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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549


FORM 10-K

|    |  |                                                                                     
|--- |  | ------------------------------------------------------------------------------------
|[X] |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|    |  | For the fiscal year ended:    December 31, 2002                                     

or

|      |  |                                                                                   
|----- |  | ----------------------------------------------------------------------------------
|[   ] |  | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|      |  | For the transition period from      to                                            

Commission file number: 0-27938

COLUMBIA BANCORP

(Exact name of registrant as specified in its charter)


|                         |  |                    
|------------------------ |  | -------------------
|                         |  | 93-1193156         
|Oregon                   |  | (I.R.S. Employer   
|(State of incorporation) |  | Identification No.)

401 East Third Street, Suite 200
The Dalles, Oregon 97058
(Address of principal executive offices)

Registrants telephone number: (541) 298-6649

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common stock, no par value

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.   Yes  [X]   No  [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).   Yes  [X]   No  [ ]

The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of February 18, 2003 was $118,351,530.

The number of shares outstanding of each of the issuers classes of common
equity as of the latest practicable date: 7,890,102 shares of no par value
common stock on February 18, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants proxy statement dated March 10, 2003 for the
2003 Annual Meeting of Stockholders (Proxy Statement) are incorporated by
reference in Part III hereof.





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|                                                |                                                                                               |  |  |  |  |  |  | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
|Part I                                         
|                                                | ITEM 1. DESCRIPTION OF BUSINESS                                                              
|                                                | ITEM 2. PROPERTIES                                                                           
|                                                | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                                | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|Part II                                        
|                                                | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|                                                | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                                | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                | ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                | ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           
|                                                | ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  
|PART III                                       
|                                                | ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                   
|                                                | ITEM 11 EXECUTIVE COMPENSATION AND REPORT OF COMPENSATION COMMITTEE                          
|                                                | ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                       
|                                                | ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                       
|                                                | ITEM 14 CONTROLS AND PROCEDURES                                                              
|Part IV                                        
|                                                | ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                     
|SIGNATURES                                     
|Exhibit 10.1(a)                                
|Exhibit 10.3(a)                                
|Exhibit 10.4(a)                                
|Exhibit 10.11                                  
|Exhibit 10.12                                  
|Exhibit 10.13                                  
|Exhibit 10.14                                  
|Exhibit 10.15                                  
|Exhibit 10.16                                  
|Exhibit 10.17                                  
|Exhibit 10.18                                  
|Exhibit 10.19                                  
|Exhibit 10.20                                  
|Exhibit 10.21                                  
|Exhibit 10.22                                  
|Exhibit 13.1                                   
|Exhibit 21.1                                   
|Exhibit 99.1                                   
|Exhibit 99.2                                   



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COLUMBIA BANCORP
FORM 10-K
TABLE OF CONTENTS

|                                                |  |                                                                                                                                                                            |   |      |       | 
|----------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ---- | ----- | 
|                                                |  |                                                                                                                                                                            |   | PAGE
|                                                |  |                                                                                                                                                                            |   |     
|Disclosure Regarding Forward Looking Statements |  |                                                                                                                                                                            | 3 |     
|PART I                                          |  |                                                                                                                                                                            |   |      |       | 
|Item 1.                                         |  | Description of Business                                                                                                                                                    |   |      | 3-10  | 
|Item 2.                                         |  | Properties                                                                                                                                                                 |   |      | 10-11 | 
|Item 3.                                         |  | Legal Proceedings                                                                                                                                                          |   |      | 11    | 
|Item 4.                                         |  | Submission of Matters to a Vote of Security Holders                                                                                                                        |   |      | 11    | 
|PART II                                         |  |                                                                                                                                                                            |   |      |       | 
|Item 5.                                         |  | Market for Registrants Common Equity and Related Stockholder Matters                                                                                                      |   |      | 12    | 
|Item 6.                                         |  | Selected Financial Data                                                                                                                                                    |   |      | 12    | 
|Item 7.                                         |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                      |   |      | 13-31 | 
|Item 7A.                                        |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                                                 |   |      | 32    | 
|Item 8.                                         |  | Financial Statements and Supplementary Data                                                                                                                                |   |      | 33-57 | 
|Item 9.                                         |  | Changes In and Disagreements with Accountants on Accounting and Financial Disclosure                                                                                       |   |      | 58    | 
|PART III                                        |  |                                                                                                                                                                            |   |      |       | 
|                                                |  | (Items 10 through 13 are incorporated by reference from Columbia Bancorps
definitive proxy statement for the Annual Meeting of Stockholders to be held on
April 24, 2003) |   |      |       | 
|Item 10.                                        |  | Directors and Executive Officers of the Registrant                                                                                                                         |   |      | 58    | 
|Item 11.                                        |  | Executive Compensation and Report of Compensation Committee                                                                                                                |   |      | 58    | 
|Item 12.                                        |  | Security Ownership of Certain Beneficial Owners and Management                                                                                                             |   |      | 58    | 
|Item 13.                                        |  | Certain Relationships and Related Transactions                                                                                                                             |   |      | 58    | 
|Item 14.                                        |  | Controls and Procedures                                                                                                                                                    |   |      | 58    | 
|PART IV                                         |  |                                                                                                                                                                            |   |      |       | 
|Item 15.                                        |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                                                                                           |   |      | 59-62 | 
|SIGNATURES                                      |  |                                                                                                                                                                            |   |      | 63    | 





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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

This report, particularly including the section entitled Managements
Discussion and Analysis of Financial Condition and Results of Operations,
contains a number of forward-looking statements about our anticipated business,
operations, financial performance and cash flows. Statements in this report
that relate to future plans, events and circumstances are provided to describe
managements intentions and expectations based on currently available
information, and readers should not construe these statements as assurances or
guarantees. As with any predictions, these statements are inherently difficult
to make with any degree of assurance, and actual results may differ materially
and adversely from managements expectations described herein. Likewise,
managements plans described in this report may not come to pass because
unforeseen events may force management to deviate from its expressed
intentions. Forward-looking statements often can be identified by the use of
predictive or prospective terms such as expect, anticipate, believe,
plan, intend, and words of similar construction or meaning. Some of the
events or circumstances that may cause our actual results to deviate from
managements expectations include the impact of competition and local and
regional economic factors upon our customer base, our deposits and our loan
portfolio; economic and regulatory limits on our ability to grow our assets and
manage our business; interest rate fluctuations that may adversely impact our
revenues and expenses; and, the impact of impairment charges upon our
intangible and other assets. Other factors that may adversely impact our
performance are discussed in the section entitled Managements Discussion and
Analysis of financial condition and Results of Operations  Factors that May
Affect Future Results of Operations as well as other disclosures we make from
time to time in our other filings with the Securities and Exchange Commission.
Readers also should note that forward-looking statements expressed in this
report are made as of the date this report is filed and management cannot
undertake to update those statements to reflect future events or circumstances.




Part I




ITEM 1. DESCRIPTION OF BUSINESS

General

Columbia Bancorp (Columbia) is a financial holding company organized
under Oregon Law in 1996. Columbia is headquartered in The Dalles, Oregon,
with two subsidiaries, Columbia River Bank (CRB) and Columbia Bancorp Trust
I. CRB is a 17 branch, state-chartered institution authorized to provide
banking services in the states of Oregon and Washington. Columbia offers a
broad range of financial services to its customers, primarily small and medium
sized businesses, farmers, and individuals. Columbias 12 full-service branch
facilities and three limited-service branch facilities in Oregon serve the
northern and eastern Oregon communities of The Dalles, Hood River, Pendleton
and Hermiston, the central Oregon communities of Madras, Redmond, and Bend, and
the communities of McMinnville, Canby and Newberg in the Willamette Valley.
Columbias two south central Washington full-service branches serve the
communities of Goldendale and White Salmon.

As of December 31, 2002, Columbia had total assets of $544.33 million,
total deposits of $455.84 million, and stockholders equity of $50.19 million.
Columbias net income for the year ended December 31, 2002, was $9.38 million,
which was Columbias 15th consecutive year of increasingly higher net income.

From its origins as a one-branch bank in The Dalles, Oregon, Columbia has
grown as a result of merger and acquisition activity, new branch openings, the
introduction of new business lines and the expansion and cross-marketing of its
existing products and community-bank lending expertise.

In 1995, CRB merged with Juniper Banking Company. In 1996, Columbia was
formed as CRBs holding company and Columbia acquired Washington-based
Klickitat Valley Bank.

In 1997, Columbia created a division of CRB to originate conventional
residential mortgage loans for the primary purpose of selling to the secondary
market. The division, known as Columbia River Bank Mortgage Group (CRB
Mortgage Group), has grown its business substantially since its inception.
The CRB Mortgage Group





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operates its primary administrative operations from
facilities in Bend, Oregon, but also offers its products at all of Columbias
Oregon and Washington branches. It also offers wholesale mortgage loan
services directly to other retail Mortgage companies. Further growth in 1997
came from CRBs opening of a branch in Bend, Oregon.

In 1998, CRB opened a new branch in Hermiston, Oregon and Columbia
completed the acquisition of Valley Community Bancorp. During 1999, CRB opened
new branches in Pendleton and Newberg, Oregon, and a second Bend, Oregon
branch. In April 2000, Columbia River BankNet, CRBs Internet-based banking
product, was introduced.

In 2001, CRB opened a new branch in Canby, Oregon and a limited-service
banking facility in a McMinnville, Oregon retirement community as well as a
mortgage lending office in Newport, Oregon. In 2002, CRB opened a
limited-service banking facility in a Bend, Oregon retirement community.
Collectively, these growth activities have enabled Columbia to diversify its
loan portfolio and operating risks over several market areas and local
economies although our markets are located primarily in South Central
Washington and Central Oregon.

On December 19, 2002, Columbia formed Columbia Bancorp Trust I (Trust),
a wholly-owned Delaware statutory business trust, for purposes of issuing Trust
Preferred Securities. The Trust issued $4.0 million of beneficial interest in
junior subordinated debentures at a floating rate indexed to the 90 day LIBOR
with a margin of 3.30%. These securities are considered to be Tier I for
regulatory capital purposes.

The markets in which Columbia operates are economically diverse and
therefore pose both opportunities and challenges to a community bank operating
in varied economies. Columbias approach to meeting the challenge is to staff
its branches and business groups with managers who are established in their
communities and have developed a loyal customer following. Columbias senior
management, in conjunction with branch managers, review the operations of each
branch to determine which products and services are best suited to that
geographic region. The diverse economies also provide opportunities to limit
Columbias exposure to adverse market conditions in any one economic sector.

Business Strategy

Columbias strategy is to continue building on its position as a leading
community-based provider of financial services in Oregon and Washington. The
key to the success of this strategy, in Columbias view, is to continue to
provide exceptional personal service to the communities it now serves, and to
successfully expand into new communities by identifying and meeting their
unique financial services needs. Columbias target branch locations are in
non-metropolitan regions, where it aims to deliver prompt and friendly personal
financial services. The components of Columbias business strategy are outlined
below.

Successfully operate in non-metropolitan regions.Columbia believes that
the key to profitability is to maintain and open branches in non-metropolitan
communities and to: (i) provide a high level of service to the customer; (ii)
staff branches with employees who have established ties to the community; (iii)
attract and retain a highly skilled management team; and, (iv) allow branch
personnel the flexibility to emphasize products and services which best fit
their local economy. In addition, by decentralizing a portion of the
management function to the branch level, Columbia believes it can make business
decisions regarding customers more quickly and with added value than its major
banking competitors. Columbia believes it is able to profitably attract and
retain customers by providing and delivering products and services tailored to
their individual needs, and by delivering them with a high degree of personal
attention.

Maintain high asset quality.Columbia seeks to maintain high asset quality
through a program that includes prompt and strict adherence to established
credit policies combined with training and supervision of lending officers.
Additionally, Columbia uses incentives to maintain high asset quality,
including tying a portion of its loan officers compensation to the quality of
the loans they originate. Columbia also believes that its commitment to hire
branch managers with long-term ties to their communities is of significant
assistance in determining the quality of loan transactions it receives. The
variety of economies in which Columbias branches are located increases the
diversification and, in Columbias opinion, the strength of the overall loan
portfolio.





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Products and Services

Consumer Distribution Channels

Columbia offers a broad range of deposit and loan products and services
tailored to meet the banking requirements of consumers in Columbias market
areas. These include:

Retail Bank Products and Services.Columbias consumer deposit products
include numerous noninterest-bearing and interest-bearing checking accounts,
savings accounts, money market accounts, and certificates of deposit. The
interest-bearing accounts generally are priced at rates established by
management based on competitive market factors, managements desire to increase
certain types or maturities of deposit liabilities and liquidity requirements.
Columbia strives to establish customer relations to attract core deposits in
noninterest-bearing transactional accounts, which reduces its cost of funds.
Columbia provides loans to individual borrowers for a variety of purposes,
including secured and unsecured personal loans, home equity and personal lines
of credit, and motor vehicle loans.

CRB Mortgage Group Products and Services.Columbia offers a complete
range of mortgage banking services including loans for single-family owner
occupied homes, construction to permanent financing packages and mortgages for
vacation and rental homes. Customers can choose between fixed, variable and
balloon rate options. Construction loans are available through the
conventional two-step process or through a construction to permanent basis.
Junior lien financing is also offered as a single product or in combination
with a first mortgage. An added benefit offered through CRB Mortgage Group is
the ability for customers to access rates and terms not normally available from
other financial institutions, through alternative secondary market outlets.

CRB Financial Services Products and Services.Through arrangements with
Primevest Financial Services, Inc., (Primevest) a registered securities
broker-dealer, Columbia offers a wide range of non-Federal Deposit Insurance
Company (FDIC) insured financial products and services to consumers. These
include stocks, mutual funds, traditional and Roth IRAs, SEPs, tax-sheltered
annuities, life insurance, and other financial products. Representatives also
offer retirement planning services. Columbia receives a portion of the
commissions generated from financial product sales.

Technology-Based Products and Services. Columbia uses both traditional
and new technology to support its focus on personal service. These include a
VISA credit and check card (debit card) program; ATMs at each of Columbias
full-service branches, including 15 on-site ATMs and five off-site ATMs; and, a
telephone banking service that allows customers to speak directly with a
customer service representative during normal banking hours or 24-hour
telephone access to their accounts. In addition, Columbia, through its web
site, offers BankNet, the Internet banking service, which allows access to
account information as well as the ability to view checks and use other
services in an on-line environment.

Commercial Distribution Channels

Columbia has an experienced lending staff, who have special expertise in
small business, agricultural and real estate lending. Columbias loan officers
emphasize continuing contact with business customers after loans are made.
Columbia believes that its business customers appreciate the ongoing
relationship they develop with their local lending officer. Such
relationship-based banking is an important aspect of Columbias continuous
effort to maintain high asset quality.

Commercial Loans. Columbia offers to its commercial customers customized
loans including equipment and inventory financing, operational lines of credit,
SBA loans for qualified businesses, and accounts receivable financing. A
significant portion of Columbias loan portfolio consists of commercial loans.
For regulatory reporting purposes, a portion of Columbias commercial loans are
designated as real estate loans because they are secured by real property,
although these loans may finance accounts receivable, equipment and inventory
purchases, or other commercial activities. Lending decisions are based on
careful evaluation of the financial strength, management, and credit history of
the borrower and the quality of the collateral securing the loan. Commercial
loans secured by real





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property are generally limited to 75% of the value of the
collateral. Columbia typically requires personal guarantees and relies on the
identification of secondary sources of repayment.

Agricultural Loans. Columbia provides loans including production lines of
credit, equipment financing, and term loans for capital improvements and other
business purposes to agricultural businesses. Agricultural loans are generally
secured by crops, equipment, and inventory, as well as real estate.
Agricultural lending can require significant follow-up time, as farmers request
budgeting assistance and other financial advice. Columbia employs two
agricultural loan consultants with decades of farm lending experience, to
assist its loan officers in loan processing and administration. Columbias
loan officers, many of whom are graduates of the Western Agricultural School in
Pullman, Washington, make frequent visits to farming operation sites, regularly
attend agricultural lending programs and seminars, and actively participate in
growers associations and other agricultural-based organizations.

Real Estate Loans. Real estate loans are available for the construction,
purchase, or refinance of commercial and rental properties. Columbia also
provides financing to high quality land developers, and speculative and
pre-sold financing to contractors. Borrowers can choose from a variety of
fixed and adjustable rate options and terms.

Columbias real estate loans are in large part loans to commercial
customers, farmers and ranchers and are secured by the properties used in their
businesses. The majority of these loans have a variable rate feature with
adjustment periods varying from one to five years. Insofar as payments on real
estate loans depend on the successful operation and management of the
businesses and properties securing the loans, repayment can be affected by
local real estate market and economic conditions. Fluctuating land values and
local economic conditions can make loans secured by real property difficult to
evaluate and monitor.

Government-Assisted Loan Programs.Columbias loan officers make loans to
small businesses and to farmers that are supported by guarantees issued by
various state and federal government agencies. Columbia is active in the SBA
7-A and 504 programs, and in similar programs offered by the Farm Services
Agency (formerly the Farmers Home Administration) and by Oregon Economic and
Community Development Department. The government guarantees a portion of these
loans, which reduces risk in Columbias loan portfolio.

Services to Non-Profits and Public Entities.Columbia offers a general
array of loan products to borrowers in the non-profit and public entity sector,
including city and county governments, together with special programs, such as
jumbo CDs and low-cost loan programs. Columbia also offers consumer services
to nonprofit and public sector employees, such as Columbia VISA card enrollment
and direct deposit services.

For all of its loans, Columbia at all times seeks to maintain sound loan
underwriting standards with written loan policies, appropriate individual and
branch limits, and loan administration committee reviews. In the case of
particularly large loan commitments or loan participations, loans are reviewed
by a loan committee of CRBs Board of Directors. Underwriting standards are
designed to achieve a high-quality loan portfolio, compliance with lending
regulations and the desired mix of loan maturities and industry concentrations.
Management seeks to minimize credit losses by closely monitoring the financial
condition of its borrowers and the value of collateral.

Cash Management Services.Columbia also offers to business customers an
opportunity to meet additional banking needs online through its Cash Management
product. This online product gives business customers the ability to process
payroll, collections, wire transfers, and Electronic Funds Transfer tax
payments.

Deposit and Related Products.Columbias business deposit products
include basic, regular, and interest-bearing checking accounts, business money
market accounts and sweep accounts. Columbia also offers check verification
services to merchants allowing them the ability to determine, on a 24-hour
basis, whether a check drawn on an account has sufficient funds to cover the
amount drawn. In addition, Columbia offers a VISA merchant program for
business customers.

Investment Products.Columbias affiliation with Primevest allows it to
offer non-FDIC insured financial products and services to Columbias business
customers as well as to consumers. These include insurance and annuity
products, and employee retirement plan products such as SEPs, IRAs and 401(k)
plans.





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Principal Markets of Operation

Columbia accepts deposits at its branches in Wasco, Hood River, Jefferson,
Deschutes, Clackamas, Yamhill and Umatilla Counties in Oregon and Klickitat
County in Washington. Columbia makes loans in all of these counties and in
adjacent counties including Sherman, Gilliam, and Crook counties in Oregon and
Skamania County in Washington. Many of its products and services, including
investment products through Primevest and mortgages through CRBs Mortgage
Group, are offered and sold throughout Oregon and south central Washington.
Columbias ability to increase its market share in the communities it serves is
driven by a marketing plan consisting of several key components. A principal
objective is to create and foster a sales culture in each branch and
department. Employees are trained to cross-sell, offering appropriate products
and services to existing customers and expanding business relationships.
Columbia regularly examines the desirability and profitability of adding new
products and services to those currently offered. Columbia also promotes
specific products by media advertising, but relies primarily on referrals and
direct contacts for new business. Columbia recognizes the importance of
community service and supports employee involvement in community activities.
This participation allows Columbia to make a contribution to the communities it
serves, which management believes increases Columbias visibility in its
markets and thereby increases business opportunities.

Columbia does business in many different non-metropolitan communities.
Management believes the diverse assortment of customers, communities, and
economic sectors that Columbia serves are a source of strength. In addition,
as a community banking organization Columbia has certain competitive advantages
because of its local focus. However, Columbia is also more reliant on the
local economies in its market areas than are super-regional and national banks.

Competition

Columbias competitors for deposits are banks, savings and loan
associations, credit unions, money market funds, issuers of corporate and
government securities, insurance companies, brokerage firms, mutual funds, and
other financial intermediaries. Columbias business model is to compete on the
basis of customer service and not solely on price. Columbia competes for
deposits by offering a variety of deposit accounts at rates generally
competitive with financial institutions in the area.

Columbias competition for loans comes principally from banks, savings and
loan associations, mortgage companies, finance companies, insurance companies,
credit unions, and other institutional lenders. An important competitor for
agricultural loans is Farm Credit Services. Columbia competes for loan
originations through the level of interest rates and loan fees charged, its
array of commercial and mortgage loan products, and the efficiency and quality
of services provided to borrowers. Lending activity can also be affected by
the availability of lendable funds, local and national economic conditions,
current interest rate levels, and loan demand. As described above, Columbia
competes with the larger commercial banks by emphasizing a community bank
orientation and efficient personal service to customers.

A potential new source of competition is the array of on-line banking
services offered by traditional commercial banks and other financial service
providers, and by newly formed companies that use the Internet to advertise and
sell competing products. Columbia offers many on-line banking services to its
customers, but management believes that, for the foreseeable future, its
customers will continue to prefer the personal, locally-based services that it
offers.

Employees

As of December 31, 2002, Columbia had a total of 274 full-time equivalent
employees. This number of employees, which compares to 273 at December 31,
2001, has held steady due to increased efficiencies in administrative functions
and expansion of technology. None of the employees are subject to a collective
bargaining agreement. Columbia considers its relationships with its employees
to be good.





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SUPERVISION AND REGULATION

General

Columbia is extensively regulated under federal and state law. These laws
and regulations are primarily intended to protect depositors, not stockholders.
The discussion below describes and summarizes certain statutes and
regulations. These descriptions and summaries are qualified in their entirety
by reference to the particular statute or regulation. Changes in applicable
laws or regulations may have a material effect on the business and prospects of
Columbia. The operations of Columbia may also be affected by changes in the
policies of banking and other government regulators. Columbia cannot
accurately predict the nature or extent of the effects on its business and
earnings that fiscal or monetary policies, or new federal or state laws, may
have in the future.

Website Access to Reports

Columbia makes available all periodic and current reports, free of charge,
on its website as soon as reasonably practicable after such material is
electronically filed with, or furnished to the Securities and Exchange
Commission (SEC). Columbias website address is . The contents of the
website are not incorporated into this report or into Columbias other filings
with the SEC.

Gramm-Leach-Bliley Financial Services Modernization Act

In 1999 Congress passed the Gramm-Leach-Bliley Financial Services
Modernization Act (the FSMA). This new legislation repealed certain
provisions of the Glass-Steagall Act that had required the separation of the
banking, insurance and securities businesses. It also created a new business
structure known as a financial services holding company. Under this new law,
banks will have broader opportunities to affiliate with insurance and
securities companies. Banks could also become tempting acquisition targets, as
insurance and securities companies seek such affiliations themselves. The FSMA
may also encourage local jurisdictions to enact tighter bank privacy
provisions. The enactment and implementation of the FSMA will result in new
competitive challenges and opportunities for community banks in the coming
years.

Columbia is a financial services holding company under the FSMA and is
therefore subject to supervision of, and regulation by, the Board of Governors
of the Federal Reserve System (Federal Reserve). Columbia is examined by,
must file annual reports with, and provide the Federal Reserve with any
additional information as it may require. Financial holding companies are bank
holding companies that satisfy certain criteria and are permitted to engage in
activities that traditional bank holding companies are not.

Holding Company Bank Ownership. The Bank Holding Company Act of 1956
(the BHCA) requires every bank holding company to obtain the prior approval
of the Federal Reserve before (i) acquiring, directly or indirectly, ownership
or control of any voting shares of another bank or bank holding company if,
after such acquisition, it would own or control more than 5% of such shares,
(ii) acquiring all or substantially
all of the assets of another bank or bank holding company, or (iii) merging or
consolidating with another bank or bank holding company.

Holding Company Control of Nonbanks.With some exceptions, the BHCA also
prohibits a bank holding company from acquiring or retaining direct or indirect
ownership or control of more than 5% of the voting shares of any company which
is not a bank or bank holding company, or from engaging directly or indirectly
in activities other than those of banking, managing, or controlling banks, or
providing services for its subsidiaries. The principal exceptions to these
prohibitions involve certain nonbank activities which, by statute or by Federal
Reserve regulation or order, have been identified as activities closely related
to the business of banking or of managing or controlling banks. In making this
determination, the Federal Reserve considers whether the performance of such
activities by a bank holding company can be expected to produce benefits to the
public such as greater convenience, increased competition, or gains in the
efficient use of resources, which can be expected to outweigh the risks of
possible adverse effects such as decreased or unfair competition, conflicts of
interest, or unsound banking practices. The Economic Growth and Regulatory
Reduction Act of 1996 amended the BHCA to eliminate the requirement that bank
holding companies seek prior Federal Reserve approval before engaging in
certain permissible nonbanking activities





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if the holding company is well
capitalized and meets certain other specific criteria.

Transactions with Affiliates.Subsidiary banks of a bank holding company
are subject to restrictions imposed by the Federal Reserve Act on extensions of
credit to the holding company or its subsidiaries, on investments in their
securities, and on the use of their securities as collateral for loans to any
borrower. These regulations and restrictions may limit Columbias ability to
obtain funds from CRB for its cash needs, including funds for payment of
dividends, interest, and operational expenses.

Tying Arrangements.Under the Federal Reserve Act and certain regulations
of the Federal Reserve, a bank holding company and its subsidiaries are
prohibited from engaging in certain tying arrangements in connection with any
extension of credit, lease or sale of property, or furnishing of services. For
example, CRB may not generally require a customer to obtain other services from
it or from Columbia, and may not require that the customer promise not to
obtain other services from a competitor as a condition to an extension of
credit to the customer.

Federal and State Bank Regulation

General.CRB is an Oregon state-chartered bank with deposits insured by
the FDIC, and is subject to the supervision and regulation of the Oregon
Director of Banks and the FDIC. CRB is also subject to the supervision and
regulation of the Washington Department of Financial Institutions. These
agencies have the authority to prohibit banks from engaging in what they
believe constitute unsafe or unsound banking practices.

CRA.The Community Reinvestment Act (CRA) requires that, in connection
with examinations of financial institutions within their jurisdiction, the
Federal Reserve or the FDIC evaluate the records of financial institutions in
meeting the credit needs of their local communities, including low and moderate
income neighborhoods, consistent with the safe and sound operation of those
banks. These factors are also considered in evaluating mergers, acquisitions,
and applications to open a branch or facility.

Insider Credit Transactions.Banks are also subject to certain
restrictions imposed by the Federal Reserve Act on extensions of credit to
executive officers, directors, principal stockholders, or any related interests
of such persons. Extensions of credit (i) must be made on substantially the
same terms, including interest rates and collateral, and follow credit
underwriting procedures that are not less stringent than those prevailing at
the time for comparable transactions with persons not covered above and who are
not employees; and (ii) must not involve more than the normal risk of repayment
or present other unfavorable features. Banks are also subject to certain
lending limits and restrictions on overdrafts to such persons. A violation of
these restrictions may result in the assessment of substantial civil monetary
penalties on the affected bank or any officer, director, employee, agent, or
other person participating in the conduct of the affairs of that bank; the
imposition of a cease and desist order; and other regulatory sanctions.

FDICIA.Under the Federal Deposit Insurance Corporation Improvement Act
(FDICIA), each federal banking agency has prescribed, by regulation,
noncapital safety and soundness standards for institutions under its authority.
These standards cover internal controls, information systems, and internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, compensation, fees and benefits, such other operational and
managerial standards as the agency determines to be appropriate, and standards
for asset quality, earnings and stock valuation. An institution which fails to
meet these standards must develop a plan acceptable to the agency, specifying
the steps that the institution will take to meet the standards. Failure to
submit or implement such a plan may subject the institution to regulatory
sanctions. Management believes that CRB meets all such standards and,
therefore, does not believe that these regulatory standards materially affect
Columbias business operations.

Interstate Banking and Branching

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(Interstate Act) permits nationwide interstate banking and branching under
certain circumstances. This legislation generally authorizes





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interstate
branching and relaxes federal law restrictions on interstate banking.
Currently, financial holding companies may purchase banks in any state, and
states may not prohibit such purchases. Additionally, banks are permitted to
merge with banks in other states as long as the home state of neither merging
bank has opted out. The Interstate Act requires regulators to consult with
community organizations before permitting an interstate institution to close a
branch in a low-income area.

Under recent FDIC regulations, banks are prohibited from using their
interstate branches primarily for deposit production. The FDIC has accordingly
implemented a loan-to-deposit ratio screen to ensure compliance with this
prohibition.

Oregon and Washington each enacted opting in legislation in accordance
with the Interstate Act provisions allowing banks to engage in interstate
merger transactions subject to certain aging requirements. In both states,
branches may not be acquired or opened separately in the home state by an
out-of-state bank, but once an out-of-state bank has acquired a bank within the
state, either through merger or acquisition of all or substantially all of the
banks assets, the out-of-state bank may open additional branches within the
home state.

Deposit Insurance

The deposits of CRB are currently insured to a maximum of $100,000 per
depositor through the Bank Insurance Fund (BIF) administered by the FDIC.
CRB is required to pay semi-annual deposit insurance premium assessments to the
FDIC.

The FDICIA included provisions to reform the Federal Deposit Insurance
System, including the implementation of risk-based deposit insurance premiums.
The FDICIA also permits the FDIC to make special assessments on insured
depository institutions in amounts determined by the FDIC to be necessary to
give it adequate assessment income to repay amounts borrowed from the U.S.
Treasury and other sources, or for any other purpose the FDIC deems necessary.
The FDIC has implemented a risk-based insurance premium system under which
banks are assessed insurance premiums based on how much risk they present to
the BIF. Banks with higher levels of capital and a low degree of supervisory
concern are assessed lower premiums than banks with lower levels of capital or
a higher degree of supervisory concern.

Dividends

The principal source of Columbias cash revenues is dividends received
from its subsidiary. The payment of dividends is subject to government
regulation, in that regulatory authorities may prohibit banks and financial
holding companies from paying dividends which would constitute an unsafe or
unsound banking practice. In addition, a bank may not pay cash dividends if
that payment could reduce the amount of its capital below that necessary to
meet minimum applicable regulatory capital requirements. Also, under the
Oregon Bank Act, the Oregon Director of Banks may suspend the payment of
dividends if it is determined that the payment would cause a banks remaining
stockholders equity to be inadequate for the safe and sound operation of the
bank. Other than the laws and regulations noted above, which apply to all
banks and financial holding companies, neither Columbia nor CRB is currently
subject to any regulatory restrictions on their dividends.

Capital Adequacy

Federal bank regulatory agencies use capital adequacy guidelines in the
examination and regulation of financial holding companies and banks. If
capital falls below minimum guideline levels, the holding company or bank may
be denied approval to acquire or establish additional banks or nonbank
businesses or to open new facilities.

The FDIC and Federal Reserve use risk-based capital guidelines for banks
and financial holding companies. These are designed to make such capital
requirements more sensitive to differences in risk profiles among banks and
financial holding companies, to account for off-balance sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance sheet
items are assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance





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##### Table of Contents



sheet items. The guidelines are minimums,
and the Federal Reserve has noted that financial holding companies
contemplating significant expansion programs should not allow expansion to
diminish their capital ratios and should maintain ratios well in excess of the
minimum. The current guidelines require all financial holding companies and
federally regulated banks to maintain a minimum risk-based total capital ratio
equal to 8%, of which at least 4% must be Tier I capital.

Tier I capital for financial holding companies includes common
stockholders equity, qualifying perpetual preferred stock (up to 25% of total
Tier I capital, if cumulative, although under a Federal Reserve Rule,
redeemable perpetual preferred stock may not be counted as Tier I capital
unless the redemption is subject to the prior approval of the Federal Reserve),
and minority interests in equity accounts of consolidated subsidiaries, less
intangibles. Tier II capital includes: (i) the allowance for loan losses of up
to 1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred stock
which exceeds the amount which may be included in Tier I capital; (iii) hybrid
capital instruments; (iv) perpetual debt; (v) mandatory convertible securities;
and (vi) subordinated debt and intermediate term preferred stock of up to 50%
of Tier I capital. Total capital is the sum of Tier I and Tier II capital,
less reciprocal holdings of other banking organizations, capital instruments,
and investments in unconsolidated subsidiaries.

The assets of banks and financial holding companies receive risk-weights
of 0%, 20%, 50%, and 100%. In addition, certain off-balance sheet items are
given credit conversion factors to convert them to asset equivalent amounts to
which an appropriate risk-weight will apply. These computations result in
total risk-weighted assets.

Most loans are assigned to the 100% risk category, except for first
mortgage loans fully secured by residential property which carry a 50% rating.
Most investment securities are assigned to the 20% category, except for
municipal or state revenue bonds which have a 50% risk-weight, and direct
obligations of, or obligations guaranteed by, the United States Treasury or
agencies of the federal government which have 0% risk-weight. In converting
off-balance sheet items, direct credit substitutes, including general
guarantees and standby letters of credit backing financial obligations, are
given a 100% conversion factor. Transaction related contingencies such as bid
bonds, other standby letters of credit and undrawn commitments, including
commercial credit lines with an initial maturity of more than one year, have a
50% conversion factor. Short-term, self-liquidating trade contingencies are
converted at 20%, and short-term commitments have a 0% factor.

The Federal Reserve also employs a leverage ratio, which is Tier I capital
as a percentage of total assets less intangibles, to be used as a supplement to
risk-based guidelines. The principal objective of the leverage ratio is to
constrain the maximum degree to which a financial holding company may leverage
its equity capital base. The Federal Reserve requires a minimum leverage ratio
of 3%. However, for all but the most highly rated financial holding companies
and for financial holding companies seeking to expand, the Federal Reserve
expects an additional cushion of at least 1% to 2%.

The FDICIA created a statutory framework of supervisory actions indexed to
the capital level of the individual institution. Under regulations adopted by
the FDIC, an institution is assigned to one of five capital categories
depending on its total risk-based capital ratio, Tier I risk-based capital
ratio, and leverage ratio, together with certain subjective factors.
Institutions which are deemed to be undercapitalized, depending on the
category to which they are assigned, are subject to certain mandatory
supervisory corrective actions.

Effects of Government Monetary Policy

The earnings and growth of Columbia are affected not only by general
economic conditions but also by the fiscal and monetary policies of the federal
government, particularly the Federal Reserve. The Federal Reserve can and does
implement national monetary policy for such purposes as curbing inflation and
combating recession, but its open market operations in U.S. government
securities, control of the discount rate applicable to borrowings from the
Federal Reserve, and establishment of reserve requirements against certain
deposits, influence the growth of bank loans, investments and deposits, and
also affect interest rates charged on loans or paid on deposits. The nature
and impact of future changes in monetary policies and their impact on Columbia
cannot be predicted with certainty.





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##### Table of Contents



Changes in Banking Laws and Regulations

The laws and regulations that affect banks and financial holding companies
frequently undergo significant changes at the federal and state levels. Bills
are introduced from time to time in the United States Congress that contain
proposals to alter the structure, regulation, and competitive relationships of
the nations financial institutions. Any changes in laws and regulations could
have the effect of increasing or decreasing the cost of doing business,
limiting or expanding permissible activities (including activities in the
insurance and securities fields), or affecting the competitive balance among
banks, savings associations, and other financial institutions. Such changes
could also reduce the extent of federal deposit insurance, broaden the powers
or the geographical range of operations of financial holding companies, alter
the extent to which banks could engage in securities activities, alter the
taxation of banks, financial holding companies and other financial services
organizations, and change the structure and jurisdiction of various financial
institution regulatory agencies. Such ongoing changes in laws and regulations,
and the extent to which the business of Columbia might be affected thereby,
cannot be predicted with certainty.




ITEM 2. PROPERTIES

Nine of Columbias facilities in Hood River, The Dalles, Redmond, Bend,
McMinnville, Madras, Hermiston and Pendleton Oregon, as well as its two
full-service branch facilities in south central Washington, are housed in
properties owned, free of all encumbrances, by Columbia. Columbia leases the
space for its Canby and Newberg branches, both McMinnville and Bend
limited-service branches in retirement communities, the Newport Mortgage Group
office as well as its facility in the Safeway store and the Administration
building located in The Dalles. All of Columbias presently owned full-service
branches have drive-up facilities and automated teller machines. Columbias
Mortgage Group operates from the second floor of Columbias Bend branch; 1701
NE Third Street. The following sets forth certain information regarding
Columbias branch facilities.

|                                               |  |                        |  |        |  |           |  |          
|---------------------------------------------- |  | ---------------------- |  | ------ |  | --------- |  | ---------
|                                               |  |                        |  |        |  | Date      |  |          
|                                               |  |                        |  | Square |  | Opened or |  | Occupancy
|City and County                                |  | Address                |  | Feet   |  | Acquired  |  | Status   
|                                               |  |                        |  |        |  |           |  |          
|Oregon Branches                                |  |                        |  |        |  |           |  |          
|The Dalles (Main Branch), Wasco County         |  | 316 East Third Street  |  | 8,000  |  | 1977      |  | Owned    
|The Dalles (Westside Branch),
Wasco County (1) |  | 520 Mt. Hood Street    |  | 430    |  | 1986      |  | Leased   
|Hood River Branch, Hood River County           |  | 2650 Cascade Avenue    |  | 6,255  |  | 1993      |  | Owned    
|Madras Branch, Jefferson County                |  | 624 SW Fourth Street   |  | 7,400  |  | 1995      |  | Owned    
|Redmond Branch, Deschutes County               |  | 434 North Fifth Street |  | 4,700  |  | 1995      |  | Owned    
|Bend Branch, Deschutes County                  |  | 1701 NE Third Street   |  | 8,306  |  | 1996      |  | Owned    
|Shevlin Center Branch,(2) Deschutes County     |  | 925 SW Emkay Drive     |  | 15,000 |  | 1999      |  | Owned    
|Bend Limited Facility, Deschutes County        |  | 1010 NE Purcell Blvd   |  | 80     |  | 2002      |  | Leased   
|Hermiston Branch, Umatilla County              |  | 1033 South Highway 395 |  | 4,700  |  | 1998      |  | Owned    
|Pendleton Branch, Umatilla County              |  | 2101 SW Court Place    |  | 4,700  |  | 1999      |  | Owned    
|McMinnville Branch,(2) Yamhill County          |  | 723 N Baker            |  | 9,600  |  | 1998      |  | Owned    





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##### Table of Contents



|                                               |  |                            |  |        |        |           |  |           |      |  |  |       
|---------------------------------------------- |  | -------------------------- |  | ------ | ------ | --------- |  | --------- | ---- |  |  | ------
|                                               |  |                            |  |        |        |           |  | Date      |      | 
|                                               |  |                            |  | Square |        | Opened or |  | Occupancy
|City and County                                |  | Address                    |  | Feet   |        | Acquired  |  | Status   
|                                               |  |                            |  |        |        |           |  |          
|McMinnville Limited Facility, Yamhill County   |  | 900 NW Hill Rd             |  |        | 60     |           |  |           | 1998 |  |  | Leased
|McMinnville Limited Facility, Yamhill County   |  | 300 NW Hillside Pkwy       |  |        | 60     |           |  |           | 2001 |  |  | Leased
|Canby Branch, Clackamas County                 |  | 223 NE 2nd St              |  |        | 1,500  |           |  |           | 2001 |  |  | Leased
|Newberg Branch, Yamhill County                 |  | 901 N Brutscher St., Ste A |  |        | 3,900  |           |  |           | 1999 |  |  | Leased
|Washington Branches                            |  |                            |  |        |        |           |  |           |      |  |  |       
|White Salmon Branch, Klickitat County          |  | 390 NE Tohomish Street     |  |        | 5,500  |           |  |           | 1996 |  |  | Owned 
|Goldendale Branch, Klickitat County            |  | 202 West Main Street       |  |        | 6,105  |           |  |           | 1996 |  |  | Owned 
|Other Facilities                               |  |                            |  |        |        |           |  |           |      |  |  |       
|Newport, OR, Mortgage Facility, Lincoln County |  | 2009 N Coast Hwy           |  |        | 1,700  |           |  |           | 2001 |  |  | Leased
|The Dalles, OR, Administration, Wasco County   |  | 401 E Third St, Suite 200  |  |        | 14,868 |           |  |           | 2002 |  |  | Leased



---

|(1) |  | Leased space in a Safeway supermarket. Lease term expires December 2005.                                   
|--- |  | -----------------------------------------------------------------------------------------------------------
|   
|(2) |  | Branch operations are located on the first floor. A portion of the second
floor is leased to other parties.

In 1999, Columbia purchased 156,723 square feet of bare land in the
Columbia River Center in The Dalles for future branch or administrative
operations expansion. Columbia also purchased bare land in 1995, adjacent to
the Hood River Branch, for the purpose of future parking expansion. After the
completion of the parking expansion in 2001, Columbia partitioned the land and
currently has 13,068 square feet for sale.




ITEM 3. LEGAL PROCEEDINGS

Management is not presently aware of any pending or threatened claims
against Columbia that, if determined adversely to Columbia, would have a
material affect on its operations or performance. In the normal course of its
business, Columbia is a party to various debtor-creditor legal actions, none of
which, individually or in the aggregate, are presently material to Columbias
business, operations or financial condition. These include cases filed as a
plaintiff in collection and foreclosure cases, and the enforcement of
creditors rights in bankruptcy proceedings.




ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of securities holders of Columbia during the quarter ended December 31, 2002.





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##### Table of Contents






Part II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common stock of Columbia Bancorp trades on the NASDAQ National Market
under the symbol CBBO. Trading in Columbias stock on NASDAQ commenced on
November 6, 1998. The respective high and low sale prices of Columbias common
stock for the periods indicated are shown below. All prices for the periods
shown have been adjusted for subsequent stock splits. Prices do not include
retail markups, markdowns, or commissions, and may not represent actual
transactions. Columbia has paid dividends on its common stock on a quarterly
basis. The table below also sets forth dividends declared per share of common
stock for the periods indicated. As of February 18, 2003 Columbia had
7,890,102 shares issued and outstanding, which were held by approximately 2,324
stockholders.

|               |  |                     |       |               |  |          |       |                     |  |     |      |          |  |   |       |  |  |   |      |  |  |   |      | 
|-------------- |  | ------------------- | ----- | ------------- |  | -------- | ----- | ------------------- |  | --- | ---- | -------- |  | - | ----- |  |  | - | ---- |  |  | - | ---- | 
|Table 1        |  | 2002                |       | 2001         
|               |  |                     |       |              
|               |  | Stock Trading Range |       |               |  |          |       | Stock Trading Range |  |     |      |         
|               |  |                     |       | Cash Dividend |  |          |       | Cash Dividend      
|               |  | High                |       | Low           |  | Declared |       | High                |  | Low |      | Declared
|               |  |                     |       |               |  |          |       |                     |  |     |      |         
|First Quarter  |  | $                   | 11.40 |               |  | $        | 10.06 |                     |  | $   | 0.08 |          |  | $ | 8.38  |  |  | $ | 6.00 |  |  | $ | 0.08 | 
|Second Quarter |  |                     | 13.15 |               |  |          | 10.96 |                     |  |     | 0.08 |          |  |   | 9.00  |  |  |   | 7.15 |  |  |   | 0.08 | 
|Third Quarter  |  |                     | 13.92 |               |  |          | 10.90 |                     |  |     | 0.08 |          |  |   | 10.95 |  |  |   | 8.50 |  |  |   | 0.08 | 
|Fourth Quarter |  |                     | 15.05 |               |  |          | 11.75 |                     |  |     | 0.08 |          |  |   | 10.50 |  |  |   | 8.84 |  |  |   | 0.08 | 




ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain information concerning the
consolidated financial condition, operating results, and key operating ratios
for Columbia at the dates and for the periods indicated. This information does
not purport to be complete, and should be read in conjunction with
Managements Discussion and Analysis of Financial Condition and Results of
Operations, and the Consolidated Financial Statements of Columbia and Notes
thereto.

|                                                     |                       |                                            |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |         | 
|---------------------------------------------------- | --------------------- | ------------------------------------------ | - | ------- |  | ---- | - | ------- |  | ---- | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|Table 2                                              |                       | As of and For the Years Ended December 31,
|                                                     |                       |                                           
|(dollars in thousands except dollars per share data) |                       | 2002                                       |   | 2001    |  | 2000 |   | 1999    |  | 1998
|                                                     |                       |                                            |   |         |  |      |   |         |  |     
|Income Statement Data                                |                       |                                            |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |        
|                                                     | Interest income       |                                            | $ | 37,616  |  |      | $ | 35,078  |  |      | $ | 33,367  |  |  | $ | 26,883  |  |  | $ | 21,328  | 
|                                                     | Interest expense      |                                            |   | 7,782   |  |      |   | 11,583  |  |      |   | 12,256  |  |  |   | 8,568   |  |  |   | 7,205   | 
|                                                     | Net interest income   |                                            |   | 29,834  |  |      |   | 23,495  |  |      |   | 21,111  |  |  |   | 18,315  |  |  |   | 14,123  | 
|                                                     | Loan loss provision   |                                            |   | 1,800   |  |      |   | 1,450   |  |      |   | 1,697   |  |  |   | 1,005   |  |  |   | 1,000   | 
|                                                     | Net income            |                                            |   | 9,381   |  |      |   | 7,374   |  |      |   | 5,624   |  |  |   | 5,013   |  |  |   | 4,718   | 
|Balance Sheet Data                                   |                       |                                            |   |         |  |      |   |         |  |      |   |         |  |  |   |         |  |  |   |        
|                                                     | Investment securities |                                            |   | 36,048  |  |      |   | 43,532  |  |      |   | 60,544  |  |  |   | 62,333  |  |  |   | 47,894  | 
|                                                     | Loans, net            |                                            |   | 432,687 |  |      |   | 380,283 |  |      |   | 299,881 |  |  |   | 246,975 |  |  |   | 206,552 | 
|                                                     | Total assets          |                                            |   | 544,326 |  |      |   | 482,207 |  |      |   | 416,859 |  |  |   | 361,241 |  |  |   | 342,413 | 
|                                                     | Total deposits        |                                            |   | 455,835 |  |      |   | 394,636 |  |      |   | 346,427 |  |  |   | 310,910 |  |  |   | 295,680 | 
|                                                     | Shareholders equity  |                                            |   | 50,190  |  |      |   | 46,445  |  |      |   | 41,326  |  |  |   | 37,322  |  |  |   | 34,756  | 





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|                                                     |                                    |                                            |      |       |   |      |      |       |   |      |      |       |   |  |      |       |   |  |      |       |  
|---------------------------------------------------- | ---------------------------------- | ------------------------------------------ | ---- | ----- | - | ---- | ---- | ----- | - | ---- | ---- | ----- | - |  | ---- | ----- | - |  | ---- | ----- | -
|Table 2                                              |                                    | As of and For the Years Ended December 31,
|                                                     |                                    |                                           
|(dollars in thousands except dollars per share data) |                                    | 2002                                       |      | 2001  |   | 2000 |      | 1999  |   | 1998
|                                                     |                                    |                                            |      |       |   |      |      |       |   |     
|Per Share Data                                       |                                    |                                            |      |       |   |      |      |       |   |      |      |       |   |  |      |       |   |  |      |      
|Earnings Per Share                                   |                                    |                                            |      |       |   |      |      |       |   |      |      |       |   |  |      |       |   |  |      |      
|                                                     | Basic earnings per common share    |                                            |      | 1.16  |   |      |      | 0.92  |   |      |      | 0.70  |   |  |      | 0.63  |   |  |      | 0.67  |  
|                                                     | Diluted earnings per common share  |                                            |      | 1.13  |   |      |      | 0.89  |   |      |      | 0.70  |   |  |      | 0.62  |   |  |      | 0.65  |  
|Cash dividends declared per common share             |                                    |                                            | 0.32 |       |   |      | 0.32 |       |   |      | 0.28 |       |   |  | 0.24 |       |   |  | 0.23 |      
|Book value per common share                          |                                    |                                            | 6.38 |       |   |      | 5.78 |       |   |      | 5.15 |       |   |  | 4.66 |       |   |  | 4.37 |      
|Capital Ratios                                       |                                    |                                            |      |       |   |      |      |       |   |      |      |       |   |  |      |       |   |  |      |      
|                                                     | Tier I capital ratio (1)           |                                            |      | 8.87  | % |      |      | 9.36  | % |      |      | 9.78  | % |  |      | 10.17 | % |  |      | 10.90 | %
|                                                     | Total risk-based capital ratio (2) |                                            |      | 10.96 | % |      |      | 10.61 | % |      |      | 11.03 | % |  |      | 11.32 | % |  |      | 11.90 | %
|                                                     | Leverage ratio (3)                 |                                            |      | 7.82  | % |      |      | 8.61  | % |      |      | 8.14  | % |  |      | 8.26  | % |  |      | 8.90  | %
|Financial Ratios                                     |                                    |                                            |      |       |   |      |      |       |   |      |      |       |   |  |      |       |   |  |      |      
|                                                     | Return on average assets           |                                            |      | 1.80  | % |      |      | 1.64  | % |      |      | 1.41  | % |  |      | 1.44  | % |  |      | 1.83  | %
|                                                     | Return on average equity           |                                            |      | 18.80 | % |      |      | 16.76 | % |      |      | 14.40 | % |  |      | 13.90 | % |  |      | 18.10 | %



|(1) |  | Tier I capital divided by risk-weighted assets.
|--- |  | -----------------------------------------------
|   
|(2) |  | Total capital divided by risk-weighted assets. 
|   
|(3) |  | Tier I capital divided by average total assets.




ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Critical accounting policies and estimates

The Managements Discussion and Analysis of Financial Condition and
Results of Operations, as well as disclosures included elsewhere in this Form
10-K, are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses. On an ongoing basis,
management evaluates the estimates used, including the adequacy of the
allowance for loan and lease losses, impairment of intangible assets, and
contingencies and litigation. Estimates are based upon historical experience,
current economic conditions and other factors that management considers
reasonable under the circumstances. These estimates result in judgments
regarding the carrying values of assets and liabilities when these values are
not readily available from other sources as well as assessing and identifying
the accounting treatments of commitments and contingencies. Actual results may
differ from these estimates under different assumptions or conditions. The
following critical accounting policies involve the more significant judgments
and assumptions used in the preparation of the consolidated financial
statements.

The allowance for loan and lease losses is established to absorb known and
inherent losses attributable to loans and leases outstanding and related
off-balance-sheet commitments. The adequacy of the allowance is monitored on an
ongoing basis and is based on managements evaluation of numerous factors.
These factors include the quality of the current loan portfolio, the trend in
the loan portfolios risk ratings, current economic conditions, loan
concentrations, loan growth rates, past-due and nonperforming trends,
evaluation of specific loss estimates for all significant problem loans,
historical charge-off and recovery experience and other pertinent information.
Approximately 64.28% of Columbias loan portfolio is secured by real estate and
a significant depreciation in real estate values in Oregon and Washington would
cause management to increase the allowance for loan and lease losses.

Retained mortgage servicing rights are measured by allocating the carrying
value of the loans between the assets sold and the interest retained, based on
the relative fair value at the date of the sale. The fair market values are
determined using a discounted cash flow model. Mortgage servicing assets are amortized
over the expected life of





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the loan and are evaluated periodically for impairment. The expected life
of the loan can vary from managements estimates due to prepayments by
borrowers. Prepayments in excess of managements estimates would negatively
impact the recorded value of the mortgage servicing rights. The value of the
mortgage servicing rights is also dependent upon the discount rate used in the
model. Management reviews this rate on an ongoing basis based on current market
rates. A significant increase in the discount rate would negatively impact the
value of mortgage servicing rights.

At December 31, 2002, Columbia had approximately $7.4 million in goodwill
as a result of business combinations. Columbia adopted Statement of Financial
Accounting Standards (SFAS) No. 142 on January 1, 2002. Ongoing analysis of
the fair value of recorded goodwill for impairment will involve a substantial
amount of judgment, as will establishing and monitoring estimated lives of
other amortizable intangible assets.

Columbia applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for
its stock option plans. Accordingly, compensation costs are recognized as the
difference between the exercise price of each option and the market price of
Columbias stock at the date of each grant. Had compensation cost for
Columbias 2002, 2001, and 2000 grants for stock-based compensation plans been
determined consistent with SFAS No. 123, its net income and earnings per common
share for December 31, 2002, 2001, and 2000, would approximate the pro forma
amounts below (in thousands, except per share data).

Table 3

|                                             |             |      |   |       |  |      |   |       |  |  |   |       | 
|-------------------------------------------- | ----------- | ---- | - | ----- |  | ---- | - | ----- |  |  | - | ----- | 
|(dollars in thousands except per share data) |             | 2002 |   | 2001  |  | 2000
|                                             |             |      |   |       |  |     
|Net income:                                  |             |      |   |       |  |      |   |       |  |  |   |      
|                                             | As reported |      | $ | 9,381 |  |      | $ | 7,374 |  |  | $ | 5,624 | 
|                                             | Pro forma   |      | $ | 8,570 |  |      | $ | 6,823 |  |  | $ | 5,486 | 
|Basic earnings per common share:             |             |      |   |       |  |      |   |       |  |  |   |      
|                                             | As reported |      | $ | 1.16  |  |      | $ | 0.92  |  |  | $ | 0.70  | 
|                                             | Pro forma   |      | $ | 1.06  |  |      | $ | 0.85  |  |  | $ | 0.68  | 
|Diluted earnings per common share:           |             |      |   |       |  |      |   |       |  |  |   |      
|                                             | As reported |      | $ | 1.13  |  |      | $ | 0.89  |  |  | $ | 0.70  | 
|                                             | Pro forma   |      | $ | 1.03  |  |      | $ | 0.83  |  |  | $ | 0.68  | 

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option pricing model with the following assumptions for
December 31, 2002, 2001 and 2000:

|                      |  |      |       |      |  |      |       |   |  |  |       |  
|--------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|Table 4               |  | 2002 |       | 2001 |  | 2000
|                      |  |      |       |      |  |     
|Divdend yield         |  |      | 2.14  | %    |  |      | 3.00  | % |  |  | 4.84  | %
|Expected life (years) |  |      | 6.00  |      |  |      | 3.32  |   |  |  | 3.32  |  
|Expected volatility   |  |      | 45.25 | %    |  |      | 29.77 | % |  |  | 35.78 | %
|Risk-free rate        |  |      | 2.08  | %    |  |      | 3.74  | % |  |  | 5.11  | %

The effects of applying SFAS No. 123 in the pro forma disclosure are not
indicative of future amounts. Additionally, there can be no assurance that the
Financial Accounting Standards Board will not adopt accounting





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principles mandating the application of SFAS No. 123 in the future.

Columbia may become party to various legal proceedings. These matters have
a high degree of uncertainty associated with them. There can be no assurance
that the ultimate outcome will not differ materially from Columbias assessment
of them. There can also be no assurance that all matters that may be brought
against Columbia are known to them at any point in time.

Overview

The following discussion should be read in conjunction with Columbias
audited consolidated financial statements and the notes thereto as of December
31, 2002 and 2001 and for each of the three years in the period ended December
31, 2002 included elsewhere in this report.

Columbia Bancorp (Columbia) is a financial holding company, which
conducts operations principally through its wholly-owned subsidiary Columbia
River Bank (CRB). CRB is a state chartered bank, which offers a broad range
of services to its customers, primarily small and medium sized businesses,
farmers, and individuals. CRB has a network of 17 branches, 14 full-service
branch facilities and three limited-service branch facilities in Oregon serve
the northern and eastern Oregon communities of The Dalles, Hood River,
Pendleton and Hermiston, the central Oregon communities of Madras, Redmond, and
Bend, and the communities of McMinnville, Canby and Newberg in the Willamette
Valley. Columbias two south central Washington full-service branches serve
the communities of Goldendale and White Salmon.

On December 19, 2002, Columbia formed Columbia Bancorp Trust I (Trust),
a wholly-owned Delaware statutory business trust, for purposes of issuing Trust
Preferred Securities. The Trust issued $4.0 million of trust-preferred
securities at a floating rate indexed to the 90 day LIBOR with a margin of
3.30%. These securities are considered to be Tier I for regulatory capital
purposes.

Columbias goal is to grow its earning assets while maintaining a high
return on equity and high asset quality. The key to this, in Columbias view,
is to emphasize personal, quality banking products and services for its
customers, to hire and retain competent branch and administrative personnel,
and to respond quickly to customer demand and growth opportunities. Columbia
also intends to increase its penetration in its existing markets, and to expand
into new markets through further suitable acquisitions and new branch openings.

As of December 31, 2002, Columbia had total assets of $544.33 million,
total deposits of $455.84 million and stockholders equity of $50.19 million.
As of December 31, 2001 and 2000, total assets were $482.21 million and $416.86
million, total deposits were $394.64 million and $346.43 million, and
stockholders equity were $46.45 million and $41.33 million, respectively.
Columbias net income for years ended December 31, 2002, 2001 and 2000, was
$9.38 million, $7.37 million and $5.62 million, respectively. Columbias year
2002 net income represents the 15th consecutive year of increasing net income.
For the year ended December 31, 2002, Columbias return on average assets was
1.80% and return on average equity was 18.80%.

Return on average daily assets and equity and certain other ratios for the
periods indicated are presented below:





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##### Table of Contents



|                                 |  |                          |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|-------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                 |  | Years Ended December 31,
|Table 5                          |  |                         
|(dollars in thousands)           |  | 2002                     |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                                 |  |                          |         |      |  |      |         |      |  |     
|Net income                       |  | $                        | 9,381   |      |  | $    | 7,374   |      |  | $    | 5,624   |   |  | $ | 5,013   |   |  | $ | 4,718   |  
|Average assets                   |  |                          | 521,537 |      |  |      | 450,262 |      |  |      | 398,422 |   |  |   | 347,003 |   |  |   | 257,664 |  
|RETURN ON AVERAGE ASSETS         |  |                          | 1.80    | %    |  |      | 1.64    | %    |  |      | 1.41    | % |  |   | 1.44    | % |  |   | 1.83    | %
|Net income                       |  | $                        | 9,381   |      |  | $    | 7,374   |      |  | $    | 5,624   |   |  | $ | 5,013   |   |  | $ | 4,718   |  
|Average equity                   |  |                          | 49,905  |      |  |      | 43,990  |      |  |      | 39,062  |   |  |   | 36,075  |   |  |   | 26,069  |  
|RETURN ON AVERAGE EQUITY         |  |                          | 18.80   | %    |  |      | 16.76   | %    |  |      | 14.40   | % |  |   | 13.90   | % |  |   | 18.10   | %
|Cash dividends declared and paid |  | $                        | 2,580   |      |  | $    | 2,570   |      |  | $    | 2,326   |   |  | $ | 1,999   |   |  | $ | 1,587   |  
|Net income                       |  |                          | 9,381   |      |  |      | 7,374   |      |  |      | 5,624   |   |  |   | 5,013   |   |  |   | 4,718   |  
|PAYOUT RATIO                     |  |                          | 27.50   | %    |  |      | 34.85   | %    |  |      | 41.36   | % |  |   | 39.88   | % |  |   | 33.64   | %
|Average equity                   |  | $                        | 49,905  |      |  | $    | 43,990  |      |  | $    | 39,062  |   |  |   | 36,075  |   |  | $ | 26,069  |  
|Average assets                   |  |                          | 521,537 |      |  |      | 450,262 |      |  |      | 398,422 |   |  |   | 347,003 |   |  |   | 257,664 |  
|AVERAGE EQUITY TO ASSET RATIO    |  |                          | 9.13    | %    |  |      | 9.77    | %    |  |      | 9.80    | % |  |   | 10.40   | % |  |   | 10.12   | %

Results of Operations

Net Interest Income

For financial institutions, the primary component of earnings is net
interest income. Net interest income is the difference between interest
income, principally from loan and investment security portfolios, and interest
expense, principally on customer deposits and bank borrowings from other
sources, such as trust preferred securities. Changes in net interest income
result from changes in volume, spread and margin. Volume refers to the dollar
level of interest-earning assets and interest-bearing liabilities. Spread
refers to the difference between the yield on interest-earning assets and the
cost of interest-bearing liabilities. Net interest margin is the ratio of net
interest income to total average interest-earning assets and is influenced by
the relative level of interest-earning assets and interest-bearing liabilities.

Average Balances and Average Rates Earned and Paid.The following table
shows average balances and interest income or interest expense, with the
resulting average yield or rates by category of earning assets or
interest-bearing liabilities:





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##### Table of Contents



|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |      |      | 
|---------------------------------------------- | --------------------------- | ---------------------------------------------- | ------------------------- | ------------------------------------------ | ------- | ---------------------------- | ------- | --------- | ------ | --------- | ------ | ------- | ---- | --------- | ---- | --------- | ------- | -------- | ------- | --------- | ------ | --------- | ------ |  | ---- | -------- | ---- | ------- | ------- | ------ | ------- | ------ | ------ | ----- | ------ | - | ----- | ---- | ---- | 
|Table 6                                        |                             | Year Ended December 31, 2002                   |                           | Year Ended December 31, 2001               |         | Year Ended December 31, 2000
|                                               |                             |                                                |                           |                                            |         |                             
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        | Interest  |        | Average |      |           |      |           |         | Interest |         | Average   |        |           |        |  |      | Interest |      | Average
|                                               |                             |                                                |                           |                                            |         | Average                      |         | Income or |        | Yields or |        | Average |      | Income or |      | Yields or |         | Average  |         | Income or |        | Yields or
|(dollars in thousands)                         |                             | Balance                                        |                           | Expense                                    |         | Rates                        |         | Balance   |        | Expense   |        | Rates   |      | Balance   |      | Expense   |         | Rates   
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |         
|Interest-earning assets:                       |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |  
|                                               |                             | Loans (1)                                      |                           | $                                          | 419,608 |                              |         | $         | 35,334 |           |        |         | 8.42 | %         |      | $         | 348,239 |          |         | $         | 32,135 |           |        |  | 9.23 | %        |      | $       | 288,058 |        |         | $      | 29,473 |       |        |   | 10.23 | %   
|                                               |                             | Investment securities                          |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             | Taxable securities                             |                           |                                            | 18,822  |                              |         |           | 1,035  |           |        |         | 5.58 |           |      |           | 29,049  |          |         |           | 1,615  |           |        |  | 5.56 |          |      |         | 40,641  |        |         |        | 2,403  |       |        |   | 5.91  |     
|                                               |                             |                                                | Nontaxable securities (2) |                                            |         | 17,191                       |         |           |        | 1,223     |        |         |      | 7.12      |      |           |         | 18,375   |         |           |        | 1,320     |        |  |      | 7.18     |      |         |         | 19,157 |         |        |        | 1,374 |        |   |       | 7.17 |     
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total investment securities (2)            |         |                              | 36,013  |           |        |           | 2,258  |         |      |           | 6.31 |           |         |          | 47,424  |           |        |           | 2,935  |  |      |          | 6.19 |         |         |        | 59,798  |        |        |       | 3,777  |   |       |      | 6.32 | 
|                                               |                             | Interest-earning balances due
from banks       |                           |                                            | 10,781  |                              |         |           | 340    |           |        |         | 3.02 |           |      |           | 7,560   |          |         |           | 417    |           |        |  | 5.52 |          |      |         | 7,221   |        |         |        | 474    |       |        |   | 6.58  |     
|                                               |                             | Federal funds sold                             |                           |                                            | 6,465   |                              |         |           | 99     |           |        |         | 1.53 |           |      |           | 1,101   |          |         |           | 40     |           |        |  | 3.64 |          |      |         | 1,729   |        |         |        | 110    |       |        |   | 6.35  |     
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total interest-earning
assets (3)          |         |                              | 472,867 |           |        |           | 38,031 |         |      |           | 8.04 |           |         |          | 404,324 |           |        |           | 35,527 |  |      |          | 8.79 |         |         |        | 356,806 |        |        |       | 33,834 |   |       |      | 9.48 | 
|                                               | Non-interest earning assets |                                                |                           | 48,670                                     |         |                              |         |           |        |           |        |         |      |           |      | 45,938    |         |          |         |           |        |           |        |  |      |          |      | 41,616  |         |        |         |        |        |       |        |   |      
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total assets                               |         | $                            | 521,537 |           |        |           |        |         |      |           |      |           |         | $        | 450,262 |           |        |           |        |  |      |          |      |         |         | $      | 398,422 |        |        |       |        |   |       |      |      | 
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|Interest-bearing liabilities:                  |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |  
|                                               |                             | Interest-bearing checking and
savings accounts |                           | $                                          | 189,356 |                              |         | $         | 1,732  |           |        |         | 0.92 | %         |      | $         | 158,286 |          |         | $         | 3,318  |           |        |  | 2.10 | %        |      | $       | 153,540 |        |         | $      | 5,056  |       |        |   | 3.29  | %   
|                                               |                             | Time deposit & IRAs                            |                           |                                            | 128,731 |                              |         |           | 4,696  |           |        |         | 3.54 |           |      |           | 118,758 |          |         |           | 6,386  |           |        |  | 5.38 |          |      |         | 99,657  |        |         |        | 5,727  |       |        |   | 5.75  |     
|                                               |                             | Borrowed Funds                                 |                           |                                            | 35,343  |                              |         |           | 1,354  |           |        |         | 3.83 |           |      |           | 34,238  |          |         |           | 1,880  |           |        |  | 5.49 |          |      |         | 24,123  |        |         |        | 1,473  |       |        |   | 6.11  |     
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total interest-bearing liabilities         |         |                              | 353,430 |           |        |           | 7,782  |         |      |           | 2.19 |           |         |          | 311,282 |           |        |           | 11,584 |  |      |          | 3.72 |         |         |        | 277,320 |        |        |       | 12,256 |   |       |      | 4.42 | 
|                                               |                             | Noninterest-bearing deposits                   |                           |                                            | 114,652 |                              |         |           |        |           |        |         |      |           |      |           | 91,731  |          |         |           |        |           |        |  |      |          |      |         | 79,895  |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total deposits                             |         |                              | 468,082 |           |        |           |        |         |      |           |      |           |         |          | 403,013 |           |        |           |        |  |      |          |      |         |         |        | 357,215 |        |        |       |        |   |       |      |      | 
|                                               |                             | Other liabilities                              |                           |                                            | 3,550   |                              |         |           |        |           |        |         |      |           |      |           | 3,259   |          |         |           |        |           |        |  |      |          |      |         | 2,145   |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total liabilities                          |         |                              | 471,632 |           |        |           |        |         |      |           |      |           |         |          | 406,272 |           |        |           |        |  |      |          |      |         |         |        | 359,360 |        |        |       |        |   |       |      |      | 
|                                               |                             | Shareholders equity                           |                           |                                            | 49,905  |                              |         |           |        |           |        |         |      |           |      |           | 43,990  |          |         |           |        |           |        |  |      |          |      |         | 39,062  |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|                                               |                             |                                                |                           | Total liabilities and
shareholders equity |         | $                            | 521,537 |           |        |           |        |         |      |           |      |           |         | $        | 450,262 |           |        |           |        |  |      |          |      |         |         | $      | 398,422 |        |        |       |        |   |       |      |      | 
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|Net interest income (taxable equivalent basis) |                             |                                                |                           |                                            |         | $                            | 30,249  |           |        |           |        |         |      |           |      |           |         | $        | 23,943  |           |        |           |        |  |      |          |      |         |         |        | $       | 21,578 |        |       |        |  
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|Net interest income (as reported)              |                             |                                                |                           |                                            |         | $                            | 29,834  |           |        |           |        |         |      |           |      |           |         | $        | 23,495  |           |        |           |        |  |      |          |      |         |         |        | $       | 21,111 |        |       |        |  
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|Average yield on average earning
assets (1)    |                             |                                                |                           |                                            |         |                              | 8.04    | %         |        |           |        |         |      |           |      |           |         |          | 8.79    | %         |        |           |        |  |      |          |      |         |         |        |         | 9.48   | %      |      
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |      |     
|Interest expense to average earning
assets     |                             |                                                |                           |                                            |         |                              |         |           |        | 1.64      | %      |         |      |           |      |           |         |          |         |           |        | 2.87      | %      |  |      |          |      |         |         |        |         |        |        |       | 3.43   | % |      
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |       
|Net interest
spread                            |                             |                                                |                           |                                            |         |                              |         |           |        | 5.85      | %      |         |      |           |      |           |         |          |         |           |        | 5.07      | %      |  |      |          |      |         |         |        |         |        |        |       | 5.06   | % |      
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     
|Net interest margin(3)                         |                             |                                                |                           |                                            |         |                              |         |           |        | 6.40      | %      |         |      |           |      |           |         |          |         |           |        | 5.92      | %      |  |      |          |      |         |         |        |         |        |        |       | 6.05   | % |      
|                                               |                             |                                                |                           |                                            |         |                              |         |           |        |           |        |         |      |           |      |           |         |          |         |           |        |           |        |  |      |          |      |         |         |        |         |        |        |       |        |   |       |     



---

|(1) |  | Nonaccrual loans are included in the average balance.                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Tax-exempt income has been adjusted to a tax-equivalent basis at 34%.                                                      
|   
|(3) |  | Net interest margin is computed by dividing net interest income (taxable equivalent basis) by total average earning assets.

Analysis of Changes in Interest Differential.The following table shows
the dollar amount of the increase (decrease) in Columbias net interest income
and expense and attributes such dollar amounts to changes in volume as well as
changes in rates. Rate and volume variances have been allocated proportionally
between rate and volume changes:

|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |     |   |       | 
|---------------------------------------------- | ---------------------------------------------- | --------------------- | ----- | ----- | ---- | -------------------------- | ----- | -------------------------- | --- | -------------------------- | ------ | ------ | ---- | ------ | ------ | ----- | ---- | ------ | ------ | ------ | ---- | - | ------ | ------ | ---- | - | ----- | ----- | --- | --- | ------ | --- | --- | - | ----- | ----- | --- | - | ----- | 
|                                               |                                                |                       |       |       |      | 2002 over 2001             |       | 2001 over 2000             |     | 2000 over 1999            
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                           
|                                               |                                                |                       |       |       |      | Increase (Decrease) due to |       | Increase (Decrease) due to |     | Increase (Decrease) due to
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                           
|Table 7                                        |                                                |                       |       |       |      |                            |       |                            |     | Net                        |        |        |      |        |        |       |      |        |        | Net    |      |   |        |        |      |   |       |       |     | Net
|(dollars in thousands)                         |                                                | Volume                |       | Rate  |      | Change                     |       | Volume                     |     | Rate                       |        | Change |      | Volume |        | Rate  |      | Change
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |       
|Interest-earning assets:                       |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |      
|                                               | Loans                                          |                       | $     | 6,595 |      |                            | $     | (3,396                     | )   |                            | $      | 3,199  |      |        | $      | 6,153 |      |        | $      | (3,490 | )    |   | $      | 2,663  |      |   | $     | 6,656 |     |     | $      | 322 |     |   | $     | 6,978 |    
|                                               | Investment securities                          |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |    
|                                               |                                                | Taxable securities    |       |       | (568 | )                          |       |                            | (12 | )                          |        |        | (580 | )      |        |       | (686 | )      |        |        | (102 | ) |        |        | (788 | ) |       |       | 146 |     |        |     | 62  |   |       |       | 208 |  
|                                               |                                                | Nontaxable securities |       |       | (56  | )                          |       |                            | (7  | )                          |        |        | (63  | )      |        |       | (820 | )      |        |        | 784  |   |        |        | (36  | ) |       |       | (83 | )   |        |     | (13 | ) |       |       | (96 | )
|                                               | Balances due from banks                        |                       |       | 178   |      |                            |       | (255                       | )   |                            |        | (77    | )    |        |        | 734   |      |        |        | (792   | )    |   |        | (58    | )    |   |       | 96    |     |     |        | 17  |     |   |       | 113   |    
|                                               | Federal funds sold                             |                       |       | 195   |      |                            |       | (136                       | )   |                            |        | 59     |      |        |        | (40   | )    |        |        | (30    | )    |   |        | (70    | )    |   |       | (745  | )   |     |        | 26  |     |   |       | (719  | )  
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |    
|                                               |                                                |                       |       | Total |      |                            | 6,344 |                            |     |                            | (3,806 | )      |      |        | 2,538  |       |      |        | 5,341  |        |      |   | (3,630 | )      |      |   | 1,711 |       |     |     | 6,070  |     |     |   | 414   |       |     |   | 6,484 | 
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |    
|Interest-bearing liabilities:                  |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |      
|                                               | Interest-bearing checking
and savings accounts |                       |       | 659   |      |                            |       | (2,244                     | )   |                            |        | (1,585 | )    |        |        | 152   |      |        |        | (1,890 | )    |   |        | (1,738 | )    |   |       | (2    | )   |     |        | 910 |     |   |       | 908   |    
|                                               | Time deposits                                  |                       |       | 540   |      |                            |       | (2,230                     | )   |                            |        | (1,690 | )    |        |        | 1,102 |      |        |        | (443   | )    |   |        | 659    |      |   |       | 1,235 |     |     |        | 605 |     |   |       | 1,840 |    
|                                               | Borrowed funds                                 |                       |       | 60    |      |                            |       | (586                       | )   |                            |        | (526   | )    |        |        | 618   |      |        |        | (212   | )    |   |        | 406    |      |   |       | 834   |     |     |        | 106 |     |   |       | 940   |    
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |    
|                                               |                                                |                       |       | Total |      |                            | 1,259 |                            |     |                            | (5,060 | )      |      |        | (3,801 | )     |      |        | 1,872  |        |      |   | (2,545 | )      |      |   | (673  | )     |     |     | 2,067  |     |     |   | 1,621 |       |     |   | 3,688 | 
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |    
|Net increase (decrease) in
net interest income |                                                | $                     | 5,085 |       |      | $                          | 1,254 |                            |     | $                          | 6,339  |        |      | $      | 3,469  |       |      | $      | (1,085 | )      |      | $ | 2,384  |        |      | $ | 4,003 |       |     | $   | (1,207 | )   |     | $ | 2,796 |      
|                                               |                                                |                       |       |       |      |                            |       |                            |     |                            |        |        |      |        |        |       |      |        |        |        |      |   |        |        |      |   |       |       |     |     |        |     |     |   |       |       |    

Net interest income on a tax equivalent basis, before provision for loan
losses, for the year ended December 31, 2002 was $30.25 million, an increase of
26.34% compared to net interest income of $23.94 million in 2001, an increase
of 10.96% compared to net interest income of $21.58 million in 2000. The
overall tax-equivalent earning asset yield was 8.04% in 2002 compared to 8.79%
in 2001 and 9.48% in 2000. For the same years, rates on interest-bearing
liabilities were 2.19%, 3.72% and 4.42%, respectively. The net interest spread
for year 2002, increased 78 basis points over year 2001.

Total interest-earning assets averaged $472.87 million for the year ended
December 31, 2002, compared to $404.32 million and $356.81 million for the
corresponding periods in 2001 and 2000. Most of the increase occurred in the
loan category. Increases in the loan portfolio are attributed to favorable
interest rates and the execution of Columbias strategy to provide personal,
quality banking products and services, to hire experienced lending personnel in
strategic branch locations and administrative capacities, and to emphasize its
marketing strategies.

Interest-bearing liabilities averaged $353.43 million for the year ended
December 31, 2002 compared to $311.28 million during the same period in 2001.
Interest cost, as a percentage of earning assets, decreased to 1.64% in 2002,
compared to 2.87% in 2001 and 3.43% in 2000.





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##### Table of Contents



Average loans, which generally carry a higher yield than investment
securities and other earning assets, comprised 88.74% of average earning assets
during 2002, compared to 86.13% in 2001 and 80.73% in 2000. During the same
periods, average yields on loans were 8.42% in 2002, 9.23% in 2001, and 10.23%
in 2000. Average investment securities comprised 7.62% of average earning
assets in 2002, which was down from 11.73% in 2001 and 16.76% in 2000. Tax
equivalent interest yields on investment securities were 6.31% for 2002, 6.19%
in 2001 and 6.32% in 2000.

Provision for Loan Losses

The provision for loan losses represents charges made to earnings to
maintain an adequate allowance for loan losses. The allowance is maintained at
an amount management believes to be sufficient to absorb losses in the loan
portfolio. Factors considered in establishing an appropriate allowance include
a careful assessment of the financial condition of the borrower; a realistic
determination of the value and adequacy of underlying collateral; the condition
of the local economy and the condition of the specific industry of the
borrower; a comprehensive analysis of the levels and trends of loan categories;
and, a review of delinquent and classified loans. Columbia applies a
systematic process for determining the adequacy of the allowance for loan
losses, including an internal loan review function and a quarterly analysis of
the adequacy of the allowance. The quarterly analysis includes determination
of specific potential loss factors on individual classified loans, historical
potential loss factors derived from actual net charge-off experience and trends
in nonperforming loans, and potential loss factors for other loan portfolio
risks such as loan concentrations, the condition of the local economy, and the
nature and volume of loans. For the year ended December 31, 2002 the allowance
for loan losses totaled $6.42 million, compared to $5.31 million at December
31, 2001, and $4.58 million at December 31, 2000. This represents an increase
of 20.80% between 2001 and 2002 and an increase of 16.03% between 2000 and
2001. A more detailed review of the loan loss provision and allowance for loan
losses is presented in Table 13.

The recorded values of loans actually removed from the consolidated
balance sheets are referred to as charge-offs and, after netting out recoveries
on previously charged-off loans, become net charge-offs. Columbias policy is
to charge off loans when, in managements opinion, the loan or a portion
thereof is deemed uncollectible, although concerted efforts are made to
maximize recovery after the charge-off. When a provision for loan loss is
recorded, the amount is based on past charge-off experience, a careful analysis
of the current portfolio, and an evaluation of economic trends in Columbias
market areas. Management will continue to closely monitor the loan quality of
new and existing relationships through stringent review and evaluation
procedures and by making loan officers accountable for collection efforts.

For the year ended December 31, 2002, loan charge-offs exceeded recoveries
by $695,000 as compared to 2001 and 2000, when loan charge-offs exceeded
recoveries by $716,000 and $417,000, respectively. A more detailed review of
the net charge-offs is presented in Table 13.

Noninterest Income

Total noninterest income increased 44.78% from year 2000 through year
2001, but declined 6.99% from year 2001 through 2002. During the prior three
years, noninterest income changed from $6.35 million in 2000, to $9.19 million
in 2001, and to $8.55 million in 2002. Noninterest income is primarily
comprised of five categories-service charges and fees, mortgage group net
revenues, credit card discounts and fees, financial services department income,
and other noninterest income. Each of the categories increased during the
prior three years, except for mortgage group revenues. Mortgage group revenues
increased $2.17 million from 2000 to 2001, but decreased $2.07 million from
2001 to 2002. The decrease in mortgage group revenues during 2002 was due to
higher amortization expense and valuation write-downs of CRBs mortgage
servicing asset. Management attributes this to accelerated prepayment rates in
mortgage loans serviced due in large part to the low mortgage rate environment.
Service charges and fees were $4.09 million for the year 2002, compared to
$3.01 million for the year 2001, and $2.60 million for the year 2000. The
growth in service charges and fees were attributable to growth in deposits and
the implementation of an overdraft protection product known as bounce. The
bounce product allows demand deposit customers to overdraw their accounts
within a pre-established limit for a fee. The remainder of the increases





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##### Table of Contents



in noninterest income is primarily attributable to improved revenues and growth
received from credit card discounts and fees, financial services fee income,
and other noninterest income fees and charges.

Noninterest Expense

Noninterest expenses consist principally of salaries and benefits,
occupancy costs, data processing expenses and other noninterest expenses. A
measure of Columbias ability to control noninterest expenses is the efficiency
ratio. For the year ended December 31, 2002, the efficiency ratio was 57.26%,
as compared to 60.20% in 2001 and 62.17% in 2000. The efficiency ratio
reflects an improving trend due to growth in revenue from the net interest
margin and efforts by management to monitor and control overhead expenses.

Noninterest expense for 2002 was $21.98 million, as compared to $19.49
million for 2001 and $16.84 million for 2000. The changes in noninterest
expense are the result of increased personnel expenses due to higher incentive
compensation and commissions paid to personnel, occupancy expense, and other
noninterest expenses. The additional increases relate primarily to costs
associated with growth in operations and continued investment in technology and
communication systems.

Income Taxes

The provision for income taxes was $5.22 million in 2002, $4.38 million in
2001 and $3.30 million in 2000. The provision resulted in effective combined
federal and state tax rates of 35.77% in 2002, 37.25% in 2001, and 37.01% in
2000. The effective tax rates differ from combined estimated statutory rates
of 38% principally due to the effects of nontaxable interest income, which is
recognized for accounting purposes but not for tax purposes.

Summary Balance Sheets

|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |        |       |   |  | 
|---------------------- | ---------------------------- | ------------------------------------------ | ------ | ------- | ------------ | ---- | ------ | ------------------- | ------- | ------------------- | ------ | ------------------- | ------- |  | ----- | ------ | ------ |  | ---- | ------ | ----- | - | ----- | ------- | ------ |  | ----- | ------ | ----- | - |  | 
|                       |                              |                                            |        |         | December 31, |      |        |                     |         |                     |        | Increase (Decrease) |         |  |       |        |        |  |      |       
|Table 8                |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |       
|(dollars in thousands) |                              | 2002                                       |        | 2001    |              | 2000 |        | 12/31/01
 12/31/02 |         | 12/31/00
 12/31/01
|                       |                              |                                            |        |         |              |      |        |                     |         |                    
|ASSETS                 |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|                       | Federal funds sold           |                                            | $      | 3,735   |              |      | $      | 1,525               |         |                     | $      | 1,141               |         |  | $     | 2,210  |        |  |      | 144.92 | %     |   | $     | 384     |        |  |       | 33.65  | %    
|                       | Investments                  |                                            |        | 36,048  |              |      |        | 43,532              |         |                     |        | 60,544              |         |  |       | (7,484 | )      |  |      | (17.19 | )     |   |       | (17,012 | )      |  |       | (28.10 | )    
|                       | Loans                        |                                            |        | 432,687 |              |      |        | 380,283             |         |                     |        | 299,881             |         |  |       | 52,404 |        |  |      | 13.78  | %     |   |       | 80,402  |        |  |       | 26.81  | %    
|                       | Other assets (1)             |                                            |        | 71,856  |              |      |        | 56,867              |         |                     |        | 55,293              |         |  |       | 14,989 |        |  |      | 26.36  | %     |   |       | 1,574   |        |  |       | 2.85   | %    
|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|                       |                              | Total assets                               |        | $       | 544,326      |      |        | $                   | 482,207 |                     |        | $                   | 416,859 |  |       | $      | 62,119 |  |      |        | 12.88 | % |       | $       | 65,348 |  |       |        | 15.68 | %
|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|LIABILITIES            |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|                       | Noninterest-bearing
deposits |                                            | $      | 129,042 |              |      | $      | 108,522             |         |                     | $      | 87,824              |         |  | $     | 20,520 |        |  |      | 18.91  | %     |   | $     | 20,698  |        |  |       | 23.57  | %    
|                       | Interest-bearing deposits    |                                            |        | 326,793 |              |      |        | 286,113             |         |                     |        | 258,603             |         |  |       | 40,680 |        |  |      | 14.22  |       |   |       | 27,510  |        |  |       | 10.64  | %    
|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|                       |                              | Total deposits                             |        |         | 455,835      |      |        |                     | 394,635 |                     |        |                     | 346,427 |  |       |        | 61,200 |  |      |        | 15.51 |   |       |         | 48,208 |  |       |        | 13.92 | %
|                       | Other liabilites (2)         |                                            |        | 38,301  |              |      |        | 41,127              |         |                     |        | 29,106              |         |  |       | (2,826 | )      |  |      | (6.87  | )     |   |       | 12,021  |        |  |       | 41.30  | %    
|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|                       |                              | Total liabilities                          |        |         | 494,136      |      |        |                     | 435,762 |                     |        |                     | 375,533 |  |       |        | 58,374 |  |      |        | 13.40 |   |       |         | 60,229 |  |       |        | 16.04 | %
|SHAREHOLDERS
EQUITY   |                              |                                            | 50,190 |         |              |      | 46,445 |                     |         |                     | 41,326 |                     |         |  | 3,745 |        |        |  | 8.06 |        |       |   | 5,119 |         |        |  | 12.39 | %     
|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       
|                       |                              | Total liabilities and
shareholders equity |        | $       | 544,326      |      |        | $                   | 482,207 |                     |        | $                   | 416,859 |  |       | $      | 62,119 |  |      |        | 12.88 | % |       | $       | 65,348 |  |       |        | 15.68 | %
|                       |                              |                                            |        |         |              |      |        |                     |         |                     |        |                     |         |  |       |        |        |  |      |        |       |   |       |         |        |  |       |       



|(1) |  | Includes cash and due from banks, property and equipment, and accrued interest receivable.
|--- |  | ------------------------------------------------------------------------------------------
|   
|(2) |  | Includes accrued interest payable and other liabilities.                                  





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##### Table of Contents



Financial Condition
Investments

A year-to-year comparison shows that Columbias investment securities at
December 31, 2002, totaled $36.05 million, compared to $43.53 million at
December 31, 2001, and $60.54 million at December 31, 2000. This represents a
decrease of 17.19% between 2001 and 2002 and a decrease of 28.10% between 2000
and 2001. The decrease in the investment portfolio is primarily a function of
call provisions that were being exercised during the prior two years of falling
interest rates. For the years ended December 31, 2002, 2001 and 2000, no
single investment security held by Columbia equaled or exceeded 10% of it
consolidated shareholders equity. On December 31, 2002, investments in
federal funds sold (an overnight investment) were $3.74 million and investments
in restricted stock were $2.70 million. The balance of federal funds sold is
influenced by cash demands, customer deposit levels, loan activity, and other
investment transactions.

Columbia follows a financial accounting principle which requires that
investment securities be identified as held-to-maturity or available-for-sale.
Held-to-maturity securities are those that Columbia has the intent and ability
to hold until they mature or are called. Available-for-sale securities are
those that management may sell if liquidity requirements dictate or if
alternative investment opportunities arise. The mix of available-for-sale and
held-to-maturity investment securities is determined by management, based on
Columbias asset-liability policy, managements assessment of the relative
liquidity of Columbia, and other factors.

At December 31, 2002, the investment portfolio, excluding restricted
equity securities, consisted of 44.23% available-for-sale securities and 55.77%
held-to-maturity securities. At December 31, 2001, the portfolio consisted of
45.36% available-for-sale securities and 54.64% held-to-maturity securities.
At December 31, 2000, Columbias investment portfolio, excluding restricted
equity securities, consisted of 66.87% available-for-sale securities and 33.13%
held-to-maturity securities.

At December 31, 2002, Columbias investment portfolio had total net
unrealized gains of approximately $1.10 million. This compares to net
unrealized gains of approximately $707,000 at December 31, 2001 and net
unrealized gains of $5,000 at December 31, 2000. Unrealized gains and losses
reflect changes in market conditions and do not represent the amount of actual
profits or losses. Actual realized gains and losses occur at the time
investment securities are sold or called.

Federal funds sold are short-term investments that mature on a daily
basis. Columbia invests in these instruments to provide for additional
earnings on excess available cash balances. Because of their short maturities,
the balance of federal funds sold fluctuates dramatically on a day-to-day
basis. The balance on any one day is influenced by cash demands, customer
deposit levels, loan activity and other investment transactions. Investments
in federal funds sold totaled $3.74 million at December 31, 2002, compared to
$1.53 million at December 31, 2001, and $1.14 million at December 31, 2000.

The following table provides the carrying value of Columbias portfolio of
investment securities as of December 31, 2002, 2001, and 2000, respectively.

|                                |                             |              |        |              |  |              |        |        |  |  |        |        |  | 
|------------------------------- | --------------------------- | ------------ | ------ | ------------ |  | ------------ | ------ | ------ |  |  | ------ | ------ |  | 
|Table 9                         |                             | December 31, |        | December 31, |  | December 31,
|(dollars in thousands)          |                             | 2002         |        | 2001         |  | 2000        
|                                |                             |              |        |              |  |             
|Investments available-for-sale: |                             |              |        |              |  |              |        |        |  |  |        |       
|                                | U.S. Treasury securities    |              | $      |             |  |              | $      | 1,016  |  |  | $      | 1,015  | 
|                                | U.S. Government obligations |              |        | 11,644       |  |              |        | 14,208 |  |  |        | 34,532 | 
|                                | Corporate debt securities   |              |        | 1,266        |  |              |        | 1,281  |  |  |        | 1,230  | 
|                                | Corporate equity securities |              |        | 113          |  |              |        | 300    |  |  |        | 300    | 
|                                | Municipal securities        |              |        | 1,727        |  |              |        | 1,997  |  |  |        | 2,311  | 
|                                |                             |              |        |              |  |              |        |        |  |  |        |        | 
|                                |                             |              | 14,750 |              |  |              | 18,802 |        |  |  | 39,388 |       
|                                |                             |              |        |              |  |              |        |        |  |  |        |        | 





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##### Table of Contents



|                              |                                                  |                             |        |              |        |              |        |        |        |  |        |        |        | 
|----------------------------- | ------------------------------------------------ | --------------------------- | ------ | ------------ | ------ | ------------ | ------ | ------ | ------ |  | ------ | ------ | ------ | 
|                              |                                                  | December 31,                |        | December 31, |        | December 31,
|Table 9                       |                                                  | 2002                        |        | 2001         |        | 2000        
|(dollars in thousands)        |                                                  |                             |        |              |        |             
|Investments held-to-maturity: |                                                  |                             |        |              |        |              |        |        |        |  |        |       
|                              | U.S. Government obligations                      |                             |        | 82           |        |              |        |       |        |  |        |       |       
|                              | Obligations of states and political subdivisions |                             |        | 14,748       |        |              |        | 15,742 |        |  |        | 16,328 |       
|                              | Mortgage-backed securities                       |                             |        | 3,770        |        |              |        | 6,916  |        |  |        | 3,190  |       
|                              |                                                  |                             |        |              |        |              |        |        |        |  |        |        |       
|                              |                                                  |                             | 18,600 |              |        |              | 22,658 |        |        |  | 19,518 |       
|                              |                                                  |                             |        |              |        |              |        |        |        |  |        |        |       
|Restricted equity securities  |                                                  |                             | 2,698  |              |        |              | 2,072  |        |        |  | 1,638  |       
|                              |                                                  |                             |        |              |        |              |        |        |        |  |        |        |       
|                              |                                                  | Total investment securities |        | $            | 36,048 |              |        | $      | 43,532 |  |        | $      | 60,544 | 
|                              |                                                  |                             |        |              |        |              |        |        |        |  |        |        |       

The maturities of investment securities, segmented by amortized cost, estimated
fair value, and tax equivalent yields, were as follows as of the dates
indicated:

|                                                  |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |      |      |  
|------------------------------------------------- | ----------------- | --------------------- | ----- | ----------------- | ------ | ----------------- | ----- | ------ | ------ | ---------- |  | --------- | ---- | ---- | ----- | ---------- | ------ | --------- | ----- | ------ | ------ |  |  | ---- | ---- | - | ----- | ------ | ------ |  | ----- | ------ | ------ |  |  | ---- | ---- | -
|Table 10                                          |                   | December
31, 2002     |       | December 31, 2001 |        | December 31, 2000
|                                                  |                   |                       |       |                   |        |                  
|                                                  |                   |                       |       | Amortized         |        | Estimated         |       | %      |        | Amortized  |  | Estimated |      | %    |       | Amortized  |        | Estimated |       | %     
|(dollars in thousands)                            |                   | Cost                  |       | Fair Value        |        | Yield*            |       | Cost   |        | Fair Value |  | Yield*    |      | Cost |       | Fair Value |        | Yield*   
|                                                  |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |          
|U.S. Treasuries and
agencies:                     |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |     
|                                                  | One year or less  |                       | $     |                  |        |                   | $     |       |        |            |  |          |      |      | $     | 1,004      |        |           | $     | 1,016  |        |  |  | 1.88 | %    |   | $     |       |        |  | $     |       |        |  |  |     |     
|                                                  | One to five years |                       |       |                  |        |                   |       |       |        |            |  |          |      |      |       |           |        |           |       |       |        |  |  |     |      |   |       | 1,018  |        |  |       | 1,015  |        |  |  | 5.41 | %   
|U.S. Government
agencies:                         |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |     
|                                                  | One year or less  |                       |       | 9,809             |        |                   |       | 10,034 |        |            |  | 2.98      | %    |      |       | 7,479      |        |           |       | 7,592  |        |  |  | 3.80 | %    |   |       | 2,913  |        |  |       | 2,902  |        |  |  | 6.18 | %   
|                                                  | One to five years |                       |       | 5,461             |        |                   |       | 5,530  |        |            |  | 2.50      | %    |      |       | 11,808     |        |           |       | 12,127 |        |  |  | 4.11 | %    |   |       | 32,913 |        |  |       | 32,813 |        |  |  | 6.03 | %   
|                                                  | Five to ten years |                       |       |                  |        |                   |       |       |        |            |  |          |      |      |       | 1,428      |        |           |       | 1,433  |        |  |  | 5.87 | %    |   |       | 2,004  |        |  |       | 2,002  |        |  |  | 6.20 | %   
|Obligations of states
and political
subdivisions: |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |     
|                                                  | One year or less  |                       |       | 2,212             |        |                   |       | 2,250  |        |            |  | 3.38      | %    |      |       | 1,260      |        |           |       | 1,281  |        |  |  | 3.39 | %    |   |       | 1,210  |        |  |       | 1,215  |        |  |  | 6.42 | %   
|                                                  | One to five years |                       |       | 3,421             |        |                   |       | 3,574  |        |            |  | 3.89      | %    |      |       | 5,133      |        |           |       | 5,257  |        |  |  | 5.18 | %    |   |       | 5,294  |        |  |       | 5,342  |        |  |  | 6.56 | %   
|                                                  | Five to ten years |                       |       | 8,228             |        |                   |       | 8,684  |        |            |  | 6.04      | %    |      |       | 4,299      |        |           |       | 4,336  |        |  |  | 6.87 | %    |   |       | 4,418  |        |  |       | 4,418  |        |  |  | 6.82 | %   
|                                                  | Over ten years    |                       |       | 2,613             |        |                   |       | 2,738  |        |            |  | 6.40      | %    |      |       | 6,993      |        |           |       | 7,022  |        |  |  | 7.23 | %    |   |       | 7,695  |        |  |       | 7,772  |        |  |  | 7.16 | %   
|Corporate and other debt
securities:              |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |     
|                                                  | One year or less  |                       |       |                  |        |                   |       |       |        |            |  |          |      |      |       |           |        |           |       |       |        |  |  |     |      |   |       |       |        |  |       |       |        |  |  |     |     
|                                                  | One to five years |                       |       | 1,229             |        |                   |       | 1,266  |        |            |  | 2.57      | %    |      |       | 1,234      |        |           |       | 1,281  |        |  |  | 4.25 | %    |   |       | 1,239  |        |  |       | 1,230  |        |  |  | 6.74 | %   
|                                                  |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |      |     
|                                                  |                   | Total debt securities |       |                   | 32,973 |                   |       |        | 34,076 |            |  |           | 4.06 | %    |       |            | 40,638 |           |       |        | 41,345 |  |  |      | 4.99 | % |       |        | 58,704 |  |       |        | 58,709 |  |  |      | 6.31 | %
|Corporate equity securities                       |                   |                       | 113   |                   |        |                   | 113   |        |        |            |  |           |      |      | 300   |            |        |           | 300   |        |        |  |  |      |      |   | 300   |        |        |  | 300   |        |        |  |  |     
|Restricted equity securities                      |                   |                       | 2,698 |                   |        |                   | 2,698 |        |        |            |  |           |      |      | 2,072 |            |        |           | 2,072 |        |        |  |  |      |      |   | 1,638 |        |        |  | 1,638 |        |        |  |  |      |     
|                                                  |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |      |      |  
|                                                  |                   | Total securities      |       | $                 | 35,784 |                   |       | $      | 36,887 |            |  |           |      |      |       | $          | 43,010 |           |       | $      | 43,717 |  |  |      |      |   |       | $      | 60,642 |  |       | $      | 60,647 |  |  |      |      |  
|                                                  |                   |                       |       |                   |        |                   |       |        |        |            |  |           |      |      |       |            |        |           |       |        |        |  |  |      |      |   |       |        |        |  |       |        |        |  |  |      |      |  

*     Weighted average yields are stated on a federal tax-equivalent basis at a 34%
rate, and have been annualized, where appropriate.

Loans

Columbias loan policies and procedures establish the basic guidelines
governing its lending operations. Generally, the guidelines address the types
of loans that it seeks, target markets, underwriting and collateral
requirements, terms, interest rate and yield considerations, and compliance
with laws and regulations. All loans or credit lines are subject to approval
procedures and amount limitations. These limitations apply to the borrowers
total outstanding indebtedness to CRB, including the indebtedness of any
guarantor. The policies are reviewed and approved by the Board of Directors of
CRB.

Bank officers are charged with loan origination in compliance with
underwriting standards overseen by the loan administration department and in
conformity with established loan policies. On an annual basis, the Board of
Directors determines the lending authority of the President and the Chief
Credit Officer, who then delegate lending authority to other lending officers.
Such delegated authority may include authority related to loans, letters of
credit, overdrafts, uncollected funds, and such other authority as determined
by the Board, the President or Chief Credit Officer within their delegated
authority.

The Chief Credit Officer has the authority to approve loans up to a
lending limit as set by the Board of Directors. All loans above the lending
limit of the Chief Credit Officer, and up to a certain limit, are reviewed for
approval by the President or Chief Operating Officer. Loans, which exceed this
limit, are subject to review and approval by the Boards Loan Committee. All
loans approved by the Board Loan Committee are reviewed by the full Board at
regularly scheduled meetings. Columbias unsecured legal lending limit was
$7.68 million and real estate secured lending limit was $12.79 million at
December 31, 2002. Columbia seldom makes loans for an amount approaching its
legal lending limits.

Net outstanding loans totaled $432.69 million at December 31, 2002,
representing an increase of $52.40 million, or 13.78% compared to $380.28
million as of December 31, 2001. Loan commitments grew to $166.81 million as
of December 31, 2002, representing an increase of $32.91 million over year-end
2001.

Columbias net loan portfolio at December 31, 2002, includes loans secured
by real estate 64.28%, commercial loans 16.48%, agricultural loans 14.57%,
consumer loans 6.47%, deferred loan fees (0.29%) and reserve for loan loss
(1.51%). The largest category is concentrated in real estate loans. This is
primarily due to the significant growth of mortgage and commercial real estate
loan activity. Residential mortgage loans usually are temporarily financed on
the balance sheet before being sold to the secondary market. Some commercial
loans are secured by real estate, but are used for purposes other than
financing the purchase of real property, such as inventory financing and
equipment purchases, where real property serves as collateral for the loan.





---



##### Table of Contents



The following table presents the composition of Columbias loan portfolio,
excluding mortgage loans held for sale, at the dates indicated:

|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |       |        |  
|----------------------------- | ------------------- | ----------------- | ------- | ----------------- | ------- | ----------------- | ------ | ----------------- | ------ | ----------------- | ------- | ---------- | ------- | ------ | ------ | ---------- | ------ | ------ | ------- | ---------- | ------- |  | ------ | ----- | ------ | - | ------- | ------ | ------- |  | ------ | ----- | ------ | - | ------- | ------ | ------- |  | ------ | ----- | ------ | -
|                              |                     | December 31, 2002 |         | December 31, 2001 |         | December 31, 2000 |        | December 31, 1999 |        | December 31, 1998
|                              |                     |                   |         |                   |         |                   |        |                   |        |                  
|(dollars in thousands)        |                     | Amount            |         | Percentage        |         | Amount            |        | Percentage        |        | Amount            |         | Percentage |         | Amount |        | Percentage |        | Amount |         | Percentage
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |           
|Commercial                    |                     | $                 | 69,882  |                   |         |                   | 16.48  | %                 |        | $                 | 64,163  |            |         |        | 17.76  | %          |        | $      | 70,790  |            |         |  | 23.61  | %     |        | $ | 60,869  |        |         |  | 23.61  | %     |        | $ | 41,275  |        |         |  | 23.61  | %    
|Agricultural                  |                     |                   | 61,770  |                   |         |                   | 14.57  | %                 |        |                   | 54,934  |            |         |        | 15.20  | %          |        |        | 44,299  |            |         |  | 14.77  | %     |        |   | 37,775  |        |         |  | 14.77  | %     |        |   | 34,604  |        |         |  | 14.77  | %    
|Real estate secured loans:    |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      
|                              | Commercial property |                   |         | 100,918           |         |                   |        | 23.81             | %      |                   |         | 80,092     |         |        |        | 22.17      | %      |        |         | 58,411     |         |  |        | 19.48 | %      |   |         | 43,469 |         |  |        | 19.48 | %      |   |         | 41,090 |         |  |        | 19.48 | %     
|                              | Farmland            |                   |         | 35,748            |         |                   |        | 8.43              | %      |                   |         | 25,292     |         |        |        | 7.00       | %      |        |         | 20,723     |         |  |        | 6.91  | %      |   |         | 13,270 |         |  |        | 6.91  | %      |   |         | 8,603  |         |  |        | 6.91  | %     
|                              | Construction        |                   |         | 91,036            |         |                   |        | 21.47             | %      |                   |         | 70,474     |         |        |        | 19.50      | %      |        |         | 41,374     |         |  |        | 13.80 | %      |   |         | 33,780 |         |  |        | 13.80 | %      |   |         | 20,048 |         |  |        | 13.80 | %     
|                              | Residential         |                   |         | 42,688            |         |                   |        | 10.07             | %      |                   |         | 44,512     |         |        |        | 12.32      | %      |        |         | 45,612     |         |  |        | 15.21 | %      |   |         | 36,768 |         |  |        | 15.21 | %      |   |         | 36,100 |         |  |        | 15.21 | %     
|                              | Home equity lines   |                   |         | 2,102             |         |                   |        | 0.50              | %      |                   |         | 3,309      |         |        |        | 0.92       | %      |        |         | 3,393      |         |  |        | 1.13  | %      |   |         | 3,027  |         |  |        | 1.13  | %      |   |         | 2,675  |         |  |        | 1.13  | %     
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      
|                              |                     | Total real estate |         |                   | 272,492 |                   |        |                   | 64.28  | %                 |         |            | 223,679 |        |        |            | 61.91  | %      |         |            | 169,513 |  |        |       | 56.53  | % |         |        | 130,314 |  |        |       | 56.53  | % |         |        | 108,516 |  |        |       | 56.53  | %
|Consumer                      |                     |                   | 20,937  |                   |         |                   | 4.94   | %                 |        |                   | 19,802  |            |         |        | 5.48   | %          |        |        | 19,195  |            |         |  | 6.40   | %     |        |   | 18,086  |        |         |  | 6.40   | %     |        |   | 16,569  |        |         |  | 6.40   | %    
|Other                         |                     |                   | 6,499   |                   |         |                   | 1.53   | %                 |        |                   | 5,251   |            |         |        | 1.45   | %          |        |        | 1,690   |            |         |  | 0.56   | %     |        |   | 827     |        |         |  | 0.56   | %     |        |   | 933     |        |         |  | 0.56   | %    
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      
|                              |                     | Total loans       |         |                   | 431,580 |                   |        |                   | 101.81 | %                 |         |            | 367,829 |        |        |            | 101.80 | %      |         |            | 305,487 |  |        |       | 101.87 | % |         |        | 247,871 |  |        |       | 101.87 | % |         |        | 201,897 |  |        |       | 101.87 | %
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      
|Less deferred loan fees       |                     |                   | (1,245  | )                 |         |                   | (0.29  | )%                |        |                   | (1,194  | )          |         |        | (0.33  | )%         |        |        | (1,028  | )          |         |  | (0.34  | )%    |        |   | (891    | )      |         |  | (0.34  | )%    |        |   | (784    | )      |         |  | (0.34  | )%   
|Less reserve for loan losses  |                     |                   | (6,417  | )                 |         |                   | (1.51  | )%                |        |                   | (5,312  | )          |         |        | (1.47  | )%         |        |        | (4,578  | )          |         |  | (1.53  | )%    |        |   | (3,298  | )      |         |  | (1.53  | )%    |        |   | (2,380  | )      |         |  | (1.53  | )%   
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      
|Loans receivable, net         |                     | $                 | 423,918 |                   |         |                   | 100.00 | %                 |        | $                 | 361,323 |            |         |        | 100.00 | %          |        | $      | 299,881 |            |         |  | 100.00 | %     |        | $ | 243,682 |        |         |  | 100.00 | %     |        | $ | 198,733 |        |         |  | 100.00 | %    
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      
|Volume change from prior year |                     |                   |         |                   |         |                   | 17.32  | %                 |        |                   |         |            |         |        | 20.49  | %          |        |        |         |            |         |  | 23.06  | %     |        |   |         |        |         |  | 22.62  | %     |        |   |         |        |         |  | 28.03  | %    
|                              |                     |                   |         |                   |         |                   |        |                   |        |                   |         |            |         |        |        |            |        |        |         |            |         |  |        |       |        |   |         |        |         |  |        |       |        |   |         |        |         |  |        |      

The following table sets forth Columbias loan portfolio maturities, excluding
mortgage loans held for sale, on fixed rate loans and repricing dates on
variable loans, for the periods indicated:

|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |         |         | 
|---------------------------------- | ------------------- | ----------------------- | ------ | ---------- | ------- | ----------------- | ------ | -------- | ------- | ----- | ----- | ------ | ------ | - | ------- | ------- | ------- | 
|                                   |                     |                         |        |            |         | December 31, 2002 |        |          |         |      
|                                   |                     |                         |        |            |         |                   |        |          |         |      
|                                   |                     |                         |        |            |         |                   |        | One year |         |       |       |        |        |   |         |        
|                                   |                     |                         |        | One year   |         | through           |        | After    |         | Total
|(dollars in thousands)             |                     | or less                 |        | five years |         | five years        |        | loans   
|                                   |                     |                         |        |            |         |                   |        |         
|Commercial loans                   |                     | $                       | 36,454 |            |         | $                 | 24,135 |          |         | $     | 9,293 |        |        | $ | 69,882  |        
|Agricultural loans                 |                     |                         | 50,749 |            |         |                   | 9,220  |          |         |       | 1,801 |        |        |   | 61,770  |        
|Real estate secured loans:         |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |        
|                                   | Commercial property |                         |        | 14,277     |         |                   |        | 50,671   |         |       |       | 35,970 |        |   |         | 100,918 |        
|                                   | Farmland            |                         |        | 6,407      |         |                   |        | 12,873   |         |       |       | 16,468 |        |   |         | 35,748  |        
|                                   | Construction        |                         |        | 78,786     |         |                   |        | 6,235    |         |       |       | 6,015  |        |   |         | 91,036  |        
|                                   | Residential         |                         |        | 11,364     |         |                   |        | 11,617   |         |       |       | 19,707 |        |   |         | 42,688  |        
|                                   | Home equity lines   |                         |        | 947        |         |                   |        | 264      |         |       |       | 891    |        |   |         | 2,102   |        
|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |        
|                                   |                     | Total real estate loans |        |            | 111,781 |                   |        |          | 81,660  |       |       |        | 79,051 |   |         |         | 272,492 | 
|Consumer                           |                     |                         | 8,104  |            |         |                   | 10,376 |          |         |       | 2,457 |        |        |   | 20,937  |        
|Other                              |                     |                         | 5,169  |            |         |                   | 74     |          |         |       | 1,256 |        |        |   | 6,499   |        
|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |        
|                                   |                     | Total loans             |        | $          | 212,257 |                   |        | $        | 125,465 |       |       | $      | 93,858 |   |         | $       | 431,580 | 
|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |        
|Loans with fixed interest rates    |                     |                         |        |            |         |                   |        |          |         |       |       |        |        | $ | 279,059 |        
|Loans with floating interest rates |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   | 152,521 |        
|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |        
|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        | $ | 431,580 |        
|                                   |                     |                         |        |            |         |                   |        |          |         |       |       |        |        |   |         |        

Allowance for Loan and Lease Losses

The reserve for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the reserve for loan
losses when management believes that the collectibility of the principal or a
portion thereof is unlikely. The reserve is an amount that management believes
will be adequate to absorb possible losses on existing loans that may become
uncollectible, based on evaluations of the collectibility of loans and prior
loan loss experience. Accrual of interest is discontinued on a loan when
management believes, after considering economic and business conditions,
collection efforts and collateral position, that the borrowers financial
condition is such that collection of interest is doubtful.

Columbia follows guidance from the Interagency Policy Statement issued by
the Federal Financial Institutions Examination Council (FFIEC) regarding
Allowance for Loan and Lease Losses Methodologies. On a quarterly basis,
management determines the appropriate allowance for loan and lease losses using
the following three methodologies:



| |  |  | Loss allocation to groups of loans by internal risk grade
| | - |  | ---------------------------------------------------------
|
| |  |  | Loss allocation by loan type                             
|
| |  |  | Loss allocation by historical loss percentage            

Managements determination of the adequacy of the reserve is based on an
assessment of the risk in the portfolio given the conditions at the time. This
assessment consists of certain loans and leases being evaluated on an
individual basis, as well as all loans being categorized based on common credit
risk attributes and as a group. The adequacy of the allowance is monitored on
an ongoing basis and is based on managements evaluation of numerous factors.
These factors include the quality of the current loan portfolio, the trend in
the loan portfolios risk ratings, current economic conditions, loan
concentrations, loan growth rates, past-due and non-performing trends,
evaluations of specific loss estimates for all significant problem loans,
historical charge-off and recovery experience and other pertinent information.

The following table shows Columbias loan loss experience for the periods
indicated:

|                                                                        |            |      |         |      |   |      |         |                          |   |      |         |      |   |   |         |     |   |   |         |      |   |  | 
|----------------------------------------------------------------------- | ---------- | ---- | ------- | ---- | - | ---- | ------- | ------------------------ | - | ---- | ------- | ---- | - | - | ------- | --- | - | - | ------- | ---- | - |  | 
|Table 13                                                                |            |      |         |      |   |      |         | Years Ended December 31, |   |      |         |      |   |  
|(dollars in thousands)                                                  |            | 2002 |         | 2001 |   | 2000 |         | 1999                     |   | 1998
|                                                                        |            |      |         |      |   |      |         |                          |   |     
|Loans outstanding at end of period, net of
unearned interest income (1) |            | $    | 439,104 |      |   | $    | 385,595 |                          |   | $    | 304,459 |      |   | $ | 250,274 |     |   | $ | 208,932 |     
|                                                                        |            |      |         |      |   |      |         |                          |   |      |         |      |   |   |         |     |   |   |         |     
|Average loans outstanding for the period (1)                            |            | $    | 419,608 |      |   | $    | 348,239 |                          |   | $    | 288,058 |      |   | $ | 222,276 |     |   | $ | 175,588 |     
|                                                                        |            |      |         |      |   |      |         |                          |   |      |         |      |   |   |         |     |   |   |         |     
|Reserve for loan losses balance, beginning of year                      |            | $    | 5,312   |      |   | $    | 4,578   |                          |   | $    | 3,298   |      |   | $ | 2,380   |     |   | $ | 1,639   |     
|                                                                        |            |      |         |      |   |      |         |                          |   |      |         |      |   |   |         |     |   |   |         |     
|Loans charged off:                                                      |            |      |         |      |   |      |         |                          |   |      |         |      |   |   |         |     |   |   |         |     
|                                                                        | Commercial |      |         | (319 | ) |      |         | (587                     | ) |      |         | (139 | ) |   |         | (41 | ) |   |         | (219 | )





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##### Table of Contents



|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |      |    |      |  
|----------------------------------------------------------- | -------------------------------- | ---------------- | ----------------------- | ---- | --- | ------------------------ | ----- | ---- | -- | ---- | ----- | ---- | -- | ---- | ----- | --- | -- | ---- | ----- | ---- | -- | ---- | -
|                                                            |                                  |                  |                         |      |     | Years Ended December 31,
|Table 13                                                    |                                  | 2002             |                         | 2001 |     | 2000                     |       | 1999 |    | 1998
|(dollars in thousands)                                      |                                  |                  |                         |      |     |                          |       |      |    |     
|                                                            | Real estate                      |                  |                         | (197 | )   |                          |       | (56  | )  |      |       | (14  | )  |      |       | (15 | )  |      |       | (51  | ) 
|                                                            | Real estate construction         |                  |                         | (58  | )   |                          |       |     |    |      |       |     |    |      |       |    |    |      |       |     |   
|                                                            | Agriculture                      |                  |                         | (15  | )   |                          |       | (79  | )  |      |       | (256 | )  |      |       | (26 | )  |      |       | (369 | ) 
|                                                            | Consumer loans                   |                  |                         | (206 | )   |                          |       | (20  | )  |      |       | (8   | )  |      |       | (57 | )  |      |       | (77  | ) 
|                                                            | Credit card and related accounts |                  |                         | (91  | )   |                          |       | (57  | )  |      |       | (42  | )  |      |       | (43 | )  |      |       | (51  | ) 
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|                                                            |                                  |                  | Total loans charged-off |      |     | (886                     | )     |      |    | (799 | )     |      |    | (459 | )     |     |    | (182 | )     |      |    | (767 | )
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|Recoveries:                                                 |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|                                                            | Commercial                       |                  |                         | 97   |     |                          |       | 71   |    |      |       | 6    |    |      |       | 32  |    |      |       | 40   |   
|                                                            | Real estate                      |                  |                         |     |     |                          |       | 1    |    |      |       |     |    |      |       |    |    |      |       |     |   
|                                                            | Real estate construction         |                  |                         | 6    |     |                          |       |     |    |      |       |     |    |      |       |    |    |      |       |     |   
|                                                            | Agriculture                      |                  |                         | 11   |     |                          |       |     |    |      |       | 30   |    |      |       | 48  |    |      |       | 49   |   
|                                                            | Consumer loans                   |                  |                         | 72   |     |                          |       | 5    |    |      |       | 3    |    |      |       | 3   |    |      |       | 1    |   
|                                                            | Credit card and related accounts |                  |                         | 5    |     |                          |       | 6    |    |      |       | 3    |    |      |       | 12  |    |      |       | 8    |   
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|                                                            |                                  | Total recoveries |                         |      | 191 |                          |       |      | 83 |      |       |      | 42 |      |       |     | 95 |      |       |      | 98 |     
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|Net charge-offs                                             |                                  |                  | (695                    | )    |     |                          | (716  | )    |    |      | (417  | )    |    |      | (87   | )   |    |      | (669  | )   
|Provision charged to operations                             |                                  |                  | 1,800                   |      |     |                          | 1,450 |      |    |      | 1,697 |      |    |      | 1,005 |     |    |      | 1,000 |     
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|Acquisition of Valley Community Bancorp                     |                                  |                  |                        |      |     |                          |      |      |    |      |      |      |    |      |      |     |    |      | 410   |     
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|Reserve for loan losses balance, end of period              |                                  | $                | 6,417                   |      |     | $                        | 5,312 |      |    | $    | 4,578 |      |    | $    | 3,298 |     |    | $    | 2,380 |     
|                                                            |                                  |                  |                         |      |     |                          |       |      |    |      |       |      |    |      |       |     |    |      |       |     
|Ratio of net loans charged-off to
average loans outstanding |                                  |                  | 0.17                    | %    |     |                          | 0.21  | %    |    |      | 0.14  | %    |    |      | 0.04  | %   |    |      | 0.38  | %   
|Ratio of reserve for loan losses to loans at
end of period  |                                  |                  | 1.46                    | %    |     |                          | 1.38  | %    |    |      | 1.50  | %    |    |      | 1.32  | %   |    |      | 1.13  | %   



|(1) |  | Includes loans held-for-sale.
|--- |  | -----------------------------

The adequacy of the reserve for loan losses should be measured in the
context of several key ratios: (1) the ratio of the reserve to total
outstanding loans; (2) the ratio of total nonperforming loans to total loans;
and, (3) the ratio of net charge-offs to average loans outstanding. Since
1998, Columbias ratio of the reserve for loan losses to total loans has ranged
from 1.13% to 1.50%. The amounts provided by these ratios have been sufficient
to fund Columbias charge-offs, which have not been historically significant,
and to provide for potential losses as the loan portfolio has grown. These
ratios have also been consistent with the level of nonperforming loans to total
loans. From December 31, 1998 through December 31, 2002, nonperforming loans
to total loans have ranged from a low of 0.18% to a high of .91%. This
experience tracks with changes in the ratio of the reserve for loan losses to
total loans and with the actual balances maintained in the reserve account.
Finally, Columbias historical ratio of net charge-offs to average outstanding
loans illustrates its favorable loan charge-off and recovery experience. From
December 31, 1998 through December 31, 2002, net charge-offs ranged from 0.04%
to 0.38% of average loans. Management believes Columbias loan underwriting
policies and its loan officers knowledge of their customers are significant
contributors to Columbias success in limiting loan losses.

During the year ended December 31, 2002, Columbia recognized $886,000 in
loan losses and $191,000 in recoveries for a net charge-off of $695,000. These
were consistent with Columbias historical experience in view of the growth in
its loan portfolio.





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##### Table of Contents



The following table presents information with respect to nonperforming
loans and other assets:

|                                                               |  |                            |              |      |     |      |        |      |       |      |        |   |       |   |        |   |     |   |        |   |       | 
|-------------------------------------------------------------- |  | -------------------------- | ------------ | ---- | --- | ---- | ------ | ---- | ----- | ---- | ------ | - | ----- | - | ------ | - | --- | - | ------ | - | ----- | 
|                                                               |  |                            | December 31,
|Table 14                                                       |  | 2002                       |              | 2001 |     | 2000 |        | 1999 |       | 1998
|(dollars in thousands)                                         |  |                            |              |      |     |      |        |      |       |     
|Loans on nonaccrual status                                     |  | $                          | 742          |      |     | $    | 890    |      |       | $    | 1,163  |   |       | $ | 394    |   |     | $ | 1,082  |  
|Loans past due - greater than 90 days                          |  |                            | 5            |      |     |      |       |      |       |      | 7      |   |       |   |       |   |     |   |       |  
|Restructured loans                                             |  |                            | 25           |      |     |      | 113    |      |       |      | 116    |   |       |   | 202    |   |     |   | 825    |  
|                                                               |  |                            |              |      |     |      |        |      |       |      |        |   |       |   |        |   |     |   |        |  
|                                                               |  | Total nonperforming loans  |              |      | 772 |      |        |      | 1,003 |      |        |   | 1,286 |   |        |   | 596 |   |        |   | 1,907 | 
|Other real estate owned                                        |  |                            |             |      |     |      | 349    |      |       |      |       |   |       |   |       |   |     |   | 281    |  
|                                                               |  |                            |              |      |     |      |        |      |       |      |        |   |       |   |        |   |     |   |        |  
|                                                               |  | Total nonperforming assets |              | $    | 772 |      |        | $    | 1,352 |      |        | $ | 1,286 |   |        | $ | 596 |   |        | $ | 2,188 | 
|                                                               |  |                            |              |      |     |      |        |      |       |      |        |   |       |   |        |   |     |   |        |  
|Allowance for loans losses                                     |  | $                          | 6,417        |      |     | $    | 5,312  |      |       | $    | 4,578  |   |       | $ | 3,298  |   |     | $ | 2,380  |  
|Ratio of total nonperforming assets to
total assets            |  |                            | 0.14         | %    |     |      | 0.28   | %    |       |      | 0.31   | % |       |   | 0.16   | % |     |   | 0.64   | %
|Ratio of total nonperforming loans to
total loans              |  |                            | 0.18         | %    |     |      | 0.26   | %    |       |      | 0.43   | % |       |   | 0.24   | % |     |   | 0.91   | %
|Ratio of reserve for loan losses to
total nonperforming assets |  |                            | 830.73       | %    |     |      | 392.82 | %    |       |      | 355.95 | % |       |   | 553.45 | % |     |   | 108.82 | %

Columbia has adopted a policy for placement of loans on nonaccrual status
after they become 90 days past due unless an exception is made to the policy.
Further, Columbia may place loans that are not contractually past due or that
are deemed fully collateralized on nonaccrual status to promote better
oversight and review of loan arrangements. Loans on nonaccrual status at
December 31, 2002 totaled approximately $742,000 compared to $890,000 at
December 31, 2001 and $1.16 million at December 31, 2000.

Columbia has adopted procedures to identify and monitor loans that have
had their original terms restructured to accommodate borrowers financial
needs. Loan revisions and modifications are provided to meet the credit needs
of borrowers in weakened financial condition and to enhance ultimate
collection. As of December 31, 2002, loans that had been classified as
restructured were insignificant and were performing in accordance with their
restructured terms. However, management will continue to monitor loans for any
changes or deterioration in performance of restructured loans.

At December 31, 2002, 2000, and 1999 Columbia had no assets in the other
real estate owned (OREO) category. There was $349,000 in OREO at December
31, 2001 and $281,000 at December 31, 1998, which represents assets acquired
through loan foreclosure or recovery activities.





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##### Table of Contents



Deposits

The following table sets forth composition of Columbias deposit balances
for the dates indicated:

|                                 |                                                         |        |                   |            |                   |        |                   |            |   |        |         |            |  |  |       |        |   |   |         |         |  |  |       |        |  
|-------------------------------- | ------------------------------------------------------- | ------ | ----------------- | ---------- | ----------------- | ------ | ----------------- | ---------- | - | ------ | ------- | ---------- |  |  | ----- | ------ | - | - | ------- | ------- |  |  | ----- | ------ | -
|                                 |                                                         |        | December 31, 2002 |            | December 31, 2001 |        | December 31, 2000
|                                 |                                                         |        |                   |            |                   |       
|Table 15                         |                                                         | Amount |                   | Percentage |                   | Amount |                   | Percentage |   | Amount |         | Percentage
|(dollars in thousands)           |                                                         |        |                   |            |                   |        |                   |            |   |        |         |           
|Interest-bearing demand deposits |                                                         | $      | 182,341           |            |                   |        | 40.00             | %          |   | $      | 136,968 |            |  |  | 34.71 | %      |   | $ | 133,467 |         |  |  | 38.53 | %     
|Savings deposits                 |                                                         |        | 32,940            |            |                   |        | 7.23              |            |   |        | 32,237  |            |  |  | 8.17  |        |   |   | 27,252  |         |  |  | 7.87  |       
|Time deposits < 100k             |                                                         |        | 66,766            |            |                   |        | 14.66             |            |   |        | 79,451  |            |  |  | 20.13 |        |   |   | 70,481  |         |  |  | 20.36 |       
|Time deposits > 100k             |                                                         |        | 44,746            |            |                   |        | 9.82              |            |   |        | 37,458  |            |  |  | 9.49  |        |   |   | 27,403  |         |  |  | 7.91  |       
|                                 |                                                         |        |                   |            |                   |        |                   |            |   |        |         |            |  |  |       |        |   |   |         |         |  |  |       |       
|                                 | Total interest-bearing
deposits                         |        |                   | 326,793    |                   |        |                   | 71.69      |   |        |         | 286,114    |  |  |       | 72.50  |   |   |         | 258,603 |  |  |       | 74.65  |  
|                                 | Total noninterest-bearing
deposits                      |        |                   | 129,042    |                   |        |                   | 28.31      |   |        |         | 108,522    |  |  |       | 27.50  |   |   |         | 87,824  |  |  |       | 25.35  |  
|                                 |                                                         |        |                   |            |                   |        |                   |            |   |        |         |            |  |  |       |        |   |   |         |         |  |  |       |       
|                                 | Total interest-bearing and
noninterest-bearing
deposits |        | $                 | 455,835    |                   |        |                   | 100.00     | % |        | $       | 394,636    |  |  |       | 100.00 | % |   | $       | 346,427 |  |  |       | 100.00 | %
|                                 |                                                         |        |                   |            |                   |        |                   |            |   |        |         |            |  |  |       |        |   |   |         |         |  |  |       |       

At December 31, 2002, total deposits were $455.84 million, an increase of
$61.20 million or 15.51%, from total deposits of $394.64 million at December
31, 2001. The total deposits at December 31, 2001 of $394.64 million represent
an increase of $48.21 million or $13.92%, from total deposits of $346.43
million at December 31, 2000. Deposit growth in 2002, 2001 and 2000 was due to
a combination of pricing strategies, increased marketing and emphasis on the
sales culture within the branches. The growth in deposit accounts in 2002 has
primarily been in noninterest-bearing and interest-bearing demand accounts. To
the extent Columbia can fund operations with noninterest-bearing demand
deposits, net interest spread, which is the difference between interest income
and interest expense, will improve. At December 31, 2002, core deposits, which
consist of all demand deposit accounts, savings accounts and certificates of
deposit less than $100,000, accounted for 90.16% of total deposits, down from
92.38% as of December 31, 2001.

Interest-bearing deposits consist of money market, savings, and time
certificate accounts. Interest-bearing account balances tend to grow or
decline as Columbia adjusts its pricing and product strategies based on market
conditions, including competing deposit products. At December 31, 2002, total
interest-bearing deposit accounts were $326.79 million, an increase of $40.68
million, or 14.22%, from December 31, 2001. Increases in savings accounts and
in interest-bearing deposits offset a decline in time deposits.
Interest-bearing demand accounts increased $45.37 million, or 33.13%, from
December 31, 2001 to 2002, after increasing $3.50 million, or 2.62%, from 2000
to 2001.

Columbia does utilize brokered deposits as a source for funding future
loan growth. In most cases, brokered deposit accounts are purchased with a
long-term maturity of two to seven years. At December 31, 2002, time
certificates of deposits in excess of $100,000 totaled $44.75 million, or 9.82%
of total outstanding deposits, compared to $37.46 million, or 9.49%, of total
outstanding deposits at December 31, 2001, and $27.40 million, or 7.91%, of
total outstanding deposits at December 31, 2000. The following table sets
forth, by time remaining to maturity, all time certificates of deposit accounts
outstanding at December 31, 2002:





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##### Table of Contents



|                                      |  |        |        |        |  |       |        |  |  |   |         | 
|------------------------------------- |  | ------ | ------ | ------ |  | ----- | ------ |  |  | - | ------- | 
|                                      |  | CDs    |        | CDs    |  |       |        | 
|Table 16                              |  | < 100k |        | > 100k |  | Total
|(dollars in
thousands)                |  |        |        |        |  |      
|Three months or less                  |  | $      | 17,100 |        |  | $     | 4,610  |  |  | $ | 21,710  | 
|Over three through six months         |  |        | 13,294 |        |  |       | 4,148  |  |  |   | 17,442  | 
|Over six months through twelve months |  |        | 19,445 |        |  |       | 3,798  |  |  |   | 23,243  | 
|Twelve months through five years      |  |        | 16,510 |        |  |       | 31,412 |  |  |   | 47,922  | 
|Over five years                       |  |        | 417    |        |  |       | 778    |  |  |   | 1,195   | 
|                                      |  |        |        |        |  |       |        |  |  |   |         | 
|                                      |  | $      | 66,766 |        |  | $     | 44,746 |  |  | $ | 111,512 | 
|                                      |  |        |        |        |  |       |        |  |  |   |         | 

Long-Term and Short-Term Borrowings

The following table sets forth certain information with respect to
Columbias Federal Home Loan Bank of Seattle borrowings.

|                                                                |  |              |        |      |  |      |        |   |  |   |        |  
|--------------------------------------------------------------- |  | ------------ | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                                |  | December 31,
|                                                                |  |             
|Table 17                                                        |  | 2002         |        | 2001 |  | 2000
|(dollars in thousands)                                          |  |              |        |      |  |     
|Amount outstanding at end of period                             |  | $            | 26,285 |      |  | $    | 35,454 |   |  | $ | 25,520 |  
|Weighted average interest rate at end of
period                 |  |              | 4.16   | %    |  |      | 4.00   | % |  |   | 6.39   | %
|Maximum amount outstanding at any
month-end and during the year |  | $            | 50,622 |      |  | $    | 39,172 |   |  | $ | 29,053 |  
|Average amount outstanding during the
period                    |  | $            | 28,673 |      |  | $    | 32,626 |   |  | $ | 22,490 |  
|Average weighted interest rate during
the period                |  |              | 4.05   | %    |  |      | 5.26   | % |  |   | 6.34   | %

Short-tem borrowings from Treasury, Tax and Loan totaled $850,000,
$451,000 and $850,000 at December 31, 2002, 2001 and 2000, respectively.

Trust Preferred Securities

In December 2002, Columbia issued $4 million in unsecured subordinated
debentures to its wholly-owned subsidiary, Columbia Bancorp Trust I. The
interest payments on the subordinated debentures are intended to pass-through
Columbia Bancorp Trust I to the beneficial owners of the Columbia Bancorp Trust
I (Trust Preferred Securities). The subordinated debentures and trust
preferred securities have identical rate, terms and conditions  variable rates
tied to the 90 day LIBOR with a margin of 3.30% and 30 year maturities. The
trust preferred securities are considered Tier I capital for regulatory
purposes. Management structured this transaction in order to repurchase
328,422 shares of common stock at a price of $12.25 in November 2002 and
maintain regulatory capital within the well-capitalized category as defined
by the Banks regulators.

Shareholders Equity and Regulatory Capital

Shareholders equity increased $3.75 million during 2002. Shareholders
equity at December 31, 2002 was $50.19 million compared to $46.45 million at
December 31, 2001. This increase reflects net income other and comprehensive
income of $9.22 million and $1.01 million in exercised stock options. These
additions to equity were partially offset by cash dividends paid or declared of
$2.58 million.





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##### Table of Contents



The Federal Reserve Board and the Federal Deposit Insurance Corporation
have established minimum requirements for capital adequacy for financial
holding companies and member banks. The requirements address both risk-based
capital and leveraged capital. The regulatory agencies may establish higher
minimum requirements if, for example, a corporation has previously received
special attention or has a high susceptibility to interest rate risk. The
following reflects Columbias various capital ratios at December 31, 2002, and
December 31, 2001, as compared to regulatory minimums for capital adequacy
purposes:

|                         |  |                   |       |                   |  |                    |       |   |  |  |      |  
|------------------------ |  | ----------------- | ----- | ----------------- |  | ------------------ | ----- | - |  |  | ---- | -
|Table 18                 |  | December 31, 2002 |       | December 31, 2001 |  | Regulatory Minimum
|                         |  |                   |       |                   |  |                   
|Tier I capital           |  |                   | 9.71  | %                 |  |                    | 9.40  | % |  |  | 4.00 | %
|Total risk-based capital |  |                   | 10.96 | %                 |  |                    | 10.60 | % |  |  | 8.00 | %
|Leverage ratio           |  |                   | 8.57  | %                 |  |                    | 8.60  | % |  |  | 4.00 | %

Liquidity and Capital Resources

Columbia has adopted policies to maintain a relatively liquid position to
enable it to respond to changes in the financial environment and ensure
sufficient funds are available to meet customers needs for borrowing and
deposit withdrawals. Generally, Columbias major sources of liquidity are
customer deposits, sales and maturities of investment securities, the use of
borrowings from the Federal Home Loan Bank of Seattle and correspondent banks,
brokered certificates of deposit and net cash provided by operating activities.
As of December 31, 2002 and 2001, unused and available lines of credit totaled
$44.68 million and $49.74 million, respectively.

Scheduled loan repayments are
a relatively stable source of funds, while deposit inflows and unscheduled loan
prepayments are not as stable because they are influenced by general interest
rate levels, competing interest rates available on other investments, market
competition, economic conditions, and other factors. Liquid asset balances
include cash, amounts due from other banks, federal funds sold, and securities
available-for-sale and securities held-to-maturity with maturities occurring
within three months. At December 31, 2002, these liquid assets totaled $45.08
million or 68.25% of total assets as compared to $41.47 million or 8.61% of
total assets at December 31, 2001. The total liquid assets of $41.47 million
or 8.61% of total assets as of December 31, 2001 compare to $66.04 million or
15.87% of total assets at December 31, 2000. Liquidity was stable during the
year 2002 as a result of steady deposit growth. Columbia has met liquidity
needs primarily from cash balances in correspondent accounts, income from
operations, borrowing from the Federal Home Loan Bank and the growth of
deposits.

The analysis of liquidity also includes a review of the changes that
appear in the consolidated statements of cash flows for the year ended December
31, 2002. The statement of cash flows includes operating, investing, and
financing categories. Operating activities include net income of $9.38
million, which is adjusted for non-cash items and increases or decreases in
cash due to changes in certain assets and liabilities. Investing activities
consist primarily of both proceeds from and purchases of securities and the
impact of the net growth in loans. Financing activities present the cash flows
associated with deposit accounts and reflect various transactions with
stockholders.

At December 31, 2002, Columbia had outstanding unfunded lending
commitments of $166.81 million. Nearly all of these commitments represented
unused portions of credit lines available to consumers under credit card and
other arrangements and to businesses. Many of these credit lines will not be
fully drawn upon and, accordingly, the aggregate commitments do not necessarily
represent future cash requirements. Management believes that Columbias
sources of liquidity are sufficient to meet likely calls on outstanding
commitments, although there can be no assurance in this regard.





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##### Table of Contents



Business Segment Information

|                                                     |  |           |         |          |  |              |        |   |  |   |         |  | 
|---------------------------------------------------- |  | --------- | ------- | -------- |  | ------------ | ------ | - |  | - | ------- |  | 
|Table 19                                             |  | Community |         | Mortgage |  |              |        |  
|(dollars in thousands)                               |  | Banking   |         | Banking  |  | Consolidated
|                                                     |  |           |         |          |  |             
|December 31, 2002                                    |  |           |         |          |  |              |        |   |  |   |         | 
|Net interest income before provision for loan losses |  | $         | 29,417  |          |  | $            | 417    |   |  | $ | 29,834  | 
|Noninterest income                                   |  |           | 2,780   |          |  |              | 5,771  |   |  |   | 8,551   | 
|Amortization of the mortgage servicing asset         |  |           |        |          |  |              | 1,029  |   |  |   | 1,029   | 
|Impairment of mortgage servicing rights              |  |           |        |          |  |              | 2,781  |   |  |   | 2,781   | 
|Salaries and benefits                                |  |           | 10,310  |          |  |              | 2,750  |   |  |   | 13,060  | 
|Occupancy expense, excluding depreciation            |  |           | 668     |          |  |              | 151    |   |  |   | 819     | 
|Depreciation                                         |  |           | 1,141   |          |  |              | 98     |   |  |   | 1,239   | 
|Operating
expenses & other                           |  |           | 4,195   |          |  |              | 657    |   |  |   | 4,852   | 
|Income before provision for income taxes             |  |           | 15,883  |          |  |              | (1,278 | ) |  |   | 14,605  | 
|Total assets                                         |  | $         | 526,202 |          |  | $            | 18,124 |   |  | $ | 544,326 | 
|December 31, 2001                                    |  |           |         |          |  |              |        |   |  |   |         | 
|Net interest income before provision for loan losses |  | $         | 22,639  |          |  | $            | 856    |   |  | $ | 23,495  | 
|Noninterest income                                   |  |           | 3,558   |          |  |              | 5,636  |   |  |   | 9,194   | 
|Amortization of the mortgage servicing asset         |  |           |        |          |  |              | 395    |   |  |   | 395     | 
|Impairment of mortgage servicing rights              |  |           |        |          |  |              | 917    |   |  |   | 917     | 
|Salaries and benefits                                |  |           | 8,689   |          |  |              | 2,733  |   |  |   | 11,422  | 
|Occupancy expense, excluding depreciation            |  |           | 576     |          |  |              | 115    |   |  |   | 691     | 
|Depreciation                                         |  |           | 1,065   |          |  |              | 74     |   |  |   | 1,139   | 
|Goodwill amortization                                |  |           | 629     |          |  |              |       |   |  |   | 629     | 
|Operating and Other Expenses                         |  |           | 5,918   |          |  |              | 455    |   |  |   | 6,373   | 
|Income before provision for income taxes             |  |           | 9,949   |          |  |              | 1,802  |   |  |   | 11,751  | 
|Total assets                                         |  | $         | 452,260 |          |  | $            | 29,947 |   |  | $ | 482,207 | 
|December 31, 2000                                    |  |           |         |          |  |              |        |   |  |   |         | 
|Net interest income before provision for loan losses |  | $         | 20,674  |          |  | $            | 437    |   |  | $ | 21,111  | 
|Noninterest income                                   |  |           | 4,086   |          |  |              | 2,265  |   |  |   | 6,351   | 
|Amortization of the mortgage servicing asset         |  |           |        |          |  |              | 160    |   |  |   | 160     | 
|Salaries and benefits                                |  |           | 8,373   |          |  |              | 1,279  |   |  |   | 9,652   | 
|Occupancy expense, excluding depreciation            |  |           | 554     |          |  |              | 75     |   |  |   | 629     | 
|Depreciation                                         |  |           | 920     |          |  |              | 60     |   |  |   | 980     | 
|Goodwill amortization                                |  |           | 629     |          |  |              |       |   |  |   | 629     | 
|Operating
 expenses & other                          |  |           | 6,844   |          |  |              | 268    |   |  |   | 7,112   | 
|Income before provision for income taxes             |  |           | 8,069   |          |  |              | 860    |   |  |   | 8,929   | 
|Total assets                                         |  | $         | 401,090 |          |  | $            | 15,769 |   |  | $ | 416,859 | 

The Mortgage Group has decreased total assets over the last year to $18.12
million at year-ending 2002. Assets were $29.95 million and $15.77 million for
years ending 2001 and 2000, respectively. Assets of the Mortgage Group are
primarily comprised of real estate loans in the portfolio, real estate loans
held for sale, mortgage servicing





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asset, accrued interest receivable, and furniture and equipment.

The mortgage
servicing asset as of December 31, 2002, 2001 and 2000, was valued at $4.61
million, $6.20 million and $2.76 million, respectively. CRB uses a servicing
portfolio valuation model to comply with Statement of Accounting Standard
(SFAS) 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities. The servicing portfolio valuation model
evaluates the value of the mortgage servicing asset by calculating the results
from data input into the system including assumptions regarding; discount
rates, inflation rates, effective tax rates, annual servicing costs, servicing
premiums, stratified loans by term, weighted average terms to maturity,
weighted average coupon, numbers of loans serviced and constant prepayment
rate. The mortgage servicing asset is amortized in proportion to and over the
period of the estimated life of the servicing income.

In 2002 The Mortgage Group recorded a loss before income taxes of $1.28
million. Income for the years ended December 31, 2001 and 2000 was $1.80
million, and $860,000 respectively. The mortgage banking groups earnings in
2002 were negatively impacted by higher mortgage servicing asset amortization
and valuation write-downs. This was caused by the low mortgage interest rate
environment, which prompted a record number of borrowers to refinance their
mortgage loans. In addition, the mortgage banking groups net interest income
was lower in 2002 due to improvements made in the departments ability to
increase the turnaround time from loan funding to investor settlement, thereby
reducing the interest income and related interest expense. Furthermore,
operating expenses were higher in 2002 as a result of higher consulting, sundry
losses and general operating expenses. Noninterest income in 2002 was higher
than the prior two years as a result of higher loan fees, improvements in the
use of derivatives in secondary marketing and loan servicing revenue.

Inflation

Management does not consider the effects of inflation, as measured by the
Consumer Price Index, on Columbias financial position and earnings to be
material.

Off-Balance Sheet

In the normal course of business, Columbia utilizes financial instruments
with off-balance sheet risk to meet the financing needs of its customers,
including loan commitments to extend credit, commercial letters of credit,
standby letters of credit, unused portions of VISA credit cards, and
commitments to fund mortgage loans.

The increase in off-balance sheet items has occurred during the last three
years as a result of growth in the loan portfolio. The table below sets forth
the distribution of Columbias contingent liabilities by off-balance sheet
type. Commitments to extend credit increased primarily due to growth and
expansion of commercial real estate construction lending from our Deschutes
County trade area.

Table 20

|                                         |  |             |  |  |  |      |         |      |  |      |         |  |  |   |         | 
|---------------------------------------- |  | ----------- |  |  |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                                         |  | December 31
|                                         |  |             |  |  |  |     
|(dollars in thousands)                   |  |             |  |  |  | 2002 |         | 2001 |  | 2000
|                                         |  |             |  |  |  |      |         |      |  |     
|Commitments to extend credit             |  |             |  |  |  | $    | 148,938 |      |  |      | 119,551 |  |  | $ | 90,862  | 
|Undisbursed credit card lines of credit  |  |             |  |  |  |      | 15,220  |      |  |      | 12,489  |  |  |   | 10,635  | 
|Commercial and standby letters of credit |  |             |  |  |  |      | 2,654   |      |  |      | 1,866   |  |  |   | 912     | 
|                                         |  |             |  |  |  |      |         |      |  |      |         |  |  |   |         | 
|Total                                    |  |             |  |  |  | $    | 166,812 |      |  | $    | 133,906 |  |  | $ | 102,409 | 
|                                         |  |             |  |  |  |      |         |      |  |      |         |  |  |   |         | 





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Derivative Management

The Mortgage Group accepts loan applications that typically do not fund
and close for 30 to 60 days. During this time, the loan is considered to be in
the open mortgage pipeline. Once the loan is either funded or closed, it is
then removed from the open mortgage pipeline. The loans that comprise the open
mortgage pipeline have been price-locked to the borrower; therefore, interest
rate fluctuations may result in gains and/or losses from the sale of loans to
the secondary market. The risk of price fluctuations to the open mortgage
pipeline is managed by the use of derivatives-forward contracts and put
options. The underlying securities of the derivatives are mortgage-backed
securities, which generally correspond with the composition of the open
mortgage pipeline. The structure of the derivatives is intended to serve as a
hedge against the impact of rising and falling interest rates. The gain or
loss on the hedged item attributable to the hedged risk is recognized in
earnings in the same period, as required by Statement of Financial Standards
(SFAS) 133, Accounting for Derivative Instruments and Hedging Activities. As
of December 31, 2002, there were $33.59 million in interest rate-locked
mortgage loans contained in the open mortgage pipeline and the notional amount
of the derivatives totaled $27.00 million in forward contract and put option
hedges. The difference in amount between the loans in the open mortgage
pipeline and the notional amount of the derivatives is due to the risk
management practices for anticipating loan fall-out. Loan fall-out occurs when
a locked-loan in the open mortgage pipeline is not closed and funded by
Mortgage Group. The two most common causes for fall-out occur when borrowers
either do not fulfill a real estate purchase contract or close their loan with
a competing provider of mortgage loans. The risk of fall-out does expose CRB
to changes in value of the derivatives that would apply to non-existent loans
in the open mortgage pipeline. This risk is usually greater during periods of
falling interest rates when borrowers take advantage of market conditions to
shop for the lowest mortgage rates among competing mortgage loan providers.
Columbia monitors this risk and adjusts its derivative coverage over the open
mortgage pipeline in order to minimize risk of losses from fall-out. However,
there can be no assurance that fluctuations in interest rates and changes in
loan fall-out will not have a material adverse impact on earnings.

Recently Issued Accounting Standards

In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS No. 148, Accounting for Stock-Based CompensationTransition and
Disclosurean Amendment of FASB Statement No. 123. This statement amends FASB
Statement No. 123, Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition,
this statement amends the disclosure requirements of statement No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. Columbias management intends to
continue using the intrinsic value method for stock-based employee compensation
arrangements and, therefore, does not expect that the application provisions of
this statement will have a material impact on Columbias consolidated financial
statements.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions. This statement provides guidance on the accounting for
the acquisition of a financial institution and applies to all acquisitions
except those between two or more mutual enterprises. Columbias management does
not expect that the application provisions of this statement will have a
material impact on Columbias consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring). The statement is
effective for exit or disposal activities that are initiated after December 31,
2002, with early application encouraged. Columbias management does not expect
that the application of the provisions of this statement will have a material
impact on Columbias consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections. This statement rescinds FASB Statement No. 4, Reporting Gains
and Losses from Extinguishment of Debt, and an amendment of that statement,
FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund
Requirements. This statement also rescinds FASB Statement No. 44, Accounting
for Intangible Assets of Motor Carriers. This statement amends





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FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the
required accounting for sale-leaseback transactions and the required accounting
for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This statement also amends other existing
authoritative pronouncements to make various technical corrections, clarify
meanings, or describe their applicability under conflicting conditions.
Columbias management does not expect that the application of the provisions of
this statement will have a material impact on Columbias consolidated financial
statements.

In January 2003, FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities. This interpretation clarifies
the application of Accounting Research Bulletin No. 51, Consolidated Financial
Statements, and requires existing unconsolidated variable interest entities to
be consolidated by their primary beneficiaries if the entities do not
effectively disperse risks among parties involved. This interpretation explains
how to identify variable interest entities and how an enterprise assesses its
interests in a variable interest entity to decide whether to consolidate that
entity. This interpretation applies immediately to variable interest entities
created after January 31, 2003, and to variable interest entities in which an
enterprise obtains an interest after that date. It applies in the first fiscal
year or interim period beginning after June 15, 2003, to entities in which an
enterprise holds a variable interest that is acquired before February 1, 2003.
The interpretation applies to public enterprises as of the beginning of the
applicable interim or annual period. Columbias management does not expect that
the application of the provisions of this interpretation will have a material
impact on Columbias consolidated financial statements.

In November 2002, FASB issued Interpretation No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing a
guarantee. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 31, 2002, and the
initial recognition and initial measurement provisions shall be applied on a
prospective basis to guarantees issued or modified after December 31, 2002.
Columbias management does not expect that the application of the provisions of
this interpretation will have a material impact on Columbias consolidated
financial statements.

Factors That May Affect Future Results of Operations

In addition to the other information contained in this report, the
following risks may affect Columbia. If any of these risks occur, our
business, financial condition or operating results could be adversely affected.

Growth and Management.Our financial performance and profitability will
depend on our ability to manage recent and possible future growth. Although
management believes that it has substantially integrated the business and
operations of recent acquisitions, there can be no assurance that unforeseen
issues relating to the acquisitions will not adversely affect us. In addition,
any future acquisitions and continued growth may present operating and other
problems that could have an adverse effect on our business, financial condition
and results of operations. Accordingly, there can be no assurance that we will
be able to execute our growth strategy or maintain the level of profitability
that we have recently experienced.

Changes in Market Interest Rates.Our earnings are impacted by changing
interest rates. Changes in interest rates affect the demand for new loans, the
credit profile of existing loans, the rates received on loans and securities,
and rates paid on deposits and borrowings. The relationship between the rates
received on loans and
securities and the rates paid on deposits and borrowings is known as interest
rate spread. Given our current volume and mix of interest-bearing liabilities
and interest-earning assets, our interest rate spread could be expected to
increase during times of rising interest rates and, conversely, to decline
during times of falling interest rates. Exposure to interest rate risk is
managed by monitoring the re-pricing frequency of CRBs rate-sensitive assets
and rate-sensitive liabilities over any given period. Although we believe our
current level of interest rate sensitivity is reasonable, significant
fluctuations in interest rates may have an adverse affect on our business,
financial condition and results of operations.

Geographic Factors.Economic conditions in the communities we serve could
adversely affect our operations. As a result of Columbias community bank
focus, our results depend largely upon economic and





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business conditions in our service areas. A deterioration in economic and business conditions in our
market areas, particularly in the agricultural and real estate industries on
which some of these areas depend, could have a material adverse impact on the
quality of our loan portfolio and the demand for our products and services,
which in turn may have a material adverse effect on our results of operations.
Further, a downturn in the national economy might further exacerbate local
economic conditions. The extent of the future impact of these events on
economic and business conditions cannot be predicted.

Regulation.We are subject to government regulation that could limit or
restrict our activities, which in turn could adversely impact our operations.
The financial services industry is regulated extensively. Federal and state
regulation is designed primarily to protect the deposit insurance funds and
consumers, and not to benefit our stockholders. These regulations can
sometimes impose significant limitations on our operations. In addition, these
regulations are constantly evolving and may change significantly over time.
Significant new laws or changes in existing laws or repeal of existing laws may
cause our results to differ materially. Further, federal monetary policy,
particularly as implemented through the Federal Reserve System, significantly
affects credit conditions for us.

Competition.Competition may adversely affect our performance. The
financial services business in our market areas is highly competitive. It is
becoming increasingly competitive due to changes in regulation, technological
advances, and the accelerating pace of consolidation among financial services
providers. We face competition both in attracting deposits and in making
loans. We compete for loans principally through the interest rates and loan
fees we charge and the efficiency and quality of services we provide.
Increasing levels of competition in the banking and financial services
industries may reduce our market share or cause the prices we charge for our
services to fall. Our results may differ in future periods depending upon the
nature or level of competition.

Credit Risk.A source of risk arises from the possibility that losses
will be sustained if a significant number of our borrowers, guarantors and
related parties fail to perform in accordance with the terms of their loans.
We have adopted underwriting and credit monitoring procedures and credit
policies, including the establishment and review of the allowance for credit
losses, that management believes are appropriate to minimize this risk by
assessing the likelihood of nonperformance, tracking loan performance and
diversifying our credit portfolio. These policies and procedures, however, may
not prevent unexpected losses that could materially affect our results of
operations.




ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk Management

In the banking industry, a major risk involves changing interest rates,
which can have a significant impact on Columbias profitability. Columbia
manages its exposure to changes in interest rates through asset and liability
management activities within the guidelines established by its Asset Liability
Committee (ALCO). ALCO has the responsibility for approving and ensuring
compliance with asset-liability management policies, including interest rate
risk exposure, capital position, liquidity management and the investment
portfolio. Reports prepared by ALCO are provided to the Board of Directors on
a regular basis.

Asset-liability management simulation models are used to measure interest
rate risk. The models quantify interest rate risk through simulating forecasted
net interest income and economic value of equity over a 12-month time horizon
under various rate scenarios. The economic value of equity is defined as the
difference between the market value of current assets less the market value
liabilities. By measuring the change in the present value of
equity under different rate scenarios, management is able to identify
interest rate risk that may not be evident in simulating changes in the
forecasted net interest income.

Table 21 below shows the simulated percentage change in forecasted net
interest income and the economic value of equity using a stable rate
environment. The change in interest rates assumes an immediate, parallel and
sustained shift in the base interest rate forecast. Through these simulations,
management estimates the impact on net interest income and present value of
equity based on a 100 and 200 basis point upward or downward gradual change of
market interest rates over a one-year period. The analysis did not allow rates
to fall below zero.





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|                         |  |  |                 |   |  |                  |       |  
|------------------------ |  |  | --------------- | - |  | ---------------- | ----- | -
|Table 21                 |  |  | Percent Change  |   |  | Percent Change  
|                         |  |  | in Net Interest |   |  | in Present Value
|Change in Interest Rates |  |  | Income          |   |  | of Equity       
|                         |  |  |                 |   |  |                 
|-200 Basis points        |  |  | -4.76           | % |  |                  | -2.49 | %
|-100 Basis points        |  |  | -2.22           | % |  |                  | -2.89 | %
|+100 Basis points        |  |  | 2.67            | % |  |                  | 3.66  | %
|+200 Basis points        |  |  | 6.96            | % |  |                  | 5.71  | %

As illustrated in the above table, our balance sheet is currently asset
sensitive, meaning that interest -earning assets mature or reprice more quickly
than interest-bearing liability in a given period. Therefore, according to the
model, net interest income should increase slightly when rates increase and
shrink somewhat when rates fall. This is primarily a result of the
concentration of variable rate and short-term commercial loans in Columbias
portfolio.

The simulation model does not take into account future management actions
that could be undertaken, should a change occur in actual market interest
rates. Also, certain assumptions underlie modeling simulation results and these
assumptions may have significant impact on the results. These include
assumptions regarding the level of interest rates and balance changes of
deposit products that do not have stated maturities. These assumptions have
been developed through a combination of industry standards and expected pricing
behavior in the future. The model also includes assumptions about changes in
the composition or mix of the balance sheet. The results derived from the
simulation model could vary significantly due to external factors such as
changes in prepayment assumptions, early withdrawals of deposits and unforeseen
competitive factors.

Mortgage Servicing Asset

The CRB Mortgage Group has recorded a mortgage-servicing asset (MSA) that
contains risk due to loan prepayments. The value of the MSA will likely
decline when interest rates fall due to an increase in loan prepayments. The
MSA is measured on a quarterly basis with the use of a model that incorporates
published data for prepayment speeds, servicing costs, ancillary income and
discount rates. Any decrease in value of the MSA is recorded as valuation
impairment. However, actual fair values may differ significantly from the
measured valuation due to CRBs analysis of available third-party market
quotations.

The value of the mortgage servicing asset is interest rate sensitive and
is likely to require quarterly valuation adjustments during 2003 if mortgage
interest rates decline further from all time low levels. However, if mortgage
rates were to increase in 2003, management would expect that mortgage service
asset valuations to decrease. In this instance, the monthly mortgage servicing
asset amortization expense would be sufficient to amortize the MSA over the
expected remaining life of the serviced mortgage loan portfolio.




ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Selected Quarterly Financial Data (unaudited)

The following tables set forth Columbias unaudited consolidated financial data
regarding operations for each quarter of 2002 and 2001. This information, in
the opinion of management, includes all normal and recurring adjustments, to
fairly state the information contained in the tables. Certain amounts
previously reported have been classified to conform with current presentation.
These reclassifications had no net impact on the results of operations.





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##### Table of Contents



|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |        |   |        | 
|------------------------------------ | --------------------------------------------------- | ----------------------------- | ------------------- | ------------- | - | ------------ | - | ------------- | - | ----- | - | ----- | - | ----- | - | ----- | - | ----- | - | ------ | - | ------ | 
|Table 22                             |                                                     | 2002 Quarterly Financial Data
|                                     |                                                     |                              
|(In thousands except per share data) |                                                     | FirstQuarter                  |                     | SecondQuarter |   | ThirdQuarter |   | FourthQuarter |   | Total
|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |  
|Income Statement Data                |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|                                     | Interest income                                     |                               | $                   | 8,587         |   |              | $ | 9,439         |   |       | $ | 9,841 |   |       | $ | 9,749 |   |       | $ | 37,616 |  
|                                     | Interest expense                                    |                               |                     | 1,790         |   |              |   | 2,029         |   |       |   | 2,090 |   |       |   | 1,873 |   |       |   | 7,782  |  
|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|                                     |                                                     |                               | Net interest income |               |   | 6,797        |   |               |   | 7,410 |   |       |   | 7,751 |   |       |   | 7,876 |   |        |   | 29,834 | 
|                                     | Loan loss provision                                 |                               |                     | 400           |   |              |   | 700           |   |       |   | 600   |   |       |   | 100   |   |       |   | 1,800  |  
|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|                                     | Net interest income after provision for loan losses |                               |                     | 6,397         |   |              |   | 6,710         |   |       |   | 7,151 |   |       |   | 7,776 |   |       |   | 28,034 |  
|                                     | Noninterest income                                  |                               |                     | 2,094         |   |              |   | 2,760         |   |       |   | 2,236 |   |       |   | 1,461 |   |       |   | 8,551  |  
|                                     | Noninterest expense                                 |                               |                     | 5,091         |   |              |   | 5,695         |   |       |   | 5,525 |   |       |   | 5,669 |   |       |   | 21,980 |  
|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|                                     | Income before provision for income taxes            |                               |                     | 3,400         |   |              |   | 3,775         |   |       |   | 3,862 |   |       |   | 3,568 |   |       |   | 14,605 |  
|                                     | Provision for income taxes                          |                               |                     | 1,219         |   |              |   | 1,353         |   |       |   | 1,338 |   |       |   | 1,314 |   |       |   | 5,224  |  
|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|                                     |                                                     |                               | Net income          |               | $ | 2,181        |   |               | $ | 2,422 |   |       | $ | 2,524 |   |       | $ | 2,254 |   |        | $ | 9,381  | 
|                                     |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|Earnings Per Share                   |                                                     |                               |                     |               |   |              |   |               |   |       |   |       |   |       |   |       |   |       |   |       
|                                     | Basic earnings per common share                     |                               | $                   | 0.27          |   |              | $ | 0.30          |   |       | $ | 0.31  |   |       | $ | 0.28  |   |       | $ | 1.16   |  
|                                     | Diluted earnings per common share                   |                               | $                   | 0.26          |   |              | $ | 0.29          |   |       | $ | 0.30  |   |       | $ | 0.27  |   |       | $ | 1.13   |  

|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |        |   |        | 
|--------------------- | --------------------------------------------------- |  | ------------------- | ----- | ----------------------------- | ----- | ------- | ----- | ------- | ----- | ------- | ----- | ----- | ----- | - | ----- | - | ----- | - | ------ | - | ------ | 
|                      |                                                     |  |                     |       | 2001 Quarterly Financial Data
|                      |                                                     |  |                     |       |                              
|                      |                                                     |  |                     |       | First                         |       | Second  |       | Third   |       | Fourth  |       |       |       |  
|                      |                                                     |  |                     |       | Quarter                       |       | Quarter |       | Quarter |       | Quarter |       | Total
|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |      
|Income Statement Data |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|                      | Interest income                                     |  | $                   | 8,539 |                               |       | $       | 8,711 |         |       | $       | 8,946 |       |       | $ | 8,882 |   |       | $ | 35,078 |  
|                      | Interest expense                                    |  |                     | 3,262 |                               |       |         | 3,063 |         |       |         | 2,995 |       |       |   | 2,263 |   |       |   | 11,583 |  
|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|                      |                                                     |  | Net interest income |       |                               | 5,277 |         |       |         | 5,648 |         |       |       | 5,951 |   |       |   | 6,619 |   |        |   | 23,495 | 
|                      | Loan loss provision                                 |  |                     | 250   |                               |       |         | 375   |         |       |         | 250   |       |       |   | 575   |   |       |   | 1,450  |  
|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|                      | Net interest income after provision for loan losses |  |                     | 5,027 |                               |       |         | 5,273 |         |       |         | 5,701 |       |       |   | 6,044 |   |       |   | 22,045 |  
|                      | Noninterest income                                  |  |                     | 1,863 |                               |       |         | 2,796 |         |       |         | 1,910 |       |       |   | 2,625 |   |       |   | 9,194  |  
|                      | Noninterest expense                                 |  |                     | 4,479 |                               |       |         | 4,754 |         |       |         | 4,953 |       |       |   | 5,302 |   |       |   | 19,488 |  
|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|                      | Income before provision for income taxes            |  |                     | 2,411 |                               |       |         | 3,315 |         |       |         | 2,658 |       |       |   | 3,367 |   |       |   | 11,751 |  
|                      | Provision for income taxes                          |  |                     | 898   |                               |       |         | 1,262 |         |       |         | 939   |       |       |   | 1,278 |   |       |   | 4,377  |  
|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|                      |                                                     |  | Net income          |       | $                             | 1,513 |         |       | $       | 2,053 |         |       | $     | 1,719 |   |       | $ | 2,089 |   |        | $ | 7,374  | 
|                      |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|Earnings Per Share    |                                                     |  |                     |       |                               |       |         |       |         |       |         |       |       |       |   |       |   |       |   |       
|                      | Basic earnings per common share                     |  | $                   | 0.19  |                               |       | $       | 0.25  |         |       | $       | 0.21  |       |       | $ | 0.26  |   |       | $ | 0.92   |  
|                      | Diluted earnings per common share                   |  | $                   | 0.19  |                               |       | $       | 0.25  |         |       | $       | 0.21  |       |       | $ | 0.25  |   |       | $ | 0.89   |  

Additional information called for by this item is contained in Columbia
Bancorps Annual Report to Stockholders for the year ended December 31, 2002,
and is incorporated herein by reference.






ITEM 
9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE


There were no changes in or disagreements with accountants regarding
accounting and financial disclosure matters during the year ended December 31,
2001.





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##### Table of Contents






PART III




ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.




ITEM 11 EXECUTIVE COMPENSATION AND REPORT OF COMPENSATION COMMITTEE

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.




ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.




ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.




ITEM 14 CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures. Our principal executive and financial officers supervised and
participated in this evaluation. Based upon this evaluation our principal
executive and financial officers each concluded that our disclosure controls
and procedures are effective in timely alerting them to material information
required to be included in our periodic SEC reports. The design of any system
of controls is based in part upon various assumptions about the likelihood of
future events, and there can be no assurance that any of our plans, products or
procedures will succeed in achieving their intended goals under future
conditions. In addition, there have been no significant changes in our internal
controls or in other factors that could significantly affect our internal
controls subsequent to our most recent evaluation, including any corrective
actions with regard to significant deficiencies or material weaknesses.




Part IV




ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) Exhibits.

The following documents are filed as part of this report and are
incorporated herein by reference from the Registrants 2002 Annual Report:





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COLUMBIA BANCORP AND SUBSIDIARIES



INDEPENDENT AUDITORS REPORT
AND
CONSOLIDATED FINANCIAL STATEMENTS



DECEMBER 31, 2002, 2001, AND 2000





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##### Table of Contents



CONTENTS

|                                              |  |  |        | 
|--------------------------------------------- |  |  | ------ | 
|                                              |  |  | PAGE   | 
|                                              |  | 
|INDEPENDENT AUDITORS REPORT                  |  |  | 1      | 
|CONSOLIDATED FINANCIAL STATEMENTS             |  |  |        | 
|Balance sheets 2  3                          |  |  |        | 
|Statements of income and comprehensive income |  |  | 4  5  | 
|Statements of changes in stockholders equity |  |  | 6      | 
|Statements of cash flows 7  8                |  |  |        | 
|Notes to financial statements                 |  |  | 9  46 | 



| |  | Note: These financial statements have not been reviewed, or confirmed for accuracy or relevance
by the Federal Deposit Insurance Corporation.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------





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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors and Stockholders
Columbia Bancorp and Subsidiaries

We have audited the accompanying consolidated balance sheets of Columbia
Bancorp and subsidiaries as of December 31, 2002 and 2001, and the related
consolidated statements of income and comprehensive income, changes in
stockholders equity, and cash flows for each of the three years in the period
ended December 31, 2002. These consolidated financial statements are the
responsibility of Columbia Bancorps management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Columbia Bancorp
and subsidiaries as of December 31, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States of America.

Portland, Oregon
January 17, 2003

1



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COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS

|                          |                                                                                   |                                 |             |              |             |      |             |             |             | 
|------------------------- | --------------------------------------------------------------------------------- | ------------------------------- | ----------- | ------------ | ----------- | ---- | ----------- | ----------- | ----------- | 
|                          |                                                                                   |                                 |             | December 31,
|                          |                                                                                   |                                 |             |             
|                          |                                                                                   |                                 |             | 2002         |             | 2001
|                          |                                                                                   |                                 |             |              |             |     
|CASH AND CASH EQUIVALENTS |                                                                                   |                                 |             |              |             |      |             |            
|                          | Cash and due from banks                                                           |                                 | $           | 28,414,139   |             |      | $           | 19,813,111  |            
|                          | Interest-bearing deposits with other banks                                        |                                 |             | 8,551,980    |             |      |             | 1,275,462   |            
|                          | Federal funds sold                                                                |                                 |             | 3,735,416    |             |      |             | 1,525,165   |            
|                          |                                                                                   |                                 |             |              |             |      |             |            
|                          |                                                                                   | Total cash and cash equivalents |             |              | 40,701,535  |      |             |             | 22,613,738  | 
|                          |                                                                                   |                                 |             |              |             |      |             |            
|INVESTMENT SECURITIES     |                                                                                   |                                 |             |              |             |      |             |            
|                          | Investment securities available-for-sale                                          |                                 |             | 14,749,694   |             |      |             | 18,802,107  |            
|                          | Investment securities held-to-maturity                                            |                                 |             | 18,600,335   |             |      |             | 22,657,264  |            
|                          | Restricted equity securities                                                      |                                 |             | 2,698,200    |             |      |             | 2,072,300   |            
|                          |                                                                                   |                                 |             |              |             |      |             |            
|                          |                                                                                   | Total investment securities     |             |              | 36,048,229  |      |             |             | 43,531,671  | 
|                          |                                                                                   |                                 |             |              |             |      |             |            
|LOANS                     |                                                                                   |                                 |             |              |             |      |             |            
|                          | Loans held-for-sale                                                               |                                 |             | 8,769,777    |             |      |             | 18,959,979  |            
|                          | Loans, net of allowance for loan losses
and unearned loan fees                    |                                 |             | 423,917,555  |             |      |             | 361,323,121 |            
|                          |                                                                                   |                                 |             |              |             |      |             |            
|                          |                                                                                   | Total loans                     |             |              | 432,687,332 |      |             |             | 380,283,100 | 
|                          |                                                                                   |                                 |             |              |             |      |             |            
|OTHER ASSETS              |                                                                                   |                                 |             |              |             |      |             |            
|                          | Property and equipment, net of accumulated
Depreciation                           |                                 |             | 14,183,851   |             |      |             | 13,887,846  |            
|                          | Accrued interest receivable                                                       |                                 |             | 3,895,237    |             |      |             | 3,485,533   |            
|                          | Goodwill                                                                          |                                 |             | 7,389,094    |             |      |             | 7,389,094   |            
|                          | Mortgage servicing asset, net of accumulated
amortization and valuation allowance |                                 |             | 4,614,391    |             |      |             | 6,196,801   |            
|                          | Other assets                                                                      |                                 |             | 4,806,315    |             |      |             | 4,818,922   |            
|                          |                                                                                   |                                 |             |              |             |      |             |            
|                          |                                                                                   | Total other assets              |             |              | 34,888,888  |      |             |             | 35,778,196  | 
|                          |                                                                                   |                                 |             |              |             |      |             |            
|TOTAL ASSETS              |                                                                                   | $                               | 544,325,984 |              |             | $    | 482,206,705 |            
|                          |                                                                                   |                                 |             |              |             |      |             |            

The accompanying Notes are an integral
part of these consolidated financial statements.

-2-



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##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

LIABILITIES AND STOCKHOLDERS EQUITY

|                                           |                                                                                                                                                      |                            |             |              |             |      |             |             |             | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----------- | ------------ | ----------- | ---- | ----------- | ----------- | ----------- | 
|                                           |                                                                                                                                                      |                            |             | December 31,
|                                           |                                                                                                                                                      |                            |             |             
|                                           |                                                                                                                                                      |                            |             | 2002         |             | 2001
|                                           |                                                                                                                                                      |                            |             |              |             |     
|DEPOSITS                                   |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           | Noninterest-bearing demand deposits                                                                                                                  |                            | $           | 129,042,083  |             |      | $           | 108,521,784 |            
|                                           | Interest-bearing demand deposits                                                                                                                     |                            |             | 182,340,665  |             |      |             | 136,967,524 |            
|                                           | Savings accounts                                                                                                                                     |                            |             | 32,939,990   |             |      |             | 32,237,233  |            
|                                           | Time certificates                                                                                                                                    |                            |             | 111,512,375  |             |      |             | 116,908,960 |            
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           |                                                                                                                                                      | Total deposits             |             |              | 455,835,113 |      |             |             | 394,635,501 | 
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|OTHER LIABILITIES                          |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           | Notes payable                                                                                                                                        |                            |             | 27,134,946   |             |      |             | 35,904,542  |            
|                                           | Accrued interest payable and other liabilities                                                                                                       |                            |             | 7,165,544    |             |      |             | 5,221,730   |            
|                                           | Guaranteed Undivided Beneficial Interest in
Junior Subordinated Debentures (Trust
Preferred Securities)                                              |                            |             | 4,000,000    |             |      |             |            |            
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           |                                                                                                                                                      | Total other liabilities    |             |              | 38,300,490  |      |             |             | 41,126,272  | 
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           |                                                                                                                                                      | Total liabilities          |             |              | 494,135,603 |      |             |             | 435,761,773 | 
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|COMMITMENTS AND CONTINGENCIES
(Note 19)    |                                                                                                                                                      |                            |             |              |             |      |             |            
|STOCKHOLDERS EQUITY                       |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           | Common stock, no par value, 20,000,000 shares
authorized; 7,862,380 and 8,037,078 issued
and outstanding at December 31, 2002 and
2001, respectively |                            |             | 15,096,638   |             |      |             | 14,679,226  |            
|                                           | Additional paid-in capital                                                                                                                           |                            |             | 2,745,062    |             |      |             | 6,054,368   |            
|                                           | Retained earnings                                                                                                                                    |                            |             | 32,174,431   |             |      |             | 25,373,550  |            
|                                           | Accumulated comprehensive income, net of taxes                                                                                                       |                            |             | 174,250      |             |      |             | 337,788     |            
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|                                           |                                                                                                                                                      | Total stockholders equity |             |              | 50,190,381  |      |             |             | 46,444,932  | 
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            
|TOTAL LIABILITIES AND STOCKHOLDERS
EQUITY |                                                                                                                                                      | $                          | 544,325,984 |              |             | $    | 482,206,705 |            
|                                           |                                                                                                                                                      |                            |             |              |             |      |             |            



|See accompanying notes. | 3
|----------------------- | -



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##### Table of Contents



COLUMBIA BANCORP AND
SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME

|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |            |           |            | 
|---------------------------------------------------- | --------------------------------------------------------- | -------------------------------- | ------------------------ | ---------- | ------------------------ | ---------- | ---------- | ---------- | --------- | ---------- | ---------- | ---------- | --------- | ---------- | 
|                                                     |                                                           |                                  |                          |            | Years Ended December 31,
|                                                     |                                                           |                                  |                          |            |                         
|                                                     |                                                           |                                  |                          |            | 2002                     |            | 2001       |            | 2000     
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |          
|INTEREST INCOME                                      |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|                                                     | Interest and fees on loans                                |                                  | $                        | 35,334,245 |                          |            | $          | 32,134,970 |           |            | $          | 29,472,770 |          
|                                                     | Interest on investments:                                  |                                  |                          |            |                          |            |            |            |           |            |            |            |          
|                                                     |                                                           | Taxable investment securities    |                          |            | 1,035,059                |            |            |            | 1,614,918 |            |            |            | 2,402,691 |           
|                                                     |                                                           | Nontaxable investment securities |                          |            | 807,504                  |            |            |            | 871,172   |            |            |            | 906,920   |           
|                                                     | Interest on federal funds sold                            |                                  |                          | 99,071     |                          |            |            | 40,038     |           |            |            | 109,878    |          
|                                                     | Other interest and dividend income                        |                                  |                          | 340,172    |                          |            |            | 417,221    |           |            |            | 474,869    |          
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|                                                     |                                                           |                                  | Total interest income    |            |                          | 37,616,051 |            |            |           | 35,078,319 |            |            |           | 33,367,128 | 
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|INTEREST EXPENSE                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|                                                     | Interest on interest-bearing deposit and
savings accounts |                                  |                          | 1,732,050  |                          |            |            | 3,317,933  |           |            |            | 5,055,588  |          
|                                                     | Interest on time deposit accounts                         |                                  |                          | 4,695,641  |                          |            |            | 6,385,589  |           |            |            | 5,727,145  |          
|                                                     | Other borrowed funds                                      |                                  |                          | 1,354,438  |                          |            |            | 1,879,647  |           |            |            | 1,473,614  |          
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|                                                     |                                                           |                                  | Total interest expense   |            |                          | 7,782,129  |            |            |           | 11,583,169 |            |            |           | 12,256,347 | 
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|NET INTEREST INCOME BEFORE
PROVISION FOR LOAN LOSSES |                                                           |                                  | 29,833,922               |            |                          |            | 23,495,150 |            |           |            | 21,110,781 |           
|PROVISION FOR LOAN LOSSES                            |                                                           |                                  | 1,800,000                |            |                          |            | 1,450,000  |            |           |            | 1,697,000  |           
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES  |                                                           |                                  | 28,033,922               |            |                          |            | 22,045,150 |            |           |            | 19,413,781 |           
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|NONINTEREST INCOME                                   |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|                                                     | Service charges and fees                                  |                                  |                          | 4,089,240  |                          |            |            | 3,013,734  |           |            |            | 2,596,294  |          
|                                                     | Mortgage Group revenues, net of expenses                  |                                  |                          | 2,193,314  |                          |            |            | 4,263,441  |           |            |            | 2,097,798  |          
|                                                     | Credit card discounts and fees                            |                                  |                          | 419,762    |                          |            |            | 357,729    |           |            |            | 283,668    |          
|                                                     | Financial Services Department income                      |                                  |                          | 559,968    |                          |            |            | 467,791    |           |            |            | 432,048    |          
|                                                     | Gain (loss) on sale of investment securities              |                                  |                          | 295,822    |                          |            |            | 27,530     |           |            |            | (6,046     | )        
|                                                     | Other noninterest income                                  |                                  |                          | 993,041    |                          |            |            | 1,063,602  |           |            |            | 946,771    |          
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           
|                                                     |                                                           |                                  | Total noninterest income |            |                          | 8,551,147  |            |            |           | 9,193,827  |            |            |           | 6,350,533  | 
|                                                     |                                                           |                                  |                          |            |                          |            |            |            |           |            |            |           





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##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |           |         |            | 
|------------------------------------------ | ---------------------------------------- | --------------------------------------------------------------------- | --------------------------------- | ---------- | ------------------------ | ---------- | ---------- | ---------- | ------- | ---------- | --------- | --------- | ------- | ---------- | 
|                                           |                                          |                                                                       |                                   |            | Years Ended December 31,
|                                           |                                          |                                                                       |                                   |            |                         
|                                           |                                          |                                                                       |                                   |            | 2002                     |            | 2001       |            | 2000   
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |        
|NONINTEREST EXPENSES                       |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|                                           | Salaries and employee benefits           |                                                                       |                                   | 13,059,535 |                          |            |            | 11,421,966 |         |            |           | 9,652,033 |        
|                                           | Occupancy expense                        |                                                                       |                                   | 2,058,065  |                          |            |            | 1,830,346  |         |            |           | 1,608,593 |        
|                                           | Goodwill amortization                    |                                                                       |                                   |           |                          |            |            | 628,623    |         |            |           | 628,623   |        
|                                           | Data processing expense                  |                                                                       |                                   | 370,889    |                          |            |            | 301,878    |         |            |           | 485,781   |        
|                                           | Other noninterest expenses               |                                                                       |                                   | 6,491,978  |                          |            |            | 5,305,635  |         |            |           | 4,460,252 |        
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |           |        
|                                           |                                          |                                                                       | Total noninterest expenses        |            |                          | 21,980,467 |            |            |         | 19,488,448 |           |           |         | 16,835,282 | 
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|INCOME BEFORE PROVISION FOR
INCOME TAXES   |                                          |                                                                       | 14,604,602                        |            |                          |            | 11,750,529 |            |         |            | 8,929,032 |          
|PROVISION FOR INCOME TAXES                 |                                          |                                                                       | 5,223,497                         |            |                          |            | 4,376,812  |            |         |            | 3,304,997 |          
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|NET INCOME                                 |                                          |                                                                       | 9,381,105                         |            |                          |            | 7,373,717  |            |         |            | 5,624,035 |          
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|OTHER COMPREHENSIVE INCOME (LOSS)          |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|                                           | Unrealized gains (losses) on securities: |                                                                       |                                   |            |                          |            |            |            |         |            |           |           |        
|                                           |                                          | Unrealized holding gains arising during the
period                    |                                   |            | 30,473                   |            |            |            | 440,769 |            |           |           | 625,387 |           
|                                           |                                          | Reclassification adjustment for (gains)
losses included in net income |                                   |            | (194,011                 | )          |            |            | (18,064 | )          |           |           | 3,990   |           
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |           |         |            | 
|                                           |                                          |                                                                       | Other comprehensive income (loss) |            |                          | (163,538   | )          |            |         | 422,705    |           |           |         | 629,377    | 
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|COMPREHENSIVE INCOME                       |                                          | $                                                                     | 9,217,567                         |            |                          | $          | 7,796,422  |            |         | $          | 6,253,412 |          
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|BASIC EARNINGS PER SHARE OF COMMON
STOCK   |                                          | $                                                                     | 1.16                              |            |                          | $          | 0.92       |            |         | $          | 0.70      |          
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          
|DILUTED EARNINGS PER SHARE OF
COMMON STOCK |                                          | $                                                                     | 1.13                              |            |                          | $          | 0.89       |            |         | $          | 0.70      |          
|                                           |                                          |                                                                       |                                   |            |                          |            |            |            |         |            |           |          



|See accompanying notes. | 5
|----------------------- | -



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##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY

|                                                |  |              |           |            |  |          |            |          |        |               |               |        |  |   |            |   |  |             |          |   |  |   |            |  
|----------------------------------------------- |  | ------------ | --------- | ---------- |  | -------- | ---------- | -------- | ------ | ------------- | ------------- | ------ |  | - | ---------- | - |  | ----------- | -------- | - |  | - | ---------- | -
|                                                |  |              |           |            |  |          |            |          |        |               |               |        |  |   |            |   |  | Accumulated |          |   |  |  
|                                                |  | Common Stock |           | Additional |  |          |            |          |        | Comprehensive |               | Total 
|                                                |  |              |           | Paid-In    |  | Retained |            |          | Income |               | Stockholders'
|                                                |  | Shares       |           | Amount     |  | Capital  |            | Earnings |        | (Loss)        |               | Equity
|                                                |  |              |           |            |  |          |            |          |        |               |               |       
|BALANCE, December 31, 1999                      |  |              | 8,010,522 |            |  | $        | 14,392,229 |          |        | $             | 6,371,490     |        |  | $ | 17,272,137 |   |  | $           | (714,294 | ) |  | $ | 37,321,562 |  
|Stock options exercised                         |  |              | 18,900    |            |  |          | 69,542     |          |        |               |              |        |  |   |           |   |  |             |         |   |  |   | 69,542     |  
|Income tax benefit from stock
options exercised |  |              |          |            |  |          |           |          |        |               | 7,903         |        |  |   |           |   |  |             |         |   |  |   | 7,903      |  
|Cash dividends paid                             |  |              |          |            |  |          |           |          |        |               |              |        |  |   | (1,683,900 | ) |  |             |         |   |  |   | (1,683,900 | )
|Cash dividends declared                         |  |              |          |            |  |          |           |          |        |               |              |        |  |   | (642,354   | ) |  |             |         |   |  |   | (642,354   | )
|Net income and comprehensive income             |  |              |          |            |  |          |           |          |        |               |              |        |  |   | 5,624,035  |   |  |             | 629,377  |   |  |   | 6,253,412  |  
|                                                |  |              |           |            |  |          |            |          |        |               |               |        |  |   |            |   |  |             |          |   |  |   |            |  
|BALANCE, December 31, 2000                      |  |              | 8,029,422 |            |  |          | 14,461,771 |          |        |               | 6,379,393     |        |  |   | 20,569,918 |   |  |             | (84,917  | ) |  |   | 41,326,165 |  
|Stock options exercised                         |  |              | 57,656    |            |  |          | 307,455    |          |        |               |              |        |  |   |           |   |  |             |         |   |  |   | 307,455    |  
|Income tax benefit from stock
options exercised |  |              |          |            |  |          |           |          |        |               | 12,478        |        |  |   |           |   |  |             |         |   |  |   | 12,478     |  
|Stock repurchased                               |  |              | (50,000   | )          |  |          | (90,000    | )        |        |               | (337,503      | )      |  |   |           |   |  |             |         |   |  |   | (427,503   | )
|Cash dividends paid                             |  |              |          |            |  |          |           |          |        |               |              |        |  |   | (1,927,227 | ) |  |             |         |   |  |   | (1,927,227 | )
|Cash dividends declared                         |  |              |          |            |  |          |           |          |        |               |              |        |  |   | (642,858   | ) |  |             |         |   |  |   | (642,858   | )
|Net income and comprehensive income             |  |              |          |            |  |          |           |          |        |               |              |        |  |   | 7,373,717  |   |  |             | 422,705  |   |  |   | 7,796,422  |  
|                                                |  |              |           |            |  |          |            |          |        |               |               |        |  |   |            |   |  |             |          |   |  |   |            |  
|BALANCE, December 31, 2001                      |  |              | 8,037,078 |            |  |          | 14,679,226 |          |        |               | 6,054,368     |        |  |   | 25,373,550 |   |  |             | 337,788  |   |  |   | 46,444,932 |  
|Stock options exercised                         |  |              | 153,724   |            |  |          | 1,008,572  |          |        |               |              |        |  |   |           |   |  |             |         |   |  |   | 1,008,572  |  
|Income tax benefit from stock
options exercised |  |              |          |            |  |          |           |          |        |               | 122,704       |        |  |   |           |   |  |             |         |   |  |   | 122,704    |  
|Stock repurchased                               |  |              | (328,422  | )          |  |          | (591,160   | )        |        |               | (3,432,010    | )      |  |   |           |   |  |             |         |   |  |   | (4,023,170 | )
|Cash dividends paid                             |  |              |          |            |  |          |           |          |        |               |              |        |  |   | (1,951,234 | ) |  |             |         |   |  |   | (1,951,234 | )
|Cash dividends declared                         |  |              |          |            |  |          |           |          |        |               |              |        |  |   | (628,990   | ) |  |             |         |   |  |   | (628,990   | )
|Net income and comprehensive income             |  |              |          |            |  |          |           |          |        |               |              |        |  |   | 9,381,105  |   |  |             | (163,538 | ) |  |   | 9,217,567  |  
|                                                |  |              |           |            |  |          |            |          |        |               |               |        |  |   |            |   |  |             |          |   |  |   |            |  
|BALANCE, December 31, 2002                      |  |              | 7,862,380 |            |  | $        | 15,096,638 |          |        | $             | 2,745,062     |        |  | $ | 32,174,431 |   |  | $           | 174,250  |   |  | $ | 50,190,381 |  
|                                                |  |              |           |            |  |          |            |          |        |               |               |        |  |   |            |   |  |             |          |   |  |   |            |  

6



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##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                     |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |              |             |  
|------------------------------------ | ----------------------------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------- | ----------- | ------------------------ | ----------- | ---- | ----------- | ------------ | ----------- | - | ----------- | ------------ | ----------- | -
|                                     |                                                                               |                                                                 |                                    |             | Years Ended December 31,
|                                     |                                                                               |                                                                 |                                    |             |                         
|                                     |                                                                               |                                                                 |                                    |             | 2002                     |             | 2001 |             | 2000        
|                                     |                                                                               |                                                                 |                                    |             |                          |             |      |             |             
|CASH FLOWS FROM OPERATING ACTIVITIES |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |            
|                                     | Net income                                                                    |                                                                 | $                                  | 9,381,105   |                          |             | $    | 7,373,717   |              |             | $ | 5,624,035   |             
|                                     | Adjustments to reconcile net income to net cash from
operating activities:    |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |             
|                                     |                                                                               | Amortization of premiums and discounts on investment
securities |                                    |             | 65,407                   |             |      |             | 36,135       |             |   |             | 30,180       |            
|                                     |                                                                               | Loss (gain) on sale of available-for-sale securities            |                                    |             | (295,822                 | )           |      |             | (27,530      | )           |   |             | 6,046        |            
|                                     |                                                                               | Loss on sale or write-down of property and equipment            |                                    |             | 29,772                   |             |      |             |             |             |   |             | 501          |            
|                                     |                                                                               | Loss on sale or write-down of other real estate owned           |                                    |             | 25,623                   |             |      |             | 776          |             |   |             |             |            
|                                     |                                                                               | (Gain) loss on call of held-to-maturity investment
securities   |                                    |             | (1,512                   | )           |      |             | 161          |             |   |             |             |            
|                                     |                                                                               | Depreciation and amortization                                   |                                    |             | 2,267,649                |             |      |             | 2,163,353    |             |   |             | 1,780,284    |            
|                                     |                                                                               | Impairment of mortgage servicing asset                          |                                    |             | 2,781,111                |             |      |             | 917,729      |             |   |             |             |            
|                                     |                                                                               | Federal Home Loan Bank stock dividend                           |                                    |             | (157,700                 | )           |      |             | (123,200     | )           |   |             | (90,900      | )          
|                                     |                                                                               | Deferred income tax (benefit) expense                           |                                    |             | (692,556                 | )           |      |             | 1,262,560    |             |   |             | 80,978       |            
|                                     |                                                                               | Provision for loan losses                                       |                                    |             | 1,800,000                |             |      |             | 1,450,000    |             |   |             | 1,697,000    |            
|                                     | Increase (decrease) in cash due to changes in certain
assets and liabilities: |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |             
|                                     |                                                                               | Proceeds from the sale of mortgage loans held-for-sale          |                                    |             | 239,365,825              |             |      |             | 318,259,993  |             |   |             | 117,490,853  |            
|                                     |                                                                               | Production of mortgage loans held-for-sale                      |                                    |             | (229,175,623             | )           |      |             | (331,901,669 | )           |   |             | (119,526,307 | )          
|                                     |                                                                               | Accrued interest receivable                                     |                                    |             | (409,704                 | )           |      |             | 506,507      |             |   |             | (1,089,439   | )          
|                                     |                                                                               | Mortgage servicing asset                                        |                                    |             | (2,227,511               | )           |      |             | (4,750,197   | )           |   |             | (1,437,145   | )          
|                                     |                                                                               | Other assets                                                    |                                    |             | (326,919                 | )           |      |             | (1,919,090   | )           |   |             | 448,807      |            
|                                     |                                                                               | Accrued interest payable and other liabilities                  |                                    |             | 2,865,950                |             |      |             | 2,335,012    |             |   |             | 523,494      |            
|                                     |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |             
|                                     |                                                                               |                                                                 | Net cash from operating activities |             |                          | 25,295,095  |      |             |              | (4,415,743  | ) |             |              | 5,538,387   |  
|                                     |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |             
|CASH FLOWS FROM INVESTING ACTIVITIES |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |            
|                                     | Proceeds from the sale of available-for-sale securities                       |                                                                 |                                    | 300,000     |                          |             |      | 18,315,428  |              |             |   | 3,014,531   |             
|                                     | Proceeds from the maturity of available-for-sale securities                   |                                                                 |                                    | 7,300,000   |                          |             |      | 2,895,000   |              |             |   | 800,000     |             
|                                     | Proceeds from the maturity of held-to-maturity securities                     |                                                                 |                                    | 4,078,785   |                          |             |      | 2,330,442   |              |             |   | 2,479,371   |             
|                                     | Purchases of held-to-maturity securities                                      |                                                                 |                                    | (81,579     | )                        |             |      | (5,484,218  | )            |             |   | (1,887,266  | )           
|                                     | Purchases of available-for-sale securities                                    |                                                                 |                                    | (4,000,000  | )                        |             |      |            |              |             |   | (1,181,794  | )           
|                                     | Purchases of restricted equity securities                                     |                                                                 |                                    | (468,200    | )                        |             |      | (311,500    | )            |             |   | (449,900    | )           
|                                     | Proceeds from sale of restricted equity securities                            |                                                                 |                                    | 487,013     |                          |             |      |            |              |             |   |            |             
|                                     | Net change in loans made to customers                                         |                                                                 |                                    | (64,947,534 | )                        |             |      | (68,850,433 | )            |             |   | (52,567,673 | )           
|                                     | Investment in low-income housing tax credits                                  |                                                                 |                                    | (10,000     | )                        |             |      |            |              |             |   |            |             
|                                     | Investment in bank-owned life insurance                                       |                                                                 |                                    |            |                          |             |      | (3,174,000  | )            |             |   |            |             
|                                     | Proceeds from the sale of property and equipment                              |                                                                 |                                    | 25,269      |                          |             |      |            |              |             |   | 27,331      |             
|                                     | Proceeds from the sale of other real estate owned                             |                                                                 |                                    | 876,690     |                          |             |      | 290,187     |              |             |   |            |             
|                                     | Payments made for purchases of property and equipment                         |                                                                 |                                    | (1,589,572  | )                        |             |      | (1,151,825  | )            |             |   | (2,886,834  | )           
|                                     |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |             
|                                     |                                                                               |                                                                 | Net cash from investing activities |             |                          | (58,029,128 | )    |             |              | (55,140,919 | ) |             |              | (52,652,234 | )
|                                     |                                                                               |                                                                 |                                    |             |                          |             |      |             |              |             |   |             |             





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##### Table of Contents



|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |            | 
|------------------------------------------------------------------- | ------------------------------------------------------------------------ | ---------------------------------- | ---------- | ------------------------ | ---------- | ---- | ---------- | ---------- | ---------- | - | ---------- | ---------- | ---------- | 
|                                                                    |                                                                          |                                    |            | Years Ended December 31,
|                                                                    |                                                                          |                                    |            |                         
|                                                                    |                                                                          |                                    |            | 2002                     |            | 2001 |            | 2000      
|                                                                    |                                                                          |                                    |            |                          |            |      |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES                                |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |           
|                                                                    | Net change in demand deposit and savings accounts                        |                                    |            | 66,596,197               |            |      |            | 29,183,436 |            |   |            | 16,178,530 |           
|                                                                    | Net change in time certificates                                          |                                    |            | (5,396,585               | )          |      |            | 19,024,644 |            |   |            | 19,339,102 |           
|                                                                    | Net increase (decrease) in notes payable                                 |                                    |            | (8,769,596               | )          |      |            | 9,535,318  |            |   |            | 15,498,905 |           
|                                                                    | Proceeds from issuance of subordinated debentures                        |                                    |            | 4,000,000                |            |      |            |           |            |   |            |           |           
|                                                                    | Dividends paid                                                           |                                    |            | (2,593,588               | )          |      |            | (2,569,581 | )          |   |            | (2,244,637 | )         
|                                                                    | Proceeds from the exercise of stock options                              |                                    |            | 1,008,572                |            |      |            | 307,455    |            |   |            | 69,542     |           
|                                                                    | Repurchase of common stock                                               |                                    |            | (4,023,170               | )          |      |            | (427,503   | )          |   |            |           |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|                                                                    |                                                                          | Net cash from financing activities |            |                          | 50,821,830 |      |            |            | 55,053,769 |   |            |            | 48,841,442 | 
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                |                                                                          |                                    | 18,087,797 |                          |            |      | (4,502,893 | )          |            |   | 1,727,595  |           
|CASH AND CASH EQUIVALENTS, beginning of year                        |                                                                          |                                    | 22,613,738 |                          |            |      | 27,116,631 |            |            |   | 25,389,036 |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|CASH AND CASH EQUIVALENTS, end of year                              |                                                                          | $                                  | 40,701,535 |                          |            | $    | 22,613,738 |            |            | $ | 27,116,631 |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |           
|                                                                    | Interest paid in cash                                                    |                                    | $          | 7,784,590                |            |      | $          | 11,705,699 |            |   | $          | 12,244,272 |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|                                                                    | Taxes paid in cash                                                       |                                    | $          | 5,919,000                |            |      | $          | 2,906,000  |            |   | $          | 2,972,000  |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |           
|                                                                    | Change in unrealized gain on available-for-sale
securities, net of taxes |                                    | $          | (163,538                 | )          |      | $          | 422,705    |            |   | $          | 629,377    |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|                                                                    | Cash dividend declared and payable after year-end                        |                                    | $          | 628,990                  |            |      | $          | 642,858    |            |   | $          | 642,354    |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           
|                                                                    | Transfers of loans to other real estate owned                            |                                    | $          | 553,100                  |            |      | $          | 640,176    |            |   | $          |           |           
|                                                                    |                                                                          |                                    |            |                          |            |      |            |            |            |   |            |            |           

- 8 -





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##### Table of Contents



NOTE
1    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Organization and nature of
operations Columbia Bancorp (Columbia) was
incorporated on October 3, 1995, and became the holding company of Columbia
River Bank (the Bank) effective January 1, 1996. The Bank is a state-chartered
financial institution authorized to provide banking services in the states of
Oregon and Washington. With its administrative headquarters in The Dalles,
Oregon, the Bank operates branch facilities in The Dalles, Hood River,
Hermiston, Pendleton, McMinnville, Canby, Newberg, Troutdale, Madras, Redmond,
and Bend, Oregon. In Washington, it operates branches in Goldendale and White
Salmon. The Bank operates a mortgage banking division, Columbia River Bank
Mortgage Group (the Mortgage Group), with administrative offices in Bend,
Oregon. The Mortgage Group also has offices in The Dalles, Hermiston,
Pendleton, Newport, Redmond, Madras, McMinnville, and Hood River, Oregon, and
provides services to all banking branches of the Bank. Substantially all
activity of Columbia is conducted through its subsidiary bank. The Bank, along
with Columbia, is subject to the regulations of certain federal and state
agencies and undergoes periodic examinations by those regulatory authorities.

On December 19, 2002, Columbia formed Columbia Bancorp Trust I, a wholly-owned
Delaware statutory business trust, for purposes of issuing guaranteed undivided
beneficial interests in junior subordinated debentures (Trust Preferred
Securities). During December 2002, the Trust issued $4 million in Trust
Preferred Securities. All significant intercompany accounts and transactions
between Columbia and its subsidiaries have been eliminated in the preparation
of the consolidated financial statements.

Managements estimates and
assumptions The preparation of the consolidated
financial statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the balance
sheet, and revenues and expenses for the period. Actual results could differ
significantly from those estimates. Significant estimations made by management
primarily involve the calculation of the allowance for loan losses and the
valuation of the mortgage servicing asset.

Cash and cash equivalents Cash and cash equivalents normally include cash on
hand, amounts due from banks, and federal funds sold. Cash and due from banks
include amounts the Bank is required to maintain to meet certain average
reserve and compensating balance requirements of the Federal Reserve. As of
December 31, 2002 and 2001, the Bank had no reserve requirement to be
maintained at the Federal Reserve; however, total clearing balance requirements
at December 31, 2002 and 2001, were $400,000.





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##### Table of Contents



NOTE
1    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Investment securities Columbia is required to specifically identify its
investment securities as held-to-maturity, available-for-sale, or trading
accounts. Accordingly, management has determined that all investment
securities held at December 31, 2002 and 2001, are either held-to-maturity or
available-for-sale and conform to the following accounting policies:

Securities held-to-maturity Bonds, notes, and debentures for which Columbia
has the intent and ability to hold to maturity are reported at cost, adjusted
for premiums and discounts that are recognized in interest income, using the
interest method over the period to maturity.

Securities available-for-sale Available-for-sale securities consist of bonds,
notes, debentures, and certain equity securities not classified as
held-to-maturity securities. Securities are generally classified as
available-for-sale if the instrument may be sold in response to such factors as
(1) changes in market interest rates and related changes in the prepayment
risk, (2) needs for liquidity, (3) changes in the availability of and the yield
on alternative instruments, and (4) changes in funding sources and terms.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as other comprehensive income and carried as
accumulated comprehensive income or loss within stockholders equity until
realized. Fair values for these investment securities are based on quoted
market prices. Gains and losses on the sale of available-for-sale securities
are determined using the specific-identification method.

Declines in the fair value of individual held-to-maturity and
available-for-sale securities below their cost that are other than temporary
result in write-downs of the individual securities to their fair value. The
related write-downs are included in earnings as realized losses. Premiums and
discounts are recognized in interest income using the effective interest method
over the period to maturity.

Restricted equity securities Columbias equity investments in the Federal
Home Loan Bank and the Federal Agriculture Mortgage Corporation are classified
as restricted equity securities since ownership of these instruments is
restricted and they do not have an active market. As restricted equity
securities, these investments are carried at cost.

Loans held-for-sale Mortgage loans held-for-sale are carried at the lower of
cost or estimated fair market value. Fair market value is determined on an
aggregate loan basis. At December 31, 2002 and 2001, mortgage loans
held-for-sale were carried at cost which approximated fair market value.

2



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##### Table of Contents



NOTE 1    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Loans, net of allowance for loan losses and unearned loan fees Loans are
stated at the amount of unpaid principal, reduced by an allowance for loan
losses and unearned loan fees. Interest on loans is calculated by using the
simple-interest method on daily balances of the principal amount outstanding.
The allowance for loan losses is established through a provision for loan
losses charged to expenses. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will be adequate
to absorb possible losses on existing loans that may become uncollectible,
based on evaluations of the collectibility of loans and prior loan loss
experience. The evaluations take into consideration such factors as changes in
the nature and volume of the loan portfolio, overall portfolio quality, review
of specific problem loans, and current economic conditions that may affect the
borrowers ability to pay. Various regulatory agencies, as a regular part of
their examination process, periodically review the Banks reserve for loan
losses. Such agencies may require the Bank to recognize additions to the
allowance based on their judgment of information available to them at the time
of the examinations.

Impaired loans are carried at the present value of expected future cash flows
discounted at the loans effective interest rate, the loans market price, or
the fair value of collateral if the loan is collateral dependent. Accrual of
interest is discontinued on impaired loans when management believes, after
considering economic and business conditions, collection efforts, and
collateral position, that the borrowers financial condition is such that
collection of interest is doubtful. When interest accrual is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently recognized
only to the extent cash payments are received or when the loan is removed from
nonaccrual status.

Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield over the life of the related loan.

Property and equipment Property and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed by the straight-line and
accelerated methods over the estimated useful lives of the assets, which range
from three to seven years for furniture and equipment and 31-1⁄2 years for
building premises.

Goodwill Goodwill represents the excess of cost over the fair value of net
assets acquired from the purchase of Valley Community Bancorp in 1998, and was
amortized by the straight-line method over a 15-year period up to December 31,
2001. Under Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets, the Bank ceased amortization of
goodwill effective January 1, 2002, and completed its initial assessment of
goodwill impairment in March 2002 and the annual assessment in December 2002.
Goodwill impairment is deemed to exist if the net book value of a reporting
unit exceeds its estimated fair value. Columbias reporting units are generally
consistent with the operating segments identified in Note 23  Segment
Information. Neither the initial or annual assessment identified impairment of
goodwill such that the net book value of the reporting unit exceeded its
estimated fair value.

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NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

The following summarizes the Banks recorded goodwill and the effects of
adoption of SFAS No. 142 for the years ended December 31, 2002, 2001, and 2000:

|                               |          |   |           |      |      |   |           |      |  |   |           |      | 
|------------------------------ | -------- | - | --------- | ---- | ---- | - | --------- | ---- |  | - | --------- | ---- | 
|                               |          |   | 2002      |      | 2001 |   | 2000     
|                               |          |   |           |      |      |   |          
|Reported net income            |          | $ | 9,381,105 |      |      | $ | 7,373,717 |      |  | $ | 5,624,035 |     
|Add back goodwill amortization |          |   |          |      |      |   | 628,623   |      |  |   | 628,623   |     
|                               |          |   |           |      |      |   |           |      |  |   |           |     
|Adjusted net income            |          | $ | 9,381,105 |      |      | $ | 8,002,340 |      |  | $ | 6,252,658 |     
|                               |          |   |           |      |      |   |           |      |  |   |           |     
|Basic earnings per share:      |          |   |           |      |      |   |           |      |  |   |           |     
|                               | Reported |   | $         | 1.16 |      |   | $         | 0.92 |  |   | $         | 0.70 | 
|                               | Adjusted |   | $         | 1.16 |      |   | $         | 1.00 |  |   | $         | 0.78 | 
|Diluted earnings per share:    |          |   |           |      |      |   |           |      |  |   |           |     
|                               | Reported |   | $         | 1.13 |      |   | $         | 0.89 |  |   | $         | 0.70 | 
|                               | Adjusted |   | $         | 1.13 |      |   | $         | 0.97 |  |   | $         | 0.77 | 

Mortgage servicing asset, net of amortization and valuation allowance The
mortgage servicing asset (MSA) is amortized in proportion to, and over the
period of, estimated net servicing revenues. Impairment of the mortgage
servicing asset is assessed based on the fair value of those rights. Fair
values are estimated using discounted cash flows of servicing revenues less
servicing costs based on current market interest rates, inflation rates, and
industry prepayment rates in accordance with SFAS No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities. The amount of a valuation allowance recognized is the amount by
which the capitalized mortgage servicing asset exceeds the calculated fair
value.

Investments in limited partnership Columbia owns approximately a 10% interest
in a limited partnership that owns and operates affordable housing projects.
Investment in this project serves as an element of Columbias compliance with
the Community Reinvestment Act, and Columbia receives tax benefits in the form
of deductions for operating losses and tax credits. The tax credits may be used
to reduce taxes currently payable or may be carried back one year or forward
twenty years to recapture or reduce taxes. Columbia uses the equity method in
operating results and tax credits are recorded in the years they become
available to reduce income taxes.

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NOTE 1    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Other real estate owned Other real estate, acquired through foreclosure or
deeds in lieu of foreclosure, is carried at the lower of cost or estimated net
realizable value. When property is acquired, any excess of the loan balance
over its estimated net realizable value is charged to the reserve for loan
losses. Subsequent write-downs to net realizable value, if any, or any
disposition gains or losses are included in noninterest income and expense. At
December 31, 2001, the Bank held $349,213 in other real estate owned. The Bank
held no other real estate owned as of December 31, 2002.

Income taxes Deferred income tax assets and liabilities are determined based
on the tax effects of the differences between the book and tax bases of the
various balance sheet assets and liabilities. Deferred tax assets and
liabilities are reflected at currently enacted income tax rates applicable to
the period in which the deferred tax assets or liabilities are expected to be
realized or settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income taxes.

Advertising Advertising costs are charged to expense during the year in which
they are incurred. Advertising expenses include promotional expenses such as
public relations costs and donations, and were $553,743, $566,831, and $520,189
for the years ended December 31, 2002, 2001, and 2000, respectively.

Earnings per share Basic earnings per share is computed by dividing net
income available to stockholders by the weighted average number of common
shares outstanding during the period, after giving retroactive effect to stock
dividends and splits. Diluted earnings per share is computed similar to basic
earnings per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. Included in the denominator
is the dilutive effect of stock options computed under the treasury stock
method.

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NOTE 1    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Stock options Columbia applies Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock option plans. Accordingly, compensation costs are
recognized as the difference between the exercise price of each option and the
market price of Columbias stock at the date of each grant. Had compensation
cost for Columbias 2002, 2001, and 2000 grants for stock-based compensation
plans been determined consistent with SFAS No. 123, Accounting for Stock-Based
Compensation, its net income and earnings per common share for December 31,
2002, 2001, and 2000, would approximate the pro forma amounts below (in
thousands, except per share data).

|                                   |             |  |      |       |      |  |      |       |  |  |   |       | 
|---------------------------------- | ----------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                   |             |  | 2002 |       | 2001 |  | 2000
|                                   |             |  |      |       |      |  |     
|Net income:                        |             |  |      |       |      |  |      |       |  |  |   |      
|                                   | As reported |  | $    | 9,381 |      |  | $    | 7,374 |  |  | $ | 5,624 | 
|                                   | Pro forma   |  | $    | 8,570 |      |  | $    | 6,823 |  |  | $ | 5,486 | 
|Basic earnings per common share:   |             |  |      |       |      |  |      |       |  |  |   |      
|                                   | As reported |  | $    | 1.16  |      |  | $    | 0.92  |  |  | $ | 0.70  | 
|                                   | Pro forma   |  | $    | 1.06  |      |  | $    | 0.85  |  |  | $ | 0.68  | 
|Diluted earnings per common share: |             |  |      |       |      |  |      |       |  |  |   |      
|                                   | As reported |  | $    | 1.13  |      |  | $    | 0.89  |  |  | $ | 0.70  | 
|                                   | Pro forma   |  | $    | 1.03  |      |  | $    | 0.83  |  |  | $ | 0.68  | 

The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions for
December 31, 2002, 2001, and 2000:

|                      |  |      |       |      |  |      |       |   |  |  |       |  
|--------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  |  | ----- | -
|                      |  | 2002 |       | 2001 |  | 2000
|                      |  |      |       |      |  |     
|Dividend yield        |  |      | 2.14  | %    |  |      | 3.00  | % |  |  | 4.84  | %
|Expected life (years) |  |      | 6.00  |      |  |      | 3.32  |   |  |  | 3.32  |  
|Expected volatility   |  |      | 45.25 | %    |  |      | 29.77 | % |  |  | 35.78 | %
|Risk-free rate        |  |      | 2.08  | %    |  |      | 3.74  | % |  |  | 5.11  | %

The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.

6



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##### Table of Contents



NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Off-balance-sheet financial instruments In the ordinary course of business,
the Bank enters into off-balance-sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit, and standby letters of credit. These financial
instruments are recorded in the financial statements when they are funded or
related fees are incurred or received.

Derivative financial instruments In 2000, Columbia adopted SFAS No. 133,
Accounting for Derivatives and Hedging Activities, and SFAS No. 138,
Accounting for Certain Derivative Instruments and Certain Hedging Activities,
an Amendment of FASB Statement No. 133. All derivative instruments, including
certain derivative instruments embedded in other contracts, are recognized in
the consolidated balance sheet at fair value. SFAS No. 133 dictates that the
accounting treatment for gains or losses from changes in the derivative
instruments fair value is contingent on whether the derivative instrument
qualifies as a hedge under the accounting standard. On the date Columbia enters
into a derivative contract, Columbia designates the derivative instruments as
(1) a hedge of the fair value of a recognized asset or liability or of an
unrecognized firm commitment (fair value hedge), (2) a hedge of a forecasted
transaction or of the variability of cash flows to be received or paid related
to a recognized asset or liability (cash flow hedge), or (3) hedge for trading,
customer accommodation or not qualifying for hedge accounting (free-standing
derivative instruments). For a fair value hedge, changes in the fair value of
the derivative instrument and changes in the fair value of the hedged asset or
liability or of an unrecognized firm commitment attributable to the hedged risk
are recorded in current period net income. For a cash flow hedge, changes in
the fair value of the derivative instrument to the extent that it is effective
are recorded in other comprehensive income, net of tax, within stockholders
equity and subsequently reclassified to net income in the same period(s) that
the hedged transaction impacts net income. For free-standing derivative
instruments, changes in the fair values are reported in current period net
income. Columbia formally documents the relationship between hedging
instruments and hedged items, as well as the risk management objective and
strategy for undertaking any hedge transaction. This process includes linking
all derivative instruments that are designated as fair value or cash flow
hedges to specific assets and liabilities on the balance sheet or to specific
forecasted transactions. Columbia uses forward sales contract derivatives as a
strategy to mitigate the risk associated with interest rate volatility.
Columbia also formally assesses both at the inception of the hedge and on an
ongoing basis, whether the derivative instruments used are highly effective in
offsetting changes in fair values or cash flows of hedged items.

Fair value of financial instruments The following methods and assumptions
were used by Columbia in estimating fair values of financial instruments as
disclosed herein:

Cash and cash equivalents The carrying amounts of cash and short-term
instruments approximate their fair value.

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##### Table of Contents



NOTE
1   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES  (continued)

Held-to-maturity, available-for-sale, and restricted equity securities Fair
values for investment securities, excluding restricted equity securities, are
based on quoted market prices. The carrying values of restricted equity
securities approximate fair values.

Loans receivable  For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying values.
Fair values for certain mortgage loans (for example, one-to-four family
residential), credit card loans, and other consumer loans are based on quoted
market prices of similar loans sold in conjunction with securitization
transactions, adjusted for differences in loan characteristics. Fair values for
commercial real estate and commercial loans are estimated using discounted cash
flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality. Fair values for impaired
loans are estimated using a discounted cash flow analysis or underlying
collateral values, where applicable.

Deposit liabilities  The fair values disclosed for demand deposits are, by
definition, equal to the amount payable on demand at the reporting date (that
is, their carrying amounts). The carrying amounts of variable-rate money market
accounts and fixed-term certificates of deposit (CDs) approximate their fair
values at the reporting date. Fair values for fixed-rate CDs are estimated
using a discounted cash flow calculation that applies interest rates currently
being offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.

Short-term borrowings  The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings
maturing within 90 days approximate their fair values. Fair values of other
short-term borrowings are estimated using discounted cash flow analyses based
on the Banks current incremental borrowing rates for similar types of
borrowing arrangements.

Long-term debt  The fair values of the Banks long-term debt is estimated
using a discounted cash flow analysis based on the Banks current incremental
borrowing rates for similar types of borrowing arrangements.

Accrued interest  The carrying amounts of accrued interest approximate their
fair values.

Off-balance-sheet instruments  The Banks off-balance-sheet instruments
include unfunded commitments to extend credit and standby letters of credit.
The fair value of these instruments is not considered practicable to estimate
because of the lack of quoted market prices and the inability to estimate fair
value without incurring excessive costs.

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NOTE 1   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

Recently issued accounting standards In December 2002, the Financial
Accounting Standards Board (FASB) issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure  an Amendment of FASB
Statement No. 123. This statement amends FASB Statement No. 123, Accounting
for Stock-Based Compensation, to provide alternative methods of transition for
a voluntary change to the fair value-based method of accounting for stock-based
employee compensation. In addition, this statement amends the disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results.
Columbias management intends to continue using the intrinsic value method for
stock-based employee compensation arrangements and, therefore, does not expect
that the application provisions of this statement will have a material impact
on Columbias consolidated financial statements.

In October 2002, the FASB issued SFAS No. 147, Acquisitions of Certain
Financial Institutions. This statement provides guidance on the accounting for
the acquisition of a financial institution and applies to all acquisitions
except those between two or more mutual enterprises. Columbias management does
not expect that the application provisions of this statement will have a
material impact on Columbias consolidated financial statements.

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit
an Activity (Including Certain Costs Incurred in a Restructuring). The
statement is effective for exit or disposal activities that are initiated after
December 31, 2002, with early application encouraged. Columbias management
does not expect that the application of the provisions of this statement will
have a material impact on Columbias consolidated financial statements.

In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement rescinds FASB Statement No. 4, Reporting Gains and Losses from
Extinguishment of Debt, and an amendment of that statement, FASB Statement No.
64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This
statement also rescinds FASB Statement No. 44, Accounting for Intangible
Assets of Motor Carriers. This statement amends FASB Statement No. 13,
Accounting for Leases, to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required
accounting for certain lease modifications that have economic effects that are
similar to sale-leaseback transactions. This statement also amends other
existing authoritative pronouncements to make various technical corrections,
clarify meanings, or describe their applicability under conflicting conditions.
Columbias management does not expect that the application of the provisions of
this statement will have a material impact on Columbias consolidated financial
statements.

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NOTE 1    ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)

In January 2003, FASB issued Interpretation No. 46 (FIN 46), Consolidation of
Variable Interest Entities. This interpretation clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, and
requires existing unconsolidated variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse
risks among parties involved. This interpretation explains how to identify
variable interest entities and how an enterprise assesses its interests in a
variable interest entity to decide whether to consolidate that entity. This
interpretation applies immediately to variable interest entities created after
January 31, 2003, and to variable interest entities in which an enterprise
obtains an interest after that date. It applies in the first fiscal year or
interim period beginning after June 15, 2003, to entities in which an
enterprise holds a variable interest that is acquired before February 1, 2003.
The interpretation applies to public enterprises as of the beginning of the
applicable interim or annual period. Columbias management does not expect that
the application of the provisions of this interpretation will have a material
impact on Columbias consolidated financial statements.

In November 2002, FASB issued Interpretation No. 45 (FIN 45), Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. This interpretation elaborates on the
disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing a
guarantee. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 31, 2002, and the
initial recognition and initial measurement provisions shall be applied on a
prospective basis to guarantees issued or modified after December 31, 2002.
Columbias management does not expect that the application of the provisions of
this interpretation will have a material impact on Columbias consolidated
financial statements.

Reclassifications  Certain reclassifications have been made to the 2001 and
2000 financial statements to conform with current year presentations.

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NOTE 2  INVESTMENT SECURITIES

The amortized cost and estimated fair values of Columbias investment
securities at December 31, 2002 and 2001, are summarized as follows:

|                               |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |            | 
|------------------------------ | -------------------------------------- | - | ---------- | ---------- | ---------- | - | ---------- | ------- | ----- | - | --------- | ---- | - | - | ---------- | ---------- | 
|                               |                                        |   |            |            |            |   | Gross      |         | Gross |   | Estimated
|                               |                                        |   | Amortized  |            | Unrealized |   | Unrealized |         | Fair 
|                               |                                        |   | Cost       |            | Gains      |   | Losses     |         | Value
|                               |                                        |   |            |            |            |   |            |         |      
|December 31, 2002:             |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |           
|Available-for-sale securities: |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |           
|                               | Obligations of U.S
government agencies |   | $          | 11,499,888 |            |   | $          | 143,700 |       |   | $         |     |   |   | $          | 11,643,588 | 
|                               | Corporate debt securities              |   |            | 1,228,919  |            |   |            | 37,253  |       |   |           |     |   |   |            | 1,266,172  | 
|                               | Corporate equity securities            |   |            | 112,987    |            |   |            |        |       |   |           |     |   |   |            | 112,987    | 
|                               | Municipal securities                   |   |            | 1,643,884  |            |   |            | 83,063  |       |   |           |     |   |   |            | 1,726,947  | 
|                               |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |            | 
|                               |                                        | $ | 14,485,678 |            |            | $ | 264,016    |         |       | $ |          |      |   | $ | 14,749,694 |           
|                               |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |            | 
|Held-to-maturity securities:   |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |           
|                               | Mortgage-backed
securities             |   | $          | 3,770,306  |            |   | $          | 149,815 |       |   | $         |     |   |   | $          | 3,920,121  | 
|                               | Municipal securities                   |   |            | 14,748,450 |            |   |            | 689,734 |       |   |           | (536 | ) |   |            | 15,437,648 | 
|                               | Obligations of U.S
government agencies |   |            | 81,579     |            |   |            |        |       |   |           |     |   |   |            | 81,579     | 
|                               |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |            | 
|                               |                                        | $ | 18,600,335 |            |            | $ | 839,549    |         |       | $ | (536      | )    |   | $ | 19,439,348 |           
|                               |                                        |   |            |            |            |   |            |         |       |   |           |      |   |   |            |            | 

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NOTE 2  INVESTMENT SECURITIES (continued)

|                               |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |            | 
|------------------------------ | -------------------------------------- | - | ---------- | ---------- | ---------- | - | ---------- | ------- | ----- | - | --------- | ------- | - | - | ---------- | ---------- | 
|                               |                                        |   |            |            |            |   | Gross      |         | Gross |   | Estimated
|                               |                                        |   | Amortized  |            | Unrealized |   | Unrealized |         | Fair 
|                               |                                        |   | Cost       |            | Gains      |   | Losses     |         | Value
|                               |                                        |   |            |            |            |   |            |         |      
|December 31, 2001:             |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |           
|Available-for-sale securities: |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |           
|                               | U.S. Treasury securities               |   | $          | 1,004,320  |            |   | $          | 11,517  |       |   | $         |        |   |   | $          | 1,015,837  | 
|                               | Obligations of U.S
government agencies |   |            | 13,799,133 |            |   |            | 408,668 |       |   |           |        |   |   |            | 14,207,801 | 
|                               | Corporate debt securities              |   |            | 1,233,885  |            |   |            | 47,211  |       |   |           |        |   |   |            | 1,281,096  | 
|                               | Corporate equity securities            |   |            | 300,000    |            |   |            |        |       |   |           |        |   |   |            | 300,000    | 
|                               | Municipal securities                   |   |            | 1,943,657  |            |   |            | 53,716  |       |   |           |        |   |   |            | 1,997,373  | 
|                               |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |            | 
|                               |                                        | $ | 18,280,995 |            |            | $ | 521,112    |         |       | $ |          |         |   | $ | 18,802,107 |           
|                               |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |            | 
|Held-to-maturity securities:   |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |           
|                               | Mortgage-backed
securities             |   | $          | 6,915,536  |            |   | $          | 41,768  |       |   | $         | (14,074 | ) |   | $          | 6,943,230  | 
|                               | Municipal securities                   |   |            | 15,741,728 |            |   |            | 217,244 |       |   |           | (58,643 | ) |   |            | 15,900,329 | 
|                               |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |            | 
|                               |                                        | $ | 22,657,264 |            |            | $ | 259,012    |         |       | $ | (72,717   | )       |   | $ | 22,843,559 |           
|                               |                                        |   |            |            |            |   |            |         |       |   |           |         |   |   |            |            | 

The amortized cost and estimated fair value of investment securities at
December 31, 2002, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.

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NOTE 2  INVESTMENT SECURITIES (continued)

|                                       |  |                    |            |                  |  |           |            |       |  |   |            |           |  |   |            | 
|-------------------------------------- |  | ------------------ | ---------- | ---------------- |  | --------- | ---------- | ----- |  | - | ---------- | --------- |  | - | ---------- | 
|                                       |  | Available-For-Sale |            | Held-To-Maturity
|                                       |  |                    |            |                 
|                                       |  |                    |            |                  |  | Estimated |            |       |  |   |            | Estimated
|                                       |  | Amortized          |            | Fair             |  | Amortized |            | Fair 
|                                       |  | Cost               |            | Value            |  | Cost      |            | Value
|                                       |  |                    |            |                  |  |           |            |      
|Due in one year or less                |  | $                  | 8,033,927  |                  |  | $         | 8,174,547  |       |  | $ | 5,215,443  |           |  | $ | 5,376,120  | 
|Due after one year through
five years  |  |                    | 6,132,824  |                  |  |           | 6,234,124  |       |  |   | 2,749,413  |           |  |   | 2,869,079  | 
|Due after five years through
ten years |  |                    | 205,940    |                  |  |           | 228,036    |       |  |   | 8,022,225  |           |  |   | 8,455,934  | 
|Due after ten years                    |  |                    |           |                  |  |           |           |       |  |   | 2,613,254  |           |  |   | 2,738,215  | 
|                                       |  |                    |            |                  |  |           |            |       |  |   |            |           |  |   |            | 
|                                       |  |                    | 14,372,691 |                  |  |           | 14,636,707 |       |  |   | 18,600,335 |           |  |   | 19,439,348 | 
|Corporate equity securities            |  |                    | 112,987    |                  |  |           | 112,987    |       |  |   |           |           |  |   |           | 
|                                       |  |                    |            |                  |  |           |            |       |  |   |            |           |  |   |            | 
|                                       |  | $                  | 14,485,678 |                  |  | $         | 14,749,694 |       |  | $ | 18,600,335 |           |  | $ | 19,439,348 | 
|                                       |  |                    |            |                  |  |           |            |       |  |   |            |           |  |   |            | 

For the purpose of the maturity table, mortgage-backed securities, which are
not due at a single maturity date, have been allocated over maturity groupings
based on the weighted-average contractual maturities of underlying collateral.
Mortgage-backed securities may mature earlier than their weighted-average
contractual maturities because of principal prepayments.

As of December 31, 2002 and 2001, investment securities with an amortized cost
of $15,270,194 and $20,850,183, respectively, have been pledged to secure notes
payable at the Federal Home Loan Bank and Federal Reserve and public and other
deposits, as required by law.

NOTE 3  RESTRICTED EQUITY SECURITIES

The composition of restricted equity securities is as follows:

|                                               |  |      |           |      |  |   |           | 
|---------------------------------------------- |  | ---- | --------- | ---- |  | - | --------- | 
|                                               |  | 2002 |           | 2001
|                                               |  |      |           |     
|Federal Home Loan Bank stock                   |  | $    | 2,688,800 |      |  | $ | 2,062,900 | 
|Federal Agriculture Mortgage Corporation stock |  |      | 9,400     |      |  |   | 9,400     | 
|                                               |  |      |           |      |  |   |           | 
|                                               |  | $    | 2,698,200 |      |  | $ | 2,072,300 | 
|                                               |  |      |           |      |  |   |           | 

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NOTE 4  LOANS AND ALLOWANCE FOR LOAN LOSSES

The loan portfolio consists of the following:

|                               |  |      |             |      |  |   |             |  
|------------------------------ |  | ---- | ----------- | ---- |  | - | ----------- | -
|                               |  | 2002 |             | 2001
|                               |  |      |             |     
|Commercial                     |  | $    | 69,881,954  |      |  | $ | 64,163,290  |  
|Agriculture                    |  |      | 61,770,202  |      |  |   | 54,934,115  |  
|Real estate                    |  |      | 181,456,664 |      |  |   | 153,204,595 |  
|Real estate  construction     |  |      | 91,035,925  |      |  |   | 70,473,600  |  
|Consumer                       |  |      | 20,936,603  |      |  |   | 19,802,296  |  
|Credit card and other loans    |  |      | 6,497,855   |      |  |   | 5,250,634   |  
|                               |  |      |             |      |  |   |             |  
|                               |  |      | 431,579,203 |      |  |   | 367,828,530 |  
|Less allowance for loan losses |  |      | (6,416,691  | )    |  |   | (5,311,715  | )
|Less unearned loan fees        |  |      | (1,244,957  | )    |  |   | (1,193,694  | )
|                               |  |      |             |      |  |   |             |  
|                               |  | $    | 423,917,555 |      |  | $ | 361,323,121 |  
|                               |  |      |             |      |  |   |             |  

Restructured and other loans considered impaired had a recorded investment of
approximately $1,028,000 and $1,147,000 at December 31, 2002 and 2001,
respectively. The Banks average investment in impaired loans, measured on the
basis of the present value of expected future cash flows discounted at the
loans effective interest rates, was approximately $1,076,000 and $1,188,000
during 2002 and 2001, respectively. The total allowance for loan losses related
to these loans at December 31, 2002 and 2001, was approximately $253,000 and
$286,000, respectively. Had the impaired loans performed according to their
original terms, additional interest income of $215,663, $209,415, and $183,248
would have been recognized in 2002, 2001, and 2000, respectively. No interest
income has been recognized on impaired loans during the period of impairment.

Changes in the allowance for loan losses were as follows:

|                           |  |      |           |      |  |      |           |   |  |   |           |  
|-------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                           |  | 2002 |           | 2001 |  | 2000
|                           |  |      |           |      |  |     
|BALANCE, beginning of year |  | $    | 5,311,715 |      |  | $    | 4,577,941 |   |  | $ | 3,298,460 |  
|Provision for loan losses  |  |      | 1,800,000 |      |  |      | 1,450,000 |   |  |   | 1,697,000 |  
|Loans charged off          |  |      | (886,156  | )    |  |      | (799,583  | ) |  |   | (459,824  | )
|Loan recoveries            |  |      | 191,132   |      |  |      | 83,357    |   |  |   | 42,305    |  
|                           |  |      |           |      |  |      |           |   |  |   |           |  
|BALANCE, end of year       |  | $    | 6,416,691 |      |  | $    | 5,311,715 |   |  | $ | 4,577,941 |  
|                           |  |      |           |      |  |      |           |   |  |   |           |  

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NOTE 5  MORTGAGE SERVICING ASSET

Mortgages serviced for others, which totaled $486.8 million and $416.3 million
at December 31, 2002 and 2001, respectively, are not included in the
accompanying consolidated balance sheets. However, mortgage servicing asset
(MSA) relating to this portfolio is recorded by the Bank as an asset based on
calculations using a discounted cash flow model, which incorporates the
expected life of the loans, estimated costs to service the loans, servicing
fees to be received, and other factors, in accordance with SFAS No. 140,
Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities. The key assumptions used to value the MSA at December 31,
2002, were as follows:

|                                           |  |         |       |         |  |        |       |   |  |   |       |  
|------------------------------------------ |  | ------- | ----- | ------- |  | ------ | ----- | - |  | - | ----- | -
|                                           |  | 30-year |       | 15-year |  | 7-year
|                                           |  |         |       |         |  |       
|Weighted-average term to maturity (months) |  |         | 341   |         |  |        | 164   |   |  |   | 74    |  
|Constant prepayment rate                   |  |         | 12.4  | %       |  |        | 9.2   | % |  |   | 14.6  | %
|Servicing cost, net of ancillary income    |  | $       | 19.50 |         |  | $      | 19.50 |   |  | $ | 19.50 |  
|Discount rate                              |  |         | 8.9   | %       |  |        | 8.9   | % |  |   | 8.9   | %

The changes in the balance of the MSA were as follows:

|                                                   |  |      |            |      |  |      |           |   |  |   |           |  
|-------------------------------------------------- |  | ---- | ---------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                   |  | 2002 |            | 2001 |  | 2000
|                                                   |  |      |            |      |  |     
|MSA balance, beginning of year                     |  | $    | 6,196,801  |      |  | $    | 2,759,687 |   |  | $ | 1,482,374 |  
|Additions for capitalized servicing
right premiums |  |      | 2,227,511  |      |  |      | 4,750,197 |   |  |   | 1,437,145 |  
|Amortization of MSA                                |  |      | (1,028,810 | )    |  |      | (395,354  | ) |  |   | (159,832  | )
|Valuation allowance adjustments                    |  |      | (2,781,111 | )    |  |      | (917,729  | ) |  |   |          |  
|                                                   |  |      |            |      |  |      |           |   |  |   |           |  
|                                                   |  | $    | 4,614,391  |      |  | $    | 6,196,801 |   |  | $ | 2,759,687 |  
|                                                   |  |      |            |      |  |      |           |   |  |   |           |  

The valuation allowance provides for adjustments to the cost basis of the total
mortgage servicing assets to estimated fair value. The fair value adjustment is
recorded as an adjustment to the income of the Banks Mortgage Group when
recognized.

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NOTE 6  PROPERTY AND EQUIPMENT

The major classifications of property and equipment are summarized as follows:

|                              |  |      |            |      |  |   |            |  
|----------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                              |  | 2002 |            | 2001
|                              |  |      |            |     
|Land                          |  | $    | 3,491,377  |      |  | $ | 3,491,377  |  
|Construction in progress      |  |      | 145,741    |      |  |   | 67,054     |  
|Buildings and improvements    |  |      | 10,153,556 |      |  |   | 9,865,897  |  
|Furniture and equipment       |  |      | 6,521,588  |      |  |   | 7,084,983  |  
|                              |  |      |            |      |  |   |            |  
|                              |  |      | 20,312,262 |      |  |   | 20,509,311 |  
|Less accumulated depreciation |  |      | (6,128,411 | )    |  |   | (6,621,465 | )
|                              |  |      |            |      |  |   |            |  
|                              |  | $    | 14,183,851 |      |  | $ | 13,887,846 |  
|                              |  |      |            |      |  |   |            |  

For certain bank branch facilities, Columbia leases office space from third
parties. Minimum future rentals on noncancellable leases for the next five
years beginning in 2003 are approximately $93,000, $94,000, $94,000, $80,000,
and $74,000. Minimum lease rentals for the year 2008 and thereafter are
approximately $153,000.

NOTE 7  TIME CERTIFICATES

Time certificates of deposit of $100,000 and over, aggregated $44,746,175 and
$37,457,669 at December 31, 2002 and 2001, respectively. Brokered time
certificates had an aggregate carrying value of $16,179,793 at December 31,
2002. There were no brokered deposits at December 31, 2001.

At December 31, 2002, the scheduled maturities for all time deposits are as
follows:

|                          |  |  |            |  |  |           |             | 
|------------------------- |  |  | ---------- |  |  | --------- | ----------- | 
|Years ending December 31, |  |  | 2003       |  |  | $         | 62,395,641  | 
|                          |  |  | 2004       |  |  |           | 19,332,342  | 
|                          |  |  | 2005       |  |  |           | 13,260,961  | 
|                          |  |  | 2006       |  |  |           | 12,398,297  | 
|                          |  |  | 2007       |  |  |           | 2,930,502   | 
|                          |  |  | Thereafter |  |  | 1,194,632 |            
|                          |  |  |            |  |  |           |             | 
|                          |  |  |            |  |  | $         | 111,512,375 | 
|                          |  |  |            |  |  |           |             | 

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NOTE 8  LINES OF CREDIT AND BORROWED FUNDS

The Bank has federal funds lines of credit agreements with six financial
institutions and the Federal Reserve. The maximum borrowings available under
these lines totaled $53,280,000. These lines support short-term liquidity and
cannot be used for more than one to fifteen consecutive business days,
depending on the lending institution. At December 31, 2002 and 2001, there were
no borrowings outstanding under these agreements.

The Bank is a member of the Federal Home Loan Bank (FHLB) of Seattle and has
entered into credit arrangements with the FHLB. Borrowings under the credit
arrangements are collateralized by the Banks FHLB stock as well as loans or
other instruments which may be pledged. As of December 31, 2002 and 2001, the
Bank had total borrowings outstanding with the FHLB of $26,284,946 and
$35,453,969, respectively, including $3,000,000 outstanding under a Cash
Management Advance agreement at December 31, 2001. The maximum borrowings
available under the Cash Management Advance agreement were $72,915,150 at
December 31, 2002. Interest rates on the promissory notes and under the Cash
Management Advance agreement range from 1.59% to 6.08%.

The Bank also participates in the U.S. Treasury Departments Treasury
Investment Program, which facilitates the acceptance and processing of federal
tax deposits. Under this program, the Bank is authorized to accumulate daily
tax payments up to authorized limits, and deploy the funds in short-term
investments. In exchange, the Bank is required to issue a fully collateralized
demand note to the U.S. Treasury and pay interest at the federal funds rate
minus 25 basis points. As of December 31, 2002 and 2001, the Bank had $850,000
and $450,573, respectively, outstanding under this program.

The maturity of notes payable is as follows:

|                          |  |  |            |  |  |           |            | 
|------------------------- |  |  | ---------- |  |  | --------- | ---------- | 
|Years ending December 31, |  |  | 2003       |  |  | $         | 11,578,495 | 
|                          |  |  | 2004       |  |  |           | 3,254,480  | 
|                          |  |  | 2005       |  |  |           | 3,750,000  | 
|                          |  |  | 2006       |  |  |           | 1,000,000  | 
|                          |  |  | 2007       |  |  |           | 6,500,000  | 
|                          |  |  | Thereafter |  |  | 1,051,971 |           
|                          |  |  |            |  |  |           |            | 
|                          |  |  |            |  |  | $         | 27,134,946 | 
|                          |  |  |            |  |  |           |            | 

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NOTE 9  TRUST PREFERRED SECURITIES

In December 2002, Columbia formed a wholly-owned Delaware statutory business
trust subsidiary, Columbia Bancorp Trust I (the Trust), which issued $4,000,000
of guaranteed undivided beneficial interests in Columbias Junior Subordinated
Deferrable Interest Debentures (Trust Preferred Securities). These debentures
qualify as Tier 1 capital under Federal Reserve Board guidelines. All of the
common securities of the Trust are owned by Columbia. The proceeds from the
issuance of the common securities and the Trust Preferred Securities were used
by Columbia Bancorp Trust I to purchase $4,124,000 million of junior
subordinated debentures of Columbia. The debentures which represent the sole
asset of the Trust, accrue and pay distributions quarterly at a variable rate
of 90-day LIBOR plus 3.3% per annum of the stated liquidation value of $1,000
per capital security. Columbia has entered into contractual arrangements which,
taken collectively, fully and unconditionally guarantee payment of: (i) accrued
and unpaid distributions required to be paid on the Trust Preferred Securities;
(ii) the redemption price with respect to any Trust Preferred Securities called
for redemption by the Trust, and (iii) payments due upon a voluntary or
involuntary dissolution, winding up or liquidation of the Trust. The Trust
Preferred Securities are mandatorily redeemable upon maturity of the debentures
on January 7, 2033, or upon earlier redemption as provided in the indenture.
Columbia has the right to redeem the debentures purchased by the Trust in whole
or in part, on or after January 7, 2008. As specified in the indenture, if the
debentures are redeemed prior to maturity, the redemption price will be the
principal amount and any accrued but unpaid interest.

NOTE 10  INTEREST RATE SWAP

During January 2003, in connection with the issuance of $4,000,000 of
floating-rate Trust Preferred Securities described in Note 9, Columbia entered
into an interest rate swap agreement with an unrelated third party. Under the
terms of the agreement, which expires in January 2008, Columbia will pay 3.27%
on a notional amount of $4,000,000 and receive 90-day LIBOR on the same amount.
The effect of this transaction was the conversion of the $4,000,0000 trust
preferred issuance from a floating rate at 90-day LIBOR plus 330 basis points
to a fixed rate of 6.57% for five years, the point at which Columbia has the
option to call the Trust Preferred Securities as described in Note 9. Columbia
has classified the swap agreement as a cash flow hedge in accordance with SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities.

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NOTE 11  INCOME TAXES

The provision for income taxes consists of the following:

|                                |         |   |           |           |      |   |           |           |  |   |           |           | 
|------------------------------- | ------- | - | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                |         |   | 2002      |           | 2001 |   | 2000     
|                                |         |   |           |           |      |   |          
|Current tax provision:          |         |   |           |           |      |   |           |           |  |   |           |          
|                                | Federal |   | $         | 4,989,761 |      |   | $         | 2,597,008 |  |   | $         | 2,696,053 | 
|                                | State   |   |           | 926,292   |      |   |           | 517,244   |  |   |           | 527,966   | 
|                                |         |   |           |           |      |   |           |           |  |   |           |           | 
|                                |         |   | 5,916,053 |           |      |   | 3,114,252 |           |  |   | 3,224,019 |          
|                                |         |   |           |           |      |   |           |           |  |   |           |           | 
|Deferred tax (benefit) expense: |         |   |           |           |      |   |           |           |  |   |           |          
|                                | Federal |   |           | (613,200  | )    |   |           | 1,117,892 |  |   |           | 71,700    | 
|                                | State   |   |           | (79,356   | )    |   |           | 144,668   |  |   |           | 9,278     | 
|                                |         |   |           |           |      |   |           |           |  |   |           |           | 
|                                |         |   | (692,556  | )         |      |   | 1,262,560 |           |  |   | 80,978    |          
|                                |         |   |           |           |      |   |           |           |  |   |           |           | 
|                                |         | $ | 5,223,497 |           |      | $ | 4,376,812 |           |  | $ | 3,304,997 |          
|                                |         |   |           |           |      |   |           |           |  |   |           |           | 

The components of the deferred tax expense consist of the following:

|                                                                                      |                                |   |          |          |      |   |           |           |  |   |          |        | 
|------------------------------------------------------------------------------------- | ------------------------------ | - | -------- | -------- | ---- | - | --------- | --------- |  | - | -------- | ------ | 
|                                                                                      |                                |   | 2002     |          | 2001 |   | 2000     
|                                                                                      |                                |   |          |          |      |   |          
|Mortgage servicing rights                                                             |                                | $ | (601,316 | )        |      | $ | 1,306,104 |           |  | $ | 529,587  |       
|Loan loss provision not deductible
for tax                                            |                                |   | (371,906 | )        |      |   | (275,426  | )         |  |   | (518,947 | )     
|Difference between book and tax
depreciation methods                                  |                                |   | 217,179  |          |      |   | 195,279   |           |  |   | 77,986   |       
|Difference between accrual and
cash basis tax reporting                               |                                |   |         |          |      |   | (17,406   | )         |  |   | (28,158  | )     
|Deferred compensation expense                                                         |                                |   | (22,933  | )        |      |   | 7,083     |           |  |   | (43,714  | )     
|Difference between book and tax
recognition of Federal Home
Loan Bank stock dividends |                                |   | 60,031   |          |      |   | 46,926    |           |  |   | 36,700   |       
|Cash surrender value greater than
investment in life insurance policies               |                                |   | 101,584  |          |      |   |          |           |  |   |         |       
|Other differences                                                                     |                                |   | (75,195  | )        |      |   |          |           |  |   | 27,524   |       
|                                                                                      |                                |   |          |          |      |   |           |           |  |   |          |       
|                                                                                      | Deferred tax (benefit) expense |   | $        | (692,556 | )    |   | $         | 1,262,560 |  |   | $        | 80,978 | 
|                                                                                      |                                |   |          |          |      |   |           |           |  |   |          |       

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NOTE 11  INCOME TAXES (continued)

The net deferred tax liability in the accompanying consolidated balance sheets
consists of the following:

|                          |                                                           |                            |            |            |          |      |            |            |            |  
|------------------------- | --------------------------------------------------------- | -------------------------- | ---------- | ---------- | -------- | ---- | ---------- | ---------- | ---------- | -
|                          |                                                           |                            |            | 2002       |          | 2001
|                          |                                                           |                            |            |            |          |     
|Deferred tax assets:      |                                                           |                            |            |            |          |      |            |           
|                          | Allowance for loan losses                                 |                            | $          | 2,213,529  |          |      | $          | 1,841,623  |           
|                          | Deferred compensation                                     |                            |            | 144,729    |          |      |            | 121,796    |           
|                          | Other                                                     |                            |            | 75,195     |          |      |            |           |           
|                          |                                                           |                            |            |            |          |      |            |            |           
|                          |                                                           |                            | 2,433,453  |            |          |      | 1,963,419  |           
|                          |                                                           |                            |            |            |          |      |            |            |           
|Deferred tax liabilities: |                                                           |                            |            |            |          |      |            |           
|                          | Mortgage servicing rights                                 |                            |            | (1,753,469 | )        |      |            | (2,354,785 | )         
|                          | Accumulated depreciation                                  |                            |            | (1,077,737 | )        |      |            | (860,558   | )         
|                          | Cash surrender value greater than life insurance
policies |                            |            | (101,584   | )        |      |            |           |           
|                          | Federal Home Loan Bank stock dividends                    |                            |            | (266,554   | )        |      |            | (206,523   | )         
|                          |                                                           |                            |            |            |          |      |            |            |           
|                          |                                                           |                            | (3,199,344 | )          |          |      | (3,421,866 | )         
|                          |                                                           |                            |            |            |          |      |            |            |           
|                          |                                                           | Net deferred tax
liability |            | $          | (765,891 | )    |            | $          | (1,458,447 | )
|                          |                                                           |                            |            |            |          |      |            |            |           

Management believes, based upon Columbias historical performance, that the
deferred tax asset will be realized in the normal course of operations and,
accordingly, management has not reduced deferred tax assets by a valuation
allowance.

The tax provision differs from the federal statutory rate of 34% due
principally to the effect of tax exemptions for interest received on municipal
investments and the amortization of nondeductible goodwill for tax purposes.

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NOTE 11  INCOME TAXES (continued)

A reconciliation between the statutory federal income tax rate and the
effective tax rate is as follows:

|                                                            |  |      |           |      |  |      |           |   |  |   |           |  
|----------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  | - | --------- | -
|                                                            |  | 2002 |           | 2001 |  | 2000
|                                                            |  |      |           |      |  |     
|Federal income taxes at statutory rate                      |  | $    | 4,965,565 |      |  | $    | 3,995,180 |   |  | $ | 3,035,871 |  
|State income tax expense, net of
federal income tax benefit |  |      | 549,190   |      |  |      | 474,257   |   |  |   | 357,649   |  
|Effect of nontaxable interest income                        |  |      | (257,239  | )    |  |      | (263,510  | ) |  |   | (268,236  | )
|Effect of nondeductible goodwill
amortization               |  |      |          |      |  |      | 213,732   |   |  |   | 213,732   |  
|Other                                                       |  |      | (34,019   | )    |  |      | (42,847   | ) |  |   | (34,019   | )
|                                                            |  |      |           |      |  |      |           |   |  |   |           |  
|                                                            |  | $    | 5,223,497 |      |  | $    | 4,376,812 |   |  | $ | 3,304,997 |  
|                                                            |  |      |           |      |  |      |           |   |  |   |           |  
|                                                            |  |      | 36        | %    |  |      | 37        | % |  |   | 37        | %
|                                                            |  |      |           |      |  |      |           |   |  |   |           |  

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NOTE 12  EARNINGS PER SHARE

Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted-average number of common
shares outstanding for the year. Diluted earnings per share reflect the
potential dilution that could occur if common shares were issued pursuant to
the exercise of options under existing stock option plans. The following table
illustrates the computations of basic and diluted earnings per share for the
years ended December 31, 2002, 2001, and 2000.

|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|---------------------------------------------------------------------------------------------------- | --------------------------------------- | - | --------- | --------- | ---- | - | --------- | --------- |  | - | --------- | --------- | 
|                                                                                                     |                                         |   | 2002      |           | 2001 |   | 2000     
|                                                                                                     |                                         |   |           |           |      |   |          
|Basic earnings per share:                                                                            |                                         |   |           |           |      |   |           |           |  |   |           |          
|                                                                                                     | Income available to common stockholders |   | $         | 9,381,105 |      |   | $         | 7,373,717 |  |   | $         | 5,624,035 | 
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|Weighted-average common shares outstanding                                                           |                                         |   | 8,091,494 |           |      |   | 8,033,119 |           |  |   | 8,016,683 |          
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|Earnings per share                                                                                   |                                         | $ | 1.16      |           |      | $ | 0.92      |           |  | $ | 0.70      |          
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|Diluted earnings per share:                                                                          |                                         |   |           |           |      |   |           |           |  |   |           |          
|                                                                                                     | Income available to common stockholders |   | $         | 9,381,105 |      |   | $         | 7,373,717 |  |   | $         | 5,624,035 | 
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|Weighted-average common shares outstanding                                                           |                                         |   | 8,091,494 |           |      |   | 8,033,119 |           |  |   | 8,016,683 |          
|Net effect of dilutive stock options  based on the
treasury stock method using average
market price |                                         |   | 210,994   |           |      |   | 210,784   |           |  |   | 63,685    |          
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|Weighted-average common shares outstanding
and common stock equivalents                              |                                         |   | 8,302,488 |           |      |   | 8,243,903 |           |  |   | 8,080,368 |          
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 
|Diluted earnings per share                                                                           |                                         | $ | 1.13      |           |      | $ | 0.89      |           |  | $ | 0.70      |          
|                                                                                                     |                                         |   |           |           |      |   |           |           |  |   |           |           | 

Outstanding common stock options excluded from diluted earnings per share
because their impact on the calculation would have been antidilutive totaled
148,343, 3,000, and 144,359 at December 31, 2002, 2001, and 2000, respectively.

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NOTE 13  STOCK INCENTIVE PLANS

Columbia maintains a stock incentive plan originally adopted by the Bank in
1993 prior to Columbias formation. The plan, most recently amended in January
2002 and ratified by the stockholders in April 2002, allows for the granting of
both incentive and nonstatutory stock options. The option price for incentive
stock options is determined by Columbias Board of Directors and cannot be less
than 100% of the fair market value of the shares on the date of grant. The
incentive stock options expire ten years from the date of grant. The option
price and duration of options for nonstatutory stock options is also determined
by the Board of Directors.

The following summarizes options available and outstanding under this plan.

|                                                        |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |      | 
|------------------------------------------------------- | -------------------------- |  | ------- | ------- | --------- |  | --------- | ------- | -------- |  | ---------- | ------- | ------- | - | --------- | ---- |  |  | - | ---- | 
|                                                        |                            |  |         |         |           |  |           |         |          |  |            |         |         |   | Weighted- |      |  |  |  
|                                                        |                            |  |         |         |           |  |           |         |          |  | Non-       |         | Average |   | Weighted-
|                                                        |                            |  | Total   |         | Incentive |  | statutory |         | Exercise |  | Average   
|                                                        |                            |  | Options |         | Options   |  | Options   |         | Price    |  | Fair Value
|                                                        |                            |  |         |         |           |  |           |         |          |  |           
|Options under grant and exercisable 
December 31, 1999 |                            |  | 271,398 |         |           |  | 204,628   |         |          |  | 66,770     |         |         | $ | 4.60      |      |  |  |   |     
|Options granted in 2000:                                |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |     
|                                                        | Incentive stock options    |  |         | 128,600 |           |  |           | 128,600 |          |  |            |        |         |   | $         | 6.88 |  |  | $ | 1.47 | 
|                                                        | Nonstatutory stock options |  |         | 14,000  |           |  |           |        |          |  |            | 14,000  |         |   | $         | 6.88 |  |  | $ | 1.47 | 
|Options exercised in 2000:                              |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |     
|                                                        | Incentive stock options    |  |         | (11,500 | )         |  |           | (11,500 | )        |  |            |        |         |   | $         | 3.47 |  |  |   |      | 
|                                                        | Nonstatutory stock options |  |         | (7,400  | )         |  |           |        |          |  |            | (7,400  | )       |   |           | 4.01 |  |  |   |      | 
|Options expired or forfeited in 2000                    |                            |  | (27,000 | )       |           |  | (25,000   | )       |          |  | (2,000     | )       |         | $ | 6.70      |      |  |  |   |     
|                                                        |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |      | 
|Options under grant and exercisable 
December 31, 2000 |                            |  | 368,098 |         |           |  | 296,728   |         |          |  | 71,370     |         |         | $ | 5.58      |      |  |  |   |     
|Options granted in 2001:                                |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |     
|                                                        | Incentive stock options    |  |         | 270,750 |           |  |           | 270,750 |          |  |            |        |         |   | $         | 8.25 |  |  | $ | 1.53 | 
|                                                        | Nonstatutory stock options |  |         | 55,638  |           |  |           |        |          |  |            | 55,638  |         |   | $         | 9.27 |  |  | $ | 1.31 | 
|Gifted shares in 2001                                   |                            |  | 400     |         |           |  |          |         |          |  | 400        |         |         | $ |          |      |  |  |   |     
|Options exercised in 2001:                              |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |     
|                                                        | Incentive stock options    |  |         | (39,759 | )         |  |           | (39,759 | )        |  |            |        |         |   | $         | 5.28 |  |  |   |      | 
|                                                        | Nonstatutory stock options |  |         | (17,897 | )         |  |           |        |          |  |            | (17,897 | )       |   | $         | 5.46 |  |  |   |      | 
|Options expired or forfeited in 2001                    |                            |  | (2,500  | )       |           |  | (1,500    | )       |          |  | (1,000     | )       |         | $ | 7.38      |      |  |  |   |     
|                                                        |                            |  |         |         |           |  |           |         |          |  |            |         |         |   |           |      |  |  |   |      | 

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NOTE 13  STOCK INCENTIVE PLANS (continued)

|                                                        |                            |  |         |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |      | 
|------------------------------------------------------- | -------------------------- |  | ------- | -------- | --------- |  | --------- | -------- | -------- |  | ---------- | ------- | ------- | - | --------- | ----- |  |  | - | ---- | 
|                                                        |                            |  |         |          |           |  |           |          |          |  |            |         |         |   | Weighted- |       |  |  |  
|                                                        |                            |  |         |          |           |  |           |          |          |  | Non-       |         | Average |   | Weighted-
|                                                        |                            |  | Total   |          | Incentive |  | statutory |          | Exercise |  | Average   
|                                                        |                            |  | Options |          | Options   |  | Options   |          | Price    |  | Fair Value
|                                                        |                            |  |         |          |           |  |           |          |          |  |           
|Options under grant and exercisable 
December 31, 2001 |                            |  | 634,730 |          |           |  | 526,219   |          |          |  | 108,511    |         |         | $ | 7.07      |       |  |  |   |     
|Options granted in 2002:                                |                            |  |         |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |     
|                                                        | Incentive stock options    |  |         | 153,343  |           |  |           | 153,343  |          |  |            |        |         |   | $         | 14.79 |  |  | $ | 5.47 | 
|                                                        | Nonstatutory stock options |  |         | 14,000   |           |  |           |         |          |  |            | 14,000  |         |   | $         | 11.71 |  |  | $ | 4.49 | 
|Options exercised in 2002:                              |                            |  |         |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |     
|                                                        | Incentive stock options    |  |         | (124,630 | )         |  |           | (124,630 | )        |  |            |        |         |   | $         | 6.37  |  |  |   |      | 
|                                                        | Nonstatutory stock options |  |         | (29,094  | )         |  |           |         |          |  |            | (29,094 | )       |   | $         | 7.38  |  |  |   |      | 
|Options expired or forfeited in 2002                    |                            |  | (5,400  | )        |           |  | (5,400    | )        |          |  |           |         |         | $ | 7.18      |       |  |  |   |     
|                                                        |                            |  |         |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |     
|Options under grant and exercisable 
December 31, 2002 |                            |  | 642,949 |          |           |  | 549,532   |          |          |  | 93,417     |         |         | $ | 9.03      |       |  |  |   |     
|                                                        |                            |  |         |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |     
|Options reserved  December 31, 2002                    |                            |  | 143,289 |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |     
|                                                        |                            |  |         |          |           |  |           |          |          |  |            |         |         |   |           |       |  |  |   |     

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NOTE 13  STOCK INCENTIVE PLANS (continued)

The following table summarizes information about fixed-stock options
outstanding at December 31, 2002, under Columbias various stock option plans:

|                        |  |                            |         |             |  |          |      |             |  |             |       |           |  |  |        |  |  |  |     | 
|----------------------- |  | -------------------------- | ------- | ----------- |  | -------- | ---- | ----------- |  | ----------- | ----- | --------- |  |  | ------ |  |  |  | --- | 
|Incentive Stock Options |  | Nonstatutory Stock Options
|                        |  |                           
|                        |  |                            |         |             |  |          |      |             |  |             |       |          
|                        |  | Number                     |         | Average     |  |          |      |             |  | Number      |       | Average  
|                        |  | of Options                 |         | Remaining   |  |          |      |             |  | of Options  |       | Remaining
|                        |  | Outstanding                |         | Contractual |  |          |      | Outstanding |  | Contractual
|Exercise                |  | and                        |         | Life        |  | Exercise |      | and         |  | Life       
|Price                   |  | Exercisable                |         | (in years)  |  | Price    |      | Exercisable |  | (in years) 
|                        |  |                            |         |             |  |          |      |             |  |            
|$2.11                   |  |                            | 5,902   |             |  |          | 0.5  |             |  | $           | 3.34  |           |  |  | 15,750 |  |  |  | 2.5 | 
|$3.34                   |  |                            | 37,628  |             |  |          | 2.5  |             |  | $           | 5.59  |           |  |  | 16,197 |  |  |  | 4.6 | 
|$5.59                   |  |                            | 61,790  |             |  |          | 4.6  |             |  | $           | 7.75  |           |  |  | 1,000  |  |  |  | 6.5 | 
|$11.50                  |  |                            | 3,000   |             |  |          | 5.3  |             |  | $           | 6.88  |           |  |  | 6,650  |  |  |  | 7.0 | 
|$8.00                   |  |                            | 1,000   |             |  |          | 6.4  |             |  | $           | 7.25  |           |  |  | 8,050  |  |  |  | 8.1 | 
|$7.75                   |  |                            | 2,000   |             |  |          | 6.4  |             |  | $           | 9.86  |           |  |  | 34,220 |  |  |  | 9.0 | 
|$6.88                   |  |                            | 80,256  |             |  |          | 7.0  |             |  | $           | 11.71 |           |  |  | 11,550 |  |  |  | 9.6 | 
|$7.25                   |  |                            | 15,444  |             |  |          | 8.1  |             |  | $           |      |           |  |  |       |  |  |  |    | 
|$7.25                   |  |                            | 97,610  |             |  |          | 8.1  |             |  | $           |      |           |  |  |       |  |  |  |    | 
|$8.25                   |  |                            | 2,500   |             |  |          | 8.5  |             |  | $           |      |           |  |  |       |  |  |  |    | 
|$9.86                   |  |                            | 89,059  |             |  |          | 9.0  |             |  | $           |      |           |  |  |       |  |  |  |    | 
|$11.10                  |  |                            | 3,000   |             |  |          | 9.2  |             |  | $           |      |           |  |  |       |  |  |  |    | 
|$11.40                  |  |                            | 2,000   |             |  |          | 9.3  |             |  | $           |      |           |  |  |       |  |  |  |    | 
|$14.91                  |  |                            | 148,343 |             |  |          | 10.0 |             |  | $           |      |           |  |  |       |  |  |  |    | 
|                        |  |                            |         |             |  |          |      |             |  |             |       |           |  |  |        |  |  |  |     | 
|                        |  |                            | 549,532 |             |  |          |      |             |  |             |       |           |  |  | 93,417 |  |  |  |     | 
|                        |  |                            |         |             |  |          |      |             |  |             |       |           |  |  |        |  |  |  |     | 

Under the 2002 stock option plan, an aggregate of no more than 10% of the
issued and outstanding shares of Columbia common stock is available for award
or grant. At December 31, 2002, 10% of Columbias issued and outstanding shares
amounted to 786,238 shares of common stock.

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NOTE 14  EMPLOYEE BENEFIT PLANS

Columbia has established an employee stock ownership plan (ESOP) for the
benefit of its employees. The ESOP allows participation by all employees over
the age of 20 who have also met minimum service requirements. Contributions to
the ESOP are at the discretion of the Board of Directors and are used to
purchase shares of Columbias common stock. Employees are not permitted to
contribute individually to the ESOP but vest in their proportionate share of
the ESOP interest after six years of participation. The allocated shares in the
ESOP are considered outstanding for purposes of calculating earnings per share.
For the years ending December 31, 2002, 2001, and 2000, Columbia contributed
$100,000, $280,000, and $250,000, respectively, to the ESOP.

The ESOPs assets as of December 31 were as follows:

|                 |  |      |         |      |  |   |         | 
|---------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                 |  | 2002 |         | 2001
|                 |  |      |         |     
|Allocated shares |  |      | 361,446 |      |  |   | 353,474 | 
|                 |  |      |         |      |  |   |         | 
|Cash on hand     |  | $    | 36,151  |      |  | $ | 27,426  | 
|                 |  |      |         |      |  |   |         | 

Columbia has also adopted a 401(k) savings investment plan which allows
employees to defer certain amounts of compensation for income tax purposes
under Section 401(k) of the Internal Revenue Code. Essentially, all employees
over the age of 18 are eligible to participate in the plan. Employees may elect
to defer and contribute up to the statutory limits. Their contributions and
those of Columbia, which are limited to 100% of employee contributions up to 4%
of total participant compensation, are invested by plan trustees in
employee-designated funds. For the years ending December 31, 2002, 2001, and
2000, Columbia contributed approximately $456,000, $128,000, and $112,000,
respectively, to the plan.

Columbia has established an employee incentive compensation program which
provides eligible participants additional compensation based upon the
achievement of certain Bank goals. For the years ending December 31, 2002,
2001, and 2000, additional compensation of approximately $2,227,000,
$1,302,000, and $1,238,000, respectively, was paid to eligible employees
pursuant to this program.

Columbia entered into both employment and retirement agreements, beginning in
1996 and later amended, with its former chief executive officer. The employment
agreement provided for the chief executives salary and customary benefits
until the agreement terminated upon retirement in May 2001. The retirement
agreement provides annual post-retirement compensation for a seven-year period
after the chief executives retirement. A portion of Columbias obligation
under the agreement was funded with a $120,000 interest-earning investment and
will be paid in annual installments of $48,000 plus interest earned on invested
funds. For the year ended December 31, 2002, Columbia had a liability recorded
of approximately $240,000 as its obligation for past services pursuant to the
retirement plan.

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NOTE 14  EMPLOYEE BENEFIT PLANS (continued)

During 2001, Columbia purchased bank-owned life insurance (BOLI) to support
life insurance, salary continuation, and deferred compensation benefits for
certain key employees. At December 31, 2002 and 2001, Columbia recognized a
salary continuation liability of $121,076 and $26,884, respectively, and an
elective deferred compensation liability of $19,353 for the year ended December
31, 2002. Key employees made no deferred compensation contributions in 2001.
Payments under the salary continuation component plan commence when the
respective key employee reaches the age of 62 and the economic value of the
coverage allocated to the key employees estate is then reported as taxable
income to that employee. At December 31, 2002, the cash surrender value of the
BOLI was $3,394,999.

NOTE 15  TRANSACTIONS WITH RELATED PARTIES

Certain directors, executive officers, and principal stockholders are customers
of and have had banking transactions with the Bank, and the Bank expects to
have such transactions in the future. All loans and commitments to loan
included in such transactions were made in compliance with applicable laws on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons and do
not involve more than the normal risk of collectibility or present any other
unfavorable features. The amount of loans outstanding to directors, executive
officers, principal stockholders, and companies with which they are associated
was as follows:

|                           |  |      |            |      |  |   |             |  
|-------------------------- |  | ---- | ---------- | ---- |  | - | ----------- | -
|                           |  | 2002 |            | 2001
|                           |  |      |            |     
|BALANCE, beginning of year |  | $    | 7,107,507  |      |  | $ | 14,580,532  |  
|Loans made                 |  |      | 6,227,476  |      |  |   | 3,026,052   |  
|Loans repaid               |  |      | (2,252,614 | )    |  |   | (10,499,077 | )
|                           |  |      |            |      |  |   |             |  
|BALANCE, end of year       |  | $    | 11,082,369 |      |  | $ | 7,107,507   |  
|                           |  |      |            |      |  |   |             |  

NOTE 16  CONCENTRATIONS OF CREDIT RISK

All of the Banks loans, commitments, and commercial and standby letters of
credit have been granted to customers in the Banks market areas. The majority
of such customers are also depositors of the Bank. Investments in state and
municipal securities are not significantly concentrated within any one region
of the United States. The concentrations of credit by type of loan are set
forth in Note 4. The distribution of commitments to extend credit approximates
the distribution of loans outstanding. Commercial and standby letters of credit
were granted primarily to commercial borrowers as of December 31, 2002. The
Banks loan policies do not allow the extension of credit to any single
borrower or group of related borrowers in excess of $1,200,000 without approval
from the Banks loan committee.

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NOTE 17  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

In the normal course of business to meet the financing needs of its customers,
the Bank is a party to financial instruments with off-balance-sheet risk. These
financial instruments include commitments to extend credit and the issuance of
letters of credit. These instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amounts recognized in the
consolidated balance sheets. The contract amounts of those instruments reflect
the extent of involvement the Bank has in particular classes of financial
instruments.

The Banks exposure to credit loss, in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and letters
of credit written, is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.

The Bank may or may not require collateral or other security to support
financial instruments with credit risk, depending on its loan underwriting
guidelines.

|                                                                   |                                          |   |                  |             |      |   |             |             | 
|------------------------------------------------------------------ | ---------------------------------------- | - | ---------------- | ----------- | ---- | - | ----------- | ----------- | 
|                                                                   |                                          |   | Contract Amounts
|                                                                   |                                          |   | December 31,    
|                                                                   |                                          |   |                 
|                                                                   |                                          |   | 2002             |             | 2001
|                                                                   |                                          |   |                  |             |     
|Financial instruments whose contract amounts contains
credit risk: |                                          |   |                  |             |      |   |             |            
|                                                                   | Commitments to extend credit             |   | $                | 148,938,344 |      |   | $           | 119,550,597 | 
|                                                                   | Undisbursed credit card lines of credit  |   |                  | 15,219,916  |      |   |             | 12,489,221  | 
|                                                                   | Commercial and standby letters of credit |   |                  | 2,654,194   |      |   |             | 1,866,093   | 
|                                                                   |                                          |   |                  |             |      |   |             |            
|                                                                   |                                          | $ | 166,812,454      |             |      | $ | 133,905,911 |            
|                                                                   |                                          |   |                  |             |      |   |             |            

Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, total commitment amounts do not necessarily represent
future cash requirements. The amount of collateral obtained, if deemed
necessary by the Bank upon an extension of credit, is based on managements
credit evaluation of the counterparty. Collateral held varies but may include
accounts receivable, inventory, property and equipment, and income-producing
properties.

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NOTE 17  FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK (continued)

Letters of credit written are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The Bank holds cash,
marketable securities, or real estate as collateral supporting those
commitments for which collateral is deemed necessary.

NOTE 18  RISK MANAGEMENT ACTIVITIES

In order to mitigate the risk that a change in interest rates will result in a
decline in the value of the Mortgage Groups committed loan pipeline and
adversely impact revenues, the Bank enters into derivative financial
instruments. Due to the variability of closings in the Banks committed loan
pipeline, which is influenced primarily by its mortgage loan customers, Bank
policy requires a hedge with forward contracts for the sale of mortgage-backed
securities or purchase or sale option contracts, designated as fair value
hedges, when the committed fixed-rate conforming pipeline loans aggregate
certain dollar thresholds. A forward sales contract protects the Bank in a
rising interest rate environment, since the sales price and delivery date are
already established. A forward sales contract is different, however, from an
option contract in that the Bank is obligated to deliver the loan to the third
party on the agreed-upon future date. Consequently, if the loan does not fund,
the Bank may not have the necessary assets to meet the commitment and may be
required to purchase other assets, at current market prices, to satisfy the
forward sales contract. To mitigate this risk, the Bank anticipates the factors
that influence pipeline fallout, which represent the percentage of loans that
are not expected to close, in calculating the amount of derivative instruments
to execute.

As of December 31, 2002 and 2001, forward sales and option contracts to sell
mortgage-backed securities were $27,000,000 and $19,000,000, respectively, in
maturities of up to two months. Derivative instruments as of December 31, 2002,
2001, and 2000, had an unrealized loss of $322,248, an unrealized gain of
$120,969, and an unrealized loss of $14,844, respectively, each recognized in
the consolidated statements of income and comprehensive income. The
mortgage-backed securities that are to be delivered under these contracts are
fixed-rate and generally correspond with the composition of the Banks
committed loan pipeline. Changes in the fair value of the mortgage loan
commitments and forward sales contracts are recognized in Mortgage Group
revenues, net of expenses in the consolidated statements of income and
comprehensive income.

In a falling interest rate environment, the Bank expects to recognize a loss on
the derivative instrument and a gain on the sale of funded loans from the
committed loan pipeline. The effectiveness of the Banks hedging activities
is measured by assessing the net losses and gains on derivative instruments
realized, unrealized premiums and discounts on loan sales, and yield spread
premium payments on mortgage loans sold.

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NOTE 18  RISK MANAGEMENT ACTIVITIES (continued)

The hedge ineffectiveness aggregated to losses of $366,767, $1,483,479, and
$3,025 for each of the years in the three-year period ended December 31, 2002.
In 2002 and 2001, particularly, hedge ineffectiveness resulted from the Banks
decision to subsidize loan pricing in order to increase its mortgage servicing
asset volume. The ineffectiveness from hedging activities, along with the
servicing retained premiums, servicing release premiums, servicing income, and
other servicing expenses, are included in Mortgage Group revenues, net of
expenses in the consolidated statements of income and comprehensive income.

As of December 31, 2002 and 2001, the Bank had short-term rate and point
commitments amounting to $26,956,841 and $14,739,437, respectively, to fund
fixed-rate mortgage loan applications in process. Substantially all of these
commitments are for periods of 60 days or less. After funding and sale of the
mortgage loans, the Banks exposure to credit loss in the event of
nonperformance by the mortgagor is limited. The Bank has potential exposure to
credit loss in the event of nonperformance by the counterparties to the various
forward sales. The Bank manages this credit risk by selecting only well
established, financially strong counterparties.

NOTE 19  COMMITMENTS AND CONTINGENCIES

Operating lease commitments As of December 31, 2002, Columbia leased certain
properties. Future minimum lease commitments are as follows:

|                          |  |            |      |  |         |   |           | 
|------------------------- |  | ---------- | ---- |  | ------- | - | --------- | 
|Years ending December 31, |  |            | 2003 |  |         | $ | 253,000   | 
|                          |  |            | 2004 |  |         |   | 256,000   | 
|                          |  |            | 2005 |  |         |   | 254,000   | 
|                          |  |            | 2006 |  |         |   | 215,000   | 
|                          |  |            | 2007 |  |         |   | 217,000   | 
|                          |  | Thereafter |      |  | 957,000 |  
|                          |  |            |      |  |         |   |           | 
|                          |  |            |      |  |         | $ | 2,152,000 | 
|                          |  |            |      |  |         |   |           | 

Rental expense for all operating leases was $249,315, $166,189, and $95,571 for
the years ended December 31, 2002, 2001, and 2000, respectively.

Legal contingencies Columbia may become a defendant in certain claims and
legal actions arising in the ordinary course of business. In the opinion of
management, after consultation with legal counsel, there are no matters
presently known to Columbia that are expected to have a material adverse effect
on the consolidated financial condition of Columbia.

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NOTE 20  PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for Columbia Bancorp (unconsolidated parent
company only) is as follows:

|                                           |                                                                         |                            |            |              |            |      |            |            |            | 
|------------------------------------------ | ----------------------------------------------------------------------- | -------------------------- | ---------- | ------------ | ---------- | ---- | ---------- | ---------- | ---------- | 
|                                           |                                                                         |                            |            | December 31,
|                                           |                                                                         |                            |            |             
|                                           |                                                                         |                            |            | 2002         |            | 2001
|                                           |                                                                         |                            |            |              |            |     
|ASSETS                                     |                                                                         |                            |            |              |            |      |            |           
|                                           | Cash                                                                    |                            | $          | 863,808      |            |      | $          | 349,900    |           
|                                           | Investment security held-to-maturity                                    |                            |            | 81,579       |            |      |            |           |           
|                                           | Corporate equity securities                                             |                            |            | 112,987      |            |      |            | 300,000    |           
|                                           | Investment in subsidiary Bank                                           |                            |            | 53,254,732   |            |      |            | 46,210,486 |           
|                                           | Investment in Columbia Bancorp Trust I                                  |                            |            | 124,000      |            |      |            |           |           
|                                           | Deferred tax asset                                                      |                            |            | 122,704      |            |      |            | 215,611    |           
|                                           | Other assets                                                            |                            |            | 677,409      |            |      |            | 126,586    |           
|                                           |                                                                         |                            |            |              |            |      |            |            |           
|TOTAL ASSETS                               |                                                                         | $                          | 55,237,219 |              |            | $    | 47,202,583 |           
|                                           |                                                                         |                            |            |              |            |      |            |            |           
|LIABILITIES                                |                                                                         |                            |            |              |            |      |            |           
|                                           | Junior Subordinated Debentures                                          |                            | $          | 4,124,000    |            |      | $          |           |           
|                                           | Dividend payable                                                        |                            |            | 628,990      |            |      |            | 642,858    |           
|                                           | Deferred compensation plan liability                                    |                            |            | 143,496      |            |      |            | 104,523    |           
|                                           | Employee benefit withholding                                            |                            |            | 143,800      |            |      |            |           |           
|                                           | Other payables                                                          |                            |            | 6,552        |            |      |            | 10,270     |           
|                                           |                                                                         |                            |            |              |            |      |            |            |           
|                                           |                                                                         | Total liabilities          |            |              | 5,046,838  |      |            |            | 757,651    | 
|                                           |                                                                         |                            |            |              |            |      |            |            |           
|STOCKHOLDERS EQUITY                       |                                                                         |                            |            |              |            |      |            |           
|                                           | Common stock                                                            |                            |            | 15,096,638   |            |      |            | 14,679,226 |           
|                                           | Additional paid-in capital                                              |                            |            | 2,745,062    |            |      |            | 6,054,368  |           
|                                           | Retained earnings                                                       |                            |            | 32,174,431   |            |      |            | 25,373,550 |           
|                                           | Unrealized gain on available-for-sale
investment securities, net of tax |                            |            | 174,250      |            |      |            | 337,788    |           
|                                           |                                                                         |                            |            |              |            |      |            |            |           
|                                           |                                                                         | Total stockholders equity |            |              | 50,190,381 |      |            |            | 46,444,932 | 
|                                           |                                                                         |                            |            |              |            |      |            |            |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                         | $                          | 55,237,219 |              |            | $    | 47,202,583 |           
|                                           |                                                                         |                            |            |              |            |      |            |            |           

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NOTE 20  PARENT COMPANY FINANCIAL INFORMATION (continued)

|                                     |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |           |            |           | 
|------------------------------------ | -------------------------------------------------------------------------- | --------------------------------------------------- | ---------------------------------- | --------- | ------------------------ | --------- | ---- | --------- | ---------- | --------- | - | --------- | ---------- | --------- | 
|                                     |                                                                            |                                                     |                                    |           | Years Ended December 31,
|                                     |                                                                            |                                                     |                                    |           |                         
|                                     |                                                                            |                                                     |                                    |           | 2002                     |           | 2001 |           | 2000      
|                                     |                                                                            |                                                     |                                    |           |                          |           |      |           |           
|REVENUES                             |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |          
|                                     | Equity in undistributed earnings of subsidiary bank                        |                                                     | $                                  | 7,208,039 |                          |           | $    | 4,592,787 |            |           | $ | 3,301,266 |           
|                                     | Dividends                                                                  |                                                     |                                    | 2,500,000 |                          |           |      | 3,150,000 |            |           |   | 2,750,000 |           
|                                     | Other                                                                      |                                                     |                                    | 314,403   |                          |           |      |          |            |           |   | (991      | )         
|EXPENSES                             |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |          
|                                     | Administrative and other expenses                                          |                                                     |                                    | (641,337  | )                        |           |      | (369,070  | )          |           |   | (426,240  | )         
|                                     |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |           |           
|                                     |                                                                            |                                                     | Net income                         |           | $                        | 9,381,105 |      |           | $          | 7,373,717 |   |           | $          | 5,624,035 | 
|                                     |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |           |           
|CASH FLOWS FROM OPERATING ACTIVITIES |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |          
|                                     | Net income                                                                 |                                                     | $                                  | 9,381,105 |                          |           | $    | 7,373,717 |            |           | $ | 5,624,035 |           
|                                     | Adjustments to reconcile net income to net cash from
operating activities: |                                                     |                                    |           |                          |           |      |           |            |           |   |           |           
|                                     |                                                                            | Equity in undistributed earnings
of subsidiary bank |                                    |           | (7,208,039               | )         |      |           | (4,592,787 | )         |   |           | (3,301,266 | )        
|                                     |                                                                            | Changes in other assets and
liabilities             |                                    |           | 30,607                   |           |      |           | (272,887   | )         |   |           | 144,363    |          
|                                     |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |           |           
|                                     |                                                                            |                                                     | Net cash from operating activities |           |                          | 2,203,673 |      |           |            | 2,508,043 |   |           |            | 2,467,132 | 
|                                     |                                                                            |                                                     |                                    |           |                          |           |      |           |            |           |   |           |           

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NOTE 20  PARENT COMPANY FINANCIAL INFORMATION (continued)

|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |            |  
|------------------------------------------------------ | ----------------------------------------------------------------------------- | ---------------------------------- | ------- | ------------------------ | ---------- | ---- | -------- | ---------- | ---------- | - | ------- | ---------- | ---------- | -
|                                                       |                                                                               |                                    |         | Years Ended December 31,
|                                                       |                                                                               |                                    |         |                         
|                                                       |                                                                               |                                    |         | 2002                     |            | 2001 |          | 2000      
|                                                       |                                                                               |                                    |         |                          |            |      |          |           
|CASH FLOWS FROM INVESTING ACTIVITIES                   |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |           
|                                                       | Investment in Columbia Bancorp Trust I                                        |                                    |         | (124,000                 | )          |      |          |           |            |   |         |           |           
|                                                       | Purchase of held-to-maturity security                                         |                                    |         | (81,579                  | )          |      |          |           |            |   |         |           |           
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|                                                       |                                                                               | Net cash from investing activities |         |                          | (205,579   | )    |          |            |           |   |         |            |           |  
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|CASH FLOWS FROM FINANCING ACTIVITIES                   |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |           
|                                                       | Dividends paid                                                                |                                    |         | (2,593,588               | )          |      |          | (2,569,581 | )          |   |         | (2,244,637 | )         
|                                                       | Repurchase of common stock                                                    |                                    |         | (4,023,170               | )          |      |          | (427,503   | )          |   |         |           |           
|                                                       | Proceeds from issuance of Junior Subordinated Debentures                      |                                    |         | 4,124,000                |            |      |          |           |            |   |         |           |           
|                                                       | Proceeds from stock options exercised                                         |                                    |         | 1,008,572                |            |      |          | 307,455    |            |   |         | 69,542     |           
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|                                                       |                                                                               | Net cash from financing activities |         |                          | (1,484,186 | )    |          |            | (2,689,629 | ) |         |            | (2,175,095 | )
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS   |                                                                               |                                    | 513,908 |                          |            |      | (181,586 | )          |            |   | 292,037 |           
|CASH AND CASH EQUIVALENTS, beginning of year           |                                                                               |                                    | 349,900 |                          |            |      | 531,486  |            |            |   | 239,449 |           
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|CASH AND CASH EQUIVALENTS, end of year                 |                                                                               | $                                  | 863,808 |                          |            | $    | 349,900  |            |            | $ | 531,486 |           
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |           
|                                                       | Change in unrealized gain (loss) on
available-for-sale securities, net of tax |                                    | $       | (163,538                 | )          |      | $        | 422,705    |            |   | $       | 629,377    |           
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           
|                                                       | Cash dividend payable                                                         |                                    | $       | 628,990                  |            |      | $        | 642,858    |            |   | $       | 642,354    |           
|                                                       |                                                                               |                                    |         |                          |            |      |          |            |            |   |         |            |           

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NOTE 21  REGULATORY MATTERS

Columbia and the Bank are subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure to meet minimum
requirements can initiate certain mandatory  and possibly additional
discretionary  actions by regulators that, if undertaken, could have a direct
material effect on a banks financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, banks
must meet specific capital guidelines that involve quantitative measures of the
banks assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. Capital amounts and classification are
also subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.

Quantitative measures established by regulation to ensure capital adequacy
require Columbia and the Bank to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier 1 capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier 1 capital to average assets
(as defined). Management believes, as of December 31, 2002, that Columbia and
the Bank meet all capital adequacy requirements to which they are subject.

As of the most recent notifications from their regulatory agencies, Columbia
and the Bank were categorized as well-capitalized under the regulatory
framework for prompt corrective action. To be categorized as adequately
capitalized, Columbia and the Bank must maintain minimum total risk-based
capital, Tier 1 risk-based capital, and Tier 1 leverage capital ratios as set
forth in the table below. There are no conditions or events since that
notification that management believes may have changed the institutions
category.

|                                        |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |     |  
|--------------------------------------- | ------------------- | ------ | ------ | ------ | ----------------- | ------ | ----------------- | ----- | - | ------ | ----------- | ------ | ----------------- |  |  | -- | - |  | ----------------- | ------ |  |  |  | --- | -
|                                        |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  | To Be Well-      
|                                        |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  | Capitalized Under
|                                        |                     |        |        |        |                   |        |                   |       |   |        | For Capital |        | Prompt Corrective
|                                        |                     |        | Actual |        | Adequacy Purposes |        | Action Provisions
|                                        |                     |        |        |        |                   |        |                  
|As of December 31, 2002                 |                     | Amount |        | Ratio  |                   | Amount |                   | Ratio |   | Amount |             | Ratio 
|(dollars in thousands)                  |                     |        |        |        |                   |        |                   |       |   |        |             |       
|Total capital to risk-weighted assets:  |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |    
|                                        | Columbia Bancorp    |        | $      | 52,116 |                   |        |                   | 11.0  | % |        | $           | 38,041 |                   |  |  | 38 | % |  |                   |       |  |  |  |    |  
|                                        | Columbia River Bank |        | $      | 51,168 |                   |        |                   | 10.8  | % |        | $           | 37,996 |                   |  |  | 38 | % |  | $                 | 47,458 |  |  |  | 310 | %
|Tier 1 capital to risk-weighted assets: |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |    
|                                        | Columbia Bancorp    |        | $      | 46,166 |                   |        |                   | 9.7   | % |        | $           | 19,020 |                   |  |  | 34 | % |  |                   |       |  |  |  |    |  
|                                        | Columbia River Bank |        | $      | 45,230 |                   |        |                   | 9.5   | % |        | $           | 18,983 |                   |  |  | >4 | % |  | $                 | 28,475 |  |  |  | 36  | %
|Tier 1 capital to average assets:       |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |    
|                                        | Columbia Bancorp    |        | $      | 46,166 |                   |        |                   | 8.6   | % |        | $           | 21,558 |                   |  |  | 34 | % |  |                   |       |  |  |  |    |  
|                                        | Columbia River Bank |        | $      | 45,230 |                   |        |                   | 8.4   | % |        | $           | 21,518 |                   |  |  | 34 | % |  | $                 | 26,898 |  |  |  | 35  | %

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NOTE 21  REGULATORY MATTERS (continued)

|                                        |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |     |  
|--------------------------------------- | ------------------- | ------ | ------ | ------ | ----------------- | ------ | ----------------- | ----- | - | ------ | ----------- | ------ | ----------------- |  |  | -- | - |  | ----------------- | ------ |  |  |  | --- | -
|                                        |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  | To Be Well-      
|                                        |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  | Capitalized Under
|                                        |                     |        |        |        |                   |        |                   |       |   |        | For Capital |        | Prompt Corrective
|                                        |                     |        | Actual |        | Adequacy Purposes |        | Action Provisions
|                                        |                     |        |        |        |                   |        |                  
|As of December 31, 2001                 |                     | Amount |        | Ratio  |                   | Amount |                   | Ratio |   | Amount |             | Ratio 
|(dollars in thousands)                  |                     |        |        |        |                   |        |                   |       |   |        |             |       
|Total capital to risk-weighted assets:  |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |    
|                                        | Columbia Bancorp    |        | $      | 43,181 |                   |        |                   | 10.6  | % |        | $           | 32,568 |                   |  |  | 38 | % |  |                   |       |  |  |  |    |  
|                                        | Columbia River Bank |        | $      | 42,946 |                   |        |                   | 10.6  | % |        | $           | 32,517 |                   |  |  | 38 | % |  | $                 | 40,647 |  |  |  | 310 | %
|Tier 1 capital to risk-weighted assets: |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |    
|                                        | Columbia Bancorp    |        | $      | 38,097 |                   |        |                   | 9.4   | % |        | $           | 16,284 |                   |  |  | 34 | % |  |                   |       |  |  |  |    |  
|                                        | Columbia River Bank |        | $      | 37,862 |                   |        |                   | 9.3   | % |        | $           | 16,259 |                   |  |  | 34 | % |  | $                 | 24,388 |  |  |  | 36  | %
|Tier 1 capital to average assets:       |                     |        |        |        |                   |        |                   |       |   |        |             |        |                   |  |  |    |   |  |                   |        |  |  |  |    
|                                        | Columbia Bancorp    |        | $      | 38,097 |                   |        |                   | 8.6   | % |        | $           | 17,690 |                   |  |  | 34 | % |  |                   |       |  |  |  |    |  
|                                        | Columbia River Bank |        | $      | 37,862 |                   |        |                   | 8.0   | % |        | $           | 18,948 |                   |  |  | 34 | % |  | $                 | 23,685 |  |  |  | 35  | %

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NOTE 22  FAIR VALUES OF FINANCIAL INSTRUMENTS

The following table estimates fair values and the related carrying values of
Columbias financial instruments (in thousands):

|                       |                                                                |  |          |         |       |  |           |         |       |  |   |         |           |  |   |         | 
|---------------------- | -------------------------------------------------------------- |  | -------- | ------- | ----- |  | --------- | ------- | ----- |  | - | ------- | --------- |  | - | ------- | 
|                       |                                                                |  | 2002     |         | 2001 
|                       |                                                                |  |          |         |      
|                       |                                                                |  |          |         |       |  | Estimated |         |       |  |   |         | Estimated
|                       |                                                                |  | Carrying |         | Fair  |  | Carrying  |         | Fair 
|                       |                                                                |  | Amount   |         | Value |  | Amount    |         | Value
|                       |                                                                |  |          |         |       |  |           |         |      
|Financial assets:      |                                                                |  |          |         |       |  |           |         |       |  |   |         |           |  |   |        
|                       | Cash and due from banks                                        |  | $        | 28,414  |       |  | $         | 28,414  |       |  | $ | 19,813  |           |  | $ | 19,813  | 
|                       | Interest-bearing deposits with other banks                     |  | $        | 8,552   |       |  | $         | 8,552   |       |  | $ | 1,275   |           |  | $ | 1,275   | 
|                       | Federal funds sold                                             |  | $        | 3,735   |       |  | $         | 3,735   |       |  | $ | 1,525   |           |  | $ | 1,525   | 
|                       | Investment securities available-for-sale                       |  | $        | 14,750  |       |  | $         | 14,750  |       |  | $ | 18,802  |           |  | $ | 18,802  | 
|                       | Investment securities held-to-maturity                         |  | $        | 18,600  |       |  | $         | 19,439  |       |  | $ | 22,657  |           |  | $ | 22,844  | 
|                       | Restricted equity securities                                   |  | $        | 2,698   |       |  | $         | 2,698   |       |  | $ | 2,072   |           |  | $ | 2,072   | 
|                       | Loans held-for-sale                                            |  | $        | 8,770   |       |  | $         | 8,770   |       |  | $ | 18,960  |           |  | $ | 18,960  | 
|                       | Loans, net of allowance for loan losses
and unearned loan fees |  | $        | 423,918 |       |  | $         | 426,286 |       |  | $ | 361,323 |           |  | $ | 375,036 | 
|                       | Accrued interest receivable                                    |  | $        | 3,895   |       |  | $         | 3,895   |       |  | $ | 3,486   |           |  | $ | 3,486   | 
|                       | Mortgage servicing asset                                       |  | $        | 4,614   |       |  | $         | 4,614   |       |  | $ | 6,197   |           |  | $ | 6,197   | 
|Financial liabilities: |                                                                |  |          |         |       |  |           |         |       |  |   |         |           |  |   |        
|                       | Demand and savings deposits                                    |  | $        | 344,323 |       |  | $         | 344,323 |       |  | $ | 277,727 |           |  | $ | 277,727 | 
|                       | Time certificates                                              |  | $        | 111,512 |       |  | $         | 113,642 |       |  | $ | 116,909 |           |  | $ | 119,254 | 
|                       | Notes payable                                                  |  | $        | 27,135  |       |  | $         | 27,135  |       |  | $ | 35,905  |           |  | $ | 35,905  | 
|                       | Accrued interest payable                                       |  | $        | 7,166   |       |  | $         | 7,166   |       |  | $ | 5,221   |           |  | $ | 5,221   | 
|                       | Junior Subordinated Debentures                                 |  | $        | 4,000   |       |  | $         | 4,000   |       |  | $ |        |           |  | $ |        | 

While estimates of fair value are based on managements judgment of the most
appropriate factors, there is no assurance that were Columbia to dispose of
such items at December 31, 2002 and 2001, the estimated fair values would
necessarily be achieved at that date, since market values may differ depending
on various circumstances. The estimated fair values at December 31, 2002 and
2001, should not necessarily be relied upon at subsequent dates.

In addition, other assets and liabilities of Columbia that are not defined as
financial instruments are not included in the above disclosures, such as
property and equipment. Also, nonfinancial instruments typically not recognized
in the consolidated financial statements nevertheless may have value but are
not included in the above disclosures. These include, among other items, the
estimated earnings power of core deposit accounts, the earnings potential of
loan servicing rights, the trained work force, customer goodwill, and similar
items.

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NOTE 23  SEGMENT INFORMATION

Columbia operates two primary segments, the community banking segment and the
mortgage banking segment. The community banking segment consists of Columbias
subsidiary, Columbia River Bank, which operates 12 full-service bank branches
and three limited banking facilities in Oregon and two branches in Washington.
The Bank offers loan, investment, and deposit products to its customers who
range from individuals to medium-size agricultural and commercial companies.
The mortgage banking segment consists of Columbia Mortgage Group, with
administrative offices in Bend, Oregon, and an additional eight offices in
Oregon. Columbia Mortgage Group offers a full range of mortgage lending
services and products to its clients.

In 2002, management evaluated the internal controls and accounting processes of
the Mortgage Group. As a result of this evaluation, certain activities were
reclassified for internal financial statement purposes, thus affecting account
level detail of the internal segment reporting process. Due to the overall
volume and nature of transactions that impact secondary marketing activities,
management determined it to be impracticable and of minimal benefit to restate
prior periods for these account reclassification changes. The overall
performance of the Bank and the overall composition of the reportable segments
remain unchanged as a result of these internal segment reporting process
changes.

Financial information that Columbias management uses to evaluate the
reportable segments and the reconciliation to Columbias consolidated results
are summarized as follows:

|                                                     |  |           |             |          |  |              |            |   |  |   |             | 
|---------------------------------------------------- |  | --------- | ----------- | -------- |  | ------------ | ---------- | - |  | - | ----------- | 
|                                                     |  | Community |             | Mortgage |  |              |            |  
|                                                     |  | Banking   |             | Banking  |  | Consolidated
|                                                     |  |           |             |          |  |             
|December 31, 2002                                    |  |           |             |          |  |              |            |   |  |   |             | 
|Net interest income before provision for
loan losses |  | $         | 29,417,087  |          |  | $            | 416,835    |   |  | $ | 29,833,922  | 
|Noninterest income                                   |  | $         | 2,780,198   |          |  | $            | 5,770,949  |   |  | $ | 8,551,147   | 
|Depreciation and amortization                        |  | $         | 1,141,368   |          |  | $            | 97,471     |   |  | $ | 1,238,839   | 
|Mortgage servicing asset amortization                |  | $         |            |          |  | $            | 1,028,810  |   |  | $ | 1,028,810   | 
|Impairment of mortgage servicing rights              |  | $         |            |          |  | $            | 2,781,111  |   |  | $ | 2,781,111   | 
|Income before provision for income taxes             |  | $         | 15,883,083  |          |  | $            | (1,278,481 | ) |  | $ | 14,604,602  | 
|Goodwill                                             |  | $         | 7,389,094   |          |  | $            |           |   |  | $ | 7,389,094   | 
|Total assets                                         |  | $         | 526,201,665 |          |  | $            | 18,124,319 |   |  | $ | 544,325,984 | 

37



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NOTE 23  SEGMENT INFORMATION (continued)

|                                                     |  |           |             |          |  |              |            |  |  |   |             | 
|---------------------------------------------------- |  | --------- | ----------- | -------- |  | ------------ | ---------- |  |  | - | ----------- | 
|                                                     |  | Community |             | Mortgage |  |              |            | 
|                                                     |  | Banking   |             | Banking  |  | Consolidated
|                                                     |  |           |             |          |  |             
|December 31, 2001                                    |  |           |             |          |  |              |            |  |  |   |             | 
|Net interest income before provision for
loan losses |  | $         | 22,639,245  |          |  | $            | 855,905    |  |  | $ | 23,495,150  | 
|Noninterest income                                   |  | $         | 3,557,900   |          |  | $            | 5,635,927  |  |  | $ | 9,193,827   | 
|Depreciation and amortization                        |  | $         | 1,694,496   |          |  | $            | 73,503     |  |  | $ | 1,767,999   | 
|Mortgage servicing asset amortization                |  | $         |            |          |  | $            | 395,354    |  |  | $ | 395,354     | 
|Impairment of mortgage servicing rights              |  | $         |            |          |  | $            | 917,729    |  |  | $ | 917,729     | 
|Income before provision for income taxes             |  | $         | 9,949,154   |          |  | $            | 1,801,375  |  |  | $ | 11,750,529  | 
|Goodwill                                             |  | $         | 7,389,094   |          |  | $            |           |  |  | $ | 7,389,094   | 
|Total assets                                         |  | $         | 452,259,905 |          |  | $            | 29,946,800 |  |  | $ | 482,206,705 | 
|December 31, 2000                                    |  |           |             |          |  |              |            |  |  |   |             | 
|Net interest income before provision for
loan losses |  | $         | 20,673,346  |          |  | $            | 437,435    |  |  | $ | 21,110,781  | 
|Noninterest income                                   |  | $         | 4,085,245   |          |  | $            | 2,265,288  |  |  | $ | 6,350,533   | 
|Depreciation and amortization                        |  | $         | 1,559,997   |          |  | $            | 60,455     |  |  | $ | 1,620,452   | 
|Mortgage servicing asset amortization                |  | $         |            |          |  | $            | 159,832    |  |  | $ | 159,832     | 
|Income before provision for income taxes             |  | $         | 8,068,615   |          |  | $            | 860,417    |  |  | $ | 8,929,032   | 
|Goodwill                                             |  | $         | 8,017,717   |          |  | $            |           |  |  | $ | 8,017,717   | 
|Total assets                                         |  | $         | 401,089,595 |          |  | $            | 15,769,420 |  |  | $ | 416,859,015 | 



| |  | The mortgage banking segment receives an intercompany cost-of-funds allocation,
based on the average outstanding balance of the mortgage banking loans. This
allocation is eliminated in consolidation; however, it appears as interest
income for the community banking segment and interest expense in the mortgage
banking segment in the tables above. For the years ended December 31, 2002,
2001, and 2000, the allocation was approximately $950,000, $882,000, and
$345,000, respectively.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|        |  |                                                                                     
|------- |  | ------------------------------------------------------------------------------------
|ITEM #9 |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants regarding
accounting and financial disclosure matters during the year ended December 31,
2001.

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PART III

|         |  |                                                   
|-------- |  | --------------------------------------------------
|ITEM #10 |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.

|         |  |                                                            
|-------- |  | -----------------------------------------------------------
|ITEM #11 |  | EXECUTIVE COMPENSATION AND REPORT OF COMPENSATION COMMITTEE

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.

|         |  |                                                               
|-------- |  | --------------------------------------------------------------
|ITEM #12 |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.

|         |  |                                               
|-------- |  | ----------------------------------------------
|ITEM #13 |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information called for by this item is contained in Columbias
definitive proxy statement for the Annual Meeting of Stockholders to be held
April 24, 2003, and is incorporated herein by reference.

|         |  |                        
|-------- |  | -----------------------
|ITEM #14 |  | CONTROLS AND PROCEDURES

Within 90 days prior to the date of this report, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures. Our principal executive and financial officers supervised and
participated in this evaluation. Based upon this evaluation our principal
executive and financial officers each concluded that our disclosure controls
and procedures are effective in timely alerting them to material information
required to be included in our periodic SEC reports. The design of any system
of controls is based in part upon various assumptions about the likelihood of
future events, and there can be no assurance that any of our plans, products or
procedures will succeed in achieving their intended goals under future
conditions. In addition, there have been no significant changes in our internal
controls or in other factors that could significantly affect our internal
controls subsequent to our most recent evaluation, including any corrective
actions with regard to significant deficiencies or material weaknesses.

Part IV

|         |  |                                                                 
|-------- |  | ----------------------------------------------------------------
|ITEM #15 |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  Exhibits.

The following documents are filed as part of this report and are incorporated
herein by reference from the Registrants 2002 Annual Report to Shareholders,
and are being filed with the Securities and Exchange Commission as part of
Columbia Bancorps Form 10-K for the year ended December 31, 2002.

Independent Auditors Report.

Consolidated Balance Sheets for the Years Ended December 31, 2002 and
2001.

Consolidated Statements of Income and Comprehensive Income for the Years Ended
December 31, 2002, 2001 and 2000.

Consolidated Statements of Changes in Stockholders Equity for the Years Ended
December 31, 2002, 2001 and 2000.

39



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##### Table of Contents



Consolidated Statements of Cash Flows for the Years Ended December 31, 2002,
2001 and 2000.

Notes to Consolidated Financial Statements.

(b)  Reports filed on Form 8-K.

Dated November 21, 2002, filed with the SEC on November 22, 2002, containing
Items 5 and 7.

The following documents are not included in this 2002 Annual Report to
Shareholders, but are either being filed with, or incorporated by reference
into, Columbia Bancorps Form 10-K for the year ended December 31, 2002 filed
with the Securities and Exchange Commission.

|        |  |                                                                                                                                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Articles of Incorporation of Columbia Bancorp (Incorporated herein by
reference to Exhibit 3(i) to Columbias form 10-Q for the period ended
June 30, 1999.)                                                                        
|        |  |                                                                                                                                                                                                                                     
|3.2     |  | Bylaws of Columbia Bancorp (Incorporated herein by reference to Exhibit
15.5 to Columbias Form 10-KSB for the year ended December 31, 1998.)                                                                                       
|        |  |                                                                                                                                                                                                                                     
|10.1    |  | Employment Agreement of January 25, 2001 between Roger Christensen and
Columbia Bancorp. (Incorporated herein by reference to Exhibit 10.1 to
Columbias Annual Report on Form 10-K for the year ended December 31,
2001.)          
|        |  |                                                                                                                                                                                                                                     
|10.1(a) |  | Amendment to Employment Agreement of January 25, 2001 between Roger
Christensen and Columbia Bancorp. (Amendment date April 15, 2002.)*                                                                                             
|        |  |                                                                                                                                                                                                                                     
|10.2    |  | Employment Agreement of June 15, 2001 between Greg Spear and Columbia
Bancorp. (Incorporated herein by reference to Exhibit 10.2 to Columbias
Annual Report on Form 10-K for the year ended December 31, 2001.)                    
|        |  |                                                                                                                                                                                                                                     
|10.3    |  | Employment Agreement of April 1, 2000 between James McCall and Columbia
River Bank. (Incorporated herein by reference to Exhibit 10.3 to
Columbias Annual Report on Form 10-K for the year ended December 31,
2001.)               
|        |  |                                                                                                                                                                                                                                     
|10.3(a) |  | Amendment to Employment Agreement of April 1, 2000 between James McCall
and Columbia River Bank. (Amendment date August 1, 2001.)*                                                                                                  
|        |  |                                                                                                                                                                                                                                     
|10.4    |  | Employment Agreement of April 1, 2000 between Craig Ortega and Columbia
River Bank. (Incorporated herein by reference to Exhibit 10.4 to
Columbias Annual Report on Form 10-K for the year ended December 31,
2001.)               
|        |  |                                                                                                                                                                                                                                     
|10.4(a) |  | Amendment to Employment Agreement of April 1, 2000 between Craig Ortega
and Columbia River Bank. (Amendment date August 1, 2001.)*                                                                                                  
|        |  |                                                                                                                                                                                                                                     
|10.5    |  | Deferred Compensation Agreement of April 1, 1999 between Terry L. Cochran
and Columbia Bancorp. (Incorporated herein by reference to Exhibit 10.2
to Columbias Annual Report on Form 10-K for the year ended December 31,
1999.)   
|        |  |                                                                                                                                                                                                                                     
|10.6    |  | Columbia Bancorp Restated Employee Stock Ownership Plan and Trust
Agreement (1999 Restatement). (Incorporated herein by reference to
Exhibit 10.2 to Columbias Annual Report on Form 10-K for the year ended
December 31, 1999.)   
|        |  |                                                                                                                                                                                                                                     
|10.7    |  | Executive Salary Continuation Agreement between Columbia River Bank and
Roger L. Christensen. (Incorporated herein by reference to Exhibit 10.2
to Columbias Periodic Report on Form 10-Q for the period ended September
30, 2002.)

40



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##### Table of Contents



|      |  |                                                                                                                                                                                                                                
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8  |  | Executive Bonus Deferral Agreement between Columbia River Bank and Roger
L. Christensen. (Incorporated herein by reference to Exhibit 10.2 to
Columbias Periodic Report on Form 10-Q for the period ended September 30,
2002.)
|      |  |                                                                                                                                                                                                                                
|10.9  |  | Split Dollar Agreement between Columbia River Bank and Roger L.
Christensen. (Incorporated herein by reference to Exhibit 10.3 to
Columbias Periodic Report on Form 10-Q for the period ended September 20,
2002.)            
|      |  |                                                                                                                                                                                                                                
|10.10 |  | Phantom Stock Agreement between Columbia Bancorp and Roger L.
Christensen. (Incorporated herein by reference to Exhibit 10.4 to
Columbias Periodic Report on Form 10-Q for the period ended September 30,
2002.               
|      |  |                                                                                                                                                                                                                                
|10.11 |  | Executive Salary Continuation Agreement between Columbia River Bank and James C. McCall.*                                                                                                                                      
|      |  |                                                                                                                                                                                                                                
|10.12 |  | Executive Bonus Deferral Agreement between Columbia River Bank and James C. McCall.*                                                                                                                                           
|      |  |                                                                                                                                                                                                                                
|10.13 |  | Split Dollar Agreement between Columbia River Bank and James C. McCall.*                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                
|10.14 |  | Executive Salary Continuation Agreement between Columbia River Bank and Craig J. Ortega.*                                                                                                                                      
|      |  |                                                                                                                                                                                                                                
|10.15 |  | Executive Bonus Deferral Agreement between Columbia River Bank and Craig J. Ortega.*                                                                                                                                           
|      |  |                                                                                                                                                                                                                                
|10.16 |  | Split Dollar Agreement between Columbia River Bank and Craig J. Ortega.*                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                
|10.17 |  | Executive Salary Continuation Agreement between Columbia River Bank and Britt W. Thomas.*                                                                                                                                      
|      |  |                                                                                                                                                                                                                                
|10.18 |  | Executive Bonus Deferral Agreement between Columbia River Bank and Britt W. Thomas.*                                                                                                                                           
|      |  |                                                                                                                                                                                                                                
|10.19 |  | Split Dollar Agreement between Columbia River Bank and Britt W. Thomas.*                                                                                                                                                       
|      |  |                                                                                                                                                                                                                                
|10.20 |  | Executive Salary Continuation Agreement between Columbia River Bank and Greg B. Spear.*                                                                                                                                        
|      |  |                                                                                                                                                                                                                                
|10.21 |  | Executive Bonus Deferral Agreement between Columbia River Bank and Greg B. Spear.*                                                                                                                                             
|      |  |                                                                                                                                                                                                                                
|10.22 |  | Split Dollar Agreement between Columbia River Bank and Greg B. Spear.*                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                
|13.1  |  | Annual Report to Shareholders for the Year Ended December 31, 2002.*                                                                                                                                                           
|      |  |                                                                                                                                                                                                                                
|21.1  |  | List of Subsidiaries.*                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                
|99.1  |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                           
|      |  |                                                                                                                                                                                                                                
|99.2  |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                                                                                                                           

Asterisk Language is:

*Included as an exhibit to Columbia Bancorps Form 10-K for the year ended
December 31, 2002 filed with the Securities and Exchange Commission.

Availability of Exhibits and Form 10-K

The exhibits listed in Section © above have been filed with the Securities and
Exchange Commission as part of annual or quarterly reports required by the
Securities Exchange Act of 1934 (the Exchange Act). Copies of such exhibits
are available from Columbia Bancorp at a charge of $.25 per page, Columbia
Bancorps reasonable expense for copying and mailing such materials, upon
written request. Please direct such requestes to: Columbia Bancorp, Investor
Relations, PO Box 1050, The Dalles, Oregon 97058. Columbia Bancorps filings
under the Exchange Act, including exhibits, may also be accessed over the
Internet through the website maintained by the Securities and

41



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##### Table of Contents



Exchange
Commission at http://www.sec.gov. In addition, a full copy (without Section ©
exhibits) of Columbia Bancorps Form 10-K for the year ended December 31, 2002
as filed with the Securities and Exchange Commission is available free of
charge upon written request to Columbia Bancorp.

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##### Table of Contents



CERTIFICATION

I, Roger L. Christensen, certify that:

1.     I have reviewed this annual report on Form 10-K of Columbia Bancorp;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 24, 2003

Roger L. Christensen
President and Chief Executive Officer

43



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##### Table of Contents



CERTIFICATION

I, Greg B. Spear, certify that:

1.     I have reviewed this annual report on Form 10-K of Columbia Bancorp;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the Evaluation Date); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrants ability to record, process,
summarize and report financial data and have identified for the registrants
auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: February 24, 2003

Greg B. Spear,
Chief Financial Officer and Chief Accounting Officer

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##### Table of Contents






SIGNATURES

In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.

COLUMBIA BANCORP

|       |  |                   |  |     |  |                                                            
|------ |  | ----------------- |  | --- |  | -----------------------------------------------------------
|DATED: |  | February 24, 2003 |  | By: |  | Roger L.
Christensen, President & C.E.O.  Columbia and CRB

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR

|       |  |                   |  |     |  |                                                           
|------ |  | ----------------- |  | --- |  | ----------------------------------------------------------
|DATED: |  | February 24, 2003 |  | By: |  | Roger L. Christensen, President & C.E.O  Columbia and CRB

CHIEF FINANCIAL OFFICER

|       |  |                   |  |    |  |                                                                                       
|------ |  | ----------------- |  | -- |  | --------------------------------------------------------------------------------------
|DATED: |  | February 24, 2003 |  | By |  | Greg B. Spear, Chief Financial Officer and
Chief Accounting Officer  Columbia and CRB

DIRECTORS:

|       |  |                   |  |     |  |                                          
|------ |  | ----------------- |  | --- |  | -----------------------------------------
|DATED: |  | February 24, 2003 |  | By: |  | Donald T. Mitchell, Director and Chairman
|      
|DATED: |  | February 24, 2003 |  | By  |  | Robert L. R. Bailey, Director            
|      
|DATED: |  | February 24, 2003 |  | By  |  | Charles F. Beardsley, Director           
|DATED: |  | February 24, 2003 |  | By  |  | Richard E. Betz, Director                
|DATED: |  | February 24, 2003 |  | By  |  | William A. Booth, Director               
|      
|DATED: |  | February 24, 2003 |  | By  |  | Dennis L. Carver, Director               
|      
|DATED: |  | February 24, 2003 |  | By  |  | Terry, L. Cochran, Director              
|DATED: |  | February 24, 2003 |  | By  |  | James J. Doran, Director                 
|DATED: |  | February 24, 2003 |  | By  |  | Jane F. Lee, Director                    
|DATED: |  | February 24, 2003 |  | By  |  | Jean S. McKinney, Director               

EXHIBIT 21.1

Subsidiaries of Columbia

Columbia Bancorps only wholly-owned subsidiaries as of December 31, 2002 were
Columbia River Bank and Columbia Bancorp Trust.

45