<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 September 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.
8,006,897 shares of common stock as of November 1, 1999
<PAGE> 2
COLUMBIA BANCORP
FORM 10-Q
SEPTEMBER 30, 1999
INDEX
<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
<S> <C>
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets as of September 30, 1999 and 3
December 31, 1998.
Consolidated Statements of Income and Comprehensive Income 4
for the nine months and quarter ended September 30, 1999 and 1998.
Consolidated Statements of Cash Flows for the nine months ended 5
September 30, 1999 and 1998.
Consolidated Statements of Changes in Shareholders' Equity for the 6
periods of December 31, 1996 to September 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 12
PART II - OTHER INFORMATION
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 12
</TABLE>
2
<PAGE> 3
COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- -------------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Cash and due from banks $ 19,949,618 $ 22,643,895
Interest-bearing deposits with other banks 5,228,506 30,575,012
Federal funds sold 4,434,524 12,554,775
------------ ------------
Total cash and cash equivalents 29,612,648 65,773,682
Investment securities available-for-sale 41,590,916 29,466,769
Investment securities held-to-maturity 22,689,008 17,310,222
Restricted equity securities 1,077,300 1,117,200
------------ ------------
Total investment securities 65,357,224 47,894,191
Loans held-for-sale 3,732,170 7,818,603
Loans, net of allowance for loan losses and unearned loan fees 228,004,390 198,733,188
Property and equipment, net of depreciation 11,264,038 8,190,068
Accrued interest receivable 3,523,862 2,487,122
Goodwill 8,803,496 9,286,832
Other real estate owned 259,350 280,800
Other assets 5,074,846 1,948,763
------------ ------------
Total assets $355,632,024 $342,413,249
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest bearing demand deposits $ 79,300,827 $ 67,408,747
Interest bearing demand 126,908,936 134,716,357
Savings accounts 29,511,767 27,969,402
Time certificates 71,850,020 65,585,883
------------ ------------
Total deposits 307,571,550 295,680,389
Notes payable 8,611,197 9,734,095
Accrued interest payable and other liabilities 2,804,669 2,242,545
------------ ------------
Total liabilities 318,987,416 307,657,029
------------ ------------
Shareholders' equity:
Common stock, no par value; 20,000,000 shares
authorized, 8,006,897 issued and outstanding
(7,949,032 at December 31, 1998) 14,378,714 14,125,315
Additional paid-in capital 6,317,732 6,317,732
Retained earnings 16,484,066 14,257,975
Accumulated other comprehensive income, net of tax (535,904) 55,198
------------ ------------
Total shareholders' equity 36,644,608 34,756,220
------------ ------------
$355,632,024 $342,413,249
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
1999 1998 1999 1998
INTEREST INCOME
<S> <C> <C> <C> <C>
Interest and fees on loans $ 5,915,408 $ 4,629,696 $ 16,431,161 $ 13,046,553
Interest on investments
Taxable investment securities 601,601 438,670 1,577,650 1,301,925
Nontaxable investment securities 259,826 203,765 746,661 623,219
Other interest income 234,832 215,886 1,012,354 441,254
------------ ------------ ------------ ------------
Total interest income 7,011,667 5,488,017 19,767,826 15,412,951
INTEREST EXPENSE
Interest bearing demand and savings 1,042,659 901,633 3,029,617 2,621,487
Interest on time deposit accounts 976,857 837,251 2,886,603 2,323,181
Other borrowed funds 128,708 112,959 363,510 322,534
------------ ------------ ------------ ------------
Total interest expense 2,148,224 1,851,843 6,279,730 5,267,202
------------ ------------ ------------ ------------
NET INTEREST INCOME 4,863,443 3,636,174 13,488,096 10,145,749
PROVISION FOR LOAN LOSSES 170,000 250,000 855,000 700,000
------------ ------------ ------------ ------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,693,443 3,386,174 12,633,096 9,445,749
NONINTEREST INCOME
Service charges and fees 575,884 434,571 1,598,808 1,268,856
Credit card discounts and fees 171,084 132,608 398,751 317,507
Financial services department income 101,414 65,847 285,656 220,678
Mortgage servicing revenue 288,803 283,588 834,133 450,215
Gain on sale of loans, net of discount (25,941) (10,123) 92,073 167,255
Mortgage loan origination income 108,698 169,804 442,722 493,607
Other noninterest income 183,465 160,477 563,390 395,452
------------ ------------ ------------ ------------
Total noninterest income 1,403,407 1,236,772 4,215,533 3,313,570
NONINTEREST EXPENSE
Salaries and employee benefits 2,125,867 1,613,812 5,989,316 4,327,710
Occupancy expense 295,585 229,167 872,881 678,133
Credit card processing fees 119,437 86,982 296,582 210,490
Office Supplies 59,644 39,309 195,389 118,660
Data processing expense 135,917 79,988 417,137 263,520
Other noninterest expenses 1,016,788 673,347 3,157,028 1,894,406
------------ ------------ ------------ ------------
Total noninterest expense 3,753,238 2,722,605 10,928,333 7,492,919
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 2,343,612 1,900,341 5,920,296 5,266,400
------------ ------------ ------------ ------------
PROVISION FOR INCOME TAXES 936,636 656,257 2,256,059 1,803,000
------------ ------------ ------------ ------------
NET INCOME $ 1,406,976 $ 1,244,084 $ 3,664,235 $ 3,463,400
============ ============ ============ ============
OTHER COMPREHENSIVE INCOME, NET
Unrealized gain or loss on AFS securities, net (141,768) 124,187 (582,536) 143,367
Reclassification for gain included in net income (148) (17,322) (8,566) (52,882)
------------ ------------ ------------ ------------
(141,916) 106,865 (591,102) 90,485
------------ ------------ ------------ ------------
COMPREHENSIVE INCOME $ 1,265,060 $ 1,350,949 $ 3,073,133 $ 3,553,885
============ ============ ============ ============
Earnings per share of common stock
Net Income Basic $ 0.18 $ 0.18 $ 0.46 $ 0.50
Net Income Diluted $ 0.17 $ 0.17 $ 0.45 $ 0.49
Weighted average common shares outstanding
Basic 7,995,588 6,939,803 7,976,950 6,924,407
Diluted 8,116,988 7,112,109 8,106,679 7,102,208
</TABLE>
See accompanying notes
4
<PAGE> 5
COLUMBIA BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended
September 30,
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net income $ 3,664,235 $ 3,463,400
Adjustments to reconcile net income to net cash from operating activities:
Loss (Gain) on sale or call of investments (8,566) (52,882)
Gain on sale of assets (92,073) -
Depreciation and amortization 980,952 365,491
Federal Home Loan Bank stock dividend (60,200) (44,000)
Provision for loan losses 855,000 700,000
Increase (decrease) in cash due to changes in assets/liabilities
Accrued interest receivable (1,036,740) (566,704)
Other assets (3,576,101) (1,909,247)
Accrued interest payable and other liabilities 562,124 (199,773)
------------ ------------
NET CASH FROM OPERATING ACTIVITIES 1,288,631 1,756,285
------------ ------------
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 8,728,987 15,784,621
Proceeds from the maturity of held-to-maturity securities 1,273,802 924,264
Purchases of held-to-maturity securities (5,906,630) (1,252,166)
Purchases of available-for-sale securities (24,649,789) (16,016,543)
Purchase of restricted equity securities 102,082 -
Net change in loans made to customers (24,329,769) (25,780,033)
Payments made for purchase of property and equipment (4,297,320) (629,989)
------------ ------------
NET CASH FROM INVESTING ACTIVITIES (47,033,182) (23,883,670)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit and savings accounts 5,627,023 17,971,646
Net proceeds from time deposits 6,264,137 10,370,374
Net borrowings of debt (1,122,898) 2,950,827
Dividends paid (1,438,144) (1,110,343)
Proceeds from stock options exercised and sales of common stock 253,399 439,004
------------ ------------
NET CASH FROM FINANCING ACTIVITIES 9,583,517 30,621,508
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (36,161,034) 8,494,123
CASH AND CASH EQUIVALENTS, beginning of period 65,773,682 19,712,501
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 29,612,648 $ 28,206,624
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash $ 6,264,919 $ 5,307,265
Taxes paid in cash $ 2,258,046 $ 1,908,198
SCHEDULE OF NONCASH ACTIVITIES
Change in unrealized loss on available-for-sale securities, net of tax $ (591,102) $ 90,485
Cash dividend declared and payable after quarter-end $ 480,414 $ 416,441
</TABLE>
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>
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 57,865 253,399 - - - 253,399
Cash dividend paid or declared - - - (1,438,144) - (1,438,144)
Net Income and Comprehensive
Income - - - 3,664,235 (591,102) 3,073,133
----------------------------------------------------------------------------------------
BALANCE, September 30, 1999 8,006,897 $ 14,378,714 $ 6,317,732 $ 16,484,066 $ (535,904) $ 36,644,608
========================================================================================
(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 nine months ended September 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 September 28, 1999 Columbia announced plans to merge its two
subsidiary banks, CRB and VCB into a single operating entity. The
combination is designed to improve operating efficiency, strengthen the
company's commitment to community banking by more effectively sharing the
resources of the existing subsidiaries and develop a broader regional
brand identity. CRB will be the remaining entity and will be wholly owned
by Columbia. The merger will be accounted for as a pooling of interests
transaction.
3. Loans and Reserve for Loan Losses
The composition of the loan portfolio was as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(Unaudited) (Audited)
<S> <C> <C>
Commercial $ 54,270,398 $ 41,274,990
Agriculture 37,046,272 34,603,691
Real estate 122,984,025 108,516,555
Consumer 17,075,445 16,568,629
Other 699,021 933,494
------------ ------------
232,075,161 201,897,359
Allowance for loan losses (3,206,493) (2,380,220)
Deferred loan fees (864,278) (783,951)
------------ ------------
$228,004,390 $198,733,188
============ ============
</TABLE>
Transactions in the reserve for loan losses were as follows for the
nine months ended September 30:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Balance at beginning of period $2,380,220 $1,638,633
Provision charged to operations 855,000 700,000
Recoveries 88,055 64,224
Loans charged off (116,782) (471,010)
---------- ----------
Balance at end of period $3,206,493 $1,931,847
========== ==========
</TABLE>
7
<PAGE> 8
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 September 30, 1999 and December 31, 1998 were approximately
$343,000 and $1,082,000, respectively.
As of September 30, 1999, Columbia identified loans totaling $541,000
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 September 30, 1999, Columbia had $259,000 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
In the third quarter, Columbia Bancorp ("Columbia") opened its second
branch in Bend, Oregon, announced plans to open a branch in Newberg, Oregon,
announced the merger of its two subsidiary banks to be completed in the
fourth-quarter and recorded record income. Columbia continued its investment in
new branches and infrastructure while growing loans 32%, deposits 34% and income
13% in the third quarter of 1999 as compared to the third quarter a year ago.
Columbia reported net income of $3,664,235, or $.45 per diluted share for
the nine months ended September 30, 1999. This represented a 6% increase in net
income, as compared to $3,463,400, or $.49 per diluted share, for the nine
months ended September 30, 1998. Net income of $1,406,976, or $.17 per diluted
share for the quarter ended September 30, 1999 represented an increase of 13% in
net income as compared to $1,244,084, or $.17 per diluted share for the quarter
ended September 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 nine months
of 1999 was offset, in part, by dividends declared and paid of $1,438,144. A
first quarter dividend of $.06 per share was paid May 1 to shareholders of
record April 15. A second quarter dividend of $.06 per share was paid August 1
to shareholders of record July 15. On September 17 the Bancorp board of
directors declared a third-quarter dividend of $.06 per share payable November 1
to shareholders of record October 15. With the payment of the declared dividend,
approximately 39% 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 November plans to open its first branch in Newberg,
Oregon. Located in the heart of Oregon's Willamette Valley wine country, Newberg
is a fast growing city of over 17,000 located 14 miles north of McMinnville,
Oregon and 20 miles southwest of Portland. CRB will be the anchor tenant in the
new 30,000 square foot office building to be called the Columbia River Bank
Building. There will be space for additional retail establishments as well as
office tenants. The building is expected to be completed in March 2000. The bank
branch is expected to operate in temporary facilities across from the
construction area.
On August 30, CRB opened its second branch in Bend, Oregon. The branch is
located in a newly constructed bank owned building 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.
9
<PAGE> 10
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.
MATERIAL CHANGES IN FINANCIAL CONDITION
Changes in the balance sheet for the nine months ended September 30, 1999
include an increase in total assets, primarily in loans and investment
securities and deposits, while cash and cash equivalents and notes payable
decreased.
At September 30, 1999, total assets increased 3.9%, or approximately
$13.2 million, over total assets at December 31, 1998. Major components of the
change in total assets were:
o $29.3 million increase in loans
o $36.2 million decrease in cash and cash equivalents
o $17.5 million increase in investment securities
The increase in loans is reflected in increases in all major 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 an increase in deposits of approximately $11.9
million during the first nine months of 1999, specifically as follows:
o Interest bearing demand deposits decreased $7.8 million
o Non-interest bearing deposits increased $11.9 million
o Savings deposits increased $1.5 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 nine months of 1999 were comparatively modest.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Total interest income increased $4,354,875 for nine months ended September
30, 1999, and $1,523,650 for the quarter ended September 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 $1,012,528 for the nine months ended
September 30, 1999, and $296,381 for the quarter ended September 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 $3,342,347 for the nine months
ended September 30, 1999 as compared to the nine months ended September 30,
1998. Diluted net income per common share decreased to $.45 for the first nine
months of 1999 from $.49 for the first nine months of 1998. Cash earnings in the
first half of 1999 were $.51 per diluted share compared to $.49 per diluted
share in the like period a year ago.
Noninterest income increased $901,964 for the nine months ended September
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 $3,435,414 for the nine months ended
September 30, 1999 as compared to the comparable 1998 period. The increase for
the nine-month period was primarily attributable to increases in salaries and
employee benefits and other expenses. The formation and staffing of the newly
opened Hermiston, Pendleton and Bend 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.
10
<PAGE> 11
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
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 nine months ended September 30, 1999, Columbia charged a
$855,000 loan loss provision to operations, as compared to $700,000 charged
during the same period in 1998. Loans charged off, net of loan recoveries, was
$28,726 during the nine months ended September 30, 1999, as compared to net
charged off loans of $406,786 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 nine months of
1999. The statement of cash flows includes operating, investing and financing
categories. Operating activities include net income of $3,664,235, 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 September 30, 1999,
as compared to regulatory minimums.
<TABLE>
<CAPTION>
At September 30, 1999 Regulatory Minimum
--------------------- ------------------
<S> <C>
Tier-one capital 10.52% 4%
Total risk-based capital 11.71% 8%
Leverage ratio 8.21% 4%
</TABLE>
11
<PAGE> 12
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.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
CRB Branching Activities
Columbia opened its second CRB branch in Bend, Oregon during the third
quarter. Construction of the new Shevlin Center branch in the Shevlin Business
Park, an office park development in the western part of Bend, was completed by
mid-August with branch operations commencing in late August.
This was the second branch opened by CRB in 1999. On January 4, 1999, CRB
opened its first branch in Pendleton, Oregon. 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.
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.
Columbia's 13th branch is expected to open in Newberg, Oregon during the
fourth quarter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibit 27 - Article 9 Financial Data Schedule for Form 10-Q
(b) No current reports on Form 8-K were filed during the quarter ended
September 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: November 1, 1999 /s/ Terry L. Cochran
------------------------------------------
Terry L. Cochran
President & Chief Executive Officer
Dated: November 1, 1999 /s/ Neal T. McLaughlin
------------------------------------------
Neal T. McLaughlin, EVP, Chief Financial
Officer - Columbia River Bank; and
Chief Financial Officer - Columbia Bancorp
12
<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 SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 19,949,618
<INT-BEARING-DEPOSITS> 5,228,506
<FED-FUNDS-SOLD> 4,434,524
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 42,668,216
<INVESTMENTS-CARRYING> 22,689,008
<INVESTMENTS-MARKET> 0
<LOANS> 234,943,053
<ALLOWANCE> 3,206,493
<TOTAL-ASSETS> 355,632,024
<DEPOSITS> 307,571,550
<SHORT-TERM> 8,311,197
<LIABILITIES-OTHER> 2,804,669
<LONG-TERM> 300,000
0
0
<COMMON> 14,378,714
<OTHER-SE> 22,265,894
<TOTAL-LIABILITIES-AND-EQUITY> 355,632,024
<INTEREST-LOAN> 16,431,161
<INTEREST-INVEST> 2,324,311
<INTEREST-OTHER> 1,012,354
<INTEREST-TOTAL> 19,767,826
<INTEREST-DEPOSIT> 5,916,220
<INTEREST-EXPENSE> 6,279,730
<INTEREST-INCOME-NET> 13,488,096
<LOAN-LOSSES> 855,000
<SECURITIES-GAINS> 8,566
<EXPENSE-OTHER> 6,721,366
<INCOME-PRETAX> 5,920,296
<INCOME-PRE-EXTRAORDINARY> 3,664,235
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,664,235
<EPS-BASIC> .46
<EPS-DILUTED> .45
<YIELD-ACTUAL> 9.19
<LOANS-NON> 343,000
<LOANS-PAST> 1,000
<LOANS-TROUBLED> 541,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,380,220
<CHARGE-OFFS> 116,782
<RECOVERIES> 88,055
<ALLOWANCE-CLOSE> 3,206,493
<ALLOWANCE-DOMESTIC> 3,206,493
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
