UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

     For the quarterly period ended March 31, 2004

     For the transition period from _________ to _________

     Commission file number 000-23277

CITIZENS BANCORP/OR

275 Southwest Third Street
Corvallis, Oregon 97339
(Address of principal executive offices)

(541) 752-5161
(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 whether the Registrant is an accelerated filer as defined by Exchange Act Rule 12b-2. YES [   ] NO [ X ]
		Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
		4,618,471 shares as of April 30, 2004, no par value.

CITIZENS BANCORP
FORM 10-Q
MARCH 31, 2004
INDEX

PART I FINANCIAL INFORMATION

See accompanying notes

1

CITIZENS BANCORP AND SUBSIDIARY

See accompanying notes

2

CITIZENS BANCORP AND SUBSIDIARY

See accompanying notes

3

CITIZENS BANCORP AND SUBSIDIARY

See accompanying notes

4

CITIZENS BANCORP

1.

BASIS OF PRESENTATION

The interim condensed consolidated financial statements include the accounts of Citizens Bancorp (“Bancorp”), a bank holding company and its wholly owned subsidiary, Citizens Bank (“Bank”) after elimination of intercompany transactions and balances. Substantially all activity of Citizens Bancorp is conducted through its subsidiary bank.

The interim financial statements are unaudited but have been prepared in accordance with accounting principles generally accepted in the United States of America for interim condensed financial information and with instructions to form 10-Q. Accordingly, the condensed interim financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments consisting only of normal recurring accruals necessary for a fair presentation for the interim periods included herein have been made.

The interim condensed consolidated financial statements should be read in conjunction with the December 31, 2003 consolidated financial statements, including notes there to, included in Bancorp’s 2003 Annual Report to shareholders. The results of operations for the three months ended March 31, 2004, are not necessarily indicative of the results which may be obtained for the full year ending December 31, 2004.

2.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIALS

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

3.

SHAREHOLDERS’ EQUITY AND NET INCOME PER COMMON SHARE

The Board of Directors declared a $.46 per share dividend to Bancorp shareholders of record on December 16, 2003 payable on January 12, 2004. Through the Dividend Reinvestment Plan (DRIP), 61,727 shares were purchased at a price of $15.52 per share.

Basic earnings per share are based on the average number of common shares outstanding, assuming no dilution. Diluted earnings per common share are computed assuming the exercise of stock options.

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4.

STOCK-BASED COMPENSATION

The Company has a stock-based employee compensation plan. The Company applies the recognition and measurement principles of APB No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, no stock-based compensation cost is reflected in net income as all options granted under this plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation to stock based employee compensation.

5.

CONTINGENCIES

Unfunded loan commitments totaled $40.8 million as of March 31, 2004 and $31.0 million as of December 31, 2003.

5.		RECENT ACCOUNTING PRONOUNCEMENTS
		In March, 2004 the Financial Accounting Standards Board (FASB) issued an exposure draft entitled: “Share-Based Payment, an Amendment of FASB Statements No. 123 and 95.” This proposed statement would eliminate the ability to account for stock-based compensation using APB 25 and require such transactions be recognized as compensations expense in the income statement based on their fair values at the date of grant. Companies transitioning to fair value based accounting for stock-based compensation will be required to use the “modified prospective” method whereby companies must recognize equity compensation cost from the beginning of the year in which the recognition provisions are first applied as if the fair value method had been used to account for all equity compensation awards granted, modified, or settled in fiscal years beginning after December 31, 1994. As proposed, this statement would be effective for the Corporation on January 1, 2005. The proposal is controversial and subject to public comment. Accordingly, the provisions of the final statement, which the FASB expects to issue in late 2004, could significantly differ from those proposed.

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ITEM 2

MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

In addition to historical information, this report contains certain “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. This statement is included for the purpose of availing Bancorp the protection of the safe harbor provisions of this Act. The forward looking statements contained in this report are subject to factors, risks and uncertainties that may cause actual results to differ materially from those projected. Factors that might result in such material difference include, but are not limited to economic conditions, the regulatory environment, rapidly changing technology, new legislation, competitive factors, the interest rate environment and the overall condition of the banking industry. Forward looking statements can be identified by such words as “estimate”, “believe”, “expect”, “intend”, “anticipate”, “should”, “may”, “will”, or other similar words or phrases. Although Bancorp believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurances that such expectations will prove to have been correct. Readers are therefore cautioned not to place undue reliance on such forward looking statements, which reflect management’s analysis only as of the date of the statement. Bancorp does not intend to update these forward-looking statements other than in its periodic filings under applicable security laws.

OVERVIEW

Citizens Bank (“the Bank”) was chartered October 1, 1957 (charter #333) by the State of Oregon as a commercial bank. Since its beginning with a single office in Corvallis, Citizens Bank has expanded to an additional ten locations in the five counties of Benton, Linn, Lane, Polk, and Yamhill. Branches are located in the communities of Corvallis, Philomath, Albany, Junction City, Veneta, McMinnville, Harrisburg, Dallas, and Springfield.

Citizens Bancorp (“Bancorp”), an Oregon Corporation and financial holding company, was formed in 1996 for the purpose of becoming the holding company of Citizens Bank. Bancorp is headquartered in Corvallis, Oregon. Its principal business activities are conducted through its full-service, commercial bank subsidiary, Citizens Bank.

Bancorp operates through a two-tiered corporate structure. At the holding company level the affairs of Bancorp are overseen by a Board of Directors elected by the shareholders of Bancorp at the annual meeting of shareholders. The business of the Bank is overseen by a Board of Directors elected by Bancorp, the sole owner of the Bank. As of the date of this Form 10-Q the respective members of the Board of Directors of the Bank and the Board of Directors of Bancorp are identical.

Bancorp’s culture focuses on the tenets of collaborative leadership, branch autonomy, assertive business development, a positive working environment, a commitment to the community, outstanding customer service, and relationship banking. Management believes that a healthy culture together with a progressive management style will result in constantly improved shareholder value.

Bancorp’s primary goal is to improve shareholder value through increased earnings while maintaining a high level of safety and soundness. Bancorp is committed to independence and long-term performance strategies.

The long-term benefit to Bancorp of its cultural and management style is consistent growth and development of the Bank over time. Risk levels have been greatly reduced because of expertise in loan, investment, operational, and human resource management.

Bancorp’s primary market focus is to provide commercial bank services to businesses, professionals, and individuals. Bancorp emphasizes the development of meaningful customer relationships and a high level of service. Its employees are well-trained banking professionals who are committed to these objectives.

The Bank offers deposit accounts, safe-deposit boxes, consumer loans, commercial loans, agricultural loans, and commercial and residential real estate loans. Commercial loans include operating lines of credit, equipment and real estate financing, capital needs, and other traditional financing products.

The Bank has a growing emphasis in financing farm operations, equipment, and property. The Bank has also emphasized loans to professionals with its professional line of credit products. The Bank’s loan portfolio has some concentrations in real estate secured loans, primarily commercial properties. The Bank also operates a small residential mortgage loan origination department that originates loans and sells them into the secondary market.

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Deposit products include regular and “package” checking accounts, savings accounts, certificates of deposit, money market accounts, and IRA accounts. The Bank offers debit cards, check guarantee cards, and ATM cards as well as credit cards as part of its retail banking services.

The Bank offers extended banking hours in selected locations as well as Saturday banking. ATM machines are also available at eleven (11) locations offering 24-hour transaction services, including cash withdrawals, deposits, account transfers, and balance inquiries. The Bank also offers its customers a 24-hour automated telephone service that offers account transfers and balance inquiries. The Bank’s on-line banking product offers services to both individuals and business account customers. Business customers have a comprehensive cash management option. All online users have the availability of the “bill payment” feature. The Bank expects to continually enhance its on-line banking product while maintaining its quality “people to people” customer service. Citizens on-line banking can be reached at www.CitizensEBank.com.

Bancorp reported net income of $1,016,000 for the first three months ended March 31, 2004 or $.22 per common share, compared to net income of $1,243,000 or $.27 per common share for the same period in 2003.

LOAN PORTFOLIO

The composition of the loan portfolio, including loans held for sale, was as follows (in thousands):

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Transactions in the allowance for credit losses were as follows for the three months ended March 31:

It is the policy of the Bank to place loans on nonaccrual after they become 90 days past due unless the loans are well secured and in the process of collection. The Bank may place loans that are not contractually past due or that are deemed fully collateralized on nonaccrual status as a management tool to actively oversee specific loans.

Loans on non-accrual status as of March 31, 2004 and December 31, 2003 were approximately $2,274,000 and $2,164,000 respectively. There were no loans past due 90 days or more on which the Bank continued to accrue interest at March 31, 2004 and $12,000 at December 31, 2003. There were no loans with modified terms as of March 31, 2004. Non-performing assets (defined as loans on non-accrual status and loans past due 90 days or more) are deemed by management to have adequate collateral or have specific reserves set aside to cover potential losses.

Four loans constitute the majority of approximately $2,274,000 in non-accrual status as of March 31, 2004. One loan of approximately $502,000 is a farm loan, management is working with the borrower to have the loan refinanced out of the bank or the farm sold or liquidated. In management’s estimation the collateral value is sufficient to cover the debt. The second loan of approximately $541,000 is a farm loan that is being restructured into a three-year pay out. Management anticipates the loan will cash flow and will be paid out at the end of the term. In management’s estimation the value of the collateral supports the debt. The third loan in the approximate amount of $369,000 is commercial real estate. Management is beginning foreclosure procedures against the borrower’s property, which the bank holds as collateral. The appraisal value of the real estate supports the outstanding debt. The fourth loan is commercial real estate of approximately $605,000. The property is in foreclosure and the Bank anticipates securing title in thirty to forty-five days. The Bank has a potential buyer and anticipates closing on the sale thirty days after the Bank has secured title. The Bank is anticipating a loss on the sale of approximately $45,000 which has been incorporated in management’s analysis of loan loss reserve levels.

INVESTMENT SECURITIES

The amortized cost and estimated book value of the investment securities held by the Bank, including unrealized gains and losses, at March 31, 2004 and December 31, 2003, are as follows (in thousands):

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MATERIAL CHANGES IN FINANCIAL CONDITION

Changes in the balance sheet for the three months ended March 31, 2004 include a slight increase in total assets, primarily in interest bearing deposits in banks, and a decrease in liabilities primarily in time deposits, repurchase agreements, and other liabilities. The Bank experienced a decrease in loans and an increase in deposits.

At March 31, 2004, total assets increased only a slight .2% or approximately $583,000 as compared to total assets at December 31, 2003. Major components of the change in assets were:

-		$9.8 million decrease in cash and due from banks
-		$13.4 million increase in interest bearing deposits in banks
-		$2.5 million decrease in securities available for sale
-		$1.5 million decrease in net loans

Loans are generally made to customers within the Company’s market area. The decrease in loans was primarily due to the pay down of operating lines of credit and slow loan demand in the Bank’s market areas. Management believes the economic condition in its market areas has been the most significant factor for the slow loan demand. Citizens Bank has a history of conservative loan underwriting and management is unwilling to compromise its standards just for growth. The Bank has a history of minimal loan charge-offs due to its exceptional underwriting policies and standards. The Bank is beginning to see loan demand pick up in our market areas and our loan officers are actively calling on prospective new customers. Management anticipates that the portfolio will grow in 2004 with high quality loans with appropriate pricing.

The Company experienced an increase in deposits, and a decrease in repurchase agreements, and other liabilities, which was due to the payment of the cash dividend during the three months ended March 31, 2004, specifically as follows:

-		$4.1 million increase in savings and interest bearing deposits
-		$2.1 million decrease in time certificates of deposits
-		$1.4 million decrease in repurchase agreements
-		$2.1 million decrease in other liabilities, due to the payment of the cash dividend to shareholders

Management believes the growth in deposits is a result of continuing penetration into the market area as a result of its emphasis on customer service, and its relationship style of banking. The decrease in repurchase agreements is due to the normal balance fluctuations in these accounts. The decrease in time certificates of deposits was a result of management’s decision not to pay above-market rates for time deposits in competition with other financial institutions when liquidity was well within its established asset-liability management guidelines. The decrease in other liabilities is attributable to the payment of the cash dividend.

MATERIAL CHANGES IN RESULTS OF OPERATIONS

The Company reported net income of approximately $1,016,000 or $.22 per common share, for the three months ended March 31, 2004, compared to net income of approximately $1,243,000 or $.27 per common share, for the same period in 2003. This represents a decrease in net income of 18.3 percent. The decrease during this period was largely attributable to a decrease in interest income which was a result of slower loan growth, lower interest rates earned on loans and investments and a decrease in mortgage department fee income due to the decline in the mortgage loan business.

Total interest income decreased approximately $477,000 or 11.4%for the three months ended March 31, 2004 as compared to the same period in 2003. The change for the three-month period was primarily a result of a decrease in interest income on loans and security investments available for sale. The decrease is directly related to the overall decrease in market interest rates from the comparable period in 2003, as well as the decrease in loan volume.

Total interest expense decreased approximately $236,000 or 37.4% for the three months ended March 31, 2004 as compared to the same period in 2003 The decrease in interest expense on deposits was the result of lower interest rates paid on deposits compared to the same period in 2003. The effect of the decrease was greater than interest expense related to increased levels of deposits. Interest expense on repurchase agreements decreased due to lower balances in the related underlying balances and a decrease in the interest rate paid on those accounts compared to the same period in 2003.

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Net interest income for the three months ended March 31, 2004 decreased $241,000 or 6.8% from the comparable period in 2003. The decrease was the result of the decrease in interest income on loans and investments due to overall lower market rates and lower loan volume as compared to the same period in 2003.

Total non-interest income increased approximately $2,000 or .2% for the three months ended March 31, 2004 as compared to the same period in 2003. The primary increases resulted from the growth in Bankcard income as a result of volume increases and increased service charges on customer accounts due to an increase in both the number of relationships and fee increases. The Bank realized lower gains on the sale of securities available for sale for the three months ended March 31, 2004 compared to the same period in 2003. The Bank generally only sells a security to reposition the portfolio from an asset-liability strategy or to fund loan demand. The Bank also experienced lower mortgage fee income due to the slow down in the mortgage business as compared to the same period in 2003.

Total non-interest expense increased $244,000 or 9.8 percent for the three months ended March 31, 2004, as compared to the same period in 2003. Non-interest expense increased as a result of routine adjustments in staff salaries and benefits along with the increase in staff relative to the new Springfield branch, and expenses related with technology enhancements, products, and occupancy.

CREDIT LOSS PROVISION

The Bank maintains an allowance for credit losses on loans that occur from time to time as an incidental part of the business of banking. The allowance is increased by provisions charged to earnings and by recoveries on loans previously charged off, and is reduced by loan charge offs.

During the first three months ended March 31, 2004, the Bank funded the allowance for credit losses $44,000 from operations as compared to $91,000 for the same three-month period of 2003. The Bank decreased the provision for credit losses for the three month period in 2004 as compared to the same period in 2003, based on its analysis of delinquencies, loan types, loan classifications, and other factors affecting the loan portfolio at March 31, 2004. The Bank experienced $4,000 in credit losses and no recoveries for the three months ended March 31, 2004 and $15,000 in net losses for the same period ended March 31, 2003. Historically, the Bank’s loan charge-off levels have been very low compared to its peers. Management believes that the allowance for credit losses at March 31, 2004 of $2,805,000 or 1.50% of total loans is adequate.

The provision for credit losses represents charges made to operating expenses to maintain an appropriate allowance for credit losses. Management considers various factors in establishing an appropriate allowance. These factors include an assessment of the financial condition of the borrower, a determination of the borrower’s ability to service the debt from cash flow, a conservative assessment of the value of the underlying collateral, the condition of the specific industry of the borrower, the economic health of the local community, a comprehensive analysis of the levels and trends of loan types, and a review of past due and classified loans.

It is Bank policy that once each quarter, Bank management makes recommendations to the Board regarding the adequacy of the Bank’s allowance for credit losses at quarter end and the amount of the provision that should be charged against earnings for the next three months. Management’s recommendations are based on an internal loan review process to determine specific potential loss factors on classified loans, risk factor of loan grades, historical loss factors derived from actual net charge-off experience, trends in non-performing loans and other potential risks in the loan portfolio such as industry concentration, the local economy and the volume of loans.

Management uses a loan grading system wherein loan officers assign a risk grade to each of their loans at inception and at intervals based on receipt of financial information, renewal, or when there is an indication that a credit may have improved or weakened. The risk grades in the loan portfolio are used in determining a factor that is used in analyzing the adequacy of the reserve for credit losses.

The Bank’s policy is to charge off loans when, in management’s opinion, the loan or a portion of the loan is deemed uncollectible following a concerted collection effort. Management continues to pursue collection after a loan is charged-off until all possibilities for collection have been exhausted.

LIQUIDITY AND CAPITAL RESOURCES

Bancorp’s subsidiary, the Bank, has adopted policies to maintain a relatively liquid position to enable it to respond to changes in the Bank’s financial environment. Generally, the Bank’s major sources of liquidity are customer deposits, sales and maturities of securities, the use of borrowing lines with correspondent banks including Federal Home Loan bank borrowings, loan repayments and net cash provided by operating activities.

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The analysis of liquidity should also include a review of the changes that appear in the consolidated statement of cash flows for the first three months of 2004. The statement of cash flows includes operating, investing and financing categories. Operating activities include net income that is adjusted for non-cash items and increases or decreases in cash due to certain changes in assets and liabilities. Investing activities consist primarily of both proceeds from maturities and purchases of securities, and the net growth in loans. Financing activities present the cash flows associated with the Bank’s deposit accounts.

Management believes that the Bank’s existing sources of liquidity will enable the Bank to fund its requirements in the normal course of business.

As of March 31, 2004, shareholders’ equity totaled $37,739,000 as compared to $35,617,000 at December 31, 2003, an increase of 6.0%. This increase in equity was primarily due to the Company’s net income.

The total number of shares of Bancorp’s common stock that may be issued upon the exercise of all options granted under the Incentive Stock Option Plan may not exceed in the aggregate four percent (4%) of Bancorp’s issued and outstanding shares of common stock. As of April 30, 2004 the maximum number of shares issuable under the Incentive Stock Option Plan was 181,460 shares. As of April 30, 2004, options for 177,364 shares had been granted, options for 5,744 shares exercised, and options for 8,773 shares expired under this Plan.

The total number of shares of Bancorp’s common stock that may be issued under the Stock Bonus Plan may not exceed in the aggregate one percent (1%) of Bancorp’s issued and outstanding shares of common stock. As of April 30, 2004 the maximum number of shares issuable under the Stock Bonus Plan was 45,365 shares. As of April 30, 2003, 50 shares had been issued under this Plan.

Capital ratios for the Company were as follows as of the dates indicated:

ITEM 3. QUANTITATIVE & QUALITATIVE ANALYSIS ABOUT MARKET RISK

Interest rate, credit, and operations risks are the most significant market risks impacting the Bank’s performance. The Bank relies on loan review, prudent loan underwriting standards and an adequate allowance for credit losses to mitigate credit risk.

The Bank uses an asset/liability management simulation model to measure interest rate risk. The model quantifies interest rate risk through simulating forecasted net interest income over a 12 month time period under various rate scenarios, as well as monitoring the change in the present value of equity under the same rate scenarios. The present value of equity is defined as the difference between the market value of current assets less current liabilities. By measuring the change in the present value of equity under different rate scenarios, management is able to identify interest rate risk that may not be evident in simulating changes in forecasted net interest income.

The Bank is currently slightly liability sensitive, meaning that interest bearing liabilities mature or reprice more quickly than interest earning assets in a given period. An increase or decrease in market rates of interest will not materially impact net interest income.

It should be noted that the simulation model does not take into account future management actions that could be undertaken if there were a change in actual market interest rate during the year. Also, certain assumptions are required to perform modeling simulations that may have significant impact on the results. These include assumptions regarding the level of interest rates and balance changes on deposit products that do not have stated maturities. These assumptions have been developed through a combination of industry standards and future expected pricing behavior. The model also includes assumptions about changes in the composition or mix of the balance sheet. The results derived from the simulation model could vary significantly by external factors such as changes in the prepayment assumptions, early withdrawals of deposits and competition. Management has assessed these risks and believes that there has been no material change since December 31, 2003.

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ITEM 4. CONTROLS AND PROCEDURES

Based on their most recent evaluation which was completed within 90 days of the filing of this Form 10-Q, the Company’s Chief Executive Officer and Chief Financial Officer believe the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to the Evaluation Date, nor any significant deficiencies or material weaknesses in such controls requiring corrective actions. As a result, no corrective actions were taken.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     None

ITEM 2. CHANGES IN SECURITIES

     None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

     None

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

     None

ITEM 5. OTHER INFORMATION

     None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

     (b) Reports on Form 8-K

     None

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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