According to U.S. Census Bureau data, Washington State has a population of 6.4 million. The state population has grown 8.5% since the year 2000. As of May 2007, the Washington State Employment Security Department reported that the unemployment rate in the State of Washington was at one of the lowest historical rates, 4.6%, with approximately 59,000 jobs being added over the past year and the unemployment rate in the market areas was 4.0%.

Forbes recently listed the Olympia area in Thurston County as the tenth best place in the nation for business and careers. Thurston County has experienced a 19.4% gain in Industry Employment Growth from 2001 to mid-2006, according to United State Bureau of Labor statistics. As the state capitol, government has given the community a stable economy. In recent years, private industry and other enterprises have begun to thrive as a result.

Pierce County is the fastest growing county in Washington State, and currently is the second largest county in the state, having population growth of 10.4% since 2000 according to the State of Washington Office of Financial Management. Home to Tacoma (the state’s third largest city) and the booming Port of Tacoma (the nation’s seventh largest container port), Pierce County is located between Seattle and Olympia.

Lewis County has a population of 73,000 as of 2006. Lewis County experienced a moderate level of economic growth in 2006, with the residential real estate market benefiting by the county’s proximity to Thurston and Pierce counties to the north, and Clark County, along with Portland, Oregon, to the south.

The Company also provides a broad range of banking services and products to individuals, including personal checking and savings accounts and other consumer banking products, including electronic banking.

The Company offers a full range of deposit, lending, and other banking services throughout its market area.

Real estate lending has been the primary focus of the Company’s lending activities. At March 31, 2007, the Company’s portfolio was centered in real estate loans with construction loans at 43.2% of the portfolio, commercial real estate at 37.7% and residential real estate loans at 5.5%.

As a community bank, the Company’s historical focus has been on real estate lending, but the Company also offers a full range of short- to long-term C&I and consumer lending products and services. The Company originates a variety of types of loans, including construction, commercial real estate, residential real estate, C & I, and to a lesser extent consumer loans.

The Company is focused on commercial and residential real estate lending throughout a project’s life cycle, from acquisition and development loans to acquire property, to permanent, long-term mortgage financing. The Company’s underwriting requires the full and unconditional personal guaranties of the principals for all real estate loans.

The C&I segment of the Company’s portfolio had a balance of $84.7 million as of March 31, 2007, and includes loans to qualified businesses in its market area. The Company’s commercial lending portfolio consists primarily of commercial and industrial loans for the financing of accounts receivable, inventory, property, plant and equipment.

In addition to its primary segments, the Company has a staff of mortgage loan originators that originate loans for sale into the secondary markets.

Interest expense increased by $3.8 million to $8.9 million in the three months ended March 31, 2007 from $5.1 million in the three months ended March 31, 2006.

Net income increased by $880,000 to $3.2 million in the three months ended March 31, 2007 from $2.3 million in the three months ended March 31, 2006.