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Columbia Bancorp
[GRAPHIC]
http://www.columbiabancorp.com
2000 Annual Report
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Our Mission Statement
To be the premier provider of high quality financial products and
services, thereby creating superior value for our shareholders.
About the Company
With assets in excess of $416 million, Columbia Bancorp is the bank
holding company for 13 Columbia River Bank branches in Oregon and Washington. In
addition to these community-oriented branches, Columbia provides mortgage
lending services through Columbia River Bank Mortgage Group and brokerage
services through affiliation with PrimeVest Financial Services, Inc. and LaSalle
St. Securities, LLC. Columbia Bancorp is listed on NASDAQ and trades under the
symbol "CBBO".
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Financial Highlights
YEARS ENDING DECEMBER 31,
(dollars in thousands Growth
except per share data) 1999-2000 2000 1999 1998
- ---------------------- --------- ---- ---- ----
INCOME STATEMENT DATA
Interest income 24% $ 33,367 $ 26,883 $ 21,328
Interest expense 43% 12,256 8,568 7,205
Net interest income 15% 21,111 18,315 14,123
Loan loss provision 69% 1,697 1,005 1,000
Net interest income after
provision for loan losses 12% 19,414 17,310 13,123
Noninterest income 21% 6,978 5,784 4,678
Noninterest expense 17% 17,463 14,976 10,633
Income before provision for
income taxes 10% 8,929 8,118 7,168
Provision for income taxes 6% 3,305 3,105 2,450
Net income 12% 5,624 5,013 4,718
=== =========== =========== ========
Dividends declared 16% 2,326 1,999 1,587
--- ----------- ----------- --------
Ratio of dividends declared to
net income 4% 41.36% 39.88% 33.64%
=== =========== =========== ========
PER SHARE DATA
Earnings Per Share
Basic earnings per
common share 11% 0.70 0.63 0.67
Diluted earnings per
common share 13% 0.70 0.62 0.65
Cash Earnings Per Share
Basic earnings per
common share 10% 0.78 0.71 0.68
Diluted earnings per
common share 10% 0.77 0.70 0.66
Weighted average shares
outstanding
Basic 0% 8,017 7,985 7,066
Diluted 0% 8,080 8,090 7,238
BALANCE SHEET DATA
Investment securities (3%) 60,544 62,333 47,894
Loans, net 21% 299,881 246,975 206,552
Total assets 15% 416,859 361,241 342,413
Total deposits 11% 346,427 310,910 295,680
Shareholders' equity 11% 41,326 37,322 34,756
KEY FINANCIAL RATIOS
Return on average assets 1.41% 1.44% 1.83%
Return on average equity 14.40 13.90 18.10
Total loans to total deposits 86.56 79.44 69.86
Net interest margin 6.05 6.17 6.19
Efficiency ratio 62.17 62.14 56.56
Cash efficiency ratio 59.93 59.53 56.28
ASSET QUALITY RATIOS
Reserve for loans losses to:
Nonperforming assets 355.95% 553.45% 108.82%
Ending total loans 1.50 1.32 1.13
Nonperforming assets to ending
total assets 0.31 0.16 0.64
Net loan charge-offs (recoveries)
to average loans 0.14 0.04 0.38
CAPITAL RATIOS
Average shareholders' equity to
average assets 9.80% 10.40% 10.12%
Tier 1 capital ratio 9.80 10.20 10.90
Total risk-based capital ratio 11.00 11.30 11.90
Leverage ratio 8.10 8.30 8.90
Assets
(in millions)
[BAR GRAPH]
Shareholders' Equity
(in millions)
[BAR GRAPH]
Net Earnings
(in millions)
[BAR GRAPH]
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Partnering Solutions for Technology
"We make microwave filters for the wireless telecommunications industry. We came
to Columbia River Bank more than a year ago to seek financing to help with our
expansion beyond our defense contracts. Columbia River Bank is very dedicated to
helping us succeed and promote the growth of high technology manufacturing in
Central Oregon. They worked with us and the Oregon Economic Community
Development Department to obtained the financing we needed to keep growing.
Because of their dedication to high technology manufacturing, we look forward to
a future with Columbia River Bank. We need a bank that will focus on us today
and tomorrow."
Ken Lakin, President
TFR Technologies, Inc.
Bend, Oregon
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To our shareholders, customers and friends
Message from the President
The staff of Columbia Bancorp completed our work in 2000 with pride in
our accomplishments and a sense of growing satisfaction as we moved to become
the premier provider of quality financial products and services in the region.
We know, however, that this is just the beginning of a process, and we will not
rest on our laurels. In a difficult year for equity markets, we also held our
own as an investment within the banking industry, particularly for small market
capitalization stocks. Our consistent performance and the lower interest rate
environment have positioned our stock to be more appropriately valued in 2001.
Among highlights for the year, we:
- Achieved our 13th consecutive year of net income growth
- Raised our dividend in the fourth quarter to $.08 per quarter, a
14% increase
- Expanded our existing branch facilities
- Attained Certified Lender status with the Small Business
Administration and the Farm Service Agency
- Added affiliated investment and stock brokerage services
- Successfully launched an Internet banking product -- Columbia
River BankNet
- Added a Credit Review Department and improved asset quality
- Maintained growth and profitability in residential mortgage
lending, despite a higher rate environment
Financial notes
Our 2000 accomplishments included the 13th consecutive year of net
income growth. Assets grew to a record year-end high of $416.9 million, a 15.4%
increase. Loan totals grew more than 21.4% during the year, with overall credit
quality improvement, thanks to our lending staff. Earnings per share increased
12.9% in 2000 to $0.70 per share, compared to $0.62 per share in 1999. Return on
average equity (ROAE) was a healthy 14.4%, compared to 13.9% in 1999. Cash ROAE
was
[PICTURE]
Terry L. Cochran
President/Chief Executive Officer
Columbia Bancorp
[PICTURE]
Donald T. Mitchell
Chairman of the Board
Columbia Bancorp
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16.0%. Net earnings increased from $5.0 million in 1999 to $5.6 million in 2000.
In a year when most equity markets faltered, we outperformed both the NASDAQ and
Dow Jones indices.
[PICTURE]
Our board, managers and staff remain committed to delivering on our mission for
shareholders in the years ahead.
Meeting customer needs for financial services
During the year, we implemented initiatives that will positively impact
the company for years to come. One was our establishment of our Internet banking
service -- BankNet -- which we introduced to the public in April. BankNet allows
customers access to their accounts when and how they want them -- every hour of
every day. Coupled with our Telebank option and our ATM and branch networks, we
are now providing the highest levels of customer service. We also outsourced
most of our data and item processing functions during the year, allowing us to
focus on our core business activities, where we can add real value.
We further expanded our offering of investment services in 2000 by
adding a new affiliation with LaSalle St. Securities, LLC, through Trustime,
Inc., for our customers in Eastern Oregon. These enhancements continued our
financial offerings to customers, helping us build the long-term relationships
that are so important to Columbia River Bank.
During 2000, our newest branches, Bend Shevlin Center, Hermiston,
Newberg and Pendleton, experienced strong growth, and all are contributing to
our bottom line.
Looking ahead
We made great strides in 2000. Our financial performance continues to be
strong and should improve. Our asset quality is excellent. We continued
expanding our presence in the communities in which we operate, enhancing the
scope of products and services offered to help our customers find everything
they need in one financial services organization. Columbia Bancorp and Columbia
River Bank are focused on a mission to be the premier provider of quality
financial products and services. Our board, managers and staff remain committed
to delivering on that mission for our shareholders in the years ahead. We will
continue our emphasis on providing local, community-focused banking services and
products that meet and exceed the needs of our customers.
/s/ TERRY L. COCHRAN
Terry L. Cochran
President and Chief Executive Officer
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Message from the Chairman
The Board of Directors of Columbia Bancorp share a sense of pride with
our President and CEO, Terry Cochran, for your Bank's outstanding
accomplishments in 2000! With a dynamic strategic plan in place, we look at 2001
and beyond with great optimism for continued superior performance and enhanced
shareholder value.
Early in 2000, we welcomed Richard Betz of Hermiston to the Boards of
Columbia Bancorp and Columbia River Bank. A graduate of Washington State
University, Mr. Betz has received numerous awards for representing both the
agricultural industry and his community.
Two other directors, Ward Eason and Jim Roberson, have announced their
retirement from the Board effective April 26, 2001. Ward has served as a
director since 1986, previously serving as Chairman of the Valley Community Bank
Board. Jim has served since 1977, on the Klickitat Valley Bank Board prior to
his service with Columbia Bancorp. We want to express our sincere thanks to
these two fine directors for their years of dedication and service to Columbia
Bancorp.
A major event for us in 2001, announced in February, is the May
retirement of our President and CEO, Terry Cochran. Terry was hired as President
of Columbia River Bank in 1981 when the three-year old bank had $14 million in
assets, was undercapitalized and unprofitable. He and the talented staff he
assembled have written a truly remarkable success story! His retirement will cap
a stellar 35-year career as a well-known and respected Oregon banker. We are
deeply indebted to Terry for his dedication, his contribution, his leadership
and his vision. Thank you, Terry, for all you have done to further the success
of Columbia Bancorp. All our best wishes go out to you and Judy for a happy,
healthy retirement!
We are pleased that Terry has accepted the nomination for re-election to
the Board of Directors. Serving as a director, he will continue to be a valuable
asset to our organization.
As we also announced earlier, our Chief Operating Officer, Roger
Christensen, will become the new President and Chief Executive Officer of
Columbia Bancorp and Columbia River Bank. The Columbia River Bank staff has
reported to Roger since 1999, and the transition plan has progressed very
smoothly. Roger has 19 years of banking experience, and is very well known and
respected in the banking community. He is a very intelligent, highly motivated,
experienced executive, who can lead our exceptional staff and management team in
the achievement of our strategic objectives.
Thank you for your continued support of Columbia Bancorp and Columbia
River Bank. The Board of Directors' primary responsibility is to represent you,
our fellow shareholders. Please feel free to contact any of us if you have
questions or comments. We always welcome your input.
/s/ DONALD T. MITCHELL
Donald T. Mitchell
Chairman of the Board
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{PICTURE]
New technology, such as Columbia River BankNet at www.columbiariverbank.com,
means we can reach out to our customers in new and innovative ways; expanding
our commitment to customer service and our presence in local communities.
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Operations Review
21(ST) CENTURY PRODUCTS
MEETING NEW MILLENNIUM NEEDS
As a leading regional bank, we serve markets that are economically
diverse. To meet customers' needs in our community-focused environment, we work
hard to understand what our customers want. During our 24-year history, we have
grown through acquisitions and internal development. We now operate 13 branches
in Oregon and Southwest Washington. We offer community-oriented financial
services, including mortgage lending services though Columbia River Bank
Mortgage Group and broker services through our affiliation with PrimeVest
Financial Services, Inc. and LaSalle St. Securities, LLC. All of our business
affiliations are with organizations that share our commitment to customer
service and building long-term relationships.
In 2000, we also dramatically expanded our on-line banking services,
allowing customers the ability to access information about their accounts, pay
bills or complete many other tasks...whenever and wherever they want. This
ability to meet and exceed customer demands will become increasingly important
in the years ahead. We recognized these opportunities and now have a growing
on-line service, Columbia River BankNet, that is used by an increasing number of
customers. Some of the on-line options available to customers by going directly
to our web site at www.columbiariverbank.com include:
- A summary of accounts and balances
- Interest detail on all accounts
- Account history
- Transferring funds between accounts
- Applying for loans
- Secure messaging
- Bill payment
[PICTURE]
A Commitment to Customer Service
"Buehner-Fry, Inc. and Columbia River Bank have much in common, especially their
commitment to personal service and respect.
We provide sophisticated phone and data services to vacation and executive
lodging properties throughout North America. Columbia River Bank earned our
respect because they took an interest in learning about the cycles of the
vacation industry, something they learned from supporting the Northwest's
agricultural industry.
We are excited about our future relationship with Columbia River Bank because
they've never forgotten their commitment to personal service and respect...and
earning it every day."
Milton Buehner, President & CEO
Buehner-Fry, Inc.
Bend, Oregon
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[PICTURE]
Executive Leadership in 2000,
from left to right:
James C. McCall
Chief Lending Officer
Roger L. Christensen
Chief Operating Officer
Terry L. Cochran
President and CEO
Columbia Bancorp
Neal T. McLaughlin
Chief Financial Officer
Craig J. Ortega
President
Columbia River Bank
New technology means we can reach out to our customers in new and
innovative ways; expanding our commitment to customer service and our presence
in local communities. To aid our growth and provide even better customer
service, we built new Oregon branch offices in Hermiston, Pendleton and Newberg
to meet the demands of these fast-growing areas. In addition, we have expanded
our investment affiliations with more brokers in the branches and established a
new affiliation with LaSalle St. Securities, LLC in Hermiston and Pendleton. To
further serve our customers, we have also expanded our mortgage capabilities and
have added lease financing to our portfolio of services.
Achieving Certified Lender status
Our growth strategy in the years ahead includes our underlying
commitment to customers and a community orientation. Toward that end, Columbia
River Bank received Certified Lender status with two important organizations in
2000: the Small Business Administration and the Farm Service Agency. Being
certified helps provide additional options to our customers as they seek the
very best in financial services offerings. From the Company's perspective,
achieving Certified Lender status enhances our ability to meet our customers'
needs.
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Financial Review
Selected Financial Data 10
Management's Discussion and Analysis 11
Consolidated Balance Sheets 16
Consolidated Statements of Income and
Comprehensive Income 17
Consolidated Statements of Changes in
Stockholders' Equity 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements 20
Independent Auditor's Report 34
Columbia Bancorp and Columbia River Bank
Executives, Other Senior Vice Presidents 34
Columbia River Bank Branch Managers and
Branch Locations 35
Corporate and Shareholder Information 36
Board of Directors 37
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Financial Condition and Results of Operations
Selected Financial Data
YEARS ENDING DECEMBER 31,
(dollars in thousands except
per share data) 2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA
Interest income $ 33,367 $ 26,883 $ 21,328 $ 18,144 $ 15,385
Interest expense 12,256 8,568 7,205 6,270 5,746
----------- ----------- ----------- ----------- -----------
Net interest income 21,111 18,315 14,123 11,874 9,639
Loan loss provision 1,697 1,005 1,000 581 246
----------- ----------- ----------- ----------- -----------
Net interest income after provision
for loan losses 19,414 17,310 13,123 11,293 9,393
Noninterest income 6,978 5,784 4,678 2,481 1,799
Noninterest expense 17,463 14,976 10,633 8,092 7,180
----------- ----------- ----------- ----------- -----------
Income before provision for
income taxes 8,929 8,118 7,168 5,682 4,012
Provision for income taxes 3,305 3,105 2,450 1,795 1,285
----------- ----------- ----------- ----------- -----------
Net income $ 5,624 $ 5,013 $ 4,718 $ 3,887 $ 2,727
=========== =========== =========== =========== ===========
DIVIDENDS
Cash dividends declared $ 2,326 $ 1,999 $ 1,587 $ 842 $ 882
Ratio of dividends declared
to net income 41.36% 39.88% 33.64% 21.67% 32.37%
PER SHARE DATA
Earnings Per Share
Basic earnings per common share $ 0.70 $ 0.63 $ 0.67 $ 0.57 $ 0.41
Diluted earnings per common share 0.70 0.62 0.65 0.55 0.40
Cash Earnings Per Share
Basic earnings per common share $ 0.78 $ 0.71 $ 0.68 $ 0.57 $ 0.41
Diluted earnings per common share 0.77 0.70 0.66 0.55 0.40
Book value per common share 5.15 4.66 4.37 3.35 2.89
Weighted average shares outstanding
Basic 8,017 7,985 7,066 6,813 6,732
Diluted 8,080 8,090 7,238 7,013 6,847
BALANCE SHEET DATA
Investment securities $ 60,544 $ 62,333 $ 47,894 $ 48,804 $ 51,484
Loans, net 299,881 246,975 206,552 155,219 118,228
Total assets 416,859 361,241 342,413 231,827 200,302
Total deposits 346,427 310,910 295,680 201,568 178,744
Shareholders' equity 41,326 37,322 34,756 22,987 19,533
KEY FINANCIAL RATIOS
Return on average assets 1.41% 1.44% 1.83% 1.77% 1.45%
Return on average equity 14.40 13.90 18.10 18.37 14.91
Total loans to total deposits 86.56 79.44 69.86 77.00 66.14
Net interest margin(1) 6.05 6.17 6.19 6.15 5.74
Efficiency ratio 62.17 62.14 56.56 56.37 62.77
Cash efficiency ratio 59.93 59.53 56.28 56.37 62.77
ASSET QUALITY RATIOS
Reserve for loans losses to:
Nonperforming assets 355.95% 553.45% 108.82% 112.65% 384.17%
Ending total loans 1.50 1.32 1.13 1.04 0.83
Nonperforming assets to ending
total assets 0.31 0.16 0.64 0.63 0.04
Net loan charge-offs (recoveries)
to average loans 0.14 0.04 0.38 (0.04) 0.29
CAPITAL RATIOS
Average shareholders' equity to
average assets 9.80% 10.40% 10.12% 9.62% 9.73%
Tier 1 capital ratio 9.80 10.20 10.90 13.70 14.20
Total risk-based capital ratio 11.00 11.30 11.90 14.70 14.90
Leverage ratio 8.10 8.30 8.90 10.60 9.90
(1) Interest earned on nontaxable securities has been computed on a 34% tax
equivalent basis.
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Management's Discussion and Analysis
Stock Price and Dividends
The common stock of Columbia Bancorp ("Columbia") trades on the Nasdaq National
Market under the symbol "CBBO". Trading in Columbia's stock on Nasdaq commenced
on November 6, 1998. The respective high and low sale prices of Columbia's
common stock for the periods indicated are shown below. All prices for the
periods shown have been adjusted for all stock splits. Prices do not include
retail markups, markdowns, or commissions, and may not represent actual
transactions. As of February 5, 2001 Columbia's stock was held by approximately
1,040 shareholders of record.
2000 1999
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Cash Dividend Cash Dividend
High Low Declared High Low Declared
----- ----- ----- ----- ----- -----
First Quarter $7.13 $5.50 $0.07 $9.13 $8.25 $0.06
Second Quarter $6.75 $5.75 $0.07 $9.13 $7.44 $0.06
Third Quarter $6.75 $6.00 $0.07 $8.13 $6.25 $0.06
Fourth Quarter $6.38 $5.75 $0.08 $8.25 $6.25 $0.07
Overview
From its origins as a one-branch bank in The Dalles, Oregon, Columbia has grown
as a result of merger and acquisition activity, new branch openings, the
introduction of new business lines and the expansion and cross-marketing of its
existing products and community-bank lending expertise. In 1995, Columbia River
Bank ("CRB") merged with Juniper Banking Company. In 1996, Columbia was formed
as CRB's holding company, and Columbia acquired Washington-based Klickitat
Valley Bank. Further growth came from CRB's Hood River and Bend branch openings,
and from the expansion in 1997 of CRB's residential mortgage business. In 1998,
CRB opened a new branch in Hermiston, Oregon and Columbia completed the
acquisition of Valley Community Bank. During 1999, CRB opened new branches in
Pendleton and Newberg, Oregon, and opened a second Bend, Oregon branch. In April
2000, Columbia River BankNet, CRB's Internet-based banking product, was
introduced. Collectively, these growth and acquisition activities have enabled
Columbia to diversify its portfolio and its operating risk over several market
areas and local economies.
Columbia's goal is to grow its earning assets while maintaining a high return on
equity and keeping asset quality strong. The key to this, in Columbia's view, is
to emphasize personal, quality banking products and services for its customers,
to hire and retain competent branch management and administrative personnel and
to respond quickly to customer demand and growth opportunities. Columbia also
intends to increase its market penetration in its existing markets, and to
expand into new markets through further suitable acquisitions and through new
branch openings. Columbia's goal is to increase earning assets without
compromising its commitment to strong asset quality.
As of December 31, 2000, Columbia had total assets of $416.86 million, total
deposits of $346.43 million, and shareholders' equity of $41.33 million.
Columbia's net income for the year ended December 31, 2000, was $5.62 million,
which was Columbia's 13th consecutive year of increasingly higher net income.
For the year ended December 31, 2000, Columbia's return on average assets was
1.41% and return on average equity was 14.40%. Since the year ended December 31,
1995, Columbia has increased earnings by an average of 25.19% per year and
achieved an average return on average assets of 1.56%. During the same period,
Columbia has achieved an average return on average equity of 15.86% while
sustaining strong asset quality.
Results of Operations
Net Interest Income
Net interest income, before provision for loan losses, for the year ended
December 31, 2000 was $21.11 million, an increase of 15.26% compared to net
interest income of $18.32 million in 1999, an increase of 29.68% compared to net
interest income of $14.12 million in 1998. The overall tax-equivalent earning
asset yield was 9.48% in 2000 compared to 8.98% in 1999 and 9.25% in 1998. For
the same years, rates on interest-bearing liabilities were 4.42%, 3.60%, and
3.97%, respectively. These results were primarily due to an increase in the
volume of earning assets and the growth of noninterest-bearing deposits. For the
three-year period 1998 through 2000, the average yield on earning assets
increased 0.23% while rates paid on interest-bearing liabilities increased by
0.45%. Average loans increased 64.05% while average noninterest-bearing deposits
increased 63.11%.
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ANALYSIS OF NET INTEREST INCOME
The following table presents information regarding yields on interest-earning
assets, expense on interest-bearing liabilities and net yields on
interest-earning assets for the periods indicated.
Year Ended December 31, Increase Change
--------------------------------------- ------------------------ -----------------
(dollars in thousands) 2000 1999 1998 00-99 99-98 00-99 99-98
----------- ----------- ----------- ----------- ----------- ----- -----
Interest and fee income(1) $ 33,834 $ 27,400 $ 21,764 $ 6,434 $ 5,636 23.48 25.90%
Interest expense $ 12,256 $ 8,568 $ 7,205 $ 3,688 $ 1,363 43.04 18.92%
Net interest income before
provision for loan loss(1) $ 21,578 $ 18,832 $ 14,559 $ 2,746 $ 4,273 14.58 29.35%
Average interest-earning assets $ 356,806 $ 305,287 $ 235,277 $ 51,519 $ 70,010 16.88 29.76%
Average interest-bearing liabilities $ 277,320 $ 238,646 $ 181,400 $ 38,674 $ 57,246 16.21 31.56%
Average interest-earning assets/
interest-bearing liabilities 128.66% 127.92% 129.70% 0.74 (1.78)
Average yields earned(1) 9.48% 8.98% 9.25% 0.50 (0.27)
Average rates paid 4.42% 3.60% 3.97% 0.82 (0.37)
Net interest spread(1) 5.06% 5.38% 5.28% (0.32) 0.10
Net interest margin(1) 6.05% 6.17% 6.19% (0.12) (0.02)
(1) Tax-exempt income has been adjusted to a tax-equivalent basis at 34%.
Total interest-earning assets averaged $356.81 million for the year ended
December 31, 2000, compared to $305.29 million for the corresponding period in
1999. Most of the increase was due to an increase in loans. Increases in the
loan portfolio are attributed to execution of Columbia's strategy to provide
personal, quality banking products and services for its customers and the hiring
of additional lending personnel in strategic branch locations and administrative
capacities.
Interest-bearing liabilities averaged $277.32 million for the year ended
December 31, 2000 compared to $238.65 million during the same period in 1999.
Although further competitive pressure is expected in expanding deposit
relationships, management, does not generally seek to attract high-priced,
brokered deposits.
Loans, which generally carry a higher yield than investment securities and other
earning assets, comprised 80.73% of average earning assets during 2000, compared
to 72.81% in 1999 and 74.63% in 1998. During the same periods, average yields on
loans were 10.23% in 2000, 10.12% in 1999, and 10.22% in 1998. Investment
securities comprised 16.76% of average earning assets in 2000, which was down
from 19.43% in 1999 and 20.62% in 1998. Tax equivalent interest yields on
investment securities have ranged from 6.32% in 2000 to 6.27% in 1999 and 6.54%
in 1998.
Interest cost, as a percentage of earning assets, increased to 3.44% in 2000,
compared to 2.81% in 1999 and 3.06% in 1998. Local competitive pricing
conditions and funding needs for Columbia's investments in loans have been the
primary determinants of rates paid for deposits during these three years.
PROVISION FOR LOAN LOSSES
The provision for loan losses represents charges made to earnings to maintain an
adequate allowance for loan losses. The allowance is maintained at an amount
believed to be sufficient to absorb losses in the loan portfolio. Factors
considered in establishing an appropriate allowance include a careful assessment
of the financial condition of the borrower; a realistic determination of the
value and adequacy of underlying collateral; the condition of the local economy
and the condition of the specific industry of the borrower; a comprehensive
analysis of the levels and trends of loan categories; and a review of delinquent
and classified loans.
Years Ended December 31,
----------------------------------------------------------------------
(dollars in thousands) 2000 1999 1998 1997 1996
-------- -------- -------- --------- --------
Outstanding loans at end of period,
net of unearned interest income $304,459 $250,274 $208,932 $ 156,858 $119,223
Net charge-offs (recoveries) $ 418 $ 86 $ 669 $ (63) $ 324
Ratio of net loans charged-off
(recovered) to average
outstanding loans 0.14% 0.04% 0.38% (0.04)% 0.29%
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For the year ended December 31, 2000, loan charge-offs exceeded recoveries by
$418,000 as compared to 1999, when loan charge-offs exceeded recoveries by
$86,000. Nearly one-half of the loss experienced in 2000 was due to a loss from
one loan. All remaining net charge-offs incurred by Columbia were smaller in
amount and generally distributed evenly among all other branch locations.
NONINTEREST INCOME
Total noninterest income increased through year-end 2000 from 1998. During this
three-year period, noninterest income has increased from $4.68 million in 1998,
to $5.78 million in 1999, to $6.98 million in 2000. Noninterest income is
primarily derived from service charges and related fees, as well as mortgage
origination and processing fees. Such income increased $1.20 million, or 20.65%
for the year ended December 31, 2000, compared to the year ended December 31,
1999. The increase, in part, was the result of increasing deposit volumes and
related service fees. Service charges were $2.60 million for the year ended
December 31, 2000, compared to $2.19 million for the year ended December 31,
1999, and $1.74 million for the year ended December 31, 1998. Management
attributes this 18.72% increase to the increase in customers served at all CRB
branches. The increase in noninterest income was also a result of income
generated by Columbia's mortgage lending division, which operates under the name
"Columbia River Bank Mortgage Group." For the year ended 2000, this division
generated $2.31 million in revenue from originating, processing, servicing and
selling mortgage loans. The remainder of the increase in noninterest income is
primarily attributable to improved revenues received from credit card discounts
and fees, investment fee income provided by Columbia's financial services
department and other noninterest fees and charges.
NONINTEREST EXPENSE
Noninterest expenses consist primarily of employees' salaries and benefits,
occupancy costs, data processing expenses and other noninterest expenses. A
measure of Columbia's ability to contain noninterest expenses is the efficiency
ratio. For the year ended December 31, 2000, the cash basis efficiency ratio had
slipped to 59.93% compared to 59.53% for the corresponding period in 1999. The
decline in the efficiency ratio primarily reflects increased expenses.
Noninterest expense was $17.46 million for the year ended December 31, 2000, an
increase of $2.49 million from the year ended December 31, 1999. This was due to
an increase in staffing costs, occupancy expense, and other noninterest expense.
The additional increases related primarily to costs associated with growth in
operations, continuing investments in technology and communication systems, and
the introduction of Columbia River BankNet, CRB's Internet banking product. Data
processing costs decreased during the year, as CRB acquired the remaining 71.4%
of Datatech of Oregon, Inc. and entered into a servicing agreement with FISERV
for data processing services. Management believes these actions allow the
Company more control over data processing systems with less cost.
INCOME TAXES
The provision for income taxes was $3.30 million in 2000, $3.11 million in 1999
and $2.45 million in 1998. The provision resulted in effective combined federal
and state tax rates of 37.01% in 2000, 38.25% in 1999, and 34.18% in 1998. The
effective tax rates differ from combined estimated statutory rates of 38%
principally due to the effects of nontaxable interest income which is recognized
for book but not for tax purposes.
LOANS
CRB's loan policies and procedures establish the basic guidelines governing its
lending operations. Generally, the guidelines address the types of loans that
CRB seeks, target markets, underwriting and collateral requirements, terms,
interest rate and yield considerations, and compliance with laws and
regulations. All loans or credit lines are subject to approval procedures and
amount limitations. These limitations apply to the borrower's total outstanding
indebtedness to CRB, including the indebtedness of any guarantor. The policies
are reviewed and approved at least annually by the Board of Directors of CRB.
Net outstanding loans totaled $299.88 million at December 31, 2000, representing
an increase of $52.91 million, or 21.42% compared to $246.98 million as of
December 31, 1999. Loan commitments grew to $102.41 million as of December 31,
2000, representing an increase of $19.72 million over year-end 1999. Net
outstanding loans were $206.55 million at December 31,1998.
CRB's net loan portfolio at December 31, 2000, includes loans secured by real
estate (55.74% of total), commercial loans (24.03% of total), agricultural loans
(15.04% of total) and consumer loans (6.52% of total). These percentages are
generally consistent with previous reporting periods. Loans secured by real
estate include loans made for purposes other than financing purchases of real
property, such as inventory financing and equipment purchases, where real
property serves as collateral for the loan.
ASSET-LIABILITY MANAGEMENT AND INTEREST RATE SENSITIVITY
Columbia's results of operations depend substantially on its net interest
income. Interest income and interest expense are affected by general economic
conditions and by competition in the marketplace. Columbia's interest and
pricing strategies are driven by its asset-liability management analysis and by
local market conditions.
Columbia seeks to manage its assets and liabilities to generate a stable level
of earnings in response to changing interest rates and to manage its interest
rate risk. Columbia further strives to serve its communities and customers
through deployment of its resources on a corporate-wide basis so that qualified
loan demands may
13
16
be funded wherever necessary in its branch banking system. Asset/liability
management involves managing the relationship between interest rate sensitive
assets and interest rate sensitive liabilities. If assets and liabilities do not
mature or reprice simultaneously, and in equal amounts, the potential for
exposure to interest rate risk exists, and an interest rate "gap" is said to be
present.
Rising and falling interest rate environments can have various effects on a
bank's net interest income, depending on the interest rate gap, the relative
changes in interest rates that occur when assets and liabilities are repriced,
unscheduled repayments of loans, early withdrawals of deposits and other
factors.
The following table sets forth the dollar amount of maturing interest-earning
assets and interest-bearing liabilities at December 31, 2000, and the difference
between them for the maturing or repricing periods indicated. The amounts in the
table are derived from Columbia's internal data, which varies from amounts
classified in its financial statements, and, although the information may be
useful as a general measure of interest rate risk, the data could be
significantly affected by external factors such as prepayments of loans or early
withdrawals of deposits. Each of these may greatly influence the timing and
extent of actual repricing of interest-earning assets and interest-bearing
liabilities.
December 31, 2000
---------------------------------------------------------------------------------------------
Immediate Less Than Months Months Over
(dollars in thousands) Repricing 3 Months 3 - 6 6 - 12 12 Months Total
--------- -------- --------- --------- --------- ---------
ASSETS
Liquid Investments $ 3,309 $ 435 $ 758 $ 1,516 $ 40,109 $ 46,127
Other Investments -- -- 347 694 18,641 19,682
Loans 106,542 22,765 4,621 8,901 157,052 299,881
--------- -------- --------- --------- --------- ---------
Total assets 109,851 23,200 5,726 11,111 215,802 365,690
LIABILITIES
Core deposits 177,212 28,075 17,237 17,237 79,263 319,024
Jumbo CDs -- 13,351 8,570 2,143 3,339 27,403
Borrowings 849 11,000 300 13,000 1,220 26,369
--------- -------- --------- --------- --------- ---------
Total liabilities 178,061 52,426 26,107 32,380 83,822 372,796
--------- -------- --------- --------- --------- ---------
Net position (68,210) (29,226) (20,381) (21,269) 131,980 $ (7,106)
========= ======== ========= ========= ========= =========
Net cumulative position $ (68,210) $(97,436) $(117,817) $(139,086) $ (7,106)
========= ========= ========= ========= =========
Cumulative Gap as a
percentage of assets (16.36)% (23.37)% (28.26)% (33.37)% (1.70)%
========= ========= ========= ========= =========
The net cumulative gap position is somewhat negative since more liabilities than
assets reprice during the next year. This exposure to increasing rates is
currently exaggerated by "sticky" deposit rates (not expected to reprice rapidly
in an increasing rate environment). However, Columbia's asset rates change more
than deposit rates, and management feels Columbia's asset yields will change
more than cost of funds when rates change.
Management believes that Columbia has relatively low interest rate risk that is
somewhat asset-sensitive. The net interest margin should increase slightly when
rates increase and shrink somewhat when rates fall. This interest rate risk is
driven by concentration of rate sensitive variable rate and short-term
commercial loans, one of Columbia's major business lines. Columbia does have
significant amounts of fixed rate loans to offset most of the impact from
repricing of short-term loans. However, there can be no assurance that
fluctuations in interest rates will not have a material adverse impact on
Columbia.
Columbia's sensitivity to gains or losses in future earnings due to hypothetical
decreases or increases in interest rates is as follows:
Increase or Financial Impact
Decrease in on Net
Interest Rates Interest Margin
-------------- ---------------
2% $ 420,000
1% $ 210,000
-1% $(280,000)
-2% $(716,000)
LIQUIDITY
Columbia has adopted policies to maintain a relatively liquid position to enable
it to respond to changes in the financial environment and ensure sufficient
funds are available to meet customers' needs for borrowing and deposit
withdrawals. Generally, Columbia's major sources of liquidity are customer
deposits, sales and maturities of investment securities, the use of federal
funds markets and net cash provided by operating
14
17
activities. Scheduled loan repayments are a relatively stable source of funds,
while deposit inflows and unscheduled loan prepayments, which are influenced by
general interest rate levels, interest rates available on other investments,
competition, economic conditions, and other factors, are not. Liquid asset
balances include cash, amounts due from other banks, federal funds sold,
securities available-for-sale and securities held-to-maturity with maturities
in the next three months. At December 31, 2000, these liquid assets totaled
$66.04 million or 15.87% of total assets as compared to $67.04 million or 18.56%
of total assets at December 31, 1999. Another source of liquidity is provided by
CRB's ability to borrow from the Federal Home Loan Bank of Seattle and other
correspondent banks.
An analysis of liquidity also includes a review of the changes that appear in
the consolidated statements of cash flows. The statement of cash flows includes
operating, investing and financing categories. Operating activities include net
income of $5.62 million, which is adjusted for non-cash items and increases or
decreases in cash due to changes in certain assets and liabilities. Investing
activities consist primarily of both proceeds from and purchases of securities
and the impact of the net growth in loans. Financing activities present the cash
flows associated with deposit accounts and reflect dividends paid to
shareholders.
At December 31, 2000, CRB had outstanding commitments to make loans of $102.41
million. Nearly all of these commitments represented unused portions of credit
lines available to consumers under credit card and other arrangements and to
businesses. Many of these credit lines will not be fully drawn upon and,
accordingly, the aggregate commitments do not necessarily represent future cash
requirements. Management believes that Columbia's sources of liquidity are more
than adequate to meet likely calls on outstanding commitments, although there
can be no assurance in this regard.
SHAREHOLDERS' EQUITY AND REGULATORY CAPITAL
Shareholders' equity increased $4.01 million during 2000. Shareholders' equity
at December 31, 2000 was $41.33 million compared to $37.32 million at December
31, 1999. This increase reflects net income and comprehensive income of $6.25
million and $70,000 in exercised stock options. These additions to equity were
partially offset by cash dividends paid or declared of $2.33 million.
The Federal Reserve Board and the Federal Deposit Insurance Corporation 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 reflects Columbia's
various capital ratios at December 31, 2000, and December 31, 1999, as compared
to regulatory minimums for capital adequacy purposes:
At At
December December Regulatory
31, 2000 31, 1999 Minimum
----- ----- ----
Tier I capital 9.80% 10.20% 4.00%
Total risk-based
capital 11.00% 11.30% 8.00%
Leverage ratio 8.10% 8.30% 4.00%
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report includes forward-looking statements as defined in applicable
federal securities laws and regulations. Such forward-looking statements are
based on certain assumptions made by Columbia's management, information
currently available to management, and management's present beliefs about
Columbia's business and operations. All statements, other than statements of
historical fact in this document, regarding Columbia's financial position,
business strategy, and plans and objectives of management of Columbia for future
operations, are forward-looking statements. Forward-looking statements can be
identified by words such as "believe," "estimate," "anticipate," "expect,"
"intend," "will," "may," "should," or other similar phrases or words. Although
Columbia believes that the expectations reflected in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove to have been correct. Readers are therefore cautioned not to place undue
reliance on such forward-looking statements. Such factors as changed conditions,
incorrect assumptions or the materialization of a risk or uncertainty could
cause actual results to differ materially from results described in this
document as believed, anticipated, estimated, expected, or intended. Columbia
does not intend to update these forward-looking statements other than in its
quarterly and annual reports and other filings under applicable securities laws.
15
18
Consolidated Balance Sheets
DECEMBER 31, 2000 1999
------------- -------------
ASSETS
Cash and due from banks $ 23,807,918 $ 23,796,174
Interest-bearing deposits with other banks 2,167,580 912,838
Federal funds sold 1,141,133 680,024
------------- -------------
Total cash and cash equivalents 27,116,631 25,389,036
------------- -------------
Investment securities available-for-sale 39,388,134 41,111,041
Investment securities held-to-maturity 19,518,428 20,125,225
Restricted equity securities 1,637,600 1,096,800
------------- -------------
Total investment securities 60,544,162 62,333,066
------------- -------------
Loans held-for-sale 5,318,303 3,282,849
Loans, net of allowance for loan losses and
unearned loan fees 294,562,864 243,692,191
Property and equipment, net of depreciation 13,875,397 12,008,224
Accrued interest receivable 3,992,040 2,902,601
Goodwill 8,017,717 8,646,340
Other assets 3,431,901 2,986,360
------------- -------------
Total assets $ 416,859,015 $ 361,240,667
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand deposits $ 87,823,991 $ 74,889,247
Interest-bearing demand deposits 133,467,551 130,148,498
Savings accounts 27,251,563 27,326,830
Time certificates 97,884,316 78,545,214
------------- -------------
Total deposits 346,427,421 310,909,789
------------- -------------
Notes payable 26,369,223 10,870,318
Accrued interest payable and other liabilities 2,736,206 2,138,998
------------- -------------
Total liabilities 375,532,850 323,919,105
------------- -------------
COMMITMENTS AND CONTINGENCIES (NOTE 16)
STOCKHOLDERS' EQUITY
Common stock, no par value,
20,000,000 shares authorized, 8,029,422
issued and outstanding at December 31, 2000
(8,010,522 in 1999) 14,461,771 14,392,229
Additional paid-in capital 6,379,393 6,371,490
Retained earnings 20,569,918 17,272,137
Accumulated other comprehensive income (loss),
net of taxes (84,917) (714,294)
------------- -------------
Total stockholders' equity 41,326,165 37,321,562
------------- -------------
Total liabilities and stockholders' equity $ 416,859,015 $ 361,240,667
============= =============
See accompanying notes.
16
19
Consolidated Statements of Income
and Comprehensive Income
YEARS ENDED DECEMBER 31, 2000 1999 1998
----------- ------------ ------------
INTEREST INCOME
Interest and fees on loans $29,472,770 $ 22,494,529 $ 17,938,902
Interest on investments:
Taxable investment securities 2,402,691 2,194,632 1,719,464
Nontaxable investment securities 906,920 1,002,837 847,508
Interest on federal funds sold 109,878 829,137 492,361
Other interest and dividend income 474,869 362,171 329,615
----------- ------------ ------------
Total interest income 33,367,128 26,883,306 21,327,850
----------- ------------ ------------
INTEREST EXPENSE
Interest on interest-bearing deposit and savings accounts 5,055,588 4,147,874 3,570,752
Interest on time deposit accounts 5,727,145 3,886,563 3,195,414
Other borrowed funds 1,473,614 533,800 438,588
----------- ------------ ------------
Total interest expense 12,256,347 8,568,237 7,204,754
----------- ------------ ------------
Net interest income before
provision for loan losses 21,110,781 18,315,069 14,123,096
----------- ------------ ------------
PROVISION FOR LOAN LOSSES 1,697,000 1,005,000 1,000,000
----------- ------------ ------------
Net interest income after
provision for loan losses 19,413,781 17,310,069 13,123,096
----------- ------------ ------------
NONINTEREST INCOME
Service charges and fees 2,596,294 2,186,953 1,744,620
Mortgage Group revenues 2,308,574 1,852,115 1,605,250
Credit card discounts and fees 700,440 550,812 420,577
Financial services department income 432,048 377,332 311,925
Other noninterest income 940,725 816,408 595,446
----------- ------------ ------------
Total noninterest income 6,978,081 5,783,620 4,677,818
----------- ------------ ------------
NONINTEREST EXPENSES
Salaries and employee benefits 9,652,033 8,043,843 6,014,344
Occupancy expense 1,608,593 1,188,923 948,287
Goodwill amortization 628,623 628,623 52,385
Credit card processing fees 507,370 405,075 282,041
Data processing expense 485,781 566,113 364,431
Other noninterest expenses 4,580,430 4,142,533 2,971,674
----------- ------------ ------------
Total noninterest expenses 17,462,830 14,975,110 10,633,162
----------- ------------ ------------
INCOME BEFORE PROVISION FOR INCOME TAXES 8,929,032 8,118,579 7,167,752
----------- ------------ ------------
PROVISION FOR INCOME TAXES 3,304,997 3,105,356 2,449,899
----------- ------------ ------------
NET INCOME 5,624,035 5,013,223 4,717,853
=========== ============ ============
OTHER COMPREHENSIVE INCOME
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising during the period 625,387 (764,362) 148,939
Reclassification adjustment for (gains) losses included
in net income 3,990 (5,130) (103,833)
----------- ------------ ------------
Other comprehensive income (loss) 629,377 (769,492) 45,106
----------- ------------ ------------
COMPREHENSIVE INCOME $ 6,253,412 $ 4,243,731 $ 4,762,959
=========== ============ ============
BASIC EARNINGS PER SHARE OF COMMON STOCK $ 0.70 $ 0.63 $ 0.67
=========== ============ ============
DILUTED EARNINGS PER SHARE OF COMMON STOCK $ 0.70 $ 0.62 $ 0.65
=========== ============ ============
See accompanying notes.
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20
Consolidated Statements of Changes
in Stockholders' Equity
Accumulated
Additional Compre- Total
Common Stock Paid-In Retained hensive Stockholders'
Shares Amount Capital Earnings Income (Loss) Equity
--------- ----------- ---------- ------------ --------- ------------
BALANCE,
December 31, 1997 2,288,451 $ 5,528,218 $6,317,732 $ 11,131,444 $ 10,092 $ 22,987,486
Stock options exercised 26,110 236,607 -- -- -- 236,607
Sale of common stock 1,009,375 8,360,490 -- -- -- 8,360,490
3 for 2 stock split and cash
paid for fractional shares 1,154,755 -- -- (4,037) -- (4,037)
2 for 1 stock split 3,470,341 -- -- -- -- --
Cash dividends paid -- -- -- (1,110,343) -- (1,110,343)
Cash dividends declared -- -- -- (476,942) -- (476,942)
Net income and
comprehensive income -- -- -- 4,717,853 45,106 4,762,959
--------- ----------- ---------- ------------ --------- ------------
BALANCE,
December 31, 1998 7,949,032 14,125,315 6,317,732 14,257,975 55,198 34,756,220
Stock options exercised 61,490 266,914 -- -- -- 266,914
Income tax benefit from
stock options exercised -- -- 53,758 -- -- 53,758
Cash dividends paid -- -- -- (1,438,324) -- (1,438,324)
Cash dividends declared -- -- -- (560,737) -- (560,737)
Net income and
comprehensive income -- -- -- 5,013,223 (769,492) 4,243,731
--------- ----------- ---------- ------------ --------- ------------
BALANCE,
December 31, 1999 8,010,522 14,392,229 6,371,490 17,272,137 (714,294) 37,321,562
Stock options exercised 18,900 69,542 -- -- -- 69,542
Income tax benefit from
stock options exercised -- -- 7,903 -- -- 7,903
Cash dividends paid -- -- -- (1,683,900) -- (1,683,900)
Cash dividends declared -- -- -- (642,354) -- (642,354)
Net income and
comprehensive income -- -- -- 5,624,035 629,377 6,253,412
--------- ----------- ---------- ------------ --------- ------------
BALANCE,
December 31, 2000 8,029,422 $14,461,771 $6,379,393 $ 20,569,918 $ (84,917) $ 41,326,165
========= =========== ========== ============ ========= ============
See accompanying notes.
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21
Consolidated Statements of Cash Flows
YEARS ENDED DECEMBER 31, 2000 1999 1998
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,624,035 $ 5,013,223 $ 4,717,853
Adjustments to reconcile net income to net
cash from operating activities:
Amortization of premiums and discounts
on investment securities 30,180 43,171 (8,385)
Loss (gain) on sale of available-for-sale securities 6,046 (8,566) (142,320)
Loss (gain) on sale or write-down of property
and equipment 501 -- (10,393)
Loss on sale or write-down of other real estate owned -- 41,450 --
Loss (gain) on call of held-to-maturity investment securities -- 793 (15,003)
Depreciation and amortization 1,620,452 1,328,275 552,955
Federal Home Loan Bank stock dividend (90,900) (79,700) (59,600)
Deferred income tax benefit 80,978 373,285 (186,665)
Provision for loan losses 1,697,000 1,005,000 1,000,000
Increase (decrease) in cash due to changes in certain assets
and liabilities:
Proceeds from the sale of loans held-for-sale 117,490,853 134,746,355 112,433,596
Production of loans held-for-sale (119,526,307) (130,210,601) (117,538,534)
Accrued interest receivable (1,089,439) (415,479) (76,406)
Other assets (828,506) (1,026,781) (865,964)
Accrued interest payable and other liabilities 523,494 (133,584) (946,616)
------------- ------------- -------------
Net cash from operating activities 5,538,387 10,676,841 (1,145,482)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of available-for-sale securities 3,014,531 9,706,623 16,220,625
Proceeds from the maturity of available-for-sale securities 800,000 1,565,000 7,665,000
Proceeds from the maturity of held-to-maturity securities 2,479,371 3,473,381 2,524,291
Purchases of held-to-maturity securities (1,887,266) (6,304,797) (3,097,129)
Purchases of available-for-sale securities (1,181,794) (24,076,603) (15,995,790)
Purchase of restricted equity securities (449,900) (26,650) --
Proceeds from sale of restricted equity securities -- 126,750 --
Net change in loans made to customers (52,567,673) (46,123,083) (27,489,520)
Cash paid, net of cash received from acquisition -- -- (709,364)
Proceeds from the sale of property and equipment 27,331 -- 10,393
Proceeds from the sale of other real estate owned -- 398,430 --
Payments made for purchase of property and equipment (2,886,834) (4,517,809) (1,847,077)
------------- ------------- -------------
Net cash from investing activities (52,652,234) (65,778,758) (22,718,571)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit and savings accounts 16,178,530 2,270,069 43,715,064
Net change in time deposits 19,339,102 12,959,331 15,860,017
Net increase in borrowings 15,498,905 1,136,223 3,096,282
Dividends paid and fractional share payments (2,244,637) (1,915,266) (1,343,226)
Proceeds from stock options exercised and
sales of common stock 69,542 266,914 470,982
Proceeds from public stock offering, net of expenses -- -- 8,126,115
------------- ------------- -------------
Net cash from financing activities 48,841,442 14,717,271 69,925,234
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,727,595 (40,384,646) 46,061,181
CASH AND CASH EQUIVALENTS, beginning of year 25,389,036 65,773,682 19,712,501
------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of year $ 27,116,631 $ 25,389,036 $ 65,773,682
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash $ 12,244,272 $ 8,464,322 $ 7,270,325
============= ============= =============
Taxes paid in cash $ 2,972,000 $ 2,930,000 $ 2,582,783
============= ============= =============
SCHEDULE OF NONCASH ACTIVITIES
Change in unrealized loss on available-for-sale
securities, net of taxes $ 629,377 $ (769,492) $ 45,106
============= ============= =============
Cash dividend declared and payable after year-end $ 642,354 $ 560,737 $ 476,942
============= ============= =============
Transfers of loans to other real estate owned $ -- $ 159,080 $ 280,800
============= ============= =============
See accompanying notes.
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22
Notes to Consolidated Financial Statements
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 ("CRB" or "Bank") effective January 1, 1996.
CRB is a state-chartered banking institution authorized to provide banking
services by the States of Oregon and Washington. With its administrative
headquarters in The Dalles, Oregon, CRB operates branch facilities in The
Dalles, Hood River, Hermiston, Pendleton, McMinnville, Newberg, Madras, Redmond,
and Bend, Oregon. In Washington, it operates branches in Goldendale and White
Salmon.
Substantially all activity of Columbia is conducted through its subsidiary bank,
CRB, which, 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 CRB have been eliminated in the preparation of the
consolidated financial statements.
BUSINESS ACQUISITION AND EXPANSION ACTIVITY -- In 1997, CRB began operating a
mortgage banking division, Columbia River Bank Mortgage Group (the "Mortgage
Group"), which is headquartered in Bend, Oregon. The Mortgage Group has an
office in The Dalles, Oregon and provides services to all commercial banking
branches of CRB.
As further discussed in Note 2, Columbia acquired Valley Community Bancorp and
its subsidiaries, Valley Community Bank ("VCB"), and Valley Community Mortgage
Services, Inc., in November 1998.
MANAGEMENT'S ESTIMATES AND ASSUMPTIONS -- In preparing the consolidated
financial statements, management is required 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.
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, 2000 and 1999, are either "available-for-sale" or
"held-to-maturity" and conform to the following accounting policies:
Securities held-to-maturity -- Bonds, notes, and debentures for which Columbia
has the intent and ability to hold to maturity are reported at cost, adjusted
for premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.
Securities available-for-sale -- Available-for-sale securities consist of bonds,
notes, debentures, and certain equity securities not classified as
held-to-maturity securities. Securities are generally classified as
available-for-sale if the instrument may be sold in response to such factors
as: (1) changes in market interest rates and related changes in the prepayment
risk, (2) needs for liquidity, (3) changes in the availability of and the yield
on alternative instruments and (4) changes in funding sources and terms.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as other comprehensive income and carried as accumulated
comprehensive income or loss within stockholders' equity until realized. Fair
values for these investment securities are based on quoted market prices. Gains
and losses on the sale of available-for-sale securities are determined using the
specific-identification method.
Declines in the fair value of individual held-to-maturity and available-for-sale
securities below their cost that are other than temporary result in write-downs
of the individual securities to their fair value. The related write-downs are
included in earnings as realized losses. Premiums and discounts are recognized
in interest income using the effective interest method over the period to
maturity.
RESTRICTED EQUITY SECURITIES -- Columbia's equity investments in the Federal
Home Loan Bank and the Federal Agriculture Mortgage Corporation are classified
as restricted equity securities since ownership of these instruments is
restricted and they do not have an active market. As restricted equity
securities, these investments are carried at cost.
LOANS, NET OF ALLOWANCE FOR LOAN LOSSES AND UNEARNED INCOME -- Loans are stated
at the amount of unpaid principal, reduced by an allowance for loan losses and
unearned income. Interest on loans is calculated by using the simple-interest
method on daily balances of the principal amount outstanding. The allowance for
loan losses is established through a provision for loan losses charged to
expenses. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that
20
23
may affect the borrower's ability to pay. Various regulatory agencies, as a
regular part of their examination process, periodically review the Bank's
reserve for loan losses. Such agencies may require the Bank to recognize
additions to the allowance based on their judgment of information available to
them at the time of examination.
Impaired loans are carried at the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's market price, or
the fair value of the collateral if the loan is collateral dependent. Accrual of
interest is discontinued on impaired loans when management believes, after
considering economic and business conditions, collection effort, and collateral
position, that the borrower's financial condition is such that collection of
interest is doubtful. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only to the
extent cash payments are received.
Loan origination fees and certain direct origination costs are capitalized and
recognized as an adjustment of the yield of the related loan.
LOANS HELD-FOR-SALE -- Mortgage loans held-for-sale are carried at the lower of
cost or estimated market value. Market value is determined on an aggregate loan
basis. At December 31, 2000 and 1999, mortgage loans held-for-sale were carried
at cost which approximated market.
LOAN SERVICING -- The cost of mortgage servicing rights is amortized in
proportion to, and over the period of, estimated net servicing revenues.
Impairment of mortgage servicing rights is assessed based on the fair value of
those rights. Fair values are estimated using discounted cash flows based on
current market interest rates. The amount of impairment recognized is the amount
by which the capitalized mortgage servicing rights exceed fair value.
Rights to future interest income from serviced loans that exceeds contractually
specified servicing fees are classified as interest-only strips and accounted
for as debt securities that are available-for-sale.
PROPERTY AND EQUIPMENT -- Property and equipment are stated at cost, less
accumulated depreciation. Depreciation is computed by the straight-line and
accelerated methods over the estimated useful lives of the assets, which range
from three to seven years for furniture and equipment and 31-1/2 years for
building premises.
OTHER REAL ESTATE -- Other real estate, acquired through foreclosure or deeds in
lieu of foreclosure, is carried at the lower of cost or estimated net realizable
value. When property is acquired, any excess of the loan balance over its
estimated net realizable value is charged to the reserve for loan losses.
Subsequent write-downs to net realizable value, if any, or any disposition gains
or losses are included in noninterest income and expense.
GOODWILL -- Goodwill represents the excess of cost over the fair value of net
assets acquired from the purchase of Valley Community Bancorp (see Note 2), and
is being amortized by the straight-line method over a 15-year period.
INCOME TAXES -- Deferred income tax assets and liabilities are determined based
on the tax effects of the differences between the book and tax bases of the
various balance sheet assets and liabilities. Deferred tax assets and
liabilities are reflected at currently enacted income tax rates applicable to
the period in which the deferred tax assets or liabilities are expected to be
realized or settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income taxes.
ADVERTISING -- Advertising costs are charged to expense during the year in which
they are incurred. Advertising expenses were $384,786, $278,834, and $248,239
for the years ended December 31, 2000, 1999, and 1998, respectively.
CASH AND CASH EQUIVALENTS -- Cash and cash equivalents normally include cash
on hand, amounts due from banks and federal funds sold.
OFF-BALANCE-SHEET FINANCIAL INSTRUMENTS -- In the ordinary course of business,
the Bank has entered into off-balance-sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. These financial
instruments are recorded in the financial statements when they are funded or
related fees are incurred or received.
DERIVATIVE FINANCIAL INSTRUMENTS -- In order to mitigate the risk that a
change in interest rates will result in a decline in the value of Mortgage
Group's committed loan pipeline, the Bank enters into derivative financial
instruments designated as fair value hedges. The gain or loss on a derivative
instrument designated and qualifying as a fair value hedging instrument, as well
as the offsetting loss or gain on the hedged item attributable to the hedged
risk, is recognized in earnings in the same period, as required by Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which was adopted by the Company in the
current year.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The following methods and assumptions
were used by Columbia in estimating fair values of financial instruments as
disclosed herein:
Cash and cash equivalents -- The carrying amounts of cash and short-term
instruments approximate their fair value.
Held-to-maturity and available-for-sale 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
21
24
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 discounted
cash flow analyses 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, fixed-term
money market accounts and certificates of deposit (CDs) approximate their fair
values at the reporting date. Fair values for fixed-rate CDs are estimated using
a discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly maturities
on time deposits.
Short-term borrowings -- The carrying amounts of federal funds purchased,
borrowings under repurchase agreements, and other short-term borrowings maturing
within 90 days approximate their fair values. Fair values of other short-term
borrowings are estimated using discounted cash flow analyses based on the Bank's
current incremental borrowing rates for similar types of borrowing arrangements.
Long-term debt -- The fair values of the Bank's long-term debt is estimated
using discounted cash flow analyses based on the Bank's current incremental
borrowing rates for similar types of borrowing arrangements.
Accrued interest -- The carrying amounts of accrued interest approximate their
fair values.
Off-balance-sheet instruments -- The Banks' off-balance-sheet instruments
include unfunded commitments to extend credit and standby letters of credit. The
fair value of these instruments is not considered practicable to estimate
because of the lack of quoted market prices and the inability to estimate fair
value without incurring excessive costs.
STOCK OPTIONS -- Columbia applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for its stock option plans. Accordingly,
compensation costs are recognized as the difference between the exercise price
of each option and the market price of Columbia's stock at the date of each
grant. No compensation costs were recognized in 2000, 1999, and 1998,
respectively. Had compensation for Columbia's stock option plans been determined
based on the fair value at the grant dates for awards under those plans
consistent with the method of SFAS No. 123, net income would have been affected
as described in Note 18.
Recently issued accounting standards -- The Financial Accounting Standards Board
issued SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishment of Liabilities -- a replacement of FASB Statement No. 125,"
effective for transfers and extinguishments occurring after March 31, 2001. The
impact and adoption of these standards is not expected to materially affect
Columbia's financial condition or results of operations.
RECLASSIFICATIONS -- Certain reclassifications have been made to the 1999 and
1998 financial statements to conform with current year presentations.
Note 2 -- Acquisition of Valley Community Bancorp
Effective November 30, 1998, Columbia completed its acquisition of Valley
Community Bancorp and its wholly-owned subsidiaries, VCB and Valley Community
Mortgage Services, Inc., headquartered in McMinnville, Oregon. As consideration
for the acquisition, Columbia paid $15.1 million in exchange for all of the
outstanding common and preferred stock held by stockholders of Valley Community
Bancorp. Total cash paid, net of cash received from the acquisition was
$709,364. VCB is no longer a separate entity, having been merged into CRB in
1999.
The business combination was accounted for as a purchase for accounting
purposes. Accordingly, under generally accepted accounting principles, the
assets and liabilities of Valley Community Bancorp were recorded by Columbia at
their respective fair market values as of the effective date of the acquisition.
As a result, goodwill, which is the excess of the purchase price over the net
fair value of the assets acquired and liabilities assumed, was recorded at
$9,327,348. Amortization of goodwill over a 15-year period will result in a
charge to earnings of approximately $629,000 per year. Had the acquisition
occurred as of January 1, 1998, the pro forma effects on the results of
operations would have been as follows: net interest income before the provision
for loan losses of $16,137,000; net income of $5,446,000; basic earnings of
$0.80 per common share; and diluted earnings of $0.78 per common share. The
pro forma results do not necessarily indicate the actual results that would have
been obtained nor are they necessarily indicative of the future operations of
the combined companies.
22
25
Note 3 -- Investment Securities
The amortized cost and estimated fair values of Columbia's investment securities
at December 31, 2000 and 1999, are summarized as follows:
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ------------ -----------
DECEMBER 31, 2000
Available-for-sale securities:
U.S. Treasury securities $ 1,017,683 $ -- $ (2,517) $ 1,015,166
Obligation of U.S.
government agencies 34,640,087 55,839 (164,401) 34,531,525
Corporate debt securities 1,238,864 -- (8,711) 1,230,153
Corporate equity securities 300,000 -- -- 300,000
Municipal securities 2,288,586 22,704 -- 2,311,290
----------- ----------- ------------ -----------
$39,485,220 $ 78,543 $ (175,629) $39,388,134
=========== =========== ============ ===========
Held-to-maturity securities:
Mortgage-backed securities $ 3,190,531 $ 3,332 $ (8,611) $ 3,185,252
Municipal securities 16,327,897 182,248 (75,142) 16,435,003
----------- ----------- ------------ -----------
$19,518,428 $ 185,580 $ (83,753) $19,620,255
=========== =========== ============ ===========
DECEMBER 31, 1999
Available-for-sale securities:
U.S. Treasury securities $ 1,630,825 $ 1,701 $ (22,405) $ 1,610,121
Obligation of U.S.
government agencies 37,162,723 1,343 (959,218) 36,204,848
Corporate debt securities 557,334 -- (25,162) 532,172
Corporate equity securities 300,000 -- -- 300,000
Municipal securities 2,488,684 1,931 (26,715) 2,463,900
----------- ----------- ------------ -----------
$42,139,566 $ 4,975 $ (1,033,500) $41,111,041
=========== =========== ============ ===========
Held-to-maturity securities:
Mortgage-backed securities $ 2,538,993 $ 405 $ (20,108) $ 2,519,290
Municipal securities 17,586,232 30,999 (565,409) 17,051,822
----------- ----------- ------------ -----------
$20,125,225 $ 31,404 $ (585,517) $19,571,112
=========== =========== ============ ===========
The amortized cost and estimated fair value of investment securities at
December 31, 2000, 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 $ 2,894,756 $ 2,885,321 $ 1,228,685 $ 1,231,838
Due after one year through five years 35,651,491 35,549,050 4,812,302 4,850,343
Due after five years through ten years 638,973 653,763 5,782,780 5,765,733
Due after ten years -- -- 7,694,661 7,772,341
----------- ----------- ----------- -----------
39,185,220 39,088,134 19,518,428 19,620,255
Corporate equity securities 300,000 300,000 -- --
----------- ----------- ----------- -----------
$39,485,220 $39,388,134 $19,518,428 $19,620,255
=========== =========== =========== ===========
23
26
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 mature earlier than their weighted-average
contractual maturities because of principal prepayments.
As of December 31, 2000 and 1999, investment securities with an amortized cost
of $21,231,455 and $11,715,839, respectively, have been pledged to secure public
and other deposits, as required by law.
Note 4 -- Restricted Equity Securities
The composition of restricted equity securities is as follows:
2000 1999
---------- ----------
Federal Home Loan Bank stock $1,628,200 $1,087,400
Federal Agriculture Mortgage Corporation stock 9,400 9,400
---------- ----------
$1,637,600 $1,096,800
========== ==========
Note 5 -- Loans
The loan portfolio consists of the following:
2000 1999
------------- -------------
Commercial $ 70,789,620 $ 60,868,875
Agriculture 44,299,508 37,775,087
Real estate 164,195,275 130,313,434
Consumer 19,194,533 18,096,432
Credit card and
other loans 1,689,664 827,362
------------- -------------
300,168,600 247,881,190
Less:
Allowance for
loan losses (4,577,941) (3,298,460)
Unearned loan fees (1,027,795) (890,539)
------------- -------------
$ 294,562,864 $ 243,692,191
============= =============
Impairment of loans having recorded investments of approximately $1,286,000 and
$596,000 at December 31, 2000 and 1999, have been recognized by the Bank. CRB'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 rate,
was $1,446,312 and $640,697 during 2000 and 1999, respectively. The total
allowance for loan losses related to these loans at December 31, 2000 and 1999,
was approximately $215,000 and $75,000, respectively. Had the impaired loans
performed according to their original terms, additional interest income of
$183,248, $43,156, and $113,298 would have been recognized in 2000, 1999, and
1998, respectively. No interest income has been recognized on impaired loans
during the period of impairment.
Note 6 -- Allowance for Loan Losses
Changes in the allowance for loan losses were as follows:
2000 1999 1998
----------- ----------- -----------
BALANCE, beginning of year $ 3,298,460 $ 2,380,220 $ 1,638,633
Acquired with acquisition of Valley Community Bancorp -- -- 410,540
Provision for loan losses 1,697,000 1,005,000 1,000,000
Loans charged-off (459,824) (182,366) (766,632)
Loan recoveries 42,305 95,606 97,679
----------- ----------- -----------
BALANCE, end of year $ 4,577,941 $ 3,298,460 $ 2,380,220
=========== =========== ===========
24
27
Note 7 -- Loan Servicing
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of mortgage loans
serviced for others was $154,516,425 and $89,650,772, at December 31, 2000 and
1999, respectively.
Mortgage servicing rights (MSR's) total $2,759,687 and $1,482,374 at December
31, 2000 and 1999, respectively; MSR's of $1,437,145 and $932,724 were
capitalized in 2000 and 1999. Amortization of MSR's was $159,832, $96,896, and
$20,119 for the years ended December 31, 2000, 1999, and 1998, respectively.
Note 8 -- Property and Equipment
The major classifications of property and equipment are summarized as follows:
2000 1999
------------ ------------
Land $ 3,491,377 $ 3,491,377
Construction
in progress 20,098 727,565
Buildings and
improvements 9,840,907 7,808,056
Furniture and equipment 6,085,255 4,555,982
------------ ------------
19,437,637 16,582,980
Less accumulated
depreciation (5,562,240) (4,574,756)
------------ ------------
$ 13,875,397 $ 12,008,224
============ ============
Note 9 -- Time Deposits
Time certificates of deposit of $100,000 and over, aggregated $27,403,095 and
$19,177,862 at December 31, 2000 and 1999, respectively.
At December 31, 2000, the scheduled maturities for all time deposits are as
follows:
2001 $83,358,703
2002 9,245,695
2003 2,337,219
2004 845,888
2005 and thereafter 2,096,811
-----------
$97,884,316
===========
Note 10 -- Income Taxes
The provision for income taxes consists of the following:
2000 1999 1998
---------- ----------- -----------
Current tax provision
Federal $2,696,053 $ 2,255,833 $ 2,225,178
State 527,966 476,238 411,386
---------- ----------- -----------
3,224,019 2,732,071 2,636,564
---------- ----------- -----------
Deferred tax expense (benefit)
Federal 71,700 329,140 (165,276)
State 9,278 44,145 (21,389)
---------- ----------- -----------
80,978 373,285 (186,665)
---------- ----------- -----------
$3,304,997 $ 3,105,356 $ 2,449,899
========== =========== ===========
The components of the deferred tax benefit (expense) consist of the following:
2000 1999 1998
--------- --------- ---------
Mortgage servicing rights $ 529,587 $ 519,094 $ --
Loan loss provision not deductible for tax (518,947) (321,941) (127,122)
Difference between book and tax depreciation methods 77,986 6,270 38,698
Difference between accrual and cash basis tax reporting (28,158) (17,406) (102,083)
Deferred compensation expense (43,714) 135,967 7,233
Difference between book and tax recognition of
Federal Home Loan Bank stock dividends 36,700 30,400 22,979
Other differences 27,524 20,901 (26,370)
--------- --------- ---------
Deferred tax expense (benefit) $ 80,978 $ 373,285 $(186,665)
========= ========= =========
25
28
The net deferred tax liability in the accompanying consolidated balance sheets
consists of the following:
2000 1999
----------- -----------
Deferred tax assets:
Allowance for loan losses $ 1,566,197 $ 1,047,250
Net operating loss carryforward -- 27,524
Deferred compensation 128,879 85,165
----------- -----------
1,695,076 1,159,939
----------- -----------
Deferred tax liabilities:
Mortgage servicing rights (1,048,681) (519,094)
Accumulated depreciation (665,279) (587,293)
Conversion to accrual basis tax reporting (17,406) (45,564)
Federal Home Loan Bank stock dividends (159,597) (122,897)
----------- -----------
(1,890,963) (1,274,848)
----------- -----------
Net deferred tax liability $ (195,887) $ (114,909)
=========== ===========
Management believes, based upon Columbia's historical performance, that the
deferred tax asset will be realized in the normal course of operations and,
accordingly, management has not reduced deferred tax assets by a valuation
allowance.
The tax provision differs from the federal statutory rate of 34% due principally
to the effect of tax exemptions for interest received on municipal investments
and the amortization of nondeductible goodwill for tax purposes.
A reconciliation between the statutory federal income tax rate and the effective
tax rate is as follows:
2000 1999 1998
----------- ----------- -----------
Federal income taxes at statutory rate $ 3,035,871 $ 2,886,086 $ 2,437,036
State income tax expense, net of
federal income tax benefit 357,649 340,773 271,503
Effect of nontaxable interest income (268,236) (305,873) (255,867)
Effect of nondeductible goodwill amortization 213,732 213,732 --
Other (34,019) (29,362) (2,773)
----------- ----------- -----------
$ 3,304,997 $ 3,105,356 $ 2,449,899
----------- ----------- -----------
37% 38% 34%
=========== =========== ===========
Note 11 -- Transactions with Related Parties
Certain directors, executive officers, and principal stockholders are customers
of and have had banking transactions with the Bank, and the Bank expects to have
such transactions in the future. All loans and commitments to loan included in
such transactions were made in compliance with applicable laws on substantially
the same terms (including interest rates and collateral) as those prevailing at
the time for comparable transactions with other persons and do not involve more
than the normal risk of collectibility or present any other unfavorable
features. The amount of loans outstanding to directors, executive officers,
principal stockholders, and companies with which they are associated was as
follows:
2000 1999
------------ -----------
Balance,
beginning of year $ 1,690,504 $ 2,821,788
Loans made 14,038,693 214,305
Loans repaid (1,148,665) (1,345,589)
------------ -----------
Balance, end of year $ 14,580,532 $ 1,690,504
============ ===========
26
29
Note 12 -- 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 balance
sheet. 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 non-performance 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 they do for on-balance-sheet instruments.
Unless noted otherwise, the Bank does not require collateral or other security
to support financial instruments with credit risk.
Contract Amounts
December 31,
----------------------------
2000 1999
------------ -----------
Financial instruments
whose contract amounts
represent credit risk:
Commitments to
extend credit $ 90,861,669 $74,100,106
Undisbursed credit
card lines of credit 10,635,327 7,703,902
Commercial and
standby letters of
credit 912,351 889,019
------------ -----------
$102,409,347 $82,693,027
============ ===========
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.
Letters of credit written are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third-party. Those guarantees are
primarily issued to support public and private borrowing arrangements, including
commercial paper, bond financing and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as that involved
in extending loan facilities to customers. The Bank holds cash, marketable
securities, or real estate as collateral supporting those commitments for which
collateral is deemed necessary.
Note 13 -- Risk Management Activities
In order to mitigate the risk that a change in interest rates will result in a
decline in the value of the Mortgage Group's committed loan pipeline and
adversely impact revenues, the Bank enters into derivative financial
instruments. Due to the variability of closings in the Bank's committed loan
pipeline, which is driven primarily by interest rates, the Bank's hedging
policies require a hedge with forward contracts for the sale of mortgage-backed
securities when the committed fixed-rate conforming pipeline loans aggregate
$1,000,000, plus or minus 20%, designated as a fair value hedge. As of December
31, 2000, the forward contracts to sell mortgage-backed securities amounted to
$3,000,000 in maturities of up to two months. These forward contracts had an
unrealized loss of $29,206 at December 31, 2000, which has been recognized as a
liability. The mortgage-backed securities that are to be delivered under these
contracts are fixed-rate, and generally correspond with the composition of the
Bank's committed loan pipeline.
The net loss recognized from derivative instruments designated as fair value
hedges used to protect the Mortgage Group revenues was $159,772 (including hedge
ineffectiveness aggregating to a loss of $3,026) for the period ended December
31, 2000. The net loss is included in Mortgage Group revenues in the statements
of income and comprehensive income.
As of December 31, 2000, the Bank had short-term rate and point commitments
amounting to $4,074,454 to fund fixed-rate mortgage loan applications in
process. Substantially all of these commitments are for periods of 60 days or
less. After funding and sale of the mortgage loans, the Bank's exposure to
credit loss in the event of nonperformance by the mortgagor is limited. The Bank
has potential exposure to credit loss in the event of nonperformance by the
counterparties to the various forward sales. The Bank manages this credit risk
by selecting only well established, financially strong counterparties.
27
30
Note 14 -- Fair Values of Financial Instruments
The following table estimates fair value and the related carrying values of
Columbia's financial instruments (in thousands):
2000 1999
--------------------- ---------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- -------- -------- --------
Financial assets:
Cash and due from banks $ 23,808 $ 23,808 $ 23,796 $ 23,796
Interest bearing deposits with other banks 2,168 2,168 913 913
Federal funds sold 1,141 1,141 680 680
Investment securities available-for-sale 39,388 39,388 41,111 41,111
Investment securities held-to-maturity 19,518 19,617 20,125 19,571
Restricted equity securities 1,638 1,638 1,097 1,097
Loans held-for-sale 5,318 5,318 3,283 3,283
Loans, net of allowance for loan
losses and unearned loan fees 294,563 293,200 243,692 243,086
Accrued interest receivable 3,992 3,992 2,903 2,903
Financial liabilities:
Demand and savings deposits $248,543 $248,543 $232,365 $232,365
Time deposits 97,844 97,844 78,545 78,528
Notes payable 26,369 26,369 10,870 10,870
Accrued interest payable and
other liabilities 439 439 427 427
While estimates of fair value are based on management's judgment of the most
appropriate factors, there is no assurance that were Columbia to have disposed
of such items at December 31, 2000 and 1999, the estimated fair values would
necessarily have been achieved at that date, since market values may differ
depending on various circumstances. The estimated fair values at December 31,
2000 and 1999, should not necessarily be considered to apply 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 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 15 -- 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 5. 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, 2000. The Bank's
loan policies do not allow the extension of credit to any single borrower or
group of related borrowers in excess of $1,000,000 without approval from the
Bank's respective loan committees.
Note 16 -- Commitments and Contingencies
Operating lease commitments -- As of December 31, 2000, Columbia leased certain
properties. Future minimum lease commitments are as follows:
2001 $127,000
2002 96,000
2003 79,000
2004 79,000
2005 72,000
Thereafter 496,000
--------
$949,000
========
Rental expense for all operating leases was $95,571, $106,106, and $65,457 for
the years ended December 31, 2000, 1999, and 1998, respectively.
28
31
LEGAL CONTINGENCIES -- Columbia may become a defendant in certain claims and
legal actions arising in the ordinary course of business. In the opinion of
management, after consultation with legal counsel, there are no matters
presently known to Columbia that are expected to have a material adverse effect
on the consolidated financial condition of Columbia.
Note 17 -- Notes Payable
The Bank is a member of the Federal Home Loan Bank ("FHLB") of Seattle and has
entered into "Advances, Security and Deposit Agreements" which provide a credit
arrangement from FHLB. Borrowings under the credit arrangement are
collateralized by the Bank's FHLB stock as well as deposits or other instruments
which may be pledged. As of December 31, 2000 and 1999, the Bank had borrowings
outstanding with the FHLB of $25,519,703 and $10,598,390, respectively. The
promissory notes mature in 2001, 2008, and 2013 and carry interest rates ranging
from 5.46% to 6.57%.
CRB 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, CRB is authorized to accumulate daily tax payments
up to authorized limits and deploy the funds in short-term investments. In
exchange, CRB is required to issue a fully collateralized demand note to the
Treasury and pay interest at the federal funds rate minus 25 basis points. As of
December 31, 2000 and 1999, the Bank had $849,520 and $271,928, respectively,
outstanding under this program.
Note 18 -- Stock Incentive Plans
Columbia maintains a Stock Incentive Plan originally adopted by CRB in 1993
prior to Columbia's formation. The plan, most recently amended in February 1999,
and ratified by the shareholders in April 1999, allows for the granting of both
incentive and nonstatutory stock options. The option price for incentive stock
options is determined by Columbia's Board of Directors and cannot be less than
100% of the fair market value of the shares on the date of grant. The incentive
stock options expire ten years from the date of grant. The option price and
duration of options for nonstatutory stock options is also determined by the
Board of Directors.
The following, adjusted for 1998 stock splits and dividends, summarizes options
available and outstanding under this plan.
Weighted
Number Average
Of Exercise
Options Price
------- -------
Options under grant --
December 31, 1997 372,988 $ 4.39
Options granted in 1998:
Incentive stock options 5,000 $10.50
Gifted shares in 1998 400 $ --
Options exercised in 1998:
Incentive stock options (31,000) $ 3.84
Nonstatutory stock options (24,900) $ 4.72
-------
Options under grant
and exercisable --
December 31, 1998 322,488 $ 4.53
Options granted in 1999:
Incentive stock options 3,000 $ 7.83
Nonstatutory stock options 4,000 $ 7.75
Gifted shares in 1999 400 $ --
Options exercised in 1999:
Incentive stock options (26,690) $ 4.70
Nonstatutory stock options (34,800) $ 4.07
Options expired or forfeited
in 1999 (1,800)
-------
Options under grant
and exercisable --
December 31, 1999 266,598 $ 4.65
Options granted in 2000:
Incentive stock options 28,600 $ 6.88
Nonstatutory stock options 14,000 $ 6.88
Gifted shares in 2000 --
Options exercised in 2000:
Incentive stock options (11,500) $ 3.47
Nonstatutory stock options (7,400) $ 4.01
Options expired or forfeited
in 2000 (27,000)
-------
Options under grant
and exercisable --
December 31, 2000 363,298 $ 5.42
=======
Options reserved --
December 31, 2000 187,777
=======
On February 15, 2001, options covering a total of 158,300 shares of Columbia's
common stock were granted to directors and employees of Columbia. Under the 1999
plan, an aggregate of no more than 4% of the issued and outstanding shares of
Columbia common stock is available for award or grant (excluding grants prior to
1999). At December 31, 2000, 4% of the issued and outstanding shares amounted to
321,176 shares of common stock.
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Had compensation cost for Columbia's 2000, 1999, and 1998, grants for
stock-based compensation plans been determined consistent with SFAS No. 123, its
net income and net income per common share for December 31, 2000, 1999, and
1998, would approximate the pro forma amounts below (in thousands expect per
share data).
2000
-----------------------
As Pro
Reported Forma
--------- ---------
Net income $ 5,624 $ 5,486
Basic earnings per
common share $ 0.70 $ 0.68
Diluted earnings per
common share $ 0.70 $ 0.68
1999
-----------------------
As Pro
Reported Forma
--------- ---------
Net income $ 5,013 $ 5,002
Basic earnings per
common share $ 0.63 $ 0.63
Diluted earnings per
common share $ 0.62 $ 0.62
1998
-----------------------
As Pro
Reported Forma
--------- ---------
Net income $ 4,718 $ 4,512
Basic earnings per
common share $ 0.67 $ 0.64
Diluted earnings per
common share $ 0.65 $ 0.62
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, 2000, 1999, and 1998, respectively: (1) dividend yield of 4.84%,
3.38%, and 2.08%, (2) expected volatility of 35.78%, 39.68%, and 34.89%, (3)
risk-free rate of 5.11%, 6.39%, and 4.55%, and (4) expected life of 3.32, 4.25,
and 3.92 years.
The effects of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.
Note 19 -- Employee Benefit Plans
Columbia has established an Employee Stock Ownership Plan ("ESOP") for the
benefit of its employees. The ESOP allows participation by all employees over
the age of 20 who have also met minimum service requirements. Contributions to
the ESOP are at the discretion of the Board of Directors and are used to
purchase shares of Columbia's common stock. Employees are not permitted to
contribute individually to the ESOP but vest in their proportionate share of the
ESOP interest after six years of participation. For the years ending December
31, 2000, 1999, and 1998, Columbia contributed $250,000, $230,000, and $230,000,
respectively, to the ESOP.
The ESOP's assets as of December 31, 2000 and 1999, were as follows:
2000 1999
------- -------
Allocated shares 328,010 309,884
======== =========
Cash on hand $ 60,295 $ (167)
======== =========
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 full-time
employees over the age of 20 and meeting length of service requirements are
eligible to participate in the plan. Employees may elect to defer and
contribute, within statutory limits, up to 10% of their annual compensation to
the plan. Their contributions and those of Columbia, which are limited to 25% of
employee contributions up to 6% of total participant compensation, are invested
by plan trustees in employee designated funds. For the years ending December 31,
2000, 1999, and 1998, Columbia contributed approximately $112,000, $58,000, and
$45,000, respectively, to the plan.
Columbia has established an employee incentive compensation program, which
provides eligible participants additional compensation based upon the
achievement of certain company goals. For the years ending December 31, 2000,
1999, and 1998, additional compensation of approximately $1,238,000, $781,000,
and $636,000, respectively, was paid to eligible employees.
Columbia also entered into both employment and retirement agreements beginning
in 1996 and later amended, with its chief executive officer. The employment
agreement provides for the executive's salary and customary benefits until
termination of the agreement in May 2001. The retirement agreement provides
annual post-retirement compensation for a seven-year period after the chief
executive's retirement. A portion of Columbia's obligation under the agreement
has been funded with a $120,000 interest-earning investment and will be paid in
annual installments of $48,000 plus interest earned on invested funds. For the
year ended December 31, 2000, Columbia recorded a liability of $343,167 as its
obligation for current services pursuant to the retirement plan. In the event
employment of the chief executive officer is terminated prior to expiration of
the agreements, all salary and benefits accrued as of the termination date and
all retirement payments provided in the retirement agreement will be paid to the
executive.
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Note 20 -- Earnings Per Share
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the year. Diluted earnings per share reflect the potential
dilution that could occur if common shares were issued pursuant to the exercise
of options under existing stock option plans. The following table illustrates
the computations of basic and diluted earnings per share for the years ended
December 31, 2000, 1999, and 1998.
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- --------- --------
2000
Basic earnings per share
Income available to common shareholders $5,624,035 8,016,683 $ 0.70
========
Effect of dilutive securities
Outstanding common stock options -- 63,685
---------- --------- --------
Income available to common shareholders
plus assumed conversions $5,624,035 8,080,368 $ 0.70
========== ========= ========
1999
Basic earnings per share
Income available to common shareholders $5,013,223 7,985,227 $ 0.63
========
Effect of dilutive securities
Outstanding common stock options -- 104,733
---------- --------- --------
Income available to common shareholders
plus assumed conversions $5,013,223 8,089,960 $ 0.62
========== ========= ========
1998
Basic earnings per share
Income available to common shareholders $4,717,853 7,066,229 $ 0.67
========
Effect of dilutive securities
Outstanding common stock options -- 172,236
Income available to common shareholders
---------- --------- --------
plus assumed conversions $4,717,853 7,238,465 $ 0.65
========== ========= ========
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Note 21 -- Parent Company Financial Information
Condensed financial information for Columbia Bancorp (unconsolidated parent
company only) is as follows:
2000 1999
------------ ------------
ASSETS
Cash $ 531,486 $ 239,449
Investment securities 300,000 300,000
Investment in subsidiaries 41,194,993 37,264,503
Other assets 128,840 150,248
------------ ------------
Total assets $ 42,155,319 $ 37,954,200
============ ============
LIABILITIES
Dividend payable $ 642,354 $ 560,737
Deferred compensation 106,800 --
Employee benefit withholding 80,000 71,901
------------ ------------
Total liabilities $ 829,154 $ 632,638
============ ============
STOCKHOLDERS' EQUITY
Common stock $ 14,461,771 $ 14,392,229
Additional paid-in capital 6,379,393 6,371,490
Retained earnings 20,569,918 17,272,137
Unrealized loss on available-for-sale
investment securities (84,917) (714,294)
------------ ------------
Total stockholders' equity 41,326,165 37,321,562
------------ ------------
Total liabilities and stockholders' equity $ 42,155,319 $ 37,954,200
============ ============
2000 1999 1998
----------- ----------- ------------
REVENUES
Equity in undistributed (excess distribution of)
earnings of subsidiary banks $ 3,301,266 $ 3,255,598 $ (3,098,692)
Dividends 2,750,000 2,250,000 7,975,000
Loss on sale of assets (991) -- --
EXPENSES
Administrative expenses (426,240) (492,375) (158,455)
----------- ----------- ------------
Net income $ 5,624,035 $ 5,013,223 $ 4,717,853
=========== =========== ============
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,624,035 $ 5,013,223 $ 4,717,853
Adjustments to reconcile net income to net
cash from operating activities:
Excess distribution of (equity in undistributed)
earnings of subsidiary bank (3,301,266) (3,255,598) 3,098,692
Changes in other assets and liabilities 144,363 (50,193) (7,513)
----------- ----------- ------------
Net cash from operating activities 2,467,132 1,707,432 7,809,032
=========== =========== ============
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from public stock offering, net of costs -- -- 8,126,115
Cash dividends and fractional share payments (2,244,637) (1,915,266) (1,343,226)
Proceeds from stock options exercised and
purchases of common stock 69,542 266,914 470,982
----------- ----------- ------------
Net cash from financing activities (2,175,095) (1,648,352) 7,253,871
=========== =========== ============
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for acquisition of Valley Community Bancorp
and subsidiaries -- -- (15,068,552)
----------- ----------- ------------
Net cash from investing activities -- -- (15,068,552)
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 292,037 $ 59,080 $ (5,649)
CASH AND CASH EQUIVALENTS, beginning of year 239,449 180,369 186,018
----------- ----------- ------------
CASH AND CASH EQUIVALENTS, end of year $ 531,486 $ 239,449 $ 180,369
=========== =========== ============
SCHEDULE OF NONCASH ACTIVITIES
Change in unrealized gain (loss) on available-for-sale
securities, net of tax $ 629,377 $ (769,492) $ 45,106
=========== =========== ============
Cash dividend payable $ 642,354 $ 560,737 $ 476,942
=========== =========== ============
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Note 22 -- Regulatory Matters
Columbia and CRB are subject to various regulatory capital requirements
administered by the federal 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, 2000, that Columbia and
CRB meet all capital adequacy requirements to which they are subject.
As of the most recent notifications from their regulatory agencies, Columbia and
CRB were categorized as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as adequately capitalized, Columbia
and CRB must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1
leverage ratios as set forth in the table below. There are no conditions or
events since that notification that management believes have changed the
institutions' category.
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- ----------------- -----------------
(in thousands) Amount Ratio Amount Ratio Amount Ratio
------- ----- ------- ----- ------ -----
AS OF DECEMBER 31, 2000
COLUMBIA BANCORP
Total capital to risk-weighted assets $37,354 11.0% $27,167 >=8% $33,958 >=10%
Tier 1 capital to risk-weighted assets 33,117 9.8 13,517 >=4 20,276 >=6
Tier 1 capital to average assets 33,117 8.1 16,354 >=4 20,443 >=5
AS OF DECEMBER 31, 2000
COLUMBIA RIVER BANK
Total capital to risk-weighted assets $37,220 11.0% $27,069 >=8% $33,836 >=10%
Tier 1 capital to risk-weighted assets 32,984 9.7 13,602 >=4 20,402 >=6
Tier 1 capital to average assets 32,984 8.1 16,288 >=4 $20,360 >=5
AS OF DECEMBER 31, 1999
COLUMBIA BANCORP
Total capital to risk-weighted assets $32,539 11.3% $23,036 >=8% $28,796 >=10%
Tier I capital to risk-weighted assets 29,241 10.2 11,467 >=4 17,201 >=6
Tier I capital to average assets 29,241 8.3 14,092 >=4 17,615 >=5
AS OF DECEMBER 31, 1999
COLUMBIA RIVER BANK
Total capital to risk-weighted assets $32,481 11.0% $23,623 >=8% $29,528 >=10%
Tier 1 capital to risk-weighted assets 29,183 9.8 11,911 >=4 17,867 >=6
Tier 1 capital to average assets 29,183 8.3 14,064 >=4 17,580 >=5
Note 23 -- Stock Offering
During November 1998, Columbia registered 1,000,000 shares of common stock for
sale to the public at a price of $9 per share, for an aggregate offering price
of $9,000,000. All shares were sold, resulting in net proceeds of $8,126,115,
after deducting $873,885 for underwriting discounts and commissions, legal,
accounting, printing fees and other offering expenses. Net proceeds used in
connection with Columbia's expansion plans included the acquisition of Valley
Community Bancorp as of November 30, 1998 (see Note 2). Pending such use, the
net proceeds were invested in short-term, investment-grade securities.
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Independent Auditor's Report
To the Board of Directors and Stockholders
Columbia Bancorp
We have audited the accompanying consolidated balance sheets of Columbia Bancorp
and Subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of income and comprehensive income, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
2000, 1999, and 1998. These 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Columbia Bancorp and
Subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with generally accepted accounting principles.
/s/ MOSS ADAMS LLP
Portland, Oregon
January 19, 2001
Columbia Bancorp and Columbia River Bank
Executives and Other Senior Vice Presidents
EXECUTIVE OFFICERS
TERRY L. COCHRAN
President and CEO, Columbia Bancorp
ROGER L. CHRISTENSEN
Chief Operating Officer, Columbia Bancorp
CRAIG J. ORTEGA
President, Columbia River Bank
JAMES C. MCCALL
Chief Lending Officer, Columbia River Bank
NEAL T. MCLAUGHLIN
Chief Financial Officer, Columbia Bancorp and
Columbia River Bank
OTHER SENIOR VICE PRESIDENTS
PHILIP S. HAMILTON
Senior Vice President/Mortgage Group Manager
CHARLA L. HERMAN
Senior Vice President/Human Resource Director
BRITT W.THOMAS
Senior Vice President/Loan Administrator
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Columbia River Bank
Branch Managers and Branch Locations
RICK A. ANDERSEN
Vice President and Manager
McMinnville Branch
GERALD "HAP" P. COOLEY
Vice President and Manager
Pendleton Branch
JOHN B. KASBERGER
Vice President and Manager
Hood River Branch
R. SHANE CORREA
Vice President and Manager
Hermiston Branch
LINDA J. CREAGER
Vice President and Manager
White Salmon Branch
BOB J. FICKER
Vice President and Manager
Newberg Branch
[MAP]
I. NORMAN GLOVER
Senior Vice President and Manager
Goldendale Branch
GARY W. HERTEL
Senior Vice President and Manager
The Dalles Branch
PETE R. MCCABE
Vice President and Manager
Madras Branch
SANDI K. OLSON
Assistant Vice President and Manager
Westside Branch
KYLE E. SAGER
Vice President and Manager
Redmond Branch
MICHAEL F.TESTERMAN
Vice President and Manager
Bend Branch
PHILLIP L. WAGGONER
Vice President and Manager
Shevlin Center Branch
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Corporate and Shareholder Information
ANNUAL MEETING
The annual meeting of shareholders is scheduled for 6:30 pm, Pacific Time, April
26, 2001, at Columbia Gorge Discovery Center, 5000 Discovery Drive, The Dalles,
Oregon.
FINANCIAL INFORMATION
Copies of financial reports are available upon request and without charge.
Quarterly financial information is available in press release format. To receive
the above information, you can dial our Fax-On-Demand Service at 1-800-683-0074
or write the address or call the phone number below and these will be provided.
Financial reports, press releases and the annual report are also available on
the Internet at the following address: www.columbiabancorp.com.
Investor Relations
PO Box 1050
The Dalles, Oregon 97058
541-298-6649
TRANSFER AGENT
Shareholder Services
Wells Fargo Shareowners Services
PO Box 64854
St. Paul, Minnesota 55164-0854
1-800-468-9716
OUTSIDE LEGAL COUNSEL
Bennett H. Goldstein
Attorney At Law
2548 SW St. Helens Court
Portland, Oregon 97201
INDEPENDENT AUDITORS
Moss Adams LLP
222 SW Columbia, Suite 400
Portland, Oregon 97201
STOCK TRADING MARKET
Columbia Bancorp common stock is quoted on the
NASDAQ National Market under the symbol "CBBO."
WEB SITE
Visit us online at www.columbiabancorp.com or
www.columbiariverbank.com
Member FDIC [LOGO] Equal Housing Opportunity
These financial statements have not been reviewed, or confirmed for accuracy or
relevance by the Federal Deposit Insurance Corporation.
Steve D. Martin, Founder and Visionary
[PICTURE]
In 1975, Steve Martin became involved in the organization of Columbia River Bank
in The Dalles, Oregon.He served as a member of the Board of Directors until
1998, and as Chairman from 1995 until 1998. His retirement from the bank board
in December 1998 was felt as a great loss by the other members.
Mr. Martin was involved in the hospitality business where he owned and managed
such facilities as the Surfsand Resort, Stephanie Inn, Carriage House, Haystack
Resort, Wayfarer Restaurant and Lounge and the Dinning Room at the Stephanie Inn
as well as Quality Inn in The Dalles and Cousin's Restaurant.
Mr. Martin also served as Chairman of the Board for Cannon Beach Lumber Company
and was a member of the Advisory Board for the Small Business Administration. In
1988, he was honored as the Oregon Small Business Man of the Year by Oregon
Business Magazine.
Steve Martin passed away in August 2000 after a three year battle with cancer,
he will be missed by one and all at Columbia Bancorp.
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[PICTURE]
Left to right, standing: Jim Roberson, Jim Doran, Don Mitchell, Rich Betz and
Jane Lee. Left to right, seated: Dennis Carver, Chuck Beardsley, Craig Ortega,
Bill Booth, Terry Cochran, Jean McKinney, Ward Eason and Bob Bailey.
BOARDS OF DIRECTORS
ROBERT L.R. BAILEY DENNIS L. CARVER JEAN S. MCKINNEY
Orchard View Farms Goldendale Chiropractic Clinic McKinney Ranch
Owner Chiropractor/Owner Owner
CHARLES F. BEARDSLEY TERRY L. COCHRAN DONALD T. MITCHELL
Hershner & Bell Columbia Bancorp Lumber Broker
Real Estate & Insurance President and CEO Retired
Owner
JIM J. DORAN CRAIG J. ORTEGA
RICHARD E. BETZ Jim Doran Chevrolet Oldsmobile Columbia River Bank
Royal Columbia, Inc. Jim Doran Dodge Chrysler President
Bud-Rich Potatos, Inc. Owner
Owner JAMES B. ROBERSON
WARD R. EASON Optometrist
WILLIAM A. BOOTH Willamette West Realtors Retired
Booth & Kelly Realtor
Real Estate & Insurance
Owner JANE F. LEE
Rancher
Photographed in front of the Mark O. Hatfield window at the Columbia Gorge
Discovery Center.
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[COLUMBIA BANCORP LOGO]
Columbia Bancorp
420 East Third Street, Suite 200
PO Box 1050
The Dalles, OR 97058
www.columbiabancorp.com