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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 30, 2002

For the transition period from _________ to _________

Commission file number 0-27938

COLUMBIA BANCORP

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

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

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.

8,127,696 shares of common stock as of August 1, 2002

Table of Contents

COLUMBIA BANCORP

FORM 10-Q

June 30, 2002

INDEX

					Page
PART I - FINANCIAL INFORMATION					Reference
		Consolidated Balance Sheets as of June 30, 2002 and December 31, 2001.			3
		Consolidated Statements of Income and Comprehensive Income for the three and six month periods ended June 30, 2002 and 2001.			4
		Consolidated Statements of Cash Flows for the six months ended June 30, 2002 and 2001.			5
		Consolidated Statements of Changes in Shareholders’ Equity for the period December 31, 2000 to June 30, 2002.			6
		Notes to Consolidated Financial Statements			7-9
		Management’s Discussion and Analysis of Financial Condition and Results of Operations:
			Forward Looking Information		10
			Overview		10-11
			Material Changes in Financial Condition		11
			Material Changes in Results of Operations		11-12
			Loan Loss Provision		12
			Liquidity and Capital Resources		12-13
		Quantitative and Qualitative Disclosures about Market Risk			13
PART II - OTHER INFORMATION
		Item 4 — Submission of Matters to a Vote of Security Holders			14
		Item 5 — Other Information			14
		Item 6 — Exhibits and Reports on Form 8-K			14
		Signatures			14

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COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS

				June 30,				December 31,
				2002				2001
				(Unaudited)				(Audited)
ASSETS
Cash and due from banks				$	21,517,302			$	19,813,111
Interest-bearing deposits with other banks					11,063,420				1,275,462
Federal funds sold					7,524,040				1,525,165
		Total cash and cash equivalents			40,104,762				22,613,738
Investment securities available-for-sale					14,930,674				18,802,107
Investment securities held-to-maturity					20,767,219				22,657,264
Restricted equity securities					2,614,000				2,072,300
		Total investment securities			38,311,893				43,531,671
Loans held-for-sale					10,628,035				18,959,979
Loans, net of allowance for loan losses and unearned loan fees					411,836,358				361,323,121
Property and equipment, net of depreciation					14,331,905				13,887,846
Goodwill, net of amortization					7,389,094				7,389,094
Accrued interest receivable					4,106,776				3,485,533
Other assets					10,445,685				11,015,723
		Total assets		$	537,154,508			$	482,206,705
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
	Noninterest-bearing demand deposits			$	114,973,397			$	108,521,784
	Interest-bearing demand accounts				165,000,098				136,967,524
	Savings accounts				31,574,371				32,237,233
	Time certificates				133,482,792				116,908,960
		Total deposits			445,030,658				394,635,501
Notes payable					37,444,933				35,904,542
Accrued interest payable and other liabilities					4,514,527				5,221,730
		Total liabilities			486,990,118				435,761,773
Shareholders’ equity:
	Common stock, no par value; 20,000,000 shares authorized, 8,124,871 issued and outstanding (8,037,078 at December 31, 2001)				15,201,912				14,679,226
	Additional paid-in capital				6,054,368				6,054,368
	Retained earnings				28,678,187				25,373,550
	Accumulated other comprehensive income, net of taxes				229,923				337,788
		Total shareholders’ equity			50,164,390				46,444,932
		Total liabilities and shareholder’s equity		$	537,154,508			$	482,206,705

See accompanying notes.

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COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

			Three months ended								Six months ended
			June 30,								June 30,
			2002				2001				2002				2001
INTEREST INCOME
Interest and fees on loans			$	8,870,220			$	7,952,296			$	16,884,004			$	15,622,737
Interest on investments
	Taxable investment securities			273,365				367,221				574,473				915,335
	Nontaxable investment securities			204,445				219,433				410,826				440,358
Other interest income				90,760				171,261				156,863				271,004
	Total interest income			9,438,790				8,710,211				18,026,166				17,249,434
INTEREST EXPENSE
Interest-bearing demand and savings				446,430				926,016				706,660				2,050,518
Interest on time deposit accounts				1,226,046				1,725,424				2,389,668				3,338,023
Other borrowed funds				340,228				411,032				699,196				936,737
	Total interest expense			2,012,704				3,062,472				3,795,524				6,325,278
NET INTEREST INCOME				7,426,086				5,647,739				14,230,642				10,924,156
PROVISION FOR LOAN LOSSES				700,000				375,000				1,100,000				625,000
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES				6,726,086				5,272,739				13,130,642				10,299,156
NONINTEREST INCOME
Service charges and fees				1,170,184				760,488				2,010,479				1,471,683
Net Mortgage Group revenues				971,113				1,595,091				1,351,210				2,374,568
Credit card discounts and fees				99,683				82,495				185,903				148,982
Financial services department income				167,525				142,335				319,092				271,516
Other noninterest income				351,011				298,779				986,822				524,601
	Total noninterest income			2,759,516				2,879,188				4,853,506				4,791,350
NONINTEREST EXPENSE
Salaries and employee benefits				3,391,604				2,789,701				6,397,516				5,373,122
Occupancy expense				497,824				463,687				966,550				913,246
Goodwill amortization				—				157,156				—				314,312
Credit card processing fees				27,479				23,629				50,454				43,148
Data processing expense				108,122				85,342				190,371				140,063
Other noninterest expenses				1,685,614				1,307,734				3,204,615				2,580,650
	Total noninterest expense			5,710,643				4,827,250				10,809,506				9,364,541
INCOME BEFORE INCOME TAXES				3,774,959				3,324,677				7,174,642				5,725,965
PROVISION FOR INCOME TAXES				1,353,323				1,262,733				2,572,109				2,161,342
NET INCOME			$	2,421,636			$	2,061,944			$	4,602,533			$	3,564,623
OTHER COMPREHENSIVE INCOME, NET
Unrealized holding gains (losses) arising during the period			$	202,746			$	(41,417	)		$	(92,231	)		$	276,829
Reclassification adjustment for (gains) losses included in net income				(201,879	)			25,781				(15,634	)			27,529
				867				(15,636	)			(107,865	)			304,358
COMPREHENSIVE INCOME			$	2,422,503			$	2,046,309			$	4,494,668			$	3,868,981
Earnings per share of common stock
	Net Income Basic		$	0.30			$	0.25			$	0.57			$	0.44
	Net Income Diluted		$	0.29			$	0.25			$	0.55			$	0.44
Weighted average common shares outstanding
	Basic			8,106,077				8,053,575				8,084,743				8,043,839
	Diluted			8,349,206				8,214,770				8,338,933				8,178,905

See accompanying notes.

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COLUMBIA BANCORP AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

			Six months ended
			June 30,
			2002				2001
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net income			$	4,602,533			$	3,564,623
Adjustments to reconcile net income to net cash from operating activities:
	Gain on sale or call of investments			(200,096	)			(27,530	)
	Depreciation and amortization			977,662				1,015,060
	Impairment of mortgage servicing asset			1,347,756
	Federal Home Loan Bank stock dividend			(73,603	)			(54,965	)
	Provision for loan losses			1,100,000				625,000
Increase (decrease) in cash due to changes in assets/liabilities:
	Accrued interest receivable			(621,243	)			(228,334	)
	Other assets			570,038				(2,848,456	)
	Accrued interest payable and other liabilities			(698,937	)			158,116
	NET CASH FROM OPERATING ACTIVITIES			7,004,110				2,203,514
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from the sale of available-for-sale securities				947,965				18,471,454
Proceeds from maturity of available-for-sale securities				2,750,000				1,475,000
Proceeds from the maturity of held-to-maturity securities				1,871,580				725,856
Purchases of held-to-maturity securities				—				(5,499,452	)
Purchases of restricted equity securities				(468,200	)			—
Net change in loans made to customers				(44,760,577	)			(50,534,901	)
Payments made for purchase of property and equipment				(1,021,324	)			(626,444	)
	NET CASH FROM INVESTING ACTIVITIES			(40,680,556	)			(35,988,487	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit and savings accounts				33,821,325				2,805,092
Net change in time certificates				16,573,832				22,626,934
Net increase in notes payable				1,540,391				6,659,896
Dividends paid				(1,290,764	)			(1,285,623	)
Proceeds from stock options exercised and sales of common stock				522,686				184,906
	NET CASH FROM FINANCING ACTIVITIES			51,167,470				30,991,205
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS				17,491,024				(2,793,768	)
CASH AND CASH EQUIVALENTS, beginning of period				22,613,738				27,116,631
CASH AND CASH EQUIVALENTS, end of period			$	40,104,762			$	24,322,863
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash			$	3,720,904			$	6,419,407
Taxes paid in cash			$	2,916,000			$	1,655,219
SCHEDULE OF NONCASH ACTIVITIES
Change in unrealized gain/loss on available-for-sale securities, net of taxes			$	(107,865	)		$	304,358
Cash dividend declared and payable after quarter-end			$	649,990			$	645,123

See accompanying notes.

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

																				Accumulated
												Additional								Other				Total
								Common				Paid-in				Retained				Comprehensive				Shareholders'
				Shares				Stock				Capital				Earnings				Income				Equity
BALANCE, December 31, 2000					8,029,422			$	14,461,771			$	6,379,393			$	20,569,918			$	(84,917	)		$	41,326,165
	(Audited)
Stock options exercised					57,656				307,455				—				—				—				307,455
Income tax benefit from stock options exercised					—				—				12,478				—				—				12,478
Stock repurchase					(50,000	)			(90,000	)			(337,503	)			—				—				(427,503	)
Cash dividend paid or declared					—				—				—				(2,570,085	)			—				(2,570,085	)
Net Income and Comprehensive
		Income			—				—				—				7,373,717				422,705				7,796,422
BALANCE, December 31, 2001					8,037,078			$	14,679,226			$	6,054,368			$	25,373,550			$	337,788			$	46,444,932
	(Audited)
Stock options exercised					87,793				522,686				—				—				—				522,686
Cash dividend paid or declared					—				—				—				(1,297,896	)			—				(1,297,896	)
Net Income and Comprehensive
		Income			—				—				—				4,602,533				(107,865	)			4,494,668
BALANCE, June 30, 2002					8,124,871			$	15,201,912			$	6,054,368			$	28,678,187			$	229,923			$	50,164,390
	(Unaudited)

See accompanying notes.

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COLUMBIA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		Principles of Consolidation
		The interim consolidated financial statements include the accounts of Columbia Bancorp, a financial holding company (“Columbia”), and its wholly-owned subsidiary Columbia River Bank (“CRB”), after elimination of intercompany transactions and balances. CRB is an Oregon state-chartered bank, headquartered in The Dalles, Oregon. Substantially all activity of Columbia is conducted through its subsidiary bank, CRB.
		The interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. The financial information included in this interim report has been prepared by management. Columbia’s annual report contains audited financial statements. All adjustments including normal recurring accruals necessary for 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, 2002 are not necessarily indicative of results to be anticipated for the year ending December 31, 2002.
2.		Loans and Reserve for Loan Losses
		The composition of the loan portfolio was as follows:

Changes in the allowance for loan losses were as follows for the six months ended June 30:

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 that are deemed fully collateralized on nonaccrual status to promote better oversight and review of loan arrangements. Loans on nonaccrual status at June 30, 2002 and December 31, 2001 were approximately $1,402,815, and $889,538, respectively.

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		At June 30, 2002, Columbia identified loans totaling $109,569 on which the interest rate or payment schedules were modified from original terms to accommodate borrowers’ weakened financial positions. There were $113,453 of loans in this category at December 31, 2001.
		At June 30, 2002, Columbia had no balance in other real estate owned (“OREO”), which represents assets held through loan foreclosure or recovery activities. There was $349,213 in OREO at December 31, 2001.
3.		Segment Information
		Columbia operates two primary segments, the community banking segment and the mortgage banking segment. The community banking segment consists of Columbia’s subsidiary, Columbia River Bank, which operates 14 bank branches in Oregon and two branches in Washington. The Bank offers loan, investment, and deposit products to its customers who range from individuals to medium-size agricultural and commercial companies. The mortgage banking segment consists of Columbia Mortgage Group, headquartered in Bend, Oregon, with an additional eight offices in Oregon. Columbia Mortgage Group offers a full range of mortgage lending services and products to its clients.
		During the first two quarters of 2002, the mortgage servicing asset value was reduced by $1,347,756. The impact of this valuation adjustment is reflected in the year-to-date loss for 2002 of ($346,133) on a before tax basis. Since year 2001, management has adjusted some of the accounting processes for the Mortgage Group. This factor causes differences in the segment information for the two six-month periods.
		Financial information that Columbia’s management uses to evaluate the reportable segments and the reconciliation to Columbia’s consolidated results are summarized as follows:

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4.		Earnings Per Share
		Basic earning per share excludes dilution and is computed by dividing net income by the weighted average number of 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
		In June 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” The statement is effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. Columbia’s management does not expect that the application of the provisions of this statement will have a material impact on Columbia’s consolidated financial statements.
		In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” This Statement rescinds FASB Statement No. 4, “Reporting Gains and Losses from Extinguishment of Debt,” and an amendment of that Statement, FASB Statement No. 64, “Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements.” This Statement also rescinds FASB Statement No. 44, “Accounting for Intangible Assets of Motor Carriers.” This Statement amends FASB Statement No. 13, “Accounting for Leases,” to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. Columbia’s management does not expect that the application of the provisions of this statement will have a material impact on Columbia’s consolidated financial statements.
		Other issued but not yet required FASB statements are not currently applicable to Columbia’s operations. Management believes these pronouncements will have no material effect upon Columbia’s financial position or results of operations.
6.		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 for the allowance for loan losses and valuation of the mortgage-servicing asset.

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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, the impact of competition and interest rates on revenues and margins, and other risks and uncertainties, including statements relating to the year 2002, as may be detailed from time to time in Columbia’s public announcements and filings with the Securities and Exchange Commission (“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 this press release, other than in its periodic filings with the SEC, or to reflect the occurrence of unanticipated events.

OVERVIEW

     Highlights for the second quarter to date (“QTD”) and year to date (“YTD”) of 2002 as compared to the same periods in 2001 for Columbia Bancorp (“Columbia”):

     Columbia reported net income of $4,602,533, or $.55 per diluted share for the six months ended June 30, 2002. This represented a 29% increase in net income, as compared to $3,564,623, or $.44 per diluted share, for the six months ended June 30, 2001.

     The net income added to shareholders’ equity during the first six months of 2002 was offset, in part, by dividends declared and paid of $1,297,896. A first quarter dividend of $.08 per share was paid May 1 to shareholders of record on April 15. On June 25 the Bancorp Board of Directors declared a second quarter dividend of $.08 per share payable August 1 to shareholders of record on July 15. With the payment of the declared dividend, approximately 28% of earnings will have been returned to shareholders, the remainder being retained to fund the continued growth of Columbia.

     The book value of the mortgage-servicing asset as of the quarter ended June 30, 2002 was $5.7 million. Columbia is servicing $481.1 million in mortgage loans, or a 1.19 multiple of the mortgage-servicing asset. Management believes improved risk management measures, lower capitalization rates and reduced amortization lives have improved the overall quality of the mortgage-servicing asset.

     The open mortgage pipeline as of June 30, 2002, consisted of $17,351,745 in locked loans. These loans were covered by derivatives that included $16 million in forward call options and $2 million in put options. The purpose of hedging the open mortgage pipeline is to reduce the risk of exposure to interest

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rate volatility. The unrealized value of the mortgage loans was a gain of $130,601 and the unrealized loss on the derivative contracts was ($126,602), for a net open position of $3,999.

MATERIAL CHANGES IN FINANCIAL CONDITION

     Changes in the balance sheet for the six months ended June 30, 2002 include an increase in total assets, primarily in loans, interest bearing deposits with other banks and fed funds, and an increase in total liabilities, primarily in total deposits.

     At June 30, 2002, total assets increased 11.4%, or approximately $54.9 million, over total assets at December 31, 2001. Major components of the change in total assets were:

	•		$51.5 million increase in gross loans
	•		$8.3 million decrease in loans held-for-sale
	•		$3.9 million decrease in investment securities available for sale
	•		$17.5 million increase in cash and cash equivalents

     The increase in loans is reflected in increases in all loan categories, including agriculture, commercial, real estate and consumer loan categories. Management attributes the increase in real estate loans to a continued diversified growth in the Bend real estate market. The attractive low interest rate environment as well as the continued penetration within Columbia’s market areas has also affected the growth in real estate loans as well as all other categories.

     The increase in assets over the last six months was funded by strong deposit growth of $50.4 million, specifically as follows:

	•		Noninterest-bearing deposits increased $6.5 million
	•		Interest-bearing demand deposits increased $28.0 million
	•		Savings deposits decreased $0.7 million
	•		Time certificate deposits increased $16.6 million

Interest-bearing deposit increases are due to the promotion of a new premium money market account, while increases in time certificates are due to the purchase of brokered certificates of deposit. Columbia had $26.3 million in brokered certificates of deposit at June 30, 2002.

     Notes payable increased $1.5 million in the six months ended June 30, 2002. Along with deposit growth, notes payable were used to fund the loan growth experienced in the quarter. Because the deposit growth exceeded net loan growth, Columbia increased its overall federal funds sold by $6.0 million and interest bearing deposits with other banks, primarily funds held at Federal Home Loan Bank, by $9.8 million.

     All other changes experienced in asset and liability categories during the first six months of 2002 were comparatively modest.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

     Total interest income increased $776,732 for the six months ended June 30, 2002, and $728,579 for the quarter ended June 30, 2002, as compared to the same period in 2001. This increase is primarily due to the increase in loans held in 2002 as compared to 2001.

     Total interest expense decreased $2,529,754 or 40% for the six months ended June 30, 2002, or $1,049,768 or 34% for the quarter ended June 30, 2002, as compared to the same periods in 2001. The decrease is primarily due to well-disciplined deposit pricing management and a steady decrease in the interest rate environment over the last fifteen months.

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     Columbia’s net interest income increased by $3,306,486 for the six months ended June 30, 2002 and $1,778,347 for the quarter ended June 30, 2002, as compared to the same periods in 2001. Management believes the increase in net interest income is primarily due to higher loan volumes producing greater interest income, specifically real estate construction lending where loan interest and fee income increased $1.8 million for the six months ended June 30, 2002 over the same period the prior year, which exceeded the interest expense incurred to fund this growth.

     Noninterest income decreased $149,100 for the six months ended June 30, 2002, and $234,772 for the quarter ended June 30, 2002, as compared to the same periods in 2001. This decrease is primarily attributable to a decrease in net Mortgage Group revenue by $1.0 million for the six months ended June 30, 2002 as compared to the six months ended June 30, 2001, as a result of the first quarter mortgage servicing asset valuation adjustment of $1.2 million. The decrease was offset in part by an increase in net NSF fees of $595,111 year to date over the previous year, due to management’s implementation of a new overdraft product called Bounce Protection. This product is an overdraft privilege, where as long as the account is in good standing, Columbia may honor overdrafts up to the Bounce Protection limit on the account while collecting the standard NSF fee.

     Noninterest expense increased $1,233,709 for the six months ended June 30, 2002, and $768,293 for the quarter ended June 30, 2002, as compared to the comparable 2001 periods. The increase was primarily attributable to an enhanced incentive compensation program to employees and other expenses which were impacted by the increase in business volumes. Diluted net income per common share increased to $.55 for the first six months of 2002 from $.44 for the first six months of 2001, and $.29 for the quarter ended June 30, 2002 as compared to $.25 for the same quarter in 2001.

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statements of Financial Accounting Standards No. 141, Business Combinations, and No. 142, Goodwill and Other Intangible Assets, effective for fiscal years beginning after December 15, 2001. Under the new rules, goodwill (and intangible assets deemed to have indefinite lives) will no longer be amortized but will be subject to annual impairment tests in accordance with the Statements. Other intangible assets will continue to be amortized over their useful lives.

     Columbia applied the new rules in accounting for goodwill and other intangible assets during the first quarter of 2002. Application of the nonamortization provisions of the Statement is expected to result in an increase in net income of $314,311 for the first six months of 2002.

LOAN LOSS PROVISION

     During the six months ended June 30, 2002, Columbia charged a $1,100,000 loan loss provision to operations, as compared to $625,000 charged during the same period in 2001. Loans charged off, net of loan recoveries, was $281,445 during the six months ended June 30, 2002, as compared to net charged off loans of $73,445 for the like period in 2001.

     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 economic trends impacting the areas and customers served by Columbia.

LIQUIDITY AND CAPITAL RESOURCES

     Columbia has adopted policies in order to meet the liquidity needs in the financial environment as

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well as to 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, brokered certificate of deposit 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 second quarter of 2002 saw an increase in Columbia’s liquidity position as a result of the demand deposit growth, specifically the new premium money market account. As of June 30, 2002, this premium money market account had a combined total balance of $40 million.

     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 2002. The statement of cash flows includes operating, investing and financing categories. Net cash from operating activities was $7.0 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 and loan accounts, and reflect the dividends paid to shareholders.

     Columbia’s capital was leveraged to meet loan growth during the second quarter 2002. Management plans to manage the balance sheet during the remainder of the year in order to remain well capitalized.

     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, 2002, as compared to regulatory minimums.

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, 2001.

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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 25, 2002. At the meeting, two items, the Election of Directors of Bancorp and the amendment of the 1999 Columbia Bancorp Stock Incentive Plan, were put to a vote of the shareholders.

     The following shows the results of the election of directors for Columbia Bancorp including term to be served for each director:

     Directors continuing in office include Charles F. Beardsley, William A. Booth, Roger L. Christensen, Terry L. Cochran, Richard E. Betz, Jane F. Lee, and Jean S. McKinney.

     The following shows the results of the voting of the amendment of the 1999 Columbia Bancorp Stock Incentive Plan:

Item 5. Other Information