other borrowings				1,000
Long-term subordinated debt				22,196		22,180
Other liabilities				11,763		10,669
Total liabilities				1,638,337		1,593,975
Shareholders’ equity:
Preferred stock (no par value)
Authorized, 2 million shares; none outstanding
Common stock (no par value)	March 31, 2004	December 31, 2003
Authorized shares	60,032	60,032
Issued and outstanding	13,557	13,433		114,584		112,675
Retained earnings				42,689		38,210
Accumulated other comprehensive income —
Unrealized gains (losses) on securities available for sale, net of tax				5,743		(513	)
Total shareholders’ equity				163,016		150,372
Total Liabilities and Shareholders’ Equity			$	1,801,353	$	1,744,347

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