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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Commission file number: 0-27938

COLUMBIA BANCORP

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

Registrant’s telephone number: (541) 298-6649

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common stock, no par value

     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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [  ]

     The aggregate market value of the voting stock held by non-affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of June 30, 2003, which is the last business day of the registrant’s most recently completed second fiscal quarter, was $116,304,117.

     The number of shares outstanding of each of the issuer’s classes of common equity as of the latest practicable date: 8,780,109 shares of no par value common stock on February 17, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant’s proxy statement dated March 1, 2004 for the 2004 Annual Meeting of Shareholders (“Proxy Statement”) are incorporated by reference in Part III hereof.

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COLUMBIA BANCORP
FORM 10-K
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

     This report, particularly including but not limited to the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains a number of forward-looking statements about our anticipated business, operations, financial performance and cash flows. Statements in this report that relate to future plans, events and circumstances are provided to describe management’s intentions and expectations based on currently available information, and readers should not construe these statements as assurances or guarantees. As with any predictions, these statements are inherently difficult to make with any degree of assurance, and actual results may differ materially and adversely from management’s expectations described herein. Likewise, management’s plans described in this report may not come to pass because unforeseen events may force management to deviate from its expressed intentions. Forward-looking statements often can be identified by the use of predictive or prospective terms such as “expect,” “anticipate,” “believe,” “plan,” “intend,” and words of similar construction or meaning. Some of the events or circumstances that may cause our actual results to deviate from management’s expectations include the impact of competition and local and regional economic factors upon our customer base, our deposits and our loan portfolio; economic and regulatory limits on our ability to grow our assets and manage our business; customer acceptance of our products and services; interest rate fluctuations that may adversely impact our revenues and expenses; and, the impact of impairment charges upon our intangible and other assets. We also face risks associated with the geographic concentration of our customers, our ability to maintain or expand our market share or net interest margins, and competitive and economic issues that impact our ability to implement our marketing and growth strategies. Other factors that may adversely impact our performance are discussed in the section entitled Management’s Discussion and Analysis of Financial Condition and Results of Operations – Factors that May Affect Future Results of Operations, as well as other disclosures we make from time to time in our other filings with the Securities and Exchange Commission. Readers should be aware that these factors are not an exhaustive list, and should not assume that these are the only factors that may cause our actual results to differ from our expectations. Readers also should note that forward-looking statements expressed in this report are made as of the date this report is filed and management cannot undertake to update those statements to reflect future events or circumstances.

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Part I

ITEM 1. DESCRIPTION OF BUSINESS

General

     Columbia Bancorp (“Columbia”) is a financial holding company organized in 1996 under Oregon Law. Columbia is headquartered in The Dalles, Oregon, with two wholly owned subsidiaries, Columbia River Bank (“CRB”) and Columbia Bancorp Trust I. CRB is an 18 branch, state-chartered institution authorized to provide banking services in Oregon and Washington. Columbia offers a broad range of financial services to its customers, primarily small and medium sized businesses, farmers, and individuals. Columbia’s 12 full-service branch facilities and three limited-service branch facilities in Oregon serve the northern and eastern Oregon communities of The Dalles (2), Hood River, Pendleton and Hermiston, the central Oregon communities of Madras, Redmond, and Bend (3), and the communities of McMinnville (3), Canby and Newberg in the Willamette Valley. Columbia’s three south central Washington full-service branches serve the communities of Goldendale, White Salmon and Kennewick.

     As of December 31, 2003, Columbia had total assets of $584.14 million, total deposits of $496.36 million, and shareholders’ equity of $57.80 million. Columbia’s net income for the year ended December 31, 2003, was $9.83 million, which was Columbia’s 17^th consecutive year of increasingly higher net income.

     From CRB’s establishment in 1977 as a one-branch bank in The Dalles, Oregon, Columbia has grown as a result of merger and acquisition activity, new branch openings, the introduction of new business lines and the expansion and cross-marketing of its existing products and community-bank lending expertise. Collectively, these growth activities have enabled Columbia to diversify its loan portfolio and operating risks over several market areas and local economies, which can be defined geographically as central Oregon, Willamette Valley Oregon, Mid-Columbia Oregon and south central Washington. This market diversity in which Columbia operates poses both opportunities and challenges to a community bank operating in varied local economies. Columbia’s approach to meeting the challenge is to staff its branches and business groups with managers who are established in their communities and have developed a loyal customer following. Columbia’s senior management, in conjunction with branch managers, review the operations of each branch to determine which products and services are best suited to that geographic region. Management believes that geographic diversity across a broad portion of the Pacific Northwest will limit Columbia’s exposure to adverse market conditions in any one geographical region or economic sector.

     Columbia provides high quality financial products and services to consumers and businesses. Our offerings include a broad range of deposit and loan products and services including retail banking, mortgage loans, broker dealer and commercial, agricultural and real estate lending.

     In 2003, Columbia focused on strengthening market share by opening a new branch in Kennewick, Washington and announcing two new branch locations in Bend and Redmond, Oregon planned for 2004. The mortgage lending office in Newport, Oregon has been closed due to insufficient loan volume necessary to meet strategic financial goals. Columbia also initiated changes to the mortgage and financial services divisions. The name Columbia River Bank Mortgage Group was changed to Columbia River Bank Mortgage Team (“Mortgage Team”); CRB Financial Services has become CRB Financial Services Team (“Financial Services Team”). These changes create a shift in customer perception and provide value by identifying employees as part of a “team”. The Mortgage Team has discontinued the practice of growing the mortgage servicing asset by capitalizing the service retained premiums. In addition, interest rate risk normally associated with the mortgage lending pipeline has been reduced by locking mortgage rates directly with potential investors, sometimes known as “best efforts”. “Best efforts” involves the sale of mortgage loans to third party investors at a committed loan rate and loan amount within a predetermined time period without risk of a penalty for failure to deliver the locked mortgage loans.

     Columbia has two reportable operating business segments, Community Banking and Mortgage Banking. A summary of Columbia’s net revenue, earnings from operations and assets for business segments is found in Note 23 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference. A discussion of various factors potentially affecting our operations is set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Factors That

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May Affect Future Results of Operations, “ in Item 7, which is incorporated herein by reference.

Business Strategy

     Columbia’s strategy is to remain a high performing financial institution, which is defined as achieving performance levels in the top quartile of all bank holding companies with assets between $500 million to $1 billion. Performance statistics are presented quarterly in the Bank Holding Company Performance Report as prepared by the Federal Reserve Bank. Columbia will continue building on its position as a leading community-based provider of financial services in Oregon and Washington while maintaining an close balance of its goals and priorities with benefits to shareholders, customers and employees. The components of Columbia’s business strategy are outlined below.

     Successfully operate in small to medium sized communities. Columbia believes the key to profitability is to maintain and open branches in small to medium sized communities, which are defined by population levels between 20,000 to 150,000 in size. This strategy encompasses the following: (i) provide a high level of service to the customer; (ii) staff branches with employees who have established ties to the community; (iii) attract and retain a highly skilled management team; and, (iv) allow branch personnel the flexibility to emphasize products and services which best fit their local economy. In addition, by decentralizing a portion of the management function to the branch level, Columbia believes it can make business decisions regarding customers more quickly and with added value than its major banking competitors. Columbia believes it is able to profitably attract and retain customers by providing and delivering products and services tailored to their individual needs, and by delivering them with a high degree of personal attention. Management and the Board of Directors will carefully review any exception to this strategy to ensure it is complimentary to Columbia’s current and future strategic initiatives.

     Maintain high asset quality. Columbia seeks to maintain high asset quality through a program that includes prompt and strict adherence to established credit policies combined with training and supervision of lending officers. Additionally, Columbia uses incentives to maintain high asset quality, including tying a portion of its loan officers compensation to the quality of the loans they originate. Columbia also believes that its commitment to hire branch managers with long-term ties to their communities is of significant assistance in determining the quality of loan transactions it receives. The variety of economies in which Columbia’s branches are located increases the diversification and, in Columbia’s opinion, the strength of the overall loan portfolio.

Products and Services

Consumer Distribution Channels

     Columbia offers a broad range of deposit and loan products and services tailored to meet the banking requirements of consumers in Columbia’s market areas. These include:

     Retail Bank Products and Services. Columbia’s consumer deposit products include numerous noninterest-bearing and interest-bearing demand accounts, savings accounts, money market accounts, and certificates of deposit. Management generally prices interest-bearing accounts based on competitive market factors, a desire to manage certain types or maturities of deposit liabilities and liquidity requirements. Columbia strives to establish customer relations to attract core deposits in noninterest-bearing transactional accounts, which reduces its cost of funds. Columbia provides loans to individual borrowers for a variety of purposes, including secured and unsecured personal loans, home equity, personal lines of credit and motor vehicle loans.

     CRB Mortgage Team Products and Services. Columbia offers a complete range of mortgage banking services including loans for single-family owner occupied homes, construction to permanent financing packages and mortgages for vacation and rental homes. Customers can choose between fixed, variable and balloon rate options. Construction loans are available through the conventional two-step process or through a construction to permanent basis. Junior lien financing is also offered as a single product or in combination with a first mortgage. An added benefit offered through the Mortgage Team is the ability for customers to access alternative secondary market outlets not normally available from other financial institutions.

     CRB Financial Services Team Products and Services. Through arrangements with Primevest Financial Services, Inc., (“Primevest”) a registered securities broker-dealer, Financial Services Team

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offers a wide range of non-Federal Deposit Insurance Company (“FDIC”) insured financial products and services to consumers. These include stocks, mutual funds, traditional and Roth IRAs, SEPs, tax-sheltered annuities, life insurance, and other financial products. Representatives also offer retirement planning services. Columbia receives a portion of the commissions generated from financial product sales.

     Technology-Based Products and Services. Columbia uses both traditional and new technology to support its focus on personal service. These include a VISA credit and check card (debit card) program; ATMs at each of Columbia’s full-service branches, including 15 on-site ATMs and five off-site ATMs; and, a telephone banking service that allows customers to speak directly with a customer service representative during normal banking hours or with 24-hour telephone access to their accounts. In addition, Columbia, through its web site, offers BankNet, an Internet banking service, which allows access to account information as well as the ability to view checks and use other services in an on-line environment.

Commercial Distribution Channels

     Columbia has an experienced lending staff, who have special expertise in small business, agricultural and real estate lending. Columbia’s loan officers emphasize continuing contact with business customers after loans are made. Columbia believes that its business customers appreciate the ongoing relationship they develop with their local lending officer. Such relationship-based banking is an important aspect of Columbia’s continuous effort to maintain high asset quality.

     Commercial Loans. Columbia offers customized loans including equipment and inventory financing, operational lines of credit, SBA loans for qualified businesses, and accounts receivable financing. A significant portion of Columbia’s loan portfolio consists of commercial loans. For regulatory reporting purposes, a portion of Columbia’s commercial loans are designated as real estate loans because they are secured by real property, although these loans may finance accounts receivable, equipment and inventory purchases, or other commercial activities. Lending decisions are based on careful evaluation of the financial strength, management, credit history of the borrower and the quality and marketability of the collateral securing the loan. Commercial loans secured by real property are generally limited to 75% of the value of the collateral. Columbia often requires personal guarantees and relies on the identification of secondary sources of repayment.

     Agricultural Loans. Columbia provides loans including production lines of credit, equipment financing, and term loans for capital improvements and other business purposes to agricultural businesses. Agricultural loans are generally secured by crops, equipment, and inventory, as well as real estate. Agricultural lending can require significant follow-up time, as farmers request budgeting assistance and other financial advice. Columbia employs two agricultural loan consultants with decades of farm lending experience, to assist its loan officers in loan processing and administration. Columbia’s loan officers, many of whom are graduates of the Western Agricultural Banking School in Pullman, Washington, make frequent visits to farming operation sites, regularly attend agricultural lending programs and seminars, and actively participate in growers’ associations and other agricultural-based organizations.

     Real Estate Loans. Real estate loans are available for the construction, purchase, or refinance of commercial and rental properties. Columbia also provides financing to high quality land developers, and speculative and pre-sold financing to contractors. Borrowers can choose from a variety of fixed and adjustable rate options and terms.

     Columbia’s real estate loans are in large part loans to commercial customers, farmers and ranchers and are secured by the properties used in their businesses. The majority of these loans have a variable rate feature with adjustment periods varying from one to five years. Insofar as payments on real estate loans depend on the successful operation and management of the businesses and properties securing the loans, repayment can be affected by local real estate market and economic conditions. Fluctuating land values and local economic conditions can make loans secured by real property difficult to evaluate and monitor.

     Government-Assisted Loan Programs. Columbia’s loan officers make loans to small businesses and to farmers that are supported by guarantees issued by various state and federal government agencies. Columbia is active in the SBA 7-A and 504 programs, and in similar programs offered by the Farm Services Agency (formerly the Farmers Home Administration) and by Oregon Economic and

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Community Development Department. The government guarantees a portion of these loans, which reduces risk in Columbia’s loan portfolio.

     Services to Non-Profits and Public Entities. Columbia offers a general array of loan products to borrowers in the non-profit and public entity sector, including city and county governments, together with special programs, such as jumbo CDs and low-cost loan programs. Columbia also offers consumer services to nonprofit and public sector employees, such as Columbia VISA card enrollment and direct deposit services.

     For all of its loans, Columbia at all times seeks to maintain sound loan underwriting standards with written loan policies, appropriate individual and branch limits, and loan administration committee reviews. In the case of particularly large loan commitments or loan participations, loans are reviewed by a loan committee of CRB’s Board of Directors. Underwriting standards are designed to achieve a high-quality loan portfolio, compliance with lending regulations and the desired mix of loan maturities and industry concentrations. Management seeks to minimize credit losses by closely monitoring the financial condition of its borrowers and the value of collateral.

     Cash Management Services. Columbia also offers to business customers an opportunity to meet additional banking needs online through its Internet Business Solutions product. This online product gives business customers the ability to process payroll, collections, wire transfers, and Electronic Funds Transfer tax payments.

     Deposit and Related Products. Columbia’s business deposit products include basic, regular, and interest-bearing demand accounts, business money market accounts and sweep accounts. Columbia also offers check verification services to merchants allowing them the ability to determine, on a 24-hour basis, whether a check drawn on an account has sufficient funds to cover the amount drawn. In addition, Columbia offers a VISA merchant program for business customers.

     Investment Products. Columbia’s affiliation with Primevest allows it to offer non-FDIC insured financial products and services to Columbia’s business customers as well as to consumers through Financial Services Team. These include insurance and annuity products, and employee retirement plan products such as SEPs, IRAs and 401(k) plans.

Principal Markets of Operation

     Columbia accepts deposits at its branches in Wasco, Hood River, Jefferson, Deschutes, Clackamas, Yamhill and Umatilla Counties in Oregon and Klickitat and Benton Counties in Washington. Columbia makes loans in all of these counties and in adjacent counties including Sherman, Gilliam, and Crook counties in Oregon and Skamania County in Washington. Many of its products and services, including investment products through Financial Services Team and mortgages through the Mortgage Team, are offered and sold throughout Oregon and south central Washington. Columbia’s ability to increase its market share in the communities it serves is driven by a marketing plan consisting of several key components. A principal objective is to create and foster a sales culture in each branch and department. Employees are trained to cross-sell, offering appropriate products and services to existing customers and expanding business relationships. Columbia regularly examines the desirability and profitability of adding new products and services to those currently offered. Columbia also promotes specific products through media advertising, but relies primarily on referrals and direct contacts for new business. Columbia recognizes the importance of community service and supports employee involvement in community activities. This participation allows Columbia to make a contribution to the communities it serves, which management believes increases Columbia’s visibility in its markets and thereby increases business opportunities.

     Columbia does business in many different small to medium sized communities. Management believes the diverse assortment of customers, communities, and economic sectors that Columbia serves are a source of strength. In addition, as a community banking organization Columbia has certain competitive advantages because of its local focus. However, Columbia is also more reliant on the local economies in its market areas than are super-regional and national banks.

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     We include as an asset on our balance sheet a mortgage servicing asset (“MSA”), which represents the estimated present value of our future income relating to service retained premiums from mortgage loans sold. The MSA has been steadily declining in value during the last three years as depressed mortgage interest rates have encouraged borrowers to pay off or refinance mortgages at a higher–than-expected rate, as shown below.

Competition

     Columbia’s competitors for deposits are banks, savings and loan associations, credit unions, money market funds, issuers of corporate and government securities, insurance companies, brokerage firms, mutual funds, and other financial intermediaries. Columbia’s business model is to compete on the basis of customer service and not solely on price. Columbia competes for deposits by offering a variety of deposit accounts at rates generally competitive with financial institutions in the area.

     Columbia’s competition for loans comes principally from banks, savings and loan associations, mortgage companies, finance companies, insurance companies, credit unions, and other institutional lenders. A primary competitor for agricultural loans is Farm Credit Services. Columbia competes for loan originations through the level of interest rates and loan fees charged, its array of commercial and mortgage loan products, and the efficiency and quality of services provided to borrowers. Lending activity can also be affected by the availability of lendable funds, local and national economic conditions, current interest rate levels, and loan demand. As described above, Columbia competes with larger commercial banks by emphasizing a community bank orientation and personal service to customers.

     A potential new source of competition is the array of on-line banking services offered by traditional commercial banks and other financial service providers, and by newly formed companies that use the Internet to advertise and sell competing products. Columbia offers many on-line banking services to its customers, but management believes that, for the foreseeable future, its customers will continue to prefer the personal, locally-based services that it offers.

Employees

     As of December 31, 2003, Columbia had a total of 272 full-time equivalent employees. This number of employees, which compares to 274 at December 31, 2002, has held steady, even though Columbia has grown its branch network, due to increased efficiencies in administrative functions and expansion of technology. None of the employees are subject to a collective bargaining agreement. Columbia considers its relationships with its employees to be good.

Directors and Executive Officers

     Information regarding Columbia’s executive officers and Board of Directors is set forth in “Directors and Executive Officers of the Registrant, “ in Item 10, which is incorporated herein by reference.

Website Access to Reports

     Columbia makes available all periodic and current reports, free of charge, on its website as soon as reasonably practicable after such material is electronically filed with, or furnished to the Securities and Exchange Commission (“SEC”). Columbia’s website address is www.columbiabancorp.com. The contents of the website are not incorporated into this report or into Columbia’s other filings with the SEC.

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SUPERVISION AND REGULATION

General

     Columbia is extensively regulated under federal and state law. These laws and regulations are primarily intended to protect depositors, not shareholders. The discussion below describes and summarizes certain statutes and regulations. These descriptions and summaries are qualified in their entirety by reference to the particular statute or regulation. Changes in applicable laws or regulations may have a material effect on the business and prospects of Columbia. The operations of Columbia may also be affected by changes in the policies of banking and other government regulators. Columbia cannot accurately predict the nature or extent of the effects on its business and earnings that fiscal or monetary policies, or new federal or state laws, may have in the future.

Gramm-Leach-Bliley Financial Services Modernization Act

     In 1999 Congress passed the Gramm-Leach-Bliley Financial Services Modernization Act (the “FSMA”). This new legislation repealed certain provisions of the Glass-Steagall Act that had required the separation of the banking, insurance and securities businesses. It also created a new business structure known as a financial services holding company. Under this new law, banks will have broader opportunities to affiliate with insurance and securities companies. Banks could also become tempting acquisition targets, as insurance and securities companies seek such affiliations themselves. The FSMA may also encourage local jurisdictions to enact tighter bank privacy provisions. The enactment and implementation of the FSMA will result in new competitive challenges and opportunities for community banks in the coming years.

     Columbia is a financial services holding company under the FSMA and is therefore subject to supervision of, and regulation by, the Board of Governors of the Federal Reserve System (“Federal Reserve”). Columbia is examined by, must file annual reports with, and provide the Federal Reserve with any additional information as it may require. Financial holding companies are bank holding companies that satisfy certain criteria and are permitted to engage in activities that traditional bank holding companies are not.

     Holding Company Bank Ownership. The Bank Holding Company Act of 1956 (“the BHCA”) requires every bank holding company to obtain the prior approval of the Federal Reserve before (i) acquiring, directly or indirectly, ownership or control of any voting shares of another bank or bank holding company if, after such acquisition, it would own or control more than 5% of such shares, (ii) acquiring all or substantially all of the assets of another bank or bank holding company, or (iii) merging or consolidating with another bank or bank holding company.

     Holding Company Control of Nonbanks. With some exceptions, the BHCA also prohibits a bank holding company from acquiring or retaining direct or indirect ownership or control of more than 5% of the voting shares of any company which is not a bank or bank holding company, or from engaging directly or indirectly in activities other than those of banking, managing, or controlling banks, or providing services for its subsidiaries. The principal exceptions to these prohibitions involve certain nonbank activities which, by statute or by Federal Reserve regulation or order, have been identified as activities closely related to the business of banking or of managing or controlling banks. In making this determination, the Federal Reserve considers whether the performance of such activities by a bank holding company can be expected to produce benefits to the public such as greater convenience, increased competition, or gains in the efficient use of resources, which can be expected to outweigh the risks of possible adverse effects such as decreased or unfair competition, conflicts of interest, or unsound banking practices. The Economic Growth and Regulatory Reduction Act of 1996 amended the BHCA to eliminate the requirement that bank holding companies seek prior Federal Reserve approval before engaging in certain permissible nonbanking activities if the holding company is well capitalized and meets certain other specific criteria.

     Transactions with Affiliates. Subsidiary banks of a bank holding company are subject to restrictions imposed by the Federal Reserve Act on extensions of credit to the holding company or its subsidiaries, on investments in their securities, and on the use of their securities as collateral for loans to any borrower. These regulations and restrictions may limit Columbia’s ability to obtain funds from CRB for its cash needs, including funds for payment of dividends, interest, and operational expenses.

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     Tying Arrangements. Under the Federal Reserve Act and certain regulations of the Federal Reserve, a bank holding company and its subsidiaries are prohibited from engaging in certain tying arrangements in connection with any extension of credit, lease or sale of property, or furnishing of services. For example, CRB may not generally require a customer to obtain other services from it or from Columbia, and may not require that the customer promise not to obtain other services from a competitor as a condition to an extension of credit to the customer.

Federal and State Bank Regulation

     General. CRB is an Oregon state-chartered bank with deposits insured by the FDIC, and is subject to the supervision and regulation of the Oregon Director of Banks and the FDIC. CRB is also subject to the supervision and regulation of the Washington Department of Financial Institutions. These agencies have the authority to prohibit banks from engaging in what they believe constitute unsafe or unsound banking practices.

     CRA. The Community Reinvestment Act (“CRA”) requires that, in connection with examinations of financial institutions within their jurisdiction, the Federal Reserve or the FDIC evaluate the records of financial institutions in meeting the credit needs of their local communities, including low and moderate income neighborhoods, consistent with the safe and sound operation of those banks. These factors are also considered in evaluating mergers, acquisitions, and applications to open a branch or facility.

     Insider Credit Transactions. Banks are also subject to certain restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal shareholders, or any related interests of such persons. Extensions of credit (i) must be made on substantially the same terms, including interest rates and collateral, and follow credit underwriting procedures that are not less stringent than those prevailing at the time for comparable transactions with persons not covered above and who are not employees; and (ii) must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to certain lending limits and restrictions on overdrafts to such persons. A violation of these restrictions may result in the assessment of substantial civil monetary penalties on the affected bank or any officer, director, employee, agent, or other person participating in the conduct of the affairs of that bank; the imposition of a cease and desist order; and other regulatory sanctions.

     FDICIA. Under the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”), each federal banking agency has prescribed, by regulation, noncapital safety and soundness standards for institutions under its authority. These standards cover internal controls, information systems, and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, such other operational and managerial standards as the agency determines to be appropriate, and standards for asset quality, earnings and stock valuation. An institution which fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that the institution will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions. Management believes that CRB meets all such standards and, therefore, does not believe that these regulatory standards materially affect Columbia’s business operations.

Interstate Banking and Branching

     The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (“Interstate Act”) permits nationwide interstate banking and branching under certain circumstances. This legislation generally authorizes interstate branching and relaxes federal law restrictions on interstate banking. Currently, financial holding companies may purchase banks in any state, and states may not prohibit such purchases. Additionally, banks are permitted to merge with banks in other states as long as the home state of neither merging bank has opted out. The Interstate Act requires regulators to consult with community organizations before permitting an interstate institution to close a branch in a low-income area.

     Under recent FDIC regulations, banks are prohibited from using their interstate branches primarily for deposit production. The FDIC has accordingly implemented a loan-to-deposit ratio screen to ensure compliance with this prohibition.

     Oregon and Washington each enacted “opting in” legislation in accordance with the Interstate Act

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provisions allowing banks to engage in interstate merger transactions subject to certain “aging” requirements. In both states, branches may not be acquired or opened separately in the home state by an out-of-state bank, but once an out-of-state bank has acquired a bank within the state, either through merger or acquisition of all or substantially all of the bank’s assets, the out-of-state bank may open additional branches within the home state.

Deposit Insurance

     The deposits of CRB are currently insured to a maximum of $100,000 per depositor through the Bank Insurance Fund (“BIF”) administered by the FDIC. CRB is required to pay semi-annual deposit insurance premium assessments to the FDIC.

     The FDICIA included provisions to reform the Federal Deposit Insurance System, including the implementation of risk-based deposit insurance premiums. The FDICIA also permits the FDIC to make special assessments on insured depository institutions in amounts determined by the FDIC to be necessary to give it adequate assessment income to repay amounts borrowed from the U.S. Treasury and other sources, or for any other purpose the FDIC deems necessary. The FDIC has implemented a risk-based insurance premium system under which banks are assessed insurance premiums based on how much risk they present to the BIF. Banks with higher levels of capital and a low degree of supervisory concern are assessed lower premiums than banks with lower levels of capital or a higher degree of supervisory concern.

Dividends

     The principal source of Columbia’s cash revenues is dividends received from its subsidiary. The payment of dividends is subject to government regulation, in that regulatory authorities may prohibit banks and financial holding companies from paying dividends which would constitute an unsafe or unsound banking practice. In addition, a bank may not pay cash dividends if that payment could reduce the amount of its capital below that necessary to meet minimum applicable regulatory capital requirements. Also, under the Oregon Bank Act, the Oregon Director of Banks may suspend the payment of dividends if it is determined that the payment would cause a bank’s remaining shareholders’ equity to be inadequate for the safe and sound operation of the bank. Other than the laws and regulations noted above, which apply to all banks and financial holding companies, neither Columbia nor CRB is currently subject to any regulatory restrictions on their dividends.

Capital Adequacy

     Federal bank regulatory agencies use capital adequacy guidelines in the examination and regulation of financial holding companies and banks. If capital falls below minimum guideline levels, the holding company or bank may be denied approval to acquire or establish additional banks or nonbank businesses or to open new facilities.

     The FDIC and Federal Reserve use risk-based capital guidelines for banks and financial holding companies. These are designed to make such capital requirements more sensitive to differences in risk profiles among banks and financial holding companies, to account for off-balance sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The guidelines are minimums, and the Federal Reserve has noted that financial holding companies contemplating significant expansion programs should not allow expansion to diminish their capital ratios and should maintain ratios well in excess of the minimum. The current guidelines require all financial holding companies and federally regulated banks to maintain a minimum risk-based total capital ratio equal to 8%, of which at least 4% must be Tier I capital.

     Tier I capital for financial holding companies includes common shareholders’ equity, qualifying perpetual preferred stock (up to 25% of total Tier I capital, if cumulative, although under a Federal Reserve Rule, redeemable perpetual preferred stock may not be counted as Tier I capital unless the redemption is subject to the prior approval of the Federal Reserve), and minority interests in equity accounts of consolidated subsidiaries, less intangibles. Tier II capital includes: (i) the allowance for loan losses of up to 1.25% of risk-weighted assets; (ii) any qualifying perpetual preferred stock which exceeds the amount which may be included in Tier I capital; (iii) hybrid capital instruments; (iv) perpetual debt; (v) mandatory convertible securities; and (vi) subordinated debt and intermediate term preferred stock of up

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to 50% of Tier I capital. Total capital is the sum of Tier I and Tier II capital, less reciprocal holdings of other banking organizations, capital instruments, and investments in unconsolidated subsidiaries.

     The assets of banks and financial holding companies receive risk-weights of 0%, 20%, 50%, and 100%. In addition, certain off-balance sheet items are given credit conversion factors to convert them to asset equivalent amounts to which an appropriate risk-weight will apply. These computations result in total risk-weighted assets.

     Most loans are assigned to the 100% risk category, except for first mortgage loans fully secured by residential property which carry a 50% rating. Most investment securities are assigned to the 20% category, except for municipal or state revenue bonds which have a 50% risk-weight, and direct obligations of, or obligations guaranteed by, the United States Treasury or agencies of the federal government which have 0% risk-weight. In converting off-balance sheet items, direct credit substitutes, including general guarantees and standby letters of credit backing financial obligations, are given a 100% conversion factor. Transaction related contingencies such as bid bonds, other standby letters of credit and undrawn commitments, including commercial credit lines with an initial maturity of more than one year, have a 50% conversion factor. Short-term, self-liquidating trade contingencies are converted at 20%, and short-term commitments have a 0% factor.

     The Federal Reserve also employs a leverage ratio, which is Tier I capital as a percentage of total assets less intangibles, to be used as a supplement to risk-based guidelines. The principal objective of the leverage ratio is to constrain the maximum degree to which a financial holding company may leverage its equity capital base. The Federal Reserve requires a minimum leverage ratio of 3%. However, for all but the most highly rated financial holding companies and for financial holding companies seeking to expand, the Federal Reserve expects an additional cushion of at least 1% to 2%.

     The FDICIA created a statutory framework of supervisory actions indexed to the capital level of the individual institution. Under regulations adopted by the FDIC, an institution is assigned to one of five capital categories depending on its total risk-based capital ratio, Tier I risk-based capital ratio, and leverage ratio, together with certain subjective factors. Institutions which are deemed to be “undercapitalized”, depending on the category to which they are assigned, are subject to certain mandatory supervisory corrective actions.

Effects of Government Monetary Policy

     The earnings and growth of Columbia are affected not only by general economic conditions but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy for such purposes as curbing inflation and combating recession, but its open market operations in U.S. government securities, control of the discount rate applicable to borrowings from the Federal Reserve, and establishment of reserve requirements against certain deposits, influence the growth of bank loans, investments and deposits, and also affect interest rates charged on loans or paid on deposits. The nature and impact of future changes in monetary policies and their impact on Columbia cannot be predicted with certainty.

Changes in Banking Laws and Regulations

     The laws and regulations that affect banks and financial holding companies frequently undergo significant changes at the federal and state levels. Bills are introduced from time to time in the United States Congress that contain proposals to alter the structure, regulation, and competitive relationships of the nation’s financial institutions. Any changes in laws and regulations could have the effect of increasing or decreasing the cost of doing business, limiting or expanding permissible activities (including activities in the insurance and securities fields), or affecting the competitive balance among banks, savings associations, and other financial institutions. Such changes could also reduce the extent of federal deposit insurance, broaden the powers or the geographical range of operations of financial holding companies, alter the extent to which banks could engage in securities activities, alter the taxation of banks, financial holding companies and other financial services organizations, and change the structure and jurisdiction of various financial institution regulatory agencies. Management cannot anticipate or predict specific ongoing changes in laws and regulations or the extent to which they might affect its business.

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ITEM 2. PROPERTIES

     Nine of Columbia’s facilities in Hood River, The Dalles, Redmond, Bend, McMinnville, Madras, Hermiston and Pendleton Oregon, as well as its two full-service branch facilities in White Salmon and Goldendale, Washington, are housed in properties owned, free of all encumbrances, by Columbia. Columbia leases the space for its Canby, Newberg and Kennewick branches, both McMinnville and Bend limited-service branches in retirement communities, its facility in The Dalles Safeway store and the Administration office located in The Dalles. All of Columbia’s branches, except the Westside branch in The Dalles, Oregon and its limited service branches, have drive-up facilities and automated teller machines. The Mortgage Team operates from the second floor of Columbia’s Bend branch; 1701 NE Third Street. The following sets forth certain information regarding Columbia’s branch facilities.

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     In 1999, Columbia purchased 156,723 square feet of bare land in the Columbia River Center in The Dalles for future branch or administrative operations expansion. Columbia also purchased bare land in 1995, adjacent to the Hood River Branch, for the purpose of future parking expansion. After the completion of the parking expansion in 2001, Columbia partitioned the land and currently has 13,068 square feet listed for sale. In 2003, Columbia closed its mortgage lending office in Newport, Oregon due to the declining volume of mortgage transactions generated through that office.

ITEM 3. LEGAL PROCEEDINGS

     Management is not presently aware of any pending or threatened claims against Columbia that, if determined adversely to Columbia, would have a material affect on its operations or performance. In the normal course of its business, Columbia is a party to various debtor-creditor legal actions, none of which, individually or in the aggregate, are presently material to Columbia’s business, operations or financial condition. These include cases filed as a plaintiff in collection and foreclosure cases, and the enforcement of creditors’ rights in bankruptcy proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No matters were submitted to a vote of securities holders of Columbia during the quarter ended December 31, 2003.

Part II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

     The common stock of Columbia Bancorp trades on the NASDAQ National Market under the symbol “CBBO”. Trading in Columbia’s stock on NASDAQ commenced on November 6, 1998. The respective high and low sale prices of Columbia’s common stock for the periods indicated are shown below. All prices for the periods shown have been adjusted for subsequent stock splits. Prices do not include retail markups, markdowns, or commissions, and may not represent actual transactions. Columbia has paid dividends on its common stock on a quarterly basis. The table below also sets forth dividends declared per share of common stock for the periods indicated. As of February 17, 2004 Columbia had 8,780,109 shares issued and outstanding, which were held by approximately 2,863 shareholders of record.

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Table 1

(1)  Prior periods have been adjusted to reflect the 10% stock dividend, effective May 1, 2003.

Sales of Unregistered Securities

     Columbia had no recent sales of unregistered securities during the fourth quarter of 2003.

ITEM 6. SELECTED FINANCIAL DATA

     The following table sets forth certain information concerning the consolidated financial condition, operating results, and key operating ratios for Columbia at the dates and for the periods indicated. This information does not purport to be complete, and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements of Columbia and Notes thereto.

Table 2

(1)  Prior periods have been adjusted to reflect the 10% stock dividend, effective May 1, 2003.

(2)  Tier I capital divided by risk-weighted assets.

(3)  Total regulatory capital divided by risk-weighted assets.

(4)  Tier I capital divided by average total assets.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

     The following discussion should be read in conjunction with Columbia Bancorp’s (“Columbia”) audited consolidated financial statements and the notes thereto as of December 31, 2003 and 2002 and for each of the three years in the period ended December 31, 2003 included elsewhere in this report.

     Columbia is a financial holding company which conducts operations principally through its wholly-owned subsidiary, Columbia River Bank (“CRB”). CRB is a state chartered bank which offers a broad range of services to its customers, primarily small and medium sized businesses, farmers, and individuals. CRB has a network of 18 branches, 12 full-service branch facilities and three limited-service branch facilities in Oregon serve the northern and eastern Oregon communities of The Dalles (2), Hood River, Pendleton and Hermiston, the central Oregon communities of Madras, Redmond, and Bend (3), and the communities of McMinnville (3), Canby and Newberg in the Willamette Valley. Columbia’s three south central Washington full-service branches serve the communities of Goldendale, White Salmon and Kennewick.

     On December 19, 2002, Columbia formed Columbia Bancorp Trust I (“Trust”), a wholly-owned Delaware statutory business trust, for purposes of issuing Trust Preferred Securities. The Trust issued $4.0 million of trust-preferred securities at a floating rate indexed to the 90 day LIBOR with a margin of 3.30%. These securities are considered to be Tier I for regulatory capital purposes.

     Management’s goal is to grow Columbia’s earning assets while maintaining a high return on equity and high asset quality. The key to this, in management’s view, is to emphasize personalized, quality banking products and services for its customers, to hire and retain competent branch and administrative personnel, and to respond quickly to customer demand and growth opportunities. Management also intends to increase Columbia’s penetration in our existing markets, and to expand into new markets through suitable acquisitions and new branch openings.

     As of December 31, 2003, Columbia had total assets of $584.14 million, total deposits of $496.36 million and shareholders’ equity of $57.80 million. As of December 31, 2002 and 2001, total assets were $544.33 million and $482.21 million; total deposits were $458.62 million and $394.64 million, and shareholders’ equity were $50.19 million and $46.45 million, respectively. Columbia’s net income for years ended December 31, 2003, 2002 and 2001, was $9.83 million, $9.38 million and $7.37 million, respectively. Columbia’s year 2003 net income represents the seventeenth consecutive year of increasing net income. For the year ended December 31, 2003, Columbia’s return on average assets was 1.71% and return on average equity was 18.25%, as compared to 2002 and 2001, where return on average assets were 1.80% and 1.64% and return on average equity were 18.80% and 16.76%, respectively.

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     Return on average daily assets and equity and certain other ratios for the periods indicated are presented below:

Table 3

Critical accounting policies and estimates

     The “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures included elsewhere in this Form 10-K, are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, management evaluates the estimates used, including the adequacy of the allowance for loan and lease losses, impairment of intangible assets, and contingencies and litigation. Estimates are based upon historical experience, current economic conditions and other factors that management considers reasonable under the circumstances. These estimates result in judgments regarding the carrying values of assets and liabilities when these values are not readily available from other sources as well as assessing and identifying the accounting treatments of commitments and contingencies. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies involve the more significant judgments and assumptions used in the preparation of the consolidated financial statements.

     The allowance for loan and lease losses is established to absorb known and inherent losses attributable to loans and leases outstanding and related off-balance-sheet commitments. The adequacy of the allowance is monitored on an ongoing basis and is based on management’s evaluation of numerous factors. These factors include the quality of the current loan portfolio, the trend in the loan portfolio’s risk ratings, current economic conditions, loan concentrations, loan growth rates, past-due and nonperforming trends, evaluation of specific loss estimates for all significant problem loans, historical charge-off and recovery experience and other pertinent information. Approximately 63% of Columbia’s gross loan portfolio is secured by real estate and a significant depreciation in real estate values in Oregon and Washington would cause management to increase the allowance for loan and lease losses.

     During 2003 and prior years, Columbia capitalized service retained mortgage premiums which resulted in recognition of a mortgage servicing asset (“MSA”) and a corresponding recognition of servicing income. The MSA has been valued on a quarterly basis by a qualified, third party with access and knowledge of current servicing portfolio values in the market place.. The techniques used in valuing the MSA incorporate assumptions relative to prevailing conditions in the secondary servicing market. These assumptions have been dependent upon near term transactions and include prepayment speed forecasts, market discount rates, earning rates, servicing costs, acquisition costs and ancillary income. A calculated decrease in the value of the MSA is recorded as a valuation write-down adjustment. However, actual fair

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values may differ from the measured valuation due to limitations in available third-party market quotations and potential changes in the underlying assumptions. Mortgage servicing assets have been amortized over the expected life of the outstanding net servicing income. The expected life of the outstanding net servicing income that is generated from the MSA can vary from management’s estimates due to interest rate volatility and changing prepayment speeds. Prepayment speeds in excess of management’s estimates could negatively impact the recorded value of the MSA.

     Columbia initiated a strategic shift in the fourth quarter of 2003 and discontinued the practice of capitalizing service retained mortgage premiums. Columbia River Bank Mortgage Team (“Mortgage Team”) now originates mortgage loans which are sold exclusively on a brokerage basis with mortgage servicing released. . This means the existing MSA balance will not increase as a result of additional mortgage loan activity in which mortgage premiums are retained. . This strategy will continue into 2004 with a focus on producing quality loans, providing competitive loan products, and selling service released mortgage premiums in the secondary servicing market. Management believes this will reduce interest rate risk associated with the MSA.. Any future decision to sell the MSA will be dependent upon the movement of interest rates. A rise in interest rates in 2004 will likely improve the value of the MSA and provide management with the ability to examine sale options.

     At December 31, 2003, Columbia had approximately $7.4 million in goodwill as a result of business combinations. Columbia adopted Statement of Financial Accounting Standards (“SFAS”) No. 142 on January 1, 2002. Annual and periodic analyses of the fair value of recorded goodwill for impairment will involve judgment on the part of management.

     Columbia applies Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for its stock option plans. Accordingly, compensation costs are recognized as the difference between the exercise price of each option and the market price of Columbia’s stock at the date of each grant. Had compensation cost for Columbia’s 2003, 2002, and 2001 grants for stock-based compensation plans been determined consistent with SFAS No. 123, its net income and earnings per common share for December 31, 2003, 2002, and 2001, would approximate the pro forma amounts below.

Table 4

(1)  Prior periods have been adjusted to reflect the 10% stock dividend, effective May 1, 2003.

     The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions for December 31, 2003, 2002 and 2001:

Table 5

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     The effects of applying SFAS No. 123 in the pro forma disclosure are not indicative of future amounts. Additionally, there can be no assurance that the Public Accounting Oversight Board (PCAOB), the accounting standard setting organization for public companies, will not issue new pronouncements that will change the accounting for stock-based compensation plans in the future.

     Columbia may become party to various legal proceedings. These matters have a high degree of uncertainty associated with them. There can be no assurance that the ultimate outcome will not differ materially from Columbia’s assessment of them. There can also be no assurance that all matters that may be brought against Columbia are known to them at any point in time.

Results of Operations

Net Interest Income

     For financial institutions, the primary component of earnings is net interest income. Net interest income is the difference between interest income, principally from loan and investment security portfolios, and interest expense, principally on customer deposits and bank borrowings from other sources, such as trust preferred securities. Changes in net interest income result from changes in volume, spread and margin. Volume refers to the dollar level of interest-earning assets and interest-bearing liabilities. Spread refers to the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities. Net interest margin is the ratio of net interest income to total average interest-earning assets and is influenced by the relative level of interest-earning assets and interest-bearing liabilities.

     Average Balances and Average Rates Earned and Paid. The following table shows average balances and interest income or interest expense, with the resulting average yield or rates by category of earning assets or interest-bearing liabilities:

Table 6

[Additional columns below]

[Continued from above table, first column(s) repeated]

						Year Ended December 31, 2001
										Interest				Average
						Average				Income or				Yields or
(dollars in thousands)						Balance				Expense				Rates
Interest-earning assets:
		Loans (1)				$	348,239			$	32,135				9.23	%
		Investment securities
			Taxable securities				29,049				1,615				5.56
			Nontaxable securities (2)				18,375				1,320				7.18
				Total investment securities (2)			47,424				2,935				6.19
		Interest-earning balances due from banks					7,560				417				5.52
		Federal funds sold					1,101				40				3.64
				Total interest-earning assets (3)			404,324				35,527				8.79
	Non-interest earning assets						45,938
				Total assets		$	450,262
Interest-bearing liabilities:
		Interest-bearing checking and savings accounts				$	158,286			$	3,318				2.10	%
		Time deposit & IRAs					118,758				6,386				5.38
		Borrowed funds					34,238				1,880				5.49
				Total interest-bearing liabilities			311,282				11,584				3.72
		Noninterest-bearing deposits					91,731
				Total deposits and borrowed funds			403,013
		Other liabilities					3,259
				Total liabilities			406,272
		Shareholders’ equity					43,990
				Total liabilities and shareholders’ equity		$	450,262
Net interest income (taxable equivalent basis)										$	23,943
Net interest income (as reported)										$	23,495
Average yield on average earning assets (1)															8.79	%
Interest expense to average earning assets															2.87	%
Net interest margin (3)															5.92	%
Net interest spread															5.07	%