##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-K/A þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 December 31, 2004
  o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 Commission file number: 0-27938 COLUMBIA BANCORP  Oregon
    
    93-1193156(State of incorporation)
    
    (I.R.S. EmployerIdentification 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 þ No o 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. o Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Act). Yes þ No o 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 June
30, 2004, which is the last business day of the registrants most recently completed second fiscal
quarter, was $121,672,879. The number of shares outstanding of each of the issuers classes of common equity as of the latest
practicable date: 8,851,588 shares of no par value common stock on February 16, 2005.




---



TABLE OF CONTENTS  PART IIITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMPART IVITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSIGNATURESEXHIBIT 23.1EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2    Table of Contents  Explanatory Note Columbia Bancorp is amending Part II, Item 8 and Part IV, Item 15 of its Annual Report on Form 10-K
for the year ended December 31, 2004 to include a change to the the Report of Registered
Independent Registered Public Accounting Firm to modify the date of the Report and to Exhibit 23.1
to modify the date of report of its independent auditors and other minor language changes included
in Exhibit 23.1 the Consent of Independent Auditors. Part II, Item 8 and Part IV, Item 15 are
included in their entireties, but no other changes have been made to Item 8 or Item 15 or any other
exhibit. 
 PART II 
 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 2004 and 2003. 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 reclassified to conform with the current
presentation. These reclassifications had no net impact on the results of operations. 
 2004 Quarterly Financial DataTable 25
    
    First
    
    
    Second
    
    
    Third
    
    
    Fourth(In thousands except per share data)
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TotalIncome Statement DataInterest income
    
    $
    9,607
    
    
    $
    10,352
    
    
    $
    11,208
    
    
    $
    11,541
    
    
    $
    42,708Interest expense
    
    
    1,467
    
    
    
    1,554
    
    
    
    2,027
    
    
    
    2,280
    
    
    
    7,328Net interest income
    
    
    8,140
    
    
    
    8,798
    
    
    
    9,181
    
    
    
    9,261
    
    
    
    35,380Loan loss provision
    
    
    700
    
    
    
    1,390
    
    
    
    550
    
    
    
    120
    
    
    
    2,760Net interest income after
loan loss provision
    
    
    7,440
    
    
    
    7,408
    
    
    
    8,631
    
    
    
    9,141
    
    
    
    32,620Non-interest income
    
    
    1,581
    
    
    
    1,917
    
    
    
    2,016
    
    
    
    2,798
    

    
    
    8,312Non-interest expense
    
    
    5,871
    
    
    
    5,674
    
    
    
    6,013
    
    
    
    6,413
    
    
    
    23,971Income before provision for
income taxes
    
    
    3,150
    
    
    
    3,651
    
    
    
    4,634
    
    
    
    5,526
    
    
    
    16,961Provision for income taxes
    
    
    1,133
    
    
    
    1,336
    
    
    
    1,736
    
    
    
    2,021
    
    
    
    6,226Net income
    
    $
    2,017
    
    
    $
    2,315
    
    
    $
    2,898
    
    
    $
    3,505
    
    
    $
    10,735Earnings Per ShareBasic earnings per common share
    
    $
    0.23
    
    
    $
    0.26
    
    
    $
    0.33
    
    
    $
    0.40
    
    
    $
    1.22Diluted earnings per common share
    
    $
    0.22
    
    
    $
    0.26
    
    
    $
    0.32
    
    
    $
    0.39
    
    
    $
    1.19
 2003 Quarterly Financial DataFirst
    
    
    Second
    
    
    Third
    
    
    FourthQuarter
    
    
    Quarter
    
    
    Quarter
    
    
    Quarter
    
    
    TotalIncome Statement DataInterest income
    
    $
    9,396
    
    
    $
    9,583
    
    
    $
    9,737
    
    
    $
    9,514
    
    
    $
    38,230Interest expense
    
    
    1,770
    
    
    
    1,776
    
    
    
    1,703
    
    
    
    1,582
    
    
    
    6,831Net interest income
    
    
    7,626
    
    
    
    7,807
    
    
    
    8,034
    
    
    
    7,932
    
    
    
    31,399Loan loss provision
    
    
    300
    
    
    
    1,700
    
    
    
    400
    
    
    
    175
    
    
    
    2,575Net interest income after
loan loss provision
    
    
    7,326
    
    
    
    6,107
    
    
    
    7,634
    
    
    
    7,757
    
    
    
    28,824Non-interest income
    
    
    2,000
    
    
    
    1,971
    
    
    
    2,843
    
    
    
    2,110
    
    
    
    8,924Non-interest expense
    
    
    5,588
    
    
    
    5,758
    
    
    
    5,651
    
    
    
    5,353
    
    
    
    22,350Income before provision for
income taxes
    
    
    3,738
    
    
    
    2,320
    
    
    
    4,826
    
    
    
    4,514
    
    
    
    15,398Provision for income taxes
    
    
    1,348
    
    
    
    849
    
    
    
    1,767
    
    
    
    1,600
    
    
    
    5,564Net income
    
    $
    2,390
    
    
    $
    1,471
    
    
    $
    3,059
    
    
    $
    2,914
    
    
    $
    9,834Earnings Per ShareBasic earnings per common share (1)
    
    $
    0.27
    
    
    $
    0.17
    
    
    $
    0.35
    
    
    $
    0.33
    
    
    $
    1.13Diluted earnings per common share (1)
    
    $
    0.26
    
    
    $
    0.16
    
    
    $
    0.34
    
    
    $
    0.32
    
    
    $
    1.09
   (1)
    
    Prior periods have been adjusted to reflect the 10% stock dividend, effective May 1, 2003. 
 Additional information called for by this item is contained in Columbia Bancorps Annual
Report to Shareholders for the year ended December 31, 2004, and is incorporated herein by
reference. Columbia Bancorp - 2




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders
Columbia Bancorp and Subsidiary We have audited the accompanying consolidated balance sheets of Columbia Bancorp and Subsidiary as
of December 31, 2004 and 2003, and the related consolidated statements of income and comprehensive
income, changes in shareholders equity, and cash flows for each of the three years in the period
ended December 31, 2004. 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 standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit 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 consolidated 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 Subsidiary as of December 31,
2004 and 2003, and the results of their operations and their cash flows for each of the three years
in the period ended December 31, 2004, in conformity with United States generally accepted
accounting principles. We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the effectiveness of the Companys internal control over financial reporting
as of December 31, 2004, based on the criteria established in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
March 14, 2005, expressed an unqualified opinion on managements assessment of the effectiveness of
the Companys internal control over financial reporting and an unqualified opinion on the
effectiveness of the Companys internal control over financial reporting. (SIGNATURE) Portland, Oregon
March 14, 2005 3 - Columbia Bancorp




---



##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS December 31,2004
    
    
    2003ASSETSCASH AND CASH EQUIVALENTSCash and due from banks
    
    $
    25,527,270
    
    
    $
    33,809,732Interest-bearing deposits with banks
    
    
    12,165,712
    
    
    
    5,100,513Federal funds sold
    
    
    20,285,817
    
    
    
    14,955,948Total cash and cash equivalents
    
    
    57,978,799
    
    
    
    53,866,193INVESTMENT SECURITIESInvestment securities available-for-sale
    
    
    24,573,394
    
    
    
    13,796,896Investment securities held-to-maturity
    
    
    17,789,481
    
    
    
    14,963,728Equity securities
    
    
    605,594
    
    
    
    78,750Restricted equity securities
    
    
    2,429,200
    
    
    
    2,843,100Total investment securities
    
    
    45,397,669
    
    
    
    31,682,474LOANSLoans held-for-sale
    
    
    2,517,182
    
    
    
    2,792,384Loans, net of allowance for loan losses and unearned loan fees
    
    
    571,607,850
    
    
    
    461,557,765Total loans
    
    
    574,125,032
    
    
    
    464,350,149OTHER ASSETSProperty and equipment, net of accumulated depreciation
    
    
    15,222,622
    
    
    
    13,766,909Accrued interest receivable
    
    
    4,107,806
    
    
    
    3,769,527Goodwill
    
    
    7,389,094
    
    
    
    7,389,094Mortgage servicing asset, net of accumulated
amortization and valuation allowance
    
    
    2,162,654
    
    
    
    3,691,449Other assets
    
    
    8,988,842
    
    
    
    5,619,839Total other assets
    
    
    37,871,018
    
    
    
    34,236,818TOTAL ASSETS
    
    $
    715,372,518
    
    
    $
    584,135,634LIABILITIES AND SHAREHOLDERS EQUITYDEPOSITSNoninterest-bearing demand deposits
    
    $
    172,421,947
    
    
    $
    150,425,062Interest-bearing demand deposits
    
    
    211,239,408
    
    
    
    187,452,543Savings accounts
    
    
    35,926,117
    
    
    
    35,732,611Time certificates
    
    
    187,356,091
    
    
    
    122,747,824Total deposits
    
    
    606,943,563
    
    
    
    496,358,040OTHER LIABILITIESNotes payable
    
    
    34,889,564
    
    
    
    21,983,465Accrued interest payable and other liabilities
    
    
    3,538,413
    
    
    
    3,989,665Junior subordinated debentures
    
    
    4,124,000
    
    
    
    Guaranteed undivided beneficial interest in junior subordinated
deferrable interest debenture (Trust preferred securities)
    
    
    
    
    
    
    4,000,000Total other liabilities
    
    
    42,551,977
    
    
    
    29,973,130Total liabilities
    
    
    649,495,540
    
    
    
    526,331,170COMMITMENTS AND CONTINGENCIES (Note 19)SHAREHOLDERS EQUITYCommon stock, no par value, 20,000,000 shares authorized;
8,839,151 and 8,750,582 shares issued and outstanding
at December 31, 2004 and 2003, respectively
    
    
    32,140,776
    
    
    
    31,520,099Retained earnings
    
    
    33,816,489
    
    
    
    26,252,366Accumulated comprehensive (loss) income, net of taxes
    
    
    (80,287
    )
    
    
    31,999Total shareholders equity
    
    
    65,876,978
    
    
    
    57,804,464TOTAL LIABILITIES AND SHAREHOLDERS EQUITY
    
    $
    715,372,518
    
    
    $
    584,135,634
 See accompanying notes. 
 45 - Columbia Bancorp Columbia Bancorp - 4




---



##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Years Ended December 31,2004
    
    
    2003
    
    
    2002INTEREST INCOMEInterest and fees on loans
    
    $
    41,239,595
    
    
    $
    36,496,259
    
    
    $
    35,334,245Interest on investments:Taxable investment securities
    
    
    434,568
    
    
    
    514,195
    
    
    
    1,035,059Nontaxable investment securities
    
    
    617,105
    
    
    
    729,022
    
    
    
    807,504Interest on federal funds sold
    
    
    201,278
    
    
    
    205,367
    
    
    
    99,071Other interest and dividend income
    
    
    215,417
    
    
    
    285,276
    
    
    
    340,172Total interest income
    
    
    42,707,963
    
    
    
    38,230,119
    
    
    
    37,616,051INTEREST EXPENSEInterest on interest-bearing demand deposit
and savings accounts
    
    
    1,475,891
    
    
    
    1,665,626
    
    
    
    1,825,731Interest on time certificates
    
    
    4,554,432
    
    
    
    3,954,361
    
    
    
    4,601,960Other borrowed funds
    
    
    1,297,755
    
    
    
    1,210,653
    
    
    
    1,354,438Total interest expense
    
    
    7,328,078
    
    
    
    6,830,640
    
    
    
    7,782,129NET INTEREST INCOME BEFORE PROVISION
FOR LOAN LOSSES
    
    
    35,379,885
    
    
    
    31,399,479
    
    
    
    29,833,922PROVISION FOR LOAN LOSSES
    
    
    2,760,000
    
    
    
    2,575,000
    
    
    
    1,800,000NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES
    
    
    32,619,885
    
    
    
    28,824,479
    
    
    
    28,033,922NON-INTEREST INCOMEService charges and fees
    
    
    4,657,884
    
    
    
    4,307,634
    
    
    
    4,089,240Mortgage Team net revenues
    
    
    1,121,546
    
    
    
    2,431,672
    
    
    
    2,193,314CRB Financial Services Team revenues
    
    
    520,427
    
    
    
    579,388
    
    
    
    559,968Credit card discounts and fees
    
    
    465,481
    
    
    
    436,953
    
    
    
    419,762Net (loss) gain on sale or call of investment securities
    
    
    (6,823
    )
    
    
    462,249
    
    
    
    295,822Other non-interest income
    
    
    1,553,040
    
    
    
    705,881
    
    
    
    993,041Total non-interest income
    
    
    8,311,555
    
    
    
    8,923,777
    
    
    
    8,551,147NON-INTEREST EXPENSESalaries and employee benefits
    
    
    13,402,913
    
    
    
    13,055,840
    
    
    
    13,059,535Occupancy expense
    
    
    2,654,462
    
    
    
    2,247,309
    
    
    
    2,058,065Item and statement processing
    
    
    774,591
    
    
    
    777,594
    
    
    
    760,156Advertising
    
    
    811,067
    
    
    
    536,871
    
    
    
    500,086Data processing expense
    
    
    512,770
    
    
    
    352,743
    
    
    
    370,889Other non-interest expense
    
    
    5,815,286
    
    
    
    5,379,794
    
    
    
    5,231,736Total non-interest expense
    
    
    23,971,089
    
    
    
    22,350,151
    
    
    
    21,980,467INCOME BEFORE PROVISION FOR
INCOME TAXES
    
    
    16,960,351
    
    
    
    15,398,105
    
    
    
    14,604,602PROVISION FOR INCOME TAXES
    
    
    6,225,661
    
    
    
    5,564,309
    
    
    
    5,223,497NET INCOME
    
    
    10,734,690
    
    
    
    9,833,796
    
    
    
    9,381,105OTHER COMPREHENSIVE INCOME (LOSS)Unrealized (losses) gains on securities:Unrealized holding (losses) gains arising during the period
    
    
    (92,800
    )
    
    
    173,809
    
    
    
    30,473Reclassification adjustment for (losses) gains
included in net income
    
    
    4,326
    
    
    
    (295,839
    )
    
    
    (194,011
    )Reduction in fair value of interest-rate swap
    
    
    (23,812
    )
    
    
    (20,221
    )
    
    
    Other comprehensive loss, net of taxes
    
    
    (112,286
    )
    
    
    (142,251
    )
    
    
    (163,538
    )COMPREHENSIVE INCOME
    
    $
    10,622,404
    
    
    $
    9,691,545
    
    
    $
    9,217,567BASIC EARNINGS PER SHARE OF COMMON
STOCK
    
    $
    1.22
    
    
    $
    1.13
    
    
    $
    1.05DILUTED EARNINGS PER SHARE OF
COMMON STOCK
    
    $
    1.19
    
    
    $
    1.09
    
    
    $
    1.03
 See accompanying notes. 
 5 - Columbia Bancorp




---



##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY AccumulatedComprehensive
    
    
    TotalCommon Stock
    
    
    Retained
    
    
    Income
    
    
    ShareholdersShares
    
    
    Amount
    
    
    Earnings
    
    
    (Loss)
    
    
    EquityBALANCE, December 31, 2001
    
    
    8,037,078
    
    
    $
    20,733,594
    
    
    $
    25,373,550
    
    
    $
    337,788
    
    
    $
    46,444,932Stock options exercised
    
    
    153,724
    
    
    
    1,008,572
    
    
    
    
    
    
    
    
    
    
    
    1,008,572Income tax benefit from stock options
exercised
    
    
    
    
    
    
    122,704
    
    
    
    
    
    
    
    
    
    
    
    122,704Repurchase of common stock
    
    
    (328,422
    )
    
    
    (4,023,170
    )
    
    
    
    
    
    
    
    
    
    
    (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
    )
    
    
    9,217,567BALANCE, December 31, 2002
    
    
    7,862,380
    
    
    
    17,841,700
    
    
    
    32,174,431
    
    
    
    174,250
    
    
    
    50,190,381Stock options exercised
    
    
    113,015
    
    
    
    782,637
    
    
    
    
    
    
    
    
    
    
    
    782,637Income tax benefit from stock options
exercised
    
    
    
    
    
    
    212,242
    
    
    
    
    
    
    
    
    
    
    
    212,24210% stock dividend and cash paid for
fractional shares
    
    
    791,887
    
    
    
    12,931,515
    
    
    
    (12,937,194
    )
    
    
    
    
    
    
    (5,679
    )Repurchase of common stock
    
    
    (16,700
    )
    
    
    (247,995
    )
    
    
    
    
    
    
    
    
    
    
    (247,995
    )Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    (2,031,115
    )
    
    
    
    
    
    
    (2,031,115
    )Cash dividends declared
    
    
    
    
    
    
    
    
    
    

    (787,552
    )
    
    
    
    
    
    
    (787,552
    )Net income and comprehensive income
    
    
    
    
    
    
    
    
    
    
    9,833,796
    
    
    
    (142,251
    )
    
    
    9,691,545BALANCE, December 31, 2003
    
    
    8,750,582
    
    
    
    31,520,099
    
    
    
    26,252,366
    
    
    
    31,999
    
    
    
    57,804,464Stock options exercised
    
    
    101,069
    
    
    
    725,193
    
    
    
    
    
    
    
    
    
    
    
    725,193Income tax benefit from stock options
exercised
    
    
    
    
    
    
    121,713
    
    
    
    
    
    
    
    
    
    
    
    121,713Repurchase of common stock
    
    
    (12,500
    )
    
    
    (226,229
    )
    
    
    
    
    
    
    
    
    
    
    (226,229
    )Cash dividends paid
    
    
    
    
    
    
    
    
    
    
    (2,375,043
    )
    
    
    
    
    
    
    (2,375,043
    )Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    (795,524
    )
    
    
    
    
    
    
    (795,524
    )Net income and comprehensive income
    
    
    
    
    
    
    
    
    
    
    10,734,690
    
    
    
    (112,286
    )
    
    
    10,622,404BALANCE, December 31, 2004
    
    
    8,839,151
    
    
    $
    32,140,776
    
    
    $
    33,816,489
    
    
    $
    (80,287
    )
    
    $
    65,876,978
 See accompanying notes. 
 Columbia Bancorp - 6




---



##### Table of Contents



COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31,2004
    
    
    2003
    
    
    2002CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    10,734,690
    
    
    $
    9,833,796
    
    
    $
    9,381,105Adjustments to reconcile net income to net cash from
operating activities:Amortization of premiums and discounts on investment securities
    
    
    52,682
    
    
    
    16,113
    
    
    
    65,407Net loss (gain) on sale or call of investment securities
    
    
    6,823
    
    
    
    (462,249
    )
    
    
    (295,822
    )Federal Home Loan Bank stock dividend
    
    
    (69,800
    )
    
    
    (144,900
    )
    
    
    (157,700
    )Loss on sale or write-down of property, equipment,
and other real estate owned
    
    
    (560,650
    )
    
    
    118,196
    
    
    
    55,395Depreciation and amortization:Property, equipment, and other
    
    
    1,551,223
    
    
    
    1,351,158
    
    
    
    1,238,839Mortgage servicing asset
    
    
    1,621,091
    
    
    
    2,000,050
    
    
    
    1,028,810Impairment of mortgage servicing asset
    
    
    
    
    
    
    858,000
    
    
    
    2,781,111Deferred income tax benefit
    
    
    (194,493
    )
    
    
    (828,758
    )
    
    
    (692,556
    )Provision for loan losses
    
    
    2,760,000
    
    
    
    2,575,000
    
    
    
    1,800,000Increase (decrease) in cash due to changes in certain assets
and liabilities:Proceeds from the sale of mortgage loans held-for-sale
    
    
    42,608,162
    
    
    
    236,753,057
    
    
    
    239,365,825Production of mortgage loans held-for-sale
    
    
    (42,332,960
    )
    
    
    (230,775,664
    )
    
    
    (229,175,623
    )Accrued interest receivable
    
    
    (338,279
    )
    
    
    125,710
    
    
    
    (409,704
    )Mortgage servicing asset
    
    
    (92,296
    )
    
    
    (1,935,108
    )
    
    
    (2,227,511
    )Other assets
    
    
    (1,178,026
    )
    
    
    (781,711
    )
    
    
    (326,919
    )Accrued interest payable and other liabilities
    
    
    (92,050
    )
    
    
    537,802
    
    
    
    2,865,950Net cash from operating activities
    
    
    14,476,117
    
    
    
    19,240,492
    
    
    
    25,296,607CASH FLOWS FROM INVESTING ACTIVITIESProceeds from the sale of available-for-sale securities
    
    
    4,500,000
    
    
    
    5,670,252
    
    
    
    300,000Proceeds from the maturity of available-for-sale securities
    
    
    8,100,000
    
    
    
    19,030,000
    
    
    
    7,300,000Purchases of available-for-sale securities
    
    
    (23,508,519
    )
    
    
    (23,533,877
    )
    
    
    (4,000,000
    )Proceeds from the maturity or call of held-to-maturity securities
    
    
    1,340,143
    
    
    
    4,954,467
    
    
    
    4,077,273Purchases of held-to-maturity securities
    
    
    (4,180,255
    )
    
    
    (1,347,865
    )
    
    
    (81,579
    )Purchases of equity securities
    
    
    (601,250
    )
    
    
    
    
    
    
    Net change from the sale (purchases) of restricted equity securities
    
    
    483,700
    
    
    
    
    
    
    
    18,813Net change in loans made to customers
    
    
    (114,346,355
    )
    
    
    (40,319,910
    )
    
    
    (64,947,534
    )Investment in low-income housing tax credits
    
    
    (76,750
    )
    
    
    
    
    
    
    (10,000
    )Investment in bank-owned life insurance
    
    
    (2,000,000
    )
    
    
    
    
    
    
    Proceeds from the sale of property and equipment
    
    
    1,519,486
    
    
    
    
    
    
    
    25,269Proceeds from the sale of other real estate owned
    
    
    1,531,330
    
    
    
    63,174
    
    
    
    876,690Payments made for purchase of property and equipment
    
    
    (3,952,582
    )
    
    
    (1,042,699
    )
    
    
    (1,589,572
    )Net cash from investing activities
    
    
    (131,191,052
    )
    
    
    (36,526,458
    )
    
    
    (58,030,640
    )CASH FLOWS FROM FINANCING ACTIVITIESNet change in demand deposit and savings accounts
    
    
    45,977,256
    
    
    
    26,498,587
    
    
    
    66,596,197Net change in time certificates
    
    
    64,608,267
    
    
    
    11,235,449
    
    
    
    (5,396,585
    )Net increase (decrease) in notes payable
    
    
    12,906,099
    
    
    
    (5,151,481
    )
    
    
    (8,769,596
    )Proceeds from issuance of Trust Preferred Securities
    
    
    
    
    
    
    
    
    
    
    4,000,000Dividends paid and cash paid for fractional shares
    
    
    (3,163,045
    )
    
    
    (2,666,573
    )
    
    
    (2,593,588
    )Proceeds from the exercise of stock options
    
    
    725,193
    
    
    
    782,637
    
    
    
    1,008,572Repurchase of common stock
    
    
    (226,229
    )
    
    
    (247,995
    )
    
    
    (4,023,170
    )Net cash from financing activities
    
    
    120,827,541
    
    
    
    30,450,624
    
    
    
    50,821,830NET INCREASE IN CASH AND CASH
EQUIVALENTS
    
    
    4,112,606
    
    
    
    13,164,658
    
    
    
    18,087,797CASH AND CASH EQUIVALENTS, beginning of year
    
    
    53,866,193
    
    
    
    40,701,535
    
    
    
    22,613,738CASH AND CASH EQUIVALENTS, end of year
    
    $
    57,978,799
    
    
    $
    53,866,193
    
    
    $
    40,701,535SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATIONInterest paid in cash
    
    $
    8,277,852
    
    
    $
    6,728,204
    
    
    $
    7,784,590Taxes paid in cash
    
    $
    6,744,000
    
    
    $
    6,027,000
    
    
    $
    5,919,000SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIESChange in unrealized gain or loss on available-for-sale
securities, net of taxes
    
    $
    (104,590
    )
    
    $
    (122,030
    )
    
    $
    (163,538
    )Change in fair value of interest-rate swap
    
    $
    (7,696
    )
    
    $
    (20,221
    )
    
    $
    Cash dividend declared and payable after year-end
    
    $
    795,524
    
    
    $
    787,552
    
    
    $
    628,990Transfers of loans to other real estate owned
    
    $
    1,536,270
    
    
    $
    104,700
    
    
    $
    553,100
 See accompanying notes. 
 7 - Columbia Bancorp




---



##### 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 20 branch facilities; 17 branches are located in Wasco, Hood River, Deschutes,
Clackamas, Jefferson, Umatilla, and Yamhill counties in Oregon, and three branches in Benton and
Klickitat counties in Washington. The Bank operates a mortgage banking division, the CRB Mortgage
Team, which provides services to all banking branches of the Bank. Through arrangements with
Primevest Financial Services, Inc., a registered securities broker-dealer, the CRB Financial
Services Team offers a wide range of non-Federal Deposit Insurance Corporation insured financial
products and services to consumers. Until March 31, 2004, Columbia also recognized Columbia Bancorp
Trust I (Trust), as 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 $4.0 million in Trust Preferred Securities for
the purpose of repurchasing shares of common stock and to maintain appropriate regulatory capital.
In accordance with Financial Accounting Standards Boards (FASB) Interpretation No. 46 (revised
December 2003) (FIN 46R) Consolidation of Variable Interest Entities, Columbia was required to
deconsolidate the Trust effective March 31, 2004. 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. All significant intercompany accounts and transactions between Columbia and its subsidiary have
been eliminated in the preparation of the consolidated financial statements. Managements estimates and assumptions 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, 2004 and 2003, the Bank had no reserve requirement to be maintained at
the Federal Reserve; however, total clearing balance requirements at December 31, 2004 and 2003
were $400,000. 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, 2004 and 2003, 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 shareholders 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. Columbia Bancorp - 8




---



##### Table of Contents



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. At each financial statement date, Management
assesses each investment to determine if impaired investments are temporarily impaired or if the
impairment is other-than-temporary based upon the positive and negative evidence available.
Evidence evaluated includes, but is not limited to, industry analyst reports, credit market
conditions and interest rate trends. A decline in the market value of any security below cost that
is deemed other-than-temporary results in a charge to earnings and the corresponding establishment
of a new cost basis for the security. Premiums and discounts are recognized in interest income
using the effective interest method over the period to maturity. Equity securities Columbias equity investments consist of a participation in a mutual fund for
the purpose of Community Reinvestment Act (CRA) credit and corporate equity securities. These
securities are carried at fair value. 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. Restricted equity securities Columbias equity investments in the Federal Home Loan Bank of
Seattle and the Federal Agriculture Mortgage Corporation are classified as restricted equity
securities since ownership of these instruments is restricted and there is no active market for
them. 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, 2004
and 2003, mortgage loans held-for-sale were carried at cost which approximated fair market value. 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 using the simple-interest method on daily balances of the principal amount
outstanding. 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. The Bank does not accrue interest on loans for which payment in full of principal and interest is
not expected, or which payment of principal or interest has been in default 90 days or more, unless
the loan is well-secured and in the process of collection. Nonaccrual loans are considered impaired
loans. Each impaired loan is 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. 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. Large groups of smaller balance,
homogeneous loans may be collectively evaluated for impairment. Accordingly, the Bank may not
separately identify individual consumer and residential loans for evaluation of impairment. The allowance for loan losses is established through a provision for loan losses charged to
expense. 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 allowance 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. Property and equipment Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed by straight-line and accelerated methods over the estimated useful lives
of the assets, which range from 3 to 7 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 until December 31, 2001. Under Statement of Financial Accounting Standards
(SFAS) No. 9 - Columbia Bancorp




---



##### Table of Contents



142, Goodwill and Other Intangible Assets, the Bank ceased amortization of goodwill effective January
1, 2002, completed its initial assessment of goodwill impairment in March 2002, and has completed
the annual assessment each December thereafter. 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 assessments have identified impairment of goodwill such that the net
book value of the reporting unit exceeded its estimated fair value. Mortgage servicing asset, net of amortization and valuation allowance Mortgage servicing rights
retained 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 sale. Mortgage servicing rights
retained are capitalized and included in the mortgage servicing asset (MSA) at their allocated
carrying value and amortized in proportion to, and over the period of, estimated future net
servicing revenues. Impairment of the mortgage servicing asset is assessed based on the fair value
of those rights. The amount of a valuation allowance recognized is the amount by which the
capitalized mortgage servicing asset exceeds the calculated fair value. For 2002 and 2003, fair
values were 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. To validate the carrying value of the MSA, the Bank utilizes an independent third
party vendor, who uses a combination of near term secondary marketing transactions, discount rates,
loan pre-payment rates, estimated loan lives, servicing costs, weighted-average term to maturity
rates and other relevant factors. Investment in a limited partnership Columbia has a 10% interest in a limited partnership that
owns and operates affordable housing projects. Investment in these projects serve 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 20 years to recapture or reduce
taxes. Columbia uses the equity method in accounting for its interest in the partnerships
operating results; tax credits are recorded in the years they become available to reduce income
taxes. 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
allowance for loan losses. Subsequent write-downs to net realizable value, if any, or any
disposition gains or losses are included in non-interest income and expense. At December 31, 2004
and 2003, the Bank held $100,000 and $41,500, respectively, in other real estate owned. 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 income 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 $811,067, $536,871, and $500,086 for the years ended December 31, 2004, 2003, and 2002,
respectively. Earnings per share Basic earnings per share is computed by dividing net income available to
shareholders 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 the denominator is increased to include the number of
additional common shares that would have been outstanding if dilutive potential common shares had
been issued. Included in the denominator is the dilutive effect of stock options computed by the
treasury stock method. 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 plan using the
intrinsic value-based method. 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 Columbia Bancorp - 10




---



##### Table of Contents



compensation cost for Columbias 2004, 2003, and 2002 grants under its stock-based compensation
plan been determined consistent with the fair value-based method defined in SFAS No. 123,
Accounting for Stock-Based Compensation, its net income and earnings per common share for
December 31, 2004, 2003, and 2002, would approximate the pro forma amounts shown in the following
table. 
 (dollars in thousands except per share data)
    
    2004
    
    
    2003
    
    
    2002Net income, as reported
    
    $
    10,735
    
    
    $
    9,834
    
    
    $
    9,381Deduct: Total stock-based employee
compensation expense determined
under fair value based methods for
all awards, net of related tax effects
    
    
    (82
    )
    
    
    (177
    )
    
    
    (811
    )$
    10,653
    
    
    $
    9,657
    
    
    $
    8,570Pro forma net incomeEarnings per share(1):Basic - as reported
    
    $
    1.22
    
    
    $
    1.13
    
    
    $
    1.05Basic - pro forma
    
    
    1.21
    
    
    
    1.11
    
    
    
    0.96Diluted - as reported
    
    
    1.19
    
    
    
    1.09
    
    
    
    1.03Diluted - pro forma
    
    
    1.18
    
    
    
    1.07
    
    
    
    0.94
   (1)
    
    Amounts for 2002 have been adjusted to reflect the 10% stock dividend, effective May 1,
2003. 
 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, 2004, 2003, and
2002. 
 2004
    
    
    2003
    
    
    2002Dividend yield
    
    
    1.80
    %
    
    
    2.14
    %
    
    
    2.14
    %Expected life (years)
    
    6-8 years
    
    6 years
    
    6 yearsExpected volatility
    
    
    43.28
    %
    
    
    43.71
    %
    
    
    45.25
    %Risk-free rate
    
    
    2.90-3.02
    %
    
    
    3.02
    %
    
    
    2.08
    %
 The effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future
amounts. 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 consolidated financial statements when they are funded or
related fees are incurred or received. The Bank maintains an allowance for off-balance-sheet items,
included in the allowance for loan losses, established through charges to the provision for loan
losses. The allowance is an amount that Management believes will be adequate to absorb possible
losses associated with off-balance sheet credit risk. The evaluations take into consideration such
factors as changes in the nature and volume of the commitments to extend credit undisbursed balance
of existing lines of credit and letters of credit. Columbia monitors these off-balance-sheet items regularly along with its liquidity position to
ensure funds are available if these commitments are funded. Derivative financial instruments Columbia has 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 SFAS No. 133. All derivative instruments, including
certain derivative instruments embedded in other contracts, are recognized in the consolidated
balance sheets at fair value. SFAS No. 133 requires that the accounting for gains or losses from
changes in the derivative instruments fair value is contingent upon 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 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 11 - Columbia Bancorp




---



##### Table of Contents



variability of
cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), or
(3) a 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 shareholders
equity and subsequently reclassified to net income in the same period 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 has historically used forward sales contract derivatives
as a strategy to mitigate the risk associated with interest rate volatility and currently uses an
interest-rate swap to mitigate the variability of interest payments on its junior subordinated
debentures. 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: Held-to-maturity, available-for-sale, equity securities 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 savings accounts 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 value of the Banks long-term debt is estimated using a discounted cash
flow analysis based on the Banks current incremental borrowing rate for similar types of borrowing
arrangements. Off-balance-sheet instruments The Banks off-balance-sheet instruments include unfunded
commitments to extend credit and standby and performance 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. Recently issued accounting
standards In December 2004, the FASB issued Statement
No. 123(R)
Share-Based Payment. This statement replaces existing requirements under SFAS No. 123
Accounting
for Stock-Based Compensation, and eliminates the ability to account for share-based compensation
transactions under APB Opinion No. 25 Accounting for Stock
Issued to Employees. SFAS No. 123(R)
requires stock-based transactions to be recognized as compensation expense in the Columbia Bancorp - 12




---



##### Table of Contents



income statement
based on their fair values at the date of grant. The fair value should be estimated using
option-pricing models such as the Black-Scholes model or a binomial model. This statement is
effective for interim periods beginning after June 15, 2005. At this time, Columbia does not
believe the future impact on earnings to be a great extent different than what has historically
been reported as the pro forma effect to income in Note 1. The impact to operating and financing
cash flows is not considered to be material to the Financial Statements. In December 2003, the Accounting Standards Executive Committee of the American Institute of
Certified Public Accountants issued Statement of Position 03-3 (SOP 03-3), Accounting for
Certain Loans or Debt Securities Acquired in a Transfer, which addresses the accounting for
certain loans acquired in a transfer when it is probable, at acquisition, that the investor will be
unable to collect all contractually required payments receivable. SOP 03-3 is to be applied
prospectively, effective for loans acquired in years beginning after December 15, 2004. SOP 03-3
requires acquired loans with evidence of credit deterioration to be recorded at fair value and
prohibits recording any valuation allowance related to such loans at the time of purchase. This SOP
limits the yield that may be accreted on such loans to the excess of the investors estimated cash
flows over its initial investment in the loan. The excess of contractual cash flows over cash flows
expected to be collected is not to be recognized as an adjustment of yield. Subsequent increases in
cash flows expected to be collected are recognized prospectively through adjustment of the loans
yield over its remaining life. Decreases in cash flows expected to be collected are recognized as
impairment. Loans carried at fair value, mortgage loans held-for-sale, and loans to borrowers in
good standing under revolving credit agreements are excluded from the scope of SOP 03-3. In November 2003, the EITF reached a consensus that certain quantitative and qualitative
disclosures should be required for debt and marketable equity securities classified as
available-for-sale or held-to-maturity under SFAS No. 115 and 124, that are impaired at the balance
sheet date but for which an other-than-temporary impairment has not been recognized. This EITF
consensus is effective for fiscal years ending after December 15, 2003. Accordingly, Columbia has
adopted the provisions of this consensus as of December 31, 2003 and the result did not have an
impact on Columbias statement of financial position or results of operations. In September 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. This statement establishes standards regarding
classification and measurement of certain financial instruments with characteristics of both
liabilities and equity. It requires financial instruments within the scope of this statement to be
classified as liabilities. Many of these financial instruments were previously classified as
equity. This statement became effective for financial instruments entered into or modified after
May 31, 2003, and was otherwise effective at the beginning of the first interim period beginning
after September 15, 2003. For financial instruments created before the issuance date of this
statement and still existing at the beginning of the interim period of adoption, transition was
achieved by reporting the cumulative effect of a change in an accounting principle by initially
measuring the financial instruments at fair value. Application of the provisions of this statement
did not have a material impact on Columbias consolidated financial statements. In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. This statement amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in other contracts and
for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. Application of the provisions of this statement did not have a material impact on
Columbias consolidated financial statements. In January 2003, the 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. In December 2003, the FASB made revisions and delayed
implementation of certain provisions of FIN 46 by issuing FIN 46R. As a public entity that is not
a Small Business Issuer, Columbia was required to apply FIN 46R to all unconsolidated variable
interest entities no later than March 31, 2004, with the exception of unconsolidated
special-purpose entities, which had an implementation deadline of December 31, 2003.
Special-purpose entities for this provision are expected to include entities whose activities are
primarily related to securitizations or other forms of asset-backed financings or single-lessee
leasing arrangements. As a result of adoption of FIN 46R, Columbia no longer consolidates Columbia
Bancorp Trust I within its financial statements and recognizes $4.1 million as junior subordinated
debentures due to the Trust 13 - Columbia Bancorp




---



##### Table of Contents



effective March 31, 2004. Management does not anticipate adoption of
the Interpretation will have further effects on the financial condition or results of operations of
Columbia. Reclassifications Certain reclassifications have been made to the 2003 and 2002 consolidated
financial statements to conform with the current year presentations. NOTE 2 INVESTMENT SECURITIES The amortized cost and estimated fair values of Columbias investment securities at December 31,
2004 and 2003 are summarized as follows. 
 Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2004:Available-for-sale securities:Obligations of U.S.
government agencies
    
    $
    24,045,449
    
    
    $
    
    
    
    $
    (146,327
    )
    
    $
    23,899,122Municipal securities
    
    
    639,617
    
    
    
    34,655
    
    
    
    
    
    
    
    674,272$
    24,685,066
    
    
    $
    34,655
    
    
    $
    (146,327
    )
    
    $
    24,573,394Held-to-maturity securities:Mortgage-backed
securities
    
    $
    5,174,079
    
    
    $
    39,089
    
    
    $
    (28,664
    )
    
    $
    5,184,504Municipal securities
    
    
    12,534,465
    
    
    
    596,234
    
    
    
    (936
    )
    
    
    13,129,763Obligations of U.S.
government agencies
    
    
    80,937
    
    
    
    
    
    
    
    
    
    
    
    80,937$
    17,789,481
    
    
    $
    635,323
    
    
    $
    (29,600
    )
    
    $
    18,395,204Equity securities
    
    $
    576,524
    
    
    $
    29,070
    
    
    $
    
    
    
    $
    605,594
 Gross
    
    
    Gross
    
    
    EstimatedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    ValueDecember 31, 2003:Available-for-sale securities:Obligations of U.S.
government agencies
    
    $
    12,980,989
    
    
    $
    24,165
    
    
    $
    (1,250
    )
    
    $
    13,003,904Municipal securities
    
    
    739,455
    
    
    
    53,537
    
    
    
    
    
    
    
    792,992$
    13,720,444
    
    
    $
    77,702
    
    
    $
    (1,250
    )
    
    $
    13,796,896Held-to-maturity securities:Mortgage-backed
securities
    
    $
    1,866,412
    
    
    $
    62,116
    
    
    $
    
    
    
    $
    1,928,528Municipal securities
    
    
    13,016,058
    
    
    
    818,153
    
    
    
    (539
    )
    
    
    13,833,672Obligations of U.S.
government agencies
    
    
    81,258
    
    
    
    
    
    
    
    
    
    
    
    81,258$
    14,963,728
    
    
    $
    880,269
    
    
    $
    (539
    )
    
    $
    15,843,458Equity securities
    
    $
    75,000
    
    
    $
    3,750
    
    
    $
    
    
    
    $
    78,750
 
 Columbia Bancorp - 14




---



##### Table of Contents



The following table presents the gross unrealized losses and fair value of the Banks
investment securities, aggregated by investment category and length of time that individual
securities have been in a continuous unrealized loss position, at December 31, 2004. 
 Less than 12 months
    
    
    12 months or more
    
    
    TotalUnrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedFair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesObligations of U.S.
government agencies
    
    $
    23,898,669
    
    
    $
    (146,327
    )
    
    $
    
    
    
    $
    
    
    
    $
    23,898,669
    
    
    $
    (146,327
    )Mortgage-backed securities
    
    
    4,487,623
    
    
    
    (28,664
    )
    
    
    
    
    
    
    
    
    
    
    4,487,623
    
    
    
    (28,664
    )Municipal securities
    
    
    337,035
    
    
    
    (578
    )
    
    
    55,054
    
    
    
    (358
    )
    
    
    392,089
    
    
    
    (936
    )$
    28,723,327
    
    
    $
    (175,569
    )
    
    $
    55,054
    
    
    $
    (358
    )
    
    $
    28,778,381
    
    
    $
    (175,927
    )
 
 Columbia uses an outside third party to determine current market values of the securities it
holds. These fair market values are compared to current carrying values to determine if a security
is in a gain or loss position. As market rates fluctuate, a securitys fair value can move from a
gain or loss position. Columbia had one security in its portfolio at December 31, 2004, that had
an unrealized loss for 12 months or longer. Columbia believes that the unrealized loss on this
security is due to changes in market rates. The amortized cost and estimated fair value of investment securities at December 31, 2004, 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. 
 Available-for-Sale
    
    
    Held-to-MaturityEstimated
    
    
    
    
    
    
    EstimatedAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueDue in one year or less
    
    $
    8,989,354
    
    
    $
    8,974,566
    
    
    $
    452,513
    
    
    $
    468,441Due after one year through
five years
    
    
    15,695,712
    
    
    
    15,598,828
    
    
    
    7,066,793
    
    
    
    7,132,865Due after five years through
ten years
    
    
    
    
    
    
    
    
    
    
    9,339,561
    
    
    
    9,806,353Due after ten years
    
    
    
    
    
    
    
    
    
    
    930,614
    
    
    
    987,54524,685,066
    
    
    
    24,573,394
    
    
    
    17,789,481
    
    
    
    18,395,204Equity securities
    
    
    576,524
    
    
    
    605,594
    
    
    
    
    
    
    
    $
    25,261,590
    
    
    $
    25,178,988
    
    
    $
    17,789,481
    
    
    $
    18,395,204
 
 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, 2004 and 2003, investment securities with an amortized cost of $17.06 million
and $14.04 million, respectively, have been pledged to secure notes payable at the Federal Home
Loan Bank of Seattle and Federal Reserve Bank and public or other deposits, as required by law. 15 - Columbia Bancorp




---



##### Table of Contents



NOTE 3 RESTRICTED EQUITY SECURITIES The composition of restricted equity securities is as follows. 
 2004
    
    
    2003Federal Home Loan Bank of Seattle stock
    
    $
    2,419,800
    
    
    $
    2,833,700Federal Agriculture Mortgage Corporation stock
    
    
    9,400
    
    
    
    9,400$
    2,429,200
    
    
    $
    2,843,100
 NOTE 4 LOANS AND ALLOWANCE FOR LOAN LOSSES The loan portfolio consists of the following. 
 2004
    
    
    2003Commercial
    
    $
    93,618,385
    
    
    $
    86,163,437Agriculture
    
    
    79,223,710
    
    
    
    64,058,572Real estate
    
    
    247,045,236
    
    
    
    206,754,240Real estate
 construction
    
    
    139,414,655
    
    
    
    87,426,996Consumer
    
    
    14,385,879
    
    
    
    18,241,447Credit card and other loans
    
    
    7,660,273
    
    
    
    6,975,262581,348,138
    
    
    
    469,619,954Less allowance for loan losses
    
    
    (8,184,488
    )
    
    
    (6,612,308
    )Less unearned loan fees
    
    
    (1,555,800
    )
    
    
    (1,449,881
    )Loans, net of allowance for loan losses
and unearned loan fees
    
    $
    571,607,850
    
    
    $
    461,557,765
 Columbia had a recorded investment in impaired loans of $4.22 million and $3.29 million at
December 31, 2004 and 2003, 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 $4.22 million and $4.02 million during 2004 and 2003,
respectively. The total allowance for loan losses related to these loans at December 31, 2004 and
2003 was approximately $785,000 and $1.11 million, respectively. Had the impaired loans performed
according to their original terms, additional interest income of $421,609, $589,125 and $215,663
would have been recognized in 2004, 2003 and 2002, 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. 
 2004
    
    
    2003
    
    
    2002BALANCE, beginning of year
    
    $
    6,612,308
    
    
    $
    6,416,691
    
    
    $
    5,311,715Provision for loan losses
    
    
    2,760,000
    
    
    
    2,575,000
    
    
    
    1,800,000Loans charged off
    
    
    (1,291,479
    )
    
    
    (2,533,521
    )
    
    
    (886,156
    )Loan recoveries
    
    
    103,659
    
    
    
    154,138
    
    
    
    191,132BALANCE, end of year
    
    $
    8,184,488
    
    
    $
    6,612,308
    
    
    $
    6,416,691
 
 Columbia Bancorp - 16




---



##### Table of Contents



NOTE 5 PROPERTY AND EQUIPMENT The major classifications of property and equipment are summarized as follows. 
 2004
    
    
    2003Land
    
    $
    4,365,164
    
    
    $
    3,468,310Construction in progress
    
    
    346,307
    
    
    
    355,759Buildings and improvements
    
    
    10,740,303
    
    
    
    10,171,670Furniture and equipment
    
    
    7,856,658
    
    
    
    6,730,885Total property and equipment
    
    
    23,308,432
    
    
    
    20,726,624Less accumulated depreciation
    
    
    (8,085,810
    )
    
    
    (6,959,715
    )Property and equipment, net of
accumulated depreciation
    
    $
    15,222,622
    
    
    $
    13,766,909
 
 For certain bank branch facilities, Columbia leases office space to third parties. Minimum
future rental income from noncancellable leases for the next five years beginning in 2005 is
approximately $117,000, through 2008, and $81,000 in 2009. Minimum lease rental income for the year
2010 and thereafter is approximately $6,000. NOTE 6 MORTGAGE SERVICING AND LENDING ACTIVITIES Mortgages serviced for others, which totaled $333.74 million and $444.65 million at December 31,
2004 and 2003, respectively, are not included in the accompanying consolidated balance sheets.
During fourth quarter 2003, Management initiated a strategic shift from originating mortgage loans
with servicing retained premiums to one of servicing released premiums. This resulted in less than
$100,000 in additional servicing retained premiums being capitalized in 2004, attributable to
previously committed construction to permanent loans being completed subsequent to December 31,
2003. The key statistics and assumptions used to determine the value of the MSA at December 31,
2004, segmented by interest rate tranches, were as follows. 
 Adjustable< = 6.00%
    
    
    6.01% - 7.00%
    
    
    > = 7.01%
    
    
    RateUnpaid principal balance
    
    $
    180,154,069
    
    
    $
    99,978,421
    
    
    $
    29,272,765
    
    
    $
    24,336,707Number of loans
    
    
    1,476
    
    
    
    959
    
    
    
    333
    
    
    
    164Weighted-average term to maturity
(months)
    
    
    251
    
    
    
    279
    
    
    
    298
    
    
    
    334Estimated loan life (months)
    
    
    78
    
    
    
    54
    
    
    
    35
    
    
    
    23Servicing cost of each loan per month,
net of ancillary income
    
    $
    25
    
    
    $
    25
    
    
    $
    25
    
    
    $
    40Discount rate (average)
    
    
    10.02
    %
    
    
    10.08
    %
    
    
    10.27
    %
    
    
    11.49
    %
 
 17 - Columbia Bancorp




---



##### Table of Contents



Changes in the balance of the MSA were as follows. 
 2004
    
    
    2003
    
    
    2002MSA balance, beginning of year
    
    $
    3,691,449
    
    
    $
    4,614,391
    
    
    $
    6,196,801Additions for capitalized servicing
right premiums
    
    
    92,296
    
    
    
    1,935,108
    
    
    
    2,227,511Amortization of MSA
    
    
    (1,621,091
    )
    
    
    (2,000,050
    )
    
    
    (1,028,810
    )Valuation allowance adjustments
    
    
    
    
    
    
    (858,000
    )
    
    
    (2,781,111
    )$
    2,162,654
    
    
    $
    3,691,449
    
    
    $
    4,614,391
 
 The valuation allowance provides for adjustments to the cost basis of the total mortgage
servicing asset to estimated fair value. The fair value adjustment is recorded as an adjustment to
the CRB Mortgage Teams net revenues when recognized. CRB Mortgage Team net revenues consisted of
the following. 
 2004
    
    
    2003
    
    
    2002Mortgage loan origination and
processing fee income
    
    $
    927,545
    
    
    $
    2,337,879
    
    
    $
    2,513,005Loan servicing fees
    
    
    995,357
    
    
    
    1,193,393
    
    
    
    1,163,815Net mortgage servicing expense
    
    
    (1,528,796
    )
    
    
    (924,092
    )
    
    
    (1,582,410
    )Gain (loss) on loan sales
    
    
    195,516
    
    
    
    (288,909
    )
    
    
    1,353,772Servicing release premium
    
    
    531,924
    
    
    
    253,607
    
    
    
    461,982Hedge expense
    
    
    
    
    
    
    (140,206
    )
    
    
    (1,720,539
    )Other
    
    
    
    
    
    
    
    
    
    
    3,689Mortgage Team net revenues
    
    $
    1,121,546
    
    
    $
    2,431,672
    
    
    $
    2,193,314
 
 NOTE 7 TIME CERTIFICATES Time certificates of deposit of $100,000 and over, aggregated $104.11 million and $38.33 million at
December 31, 2004 and 2003, respectively. Brokered time certificates, which are time certificates
purchased by a broker in large blocks, had an aggregate carrying value of $46.65 million and $26.17
million at December 31, 2004 and 2003, respectively. New in 2004, wholesale certificates of
deposit, which are similar to brokered certificates of deposit through which Columbia posts rates
on a certificates of deposit proprietary network that solicits deposits from other financial
institutions, had an aggregate carrying value of $18.92 million at December 31, 2004. At December 31, 2004, the scheduled maturities for all time certificates are as follows. 
 Years ending December 31,
    2005
    
    
    $
    109,512,3842006
    
    
    
    30,277,4582007
    
    
    
    19,449,5362008
    
    
    
    6,346,2522009
    
    
    
    17,849,031Thereafter
    
    
    
    3,921,430$
    187,356,091
 
 Columbia Bancorp - 18




---



##### Table of Contents



NOTE 8 LINES OF CREDIT AND BORROWED FUNDS The Bank has federal funds line of credit agreements with five financial institutions and the
Federal Reserve Bank of San Francisco. Maximum aggregate borrowings available under these lines
totaled $31.40 million, with available line of credit funds reduced by other borrowings. These
lines support short-term liquidity and cannot be used for more than 1 to 15 consecutive business
days, depending on the lending institution. At December 31, 2004 and 2003, 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 under which authorized borrowings are collateralized by the Banks FHLB
stock as well as loans or other instruments which may be pledged. As of December 31, 2004 and 2003,
the Bank had total borrowings outstanding with the FHLB of $34.04 million and $21.13 million,
respectively. Interest rates on notes outstanding range from 2.09% to 6.08%. The Bank had $43.54
million available for additional borrowings at December 31, 2004. Maximum borrowings available
from the FHLB for notes payable, lines of credit and the Cash Management Advance agreement totaled
$74.94 million at December 31, 2004. The Bank had outstanding notes from the FHLB at December 31, 2004 and 2003, as follows. 
 December 31, 2004
    
    December 31, 2003Weighted-
    
    
    
    
    
    
    
    Weighted-Maturity
    
    Average
    
    
    
    
    
    Maturity
    
    AverageAmount
    
    Year
    
    Interest Rate
    
    Amount
    
    
    Year
    
    Interest Rate$                            6,750,000
    
    2005
    
    2.84%
    
    $
    5,921,147
    
    
    2004
    
    2.22%3,000,000
    
    2006
    
    3.12%
    
    
    3,750,000
    
    
    2005
    
    3.17%11,500,000
    
    2007
    
    3.91%
    
    
    3,000,000
    
    
    2006
    
    2.70%9,509,958
    
    2008
    
    3.30%
    
    
    6,500,000
    
    
    2007
    
    4.78%2,551,613
    
    2009
    
    2.81%
    
    
    1,180,334
    
    
    2008
    
    3.63%728,023
    
    2013
    
    5.47%
    
    
    781,984
    
    
    2013
    
    5.47%$                          34,039,594
    
    
    
    3.41%
    
    $
    21,133,465
    
    
    
    
    3.44%
 
 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, 2004 and 2003, the Bank had $849,970 and $850,000, respectively, outstanding under
this program. NOTE 9 JUNIOR SUBORDINATED DEBENTURES In December 2002, Columbia formed a wholly-owned Delaware statutory business trust subsidiary,
Columbia Bancorp Trust I (the Trust), which issued $4.00 million 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 the Trust to
purchase $4.12 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: (1) accrued and unpaid distributions required to be paid on
the Trust Preferred Securities, (2) the redemption price with respect to any Trust Preferred
Securities called for redemption by the Trust and (3) 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 19 - Columbia Bancorp




---



##### Table of Contents



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
interest. For the years ended December 31, 2004 and 2003, Columbia paid interest expense related to
the Trust Preferred Securities of $194,567 and $187,162, respectively. In March 2004, Columbia deconsolidated the Trust, in accordance with FASB FIN 46R Consolidation of
Variable Interest Entities. As a result, the junior subordinated debentures issued by Columbia to
the issuer trusts, totaling $4.12 million, are reflected on Columbias consolidated balance sheet
at December 31, 2004, under the caption Junior Subordinated Debentures. Columbia also recognized
its $124,000 investment in the Trust, which is recorded among Other Assets in its consolidated
balance sheet at December 31, 2004. NOTE 10 INTEREST-RATE SWAP During January 2003, in connection with the issuance of $4.00 million 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 $4.00 million and receive credit for the 90-day
LIBOR rate on the same amount. The effect of this transaction was the conversion of the $4.00
million 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. Columbia has classified the swap agreement as a cash flow hedge in accordance
with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. For the periods
ended December 31, 2004 and 2003, the hedge has been highly effective in achieving offsetting cash
flows attributable to the hedged risk. NOTE 11 INCOME TAXES The provision for income taxes consists of the following.   2004
    
    
    2003
    
    
    2002Current tax expense:Federal
    
    $
    6,467,478
    
    
    $
    5,077,462
    
    
    $
    4,989,761State
    
    
    1,080,338
    
    
    
    1,015,005
    
    
    
    926,2927,547,816
    
    
    
    6,092,467
    
    
    
    5,916,053Deferred tax (benefit) expense:Federal
    
    
    (1,182,981
    )
    
    
    (479,137
    )
    
    
    (613,200
    )State
    
    
    (139,174
    )
    
    
    (49,021
    )
    
    
    (79,356
    )(1,322,155
    )
    
    
    (528,158
    )
    
    
    (692,556
    )Provision for income taxes
    
    $
    6,225,661
    
    
    $
    5,564,309
    
    
    $
    5,223,497
 
 Columbia Bancorp - 20




---



##### Table of Contents



The components of the deferred income tax benefit consist of the following.   2004
    
    
    2003
    
    
    2002Mortgage servicing rights
    
    $
    (580,943
    )
    
    $
    (350,718
    )
    
    $
    (601,316
    )Loan loss provision not deductible
for tax
    
    
    (664,872
    )
    
    
    (141,778
    )
    
    
    (371,906
    )Difference between book and tax
depreciation methods
    
    
    (578
    )
    
    
    (117,890
    )
    
    
    217,179Deferred compensation
    
    
    (128,991
    )
    
    
    (53,472
    )
    
    
    (22,933
    )Difference between book and tax
recognition of Federal Home
Loan Bank stock dividends
    
    
    26,615
    
    
    
    54,957
    
    
    
    60,031Cash surrender value greater than
investment in life insurance policies
    
    
    (156,770
    )
    
    
    55,186
    
    
    
    101,584Other differences
    
    
    183,384
    
    
    
    25,557
    
    
    
    (75,195
    )Deferred income tax benefit
    
    $
    (1,322,155
    )
    
    $
    (528,158
    )
    
    $
    (692,556
    )
 
 The net deferred tax asset consists of the following.   2004
    
    
    2003Deferred tax assets:Allowance for loan losses
    
    $
    3,020,179
    
    
    $
    2,355,307Purchased state tax credits
    
    
    315,121
    
    
    
    300,600Deferred compensation
    
    
    327,192
    
    
    
    198,201Unrealized losses on investment securities
    
    
    31,000
    
    
    
    Other
    
    
    
    
    
    
    49,6383,693,492
    
    
    
    2,903,746Deferred tax liabilities:Mortgage servicing rights
    
    
    (821,808
    )
    
    
    (1,402,751
    )Accumulated depreciation
    
    
    (959,269
    )
    
    
    (959,847
    )Cash surrender value greater than life insurance
policies
    
    
    
    
    
    
    (156,770
    )Federal Home Loan Bank stock dividends
    
    
    (348,126
    )
    
    
    (321,511
    )Unrealized gains on investment securities
    
    
    
    
    
    
    (12,000
    )Other
    
    
    (133,746
    )
    
    
    (2,262,949
    )
    
    
    (2,852,879
    )Net deferred tax asset
    
    $
    1,430,543
    
    
    $
    50,867
 
 Management believes, based upon Columbias historical performance that the deferred tax
assets 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 due principally to the effect of tax
exemptions for interest received on municipal investments. 21 - Columbia Bancorp




---



##### Table of Contents



A reconciliation between the federal tax rate and the effective tax rate is as follows.   2004
    
    
    2003
    
    
    2002Federal income taxes at statutory rate
    
    $
    5,766,520
    
    
    $
    5,234,876
    
    
    $
    4,965,565State income tax expense, net of
federal income tax benefit
    
    
    713,023
    
    
    
    534,522
    
    
    
    549,190Effect of nontaxable interest income
    
    
    (200,083
    )
    
    
    (236,035
    )
    
    
    (257,239
    )Increase in cash surrender value of
life insurance policies
    
    
    (23,796
    )
    
    
    
    
    
    
    Other
    
    
    (30,002
    )
    
    
    30,946
    
    
    
    (34,019
    )$
    6,225,661
    
    
    $
    5,564,309
    
    
    $
    5,223,49737
    %
    
    
    36
    %
    
    
    36
    %
 
 NOTE 12 EARNINGS PER SHARE Basic earnings per share excludes dilution and is computed by dividing income available to common
shareholders by the weighted-average number of common shares outstanding for the year,
retroactively adjusted for stock dividends and splits. 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, 2004, 2003, and 2002.   2004
    
    
    2003
    
    
    2002Basic earnings per share:Income available to common shareholders
    
    $
    10,734,690
    
    
    $
    9,833,796
    
    
    $
    9,381,105Weighted-average common shares
outstanding
    
    
    8,795,148
    
    
    
    8,716,572
    
    
    
    8,900,643Basic earnings per share
    
    $
    1.22
    
    
    $
    1.13
    
    
    $
    1.05Diluted earnings per share:Income available to common shareholders
    
    $
    10,734,690
    
    
    $
    9,833,796
    
    
    $
    9,381,105Weighted-average common shares
outstanding
    
    
    8,795,148
    
    
    
    8,716,572
    
    
    
    8,900,643Net effect
of dilutive stock options - based
on the treasury stock method using
average market price
    
    
    247,338
    
    
    
    277,899
    
    
    
    232,094Weighted-average common shares
outstanding and common stock
equivalents
    
    
    9,042,486
    
    
    
    8,994,471
    
    
    
    9,132,737Diluted earnings per share
    
    $
    1.19
    
    
    $
    1.09
    
    
    $
    1.03
 
 Columbia Bancorp - 22




---



##### Table of Contents



Outstanding common stock options excluded from diluted earnings per share, because their impact on
the calculation would have been antidilutive, totaled 54,000, 20,000 and 160,000 at December 31,
2004, 2003, and 2002, respectively. NOTE 13 STOCK OPTION PLAN 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 by the board of directors and
ratified by the shareholders in April 2002, allows for the granting of both incentive and
nonstatutory stock options. The option price for incentive stock options cannot be less than 100%
of the fair market value of the shares on the date of grant. The stock options expire ten years
from the date of grant. The option price, number of shares granted recipients, and duration for the
plan stock options are determined and approved by the Board of Directors. The following summarizes options available and outstanding under this plan, retroactively adjusted
for stock dividends and splits. Weighted-
    
    
    Weighted-Non-
    
    
    Average
    
    
    AverageTotal
    
    
    Incentive
    
    
    statutory
    
    
    Exercise
    
    
    FairOptions
    
    
    Options
    
    
    Options
    
    
    Price
    
    
    ValueOptions under grant  December 31, 2001
    
    
    698,203
    
    
    
    578,841
    
    
    
    119,362
    
    
    $
    6.43Options granted in 2002:Incentive stock options
    
    
    168,677
    
    
    
    168,677
    
    
    
    
    
    
    $
    13.45
    
    
    $
    4.97Nonstatutory stock options
    
    
    15,400
    
    
    
    
    
    
    
    15,400
    
    
    $
    10.65
    
    
    $
    4.08Options exercised in 2002:Incentive stock options
    
    
    (137,093
    )
    
    
    (137,093
    )
    
    
    
    
    
    $
    5.79Nonstatutory stock options
    
    
    (32,003
    )
    
    
    
    
    
    
    (32,003
    )
    
    $
    6.71Options expired or forfeited in 2002
    
    
    (5,940
    )
    
    
    (5,940
    )
    
    
    
    
    
    $
    6.53Options under grant  December 31, 2002
    
    
    707,244
    
    
    
    604,485
    
    
    
    102,759
    
    
    $
    8.21Options granted in 2003:Incentive stock options
    
    
    30,432
    
    
    
    30,432
    
    
    
    
    
    
    $
    13.64
    
    
    $
    5.05Nonstatutory stock options
    
    
    26,167
    
    
    
    
    
    
    
    26,167
    
    
    $
    16.19
    
    
    $
    6.02Options exercised in 2003:Incentive stock options
    
    
    (98,082
    )
    
    
    (98,082
    )
    
    
    
    
    
    $
    6.37Nonstatutory stock options
    
    
    (20,894
    )
    
    
    
    
    
    
    (20,894
    )
    
    $
    7.56Options expired or forfeited in 2003
    
    
    (5,990
    )
    
    
    (5,990
    )
    
    
    
    
    
    $
    12.91Options under grant  December 31, 2003
    
    
    638,877
    
    
    
    530,845
    
    
    
    108,032
    
    
    $
    9.06Options granted in 2004:Incentive stock options
    
    
    34,000
    
    
    
    34,000
    
    
    
    
    
    
    $
    17.50
    
    
    $
    6.66Options exercised in 2004:Incentive stock options
    
    
    (96,863
    )
    
    
    (96,863
    )
    
    
    
    
    
    $
    7.15Nonstatutory stock options
    
    
    (4,206
    )
    
    
    
    
    
    
    (4,206
    )
    
    $
    5.01Options expired or forfeited in 2004
    
    
    (221
    )
    
    
    (221
    )
    
    
    
    
    
    $
    13.55Options under grant  December 31, 2004
    
    
    571,587
    
    
    
    467,761
    
    
    
    103,826
    
    
    $
    9.89Options reserved  December 31, 2004
    
    
    316,831
 
 23 - Columbia Bancorp




---



##### Table of Contents



The following table summarizes information regarding stock options outstanding at December 31,
2004, under Columbias stock option plan.   Incentive Stock Options
    
    
    Nonstatutory Stock OptionsNumber
    
    
    Average
    
    
    
    
    
    
    Number
    
    
    AverageNumber
    
    
    of Options
    
    
    Remaining
    
    
    
    
    
    
    of Options
    
    
    RemainingExercise
    
    of Options
    
    
    Outstanding
    
    
    Contractual Life
    
    
    Exercise
    
    
    Outstanding
    
    
    Contractual LifePrice
    
    Outstanding
    
    
    and Exercisable
    
    
    (in years)
    
    
    Price
    
    
    and Exercisable
    
    
    (in years)$  3.04
    
    
    5,595
    
    
    
    5,595
    
    
    
    0.5
    
    
    $
    3.04
    
    
    
    12,375
    
    
    
    0.5$  5.08
    
    
    33,809
    
    
    
    33,809
    
    
    
    2.6
    
    
    $
    5.08
    
    
    
    13,202
    
    
    
    2.6$10.45
    
    
    2,200
    
    
    
    2,200
    
    
    
    3.3
    
    
    $
    6.25
    
    
    
    3,080
    
    
    
    5.0$  7.27
    
    
    1,100
    
    
    
    1,100
    
    
    
    4.4
    
    
    $
    6.59
    
    
    
    4,620
    
    
    
    6.1$  7.05
    
    
    2,200
    
    
    
    2,200
    
    
    
    4.4
    
    
    $
    8.96
    
    
    
    37,642
    
    
    
    7.0$  6.25
    
    
    50,423
    
    
    
    50,423
    
    
    
    5.0
    
    
    $
    10.65
    
    
    
    9,240
    
    
    
    9.6$  6.59
    
    
    84,541
    
    
    
    84,541
    
    
    
    6.1
    
    
    $
    13.64
    
    
    
    3,667
    
    
    
    8.0$  7.50
    
    
    500
    
    
    
    500
    
    
    
    6.5
    
    
    $
    16.61
    
    
    
    20,000
    
    
    
    8.9$  8.96
    
    
    97,962
    
    
    
    97,962
    
    
    
    7.0$10.09
    
    
    1,845
    
    
    
    1,845
    
    
    
    7.2$10.36
    
    
    2,200
    
    
    
    2,200
    
    
    
    7.3$13.55
    
    
    122,054
    
    
    
    122,054
    
    
    
    8.0$13.64
    
    
    27,132
    
    
    
    27,132
    
    
    
    8.0$13.77
    
    
    2,200
    
    
    
    2,200
    
    
    
    8.2$17.44
    
    
    30,000
    
    
    
    12,000
    
    
    
    9.0$17.94
    
    
    2,000
    
    
    
    2,000
    
    
    
    9.0$18.00
    
    
    2,000
    
    
    
    2,000
    
    
    
    9.2467,761
    
    
    
    449,761
    
    
    
    
    
    
    
    
    
    
    
    103,826
 
 Under the 2002 amended stock option plan, an aggregate of no more than 888,418 of the
issued and outstanding shares of Columbias common stock is available for award or grant as of
December 31, 2004. Subsequent to year end 2004, Columbia granted 48,575 options to employees as of January 31, 2005
with an exercise of price $18.08. NOTE 14 EMPLOYEE BENEFIT PLANS AND AGREEMENTS 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 plan over
a period of six years. The allocated shares in the ESOP are considered outstanding for purposes of
calculating earnings per share. For the year ending December 31, 2004, Columbia contributed
$120,000 to the ESOP and $100,000 for the years ending December 31, 2003, and 2002. The ESOPs assets as of December 31 were as follows.   2004
    
    
    2003Allocated shares, retroactively adjusted
for stock dividends and splits
    
    
    331,089
    
    
    
    344,217Cash on hand
    
    $
    25,695
    
    
    $
    23,090
 
 Columbia Bancorp - 24




---



##### Table of Contents



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, 2004, 2003, and 2002, Columbia contributed approximately $436,000, $451,000 and
$456,000, 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, 2004, 2003 and 2002, additional compensation of approximately $1.36
million, $1.37 million and $2.23 million, 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 former
chief executive officers salary and customary benefits until the agreement terminated upon his
retirement in May 2001. The retirement agreement also provides annual post-retirement compensation
for a seven-year period after the former chief executive officers retirement. Columbias
obligation under the agreement was partially funded with a $120,000 interest-earning investment and
is being paid in annual installments of $48,000 plus interest earned on the $120,000 of invested
funds. At December 31, 2004, Columbia had a liability recorded of $155,766 as its obligation for
past services pursuant to the retirement agreement. During 2001, Columbia purchased bank-owned life insurance (BOLI) to support life insurance,
salary continuation, and deferred compensation benefits for certain key employees. As of December
31, 2004 and 2003, Columbia recognized a salary continuation liability of $402,686 and $226,405,
respectively, and an elective deferred compensation liability of $135,225 and $87,842,
respectively, pursuant to these benefit plans. Payments under the salary continuation component
commence when the respective key employee reaches the age of 62 and the economic value of the
insurance coverage allocated to the employees estate is then reported as taxable income to that
employee. As of December 31, 2004 and 2003, the cash surrender value of the BOLI was $5.76 million
and $3.54 million, respectively. During 2002, Columbia entered into an employment agreement for a phantom stock grant with its chief
executive officer (CEO). The CEO received 15,764 units at a price of $8.96, retroactively
adjusted for stock dividends and splits, and exercisable per the plan agreement after December 31,
2002. Upon exercise of the grant, the CEO will receive a cash payment equal to the difference
between the unit grant price and the common stock market price for each unit on the date of
exercise. As of December 31, 2004, no units have been exercised. Columbia has recognized a
liability for the phantom stock grant in the amount of $167,355 and $130,626 as of December 31,
2004 and 2003, respectively. NOTE 15 TRANSACTIONS WITH RELATED PARTIES Certain directors, executive officers, and principal shareholders 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 lend 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 shareholders and companies with whom they
are associated was as follows.   2004
    
    
    2003BALANCE, beginning of year
    
    $
    10,352,164
    
    
    $
    11,082,369Loans made
    
    
    6,911,685
    
    
    
    1,112,282Loans repaid
    
    
    (3,888,114
    )
    
    
    (1,842,487
    )BALANCE, end of year
    
    $
    13,375,735
    
    
    $
    10,352,164
 At December 31, 2004, directors, executive officers, principal shareholders and companies
with which they are associated had approximately $3.55 million on deposit at the Bank. 25 - Columbia Bancorp




---



##### Table of Contents



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, 2004. The Banks loan policies do not allow the extension of credit to
any single borrower or group of related borrowers in excess of $1.00 million without approval from
either the Board Loan Committee, President, Chief Credit Officer or Chief Administrative Officer. 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 AmountsDecember 31,2004
    
    
    2003Financial instruments whose contract amounts
contain credit risk:Commitments to extend credit
    
    $
    168,812,079
    
    
    $
    162,232,037Undisbursed credit card lines of credit
    
    
    18,437,055
    
    
    
    17,332,801Commercial and standby letters of credit
    
    
    2,226,916
    
    
    
    2,466,414$
    189,476,050
    
    
    $
    182,031,252
 
 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. Written letters of credit 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
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. An allowance for off-balance-sheet loan commitments, undisbursed lines of credit and letters of
credit has been established in the amount of approximately $443,000 at December 31, 2004. Columbia Bancorp - 26




---



##### Table of Contents



NOTE 18 RISK MANAGEMENT ACTIVITIES During the fourth quarter of 2003, the Bank discontinued its practice of entering into derivative
financial instruments to mitigate the risk that a change in interest rates might result in a
decline in the value of the CRB Mortgage Teams committed loan pipeline and adversely impact
revenues. The CRB Mortgage Team has continued to generate mortgage loans for sale; however, loans
produced are sold on a best efforts basis to investors. The overall consideration received for
best efforts sales generally results in less revenue on a per loan basis. The execution of best
efforts sales results in a loan commitment to an investor 30 to 60 days prior to funding. Under
best efforts, interest rate risk is shifted away from the Bank and onto the investor who assumes
the risk of interest rate changes from the commitment date. Prior to the recent change, the Banks policy required the use of hedging through forward contracts
for the sale of mortgage-backed securities or through purchase/sale option contracts, designated as
fair value hedges, when the pipeline of committed fixed rate conforming loans aggregated certain
dollar thresholds. The hedge transactions were entered into to protect the Banks mortgage loan
pipeline from interest rate risks that might arise from suddenly increasing or falling rates during
the loan origination period through delivery to third-party purchases. To mitigate this risk, the
Bank anticipated potential interest rate changes and factors that influenced pipeline fallout,
which represented the percentage of loans that were not expected to close, in calculating the
amount of derivative instruments to execute. There were no forward sales or option contracts outstanding as of December 31, 2004 and 2003. As of
December 31, 2002, forward sales and option contracts to sell mortgage-backed securities were
$27.00 million with maturities of up to two months. Derivative instruments as of December 31, 2002,
had an unrealized loss of $322,248 recognized in the consolidated statements of income and
comprehensive income. The mortgage-backed securities that were to be delivered under these
contracts were fixed rate and generally corresponded with the composition of the Banks committed
loan pipeline. Changes in the fair value of the mortgage loan commitments and forward sales
contracts have been recognized in Mortgage Team net revenues in the consolidated statements of
income and comprehensive income. In a falling interest rate environment, the Bank expected 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 was 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. For the periods ended December 31, 2003 and 2002, there were aggregated hedge ineffectiveness
losses of $429,115 and $366,767, respectively. Hedge ineffectiveness resulted from the Banks
decision to subsidize loan pricing in order to increase its mortgage servicing asset volume.
Revenues from servicing rights premiums were not considered in the measure of effectiveness. The
ineffectiveness from hedging activities, along with the servicing retained premiums, servicing
release premiums, servicing income and other servicing expenses, are included in Mortgage Team net
revenues in the consolidated statements of income and comprehensive income. As of December 31, 2004 and 2003, the Bank had short-term rate and point commitments amounting to
$3.42 million and $3.80 million, 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. Prior to sale of the loan, the Bank has potential exposure to credit
loss in the event of
nonperformance by the counterparty. The Bank manages this credit risk by selecting only well
established, financially strong counterparties. 27 - Columbia Bancorp




---



##### Table of Contents



NOTE 19 COMMITMENTS AND CONTINGENCIES Operating lease commitments- As of December 31, 2004, Columbia leased certain properties. Future
minimum lease commitments are as follows.   Years ending December 31, 2005
    
    $

    686,0002006
    
    
    714,0002007
    
    
    792,0002008
    
    
    792,0002009
    
    
    792,000Thereafter
    
    
    5,476,000$
    9,252,000
 
 Rental expense for all operating leases was $530,858, $328,721 and $261,972 for the years
ended December 31, 2004, 2003 and 2002, respectively. Legal contingencies- Columbia may become a defendant in certain claims and legal actions arising
in the ordinary course of business. 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 each matter. There can also be no assurance that all matters that may be
brought against Columbia are known to them at any point in time. In the opinion of Management,
after consultation with legal counsel regarding outstanding legal matters that could possibly
result in a financial loss, there are no matters presently known to Columbia that are expected to
have a material adverse effect on the consolidated financial condition of Columbia. Columbia Bancorp - 28




---



##### Table of Contents



NOTE 20 PARENT COMPANY FINANCIAL INFORMATION Condensed financial information for Columbia Bancorp (unconsolidated parent company only) is as
follows. December 31,2004
    
    
    2003ASSETSCash
    
    $
    620,598
    
    
    $
    1,018,312Investment security held-to-maturity
    
    
    80,937
    
    
    
    81,258Corporate equity securities
    
    
    101,250
    
    
    
    78,750Investment in subsidiary Bank
    
    
    68,542,717
    
    
    
    60,341,388Deferred tax asset
    
    
    471,683
    
    
    
    333,855Other assets
    
    
    1,527,721
    
    
    
    1,265,050TOTAL ASSETS
    
    $
    71,344,906
    
    
    $
    63,118,613LIABILITIESJunior Subordinated Debentures
    
    $
    4,124,000
    
    
    $
    4,124,000Interest-rate swap liability
    
    
    44,033
    
    
    
    20,221Dividend payable
    
    
    795,524
    
    
    
    787,552Deferred compensation plan liability
    
    
    206,163
    
    
    
    181,686Employee benefit withholding
    
    
    113,865
    
    
    
    135,530Interest and other payables
    
    
    184,343
    
    
    
    65,160Total liabilities
    
    
    5,467,928
    
    
    
    5,314,149SHAREHOLDERS EQUITYCommon stock
    
    
    32,140,776
    
    
    
    31,520,099Retained earnings
    
    
    33,816,489
    
    
    
    26,252,366Accumulated comprehensive income, net of tax
    
    
    (80,287
    )
    
    
    31,999Total shareholders equity
    
    
    65,876,978
    
    
    
    57,804,464TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY
    
    $
    71,344,906
    
    
    $
    63,118,613
   29 - Columbia Bancorp




---



##### Table of Contents



Years Ended December 31,2004
    
    
    2003
    
    
    2002REVENUESEquity in undistributed earnings of subsidiary
    
    $
    8,319,064
    
    
    $
    7,213,593
    
    
    $
    7,208,039Dividends
    
    
    3,300,000
    
    
    
    2,909,603
    
    
    
    2,500,000Other
    
    
    6,580
    
    
    
    449,502
    
    
    
    314,403EXPENSESAdministrative and other expenses
    
    
    (890,954
    )
    
    
    (738,902
    )
    
    
    (641,337
    )Net income
    
    $
    10,734,690
    
    
    $
    9,833,796
    
    
    $
    9,381,105
 
 
 Years Ended December 31,2004
    
    
    2003
    
    
    2002CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    $
    10,734,690
    
    
    $
    9,833,796
    
    
    $
    9,381,105Adjustments to reconcile net income to net cash from operating
activities:Equity in undistributed earnings of subsidiaries
    
    
    (8,319,064
    )
    
    
    (7,213,593
    )
    
    
    (7,208,039
    )Gain on sale of corporate equity securities
    
    
    
    
    
    
    (457,265
    )
    
    
    (294,133
    )Loss on sale or write-down of land
    
    
    5,429
    
    
    
    23,067
    
    
    
    Changes in other assets and liabilities
    
    
    (221,979
    )
    
    
    (394,822
    )
    
    
    (156,406
    )Net cash from operating activities
    
    
    2,199,076
    
    
    
    1,791,183
    
    
    
    1,722,527CASH FLOWS FROM INVESTING ACTIVITIESInvestment in Columbia Bancorp Trust I
    
    
    
    
    
    
    
    
    
    
    (124,000
    )Purchase of corporate equity securities
    
    
    
    
    
    
    (75,000
    )
    
    
    Proceeds from sale of corporate equity securities
    
    
    
    
    
    
    570,252
    
    
    
    481,146Purchase of held-to-maturity security
    
    
    
    
    
    
    
    
    
    
    (81,579
    )Proceeds from sale of property and equipment
    
    
    102,381
    
    
    
    
    
    
    
    Payments made for purchase of property and equipment
    
    
    (35,540
    )
    
    
    
    
    
    
    Net cash from investing activities
    
    
    66,841
    
    
    
    495,252
    
    
    
    275,567CASH FLOWS FROM FINANCING ACTIVITIESDividends paid and cash paid for fractional shares
    
    
    (3,162,595
    )
    
    
    (2,666,573
    )
    
    
    (2,593,588
    )Repurchase of common stock
    
    
    (226,229
    )
    
    
    (247,995
    )
    
    
    (4,023,170
    )Proceeds from issuance of Junior Subordinated
Deferrable Interest Debentures
    
    
    
    
    
    
    
    
    
    
    4,124,000Proceeds from the exercise of stock options
    
    
    725,193
    
    
    
    782,637
    
    
    
    1,008,572Net cash from financing activities
    
    
    (2,663,631
    )
    
    
    (2,131,931
    )
    
    
    (1,484,186
    )NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    (397,714
    )
    
    
    154,504
    
    
    
    513,908CASH AND CASH EQUIVALENTS, beginning of year
    
    
    1,018,312
    
    
    
    863,808
    
    
    
    349,900CASH AND CASH EQUIVALENTS, end of year
    
    $
    620,598
    
    
    $
    1,018,312
    
    
    $
    863,808SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIESChange in unrealized loss or gain on available-for-sale, net of tax
    
    $
    (104,590
    )
    
    $
    (122,030
    )
    
    $
    (163,538
    )Change in fair value of interest-rate swap
    
    $
    (7,696
    )
    
    $
    (20,221
    )
    
    $
    Cash dividend payable
    
    $
    795,524
    
    
    $
    787,552
    
    
    $
    628,990
 
 Columbia Bancorp - 30




---



##### Table of Contents



NOTE 21 REGULATORY
MATTERS Columbia and the Bank are subject to various regulatory capital requirements administered by
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, 2004, that Columbia and the
Bank meet all capital adequacy requirements to which they are subject. As of the most recent notifications from its regulatory agencies, the Bank was categorized as
well-capitalized under the regulatory framework for prompt corrective action. To be categorized as
adequately capitalized, 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 UnderFor Capital
    
    
    Prompt CorrectiveAs of December 31, 2004
    
    Actual
    
    
    Adequacy Purposes
    
    
    Action Provisions(dollars in thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital to risk-weighted assets:Columbia Bancorp
    
    $
    70,270
    
    
    
    11.1
    %
    
    $
    50,885
    
    
    
    38
    %
    
    
    N/A
    
    
    
    N/AColumbia River Bank
    
    $
    68,935
    
    
    
    10.9
    %
    
    $
    50,723
    
    
    
    38
    %
    
    $
    63,404
    
    
    
    310
    %Tier 1 capital to risk-weighted assets:Columbia Bancorp
    
    $
    62,341
    
    
    
    9.8
    %
    
    $
    25,442
    
    
    
    34
    %
    
    
    N/A
    
    
    
    N/AColumbia River Bank
    
    $
    61,006
    
    
    
    9.6
    %
    
    $
    25,362
    
    
    
    34
    %
    
    $
    38,042
    
    
    
    36
    %Tier 1 capital to average assets:Columbia Bancorp
    
    $
    62,341
    
    
    
    8.7
    %
    
    $
    28,537
    
    
    
    34
    %
    
    
    N/A
    
    
    
    N/AColumbia River Bank
    
    $
    61,006
    
    
    
    8.6
    %
    
    $
    28,507
    
    
    
    34
    %
    
    $
    35,634
    
    
    
    35
    %
 To Be Well-Capitalized UnderFor Capital
    
    
    Prompt CorrectiveAs of December 31, 2003
    
    Actual
    
    
    Adequacy Purposes
    
    
    Action Provisions(dollars in thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTotal capital to risk-weighted assets:Columbia Bancorp
    
    $
    60,431
    
    
    
    11.7
    %
    
    $
    41,285
    
    
    
    38
    %
    
    
    N/A
    
    
    
    N/AColumbia River Bank
    
    $
    58,968
    
    
    
    11.5
    %
    
    $
    41,164
    
    
    
    38
    %
    
    $
    51,455
    
    
    
    310
    %Tier 1 capital to risk-weighted assets:Columbia Bancorp
    
    $
    53,977
    
    
    
    10.5
    %
    
    $
    20,649
    
    
    
    34
    %
    
    
    N/A
    
    
    
    N/AColumbia River Bank
    
    $
    52,534
    
    
    
    10.2
    %
    
    $
    20,581
    
    
    
    34
    %
    
    $
    30,872
    
    
    
    36
    %Tier 1 capital to average assets:Columbia Bancorp
    
    $
    53,997
    
    
    
    9.2
    %
    
    $
    23,501
    
    
    
    34
    %
    
    
    N/A
    
    
    
    N/AColumbia River Bank
    
    $
    52,534
    
    
    
    9.0
    %
    
    $
    23,453
    
    
    
    34
    %
    
    $
    29,316
    
    
    
    35
    %
 
 31 - Columbia Bancorp




---



##### Table of Contents



NOTE 22 FAIR VALUES OF FINANCIAL INSTRUMENTS The following table estimates fair values and the related carrying values of Columbias financial
instruments. 
 2004
    
    
    2003Estimated
    
    
    
    
    
    
    EstimatedCarrying
    
    
    Fair
    
    
    Carrying
    
    
    Fair(dollars in thousands)
    
    Amount
    
    
    Value
    
    
    Amount
    
    
    ValueFinancial assets:Cash and due from banks
    
    $
    25,527
    
    
    $
    25,527
    
    
    $
    33,810
    
    
    $
    33,810Interest-bearing deposits with banks
    
    $
    12,166
    
    
    $
    12,166
    
    
    $
    5,101
    
    
    $
    5,101Federal funds sold
    
    $
    20,286
    
    
    $
    20,286
    
    
    $
    14,956
    
    
    $
    14,956Investment securities available-for-sale
    
    $
    24,573
    
    
    $
    24,573
    
    
    $
    13,876
    
    
    $
    13,876Investment securities held-to-maturity
    
    $
    17,789
    
    
    $
    18,395
    
    
    $
    14,964
    
    
    $
    15,843Equity securities
    
    $
    606
    
    
    $
    606
    
    
    $
    79
    
    
    $
    79Restricted equity securities
    
    $
    2,429
    
    
    $
    2,429
    
    
    $
    2,843
    
    
    $
    2,843Loans held-for-sale
    
    $
    2,517
    
    
    $
    2,517
    
    
    $
    2,792
    
    
    $
    2,792Loans, net of allowance for loan losses
and unearned loan fees
    
    $
    571,608
    
    
    $
    569,270
    
    
    $
    461,558
    
    
    $
    465,772Mortgage servicing asset
    
    $
    2,163
    
    
    $
    2,163
    
    
    $
    3,691
    
    
    $
    3,691Financial liabilities:Demand and savings deposits
    
    $
    419,587
    
    
    $
    419,587
    
    
    $
    373,610
    
    
    $
    373,610Time certificates
    
    $
    187,356
    
    
    $
    189,130
    
    
    $
    122,748
    
    
    $
    126,048Notes payable
    
    $
    34,890
    
    
    $
    34,952
    
    
    $
    21,983
    
    
    $
    22,345Junior Subordinated Deferrable Interest
Debentures
    
    $
    4,124
    
    
    $
    4,124
    
    
    $
    4,000
    
    
    $
    4,000
 
  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. 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 20 branch facilities in Oregon and 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 the CRB Mortgage Team, with
administrative offices in Bend, Oregon, and an additional eight offices in Oregon. The CRB Mortgage
Team 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 CRB Mortgage
Team. As a result of this evaluation, certain activities were reclassified for internal financial
statement Columbia Bancorp - 32




---



##### Table of Contents



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 uses to evaluate the reportable segments and the reconciliation
to Columbias consolidated results are summarized as follows. 
 Community
    
    
    MortgageDecember 31, 2004
    
    Banking
    
    
    Banking
    
    
    Consolidated(in thousands)Net interest income before provision for loan losses
    
    $
    35,205
    
    
    $
    175
    
    
    $
    35,380Noninterest income
    
    $
    5,656
    
    
    $
    2,656
    
    
    $
    8,312Amortization of the mortgage servicing asset
    
    $
    
    
    
    $
    1,621
    
    
    $
    1,621Salaries and benefits
    
    $
    11,878
    
    
    $
    1,525
    
    
    $
    13,403Occupancy expense, excluding depreciation
    
    $
    1,093
    
    
    $
    77
    
    
    $
    1,170Depreciation
    
    $
    1,415
    
    
    $
    69
    
    
    $
    1,484Income (loss) before provision for income taxes
    
    $
    17,852
    
    
    $
    (891
    )
    
    $
    16,961Goodwill
    
    $
    7,389
    
    
    $
    
    
    
    $
    7,389Total assets
    
    $
    708,826
    
    
    $
    6,547
    
    
    $
    715,373
 December 31, 2003(in thousands)Net interest income before provision for loan losses
    
    $
    30,998
    
    
    $
    401
    
    
    $
    31,399Noninterest income
    
    $
    3,808
    
    
    $
    5,116
    
    
    $
    8,924Amortization of the mortgage servicing asset
    
    $
    
    
    
    $
    2,000
    
    
    $
    2,000Impairment of mortgage servicing rights
    
    $
    
    
    
    $
    858
    
    
    $
    858Salaries and benefits
    
    $
    10,812
    
    
    $
    2,244
    
    
    $
    13,056Occupancy expense, excluding depreciation
    
    $
    749
    
    
    $
    157
    
    
    $
    906Depreciation
    
    $
    1,260
    
    
    $
    91
    
    
    $
    1,341Income (loss) before provision for income taxes
    
    $
    15,737
    
    
    $
    (339
    )
    
    $
    15,398Goodwill
    
    $
    7,389
    
    
    $
    
    
    
    $
    7,389Total assets
    
    $
    575,463
    
    
    $
    8,673
    
    
    $
    584,136
 December 31, 2002(in thousands)Net interest income before provision for loan losses
    
    $
    29,417
    
    
    $
    417
    
    
    $
    29,834Noninterest income
    
    $
    2,780
    
    
    $
    5,771
    
    
    $
    8,551Amortization of the mortgage servicing asset
    
    $
    
    
    
    $
    1,029
    
    
    $
    1,029Impairment of mortgage servicing rights
    
    $
    
    
    
    $
    2,781
    
    
    $
    2,781Salaries and benefits
    
    $
    10,310
    
    
    $
    2,750
    
    
    $
    13,060Occupancy expense, excluding depreciation
    
    $
    668
    
    
    $
    151
    
    
    $
    819Depreciation
    
    $
    1,141
    
    
    $
    98
    
    
    $
    1,239Income (loss) before provision for income taxes
    
    $
    15,883
    
    
    $
    (1,278
    )
    
    $
    14,605Goodwill
    
    $
    7,389
    
    
    $
    
    
    
    $
    7,389Total assets
    
    $
    526,202
    
    
    $
    18,124
    
    
    $
    544,326
 
  33 - Columbia Bancorp




---



##### Table of Contents



PART IV 
 ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K  (a)
    Exhibits.(i)
    Report of Independent Registered Public Accounting Firm(ii)
    Consolidated Balance Sheets for the Years Ended December 31, 2004 and 2003(iii)
    Consolidated Statements of Income and Comprehensive Income for the Years Ended December
31, 2004, 2003, and 2002(iv)
    Consolidated Statements of Changes in Shareholders Equity for the Years Ended December
31, 2004, 2003, and 2002(v)
    Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003 and 2002(vi)
    Notes to Consolidated Financial Statements The following documents are being filed with, or incorporated by reference into, Columbia Bancorps
Form 10-K/A for the year ended December 31, 2004 and filed with the Securities and Exchange
Commission. Columbia Bancorp - 34




---



##### Table of Contents



3.1.1
    
    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.)3.1.2
    
    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.)4.1
    
    Indenture dated as of December 19, 2002 between Columbia Bancorp, as Issuer, and Wells
Fargo Bank, N.A., as Trustee, relating to Floating Rate Junior Subordinated Debt
Securities due 2033.*4.2
    
    Form of Floating Rate Junior subordinated Debt Security due 2033.*10.1+
    
    Employment Agreement between Roger L. Christensen and Columbia Bancorp dated April 15,
2004. (Incorporated herein by reference to Exhibit 10.1 to Columbias quarterly report on
Form 10-Q for the period ended June 30, 2004.)10.2+
    
    Employment Agreement between James C. McCall and Columbia River Bank dated April 15, 2004.
(Incorporated herein by reference to Exhibit 10.2 to Columbias quarterly report on Form
10-Q for the period ended June 30, 2004.)10.3+
    
    Employment Agreement between Craig J. Ortega and Columbia River Bank dated April 15, 2004.*10.4+
    
    Employment Agreement between Britt W. Thomas and Columbia River Bank dated April 15, 2004.
(Incorporated herein by reference to Exhibit 10.2 to Columbias quarterly report on Form
10-Q for the period ended September 30, 2004.)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.)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.
(Incorporated herein by reference to Exhibit 10.11 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)
 35 - Columbia Bancorp




---



##### Table of Contents



10.12+
    
    Executive Bonus Deferral Agreement between Columbia River Bank and James C. McCall.
(Incorporated herein by reference to Exhibit 10.12 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.13+
    
    Split Dollar Agreement between Columbia River Bank and James C. McCall. (Incorporated
herein by reference to Exhibit 10.13 to Columbias Annual Report on Form 10-K for the
period ended December 31, 2002.)10.14+
    
    Executive Salary Continuation Agreement between Columbia River Bank and Craig J. Ortega.
(Incorporated herein by reference to Exhibit 10.14 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.15+
    
    Executive Bonus Deferral Agreement between Columbia River Bank and Craig J. Ortega.
(Incorporated herein by reference to Exhibit 10.15 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.16+
    
    Split Dollar Agreement between Columbia River Bank and Craig J. Ortega. (Incorporated
herein by reference to Exhibit 10.16 to Columbias Annual Report on Form 10-K for the
period ended December 31, 2002.)10.17+
    
    Executive Salary Continuation Agreement between Columbia River Bank and Britt W. Thomas.
(Incorporated herein by reference to Exhibit 10.17 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.18+
    
    Executive Bonus Deferral Agreement between Columbia River Bank and Britt W. Thomas.
(Incorporated herein by reference to Exhibit 10.18 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.19+
    
    Split Dollar Agreement between Columbia River Bank and Britt W. Thomas. (Incorporated
herein by reference to Exhibit 10.19 to Columbias Annual Report on Form 10-K for the
period ended December 31, 2002.)10.20+
    
    Executive Salary Continuation Agreement between Columbia River Bank and Greg B. Spear.
(Incorporated herein by reference to Exhibit 10.20 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.21+
    
    Executive Bonus Deferral Agreement between Columbia River Bank and Greg B. Spear.
(Incorporated herein by reference to Exhibit 10.21 to Columbias Annual Report on Form
10-K for the period ended December 31, 2002.)10.22+
    
    Split Dollar Agreement between Columbia River Bank and Greg B. Spear. (Incorporated herein
by reference to Exhibit 10.22 to Columbias Annual Report on Form 10-K for the period
ended December 31, 2002.)10.23+
    
    Employment Agreement between R. Shane Correa and Columbia River Bank dated May 15, 2003.
(Incorporated herein by reference to Exhibit 10.3 to Columbias quarterly report on Form
10-Q for the period ended September 30, 2004.)10.24+
    
    Employment Agreement between Greg B. Spear and Columbia Bancorp dated April 15, 2004.
(Incorporated herein by reference to Exhibit 10.1 to Columbias quarterly report on Form
10-Q for the period ended September 30, 2004.)10.25+
    
    Columbia Bancorp 1999 Stock Incentive Plan (Amended 2002) (Incorporated herein by
reference to Exhibit 4.2 to Columbias report S-8 Securities to be offered to employees in
employee benefit plans filed January 28, 2005.)10.26+
    
    Executive Salary Continuation Agreement between Columbia River Bank and R. Shane Correa.*
 Columbia Bancorp - 36




---



##### Table of Contents



13.1
    
    Annual Report to Shareholders for the Year Ended December 31, 2004.*21.1
    
    List of Subsidiary.*23.1
    
    Consent of Moss Adams, LLP.**31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-4(a).**31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).**31.2
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) and
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.**32.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) and
Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. 1350.**
   +
    
    Management contract, plan or arrangement.*
    
    Incorporated by reference to Columbia Bancorps Form 10-K for the year ended December 31, 2004
filed with the Securities and Exchange Commission on March 15, 2005.**
    
    Included as an exhibit to Columbia Bancorps Form 10-K/A for the year ended December 31, 2004
filed with the Securities and Exchange Commission. 37 - Columbia Bancorp




---



##### Table of Contents



SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized. COLUMBIA BANCORPDATED: May 6, 2005
    
    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 DIRECTORDATED: May 6, 2005
    
    By: Roger L. Christensen, President & C.E.O  Columbia and CRBCHIEF FINANCIAL OFFICERDATED: May 6, 2005
    
    By: Greg B. Spear, Chief Financial Officer and
Chief Accounting Officer  Columbia and CRBDIRECTORS:DATED: May 6, 2005
    
    By: Richard E. Betz, Director
and ChairmanDATED: May 6, 2005
    
    By: Charles F. Beardsley, Director
 Columbia Bancorp - 38




---



##### Table of Contents



DATED: May 6, 2005
    
    By: Richard E. Betz, DirectorDATED: May 6, 2005
    
    By: William A. Booth, DirectorDATED: May 6, 2005
    
    By: Lori R. Boyd, DirectorDATED: May 6, 2005
    
    By: Dennis L. Carver, DirectorDATED: May 6, 2005
    
    By: Terry, L. Cochran, DirectorDATED: May 6, 2005
    
    By: James J. Doran, DirectorDATED: May 6, 2005
    
    By: Jean S. McKinney, DirectorDATED: May 6, 2005
    
    By: Donald T. Mitchell, Director
 39 - Columbia Bancorp