Columbia Bancorp (CBBO) 10-K/A 2004 FY Annual report (amended)

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

For the fiscal year ended:December 31, 2004

or

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                        to                                        

Commission file number:0-27938

COLUMBIA BANCORP

(Exact name of registrant as specified in its charter)

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

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yesþ Noo

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).

Yesþ Noo

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 II
	ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PART IV
	ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
SIGNATURES
EXHIBIT 23.1
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

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 Data
Table 25	First		Second		Third		Fourth
(In thousands except per share data)	Quarter		Quarter		Quarter		Quarter		Total
Income Statement Data
Interest income	$	9,607	$	10,352	$	11,208	$	11,541	$	42,708
Interest expense		1,467		1,554		2,027		2,280		7,328
Net interest income		8,140		8,798		9,181		9,261		35,380
Loan loss provision		700		1,390		550		120		2,760
Net interest income after loan loss provision		7,440		7,408		8,631		9,141		32,620
Non-interest income		1,581		1,917		2,016		2,798		8,312
Non-interest expense		5,871		5,674		6,013		6,413		23,971
Income before provision for income taxes		3,150		3,651		4,634		5,526		16,961
Provision for income taxes		1,133		1,336		1,736		2,021		6,226
Net income	$	2,017	$	2,315	$	2,898	$	3,505	$	10,735
Earnings Per Share
Basic earnings per common share	$	0.23	$	0.26	$	0.33	$	0.40	$	1.22
Diluted earnings per common share	$	0.22	$	0.26	$	0.32	$	0.39	$	1.19

	2003 Quarterly Financial Data
	First		Second		Third		Fourth
	Quarter		Quarter		Quarter		Quarter		Total
Income Statement Data
Interest income	$	9,396	$	9,583	$	9,737	$	9,514	$	38,230
Interest expense		1,770		1,776		1,703		1,582		6,831
Net interest income		7,626		7,807		8,034		7,932		31,399
Loan loss provision		300		1,700		400		175		2,575
Net interest income after loan loss provision		7,326		6,107		7,634		7,757		28,824
Non-interest income		2,000		1,971		2,843		2,110		8,924
Non-interest expense		5,588		5,758		5,651		5,353		22,350
Income before provision for income taxes		3,738		2,320		4,826		4,514		15,398
Provision for income taxes		1,348		849		1,767		1,600		5,564
Net income	$	2,390	$	1,471	$	3,059	$	2,914	$	9,834
Earnings Per Share
Basic earnings per common share(1)	$	0.27	$	0.17	$	0.35	$	0.33	$	1.13
Diluted 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

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.

Portland, Oregon
March 14, 2005

3 - Columbia Bancorp

COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

	December 31,
	2004			2003
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks	$	25,527,270		$	33,809,732
Interest-bearing deposits with banks		12,165,712			5,100,513
Federal funds sold		20,285,817			14,955,948
Total cash and cash equivalents		57,978,799			53,866,193
INVESTMENT SECURITIES
Investment securities available-for-sale		24,573,394			13,796,896
Investment securities held-to-maturity		17,789,481			14,963,728
Equity securities		605,594			78,750
Restricted equity securities		2,429,200			2,843,100
Total investment securities		45,397,669			31,682,474
LOANS
Loans held-for-sale		2,517,182			2,792,384
Loans, net of allowance for loan losses and unearned loan fees		571,607,850			461,557,765
Total loans		574,125,032			464,350,149
OTHER ASSETS
Property and equipment, net of accumulated depreciation		15,222,622			13,766,909
Accrued interest receivable		4,107,806			3,769,527
Goodwill		7,389,094			7,389,094
Mortgage servicing asset, net of accumulated amortization and valuation allowance		2,162,654			3,691,449
Other assets		8,988,842			5,619,839
Total other assets		37,871,018			34,236,818
TOTAL ASSETS	$	715,372,518		$	584,135,634
LIABILITIES AND SHAREHOLDERS’ EQUITY
DEPOSITS
Noninterest-bearing demand deposits	$	172,421,947		$	150,425,062
Interest-bearing demand deposits		211,239,408			187,452,543
Savings accounts		35,926,117			35,732,611
Time certificates		187,356,091			122,747,824
Total deposits		606,943,563			496,358,040
OTHER LIABILITIES
Notes payable		34,889,564			21,983,465
Accrued interest payable and other liabilities		3,538,413			3,989,665
Junior subordinated debentures		4,124,000			—
Guaranteed undivided beneficial interest in junior subordinated deferrable interest debenture (Trust preferred securities)		—			4,000,000
Total other liabilities		42,551,977			29,973,130
Total liabilities		649,495,540			526,331,170
COMMITMENTS AND CONTINGENCIES (Note 19)
SHAREHOLDERS’ EQUITY
Common 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			31,520,099
Retained earnings		33,816,489			26,252,366
Accumulated comprehensive (loss) income, net of taxes		(80,287	)		31,999
Total shareholders’ equity		65,876,978			57,804,464
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	715,372,518		$	584,135,634

See accompanying notes.

45- Columbia Bancorp

Columbia Bancorp - 4

COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

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

See accompanying notes.

5 - Columbia Bancorp

COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

										Accumulated
										Comprehensive			Total
	Common Stock						Retained			Income			Shareholders’
	Shares			Amount			Earnings			(Loss)			Equity
BALANCE, December 31, 2001		8,037,078		$	20,733,594		$	25,373,550		$	337,788		$	46,444,932
Stock options exercised		153,724			1,008,572			—			—			1,008,572
Income tax benefit from stock options exercised		—			122,704			—			—			122,704
Repurchase 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	)		9,217,567
BALANCE, December 31, 2002		7,862,380			17,841,700			32,174,431			174,250			50,190,381
Stock options exercised		113,015			782,637			—			—			782,637
Income tax benefit from stock options exercised		—			212,242			—			—			212,242
10% 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	)		9,691,545
BALANCE, December 31, 2003		8,750,582			31,520,099			26,252,366			31,999			57,804,464
Stock options exercised		101,069			725,193			—			—			725,193
Income tax benefit from stock options exercised		—			121,713			—			—			121,713
Repurchase 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	)		10,622,404
BALANCE, December 31, 2004		8,839,151		$	32,140,776		$	33,816,489		$	(80,287	)	$	65,876,978

See accompanying notes.

Columbia Bancorp - 6

COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
	2004			2003			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,734,690		$	9,833,796		$	9,381,105
Adjustments to reconcile net income to net cash from operating activities:
Amortization of premiums and discounts on investment securities		52,682			16,113			65,407
Net 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			55,395
Depreciation and amortization:
Property, equipment, and other		1,551,223			1,351,158			1,238,839
Mortgage servicing asset		1,621,091			2,000,050			1,028,810
Impairment of mortgage servicing asset		—			858,000			2,781,111
Deferred income tax benefit		(194,493	)		(828,758	)		(692,556	)
Provision for loan losses		2,760,000			2,575,000			1,800,000
Increase (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			239,365,825
Production 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			2,865,950
Net cash from operating activities		14,476,117			19,240,492			25,296,607
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of available-for-sale securities		4,500,000			5,670,252			300,000
Proceeds from the maturity of available-for-sale securities		8,100,000			19,030,000			7,300,000
Purchases 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			4,077,273
Purchases 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			—			18,813
Net 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			—			25,269
Proceeds from the sale of other real estate owned		1,531,330			63,174			876,690
Payments 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 ACTIVITIES
Net change in demand deposit and savings accounts		45,977,256			26,498,587			66,596,197
Net 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		—			—			4,000,000
Dividends 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			1,008,572
Repurchase of common stock		(226,229	)		(247,995	)		(4,023,170	)
Net cash from financing activities		120,827,541			30,450,624			50,821,830
NET INCREASE IN CASH AND CASH EQUIVALENTS		4,112,606			13,164,658			18,087,797
CASH AND CASH EQUIVALENTS, beginning of year		53,866,193			40,701,535			22,613,738
CASH AND CASH EQUIVALENTS, end of year	$	57,978,799		$	53,866,193		$	40,701,535
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash	$	8,277,852		$	6,728,204		$	7,784,590
Taxes paid in cash	$	6,744,000		$	6,027,000		$	5,919,000
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Change 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		$	628,990
Transfers of loans to other real estate owned	$	1,536,270		$	104,700		$	553,100

See accompanying notes.

7 - Columbia Bancorp

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

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

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

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			2002
Net income, as reported	$	10,735		$	9,834		$	9,381
Deduct: 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		$	8,570
Pro forma net income
Earnings per share(1):
Basic - as reported	$	1.22		$	1.13		$	1.05
Basic - pro forma		1.21			1.11			0.96
Diluted - as reported		1.19			1.09			1.03
Diluted - 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			2002
Dividend yield		1.80	%		2.14	%		2.14	%
Expected life (years)	6-8 years			6 years			6 years
Expected 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

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

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

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			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2004:
Available-for-sale securities:
Obligations of U.S. government agencies	$	24,045,449	$	—	$	(146,327	)	$	23,899,122
Municipal securities		639,617		34,655		—			674,272
	$	24,685,066	$	34,655	$	(146,327	)	$	24,573,394
Held-to-maturity securities:
Mortgage-backed securities	$	5,174,079	$	39,089	$	(28,664	)	$	5,184,504
Municipal securities		12,534,465		596,234		(936	)		13,129,763
Obligations of U.S. government agencies		80,937		—		—			80,937
	$	17,789,481	$	635,323	$	(29,600	)	$	18,395,204
Equity securities	$	576,524	$	29,070	$	—		$	605,594

			Gross		Gross			Estimated
	Amortized		Unrealized		Unrealized			Fair
	Cost		Gains		Losses			Value
December 31, 2003:
Available-for-sale securities:
Obligations of U.S. government agencies	$	12,980,989	$	24,165	$	(1,250	)	$	13,003,904
Municipal securities		739,455		53,537		—			792,992
	$	13,720,444	$	77,702	$	(1,250	)	$	13,796,896
Held-to-maturity securities:
Mortgage-backed securities	$	1,866,412	$	62,116	$	—		$	1,928,528
Municipal securities		13,016,058		818,153		(539	)		13,833,672
Obligations of U.S. government agencies		81,258		—		—			81,258
	$	14,963,728	$	880,269	$	(539	)	$	15,843,458
Equity securities	$	75,000	$	3,750	$	—		$	78,750

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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					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses
Obligations 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-Maturity
			Estimated				Estimated
	Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value
Due in one year or less	$	8,989,354	$	8,974,566	$	452,513	$	468,441
Due after one year through five years		15,695,712		15,598,828		7,066,793		7,132,865
Due after five years through ten years		—		—		9,339,561		9,806,353
Due after ten years		—		—		930,614		987,545
		24,685,066		24,573,394		17,789,481		18,395,204
Equity 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.

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NOTE 3 RESTRICTED EQUITY SECURITIES

The composition of restricted equity securities is as follows.

	2004		2003
Federal Home Loan Bank of Seattle stock	$	2,419,800	$	2,833,700
Federal 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			2003
Commercial	$	93,618,385		$	86,163,437
Agriculture		79,223,710			64,058,572
Real estate		247,045,236			206,754,240
Real estate – construction		139,414,655			87,426,996
Consumer		14,385,879			18,241,447
Credit card and other loans		7,660,273			6,975,262
		581,348,138			469,619,954
Less 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			2002
BALANCE, beginning of year	$	6,612,308		$	6,416,691		$	5,311,715
Provision for loan losses		2,760,000			2,575,000			1,800,000
Loans charged off		(1,291,479	)		(2,533,521	)		(886,156	)
Loan recoveries		103,659			154,138			191,132
BALANCE, end of year	$	8,184,488		$	6,612,308		$	6,416,691

Columbia Bancorp - 16

NOTE 5 PROPERTY AND EQUIPMENT

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

	2004			2003
Land	$	4,365,164		$	3,468,310
Construction in progress		346,307			355,759
Buildings and improvements		10,740,303			10,171,670
Furniture and equipment		7,856,658			6,730,885
Total property and equipment		23,308,432			20,726,624
Less 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%			Rate
Unpaid principal balance	$	180,154,069		$	99,978,421		$	29,272,765		$	24,336,707
Number of loans		1,476			959			333			164
Weighted-average term to maturity (months)		251			279			298			334
Estimated loan life (months)		78			54			35			23
Servicing cost of each loan per month, net of ancillary income	$	25		$	25		$	25		$	40
Discount rate (average)		10.02	%		10.08	%		10.27	%		11.49	%

17 - Columbia Bancorp

Changes in the balance of the MSA were as follows.

	2004			2003			2002
MSA balance, beginning of year	$	3,691,449		$	4,614,391		$	6,196,801
Additions for capitalized servicing right premiums		92,296			1,935,108			2,227,511
Amortization 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			2002
Mortgage loan origination and processing fee income	$	927,545		$	2,337,879		$	2,513,005
Loan servicing fees		995,357			1,193,393			1,163,815
Net mortgage servicing expense		(1,528,796	)		(924,092	)		(1,582,410	)
Gain (loss) on loan sales		195,516			(288,909	)		1,353,772
Servicing release premium		531,924			253,607			461,982
Hedge expense		—			(140,206	)		(1,720,539	)
Other		—			—			3,689
Mortgage 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	$	109,512,384
	2006		30,277,458
	2007		19,449,536
	2008		6,346,252
	2009		17,849,031
	Thereafter		3,921,430
		$	187,356,091

Columbia Bancorp - 18

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, 2003
		Weighted-				Weighted-
	Maturity	Average			Maturity	Average
Amount	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

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			2002
Current tax expense:
Federal	$	6,467,478		$	5,077,462		$	4,989,761
State		1,080,338			1,015,005			926,292
		7,547,816			6,092,467			5,916,053
Deferred 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

The components of the deferred income tax benefit consist of the following.

	2004			2003			2002
Mortgage 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	)		217,179
Deferred compensation		(128,991	)		(53,472	)		(22,933	)
Difference between book and tax recognition of Federal Home Loan Bank stock dividends		26,615			54,957			60,031
Cash surrender value greater than investment in life insurance policies		(156,770	)		55,186			101,584
Other 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			2003
Deferred tax assets:
Allowance for loan losses	$	3,020,179		$	2,355,307
Purchased state tax credits		315,121			300,600
Deferred compensation		327,192			198,201
Unrealized losses on investment securities		31,000			—
Other		—			49,638
		3,693,492			2,903,746
Deferred 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

A reconciliation between the federal tax rate and the effective tax rate is as follows.

	2004			2003			2002
Federal income taxes at statutory rate	$	5,766,520		$	5,234,876		$	4,965,565
State income tax expense, net of federal income tax benefit		713,023			534,522			549,190
Effect 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		$	5,223,497
		37	%		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		2002
Basic earnings per share:
Income available to common shareholders	$	10,734,690	$	9,833,796	$	9,381,105
Weighted-average common shares outstanding		8,795,148		8,716,572		8,900,643
Basic earnings per share	$	1.22	$	1.13	$	1.05
Diluted earnings per share:
Income available to common shareholders	$	10,734,690	$	9,833,796	$	9,381,105
Weighted-average common shares outstanding		8,795,148		8,716,572		8,900,643
Net effect of dilutive stock options - based on the treasury stock method using average market price	��	247,338		277,899		232,094
Weighted-average common shares outstanding and common stock equivalents		9,042,486		8,994,471		9,132,737
Diluted earnings per share	$	1.19	$	1.09	$	1.03

Columbia Bancorp - 22

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		Average
	Total			Incentive			statutory			Exercise		Fair
	Options			Options			Options			Price		Value
Options under grant — December 31, 2001		698,203			578,841			119,362		$	6.43
Options granted in 2002:
Incentive stock options		168,677			168,677			—		$	13.45	$	4.97
Nonstatutory stock options		15,400			—			15,400		$	10.65	$	4.08
Options exercised in 2002:
Incentive stock options		(137,093	)		(137,093	)		—		$	5.79
Nonstatutory stock options		(32,003	)		—			(32,003	)	$	6.71
Options expired or forfeited in 2002		(5,940	)		(5,940	)		—		$	6.53
Options under grant — December 31, 2002		707,244			604,485			102,759		$	8.21
Options granted in 2003:
Incentive stock options		30,432			30,432			—		$	13.64	$	5.05
Nonstatutory stock options		26,167			—			26,167		$	16.19	$	6.02
Options exercised in 2003:
Incentive stock options		(98,082	)		(98,082	)		—		$	6.37
Nonstatutory stock options		(20,894	)		—			(20,894	)	$	7.56
Options expired or forfeited in 2003		(5,990	)		(5,990	)		—		$	12.91
Options under grant — December 31, 2003		638,877			530,845			108,032		$	9.06
Options granted in 2004:
Incentive stock options		34,000			34,000			—		$	17.50	$	6.66
Options exercised in 2004:
Incentive stock options		(96,863	)		(96,863	)		—		$	7.15
Nonstatutory stock options		(4,206	)		—			(4,206	)	$	5.01
Options expired or forfeited in 2004		(221	)		(221	)		—		$	13.55
Options under grant — December 31, 2004		571,587			467,761			103,826		$	9.89
Options reserved — December 31, 2004		316,831

23 - Columbia Bancorp

The following table summarizes information regarding stock options outstanding at December 31, 2004, under Columbia’s stock option plan.

Incentive Stock Options							Nonstatutory Stock Options
			Number		Average				Number		Average
	Number		of Options		Remaining				of Options		Remaining
Exercise	of Options		Outstanding		Contractual Life		Exercise		Outstanding		Contractual Life
Price	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		9.2
		467,761		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		2003
Allocated shares, retroactively adjusted for stock dividends and splits		331,089		344,217
Cash on hand	$	25,695	$	23,090

Columbia Bancorp - 24

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			2003
BALANCE, beginning of year	$	10,352,164		$	11,082,369
Loans made		6,911,685			1,112,282
Loans 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

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 Amounts
	December 31,
	2004		2003
Financial instruments whose contract amounts contain credit risk:
Commitments to extend credit	$	168,812,079	$	162,232,037
Undisbursed credit card lines of credit		18,437,055		17,332,801
Commercial 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

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

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	$	686,000
2006		714,000
2007		792,000
2008		792,000
2009		792,000
Thereafter		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

NOTE 20 PARENT COMPANY FINANCIAL INFORMATION

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

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

29 - Columbia Bancorp

	Years Ended December 31,
	2004			2003			2002
REVENUES
Equity in undistributed earnings of subsidiary	$	8,319,064		$	7,213,593		$	7,208,039
Dividends		3,300,000			2,909,603			2,500,000
Other		6,580			449,502			314,403
EXPENSES
Administrative 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			2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	10,734,690		$	9,833,796		$	9,381,105
Adjustments 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			1,722,527
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in Columbia Bancorp Trust I		—			—			(124,000	)
Purchase of corporate equity securities		—			(75,000	)		—
Proceeds from sale of corporate equity securities		—			570,252			481,146
Purchase 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			275,567
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends 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		—			—			4,124,000
Proceeds from the exercise of stock options		725,193			782,637			1,008,572
Net 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			513,908
CASH AND CASH EQUIVALENTS, beginning of year		1,018,312			863,808			349,900
CASH AND CASH EQUIVALENTS, end of year	$	620,598		$	1,018,312		$	863,808
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Change 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

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 Under
						For Capital					Prompt Corrective
As of December 31, 2004	Actual					Adequacy Purposes					Action Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Columbia Bancorp	$	70,270		11.1	%	$	50,885		³8	%		N/A		N/A
Columbia 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/A
Columbia 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/A
Columbia River Bank	$	61,006		8.6	%	$	28,507		³4	%	$	35,634		³5	%

											To Be Well-
											Capitalized Under
						For Capital					Prompt Corrective
As of December 31, 2003	Actual					Adequacy Purposes					Action Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
Total capital to risk-weighted assets:
Columbia Bancorp	$	60,431		11.7	%	$	41,285		³8	%		N/A		N/A
Columbia 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/A
Columbia 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/A
Columbia River Bank	$	52,534		9.0	%	$	23,453		³4	%	$	29,316		³5	%

31 - Columbia Bancorp

NOTE 22 FAIR VALUES OF FINANCIAL INSTRUMENTS

The following table estimates fair values and the related carrying values of Columbia’s financial instruments.

	2004				2003
			Estimated				Estimated
	Carrying		Fair		Carrying		Fair
(dollars in thousands)	Amount		Value		Amount		Value
Financial assets:
Cash and due from banks	$	25,527	$	25,527	$	33,810	$	33,810
Interest-bearing deposits with banks	$	12,166	$	12,166	$	5,101	$	5,101
Federal funds sold	$	20,286	$	20,286	$	14,956	$	14,956
Investment securities available-for-sale	$	24,573	$	24,573	$	13,876	$	13,876
Investment securities held-to-maturity	$	17,789	$	18,395	$	14,964	$	15,843
Equity securities	$	606	$	606	$	79	$	79
Restricted equity securities	$	2,429	$	2,429	$	2,843	$	2,843
Loans held-for-sale	$	2,517	$	2,517	$	2,792	$	2,792
Loans, net of allowance for loan losses and unearned loan fees	$	571,608	$	569,270	$	461,558	$	465,772
Mortgage servicing asset	$	2,163	$	2,163	$	3,691	$	3,691
Financial liabilities:
Demand and savings deposits	$	419,587	$	419,587	$	373,610	$	373,610
Time certificates	$	187,356	$	189,130	$	122,748	$	126,048
Notes payable	$	34,890	$	34,952	$	21,983	$	22,345
Junior Subordinated Deferrable Interest Debentures	$	4,124	$	4,124	$	4,000	$	4,000

While estimates of fair value are based on Management’s judgment of the most appropriate factors, there is no assurance that were Columbia to dispose of such items at December 31, 2004 and 2003, the estimated fair values would necessarily be achieved at that date, since market values may differ depending on various circumstances. The estimated fair values at December 31, 2004 and 2003 should not necessarily be relied upon at subsequent dates.

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

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

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		Mortgage
December 31, 2004	Banking		Banking			Consolidated
(in thousands)
Net interest income before provision for loan losses	$	35,205	$	175		$	35,380
Noninterest income	$	5,656	$	2,656		$	8,312
Amortization of the mortgage servicing asset	$	—	$	1,621		$	1,621
Salaries and benefits	$	11,878	$	1,525		$	13,403
Occupancy expense, excluding depreciation	$	1,093	$	77		$	1,170
Depreciation	$	1,415	$	69		$	1,484
Income (loss) before provision for income taxes	$	17,852	$	(891	)	$	16,961
Goodwill	$	7,389	$	—		$	7,389
Total assets	$	708,826	$	6,547		$	715,373

December 31, 2003
(in thousands)
Net interest income before provision for loan losses	$	30,998	$	401		$	31,399
Noninterest income	$	3,808	$	5,116		$	8,924
Amortization of the mortgage servicing asset	$	—	$	2,000		$	2,000
Impairment of mortgage servicing rights	$	—	$	858		$	858
Salaries and benefits	$	10,812	$	2,244		$	13,056
Occupancy expense, excluding depreciation	$	749	$	157		$	906
Depreciation	$	1,260	$	91		$	1,341
Income (loss) before provision for income taxes	$	15,737	$	(339	)	$	15,398
Goodwill	$	7,389	$	—		$	7,389
Total assets	$	575,463	$	8,673		$	584,136

December 31, 2002
(in thousands)
Net interest income before provision for loan losses	$	29,417	$	417		$	29,834
Noninterest income	$	2,780	$	5,771		$	8,551
Amortization of the mortgage servicing asset	$	—	$	1,029		$	1,029
Impairment of mortgage servicing rights	$	—	$	2,781		$	2,781
Salaries and benefits	$	10,310	$	2,750		$	13,060
Occupancy expense, excluding depreciation	$	668	$	151		$	819
Depreciation	$	1,141	$	98		$	1,239
Income (loss) before provision for income taxes	$	15,883	$	(1,278	)	$	14,605
Goodwill	$	7,389	$	—		$	7,389
Total assets	$	526,202	$	18,124		$	544,326

The mortgage banking segment receives an intercompany cost-of-funds allocation, based on the average outstanding balance of the mortgage banking loans. This allocation is eliminated in consolidation; however, it appears as interest income for the community banking segment and interest expense in the mortgage banking segment in the tables above. For the years ended December 31, 2004, 2003, and 2002, the allocation was approximately $171,000, $332,000 and $950,000, respectively.

33 - Columbia Bancorp

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

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

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

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

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 BANCORP
DATED: 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 DIRECTOR
DATED: May 6, 2005	By: Roger L. Christensen, President & C.E.O – Columbia and CRB
CHIEF FINANCIAL OFFICER
DATED: May 6, 2005	By: Greg B. Spear, Chief Financial Officer and Chief Accounting Officer – Columbia and CRB
DIRECTORS:
DATED: May 6, 2005	By: Richard E. Betz, Director and Chairman
DATED: May 6, 2005	By: Charles F. Beardsley, Director

Columbia Bancorp - 38

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

39 - Columbia Bancorp