annual report . 2007 annual report . 2007 rooted in the pacific northwest As you travel throughout the Pacific Northwest, you’ll encounter a familiar sight in small towns and big cities alike: the blue and white logo of a West Coast Bank branch. From Olympia to Salem, Newport to Bend, our 63 branch banks reflect the uniqueness of each community and are staffed by people committed to turning financial aspirations into reality. As other banks consolidate branches and steer their customers toward automated services, West Coast continues to expand its network of branches and actually looks forward to serving its customers face to face. There’s a paradox at West Coast. While its $2.6 billion in assets and full-service trust department and investment center allow it to offer the sophisticated products of a large national bank, it retains the personal service, market knowledge and local decision-making of a community bank. West Coast Bank customers have the best of both worlds. They can take advantage of the latest technology that allows them to save time, without giving up personal service. Even in the age of remote deposits and 24/7 online banking, West Coast customers can walk into a local branch and be greeted by name. West Coast Bank has its roots in the Pacific Northwest and those roots keep it grounded in what is really important: making sure customers are completely satisfied. So the next time you’re in Hoodsport, McMinnville or Mt. Angel, stop in. We’re here to serve you. Inner East Portland Branch Portland, Oregon annual report . 2007 letter to shareholders or with the financial strength of West Coast Bancorp. The Company’s balance sheet is strong and the Bank remains well capitalized under regulatory guidelines. While 2007 was a disappointing year for us, our manage- ment team is focused on what we need to do to maintain our success in the marketplace in 2008. The Company’s strategy has not changed. We will continue to invest in new products, branches and people. We also will continue to grow our commercial and industrial loan portfolio as we have done over the past five years. And The year 2007 was a challenging one for West Coast Bank. our commitment to our customers and communities through volunteerism and donations remains unchanged. For several years we achieved our financial goals of a 15% return on equity and an annual earnings growth rate of We continue to experience strong growth in our checking greater than 10% per diluted share. We are disappointed account offerings to consumers and small businesses. that losses experienced in our residential construction loan Since our introduction of High Performance Checking in portfolio prevented us from achieving these goals in 2007. 2004, more than 56,000 net new accounts have been This loan portfolio was comprised of loans to individual added. These new checking accounts provide continuing borrowers for the construction of permanent residences, revenue streams to the Company. vacation homes or investment/rental properties to indi- Commercial business expansion also continues, not only vidual borrowers, many of whom have been negatively through growth of the loan portfolio, but also through impacted by secondary effects of the sub-prime crisis. the cross-sale of many related offerings and treasury For the full year 2007, our reported net income was $16.8 management products such as iDeposit, payroll cards, million or $1.05 per diluted share, as compared to $29.3 lock boxes, etc. The combination of strong relationship million or $1.86 per diluted share for the full year 2006. managers, an excellent treasury management sales force and competitive products has contributed to the growth The sub-prime mortgage crisis began in the summer of in this customer segment. 2007 and continues today. The crisis has significantly reduced credit availability to home borrowers as compared In 2007, we opened five new branches: Tukwila, Wash- to last year. The unavailability of credit has decreased the ington; Portland Inner East, Bend East, Eugene West and demand for housing, which has contributed to a decline in Oregon City, Oregon. We will open Happy Valley, Oregon, new home sales and appraised home values. early in 2008. As a result, some of our single-family residential construc- Our team members remain our most important asset and tion borrowers have been unable to obtain permanent we are pleased to report that, for the fifth consecutive year, financing and/or the current value of their constructed West Coast Bank has been recognized as one of Oregon’s residential property is now less than their loan balance, 100 Best Companies to Work For. Our people believe in which has resulted in losses to the Bank. their value to the Bank and represent the Company well in their communities. The Bank expects the provision for credit losses it took in the fourth quarter of 2007, and the resulting year-end As always, we are most grateful for your support as Centralia Branch allowance for credit losses, to be adequate to cover customers and shareholders. Centralia, Washington anticipated losses, based on information currently avail- able to us. Yours very truly, We do not believe the loss provision associated with the residential construction portfolio is indicative of any broader concerns with the remainder of our loan portfolio Robert D. Sznewajs Lloyd D. Ankeny President and CEO Chairman of the Board annual report . 2007 fully diluted earnings per share return on average equity, tangible $2.00 18% 16% 1.75 14% 1.50 12% 1.25 10% 1.00 8% 6% 0.75 financial highlights 4% 0.50 2% 2000 – 2007 0.25 0% 2000 2001 2002 2003 2004 2005 2006 2007 2000 2001 2002 2003 2004 2005 2006 2007 fully diluted earningsnet perinterest share margin return on average equity, efficiencytangible ratio $2.00 5.1% 18% 64% 16% 1.75 4.9% 63% 14% 1.50 4.7% 62% 12% 4.5% 61% 1.25 10% 4.3% 60% 1.00 8% 4.1% 6% 59% 0.75 3.9% 4% 58% 0.50 3.7% 2% 57% 0.25 3.5% 0% 56% 2000 20012000 20022001 20032002 20042003 20052004 20062005 20072006 2007 2000 20012000 20022001 20032002 20042003 20052004 20062005 20072006 2007 net charge-offsnet interest to averagemargin loans non-performing assetsefficiency to ending ratio assets 5.1% 0.40% 64% 1.25% 4.9% 0.35% 63% 1.00% 4.7% 0.30% 62% 4.5% 61% 0.25% 0.75% 4.3% 0.20% 60% 4.1% 0.15% 59% 0.50% 3.9% 0.10% 58% 0.25% 3.7% 0.05% 57% 3.5% 0.00% 56% 0.00% 2000 20012000 20022001 20032002 20042003 20052004 20062005 20072006 2007 2000 20012000 20022001 20032002 20042003 20052004 20062005 20072006 2007 net charge-offs to average loans non-performing assets to ending assets 0.40% 1.25% 0.35% WCB (1) WCB data net of non-recurring and non-core items Peer Average (2) Peers defined as 163 publicly traded banks in1.00% the U.S. with total assets between $1bln and $5bln. 0.30% Peer data as of 9/30/07. Data is from SNL DataSource. 0.25% 0.75% 0.20% 0.15% 0.50% 0.10% 0.25% Downtown Portland Branch 0.05% Portland, Oregon 0.00% 0.00% 2000 2001 2002 2003 2004 2005 2006 2007 2000 2001 2002 2003 2004 2005 2006 2007 WCB (1) WCB data net of non-recurring and non-core items Peer Average (2) Peers defined as 163 publicly traded banks in the U.S. with total assets between $1bln and $5bln. Peer data as of 9/30/07. Data is from SNL DataSource. GOVERNMENT GUARANTEED LENDING GROUP annual report . 2007 glass alchemy portland, oregon “I wanted the dynamics of creative thinking, and that’s what I’ve found at West Coast Bank.” Susan Webb, Owner – Glass Alchemy Susan Webb isn’t the typical president of a manufacturing The loan officer specifically recommended Jerry Burns, manager Webb sees Burns not as a banker, but as a trusted financial company. Most of her career was spent as an artist and of West Coast’s Government Guaranteed Lending Group. advisor. Glass Alchemy currently is searching for a new, sculptor, until seven years ago, when she and her husband larger facility it can purchase and Burns has suggested Henry Grimmett started their own business. Both had worked “Our loan officer knew we would be most comfortable with a options that make the most financial sense. While banks she with glass as an art medium and they saw a need to expand the community bank where we could get the extra attention we previously worked with tried to create personal connections range of colors available in borosilicate glass, which is more need,” said Webb. “I’m quite comfortable in business but I don’t by inviting her on golf outings, West Coast Bank won her trust durable and heat resistant than the “soft” glass blown by artists. know all the terminology, so I wanted a bank that wouldn’t look by providing in-depth analysis of her business. As chief technologist for the new company, Glass Alchemy, down on me for asking questions.” Grimmett created formulas that expanded the borosilicate color Her experience with West Coast reminds Webb of some useful Since moving to West Coast Bank in late 2006, Webb palette from about a dozen colors to more than 200. Today, business advice she received long ago. says the service she’s received from the Government Webb and her 12 employees manufacture the raw materials Guaranteed Lending Group and her local branch bank has “My grandmother always said ‘Know your banker.’ She never used by artists to make beads and jewelry and which are also been phenomenal.