<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________________ to ________________
Commission file number 0-27938
COLUMBIA BANCORP
(Exact name of registrant as specified in its charter)
93-1193156
Oregon (I.R.S. Employer
(State of Incorporation) Identification Number)
420 East Third Street, Suite 200
The Dalles, Oregon 97058
(Address of principal executive offices)
(541) 298-6649
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
7,999,397 shares of common stock as of August 6, 1999
<PAGE> 2
COLUMBIA BANCORP
FORM 10-Q
JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION REFERENCE
---------
<S> <C>
Consolidated Balance Sheets as of June 30, 1999 and 3
December 31, 1998.
Consolidated Statements of Income and Comprehensive Income for the six 4
months and quarter ended June 30, 1999 and 1998.
Consolidated Statements of Cash Flows for the six months ended June 30, 5
1999 and 1998.
Consolidated Statements of Changes in Shareholders' Equity for the 6
periods of December 31, 1996 to June 30, 1999.
Notes to Consolidated Financial Statements 7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Overview 9
Material Changes in Financial Condition 10
Material Changes in Results of Operations 10-11
Loan Loss Provision 11
Liquidity and Capital Resources 11
Quantitative and Qualitative Disclosures about Market Risk 11
PART II - OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12-13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 13
</TABLE>
2
<PAGE> 3
COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 24,543,229 $ 22,643,895
Interest-bearing deposits with other banks 6,737,118 30,575,012
Federal funds sold 3,000,366 12,554,775
------------ ------------
Total cash and cash equivalents 34,280,713 65,773,682
Investment securities available-for-sale 39,284,813 29,466,769
Investment securities held-to-maturity 22,689,180 17,310,222
Restricted equity securities 1,058,200 1,117,200
------------ ------------
Total investment securities 63,032,193 47,894,191
Loans held-for-sale 4,631,991 7,818,603
Loans, net of allowance for loan losses and unearned loan fees 212,978,440 198,733,188
Property and equipment, net of depreciation 9,445,440 8,190,068
Accrued interest receivable 3,060,839 2,487,122
Goodwill 8,960,652 9,286,832
Other real estate owned 279,800 280,800
Other assets 4,164,331 1,948,763
------------ ------------
Total assets $340,834,399 $342,413,249
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing demand deposits $ 70,539,087 $ 67,408,747
Interest bearing demand accounts 121,886,579 134,716,357
Savings accounts 29,547,026 27,969,402
Time certificates 71,922,606 65,585,883
------------ ------------
Total deposits 293,895,298 295,680,389
Notes payable 8,630,250 9,734,095
Accrued interest payable and other liabilities 2,587,170 2,242,545
------------ ------------
Total liabilities 305,112,718 307,657,029
------------ ------------
Shareholders' equity:
Common stock, no par value; 20,000,000 shares
authorized, 7,976,597 issued and outstanding
(7,949,032 at December 31, 1998) 14,239,712 14,125,315
Additional paid-in capital 6,317,732 6,317,732
Retained earnings 15,558,225 14,257,975
Accumulated other comprehensive income, net of tax 393,988 55,198
------------ ------------
Total shareholders' equity 35,721,681 34,756,220
------------ ------------
$340,834,399 $342,413,249
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
(Unaudited)
Three months ended Six months ended
June 30, June 30,
----------------------------- -----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 5,446,851 $ 4,382,494 $ 10,515,754 $ 8,416,856
Interest on investments
Taxable investment securities 549,909 449,774 976,049 863,255
Nontaxable investment securities 256,825 207,333 486,835 419,455
Other interest income 333,203 124,429 777,521 225,368
------------ ------------ ------------ ------------
Total interest income 6,586,788 5,164,030 12,756,159 9,924,934
INTEREST EXPENSE
Interest bearing demand and savings 1,002,180 861,370 1,986,958 1,719,853
Interest on time deposit accounts 971,372 803,290 1,909,746 1,485,930
Other borrowed funds 118,382 121,422 234,802 209,575
------------ ------------ ------------ ------------
Total interest expense 2,091,934 1,786,082 4,131,506 3,415,358
------------ ------------ ------------ ------------
NET INTEREST INCOME 4,494,854 3,377,948 8,624,653 6,509,576
PROVISION FOR LOAN LOSSES 335,000 225,000 685,000 450,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,159,854 3,152,948 7,939,653 6,059,576
NONINTEREST INCOME
Service charges and fees 523,211 427,043 1,022,924 834,286
Credit card discounts and fees 128,286 103,807 227,667 184,899
Financial services department income 98,953 90,857 184,242 154,831
Mortgage servicing revenue 298,909 166,627 545,330 166,627
Gain on sale of loans, net of discount 53,125 88,593 118,015 177,377
Mortgage loan origination income 129,538 225,580 334,024 323,803
Other noninterest income 221,474 110,298 379,924 234,975
------------ ------------ ------------ ------------
Total noninterest income 1,453,496 1,212,805 2,812,126 2,076,798
NONINTEREST EXPENSE
Salaries and employee benefits 1,980,065 1,453,807 3,863,448 2,713,898
Occupancy expense 281,597 231,808 577,297 448,966
Credit card processing fees 107,574 74,358 177,145 123,508
Office Supplies 74,683 36,431 135,745 79,350
Data processing expense 142,285 97,202 281,219 183,533
Other noninterest expenses 1,144,700 599,817 2,140,243 1,221,059
------------ ------------ ------------ ------------
Total noninterest expense 3,730,904 2,493,423 7,175,097 4,770,314
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,882,446 1,872,330 3,576,682 3,366,060
PROVISION FOR INCOME TAXES 724,497 658,890 1,319,423 1,146,743
------------ ------------ ------------ ------------
NET INCOME $ 1,157,949 $ 1,213,440 $ 2,257,259 $ 2,219,317
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME, NET
Unrealized gain or loss on AFS securities, net (313,495) 13,711 (440,769) 19,180
Reclassification for gain included in net income (1,666) (4,600) (8,417) (35,560)
------------ ------------ ------------ ------------
(315,161) 9,111 (449,186) (16,380)
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 842,788 $ 1,222,551 $ 1,808,073 $ 2,202,937
============ ============ ============ ============
Earnings per share of common stock
Net Income Basic $ 0.15 $ 0.17 $ 0.28 $ 0.32
Net Income Diluted $ 0.14 $ 0.17 $ 0.28 $ 0.31
Weighted average common shares outstanding
Basic 7,975,010 6,933,987 7,967,476 6,916,582
Diluted 8,102,877 7,133,249 8,098,791 7,121,470
</TABLE>
See accompanying notes
4
<PAGE> 5
COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net income $ 2,257,259 $ 2,219,317
Adjustments to reconcile net income to net cash from operating activities:
Gain on sale or call of investments (8,417) (35,560)
Gain on sale of assets (67,590) --
Depreciation and amortization 648,307 241,241
Federal Home Loan Bank stock dividend (41,100) (29,352)
Provision for loan losses 685,000 450,000
Increase (decrease) in cash due to changes in assets/liabilities
Accrued interest receivable (573,717) (511,808)
Other assets (2,528,880) (1,607,772)
Accrued interest payable and other liabilities 344,625 (455,103)
------------ ------------
NET CASH FROM OPERATING ACTIVITIES 715,487 270,963
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of available-for-sale securities 2,045,455 3,086,176
Proceeds from maturity of available-for-sale securities 8,478,290 11,724,309
Proceeds from the maturity of held-to-maturity securities 1,022,541 591,846
Purchases of held-to-maturity securities (5,645,434) (741,185)
Purchases of available-for-sale securities (21,859,828) (13,000,158)
Net purchase of restricted equity securities 102,082 --
Net change in loans made to customers (10,373,640) (18,209,861)
Payments made for purchase of property and equipment (2,246,374) (192,178)
------------ ------------
NET CASH FROM INVESTING ACTIVITIES (28,476,908) (16,741,051)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit and savings accounts (8,121,814) 6,829,939
Net proceeds from time deposits 6,336,723 10,022,462
Net borrowings of debt (1,103,845) 2,954,688
Dividends paid (957,009) (693,742)
Proceeds from stock options exercised and sales of common stock 114,397 425,831
------------ ------------
NET CASH FROM FINANCING ACTIVITIES (3,731,548) 19,539,178
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (31,492,969) 3,069,090
CASH AND CASH EQUIVALENTS, beginning of period 65,773,682 19,712,501
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 34,280,713 $ 22,781,591
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash $ 4,131,234 $ 3,419,427
Taxes paid in cash $ 1,301,736 $ 644,985
SCHEDULE OF NONCASH ACTIVITIES
Change in unrealized loss on available-for-sale securities, net of tax $ (449,186) $ (16,380)
Cash dividend declared and payable after quarter-end $ 478,596 $ 346,839
</TABLE>
See accompanying notes
5
<PAGE> 6
COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Accumulated
Additional Other Total
Common Paid-in Retained Comprehensive Shareholders'
Shares Stock Capital Earnings Income Equity
--------- ------------ ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 2,254,841 $ 5,139,218 $ 6,317,732 $ 8,087,264 $ (11,232) $ 19,532,982
(Audited)
Stock options exercised 21,415 214,001 -- -- -- 214,001
Sale of common stock 12,195 174,999 -- -- -- 174,999
Cash dividend paid or declared -- -- -- (842,229) -- (842,229)
Net Income and Comprehensive
Income -- -- -- 3,886,409 21,324 3,907,733
--------- ------------ ------------ ------------ ------------ ------------
BALANCE, December 31, 1997 2,288,451 5,528,218 6,317,732 11,131,444 10,092 22,987,486
(Audited)
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 1,154,755 -- -- (4,037) -- (4,037)
2 for 1 stock split 3,470,341 -- -- -- -- --
Cash dividend paid or declared -- -- -- (1,587,285) -- (1,587,285)
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
(Audited)
Stock options exercised 27,565 114,397 -- -- -- 114,397
Cash dividend paid or declared -- -- -- (957,009) -- (957,009)
Net Income and Comprehensive
Income -- -- -- 2,257,259 (449,186) 1,808,073
--------- ------------ ------------ ------------ ------------ ------------
BALANCE, June 30, 1999 7,976,597 $ 14,239,712 $ 6,317,732 $ 15,558,225 $ (393,988) $ 35,721,681
(Unaudited) ========= ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
6
<PAGE> 7
COLUMBIA BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Principles of Consolidation
The interim consolidated financial statements include the accounts of
Columbia Bancorp, a bank holding company ("Columbia"), and its
wholly-owned subsidiaries, Columbia River Bank ("CRB"), Valley Community
Bank ("VCB") and Valley Community Mortgage Services, Inc., after
elimination of intercompany transactions and balances. CRB and VCB are
Oregon state-chartered banks, headquartered in The Dalles and McMinnville,
Oregon, respectively. Substantially all activity of Columbia is conducted
through its subsidiary banks.
The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. The financial information included in this
interim report has been prepared by management without audit by
independent public accountants. Columbia's annual report will contain
audited financial statements. All adjustments including normal recurring
accruals necessary for fair presentation of results of operations for the
interim periods included herein have been made. The results of operations
for the six months ended June 30, 1999 are not necessarily indicative of
results to be anticipated for the year ending December 31, 1999.
Certain reclassifications have been made to prior period financial
statements to conform with current period presentation.
2. Recent Corporate Activity
On November 30, 1998, Columbia completed its acquisition of Valley
Community Bancorp and its wholly owned subsidiaries, VCB and Valley
Community Mortgage Services, Inc. Following the acquisition, Valley
Community Bancorp was effectively dissolved and its subsidiaries became
direct subsidiaries of Columbia. The acquisition price of $15,101,542.50
or $16.30 per share of common stock was accounted for as a purchase
transaction.
On October 19, 1998, CRB ceased using the "Juniper Banking Company" and
"Klickitat Valley Bank" assumed business names. After that date, all CRB
bank branches began using the "Columbia River Bank" name.
3. Loans and Reserve for Loan Losses
The composition of the loan portfolio was as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
(Unaudited) (Audited)
<S> <C> <C>
Commercial $ 48,348,828 $ 41,274,990
Agriculture 39,016,434 34,603,691
Real estate 111,022,831 108,516,555
Consumer 16,900,255 16,568,629
Other 1,493,403 933,494
------------- -------------
216,781,751 201,897,359
Allowance for loan losses (3,028,914) (2,380,220)
Deferred loan fees (774,397) (783,951)
------------- -------------
$ 212,978,440 $ 198,733,188
============= =============
</TABLE>
7
<PAGE> 8
Transactions in the reserve for loan losses were as follows for the six
months ended June 30:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 2,380,220 $ 1,638,633
Provision charged to operations 685,000 450,000
Recoveries 65,222 38,057
Loans charged off (101,528) (460,822)
----------- -----------
Balance at end of period $ 3,028,914 $ 1,665,868
=========== ===========
</TABLE>
Columbia has adopted a policy for placement of loans on nonaccrual
status after they become 90 days past due unless otherwise formally
waived. Further, Columbia may place loans that are not contractually past
due or the are deemed fully collateralized on nonaccrual status to promote
better oversight and review of loan arrangements. Loans on nonaccrual
status at June 30, 1999 and December 31, 1998 were approximately $849,000
and $1,082,000, respectively.
As of June 30, 1999, Columbia identified loans totaling $568,000 on
which the interest rate or payment schedule was modified from original
terms to accommodate a borrower's weakened financial position. There was
$825,000 of loans in this category at December 31, 1998.
At June 30, 1999, Columbia had $280,000 in the other real estate owned
("OREO") category, which represents assets held through loan foreclosure
or recovery activities. There were $281,000 in OREO at December 31, 1998.
4. Earnings Per Share
Basic earning per share excludes dilution and is computed by dividing
net income by the weighted average common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that
could occur if common shares were issued pursuant to the exercise of
options under stock option plans. Weighted average shares outstanding
consist of common shares outstanding and common stock equivalents
attributable to outstanding stock options.
The weighted average number of shares and common share equivalents have
been adjusted for all prior stock dividends or splits.
5. Recently Issued Accounting Standards
Columbia does not expect the recently issued SFAS No. 133, 134 and 135
to materially impact the financial condition or results of operations of
Columbia.
8
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING INFORMATION
Forward-looking statements with respect to the financial condition,
results of operations and the business of Columbia are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those set forth in such statements. These include, without limitation:
Columbia's dependence on the timely development, introduction and customer
acceptance of new products; the impact of competition on revenues and margins;
and other risks and uncertainties, including statements relating to the year
2000, as may be detailed from time to time in Columbia's public announcements
and filings with the SEC. Forward-looking statements can be identified by the
use of forward-looking terminology, such as "may", "will", "should", "expect",
"anticipate", "estimate", "continue", "plans", "intends", or other similar
terminology. Columbia does not intend to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date of
the Report, other than in its periodic filings with the SEC, or to reflect the
occurrence of unanticipated events.
OVERVIEW
Columbia Bancorp ("Columbia") recorded strong second quarter top-line
growth and expansion in assets, loans and deposits. Columbia continued its
investment in new branches and infrastructure and enhanced the management team
in the second quarter of 1999.
Columbia reported net income of $2,257,259, or $.28 per diluted share for
the six months ended June 30, 1999. This represented a 2% increase in net
income, as compared to $2,219,317, or $.31 per diluted share, for the six months
ended June 30, 1998. Net income of $1,157,949, or $.14 per diluted share for the
quarter ended June 30, 1999 represented a decrease of 5% in net income as
compared to $1,213,440, or $.17 per diluted share for the quarter ended June 30,
1998. Per share results reflect a 14% increase in weighted average shares
outstanding due primarily to the company's public offering of one million shares
in November 1998.
The net income added to shareholders' equity during the first six months
of 1999 was offset, in part, by dividends declared and paid of $957,009. A first
quarter dividend of $.06 per share was paid May 1 to shareholders of record
April 15. On June 15 the Bancorp board of directors declared a second-quarter
dividend of $.06 per share payable August 1 to shareholders of record July 15.
With the payment of the declared dividend, approximately 42% of earnings will
have been returned to shareholders, the remainder being retained to fund the
continued growth of Columbia.
Columbia's subsidiary, Columbia River Bank ("CRB") continues an aggressive
expansion plan and, in August, plans to open its second branch in Bend, Oregon.
Construction is nearly complete on the Shevlin Center branch in West Bend in the
Shevlin Business Park, an office park development. Bend is the largest market in
which CRB operates, and the potential for strong growth in CRB's downtown office
and the development of Bend's west side allow significant opportunities.
On January 4, 1999, CRB opened its first branch in Pendleton, Oregon.
Pendleton is the largest town in eastern Oregon, with a population of over
16,000. This was the second branch CRB opened in Eastern Oregon. On September
14, 1998, CRB opened a branch in the rapidly growing city of Hermiston, which is
26 miles west of Pendleton. The Hermiston office was a new market for CRB and a
natural extension for CRB's brand of relationship banking. Management believes
that the Bank's agricultural and small business lending expertise and commitment
to exceptional customer service will be well received in the both Eastern Oregon
communities.
Growth in current markets, the expansion of its base of interest earning
assets, and increased revenue generated from non-interest income all contribute
to the goal of achieving Columbia's mission of being a high performing banking
corporation providing superior financial services to the communities it serves.
9
<PAGE> 10
MATERIAL CHANGES IN FINANCIAL CONDITION
Changes in the balance sheet for the six months ended June 30, 1999
include a decrease in total assets, primarily in cash and cash equivalents.
Investment securities and loans increased, while total deposits and notes
payable decreased.
At June 30, 1999, total assets decreased 0.5%, or approximately $1.6
million, over total assets at December 31, 1998. Major components of the change
in total assets were:
o $11.1 million increase in loans
o $31.5 million decrease in cash and cash equivalents
o $15.1 million increase in investment securities
The increase in loans is reflected in increases in all loan categories.
Management attributes the change to seasonal increase in real estate
construction and agricultural operating loans as well as continued penetration
within Columbia's market. The market areas Columbia serve continue to experience
robust local economies.
Columbia experienced a decrease in deposits of approximately $1.8 million
during the first six months of 1999, specifically as follows:
o Interest bearing demand deposits decreased $12.8 million
o Non-interest bearing deposits increased $3.1 million
o Savings deposits increased $1.6 million
o Time certificate deposits increased $6.3 million
The decrease in interest bearing demand deposits, and related decrease in
cash and cash equivalents, was due primarily to a customer's withdrawal from a
sinking fund account for debt payment at another financial institution.
Notwithstanding this withdrawal, management believes deposit increases are due
to continuing expansion in current market areas served.
All other changes experienced in asset and liability categories during the
first six months of 1999 were comparatively modest.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Total interest income increased $2,831,225 for six months ended June 30,
1999, and $1,422,758 the quarter ended June 30, 1999, as compared to the same
periods in 1998. This increase is primarily due to the increase in loans and
securities held in 1999 as compared to 1998.
Total interest expense also increased $716,148 for the six months ended
June 30, 1999, and $305,852 for the quarter ended June 30, 1999, as compared to
the same periods in 1998. This increase is primarily due to the increase in time
deposits held during 1999 as compared to 1998.
Columbia's net interest income increased by $2,115,077 for the six months
ended June 30, 1999 as compared to the six months ended June 30, 1998. Diluted
net income per common share decreased to $.28 for the first six months of 1999
from $.31 for the first six months of 1998. Cash earnings in the first half of
1999 were $.32 per diluted share compared to $.31 per diluted share in the like
period a year ago.
Noninterest income increased approximately $735,328 for the six months
ended June 30, 1999 as compared to the same period in 1998. This increase is
primarily attributable to increases in income generated by CRB's mortgage group
as well as increased income generated by service charges and fees on deposit
accounts.
Noninterest expense increased approximately $2,404,800 for the six months
ended June 30, 1999 as compared to the comparable 1998 period. The increase for
the six-month period was primarily attributable to increases in salaries and
employee benefits and other expenses. The formation and staffing of the newly
opened Hermiston and Pendleton branches of CRB, and growth in the CRB mortgage
group, and the commitment and investment in technology and new products, were
primary forces in the increased expense in these categories.
Columbia's "Y2K" efforts (the enterprise-wide program to prepare
Columbia's computer systems and applications for the year 2000) are within
planned timelines and proceeding according to internal plans. Columbia is
10
<PAGE> 11
committed to addressing these Y2K challenges in a prompt and responsible manner
and has dedicated resources to do so. Management has completed an assessment of
its automated systems and has implemented a plan to resolve these issues,
including purchasing appropriate computer technology. Columbia's Y2K compliance
plan has five phases. These phases are (1) project management, (2) awareness,
(3) assessment, (4) testing, and (5) remediation and implementation. Columbia
has substantially completed all phases, although appropriate follow-up
activities will continue to occur throughout 1999. Columbia has contingency
plans in place to address any Y2K disruptions that may occur. These plans are
designed to provide our customers and shareholders with the best possible
customer service. Columbia will continue to monitor its systems for compliance
and state of readiness. Completed and ongoing efforts also include community
seminars on the subject and the education of customers.
LOAN LOSS PROVISION
During the six months ended June 30, 1999, Columbia charged a $685,000
loan loss provision to operations, as compared to $450,000 charged during the
same period in 1998. Loans charged off, net of loan recoveries, was $36,306
during the six months ended June 30, 1999, as compared to net charged off loans
of $422,765 for the like period in 1998.
Management believes that the reserve for loan losses is adequate for
potential loan losses, based on management's assessment of various factors,
including present delinquent and nonperforming loans, past history of industry
loan loss experience, and present and anticipated future economic trends
impacting the areas and customers served by Columbia.
LIQUIDITY AND CAPITAL RESOURCES
Columbia has adopted policies to maintain a relatively liquid position to
enable it to respond to changes in the financial environment and ensure
sufficient funds are available to meet customers' needs for borrowing and
deposit withdrawals. Generally, Columbia's major sources of liquidity are
customer deposits, sales and maturities of investment securities, the use of
federal funds markets and net cash provided by operating 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.
The analysis of liquidity also includes a review of the changes that
appear in the consolidated statement of cash flows for the first six months of
1999. The statement of cash flows includes operating, investing and financing
categories. Operating activities include net income of $2,257,259, 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 the dividend paid to shareholders.
The Federal Reserve Board ("FRB") and Federal Deposit Insurance
Corporation ("FDIC") have established minimum requirements for capital adequacy
for bank holding companies and member banks. The requirements address both
risk-based capital and leveraged capital. The regulatory agencies may establish
higher minimum requirements if, for example, a corporation has previously
received special attention or has a high susceptibility to interest rate risk.
The following reflects Columbia's various capital ratios at June 30, 1999, as
compared to regulatory minimums.
<TABLE>
<CAPTION>
At June 30, 1999 Regulatory Minimum
---------------- ------------------
<S> <C> <C>
Tier-one capital 10.75% 4%
Total risk-based capital 11.95% 8%
Leverage ratio 8.11% 4%
</TABLE>
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There has not been a material change in the quantitative and qualitative
market risks faced by Columbia from the risk disclosures reported in Columbia's
form 10-K covering the fiscal year ended December 31, 1998.
11
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of shareholders of Columbia Bancorp was held April 16,
1999. At the meeting, three items were put to a vote of the shareholders:
Election of Directors of Bancorp; Increase in Authorized Shares of Bancorp
Common Stock; and Adoption of Stock Incentive Plan.
All directors nominated were elected to serve a three year term. The
following shows results of the voting including term to be served for each
director.
<TABLE>
<CAPTION>
For Term Ended Votes For Votes Against Abstain
-------------- --------- ------------- -------
<S> <C> <C> <C> <C>
Robert L.R. Bailey 2002 5,133,225 56,364 76,182
Dennis Carver 2002 5,184,633 4,956 24,774
Donald T. Mitchell 2002 5,134,737 54,852 74,670
</TABLE>
Directors continuing in office include Charles F. Beardsley, William A.
Booth, Terry L. Cochran, Jane F. Lee, Jean S. McKinney, and James B. Roberson.
Bancorp shareholders approved an amendment to Article II, Section (1) of
the Articles of Incorporation of Bancorp increasing the authorized shares of its
Common Stock from 10,000,000 to 20,000,000. Approval required a simple majority
vote. Of the 7,964,932 issued and outstanding shares entitled to be voted on the
matter as of the record date of March 1, 1999, 4,870,725 were voted in favor,
214,216 were voted against and 64,806 abstained.
Prior to the approval of the amendment, Article II, Section (1) provided:
"The Corporation is authorized to issue 10,000,000 shares of Common
Stock."
Following approval of the amendment, Article II, Section (1) provides:
"The Corporation is authorized to issue 20,000,000 shares of Common
Stock."
Bancorp was incorporated on October 3, 1995, the date of filing of its
Articles of Incorporation with the Oregon Secretary of State. The amendment
described above is the second amendment made to Bancorp's Articles of
Incorporation since the date of incorporation. The prior amendment increased
Bancorp's share issuance authorization from 4,000,000 shares to 10,000,000
shares of Common Stock. Articles of Amendment reflecting the most recent
amendment were filed with the Oregon Secretary of State on May 14, 1999. A
complete copy of the Articles of Incorporation, as amended, is attached hereto
as Exhibit 3(i).
Bancorp shareholders also approved the Columbia Bancorp 1999 Stock
Incentive Plan (the "Plan") authorizing Bancorp to issue various forms of stock
incentive compensation, including stock options. Approval required a simple
majority vote. Of the 7,964,932 issued and outstanding shares entitled to be
voted on the matter as of the record date of March 1, 1999, 4,796,982 were voted
in favor, 262,834 were voted against and 157,074 abstained. A complete copy of
the Plan as approved by shareholders is attached as Exhibit 99.1 to Bancorp's
Form S-8 filed with the Securities and Exchange Commission on May 25, 1999, and
is incorporated herein by this reference.
ITEM 5. OTHER INFORMATION
Director Resignation
On May 6, Greg Walden resigned as a member of the boards of directors of
Columbia and CRB. Walden, a member of congress from Oregon's second district,
cited time constraints related to his service in the U.S. House of
Representatives for the resignation.
12
<PAGE> 13
Management Enhancements
On May 14, Columbia expanded its management team when Roger Christensen
joined the company in the newly created position of Executive Vice President and
Chief Operating Officer. Mr. Christensen was Vice President and Manager of the
Bend Main Branch of Bank of the Cascades since 1991 and prior to that held
numerous positions with Bank of America and Benj. Franklin Savings & Loan. He
received a Bachelor in Accounting from Boise State University and attended
graduate level courses in Oregon State University's MBA program.
Craig Ortega, formerly Executive Vice President and Head of Community
Banking for CRB since 1997, was promoted to President and Chief Executive
Officer for CRB. Mr. Ortega joined CRB in 1993 as Manager of the Hood River
branch. He received a Bachelor degree from Eastern Oregon State College and
graduated from Pacific Coast Banking School in 1993.
These management enhancements allow Terry Cochran, President and CEO of
Columbia Bancorp, who also previously served as President and CEO of CRB since
1981, to devote additional time to strategic planning and growth of Bancorp as a
whole.
CRB Branching Activities
Columbia's plans to open a second CRB branch in Bend, Oregon are
proceeding as planned. Construction of the new Shevlin Center branch in the
Shevlin Business Park, an office park development in the western part of Bend,
is nearly complete, and should be open by mid-August.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 3(i) - Amended Articles of Incorporation
Exhibit 27 - Article 9 Financial Data Schedule for Form 10-Q
Exhibit 99(i) - Columbia Bancorp 1999 Stock Incentive Plan
(incorporated by reference)
(b) No current reports on Form 8-K were filed during the quarter ended
June 30, 1999.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLUMBIA BANCORP
Dated: August 10, 1999 /s/ Terry L. Cochran
-------------------------------------------
Terry L. Cochran
President & Chief Executive Officer
Dated: August 10, 1999 /s/ Neal T. McLaughlin
-------------------------------------------
Neal T. McLaughlin, EVP, Chief Financial
Officer - Columbia River Bank; and
Chief Financial Officer - Columbia Bancorp
13
<PAGE> 1
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
Columbia Bancorp
ARTICLE I
The name of the Corporation is Columbia Bancorp.
ARTICLE II
(1) The Corporation is authorized to issue 20,000,000 shares of Common
Stock. (As amended by shareholder vote on April 16, 1999).
(2) Holders of Common Stock are entitled to one vote per share on any
matter submitted to the shareholders. On dissolution of the Corporation, after
any preferential amount with respect to Preferred Stock has been paid or set
aside, the holders of Common Stock and the holders of any series of Preferred
Stock entitled to participate in the distribution of assets are entitled to
receive the net assets of the Corporation.
(3) The Board of Directors (the "Board") is authorized, subject to
limitations prescribed by the Oregon Business Corporation Act, as amended from
time to time (the "Act"), and by the provisions of this Article, to provide for
the issuance of shares of Preferred Stock in series, to establish from time to
time the number of shares to be included in each series, and to determine the
designations, relative rights, preferences and limitations of the shares of each
series. The authority of the Board with respect to each series includes, without
limitation, determination of the following:
(a) The number of shares in and the distinguishing designation of
that series;
(b) Whether shares of that series shall have full, special,
conditional, limited or no voting rights, except to the extent otherwise
provided by the Act;
(c) Whether shares of that series shall be convertible and the
terms and conditions of the conversion, including provision for the adjustment
of the conversion rate in circumstances determined by the Board;
(d) Whether shares of that series shall be redeemable and the terms
and conditions of the redemption, including the date or dates upon or after
which they shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions or at different
redemption dates;
Page 1 - COLUMBIA BANCORP ARTICLES OF INCORPORATION
<PAGE> 2
(e) The dividend rate, if any, on shares of that series, the manner
of calculating any dividends, and the preferences of any dividends;
(f) The rights of shares of that series in the event of voluntary
or involuntary dissolution of the Corporation, and the rights of priority of
that series relative to the Common Stock and any other series of Preferred Stock
on the distribution of assets on dissolution; and
(g) Any other rights, preferences and limitations of that series
that are permitted by law to vary.
ARTICLE III
(1) The Board shall supervise the business of the Corporation.
(2) The Board shall consist of not more than twelve (12) and not less
than seven (7) members. The exact number of directors at any given time shall be
fixed within these limits by approval of the directors.
(3) The Board shall be divided into three classes, none of which shall
have less than two (2) members, identified as class (A), class (B), and class
(C). The term of office of directors in class (A) shall expire at the first
annual meeting of shareholders after their election or when their successors are
qualified and elected. The term of office of directors in class (B) shall expire
at the second annual meeting of shareholders after their election or when their
successors are qualified and elected. The term of office of directors in class
(C) shall expire at the third annual meeting of shareholders after their
election or when their successors are qualified and elected. At each meeting
thereafter, the number of directors equal to the number in the class whose term
expires at the time of such meeting shall be elected to hold office until the
third succeeding annual meeting or until their successors are qualified and
elected.
(4) The shareholders of the Corporation may remove one or more
directors only for cause. If the director is elected by a voting group of
shareholders, only the shareholders of that voting group may participate in the
vote to remove the director. A director may be removed by the shareholders only
at a meeting called for the purpose of removing the director. The notice of such
meeting must state that the purpose, or one of the purposes, of the meeting is
the removal of the director. For the purposes of this Article "cause" shall mean
(i) any breach of a director's duty of loyalty to the Corporation or its
shareholders, (ii) acts or omissions of a director which are not in good faith
or which involve intentional misconduct or a knowing violation of the law, (iii)
any distribution to a director which is unlawful under the provisions of ORS
60.367, or (iv) any transaction with the Corporation from which the director
derived an improper or illegal personal benefit.
Page 2 - COLUMBIA BANCORP ARTICLES OF INCORPORATION
<PAGE> 3
(5) Any directorship to be filled by reason of a vacancy in the Board
or a vacancy resulting from an increase in the number of directors shall be
filled by the affirmative vote of a majority of all the directors remaining in
office. Such vacancy shall be filled by the Board for the unexpired term of such
vacancy at the first regular meeting of the Board after the vacancy occurs.
Shareholders may not fill vacancies.
(6) Notwithstanding any other provisions of these Articles of
Incorporation or the bylaws of the Corporation, the provisions of this Article
III may not be amended or repealed, and no provisions inconsistent herewith may
be adopted by the Corporation, without the affirmative vote of seventy-five
percent (75%) of all of the votes entitled to be cast on the matter.
ARTICLE IV
(1) Any offer, proposal or plan to (a) merge, consolidate or combine
the Corporation and/or any of its subsidiaries in any way with any other
corporation, entity or affiliate thereof, or to (b) sell all or substantially
all of the Corporation and/or any of its subsidiaries or assets to any other
corporation, entity or affiliate thereof, which proposal or plan is not approved
by a majority of the Board, must be approved by the affirmative vote of
seventy-five percent (75%) of the shares of each class of stock of the
Corporation entitled to vote on the proposal.
(2) Notwithstanding any other provisions of these Articles of
Incorporation or the bylaws of the Corporation, the provisions of this Article
IV may not be amended or repealed, and no provisions inconsistent herewith may
be adopted by the Corporation, without the affirmative vote of seventy-five
percent (75%) of all of the votes entitled to be cast on the matter.
ARTICLE V
(1) No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for conduct as a director,
provided that this Article shall not eliminate the liability of a director for
(i) any breach of a director's duty of loyalty to the Corporation or its
shareholders, (ii) acts or omissions of a director which are not in good faith
or which involve intentional misconduct or a knowing violation of the law, (iii)
any distribution to a director which is unlawful under the provisions of ORS
60.367, (iv) any transaction with the Corporation from which the director
derived an improper or illegal personal benefit, or (v) any act or omission for
which such elimination of liability is not permitted under the Act.
(2) No amendment to the Act that further limits the acts or omissions
for which elimination of liability is permitted shall affect the liability of a
Page 3 - COLUMBIA BANCORP ARTICLES OF INCORPORATION
<PAGE> 4
director for any act or omission occurring prior to the effective date of the
amendment.
(3) If the Act or other Oregon law is amended to authorize the
elimination or limitation of the liability of directors, then the liability of a
director of the Corporation shall be so eliminated or limited to the fullest
extent permitted by the Act or by Oregon law as so amended.
ARTICLE VI
(1) The Corporation shall indemnify to the fullest extent not
prohibited by the Act or other law any current or former director of the
Corporation who is made, or threatened to be made, a party to an action, suit or
proceeding, whether civil, criminal, administrative, investigative or other,
including an action, suit or proceeding by or in the right of the Corporation,
by reason of the fact that such person was or is a director, employee or agent
of the Corporation or any of its subsidiaries, or was or is a fiduciary within
the meaning of the Employee Retirement Income Security Act of 1974 with respect
to any employee benefit plan of the Corporation or any of its subsidiaries, or
serves or served at the request of the Corporation as a director, officer,
employee or agent, or as a fiduciary of an employee benefit plan, of another
corporation, partnership, joint venture, trust or other enterprise.
(2) The Corporation shall reimburse or pay for the reasonable expenses
incurred by any such current or former director in any such action, suit or
proceeding in advance of the final disposition of the same if the director sets
forth in writing (i) the director's good faith belief of entitlement to
indemnification under this Article, and (ii) the director's agreement to repay
all advances if it is ultimately determined that the director is not entitled to
indemnification.
(3) No amendment to this Article that limits the Corporation's
obligation to indemnify any person shall have any effect on such obligation for
any act or omission that occurs prior to the later of the effective date of the
amendment or the date on which notice of the amendment is given to the person.
This Article shall not be deemed exclusive of any other provisions for
indemnification or advancement of expenses of directors, officers, employees,
agents and fiduciaries that may be part of or included in any statute, bylaw,
agreement, general or specific action of the Board, vote of shareholders or
other document or arrangement. The Corporation may enter into written agreements
of indemnification.
ARTICLE VII
(1) Unless otherwise permitted by the Board, any business, including
nominations of directors, may be properly brought before an annual
Page 4 - COLUMBIA BANCORP ARTICLES OF INCORPORATION
<PAGE> 5
shareholders meeting by a shareholder only upon the shareholder's timely notice
in writing to the secretary of the Corporation. To be timely, a shareholder's
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not later than the close of business on the tenth
(10th) business day following the day on which notice or disclosure of the date
of the annual meeting is given or made to shareholders.
(2) A shareholder's notice under this Article VII shall set forth (i) a
brief description of each matter desired to be brought before the annual meeting
and the reason for conducting such business at the meeting, (ii) the name and
address of the proposing shareholder, (iii) the class and number of shares of
stock of the Corporation which are beneficially owned by the proposing
shareholder, (iv) any material interest of the shareholder in the business
proposed, and (v) as for each person whom the shareholder proposes to nominate
for election as a director (a) the name, age, business address, and residence
address of such person, (b) the principal occupation or employment of such
person, (c) the class and number or shares of stock, if any, of the Corporation
which are beneficially owned by such person, (d) the proposed nominee's written
consent, and (e) any other information relating to such person that is required
to be disclosed or is otherwise required by any applicable law.
(3) Notwithstanding any other provisions of these Articles of
Incorporation or the bylaws of the Corporation, the provisions of this Article
VII may not be amended or repealed, and no provisions inconsistent herewith may
be adopted by the Corporation, without the affirmative vote of seventy-five
percent (75%) of all of the votes entitled to be cast on the matter.
ARTICLE VIII
The street address and the mailing address of the initial registered
office of the Corporation is 316 East Third Street, The Dalles, Oregon 97058 and
the name of its initial registered agent is Terry L. Cochran.
ARTICLE IX
The name and address of the incorporator is Bennett H. Goldstein,
Attorney at Law, 2548 SW St. Helens Court, Portland, Oregon 97201.
Page 1 - COLUMBIA BANCORP ARTICLES OF INCORPORATION
<PAGE> 6
ARTICLE X
The mailing address for notices to the Corporation is c/o Bennett H.
Goldstein, Attorney at Law, 2548 SW St. Helens Court, Portland, Oregon 97201.
Date: October 2, 1995.
/s/
----------------------------------
Bennett H. Goldstein, Incorporator
FILING AND AMENDMENT HISTORY
(1) Articles of Incorporation filed on October 3, 1995 as Oregon
Secretary of State Registry No. 480168-85.
(2) On April 29, 1997 an amendment to Article II was approved by
shareholders increasing authorized shares from 4 million to 10 million.
(2) On April 16, 1999 an amendment to Article II was approved by
shareholders increasing authorized shares from 10 million to 20 million.
Page 6 - COLUMBIA BANCORP ARTICLES OF INCORPORATION
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM COLUMBIA
BANCORP'S CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY REPORT ON
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1999
<CASH> 24,543,229
<INT-BEARING-DEPOSITS> 6,737,118
<FED-FUNDS-SOLD> 3,000,366
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 40,343,013
<INVESTMENTS-CARRYING> 22,689,180
<INVESTMENTS-MARKET> 0
<LOANS> 220,639,345
<ALLOWANCE> 3,028,914
<TOTAL-ASSETS> 340,834,399
<DEPOSITS> 293,895,298
<SHORT-TERM> 8,330,250
<LIABILITIES-OTHER> 2,587,170
<LONG-TERM> 300,000
0
0
<COMMON> 14,239,712
<OTHER-SE> 21,481,969
<TOTAL-LIABILITIES-AND-EQUITY> 340,834,399
<INTEREST-LOAN> 10,515,754
<INTEREST-INVEST> 1,462,884
<INTEREST-OTHER> 777,521
<INTEREST-TOTAL> 12,756,159
<INTEREST-DEPOSIT> 3,896,704
<INTEREST-EXPENSE> 4,131,506
<INTEREST-INCOME-NET> 8,624,653
<LOAN-LOSSES> 685,000
<SECURITIES-GAINS> 8,417
<EXPENSE-OTHER> 4,371,388
<INCOME-PRETAX> 3,576,682
<INCOME-PRE-EXTRAORDINARY> 2,257,259
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,257,259
<EPS-BASIC> .28
<EPS-DILUTED> .28
<YIELD-ACTUAL> 8.90
<LOANS-NON> 849,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 568,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,380,220
<CHARGE-OFFS> 101,528
<RECOVERIES> 65,222
<ALLOWANCE-CLOSE> 3,028,914
<ALLOWANCE-DOMESTIC> 3,028,914
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
