When I joined the bank 16 years ago, we were a six-branch operation with $70 million in assets. Today, we are approaching the $1 billion milestone and have grown to serve Northwestern Washington with 19 branches. It has been a very rewarding career.

While many banks in the region and in the nation have been reporting lower profits or even losses, we remain a solidly profitable independent banking company. Second quarter 2008 highlights include: steady earnings at $2.4 million, or $0.25 per diluted share; total loans increased 8% over the prior year to $813 million; return on average assets was 1.09% and return on equity was 12.74%; book value per share grew 11% to $8.17; and Total Risk-Based Capital to Risk-Weighted Assets was 12.79%, well above the regulatory well-capitalized minimum.

When we first announced the proposed merger with Frontier Financial Corporation, nearly a year ago, we were in a very different market. Although the shareholders approved the merger earlier this year, we chose to terminate it at the end of May. Frontier's inability to obtain the required regulatory approval was a primary factor in the board's decision. During this long process, the bank was fortunate to maintain the strong loyalty of many employees and customers. We believe we have a good foundation to begin to re-establish our company's strong position.