Columbia Bancorp (CBBO) 10-Q 2007 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2007

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to                    to                    

Commission file number: 0-27938

COLUMBIA BANCORP

(Exact name of registrant as specified in its charter)

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

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

(541) 298-6649
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filero      Accelerated filerþ      Non-accelerated filero

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

As of August 2, 2007, there were 10,032,456 shares of common stock of Columbia Bancorp, no par value, outstanding.

COLUMBIA BANCORP

FORM 10-Q

June 30, 2007

Table of Contents

PART I. – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS	3
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME	4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY	5
CONSOLIDATED STATEMENTS OF CASH FLOWS	6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS	10
CRITICAL ACCOUNTING POLICIES	10
OVERVIEW	11
RESULTS OF OPERATIONS	13
MATERIAL CHANGES IN FINANCIAL CONDITION	17
LIQUIDITY AND CAPITAL RESOURCES	27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
ITEM 4. CONTROLS AND PROCEDURES	29
PART II. — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS	29
ITEM 1A. RISK FACTORS	29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	29
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	29
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	30
ITEM 5. OTHER INFORMATION	30
ITEM 6. EXHIBITS	30
SIGNATURES	31
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

2

PART I. – FINANCIAL INFORMATION

These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Company’s report on Form 10-K for the year ended December 31, 2006, and the notes and other information included in this report.

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF COLUMBIA BANCORP AND SUBSIDIARY

COLUMBIA BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			December 31,
	2007			2006
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks	$	37,341,156		$	38,141,448
Interest bearing deposits with other banks		55,039,103			51,443,094
Federal funds sold		37,252,581			58,930,213
Total cash and cash equivalents		129,632,840			148,514,755
INVESTMENT SECURITIES
Debt securities available-for-sale, at fair value		19,266,622			20,187,330
Equity securities available-for-sale, at fair value		1,122,848			637,829
Debt securities held-to-maturity, at amortized cost, estimated fair value $12,636,348 and $14,536,822 at June 30, 2007 and December 31, 2006, respectively		12,638,058			14,439,764
Restricted equity securities		2,439,100			2,439,100
Total investment securities		35,466,628			37,704,023
LOANS
Loans held-for-sale		6,077,536			7,537,832
Loans, net of allowance for loan losses and unearned loan fees		846,834,698			794,333,285
Total loans		852,912,234			801,871,117
OTHER ASSETS
Property and equipment, net of accumulated depreciation		20,299,492			18,088,776
Accrued interest receivable		7,758,683			6,517,903
Goodwill		7,389,094			7,389,094
Other assets		14,090,060			13,102,162
Total other assets		49,537,329			45,097,935
TOTAL ASSETS	$	1,067,549,031		$	1,033,187,830
LIABILITIES AND SHAREHOLDERS’ EQUITY
DEPOSITS
Non-interest bearing demand deposits	$	222,950,059		$	235,036,954
Interest bearing demand deposits		301,728,564			313,432,917
Savings accounts		36,506,396			35,455,947
Time certificates		350,010,072			275,139,670
Total deposits		911,195,091			859,065,488
OTHER LIABILITIES
Notes payable		49,236,941			70,014,313
Accrued interest payable and other liabilities		7,032,217			8,966,368
Junior subordinated debentures		4,124,000			4,124,000
Total other liabilities		60,393,158			83,104,681
TOTAL LIABILITIES		971,588,249			942,170,169
SHAREHOLDERS’ EQUITY
Common stock, no par value; 20,000,000 shares authorized, 10,028,935 issued and outstanding (9,979,537 at December 31, 2006)		55,278,260			54,767,348
Retained earnings		40,751,399			36,295,441
Accumulated other comprehensive loss, net of taxes		(68,877	)		(45,128	)
TOTAL SHAREHOLDERS’ EQUITY		95,960,782			91,017,661
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,067,549,031		$	1,033,187,830

See accompanying notes.

3

COLUMBIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
INTEREST INCOME
Interest and fees on loans	$	19,001,423		$	15,798,201		$	37,009,147		$	30,531,806
Interest on investments:
Taxable investment securities		284,138			223,542			561,909			438,696
Nontaxable investment securities		123,750			135,493			256,440			277,817
Other interest income		1,085,423			476,397			1,590,664			943,453
Total interest income		20,494,734			16,633,633			39,418,160			32,191,772
INTEREST EXPENSE
Interest on interest bearing deposit and savings accounts		2,351,350			1,586,183			4,250,700			3,142,905
Interest on time deposit accounts		4,525,631			1,816,279			8,144,208			3,519,024
Other borrowed funds		223,595			457,886			716,120			798,539
Total interest expense		7,100,576			3,860,348			13,111,028			7,460,468
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES		13,394,158			12,773,285			26,307,132			24,731,304
PROVISION FOR LOAN LOSSES		2,325,000			1,270,000			3,350,000			1,820,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		11,069,158			11,503,285			22,957,132			22,911,304
NON-INTEREST INCOME
Service charges and fees		1,109,892			1,191,490			2,111,553			2,321,920
Mortgage banking revenue		1,005,226			695,721			2,018,025			1,333,544
Financial services revenue		303,624			242,724			523,591			441,697
Credit card discounts and fees		135,417			120,481			250,404			226,806
Other non-interest income		223,774			139,556			519,921			384,765
Total non-interest income		2,777,933			2,389,972			5,423,494			4,708,732
NON-INTEREST EXPENSE
Salaries and employee benefits		5,258,899			4,814,480			10,300,587			9,391,516
Occupancy expense		1,144,916			917,748			2,267,728			1,784,247
Other non-interest expenses		2,621,092			2,394,678			5,469,709			4,727,071
Total non-interest expense		9,024,907			8,126,906			18,038,024			15,902,834
INCOME BEFORE PROVISION FOR INCOME TAXES		4,822,184			5,766,351			10,342,602			11,717,202
PROVISION FOR INCOME TAXES		1,816,249			2,159,499			3,883,646			4,388,093
NET INCOME		3,005,935			3,606,852			6,458,956			7,329,109
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Unrealized holding gains (losses) arising during the period		(32,599	)		(27,686	)		1,686			(52,107	)
Increase (decrease) in fair value of interest rate swap		(13,429	)		2,740			(25,435	)		12,949
Total other comprehensive income (loss), net of taxes		(46,028	)		(24,946	)		(23,749	)		(39,158	)
COMPREHENSIVE INCOME	$	2,959,907		$	3,581,906		$	6,435,207		$	7,289,951
Earnings per share of common stock
Basic	$	0.30		$	0.36		$	0.65		$	0.74
Diluted	$	0.30		$	0.36		$	0.63		$	0.72
Weighted average common shares outstanding
Basic		9,975,997			9,887,975			9,970,090			9,870,587
Diluted		10,171,327			10,156,203			10,186,860			10,132,048

See accompanying notes.

4

COLUMBIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

										Accumulated
										Other			Total
				Common			Retained			Comprehensive			Shareholders’
	Shares			Stock			Earnings			Loss			Equity
BALANCE, December 31, 2005		8,965,408		$	33,425,084		$	44,189,700		$	(122,294	)	$	77,492,490
Stock-based compensation expense		—			294,216			—			—			294,216
Stock options exercised and stock awards granted		119,119			807,878			—			—			807,878
Income tax benefit from stock options exercised		—			484,336			—			—			484,336
Repurchase of common stock		(1,136	)		(31,070	)		—			—			(31,070	)
10% stock dividend and cash paid for fractional shares		896,146			19,786,904			(19,795,632	)		—			(8,728	)
Cash dividends, $0.39 per common share		—			—			(3,873,747	)		—			(3,873,747	)
Net income and comprehensive income		—			—			15,775,120			77,166			15,852,286
BALANCE, December 31, 2006		9,979,537			54,767,348			36,295,441			(45,128	)		91,017,661
Stock-based compensation expense		—			249,009			—			—			249,009
Stock options exercised and stock awards granted		49,398			189,610			—			—			189,610
Income tax benefit from stock options exercised		—			72,293			—			—			72,293
Cash dividends, $0.20 per common share		—			—			(2,002,998	)		—			(2,002,998	)
Net income and comprehensive income		—			—			6,458,956			(23,749	)		6,435,207
BALANCE, June 30, 2007		10,028,935		$	55,278,260		$	40,751,399		$	(68,877	)	$	95,960,782

See accompanying notes.

5

COLUMBIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended
	June 30,
	2007			2006
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	6,458,956		$	7,329,109
Adjustments to reconcile net income to net cash from operating activities:
Net accretion of discounts on investment securities		(28,342	)		(18,669	)
Loss on sale of mortgage loans held-for-sale		219,836			116,903
Depreciation and amortization of property and equipment		1,226,842			894,374
(Gain) loss on sale or write-down of property and equipment		(594	)		86,427
Loss on sale of bank owned real estate		2,723			—
Stock-based compensation expense		249,009			53,208
Tax benefits from stock options exercised		(72,293	)		(118,368	)
Deferred income tax benefit		(174,375	)		(177,609	)
Provision for loan losses		3,350,000			1,820,000
Provision for losses from off-balance sheet financial instruments		75,000			—
Increase (decrease) in cash due to changes in assets/liabilities:
Accrued interest receivable		(1,240,780	)		(648,679	)
Proceeds from the sale of mortgage loans held-for-sale		73,312,860			37,610,962
Production of mortgage loans held-for-sale		(72,072,400	)		(38,007,556	)
Other assets		(919,695	)		1,660,918
Accrued interest payable and other liabilities		(1,905,562	)		1,082,679
NET CASH FROM OPERATING ACTIVITIES		8,481,185			11,683,699
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of available-for-sale securities		5,000,000			2,185,000
Proceeds from maturity of held-to-maturity securities		498,744			1,655,569
Proceeds from called held-to-maturity securities		1,300,031			—
Purchases of available-for-sale securities		(4,531,036	)		(3,953,550	)
Net change in loans made to customers		(55,883,363	)		(78,286,133	)
Investment in low-income housing tax credits		(101,679	)		(69,000	)
Investment in state energy tax credits		(24,928	)		(101,472	)
Proceeds from the sale of property and equipment		4,980			—
Proceeds from the sale of other real estate owned		200,127			—
Purchases of property and equipment		(3,441,944	)		(3,131,055	)
NET CASH FROM INVESTING ACTIVITIES		(56,979,068	)		(81,700,641	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit and savings accounts		(22,740,799	)		19,995,618
Net change in time deposits		74,870,402			49,504,650
Net borrowings (repayments) of short-term notes payable		(10,048,462	)		34,000,000
Repayments of long-term borrowings		(10,728,910	)		(2,226,203	)
Cash paid for dividends and fractional shares		(1,998,166	)		(1,786,232	)
Proceeds from stock options exercised		189,610			372,932
Tax benefits from stock options exercised		72,293			118,368
NET CASH FROM FINANCING ACTIVITIES		29,615,968			99,979,133
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(18,881,915	)		29,962,191
CASH AND CASH EQUIVALENTS, beginning of period		148,514,755			87,088,475
CASH AND CASH EQUIVALENTS, end of period	$	129,632,840		$	117,050,666
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash	$	12,576,911		$	7,407,026
Taxes paid in cash		4,600,000			4,185,000
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Change in unrealized loss on available-for-sale securities, net of taxes	$	1,686		$	(52,107	)
Change in fair value of interest rate swap, net of taxes		(25,435	)		12,949
Cash dividend declared and payable after quarter-end		1,002,786			102,499
Transfer of loans to repossessed other assets		31,950			—

See accompanying notes.

6

COLUMBIA BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The interim consolidated financial statements include the accounts of Columbia Bancorp (“Columbia” or the “Company”), an Oregon corporation and a registered financial holding company, and its wholly-owned subsidiary Columbia River Bank (“CRB” or the “Bank”), after elimination of intercompany transactions and balances. CRB is an Oregon state-chartered bank, headquartered in The Dalles, Oregon. Substantially all activity of Columbia is conducted through its subsidiary bank, CRB.

The interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The financial information included in this interim report has been prepared by Management. Columbia’s annual report contains audited financial statements. All adjustments, including normal recurring accruals necessary for the fair presentation of results of operations for the interim periods included herein, have been made. Certain amounts for 2006 have been reclassified to conform to the 2007 presentation. The results of operations for the three months and six months ended June 30, 2007, are not necessarily indicative of results to be anticipated for the year ending December 31, 2007.

2. Management’s Estimates and Assumptions

Various elements of Columbia’s accounting policies are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, Management has identified certain policies that are critical to an understanding of the consolidated financial statements due to the judgments, estimates and assumptions inherent in those policies. These policies and judgments, estimates and assumptions are described in greater detail in the notes to the consolidated financial statements included in Columbia’s annual report on Form 10-K, filed March 16, 2007.

Management believes the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of the consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the results of operations or financial conditions.

3. Loans and Allowance for Loan Losses

Loans are stated at the amount of unpaid principal, reduced by an allowance for loan losses and by unearned loan fees, net of deferred loan costs. 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 for 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. Non-accrual 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 a loan is placed on non-accrual status, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received or when the loan is returned to accrual 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.

7

Loans on non-accrual status as of June 30, 2007 and December 31, 2006, were $4.56 million and $4.94 million, respectively.

The allowance for loan losses represents an estimate of possible losses associated with the Bank’s loan portfolio and deposit account overdrafts. The estimate is based on evaluations of loan collectibility and prior loan loss experience. Evaluations consider factors such as changes in the nature and volume of the loan portfolio, overall portfolio quality, Management’s review of specific problem loans and current economic conditions that may affect a borrower’s ability to pay.

Increases to the allowance for loan losses occur when amounts are expensed to the provision for loan losses or when previously charged-off loans or overdrafts are recovered; decreases occur when loans or overdrafts are charged-off.

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.

4. 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 and awards computed by the treasury stock method.

5. Recently Issued Accounting Standards

In June 2006, the FASB issued FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting and reporting for income taxes where interpretation of the law is uncertain. FIN 48 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of income tax uncertainties with respect to positions taken or expected to be taken in income tax returns. FIN 48 is effective for fiscal years beginning after December 15, 2006. Columbia adopted FIN 48 on January 1, 2007. As a result of the adoption, it was not necessary for Columbia to recognize any liability for unrecognized tax benefits.

Columbia and its subsidiary file income tax returns in the U.S. federal jurisdiction and in the State of Oregon jurisdiction. Columbia is no longer subject to examinations by tax authorities in U.S. federal and state jurisdictions for years before 2003. Columbia recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. The provisions of this standard apply to other accounting pronouncements that require or permit fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management does not expect the adoption of SFAS No. 157 to have a material impact on the consolidated financial statements.

8

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans.” SFAS No. 158 requires employers to recognize the funded status of defined benefit postretirement plans as a net asset or liability in its statement of financial position and to recognize changes in the funded status in the year in which the changes occur through accumulated other comprehensive income. SFAS No. 158 also requires employers to measure the funded status of a plan as of the date of its year-end statement of financial position. The new reporting requirements and related new footnote disclosure rules of SFAS No. 158 are effective for fiscal years ending after December 15, 2006. The new measurement date requirement applies for fiscal years ending after December 15, 2008. Management does not expect SFAS No.158 to have a material impact on the consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits companies to choose, at specified election dates, to measure eligible items at fair value. The standard is designed to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, or if adopted early, within 120 days of the fiscal year of adoption. Management elected not to apply the early adoption provisions of the standard and is evaluating whether it will choose to apply the fair value option provided by SFAS No. 159.

In September 2006, the FASB’s Emerging Issues Task Force (“EITF”) reached a final consensus on Issue 06-04, “Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements.” EITF 06-04 addresses employer accounting for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods and requires the employer to recognize a liability for future benefits in accordance with SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions",or Accounting Principles Board (APB) Opinion No. 12, “Omnibus Opinion—1967".EITF 06-04 is effective for fiscal years beginning after December 15, 2007. The effects of applying this Issue are recognized through either (a) a change in accounting principle through a cumulative-effect adjustment to retained earnings or to other components of equity or net assets in the statement of financial position as of the beginning of the year of adoption or (b) a change in accounting principle through retrospective application to all prior periods. Columbia has endorsement split-dollar life insurance policies that serve as a post-employment benefit to covered employees. Columbia is evaluating the potential impact of this Issue on its consolidated financial statements.

9

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report onForm 10-Q contains various forward-looking statements that are intended to be covered by the safe harbor provided by Section 21E of the Securities Exchange Act of 1933, as amended. These statements include statements about our present plans and intentions, about our strategy, growth, and deployment of resources, and about our expectations for future financial performance. Forward-looking statements use prospective language, including words like “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “continue,” “plans,” “intends,” or other similar terminology.

Because forward-looking statements are, in part, an attempt to project future events and explain current plans, they are subject to various risks and uncertainties, which could cause our actions and our financial and operational results to differ materially from those projected in forward-looking statements. These risks and uncertainties include, without limitation, the risks described in Part II – Other Information Item 1A “Risk Factors.”

Information presented in this report is accurate as of the date the report is filed with the SEC. We do not undertake any duty to update our forward-looking statements or the factors that may cause us to deviate from them, except as required by law.

CRITICAL ACCOUNTING POLICIES

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

The allowance for loan losses represents an estimate of possible losses associated with the Bank’s loan portfolio and deposit account overdrafts. On an ongoing basis, we evaluate the adequacy of the allowance based on numerous factors. These factors include the quality of the current loan portfolio, the trend in the loan portfolio’s risk ratings, current economic conditions, loan concentrations, loan growth rates, past-due and non-performing loan trends, evaluation of specific loss estimates for significant problem loans, historical charge-off and recovery experience and other pertinent information. Approximately 75% of our loan portfolio is secured by real estate. If there were a significant decrease in real estate values in Oregon and Washington, it may be necessary to increase the allowance for loan losses. A decline in real estate values represents one possible risk factor; other risk factors may also necessitate an increase in the allowance for loan losses.

As of June 30, 2007, our goodwill totaled $7.39 million as a result of business combinations. We follow Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 142, which requires us to evaluate goodwill for impairment not less than annually and to write down the goodwill if the business unit associated with the goodwill cannot sustain the value attributed to it. Our evaluation of the fair value of goodwill involves a substantial amount of judgment. No impairment of goodwill has been identified during the initial and subsequent annual assessments.

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OVERVIEW

Columbia Bancorp (“Columbia”) is a financial holding company organized in 1996 under Oregon Law. Columbia’s common stock is traded on the NASDAQ Global Select Market under the symbol “CBBO.” Columbia’s wholly-owned subsidiary, Columbia River Bank (“CRB” or “the Bank”), is an Oregon state-chartered bank, headquartered in The Dalles, Oregon, through which substantially all business is conducted. CRB offers a broad range of services to its customers, primarily small and medium sized businesses and individuals.

We have a network of 20 full-service branches, 1 commercial service branch and 3 limited-service branches. In Oregon, we operate 14 full-service branches, 1 commercial service branch and 3 limited-service branches that serve the northern and eastern Oregon communities of The Dalles, Hood River, Pendleton and Hermiston, the central Oregon communities of Madras, Redmond, and Bend, and the communities of McMinnville, Canby, Lake Oswego and Newberg in the Willamette Valley. In Washington, we operate 6 full-service branches that serve the communities of Goldendale, White Salmon, Pasco, Yakima, Sunnyside and Richland.

Our goal is to grow our earning assets while maintaining a high return on equity and strong asset quality. We will achieve this goal by emphasizing personalized, quality banking products and services for our customers; by hiring and retaining high performing, experienced branch and administrative personnel; and by responding quickly to customer demand and growth opportunities. We intend to increase market share in our existing markets and expand into new high growth markets through suitable acquisitions and new branch openings.

The following table presents an overview of our key financial performance indicators:

Key Financial Performance Indicators:
(dollars in thousands except per share data)

	As of and for the									As of and for the
	Three Months Ended June 30,									Six Months Ended June 30,
							%									%
	2007			2006			Change			2007			2006			Change
Return on average assets		1.16	%		1.72	%					1.30	%		1.78	%
Return on average equity		12.66	%		17.57	%					13.84	%		18.28	%
Net interest margin, tax equivalent basis		5.54	%		6.60	%					5.67	%		6.49	%
Efficiency ratio		55.81	%		53.60	%					56.85	%		54.02	%
Net income	$	3,006		$	3,607			-17	%	$	6,459		$	7,329			-12	%
Earnings per diluted common share	$	0.30		$	0.36			-17	%	$	0.63		$	0.72			-13	%
Total gross loans(1)										$	864,366		$	766,599			13	%
Total assets										$	1,067,549		$	952,753			12	%
Deposits										$	911,195		$	777,322			17	%
Book value per common share										$	9.57		$	8.43			14	%
Tangible book value per common share										$	8.83		$	7.68			15	%

⁽¹⁾ Includes loan portfolio and loans held-for-sale and excludes allowance for loan losses and unearned loan fees.

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Our diluted earnings per share for the three months and six months ended June 30, 2007 decreased 17% and 13%, respectively, compared to the same periods in 2006. These decreases were primarily due to the effect of our compressing net interest margin, an increase in provision for loan losses and increases in expenses related to expansion of our branch network and administrative operations.

Net interest margin compression appears to be a current trend for community banks as the industry adjusts to the relatively flat yield curve. The competitive pricing pressures of the current environment have generally led to lower loan yields and higher cost of funds as banks endeavor to grow loans and gather deposits. Community banks are also experiencing slowing demand for real estate loans and competitive challenges gathering low cost deposits.

We believe our presence in, and expansion into, high growth markets throughout the Pacific Northwest will contribute to continued loan and deposit growth. In addition, we are responding to the challenges of the current environment as follows:

• We will focus on our business model of competing primarily on the basis of service and enhancing customer relationships, rather than price alone.

• We are addressing the challenge of gathering low cost deposits by hiring dedicated deposit-gathering personnel, improving our Internet banking systems and directing more of our marketing resources to deposit gathering.

• We are improving and streamlining the core operations of the bank following a period of significant growth and expansion over the last several years.

• We will continue to identify and implement non-interest expense reductions when prudent. However, expansion into new markets may offset these savings.

Significant items for the three months and six months ended June 30, 2007 were as follows:

• Gross loans increased 6% since December 31, 2006 primarily due to loan growth from our Columbia Basin and Willamette Valley regions. During the second quarter of 2007, we experienced slowing demand for real estate acquisition, development and construction loans, particularly in our Central Oregon region.

• Deposits increased 6% since December 31, 2006 primarily due to promotional certificate of deposit offerings and additional wholesale deposits.

• Due to the higher cost of funds associated with promotional certificate of deposit offerings and wholesale deposits, our net interest margin decreased to 5.54% for the three months ended June 30, 2007 compared to 6.60% for the same period in 2006. Due to the same factors, our net interest margin decreased to 5.67% for the six months ended June 30, 2007 compared to 6.49% for the same period in 2006.

• Compared to the three months and six months ended June 30, 2006, our provision for loan losses increased 83% and 84%, respectively, primarily due to $3.22 million in charge-offs on an agricultural loan during the first six months of 2007.

• Employees hired to staff new branch and administrative positions resulted in increases in expenses for salaries and employee benefits of 9% and 10%, respectively, for the three months and six months ended June 30, 2007 compared to the same periods in 2006.

• Following branch and administrative expansion, occupancy expenses increased 25% and 27%, respectively, for the three months and six months ended June 30, 2007 compared to the same periods in 2006.

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RESULTS OF OPERATIONS

Net Interest Income

Net interest income, our primary source of operating income, is the difference between interest income and interest expense. Interest income is earned primarily from our loan and investment security portfolios. Interest expense results primarily from customer deposits and borrowings from other sources, including Federal Home Loan Bank advances, wholesale deposits and trust preferred securities. Like most financial institutions, our net interest income increases as we are able to charge higher interest rates on loans while paying relatively lower interest rates on deposits and other borrowings.

The following table presents a comparison of average balances and interest rates:

Net Interest Income Average Balances and Rates:
(dollars in thousands)

	Three Months Ended June 30,							Three Months Ended June 30,
	Average Balances							Average Yields/Costs Tax Equivalent
	2007		2006		Change			2007			2006			Change
Taxable securities	$	23,699	$	22,599	$	1,100			4.81	%		3.97	%		0.84	%
Nontaxable securities		10,846		11,806		(960	)		7.04	%		7.08	%		-0.04	%
Interest bearing deposits		21,674		13,284		8,390			5.24	%		4.83	%		0.41	%
Federal funds sold		61,535		24,822		36,713			5.23	%		5.11	%		0.12	%
Loans		857,155		708,005		149,150			8.89	%		8.95	%		-0.06	%
Interest earning assets		974,909		780,516		194,393			8.46	%		8.59	%		-0.13	%
Non-earning assets		63,826		58,556		5,270
Total assets	$	1,038,735	$	839,072	$	199,663
Savings & interest bearing deposits	$	339,751	$	312,877	$	26,874			2.78	%		2.03	%		0.75	%
Time certificates		361,964		184,479		177,485			5.01	%		3.95	%		1.06	%
Borrowed funds		18,518		37,946		(19,428	)		4.84	%		4.84	%		0.00	%
Interest bearing liabilities		720,233		535,302		184,931			3.95	%		2.89	%		1.06	%
Non-interest bearing demand deposits		220,842		216,611		4,231
Other liabilities		2,430		4,808		(2,378	)
Shareholders’ equity		95,230		82,351		12,879
Total liabilities and shareholders’ equity	$	1,038,735	$	839,072	$	199,663

	Six Months Ended June 30,							Six Months Ended June 30,
	Average Balances							Average Yields/Costs Tax Equivalent
	2007		2006		Change			2007			2006			Change
Taxable securities	$	23,800	$	22,862	$	938			4.76	%		3.87	%		0.89	%
Nontaxable securities		11,155		12,138		(983	)		7.13	%		7.10	%		0.03	%
Interest bearing deposits		18,963		13,200		5,763			5.05	%		4.45	%		0.60	%
Federal funds sold		43,465		27,937		15,528			5.18	%		4.71	%		0.47	%
Loans		842,612		697,231		145,381			8.86	%		8.83	%		0.03	%
Interest-earning assets		939,995		773,368		166,627			8.49	%		8.43	%		0.06	%
Nonearning assets		62,715		55,809		6,906
Total assets	$	1,002,710	$	829,177	$	173,533
Savings & interest bearing deposits	$	325,826	$	319,155	$	6,671			2.63	%		1.99	%		0.64	%
Time certificates		333,878		180,137		153,741			4.92	%		3.94	%		0.98	%
Borrowed funds		27,900		33,963		(6,063	)		5.18	%		4.74	%		0.44	%
Interest bearing liabilities		687,604		533,255		154,349			3.85	%		2.82	%		1.03	%
Non-interest bearing demand deposits		217,972		211,383		6,589
Other liabilities		3,022		3,668		(646	)
Shareholders’ equity		94,112		80,871		13,241
Total liabilities and shareholders’ equity	$	1,002,710	$	829,177	$	173,533

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Net interest income before provision for loan losses increased 5% and 6%, respectively, for the three months and six months ended June 30, 2007 compared to same periods in 2006. Increases in net interest income were primarily due to loan growth throughout our market areas and new branches in our Columbia Basin region. Interest income increases were partially offset by increases in our cost of funds due to higher wholesale liability balances and promotional certificate of deposit pricing.

The following table presents increases in net interest income attributable to volume changes versus rate changes:

Volume vs. Rate Changes:
(dollars in thousands)

	Three Months Ended June 30,									Six Months Ended June 30,
	2007 over 2006									2007 over 2006
	Increase (Decrease) due to									Increase (Decrease) due to
							Net									Net
	Volume			Rate			Change			Volume			Rate			Change
Interest earning assets:
Loans	$	3,381		$	(178	)	$	3,203		$	6,669		$	(192	)	$	6,477
Investment securities
Taxable securities		11			49			60			22			101			123
Nontaxable securities		(10	)		(1	)		(11	)		(20	)		(2	)		(22	)
Balances due from banks		102			21			123			131			53			184
Federal funds sold		470			16			486			372			92			464
Total		3,954			(93	)		3,861			7,174			52			7,226
Interest bearing liabilities:
Interest bearing checking and savings accounts		138			627			765			99			1,009			1,108
Time deposits		1,758			952			2,710			3,058			1,567			4,625
Borrowed funds		(234	)		(1	)		(235	)		(138	)		55			(83	)
Total		1,662			1,578			3,240			3,019			2,631			5,650
Net increase in net interest income	$	2,292		$	(1,671	)	$	621		$	4,155		$	(2,579	)	$	1,576

During the last several years, our balance sheet has been asset sensitive, meaning that the assets re-price, or adjust to market interest rates, more frequently than the liabilities. As a result, the re-pricing of our loan portfolio was closely aligned with the series of increases in the Fed Funds rate from June 2004 to June 2006. Conversely, the re-pricing of our interest bearing liabilities has lagged behind the Fed Funds rate increases. Since June 2006, our earning asset yields have stabilized, but our cost of funds continues to rise due to the re-pricing of maturing certificates of deposit and competitive pressures to attract and retain deposit customers.

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Net interest margin (net interest income as a percentage of average earning assets) measures how well a bank manages its asset and liability pricing and duration. Our tax equivalent net interest margin measured 5.54% and 5.67%, respectively, for the three months and six months ended June 30, 2007. For the three months and six months ended June 30, 2006, our net interest margin measured 6.60% and 6.49%, respectively. Compared to 2006, our net interest margin decreased primarily due to an increase in our cost of funds. The increase in our cost of funds resulted from customer deposit balances that shifted towards higher rate deposit accounts, promotional certificate of deposit offerings and an increase in wholesale liability borrowings to support loan growth.

Based on the current competitive environment, we expect our net interest margin will trend downward for the remainder of 2007, although at a lower rate of change than the last two quarters. We expect this will result from continued increases in our cost of funds and, to a lesser extent, decreases in loan yields due to competitive pressures on loan pricing.

Because our balance sheet is asset sensitive, a decrease in the Fed Funds rate would negatively impact interest income as our variable rate loans tied to the Prime Rate will immediately re-price (the Prime Rate has historically followed changes in the Fed Funds rate). In order to mitigate the negative effect of falling interest rates, we have been able to incorporate interest rate floors into approximately 56% of our loans. If the Fed Funds rate decreases, our net interest margin will likely decrease further.

Non-Interest Income

Non-interest income is comprised of service charges and fees, credit card discounts, financial services revenues, mortgage banking revenues and gains from the sale of loans, securities and other assets. Mortgage banking revenues include service release premiums and revenues from the origination and sale of mortgage loans. Financial services income is derived from the sale of investments and financial planning services to our customers.

The following table presents the balances and percentage changes in non-interest income:

Non-Interest Income:
(dollars in thousands)

	Three Months Ended June 30,									Six Months Ended June 30,
	2007			2006			% change			2007			2006			% change
Service charges and fees	$	1,110		$	1,192			-7	%	$	2,112		$	2,322			-9	%
Credit card discounts and fees		135			121			12	%		250			227			10	%
Financial services revenue		304			243			25	%		524			442			19	%
Mortgage loan origination income		636			457			39	%		1,210			847			43	%
Service release premium		441			255			73	%		857			473			81	%
Gain/(loss) on mortgage sales		(72	)		(16	)		350	%		(49	)		14			-450	%
Gain/(loss) on sale of assets		(1	)		(39	)		-97	%		1			(86	)		-101	%
Other non-interest income		225			177			27	%		518			470			10	%
Total non-interest income	$	2,778		$	2,390			16	%	$	5,423		$	4,709			15	%

Compared to 2006, mortgage banking revenues increased in 2007 due to an increase in loan production volume following the hiring of seasoned mortgage loan officers. From 2006 to 2007, financial services revenue increased due to higher sales per sales representative and changes in product mix.

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Provision for Loan Losses

Our provision for loan losses represents an expense against current period income that allows us to establish an adequate allowance for loan and deposit account overdraft losses. Charges to the provision for loan losses result from our ongoing analysis of possible losses in our loan portfolio and possible losses from deposit account overdrafts (see “Allowance for Loan Losses” section of this report).

For the three months and six months ended June 30, 2007, compared to the same periods in 2006, the provision for loan loss was higher primarily due to charge-offs of an agricultural loan to a potato grower during the first six months of 2007.

Non-Interest Expense

Non-interest expense consists of salaries and benefits, occupancy costs and various other non-interest expenses.

The following table presents the components of and changes in non-interest expense:

Non-Interest Expense:
(dollars in thousands)

	Three Months Ended							Six Months Ended
	June 30,							June 30,
	2007		2006		% change			2007		2006		% change
Salaries and employee benefits	$	5,259	$	4,814		9	%	$	10,301	$	9,392		10	%
Occupancy expense		1,145		918		25	%		2,268		1,784		27	%
Advertising expense		96		168		-43	%		218		320		-32	%
Electronic connection fees		197		104		89	%		339		210		61	%
Consulting fees		144		4		3500	%		190		61		211	%
Software licensing		131		95		38	%		216		176		23	%
Other non-interest expense		2,053		2,024		1	%		4,506		3,960		14	%
Total non-interest expense	$	9,025	$	8,127		11	%	$	18,038	$	15,903		13	%

Salaries and employee benefits increased due to employees hired to staff new branches and administrative support positions added throughout 2006. As of June 30, 2007, full-time equivalent employees (“FTE”) totaled 380 compared to 351 as of June 30, 2006. Occupancy expense and other non-interest expense increased primarily due to the incremental expenses of new branches and office space opened during 2006. Consulting fees increased primarily due to security and compliance testing of our information technology systems, as well as projects to improve those systems.

The efficiency ratio, which measures overhead costs as a percentage of total revenues, is an important measure of productivity in the banking industry. Because non-interest expense growth outpaced income growth, our efficiency ratio increased to 55.81% and 56.85%, respectively, for the three months and six months ended June 30, 2007, compared to 53.60% and 54.02% for the same periods in 2006. Increases in our efficiency ratio are primarily attributable to our branch expansion and related administrative overhead expenses.

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Provision for Income Taxes

The following table presents the provision for income taxes and effective tax rates:

Provision for Income Taxes:
(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Provision for income taxes	$	1,816		$	2,159		$	3,884		$	4,388
Income before provision for income taxes		4,822			5,766			10,343			11,717
Effective tax rate		37.66	%		37.44	%		37.55	%		37.45	%

We expect our 2007 annual effective tax rate will range between 37.00% and 38.00% and may vary depending on our level of participation in state income tax credits.

MATERIAL CHANGES IN FINANCIAL CONDITION

ASSETS

Our assets are comprised primarily of loans for which we receive interest and principal repayments from our customers, as well as cash and investment securities.

Investment Securities

Our investment securities portfolio consists of bank-qualified municipal debt securities, debt securities issued by government agencies, mortgage-backed securities, equity securities and restricted equity securities. Investment securities totaled $35.47 million as of June 30, 2007, a decrease of $2.24 million compared to December 31, 2006. During the first six months of 2007, we purchased $4.01 million of government agency bonds to replace matured and called government agency and municipal bonds totaling $6.80 million. We also invested $500,000 in a mutual fund that purchases Community Reinvestment Act eligible securities.

Qualifying securities may be pledged as collateral for public agency deposits or other borrowings. As of June 30, 2007, pledged securities totaled $22.12 million, compared to $23.13 million as of December 31, 2006.

Net unrealized losses on available-for-sale debt and equity securities totaled $152,420, or $93,129 net of tax, as of June 30, 2007, compared to net unrealized losses of $154,422, or $94,815 net of tax, as of December 31, 2006. Net unrealized losses decreased primarily due to changes in the bond market as investors measure the effects of interest rates on the discounted interest payments of bond investments. We currently have no plans to liquidate our available-for-sale securities; we expect to recover the losses over time because we have the ability to hold the securities until a market price recovery or until maturity.

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Loans

Our loan portfolio reflects our efforts to diversify risk across a range of loan types and industries, and thereby complement the markets in which we do business. Loan products include construction, land development, real estate, commercial, consumer, agriculture and credit cards.

The following table presents our loan portfolio by loan type:

Loans:
(dollars in thousands)

	June 30, 2007						December 31, 2006						June 30, 2006
				Percent of						Percent of						Percent of
	Dollar Amount			Total			Dollar Amount			Total			Dollar Amount			Total
Commercial loans	$	130,143			15	%	$	136,582			17	%	$	117,563			16	%
Agricultural loans		82,027			10	%		86,218			11	%		93,222			12	%
Real estate loans		335,583			39	%		347,526			43	%		327,942			43	%
Real estate loans — construction		286,052			34	%		212,826			27	%		199,707			26	%
Consumer loans		12,907			1	%		12,540			1	%		13,466			2	%
Other loans		11,576			1	%		10,212			1	%		8,540			1	%
		858,288						805,904						760,440
Allowance for loan losses		(10,168	)		-1	%		(10,143	)		-1	%		(9,671	)		-1	%
Unearned loan fees		(1,286	)		0	%		(1,428	)		0	%		(1,806	)		0	%
Loans, net of allowance for loan losses, unearned loan fees and loans held for sale		846,834						794,333						748,963
Loans held for sale		6,078			1	%		7,538			1	%		6,159			1	%
Total loans	$	852,912			100	%	$	801,871			100	%	$	755,122			100	%

Gross loans increased 7% since December 31, 2006 primarily due to real estate construction loan growth although we noted a slowing in the demand for real estate loans throughout our market areas during the second quarter of 2007.

Loan totals as of June 30, 2006 are presented above for comparative purposes because of the seasonal nature of our business. Compared to June 30, 2006, gross loans increased 13% due to strong demand for construction and commercial real estate loans throughout our market areas and loan growth from new branches in our Columbia Basin Region.

Since 2003, gross loans have grown at a compounded annual rate of 20%, primarily due to strong demand for real estate loans throughout our markets. Due to the real estate market slowdown, we expect loan growth will moderate from the levels we experienced over the last several years. We believe, however, that our growth rate will keep pace with our community bank peers in the Pacific Northwest at relative levels consistent with the last several years.

As of June 30, 2007, construction, land development and commercial real estate loans comprised 73% of our loan portfolio, compared to 70% as of December 31, 2006 and 69% as of June 30, 2006. This concentration is consistent with our Pacific Northwest community bank peers, and like our peers, we could become subject to future losses resulting from declines in real estate development markets and the negative economic effects of fluctuating interest rates. Some borrowers use proceeds from real estate loans for purposes other than real estate development, such as inventory and equipment purchases. In these cases, real estate market declines would represent a more indirect risk of loss because the primary source of repayment is not from real estate, but from other activities.

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We participate in non-real estate agricultural lending, which comprises approximately 10% of our total loan portfolio. Agricultural lending has unique challenges that require special expertise. We employ experienced agriculture consultants and loan officers with experience in underwriting and monitoring agricultural loans. In addition, we diversify our agricultural loan portfolio across numerous commodity types and maintain Preferred Lender Status with the Farm Service Agency. This status allows us to participate in Farm Loan Government Guarantee Programs, which provide guarantees of up to 90% on qualified loans. Approximately 15% of our agricultural loans are guaranteed through this program; however, these guarantees are limited and loans under this program are not without credit risk.

We originate and fund single-family mortgage loans that are usually committed for sale to mortgage investors and held for less than 30 days. Mortgage loans held for sale are reported as “Loans held-for-sale” on our balance sheet. As of June 30, 2007, mortgage loans held for sale totaled $6.08 million compared to $7.54 million as of December 31, 2006.

Allowance for Loan Losses

Our allowance for loan losses represents an estimate of possible losses associated with our loan portfolio and deposit account overdrafts as of the reporting date. The adequacy of the allowance is evaluated each quarter in a manner consistent with the Interagency Policy Statement issued by the Federal Financial Institutions Examination Council (FFIEC) and with FASB SFAS Nos. 5 and 114. In determining the level of the allowance, we estimate losses inherent in all loans, and evaluate non-performing loans to determine the amount, if any, necessary for a specific reserve. Loans not evaluated for impairment and not requiring a specific allocation are subject to a general allocation based on historical loss rates and other subjective factors. An important element in determining the adequacy of the allowance is an analysis of loans by loan risk rating categories. We regularly review our loan portfolio to evaluate the accuracy of risk ratings throughout the life of loans.

Our methodology for estimating inherent losses in the portfolio takes into consideration all loans in our portfolio, segmented by industry type and risk rating, and utilizes a number of subjective factors in addition to historical loss rates. Subjective factors include: the economic outlook on both a national and regional level; the volume and severity of non-performing loans; the nature and value of collateral securing the loans; trends in loan growth; concentrations in borrowers, industries and geographic regions; and competitive issues that impact loan underwriting.

Increases to the allowance occur when we expense amounts to the loan loss provision or when we recover previously charged-off loans or overdrafts. Decreases occur when we charge-off loans or overdrafts that are deemed uncollectible. We determine the appropriateness and amount of these charges by assessing the risk potential in our portfolio on an ongoing basis.

In 2006, we reclassified our exposure for credit losses related to off-balance-sheet financial instruments to a liability account. The liability represents our estimate of possible losses associated with off-balance-sheet financial instruments, which consist of commitments to extend credit, commitments under credit card arrangements, and commercial and standby letters of credit. We had previously included the liability as a component of the allowance for loan losses. Following the reclassification, the liability is included as a component of “Accrued interest payable and other liabilities” on our balance sheet.

We evaluate the adequacy of the liability for credit losses from off-balance-sheet financial instruments based upon reviews of individual credit facilities, current economic conditions, the risk characteristics of the various categories of commitments and other relevant factors. The liability is based on estimates, which are evaluated on a regular basis, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.

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The following table presents activity in the allowance for loan and credit losses:

Allowance for Loan and Credit Losses:
(dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
Allowance for loan losses, beginning of period	$	10,055		$	8,866		$	10,143		$	9,526
Charge-offs:
Commercial		8			51			99			536
Real estate		—			11			—			11
Agriculture		2,223			379			3,253			379
Consumer loans		—			—			—			—
Credit card and related accounts		9			1			14			44
Demand deposit overdrafts		70			68			137			110
Total charge-offs		2,310			510			3,503			1,080
Recoveries:
Commercial		41			3			42			21
Real estate		—			—			1			—
Agriculture		—			1			—			2
Consumer loans		10			3			22			9
Credit card and related accounts		5			5			6			6
Demand deposit overdrafts		42			33			107			57
Total recoveries		98			45			178			95
Provision for loan losses		2,325			1,270			3,350			1,820
Reclassify liability for off-balance-sheet financial instrument credit losses		—			—			—			(690	)
Allowance for loan losses, end of period	$	10,168		$	9,671		$	10,168		$	9,671
Liability for off-balance-sheet financial instruments, beginning of period	$	838		$	690		$	763		$	—
Reclassify from allowance for loan losses		—			—			—			690
Increase charged to other non-interest expense		—			—			75			—
Liability for off-balance-sheet financial instruments, end of period	$	838		$	690		$	838		$	690
Total allowance for credit losses(1)	$	11,006		$	10,361		$	11,006		$	10,361
Ratio of net loans charged-off to average loans outstanding for the period		0.26	%		0.07	%		0.39	%		0.14	%
Ratio of allowance for loan losses to gross loans at end of period								1.18	%		1.26	%
Ratio of allowance for credit losses to gross loans at end of period								1.27	%		1.35	%

⁽¹⁾ Allowance for loan losses and liability for off-balance-sheet financial instruments

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During the six months ended June 30, 2007, we charged-off $3.22 million of an agricultural loan to a potato grower. We previously charged-off $878,574 of this loan relationship in 2006. As of June 30, 2007, there was no remaining loan balance to this borrower.

Net charge-offs as a percentage of average gross loans was 0.79% and 0.28% on an annualized basis for the six months ended June 30, 2007 and 2006, respectively. Our net charge-offs as a percentage of average gross loans has ranged between 0.17% and 0.52% over the 5-year period from 2002 to 2006, averaging 0.28% on an annual basis. This percentage has increased during 2007 due to charge-offs of the potato grower loan. We expect charge-offs during the remainder of 2007 will fall back to historic levels, which would result in approximately $700,000 of additional charge-offs by year-end. These additional charge-offs would probably be related to the softening real estate market.

As a percentage of gross loans at year-end, our allowance for credit losses has ranged between 1.34% and 1.46% over the 5-year period from 2002 to 2006, averaging 1.40% on an annual basis. Because of a general trend toward relatively higher credit quality during recent years, our allowance for credit losses was 1.27% of gross loans as of June 30, 2007. However, while our allowance for credit losses as a percentage of gross loans has been trending downward over the last several quarters, we expect the real estate market slowdown may reverse this trend. Specifically, during the second quarter of 2007, we noted an increase in real estate loans assigned higher risk ratings (indicating greater risk) in our loan portfolio—a trend we believe is facing banks across the United States. We expect this trend to continue affecting our business for the remainder of 2007 and into 2008, and this shift may necessitate further increases in the allowance for credit losses.

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Non-Performing Assets

Non-performing assets consist of loans on non-accrual status, delinquent loans past due greater than 90 days, troubled debt restructured loans and other real estate owned (“OREO”). We do not accrue interest on loans for which full payment of principal and interest is not expected, or for 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. Troubled debt restructured loans are those for which the interest rate, principal balance, collateral support or payment schedules were modified from original terms, beyond what is ordinarily available in the marketplace, to accommodate a borrower’s weakened financial condition. OREO represents real estate assets held through loan foreclosure or recovery activities.

The following table presents information about our non-performing assets:

Non-performing Assets:
(dollars in thousands)

	June 30, 2007			December 31, 2006		��	June 30, 2006
Loans on non-accrual status	$	4,557		$	4,939		$	3,032
Delinquent loans past due > 90 days on accrual status		—			—			—
Troubled debt restructured loans		104			52			32
Total non-performing loans		4,661			4,991			3,064
Other real estate owned		—			203			—
Repossessed other assets		32			—			—
Total non-performing assets	$	4,693		$	5,194		$	3,064
Allowance for loan losses	$	10,168		$	10,143		$	9,671
Ratio of total non-performing assets to total assets		0.44	%		0.50	%		0.32	%
Ratio of total non-performing loans to total gross loans		0.54	%		0.61	%		0.40	%
Ratio of allowance for loan losses to total non-performing assets		216.67	%		195.28	%		315.66	%

As of June 30, 2007, a real estate loan to a housing developer in our Willamette Valley region comprised $3.58 million, or 76%, of non-performing assets. This loan was placed on non-accrual status during the second quarter of 2007. We believe the loan is adequately collateralized by the underlying real estate and that there is minimal loss potential based on current appraisals of the collateral.

An agricultural loan to a potato grower comprised $3.38 million, or 65%, of non-performing assets as of December 31, 2006. We charged-off $3.22 million of this loan during the first and second quarters of 2007. During the second quarter of 2007, we repossessed approximately $120,000 of equipment, $31,950 of which remained held-for-sale as of June 30, 2007. There was no remaining loan balance to this borrower as of June 30, 2007.

Last year, as of June 30, 2006, commercial and agricultural loans to three different borrowers, totaling $2.51 million, comprised 83% of non-performing assets. One of the agricultural loans was repaid during 2006. The other agricultural loan was repaid during the second quarter of 2007. The commercial loan is currently in the foreclosure process and remains on non-accrual status with a balance of approximately $615,000. We believe we are adequately reserved for any loss potential on this loan.

Non-performing asset balances can vary significantly from period to period because they typically do not follow a seasonal pattern.

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LIABILITIES

Our liabilities consist primarily of retail and wholesale deposits, interest accrued on deposits, notes payable and obligations to pay interest and principal on junior subordinated debentures. Retail deposits include all deposits obtained within our branch network and represent our primary source for funding loans. Wholesale liabilities include deposits obtained outside of our branch network, correspondent bank borrowings and borrowings from Federal Home Loan Bank (“FHLB”). We utilize wholesale liabilities to manage interest rate and liquidity risk. These funding sources support loan growth at times when loan growth outpaces retail deposit growth.

Deposits

We offer various deposit accounts, including non-interest bearing checking and interest bearing checking, savings, money market and certificates of deposit. The accounts vary as to terms, with principal differences being minimum balances required, length of time the funds must remain on deposit, interest rate and deposit or withdrawal options. In order to minimize our interest expense, our goal is to maximize our non-interest bearing demand deposits relative to other deposits and borrowings.

The following table presents the composition of our deposits:

Deposits:
(dollars in thousands)

	June 30, 2007					December 31, 2006					June 30, 2006
			Percent of					Percent of					Percent of
	Dollar Amount		Total			Dollar Amount		Total			Dollar Amount		Total
Non-interest bearing deposits	$	222,950		24	%	$	235,037		27	%	$	236,075		31	%
Interest bearing deposits		301,729		33	%		313,433		37	%		282,918		36	%
Savings deposits		36,506		4	%		35,456		4	%		40,651		5	%
Time certificates		350,010		39	%		275,139		32	%		217,678		28	%
Total deposits	$	911,195		100	%	$	859,065		100	%	$	777,322		100	%

Total deposits increased $52.13 million, or 6%, since December 31, 2006 primarily due to promotional certificate of deposit offerings and the addition of $74.45 million of wholesale deposits. As of December 31, 2006, interest bearing deposits included a $37.00 million temporary overnight deposit, which was subsequently withdrawn at the beginning of 2007.

Deposit totals are presented as of June 30, 2006 for comparative purposes because of the seasonal nature of our business. Compared to June 30, 2006, total deposits increased $133.87 million, or 17%, primarily due to deposit growth from our new Columbia Basin region branches and an increase in wholesale deposit balances.

We believe that increasing our retail deposits will be an ongoing challenge for community banks. Deposit customers expect innovative banking products tailored to their needs and expect interest rates that are competitive in the market place. In addition, we compete for deposits with brokerage firm money market funds that offer pricing indexed to market interest rates. We are also experiencing continued deposit pricing pressure from credit unions and other financial service providers. We will continue to address these challenges by further developing our infrastructure and technologies to focus on customer convenience and efficiency. We now have three employees who focus exclusively on deposit gathering activities for existing and potential customers. We continue to reinforce the importance of providing superior customer service. This allows us to expand and enhance our banking relationships with our customers. These efforts begin during the initial stages of the hiring process and continue with ongoing training and regular staff meetings focused on providing superior customer service to our customers.

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The following table presents a comparison of wholesale deposit balances, which are included in total deposits shown above:

Wholesale Deposits:
(dollars in thousands)

	June 30,		December 31,		June 30,
	2007		2006		2006
Brokered certificates of deposit	$	123,737	$	89,325	$	68,278
Direct certificates of deposit		10,633		5,508		3,137
Mutual fund money market deposits		53,817		18,423		18,000
Out-of-market public funds		7,899		8,382		6,759
	$	196,086	$	121,638	$	96,174

Brokered certificates of deposit are obtained through intermediary brokers that sell the certificates on the open market. Direct certificates of deposit are obtained through a proprietary network that solicits deposits from other financial institutions or from public entities. Mutual fund money market deposits are obtained from an intermediary that provides cash sweep services to broker-dealers and clearing firms. Out-of-market public fund depositors typically expect higher interest rates consistent with other wholesale borrowings.

Brokered and direct certificates of deposit are classified as “Time certificates” on our balance sheet. Mutual fund money market deposits and out-of-market public funds are classified as “Interest bearing demand deposits” on our balance sheet.

As of June 30, 2007, maturities of brokered certificates of deposit ranged between three months and three years. Direct certificate of deposit maturities ranged from one month to twelve months. Mutual fund money market deposits and out-of-market public funds are payable on demand. During the second quarter of 2007, we added a new mutual fund money market relationship totaling $35.00 million.

Notes Payable

Borrowings from Federal Home Loan Bank (“FHLB”) comprise the majority of our notes payable. As of June 30, 2007, FHLB borrowings totaled $46.66 million, a decrease of $22.73 million from the December 31, 2006 balance of $69.39 million, and a decrease of $11.96 million compared to $58.62 million as of June 30, 2006. Since December 31, 2006, FHLB borrowings decreased primarily due to the repayment of a $50.00 million short-term borrowing from December 2006, offset by a short-term borrowing of $38.00 million added in June 2007. We use short-term borrowings from FHLB to support liquidity requirements.

The following table presents FHLB balances and interest rates:

FHLB Borrowings:
(dollars in thousands)

	June 30,			December 31,			June 30,
	2007			2006			2006
Amount outstanding at end of period	$	46,658		$	69,387		$	58,615
Weighted average interest rate at end of period		5.20	%		5.21	%		4.18	%
Maximum amount outstanding at any month-end and during the period	$	46,658		$	70,001		$	58,615
Average amount outstanding during the period	$	23,465		$	27,603		$	24,758
Average weighted interest rate during the period		4.48	%		4.33	%		4.03	%

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We also use lines of credit at correspondent banks to purchase federal funds for short-term funding. Available borrowings under these lines of credit totaled $66.40 million as of June 30, 2007 and December 31, 2006. As of June 30, 2007, line of credit borrowings totaled $2.00 million. No line of credit borrowings were outstanding as of December 31, 2006. Notes payable includes a Treasury Tax and Loan note payable for $578,631 and $627,093 as of June 30, 2007 and December 31, 2006, respectively.

Trust Preferred Securities

In December 2002, Columbia formed Columbia Bancorp Trust I (“Trust”), a Delaware statutory business trust, for the purpose of issuing guaranteed undivided beneficial interests in junior subordinated debentures (“trust preferred securities”). In 2002, the Trust issued $4.00 million in trust preferred securities. The $4.12 million in debentures issued by Columbia as collateral for the trust preferred securities continue to qualify as Tier 1 capital under guidance issued by the Board of Governors of the Federal Reserve System.

Off-Balance Sheet Items – Commitments/Letters of Credit

In the normal course of business to meet the financing needs of our customers, we are 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 on our balance sheet.

Our potential exposure to credit loss for commitments to extend credit and for letters of credit is limited to the contractual amount of those instruments. A credit loss would be triggered in the event of nonperformance by the other party. When extending off-balance sheet commitments and conditional obligations, we follow the same credit policies established for our on-balance-sheet instruments.

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

The following table presents a comparison of contract commitment amounts:

Commitments:
(dollars in thousands)

	June 30,		December 31,		June 30,
	2007		2006		2006
Financial instruments whose contract amounts contain credit risk:
Commitments to extend credit	$	218,544	$	245,305	$	242,221
Undisbursed credit card lines of credit		23,087		21,265		20,943
Commercial and standby letters of credit		2,633		3,504		2,886
	$	244,264	$	270,074	$	266,050

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, total commitment amounts do not necessarily represent future cash requirements.

The amount of collateral obtained to secure a loan or commitment, if deemed necessary, is based on our credit evaluation of the borrower. The majority of commitments are secured by real estate or other types of qualifying collateral. Types of collateral vary, but may include accounts receivable, inventory, property and equipment, and income-producing properties. Less than 10% of our commitments are unsecured.

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The following table presents the distribution of commitments to extend credit classified by loan type as of June 30, 2007:

Commitments to Extend Credit:
(dollars in thousands)

	Dollar		Percent of
	Amount		Total
Commercial loans	$	76,679		35	%
Agricultural loans		31,790		14	%
Real estate loans		55,227		25	%
Real estate loans — construction		38,572		18	%
Consumer loans		14,861		7	%
Other loans		1,415		1	%
	$	218,544		100	%

Letters of credit are conditional commitments that we issue 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 parallels the risk involved in extending loans to customers. When considered necessary, we hold deposits, marketable securities, real estate or other assets as collateral for letters of credit.

Although not a contractual commitment, we offer an overdraft protection product that allows certain deposit accounts to be overdrawn up to a set dollar limit before checks will be returned. As of June 30, 2007, commitments to extend credit for overdrafts totaled $11.42 million, which represents our estimated total exposure if every customer utilized the full amount of this protection at the same time. Year-to-date average usage outstanding is much lower than this commitment, totaling approximately $220,000, or 2% of the total exposure as of June 30, 2007; approximately $233,000, or 2% of the total exposure as of December 31, 2006; and approximately $241,000, or 2% of the total exposure as of June 30, 2006.

Derivative Instruments – Interest Rate Swap

In January 2003, in connection with the issuance of $4.00 million of floating-rate trust preferred securities by Columbia Bancorp Trust I, we entered into an interest rate swap agreement (“swap”) with an unrelated third party. The swap expires in January 2008. Under the terms of the swap, we pay interest at a rate of 3.27% on a notional amount of $4.00 million and we then receive interest at the 90-day London Inter-Bank Offered Rate (“LIBOR”) on the same amount. The swap effectively converts interest payments on the $4.00 million trust preferred securities from a variable interest rate of 90-day LIBOR plus 3.30% to a fixed interest rate of 6.57% until January 2008. In January 2008, we have the option to prepay the trust preferred securities. We have classified the swap agreement as a cash flow hedge in accordance with Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133, “Accounting for Derivative Instruments and Hedging Activities.” The purpose of the swap is to mitigate variability in our cash flows by establishing a fixed interest payment during the initial five years of the trust preferred securities.

Commitments and Contingencies

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

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LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We have adopted policies to address our liquidity requirements, particularly with respect to customer needs for borrowing and deposit withdrawals. Our main sources of liquidity are customer deposits; sales and maturities of investment securities; the use of federal funds; brokered certificates of deposit; and net cash provided by operating activities. Scheduled loan repayments are a relatively stable source of funds, whereas deposit inflows and unscheduled loan prepayments are variable and are often influenced by general interest rate levels, competing interest rates available on alternative investments, market competition, economic conditions and other factors.

Measurable liquid assets include the following: cash and due from banks, excluding vault cash; interest bearing deposits with other banks; federal funds sold; held-to-maturity securities maturing within three months that are not pledged; and available-for-sale securities not pledged. Measurable liquid assets totaled $124.16 million, or 12% of total assets, as of June 30, 2007, compared to $146.34 million, or 14% of total assets, as of December 31, 2006.

During the six months ended June 30, 2007, we added $74.45 million of wholesale deposits in anticipation of loan growth during the second and third quarters of 2007. We also repaid $44.05 million of short-term borrowings, net of new borrowings, during the six months ended June 30, 2007. Because loan growth was lower than expected, liquidity was strong throughout the second quarter of 2007.

Based on historical patterns, we expect liquidity will decrease during third quarter of 2007 due to seasonal loan growth. During the fourth quarter of 2007, we expect liquidity will stabilize as loan growth subsides. We will continue to rely on retail branch deposit growth and, when necessary, we will utilize wholesale liabilities and other borrowings to meet our liquidity needs.

Our statement of cash flows reports the net changes in our cash and cash equivalents by operating, investing and financing activities. Net cash from operating activities decreased $3.20 million, or 27%, for the six months ended June 30, 2007 compared to the same period in 2006. This was the result of the decrease in net income and timing differences in the receipt and payment of accrued interest and accrued expenses.

Net cash from investing activities increased $24.72 million, or 30%, for the six months ended June 30, 2007 compared to same period in 2006. The increase was primarily the result of a decrease in loan growth during the six months ended June 30, 2007, compared to same period in 2006. To a lesser extent, the increase was also due to an increase in investment maturities.

Net cash from financing activities decreased $70.36 million, or 70%, for the six months ended June 30, 2007 compared to the same period in 2006. The decrease was the result of a decrease in the growth of demand deposits and an increase in repayments of borrowings. The decrease was partially offset by an increase in time deposits from additional wholesale deposits and promotional certificate of deposit products.

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Shareholders’ Equity

As of June 30, 2007, shareholders’ equity totaled $95.96 million, compared to $91.02 million as of December 31, 2006, an increase of 5%. The 2007 year-to-date change is primarily attributable to year-to-date net income totaling $6.46 million, which was partially offset by cash dividends totaling $2.00 million.

During the second quarter of 2007, the Board of Directors declared a dividend of $0.10 per share, payable July 31, 2007 to shareholders of record as of July 16, 2007. Based on cash dividends paid and declared in 2007, approximately 31% of our year-to-date earnings will have been returned to shareholders, with the remainder being retained to leverage future balance sheet growth.

Capital Requirements and Ratios

The Federal Reserve Board (“FRB”) and the Federal Deposit Insurance Corporation (“FDIC”) have established minimum requirements for capital adequacy for bank holding companies and member banks. The requirements address both risk-based capital and leveraged capital. The regulatory agencies may establish higher minimum requirements if, for example, a corporation has previously received special attention or has a high susceptibility to interest rate risk.

The following table presents Columbia’s capital ratios as compared to regulatory minimums:

Capital Ratios:

				Well-			June 30, 2007			December 31, 2006
	Minimum			Capitalized			Actual Ratio			Actual Ratio
Tier 1 risk-based capital		4.00	%		6.00	%		9.73	%		10.11	%
Total risk-based capital		8.00	%		10.00	%		10.88	%		11.36	%
Leverage ratio		4.00	%		5.00	%		8.99	%		8.54	%

We intend to remain “well-capitalized” by regulatory definition. Regulatory capital levels historically decrease during the second and third quarters as capital is leveraged primarily due to the increased demand for loans.

We plan to use our excess capital for continued cash dividends, stock repurchases and new branch expansion. We will also consider retiring at least a portion of the trust preferred securities at the first available prepayment date in January 2008.

From now through the end of 2008, we expect to open two to three new branches, including a new branch in Vancouver, Washington by the end of 2007. In addition, we plan to construct new branch facilities in Yakima and Sunnyside, Washington in order to replace our temporary branch locations. New branch openings will require capital resources for the following: construction of branch buildings and/or commitments on leased property, hiring new branch personnel, hiring administrative personnel to support branch operations and costs related to general overhead. We plan to further leverage our capital for continuing improvement of our core operations and technology departments and for future branch expansion.

Stock Repurchase Plan

In June 2007, the Board of Directors renewed a plan to repurchase shares of Columbia’s common stock. The Board believes the repurchases constitute a sound investment and use of our shareholders’ equity to reduce excess capital. Any stock repurchases would be made on the open market pursuant to Securities Exchange Act Rule 10b-18 at the sole discretion of Management. The repurchase plan authorizes us to repurchase common stock in an amount up to $1.50 million until the expiration date, June 30, 2008, or sooner if the maximum authorized amount of shares is repurchased prior to that date. Management determines the timing, price and number of the shares of common stock repurchased. During the three months and six months ended June 30, 2007, we did not repurchase any stock under the stock repurchase plan.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes to Columbia’s market risk position from the information provided in Part II – Item 7A “Quantitative and Qualitative Disclosures about Market Risk” of Columbia’s Form 10-K filed with the SEC on March 16, 2007 for the year ended December 31, 2006.

ITEM 4. CONTROLS AND PROCEDURES

Columbia’s Management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, to the best of their knowledge, as of the end of the period covered by this quarterly report, the disclosure controls and procedures are effective in ensuring all material information required to be filed in this quarterly report has been made known to them in a timely fashion.

There were no changes in Columbia’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are likely to materially affect, Columbia’s internal control over financial reporting.

PART II. — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

During the normal course of its business, Columbia is a party to various debtor-creditor legal actions, which individually or in the aggregate, could be material to Columbia’s business, operations or financial condition. These include cases filed as a plaintiff in collection and foreclosure cases, and the enforcement of creditors’ rights in bankruptcy proceedings. Management is presently aware of one legal proceeding, detailed below.

Columbia Bancorp and Columbia River Bank were named as defendants in the United States District Court for the District of Oregon in a case captioned Smith-Rattray Farms, et al. v. Columbia River Bank, et al. The plaintiffs sought compensatory, punitive and other damages totaling approximately $48.40 million, as well as injunctive and other relief. At a judicial settlement conference on March 28, 2007, all parties to the case agreed to a confidential settlement. The settlement does not involve a payment from either Columbia Bancorp or Columbia River Bank to the plaintiffs that would have any material effect on Columbia Bancorp’s earnings.

ITEM 1A. RISK FACTORS

There have been no material changes to Columbia’s risk factors previously disclosed in Part I – Item 1A “Risk Factors” of Columbia’s Form 10-K filed with the SEC on March 16, 2007 for the year ended December 31, 2006.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

(a) Columbia Bancorp’s 2007 Annual Meeting of Shareholders was held on April 26, 2007 in The Dalles, Oregon.

(b) The following matter was voted on at the Annual Meeting:

     Proposal 1 – Election of directors with terms expiring in 2010. Votes were as follows:

	Number of Votes				% Voting
	Yes		Withheld		by Proposal
Charles F. Beardsley		8,835,451		130,030		88.46	%
William A. Booth		8,834,400		131,081		88.45
Roger L. Christensen		8,742,753		222,728		87.54
Terry L. Cochran		8,786,639		178,842		87.97

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibits

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.*
31.1	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).
31.2	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).
32.1	Certification of Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
32.2	Certification of Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

* Incorporated by reference to Columbia Bancorp’s Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission.

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SIGNATURES

Pursuant to the requirements 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: August 9, 2007	/s/ Roger L. Christensen
	Roger L. Christensen
	President & Chief Executive Officer
Dated: August 9, 2007	/s/ Greg B. Spear
	Greg B. Spear
	Executive Vice President & Chief Financial Officer

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