UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

o		Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 0-27938

COLUMBIA BANCORP

(Exact name of registrant as specified in its charter)

Oregon		93-1193156
(State of incorporation)		(I.R.S. Employer
		Identification No.)

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

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

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of November 16, 2009, there were 10,062,545 shares of common stock of Columbia Bancorp, no par value, outstanding.

 

 

COLUMBIA BANCORP

FORM 10-Q

September 30, 2009

Table of Contents

PART I. — FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
CONSOLIDATED BALANCE SHEETS			3
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)			4
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY			5
CONSOLIDATED STATEMENTS OF CASH FLOWS			6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS			21
CRITICAL ACCOUNTING POLICIES AND ESTIMATES			21
OVERVIEW			23
MATERIAL CHANGES IN FINANCIAL CONDITION			32
LIQUIDITY AND CAPITAL RESOURCES			43
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			46
ITEM 4. CONTROLS AND PROCEDURES			47
PART II. — OTHER INFORMATION			48
ITEM 1. LEGAL PROCEEDINGS			48
ITEM 1A. RISK FACTORS			48
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			57
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			57
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS			57
ITEM 5. OTHER INFORMATION			57
ITEM 6. EXHIBITS			57
SIGNATURES			58
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I. — FINANCIAL INFORMATION

These consolidated financial statements should be read in conjunction with the financial statements, accompanying notes and other relevant information included in the Company’s report on Form 10-K for the year ended December 31, 2008, and the notes and other information included in this report.

ITEM 1.		FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS OF COLUMBIA BANCORP AND SUBSIDIARY

COLUMBIA BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

		September 30,				December 31,
		2009				2008
ASSETS
CASH AND CASH EQUIVALENTS
Cash and due from banks		$	9,828,004			$	39,245,220
Interest bearing deposits with other banks			223,156,429				25,742,260
Federal funds sold			325,714				117,491,560
Total cash and cash equivalents			233,310,147				182,479,040
INVESTMENT SECURITIES
Debt securities available-for-sale, at fair value			28,275,031				19,218,096
Equity securities available-for-sale, at fair value			1,762,083				1,673,409
Debt securities held-to-maturity, at amortized cost, estimated fair value $5,411,625 and $8,284,350 at September 30, 2009 and December 31, 2008, respectively			5,219,687				8,130,397
Restricted equity securities			3,054,500				3,054,500
Total investment securities			38,311,301				32,076,402
LOANS
Loans, net of unearned loan fees of $583,018 and $562,175 at September 30, 2009 and December 31, 2008, respectively			735,630,170				863,441,864
Allowance for loan losses			(19,606,951	)			(24,492,350	)
Net loans			716,023,219				838,949,514
OTHER ASSETS
Property and equipment, net of accumulated depreciation			21,541,977				23,627,864
Other real estate owned			15,245,699				9,622,472
Accrued interest receivable			5,373,785				4,843,767
Other assets			27,911,178				30,694,506
Total other assets			70,072,639				68,788,609
TOTAL ASSETS		$	1,057,717,306			$	1,122,293,565
LIABILITIES AND SHAREHOLDERS’ EQUITY
DEPOSITS
Non-interest bearing demand deposits		$	198,306,869			$	215,922,354
Money market and NOW accounts			290,123,366				271,244,206
Savings accounts			30,758,900				30,873,113
Time certificates			490,802,135				486,156,648
Total deposits			1,009,991,270				1,004,196,321
OTHER LIABILITIES
Federal Home Loan Bank advances and other short-term borrowings			18,400,406				36,612,730
Accrued interest payable and other liabilities			6,095,218				6,435,889
Total other liabilities			24,495,624				43,048,619
TOTAL LIABILITIES			1,034,486,894				1,047,244,940
SHAREHOLDERS’ EQUITY
Common stock, no par value; 20,000,000 shares authorized, 10,062,585 issued and outstanding (10,067,347 at December 31, 2008)			55,740,050				55,698,975
(Accumulated deficit)/retained earnings			(32,848,577	)			19,242,169
Accumulated other comprehensive income, net of taxes			338,939				107,481
TOTAL SHAREHOLDERS’ EQUITY			23,230,412				75,048,625
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,057,717,306			$	1,122,293,565

See accompanying notes.

COLUMBIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)

		Three Months Ended								Nine Month Ended
		September 30,								September 30,
		2009				2008				2009				2008
INTEREST INCOME
Interest and fees on loans		$	11,443,252			$	15,522,487			$	35,753,361			$	49,379,539
Interest on investments:
Taxable investment securities			249,753				160,841				660,078				674,588
Nontaxable investment securities			45,040				97,314				181,176				298,463
Interest on federal funds sold			1,257				242,564				72,395				558,416
Other interest and dividend income			101,173				156,160				167,343				423,444
Total interest income			11,840,475				16,179,366				36,834,353				51,334,450
INTEREST EXPENSE
Interest on interest bearing deposit and savings accounts			956,378				1,524,073				3,244,872				5,006,696
Interest on time deposit accounts			3,977,347				4,048,067				12,879,900				11,714,082
Other borrowed funds			140,442				416,844				538,815				850,173
Total interest expense			5,074,167				5,988,984				16,663,587				17,570,951
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES			6,766,308				10,190,382				20,170,766				33,763,499
PROVISION FOR LOAN LOSSES			20,250,000				25,400,000				44,350,000				34,100,000
NET INTEREST LOSS AFTER PROVISION FOR LOAN LOSSES			(13,483,692	)			(15,209,618	)			(24,179,234	)			(336,501	)
NON-INTEREST INCOME
Service charges and fees			1,255,034				1,309,748				3,701,430				3,663,437
Mortgage banking revenue			—				835,958				—				2,930,351
Payment system revenue, net			317,731				(20,450	)			849,661				249,276
Financial services revenue			235,882				278,835				636,182				840,535
Credit card discounts and fees			—				174,979				90,675				474,518
Gain on sale of credit card portfolio			—				1,233,844				—				1,233,844
Other non-interest income			205,733				224,616				1,075,257				984,659
Total non-interest income			2,014,380				4,037,530				6,353,205				10,376,620
NON-INTEREST EXPENSE
Salaries and employee benefits			4,202,763				5,549,086				12,936,089				16,347,507
FDIC premiums and state assessments			1,322,930				206,235				4,663,753				568,492
Occupancy expense			1,521,797				1,381,330				4,614,564				3,998,945
Other real estate owned impairment and (gain)/loss on sale, net			803,035				1,973,325				1,331,352				1,927,256
Other non-interest expenses			2,588,015				3,083,074				8,202,254				9,369,782
Total non-interest expense			10,438,540				12,193,050				31,748,012				32,211,982
LOSS BEFORE PROVISION FOR (BENEFIT FROM) INCOME TAXES			(21,907,852	)			(23,365,138	)			(49,574,041	)			(22,171,863	)
PROVISION FOR (BENEFIT FROM) INCOME TAXES			—				(9,274,000	)			2,516,705				(9,094,173	)
NET LOSS			(21,907,852	)			(14,091,138	)			(52,090,746	)			(13,077,690	)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAXES
Unrealized holding gains (losses) arising during the period			203,367				32,273				232,526				(66,399	)
Reclassification adjustment for gains included in net loss			—				(9,797	)			(1,068	)			(11,131	)
Decrease in fair value of interest rate swap			—				—				—				(12,739	)
Total other comprehensive income (loss), net of taxes			203,367				22,476				231,458				(90,269	)
COMPREHENSIVE LOSS		$	(21,704,485	)		$	(14,068,662	)		$	(51,859,288	)		$	(13,167,959	)
Loss per share of common stock
Basic
Diluted		$	(2.18	)		$	(1.41	)		$	(5.18	)		$	(1.31	)
Weighted average common shares outstanding		$	(2.18	)		$	(1.41	)		$	(5.18	)		$	(1.31	)
Basic
Diluted			10,062,696				10,024,085				10,052,514				10,018,590
			10,062,696				10,024,085				10,052,514				10,018,590

See accompanying notes.

COLUMBIA BANCORP AND SUBSIDIARY

										(Accumulated				Accumulated
										Deficit) /				Other				Total
						Common				Retained				Comprehensive				Shareholders’
		Shares				Stock				Earnings				Income				Equity
BALANCE, December 31, 2007			10,043,572			$	55,393,110			$	46,764,304			$	80,418			$	102,237,832
Cumulative effect of change in accounting principle — split-dollar life insurance benefit			—				—				(59,094	)			—				(59,094	)
Stock-based compensation expense			—				344,801				—				—				344,801
Stock options exercised and stock awards granted			27,985				63,676				—				—				63,676
Income tax effect from stock options exercised			—				1,563				—				—				1,563
Income tax adjustment for stock awards			—				(67,180	)			—				—				(67,180	)
Repurchase of common stock			(4,210	)			(36,995	)			—				—				(36,995	)
Cash dividends, $0.11 per common share			—				—				(1,105,092	)			—				(1,105,092	)
Net (loss) and comprehensive loss			—				—				(26,357,949	)			27,063				(26,330,886	)
BALANCE, December 31, 2008			10,067,347				55,698,975				19,242,169				107,481				75,048,625
Stock-based compensation expense			—				104,663				—				—				104,663
Stock awards forfeited			(6,020	)			(6,703	)			—				—				(6,703	)
Stock awards granted			2,500				—				—				—				—
Income tax adjustment for stock awards			—				(55,545	)			—				—				(55,545	)
Repurchase of common stock			(1,242	)			(1,340	)			—				—				(1,340	)
Net (loss) and comprehensive loss			—				—				(52,090,746	)			231,458				(51,859,288	)
BALANCE, September 30, 2009			10,062,585			$	55,740,050			$	(32,848,577	)		$	338,939			$	23,230,412

See accompanying notes.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

		Nine Months Ended
		September 30,
		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(52,090,746	)		$	(13,077,690	)
Adjustments to reconcile net loss to net cash from operating activities:
Net amortization (accretion) of discounts and premiums on investment securities			451,405				(22,792	)
Net gain on called investment securities			(1,747	)			(17,711	)
Gain on sale of credit card portfolio			—				(1,233,844	)
Loss on sale of mortgage loans			—				789,177
Depreciation and amortization of property and equipment			2,313,137				2,103,781
Loss on sale or write-down of property and equipment			120,005				4,771
Loss on sale or write-down of other real estate owned			1,331,352				1,927,256
Loss on limited partnerships			192,563				170,419
Stock-based compensation expense			97,960				324,205
Income tax benefit from stock-based compensation expense			—				(1,563	)
Provision for loan losses			44,350,000				34,100,000
(Benefit from) provision for losses from off-balance sheet financial instruments			(126,000	)			133,000
Increase (decrease) in cash due to changes in assets/liabilities:
Accrued interest receivable			(530,018	)			(495,543	)
Proceeds from the sale of mortgage loans held-for-sale			—				117,312,244
Production of mortgage loans held-for-sale			—				(111,711,979	)
Other assets			2,657,869				(7,069,001	)
Accrued interest payable and other liabilities			(335,958	)			(5,474,845	)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES			(1,570,178	)			17,759,885
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of available-for-sale securities			16,825,383				9,056,925
Proceeds from called available-for-sale securities			2,000,000				2,268,087
Proceeds from sale of available-for-sale securities			—				3,015,587
Proceeds from maturity of held-to-maturity securities			593,796				960,993
Proceeds from called held-to-maturity securities			2,315,000				—
Purchases of available-for-sale securities			(28,039,918	)			(5,542,567	)
Purchases of restricted equity securities			—				(615,400	)
Net change in loans made to customers			67,545,402				(89,644,623	)
Proceeds from sale of loans			—				7,772,738
Capital contributions to low-income housing partnerships			(148,722	)			(143,949	)
Investment in state energy tax credits			—				(1,431,069	)
Proceeds from sale of other real estate owned			4,076,314				403,800
Purchases of property and equipment			(347,255	)			(4,656,692	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES			64,820,000				(78,556,170	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in demand deposit and savings accounts			1,149,462				(19,410,593	)
Net change in time deposits			4,645,487				111,587,006
Net borrowings of short-term notes payable			—				(850,000	)
Proceeds from long-term borrowings			—				40,000,000
Repayments of long-term borrowings			(18,212,324	)			(5,018,053	)
Repayment of junior subordinated debentures			—				(4,124,000	)
Cash paid for dividends and fractional shares			—				(2,110,877	)
Proceeds from stock options exercised			—				44,024
Excess tax benefit from stock-based compensation expense			—				1,563
Repurchase of common stock			(1,340	)			(14,455	)
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES			(12,418,715	)			120,104,615
NET INCREASE IN CASH AND CASH EQUIVALENTS			50,831,107				59,308,330
CASH AND CASH EQUIVALENTS, beginning of period			182,479,040				92,223,800
CASH AND CASH EQUIVALENTS, end of period		$	233,310,147			$	151,532,130
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid in cash		$	17,130,579			$	18,056,953
Taxes paid in cash			—				2,200,000
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Change in unrealized loss on available-for-sale securities, net of taxes		$	231,458			$	(77,530	)
Change in fair value of interest rate swap, net of taxes			—				(12,739	)
Transfer of loans to other real estate owned			11,030,893				7,047,571

See accompanying notes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The interim consolidated financial statements include the accounts of Columbia Bancorp (“Columbia” or the “Company”), an Oregon corporation and a registered bank holding company, and its wholly-owned subsidiary Columbia River Bank (“CRB” or the “Bank”), after elimination of intercompany transactions and balances. CRB is an Oregon state-chartered bank, headquartered in The Dalles, Oregon. Substantially all activity of Columbia is conducted through its subsidiary bank, CRB.

The interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. Columbia has traditionally only provided a complete financial statement on an annual basis, in Form 10-K. The financial information included in this interim report has been prepared by management. Columbia’s annual report contains audited financial statements. All adjustments, including normal recurring accruals necessary for the fair presentation of results of operations for the interim periods included herein, have been made. The results of operations for the three and nine months ended September 30, 2009, are not necessarily indicative of results to be anticipated for the year ending December 31, 2009.

Certain reclassifications have been made to the 2008 consolidated financial statements to conform to the current year presentations. These reclassifications have no effect on previously reported net income (loss).

In preparing these financial statements, Columbia has evaluated events and transactions for potential recognition or disclosure through November 16, 2009, the date the financial statements were available to be issued. In management’s opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim period.

2. Management’s Estimates and Assumptions

Various elements of Columbia’s accounting policies are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. In particular, management has identified certain policies that are critical to an understanding of the consolidated financial statements due to the judgments, estimates and assumptions inherent in those policies. These policies and judgments, estimates and assumptions are described in greater detail in the notes to the consolidated financial statements included in Columbia’s 2008 annual report on Form 10-K, filed March 26, 2009.

Management believes the judgments, estimates and assumptions used in the preparation of the consolidated financial statements are appropriate given the factual circumstances at the time. However, given the sensitivity of the consolidated financial statements to these critical accounting policies, the use of other judgments, estimates and assumptions could result in material differences in the results of operations or financial conditions.

3. Regulatory Order and Management’s Plan

As disclosed in Columbia’s 2008 annual report on Form 10-K, on February 9, 2009, the Bank stipulated to the issuance of a cease and desist order (the “Order”) against the Bank by the Federal Deposit Insurance Corporation (“FDIC”) and the Oregon Department of Consumer and Business Services, Division of Finance and Corporate Securities (“DFCS”), based on certain findings from an examination of the Bank concluded in September 2008.

Material provisions of the Order were as follows:

	•		Retain qualified management and notify FDIC in writing when the Bank proposes to add any individual to its board of directors or to employ any new senior executive officer.
	•		Increase capital and maintain Tier 1 leverage ratio and total risk-based capital ratio of 10%.
	•		Increase allowance for loan losses by $25 million (recognized in quarter ended September 30, 2008).
	•		Adapt policy for estimating allowance for loan loss policy to address current state of local and regional economy, particularly in the real estate sector.
	•		Eliminate all loans classified as “loss” and one-half of loans classified as “substandard” as of September 2008 exam date; reduce “substandard” and “doubtful” loans to 75% of capital.
	•		Not extend additional credit to borrowers whose loans have been charged-off or classified as “loss” and is uncollected.
	•		Develop written plan for reduction and collection of delinquent loans.
	•		Develop written plan for systematically reducing commercial real estate loans.
	•		Develop written three year strategic plan, including specific goals for loans, deposits and investment securities.
	•		Formulate and implement a written profit plan to improve and sustain earnings.
	•		Enhance written liquidity and funds management policy, including provisions to reduce reliance on non-core funding sources.
	•		Develop policies and plans for maintaining liquid assets at 15% of total assets, including ongoing monitoring of liquidity.
	•		Submit quarterly progress reports to FDIC and DFCS detailing actions to comply with the Order.

As of September 30, 2009 and through the date of this report, requirements related to increasing the Bank’s Tier 1 leverage ratio and total risk-based capital ratio to 10% have not been met. As of September 30, 2009, the Bank’s Tier 1 leverage ratio was 2.07% and its total risk-based capital ratio was 4.05%, resulting in classification of the Bank as “significantly undercapitalized” by regulatory standards. The required improvement of capital levels is the most significant provision of the Order that has not been complied with to date. Because capital raising in the current economic environment is very limited, it is uncertain whether the Bank will be able to increase its capital to required levels. In addition, due to continued deterioration in the Bank’s asset quality and the resulting impact on capital, reductions to classified loan levels have been insufficient to comply with the provisions of the Order. The Bank believes it has materially complied with the remaining provisions of the Order.

The economic environment in our market areas and the duration of the downturn in the real estate market will continue to have a significant impact on the implementation of the Bank’s business plans. While the Company plans to continue its efforts to aggressively resolve non-performing assets, reduce expenses and improve net interest margin, it is unlikely such efforts will meet the Order’s requirements for capital levels without a significant infusion of capital from a third party. In this regard, the Company is aggressively pursuing and evaluating opportunities to raise capital.

If the Bank’s tangible equity as a percentage of total assets falls below 2.00%, the Bank would be categorized as “critically undercapitalized” for regulatory capital purposes. The classification would subject the Bank to the following limitations: (i) prohibit the Bank from paying any bonus to a senior executive officer or providing compensation to a senior executive officer at a rate exceeding the officer’s average rate of compensation (excluding bonuses, stock options and profit-sharing) during the 12 months preceding the month in which the Bank became undercapitalized, without prior written approval from the FDIC; (ii) require the FDIC to impose one or more of the following on the Bank: (A) require a sale of Bank shares or obligations of the Bank sufficient to return the Bank to adequately capitalized status; (B) if grounds exist for the appointment of a receiver or conservator for the Bank, require the Bank to be acquired or merged with another institution; (C) impose additional restrictions on transactions with affiliates beyond the normal restrictions applicable to all banks; (D) restrict interest paid on deposits to prevailing rates in the Bank’s area as determined by the FDIC; (E) impose more stringent growth restrictions than those discussed in the immediately preceding paragraph, or require the Bank to reduce its total assets; (F) require the Bank to alter, reduce or terminate any activities the FDIC determines pose excessive risk to the Bank; (G) order a new election of Bank directors; (H) require the Bank to dismiss any senior executive officer or director who held office for more than 180 days before the Bank became undercapitalized; (I) require the Bank to employ “qualified” senior executive officers; (J) prohibit the Bank from accepting, renewing or rolling over deposits from correspondent institutions; (K) prohibit the Corporation from making capital distributions without Federal Reserve Board approval; (L) require the Corporation to divest the Bank if the regulators determine that the divestiture would improve the Bank’s financial condition and future prospects; and (M) require the Bank to take any other action that the FDIC determines will better carry out the purposes of the statute requiring the imposition of one or more of the restrictions described in (A)-(L) above; and (iii) requiring prior regulatory approval for material transactions outside the usual course of business, extending credit for a highly leveraged transactions, amending the Bank’s charter or bylaws, making a material change to accounting methods, paying excessive compensate on or bonuses, and paying interest on new or renewed liabilities at a rate that would increase the Bank’s weighted average cost of funds to a level significantly exceeding the prevailing rates on interest on deposits in the Bank’s normal market areas.

There are no assurances that plans to achieve objectives set forth in the Order will successfully improve the Bank’s results of operation or financial condition or result in the termination of the Order from the FDIC and the DFCS. In addition, failure to increase capital levels consistent with the requirements of the Order could result in further enforcement actions by the FDIC and/or DFCS or the placing of the Bank into conservatorship or receivership. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future, and do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets, and the amounts or classification of liabilities that may result from the outcome of any regulatory action, which would affect the Company’s ability to continue as a going concern.

4. Investment Securities

The amortized cost and estimated fair values of investment securities as of September 30, 2009 and December 31, 2008 were as follows:

						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
September 30, 2009		Cost				Gains				Losses				Value
Debt securities available-for-sale:
Mortgage-backed securities		$	13,236,576			$	423,315			$	—			$	13,659,891
State bonds			1,972,235				9,065				—				1,981,300
Obligations of U.S. government agencies			12,500,000				133,840				—				12,633,840
		$	27,708,811			$	566,220			$	—			$	28,275,031
Equity securities available-for-sale		$	1,772,833			$	32,375			$	(43,125	)		$	1,762,083
Debt securities held-to-maturity:
Mortgage-backed securities		$	1,191,817			$	58,599			$	—			$	1,250,416
Municipal securities			4,027,870				146,167				(12,828	)			4,161,209
		$	5,219,687			$	204,766			$	(12,828	)		$	5,411,625

						Gross				Gross				Estimated
		Amortized				Unrealized				Unrealized				Fair
December 31, 2008		Cost				Gains				Losses				Value
Debt securities available-for-sale:
U.S. Treasuries		$	8,995,450			$	—			$	—			$	8,995,450
Obligations of U.S. government agencies			9,996,379				226,267				—				10,222,646
		$	18,991,829			$	226,267			$	—			$	19,218,096
Equity securities available-for-sale		$	1,723,766			$	—			$	(50,357	)		$	1,673,409
Debt securities held-to-maturity:
Mortgage-backed securities		$	1,556,394			$	24,959			$	—			$	1,581,353
Municipal securities			6,574,003				141,921				(12,927	)			6,702,997
		$	8,130,397			$	166,880			$	(12,927	)		$	8,284,350

Restricted equity securities consisted of the following as of September 30, 2009 and December 31, 2008:

		September 30,				December 31,
		2009				2008
Federal Home Loan Bank of Seattle stock		$	3,045,100			$	3,045,100
Federal Agriculture Mortgage Corporation stock			9,400				9,400
		$	3,054,500			$	3,054,500

The following table presents the gross unrealized losses and fair value of investment securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of September 30, 2009:

		Less than 12 months								12 months or more								Total
						Unrealized								Unrealized								Unrealized
		Fair Value				Losses				Fair Value				Losses				Fair Value				Losses
Municipal securities		$	—			$	—			$	428,060			$	(12,828	)		$	428,060			$	(12,828	)
Equity securities			—				—				31,875				(43,125	)			31,875				(43,125	)
		$	—			$	—			$	459,935			$	(55,953	)		$	459,935			$	(55,953	)

Fair values are compared to current carrying values to determine whether a security is in a gain or loss position. Due to changes in market interest rates since the purchase date, one municipal debt security was in an unrealized loss position for 12 months or more as of September 30, 2009.

Unrealized losses on the municipal security resulted from interest rate increases subsequent to the purchase of the security. Management monitors published credit ratings of this security and no material adverse ratings changes has occurred in the portfolio from the purchase date to September 30, 2009. As of September 30, 2009, Columbia did not intend to sell the municipal security in an unrealized loss position and based on cash flow projections and forecasts, Columbia believes it is more likely than not that it will not be required to sell said security before recovery of the security to its amortized cost basis. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because Columbia has the ability and intent to hold this investment until a market price recovery or to maturity, this security is not considered other-than-temporarily impaired.

Equity securities in an unrealized loss position in excess of 12 months consisted of an investment in common shares of a financial institution. The financial institution is a small, de novo institution in the Pacific Northwest. Unrealized losses on the common stock resulted from a devaluation of trading value of the common stock on the open market, which Management believes is a direct result of the current nation-wide financial crisis. Columbia presently has no intent to sell this security and believes that it is not more likely than not that it will be required to sell the security before market price recovery. This security is not considered other-than-temporarily impaired.

There were no gross realized gains from the sale or call of investment securities for the three months ended September 30, 2009. Gross realized gains from the sale or call of investment securities were $15,587 for the three months ended September 30, 2008. There were no gross realized losses from the sale or call of investment securities for the three months ended September 30, 2009 and 2008. Gross realized gains from the sale or call of investment securities were $4,065 and $18,087, respectively, for the nine months ended September 30, 2009 and 2008, respectively. Gross realized losses from the sale or call of investment securities were $2,318 and $376, respectively, for the nine months ended September 30, 2009 and 2008.

The amortized cost and estimated fair value of investment securities as of September 30, 2009, by contractual maturity, are presented below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

		Available-for-Sale								Held-to-Maturity
						Estimated								Estimated
		Amortized				Fair				Amortized				Fair
		Cost				Value				Cost				Value
Due in one year or less		$	10,934,436			$	11,282,296			$	1,121,012			$	1,142,871
Due in one year through five years			4,302,140				4,397,595				3,521,231				3,694,046
Due in five years through ten years			10,500,000				10,613,840				564,029				559,885
Due after ten years			1,972,235				1,981,300				13,415				14,823
Debt securities			27,708,811				28,275,031				5,219,687				5,411,625
Equity securities			1,772,833				1,762,083				—				—
		$	29,481,644			$	30,037,114			$	5,219,687			$	5,411,625

For the purpose of the maturity table, mortgage-backed securities, which are not due at a single maturity date, have been allocated over maturity groupings based on the weighted-average contractual maturities of underlying collateral. Mortgage-backed securities may mature earlier than their weighted-average contractual maturities because of principal prepayments.

As of September 30, 2009 and December 31, 2008, investment securities with an amortized cost of $21.43 million and $26.53 million, respectively, were pledged to secure notes payable at the Federal Home Loan Bank of Seattle (“FHLB”), the Federal Reserve Bank and public or other deposits, as required by law. As of September 30, 2009, the Bank held $3.05 million of common stock in the FHLB. This security is reported at par value, which represents the Bank’s cost. The FHLB has reported a risk-based capital deficiency under the regulations of the Federal Housing Finance Agency (the “FHFA”), its primary regulator. As a result, the FHLB has stopped paying a dividend and stated that it would suspend the repurchase and redemption of outstanding common stock until its retained earnings deficiency was reclaimed. The Bank monitors this issue on a consistent basis.

The FHLB has communicated to the Bank that it believes the calculation of risk-based capital under the current rules of the FHFA significantly overstates the market and credit risk of the FHLB’s private-label mortgage-backed securities in the current market environment and that it has enough capital to cover the risks reflected in the FHLB’s balance sheet. As a result, the Bank has not recorded an other-than-temporary impairment on its investment in FHLB stock. However, continued deterioration in the FHLB’s financial position may result in impairment in the value of those securities, or the requirement that the Bank contribute additional funds to recapitalize the FHLB, or reduce the Bank’s ability to borrow funds from the FHLB, which may impair the Bank’s ability to meet liquidity demands.

5. Loans and Allowance for Loan Losses

Loans are stated at the amount of unpaid principal, reduced by an allowance for loan losses and by unearned loan fees, net of deferred loan costs. Interest on loans is calculated using the simple-interest method on daily balances of the principal amount outstanding. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield over the life of the related loan.

The loan portfolio consisted of the following as of September 30, 2009 and December 31, 2008:

		September 30,				December 31,
		2009				2008
Real estate secured loans:
Commercial property		$	238,086,240			$	250,888,198
Farmland			46,162,503				65,474,029
Construction			181,553,408				253,682,700
Residential			40,153,564				44,208,284
Home equity lines			25,893,702				29,230,366
			531,849,417				643,483,577
Commercial			109,509,961				127,597,505
Agriculture			77,178,209				74,630,411
Consumer			13,556,200				14,414,445
Other loans			4,119,401				3,878,101
			736,213,188				864,004,039
Less allowance for loan losses			(19,606,951	)			(24,492,350	)
Less unearned loan fees			(583,018	)			(562,175	)
Loans, net of allowance for loan losses and unearned loan fees		$	716,023,219			$	838,949,514

The Bank does not accrue interest on loans for which payment in full of principal and interest is not expected, or for which payment of principal or interest has been in default 90 days or more, unless the loan is well-secured and in the process of collection. As of September 30, 2009, no loans in default 90 days or more were still accruing interest. In certain instances, the Bank may place on non-accrual status loans that are not yet past due 90 days or more, but have risk factors indicating full collection of principal and interest is not expected.

Non-accrual loans for which payment in full of principal and interest is not expected, or for which payment of principal or interest has been in default 90 days or more, unless in process of collection, are considered impaired loans. Each impaired loan is carried at the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s market price, or the net realizable value of collateral if the loan is collateral-dependent. When a loan is placed on non-accrual status, all unpaid accrued interest is reversed. Cash payments received on non-accrual loans are applied to the principal balance of the loan. Large groups of smaller balance, homogeneous loans may be collectively evaluated for impairment. Accordingly, the Bank may not separately identify individual consumer and residential loans for evaluation of impairment.

Loans on non-accrual status as of September 30, 2009 and December 31, 2008, were $103.22 million and $92.35 million, respectively. Impaired loans as of September 30, 2009 and December 31, 2008, were $107.93 million and $92.41 million, respectively.

The allowance for loan losses represents management’s best estimate of probable losses associated with the Bank’s loan portfolio and deposit account overdrafts. The estimate is based on evaluations of loan collectability and prior loan loss experience. The appropriateness of the recorded allowance is evaluated each quarter in a manner consistent with the Interagency Policy Statement issued by the Federal Financial Institutions Examination Council and United States Generally Accepted Accounting Principles (“GAAP”). In determining the level of the allowance, the Bank estimates losses inherent in all loans and evaluates impaired loans to determine the amount, if any, necessary for a specific reserve. Loans not evaluated for impairment and not requiring a specific allocation are subject to a general allocation based on historical loss rates and other subjective factors. An important element in determining the adequacy of the allowance is an analysis of loans by loan risk rating categories. The Bank regularly reviews the loan portfolio to evaluate the accuracy of risk ratings throughout the life of loans.

The methodology for estimating inherent losses in the portfolio takes into consideration all loans in the portfolio, segmented by industry type and risk rating, and utilizes a number of subjective factors in addition to historical loss rates. Subjective factors include: the economic outlook on both a national and regional level; the volume and severity of non-performing loans; the nature and value of collateral securing the loans; trends in loan growth; concentrations in borrowers, industries and geographic regions; and competitive issues that impact loan underwriting.

Increases to the allowance occur when amounts are expensed to the provision for loan losses or when there is a recovery for a loan or overdrafts previously charged-off. Decreases occur when loans are charged-off or for overdrafts that are deemed uncollectible. The Bank determines the appropriateness and amount of these charges by assessing the risk potential in the portfolio on an ongoing basis. Loan charge-offs do not necessarily result in the recognition of additional expense, except in cases where the amount of a loan charge-off exceeds the loss amount previously provided for in the allowance for loan losses and additional provisions are expensed for the difference.

The liability for off-balance-sheet financial instruments represents the Bank’s estimate of probable losses associated with off-balance-sheet financial instruments, which consist of commitments to extend credit, and commercial and standby letters of credit. The liability is included as a component of “Accrued interest payable and other liabilities” on the balance sheet.

The adequacy of the liability for credit losses from off-balance-sheet financial instruments are evaluated based upon reviews of individual credit facilities, current economic conditions, the risk characteristics of the various categories of commitments and other relevant factors. The liability is based on estimates, which are evaluated on a regular basis, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.

Various regulatory agencies, as a regular part of their examination process, periodically review the Bank’s allowance for loan losses. Such agencies may require the Bank to recognize additions to the allowance based on their judgment of information available to them at the time of the examinations.

Changes in the allowance for loan losses were as follows for the three and nine months ended September 30, 2009 and 2008:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
BALANCE, beginning of period		$	22,743,182			$	17,099,148			$	24,492,350			$	11,174,199
Provision for loan losses			20,250,000				25,400,000				44,350,000				34,100,000
Loans charged off			(23,499,936	)			(21,423,938	)			(49,618,820	)			(24,368,275	)
Loan recoveries			113,705				71,181				383,421				240,467
Adjustment for credit card sales			—				(219,416	)			—				(219,416	)
BALANCE, end of period		$	19,606,951			$	20,926,975			$	19,606,951			$	20,926,975

6. Other Real Estate Owned

Other real estate owned (“OREO”) represents property acquired through foreclosure or deeds in lieu of foreclosure and is carried at the lower of cost or estimated net realizable value. Net realizable value is determined based on real estate appraisals less estimated selling costs. When property is acquired, any excess of the loan balance over its estimated net realizable value is charged to the allowance for loan losses. Subsequent write-downs to the net realizable value, if any, or any disposition gains or losses are recognized in current earnings. As of September 30, 2009 and December 31, 2008, OREO totaled $15.25 million and $9.62 million, respectively.

7. Federal Funds Purchased and Federal Home Loan Bank Advances

The Bank does not maintain any federal funds lines of credit, presently or, as of September 30, 2009.

The Bank is a member of the Federal Home Loan Bank (“FHLB”) of Seattle and has entered into credit arrangements with the FHLB under which authorized borrowings are collateralized by the Bank’s FHLB stock as well as loans or other instruments which may be pledged. Interest rates on outstanding borrowings range from 2.72% to 5.48%. As of September 30, 2009, maximum available FHLB borrowings were $41.12 million, of which $22.72 million was available based on outstanding borrowings and collateral balances.

FHLB borrowings outstanding as of September 30, 2009 and December 31, 2008 were as follows:

September 30, 2009										December 31, 2008
						Weighted-												Weighted-
				Maturity		Average								Maturity				Average
Amount				Year		Interest Rate				Amount				Year				Interest Rate
$	—			2009			—	%		$	18,151,613				2009				2.94	%
	18,000,000			2010			2.80	%			18,000,000				2010				2.80	%
	400,406			2013			5.47	%			461,117				2013				5.47	%
$	18,400,406						2.86	%		$	36,612,730								2.91	%

The Bank has a secured credit arrangement with the Federal Reserve Bank of San Francisco (“FRB”) under which authorized borrowings are collateralized by loans and other instruments which may be pledged. Borrowings outstanding under this agreement bear interest at 1.00% as of September 30, 2009. As of September 30, 2009, there were no outstanding borrowings under this agreement and maximum available borrowings were limited to $63.35 million, based on collateral balances.

8. Loss Per Share

Basic loss per share is computed by dividing net loss available to shareholders by the weighted-average number of common shares outstanding during the period, after giving retroactive effect to stock dividends and splits. Diluted loss per share is computed similar to basic loss per share except the denominator is increased to include the number of additional common shares that would have been outstanding if dilutive potential common shares had been issued, unless the impact is anti-dilutive. Due to Columbia’s year to date net loss position, potentially dilutive common shares under the treasury stock method have been excluded, including un-exercised stock options, totaling 280,599 and 289,325 weighted average shares for the three and nine months ended September 30, 2009, respectively.

9. Income Tax

During the three months ended June 30, 2009, Columbia recorded a deferred tax asset (“DTA”) valuation allowance of $12.00 million. Under GAAP, management is required to assess whether it is more likely than not that some or all of the company’s DTA will not be realized. The asset must be written down to the extent that tax rules may potentially limit the ultimate realization of the DTA (generally through a “carryback” to prior year’s taxable income). While the benefit of the DTA may still be realized in the future, accounting rules limit the extent to which a company may utilize projections of future income to support current DTAs. For the three months ended September 30, 2009, an additional $10.34 million was added to the established valuation allowance for changes in the deferred tax asset position.

A company is required to project what its effective tax rate will be for the full year (including the impact of any valuation allowances for temporary differences originating during the year). This annualized effective tax rate is then applied to each interim quarter during the year. The change in valuation allowance is attributable to deferred tax assets (including DTAs related to the allowance for loan losses, valuation adjustments to OREO properties and purchased state tax credits) that originated in 2009. Therefore, management determined that it is appropriate to adjust the estimated annual effective tax rate for the year.

In November 2009, the U.S. Congress passed, and the President signed into law, a bill that would extend the allowable period of carry-back for net operating losses from two years to five years for losses incurred in either 2008 or 2009 (H.R. 3548). As a result and based on net losses for the nine months ended September 30, 2009, Columbia expects to recognize approximately $5.00 million of income tax benefit during the three months ended December 31, 2009. The tax benefit would be recorded as income thereby increasing capital by an equal amount. The amount of additional benefit will vary based on the final amount of net operating loss for 2009.

10. Fair Value of Financial Instruments and Fair Value Measurements

The following table presents estimates of fair value and the related carrying amounts of Columbia’s financial instruments:

		September 30, 2009								December 31, 2008
						Estimated								Estimated
		Carrying				Fair				Carrying				Fair
(dollars in thousands)		Amount				Value				Amount				Value
Financial assets:
Cash and cash equivalents		$	233,310			$	233,310			$	182,479			$	182,479
Investment securities available-for-sale			30,037				30,037				20,892				20,892
Investment securities held-to-maturity			5,220				5,412				8,130				8,284
Restricted equity securities			3,055				3,055				3,055				3,055
Loans, net of allowance for loan losses and unearned loan fees			716,023				681,204				838,950				790,467
Financial liabilities:
Demand and savings deposits		$	519,189			$	519,189			$	518,040			$	518,040
Time certificates			490,802				497,870				486,157				495,880
FHLB Advances			18,400				18,670				36,613				37,037

GAAP provides the following hierarchy of valuation techniques:

•		Level 1 —		Quoted unadjusted prices in active markets for identical assets or liabilities
•		Level 2 —		Significant observable inputs other than quoted prices in Level 1, such as quoted prices in active markets for similar assets or liabilities, or quoted prices for identical assets or liabilities in markets that are not active
•		Level 3 —		Significant unobservable inputs based on the company’s own assumptions about the assumptions that market participants would use in pricing the asset or liability

Certain assets and liabilities are measured at fair value on a recurring or non-recurring basis. Assets and liabilities measured at fair value on a recurring basis are initially measured at fair value and then re-measured at fair value at each financial statement reporting date. Assets and liabilities measured at fair value on a non-recurring basis result from write-downs due to impairment or lower-of-cost-or-market accounting on assets or liabilities not initially measured at fair value.

The following table presents financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2009:

		Fair Value				Level 1				Level 2				Level 3
		September 30, 2009				Inputs				Inputs				Inputs
Debt securities, available-for-sale		$	28,275,031			$	—			$	28,275,031			$	—
Equity securities, available-for-sale			1,762,083				1,762,083				—				—
Total assets measured at fair value on recurring basis		$	30,037,114			$	1,762,083			$	28,275,031			$	—

The following table presents assets and liabilities measured at fair value on a non-recurring basis as of September 30, 2009:

		Fair Value				Level 1				Level 2				Level 3
		September 30, 2009				Inputs				Inputs				Inputs
Other real estate owned		$	15,245,699			$	—			$	—			$	15,245,699
Collateral-dependent impaired loans measured at fair value of loans’ collateral			86,805,261				—				—				86,805,261
Total assets measured at fair value on non-recurring basis		$	102,050,960			$	—			$	—			$	102,050,960

During the three and nine months ended September 30, 2009, impairments charges of $525,760 and $1.07 million, respectively, were recognized to adjust the carrying value of OREO properties to updated fair values. Specific allowances to adjust collateral-dependent impaired loans to updated fair values totaled $18.46 million and $38.61 million, respectively, for the three and nine months ended September 30, 2009.

As of September 30, 2009, certain impaired loans were not considered totally collateral-dependent because borrowers were still making payments from normal cash flow sources outside of the liquidation of the primary and secondary collateral base. These accounts generally were real estate secured loans where expected cash flow projections reflected an ability to make payments, or borrowers and credits whose circumstances were substantially similar.

The following table reconciles collateral-dependent impaired loans to total impaired loans as of September 30, 2009:

Carrying value of collateral-dependent impaired loans measured at fair value of loans’ collateral		$	86,805,261
Fair market value adjustment			4,715,573
Original book value of collateral-dependent loans			91,520,834
Impaired loans carried at historical cost:
Commercial			1,342,083
Real Estate			10,546,845
Agriculture			1,388,945
Other			3,130,885
Total impaired loans		$	107,929,592

The following methods and assumptions were used by Columbia in estimating fair values of financial instruments as disclosed herein:

Held-to-maturity and available-for-sale debt securities, equity securities and restricted equity securities — Fair values for investment securities, excluding restricted equity securities, are based on quoted market prices in active markets. If quoted prices are not available, fair value is based on an independent vendor pricing models, which utilizes quoted prices of similar securities, discounted cash flows, market interest rate curves, credit spreads, and estimated pre-payment rates, as applicable. Changes in the fair value of available-for-sale securities are recorded in other comprehensive income. The carrying value of restricted equity securities approximates fair value.

Loans receivable — The carrying value of variable rate loans that re-price frequently and have no significant change in credit risk approximates fair value. Fair values for certain mortgage loans (for example, one-to-four family residential loans) and other consumer loans are based on quoted market prices of similar loans sold in conjunction with securitization transactions, adjusted for differences in loan characteristics. Fair values for fixed-rate commercial real estate and commercial loans are estimated using a present value of future expected cash flow methodology which includes, among other factors, estimated liquidity discounts. The carrying value of impaired loans approximates fair value.

Other real estate owned — Fair values of OREO are based on a combination of independent appraisals performed on the individual properties within OREO, internal valuations performed by on-staff certified appraisers and management’s evaluation of expected sales prices and selling costs. When property is acquired, any excess of the loan balance over its estimated net realizable value is charged to the allowance for loan losses. Subsequent analyses of fair market values are performed on a regular basis, and carrying values of properties are written down as necessary.

Collateral-dependent impaired loans — Collateral-dependent impaired loans are measured at the fair value of the underlying collateral less estimated costs to sell. Collateral values are based on property appraisals and management’s judgment. Adjustments to reflect the fair value of collateral-dependent impaired loans are a component in determining an appropriate allowance for loan losses. As a result, adjustments to the fair value of collateral-dependent impaired loans may result in increases or decreases to the provision for loan losses recorded in current earnings. The associated increase in the allowance for loan losses is reflected in the provision for loan losses in the income statement. Collateral-dependent loans do not necessarily include all non-accrual notes, as certain loans classified as non-accrual notes may have other sources of cash flow excluding the liquidation of collateral. These accounts are typically agricultural credits where projected crop sales and expected cash flow projections reflect an ability to make payments or borrowers whose circumstances were substantially similar.

Deposit liabilities — The fair value of deposits with no stated maturity is equal to the amount payable on demand. The fair value of time certificates of deposit is estimated using a present value of future cash flow methodology. Present value is measured using current market interest rates and contractual cash flows.

Short-term borrowings — The carrying value of federal funds purchased, borrowings under repurchase agreements and other short-term borrowings maturing within 90 days approximates fair value. Fair values of other borrowings are estimated using discounted cash flow analyses based on the Bank’s current incremental borrowing rates for similar types of borrowing arrangements.

Long-term debt — The fair value of Columbia’s long-term debt is estimated using a discounted cash flow analysis based on Columbia’s current incremental borrowing rate for similar types of borrowing arrangements.

Off-balance-sheet instruments — The Bank’s off-balance-sheet instruments include unfunded commitments to extend credit and standby and performance letters of credit. The fair value of these instruments is not considered practicable to estimate because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs.

Each of the aforementioned methods and assumptions are unchanged from December 31, 2008 to September 30, 2009.

11. Reclassifications

During the period, Columbia reclassified amounts from other non-interest income and non-interest expense into payment systems revenue. Payment systems revenue includes interchange income from credit and debit cards, annual fees, and other transaction and account management fees. Interchange income is a fee paid by a merchant bank to the card-issuing bank through the interchange network. Interchange fees are set by the credit card associations and are based on cardholder purchase volumes. Columbia records interchange income as transactions occur. Transaction and account management fees are recognized as transactions occur or services are provided. Volume-related payments to partners and credit card associations and expenses for rewards programs are also recorded within payment systems revenue. Payments to partners and expenses related to rewards programs are recorded when earned by the partner or customer.

12. Recent Accounting Pronouncements

In April 2009, the FASB issued the following three FASB Staff Positions (“FSP”) to provide additional guidance and enhance disclosures regarding fair value measurements and impairment of securities:

FSP FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” provides additional guidance for estimating fair value in accordance with SFAS No. 157 when the volume and level of activity for the asset or liability have decreased significantly. FSP FAS 157-4 also provides guidance on identifying circumstances that indicate a transaction is not orderly. The provisions of FSP FAS 157-4 are effective for Columbia’s current interim period. Adoption of FSP FAS 157-4 did not have a material impact on Columbia’s consolidated financial statements.

FSP FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” requires disclosures about fair value of financial instruments in interim reporting periods of publicly traded companies that were previously only required to be disclosed in annual financial statements. The provisions of FSP FAS 107-1 and APB 28-1 are effective for Columbia’s current interim period and the required disclosures have been added to the notes to the interim financial statements.

FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” amends current other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. This FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The provisions of FSP FAS 115-2 and FAS 124-2 are effective for Columbia’s current interim period. The adoption of FSP FAS 115-2 and FAS 124-2 did not have a material impact on Columbia’s consolidated financial statements.

In May 2009, FASB issued SFAS No. 165, “Subsequent Events.” SFAS No. 165 established general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It should not result in significant changes in the subsequent events that an entity reports, either through recognition or disclosure in its financial statements. The statement requires disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. We adopted the provisions of SFAS No. 165 for the interim period ended June 30, 2009, and the impact of adoption did not have a material impact on Columbia’s consolidated financial statements.

In June 2008, the FASB issued FSP EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities.” Under this FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to dividends will be considered to be a separate class of common stock and will be included in the basic EPS calculation using the two-class method that is described in FASB Statement No. 128, Earnings per Share. FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008 and interim periods within those years. The adoption of FSB EITF 03-6-1 did not have a material impact on Columbia’s consolidated financial statements.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles — a replacement of FASB Statement No. 162,”. SFAS 168 establishes the FASB Accounting Standards Codification (“Codification”) as the source of authoritative GAAP for nongovernmental entities. The Codification does not change GAAP. Instead, it takes the thousands of individual pronouncements that previously comprised GAAP and reorganizes them into approximately 90 accounting Topics, and displays all Topics using a consistent structure. Contents in each Topic are further organized first by Subtopic, then Section and finally Paragraph. The Paragraph level is the only level that contains substantive content. Citing particular content in the

Codification involves specifying the unique numeric path to the content through the Topic, Subtopic, Section and Paragraph structure. FASB suggests that all citations begin with “FASB ASC,” where ASC stands for Accounting Standards Codification. Changes to the ASC subsequent to June 30, 2009 are referred to as Accounting Standards Updates (“ASU”).

In conjunction with the issuance of SFAS 168, the FASB also issued its first Accounting Standards Update No. 2009-1, “Topic 105 —Generally Accepted Accounting Principles” which includes SFAS 168 in its entirety as a transition to the ASC. ASU 2009-1 is effective for interim and annual periods ending after September 15, 2009 and will not have an impact on Columbia’s consolidated financial statements but will change the referencing system for accounting standards. Certain of the following pronouncements were issued prior to the issuance of the ASC and adoption of the ASUs. For such pronouncements, citations to the applicable Codification by Topic, Subtopic and Section are provided where applicable in addition to the original standard type and number.

The FASB issued ASU 2009—05, “Fair Value Measurements and Disclosures (Topic 820) — Measuring Liabilities at Fair Value” in August, 2009 to provide guidance when estimating the fair value of a liability. When a quoted price in an active market for the identical liability is not available, fair value should be measured using (a) the quoted price of an identical liability when traded as an asset; (b) quoted prices for similar liabilities or similar liabilities when traded as assets; or (c) another valuation technique consistent with the principles of Topic 820 such as an income approach or a market approach. If a restriction exists that prevents the transfer of the liability, a separate adjustment related to the restriction is not required when estimating fair value. The ASU was effective October 1, 2009 for Columbia and will have no impact on financial position or operations.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on Columbia’s consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains various forward-looking statements that are intended to be covered by the safe harbor provided by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements include statements about our present plans and intentions, about our strategy, growth, and deployment of resources, and about our expectations for future financial performance. Forward-looking statements sometimes are accompanied by prospective language, including words like “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “continue,” “plans,” “intends,” or other similar terminology.

Because forward-looking statements are, in part, an attempt to project future events and explain current plans, they are subject to various risks and uncertainties, which could cause our actions and our financial and operational results to differ materially from those projected in forward-looking statements. These risks and uncertainties include, without limitation, the factors discussed in Part II — Section 1A — “Risk Factors.”

Information presented in this report is accurate as of the date the report is filed with the SEC. We do not undertake any duty to update our forward-looking statements or the factors that may cause us to deviate from them, except as required by law.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as disclosures included elsewhere in this Form 10-Q, are based upon 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 losses, impairment of intangible assets, 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.

Allowance for Loan Losses

Our allowance for loan losses represents our estimate of probable losses associated with our loan portfolio and deposit account overdrafts as of the reporting date. Management evaluates the amount of our allowance each quarter in a manner consistent with the Interagency Policy Statement issued by the Federal Financial Institutions Examination Council (FFIEC) and with GAAP. In determining the level of the allowance, we estimate losses inherent in all loans and evaluate individual classified and non-performing loans to determine the amount, if any, necessary for a specific reserve. Certain loans have been stress tested for potential impairment whether or not currently performing according to terms; these loans may require a specific allocation based on historical loss rates and other subjective factors, to the extent that impairment is not identified. Loans not evaluated for impairment and not requiring a specific allocation because the loan is determined not to be impaired are subject to a general allocation based on historical loss rates and other subjective factors. An important element in determining the adequacy of the allowance is an analysis of loans by loan risk rating categories. We regularly review our loan portfolio to evaluate the accuracy of risk ratings throughout the life of loans.

Our methodology for estimating inherent losses in the portfolio takes into consideration all loans in our portfolio, segmented by industry type and risk rating, and utilizes a number of subjective factors in addition to historical loss rates. Subjective factors include: the economic outlook on both a national and regional level; the volume and severity of non-performing loans; the nature, value and estimated liquidity of collateral securing the loans; trends in loan growth; concentrations with individual and interrelated borrowers, industries and geographic regions; and competitive issues that impact loan underwriting.

Increases to the allowance occur when we expense amounts to the provision for loan losses or when we recover previously charged-off loans or overdrafts. We reduce the allowance when we charge-off loans or overdrafts that are deemed uncollectible, although we do not necessarily cease collection activities when a loan is charged-off. We determine the appropriateness and amount of these charges by assessing the risk potential in our portfolio on an ongoing basis. Loan charge-offs do not result in the recognition of additional expense, unless the amount of a loan charge-off exceeds the loss amount previously provided for in the allowance for loan losses.

On loans of either a larger size or troubled industry classification, we also may perform an individual risk analysis on specific performing loans. This individual analysis may include factors such as an updated review of the value of the collateral securing the loan, the geographic location of the loan, the expected or potential cash flows from the borrowers operations, the relative strength and liquidity of the guarantors and the past payment performance on the loan. If existing, collateral appraisals or evaluations are, in our opinion, dated or stale, we will typically obtain new appraisals or evaluations and these new values will be used to evaluate the risk of the loan and resulting provision for loan losses. Furthermore, in cases where the cash flow or liquidity of the borrower has been eliminated or there is an absence of guarantor strength, we may deem the loan to be totally collateral dependent. In such cases, if the analysis of the net realizable value of the loan collateral is determined to be deficient, that deficiency is charged-off.

The liability for off-balance-sheet financial instruments represents our best estimate of probable losses associated with off-balance-sheet financial instruments, which consist of commitments to extend credit, commitments under credit card arrangements, and commercial and standby letters of credit. The liability is included as a component of “Accrued interest payable and other liabilities” on our balance sheet.

We evaluate the adequacy of the liability for credit losses from off-balance-sheet financial instruments based upon reviews of individual credit facilities, current economic conditions, the risk characteristics of the various categories of commitments and other relevant factors. The liability is based on estimates, which are evaluated on a regular basis, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known.

Approximately 72%, or $531.85 million, of our loan portfolio is secured by real estate collateral. Within the total balance of loans secured by real estate, certain loans are designated as construction credits. Of these, $59.10 million is secured by commercial property under construction (office buildings, warehouse, commercial lot pads, etc.) and $122.45 million is secured by residential property under construction (residential subdivisions, 1-4 family dwellings, homes under construction by developers, etc.). We are actively monitoring residential and commercial real estate values in all of our markets. The residential markets have declined significantly in our Central Oregon and Portland-Vancouver metropolitan markets. Some of our more rural eastern Oregon and Washington markets have remained stable or experienced only minor declines. Although commercial real estate markets are also softening, only Central Oregon has demonstrated significant distress at this time. In addition, due to the downturn in national and regional real estate sales, a number of our residential real estate construction and acquisition and development customers have been unable to sell existing inventories in the normal course of business and the repayment of these loans is now solely dependent on the liquidation of the collateral. Many of the loans of this nature were written down to their estimated fair market value less estimated costs to sell, resulting in significant charge-offs during the year ended December 31, 2008 and nine months ended September 30, 2009. For example, during the nine months ended September 30, 2009, we wrote down $32.63 million of residential construction loans based on appraisal declines or other factors. Write downs of commercial construction projects were less significant, totaling $635,750 during the nine months ended September 30, 2009.

Income Taxes

We estimate tax expense based on the amount of taxes we expect to owe various taxing authorities in the current and future periods for transactions arising during the current period. Accrued and/or refundable income tax represents the net estimated amount due or to be received from taxing authorities. In estimating accrued taxes and refundable taxes, we assess the relative merits and risks of the appropriate tax treatment of transactions taking into account statutory, judicial and regulatory guidance in the context of our tax position.

The determination of our ability to fully utilize our deferred tax assets requires significant judgment, the use of estimates and the interpretation of complex tax laws. During the three month period ended June 30, 2009, we determined that it is not, “more likely than not”, that we would be able to fully recognize a portion of our deferred tax assets. That evaluation is unchanged as of September 30, 2009; therefore, we maintained a valuation allowance to reduce our net deferred tax assets to zero.

OVERVIEW

Columbia Bancorp (“Columbia”) is a bank holding company organized in 1996 under Oregon Law. Columbia’s common stock is traded on the Nasdaq Global Select Market under the symbol “CBBO.” Columbia’s wholly-owned subsidiary, Columbia River Bank (“CRB” or the “Bank”), is an Oregon state-chartered bank, headquartered in The Dalles, Oregon, through which substantially all business is conducted. CRB offers a broad range of services to its customers, primarily small and medium sized businesses and individuals.

We have a network of 21 full-service branches throughout Oregon and Washington. In Oregon, we operate 14 branches. These branches serve the northern and eastern Oregon communities of The Dalles, Hood River, Pendleton and Hermiston, the central Oregon communities of Madras, Redmond, and Bend, and the Willamette Valley communities of McMinnville, Canby and Newberg. In Washington, we operate seven branches. These branches serve the communities of Goldendale, White Salmon, Pasco, Yakima, Sunnyside, Richland and Vancouver.

Strategic Initiatives:

A primary business strategy has been a continuing focus on improving credit quality and resolving non-performing assets. During the third quarter of 2009, we were able to resolve eight of our previously reported properties maintained in other real estate owned, totaling approximately $3.43 million. Over half of these properties were located in the Central Oregon region and the majority of the other properties were located in the Portland/Vancouver metro area. In addition, we have executed contracts for the sale of ten additional properties, representing approximately $3.04 million of our recorded other real estate owned, which are expected to close in the fourth quarter of 2009. While we continued to have additional loans progress to foreclosure during the quarter ended September 30, 2009, we were pleased with increased sales activity, a benefit from a second quarter strategic decision to re-align our Special Asset Team and to engage a dedicated real estate broker responsible for coordinating the marketing efforts of our other real estate owned.

To aid our continued momentum in credit resolution, during the quarter ended September 30, 2009, we added three additional senior Special Asset Team members. This brings our total special asset team to a level of 7 officers and 4 support staff. All of these individuals are seasoned experts in working problem credits to maximize the repayment and recovery of funds. In addition, to improve our efficiency while stemming costs, we have engaged in-house legal counsel to aid in these collection and resolution efforts.

As we reduce our concentrations of real estate construction and development loans, we plan to diversify our lending into other loan categories in both the commercial and consumer sectors. We plan to expand our commercial and industrial lending activity, especially in our core market areas, with a focus on asset-based lending and equipment financing. We also plan to put more emphasis on agricultural lending activities, including production and equipment financing. In addition, we plan to expand lending to professional service firms, including medical professionals, accountants and attorneys. Our lending will continue to be directed towards small to medium-sized businesses located within the regions in which we do business. We believe this lending strategy will help return the company to a sustainable level of growth and earnings.

During the three months ended September 30, 2009, our liquidity ratios continued to improve as we were successful in opening 1,320 new retail deposit accounts and maintaining our retail and wholesale deposit balances, while allowing $31.00 million of brokered certificates of deposit to mature without renewal. As of September 30, 2009, the ratio of liquid assets to total assets improved to 22% from 17% and 16% as of June 30, 2009 and December 31, 2008, respectively. As a result of our improved liquidity position, we began a strategic initiative to deploy excess cash balances into investment securities and investment certificates of deposit at correspondent banks purchased through internet-based listing services.

Financial Overview:

The following table presents an overview of our key financial performance indicators:

Key Financial Performance Indicators:
(dollars in thousands except per share data)

		As of and for the												As of and for the
		Three Months Ended September 30,												Nine Months Ended September 30,
										%												%
		2009				2008				Change				2009				2008				Change
Return on average assets			-8.15	%			-5.01	%							-6.55	%			1.63	%
Return on average equity			-221.61	%			-59.62	%							-119.81	%			-17.47	%
Average equity to average assets			3.68	%			8.40	%							5.47	%			9.33	%
Net interest margin, tax equivalent basis			2.71	%			3.86	%							2.71	%			4.51	%
Efficiency ratio			118.88	%			83.42	%							119.70	%			71.59	%
Net loss		$	(21,908	)		$	(14,091	)			55	%		$	(52,091	)		$	(13,078	)			298	%
Loss per diluted common share		$	(2.18	)		$	(1.41	)			55	%		$	(5.18	)		$	(1.31	)			295	%
Total gross loans (1)														$	736,213			$	924,181				-20	%
Total assets														$	1,057,717			$	1,150,026				-8	%
Deposits														$	1,009,991			$	1,015,068				-1	%
Book value per common share														$	2.31			$	8.75				-74	%
Tangible book value per common share														$	2.31			$	8.02				-71	%

The decrease noted in earnings per diluted share for the three and nine months ended September 30, 2009 was primarily due to an increase in the provision for loan losses, the valuation allowance recorded against deferred tax assets, the effect of net interest margin compression and increases in non-interest expenses related to the increase in FDIC premiums.

Significant items as of and for the three months ended September 30, 2009 were as follows:

	•		Rebalanced assets and liabilities. As a part of our strategic plan to re-balance our assets and liabilities and focus closely upon our asset quality, gross loans decreased by $127.79 million from December 31, 2008. This decline was accomplished in several ways. First we decided to exit certain market sectors and customer relationships. Secondly, loan totals have dropped due to the migration of troubled loans to other real estate owned (“OREO”). Finally, loans have decreased due to charge-offs against our allowance for loan loss. Gross loans as of September 30, 2009 decreased $63.35 million, or 8%, from June 30, 2009 for the same reasons.
	•		Non-performing assets (“NPAs”) of $123.18 million, or 12% of total assets. As of September 30, 2009, non-accrual loans, excluding troubled debt restructures, comprised $103.22 million, or 84%, of NPAs. Troubled debt restructures, which are also on non-accrual status, totaled $4.70 million, or 4%, of NPAs as of September 30, 2009. The remaining balance of NPAs as of September 30, 2009 of $15.25 million, or 12%, was comprised of properties held as OREO. Of the non-accrual loans as of September 30, 2009, $67.95 million, or 66%, of the total are loans secured by real estate construction properties, $8.67 million, or 8%, are loans secured by residential home loans, $9.28 million, or 9%, are loans secured by commercial real estate, $4.53 million, or 4%, are loans secured by agricultural farmland, and the remaining $12.80 million, or 13%, are loans secured by other miscellaneous asset types.
	•		Loan loss provision of $20.25 million. Our third quarter 2009 loan loss provision decreased $5.15 million, or 20%, compared to the third quarter of 2008. Loan loss provision for the third quarter of 2009 increased $10.55 million and $5.85 million, respectively, compared to the first and second quarters of 2009. The increases from earlier quarters in 2009 was primarily due to losses related to a large agricultural credit where collateral values had declined, continued losses from other collateral-dependent loans and the application of higher estimated loss rates in our allowance methodology.
	•		Repaid $40.96 million of brokered deposits and borrowings. We paid off higher-cost wholesale borrowings and deposits using available liquid assets and retail deposits gathered over the last several months, and have concentrated heavily on maintaining retail deposits. Compared to June 30, 2009, total deposits increased $17.30 million including a $9.10 million increase in non-interest bearing demand deposits and a $6.86 million increase in money market and NOW deposits.
	•		Regulatory capital ratios. As of September 30, 2009, Columbia River Bank is classified as significantly under-capitalized based on the following regulatory capital ratios: Tier 1 leverage ratio 2.08%, Tier 1 risk-based capital ratio 2.78% and total risk-based capital ratio 4.05%.
	•		FDIC premiums increased $4.10 million, or 720%, year over year. FDIC premiums and state assessments totaled $1.32 million for the three months ended September 30, 2009, an increase of $1.12 million, in comparison to the same period in 2008. The increase is a result of increases in premium assessments imposed by the FDIC and the FDIC’s rates applicable to institutions with our capital ratios. For the nine months ended September 30, 2009, our FDIC premiums and state assessments totaled $4.66 million, an increase of $4.10 million, in comparison to the same period in 2008. In addition to the FDIC rate changes, premiums increased due to a special assessment assessed on all financial institutions during the second quarter of 2009 totaling 0.05% of total assets, or approximately $496,000.

	•		Reduced salaries and employee benefits expense. Salaries and employee benefits decreased 24%, or $1.35 million, for the three months ended September 30, 2009 in comparison to the same period in 2008. Contributing to the decrease was the cost cutting measure to discontinue the 401(k) match along with the overall reduction in full-time employee equivalents (“FTE”). FTEs have decreased by 43, or 12%, from 365 FTEs as of September 30, 2008 to 322 FTEs as of September 30, 2009. We have reduced our salary and benefit expense, while maintaining high quality customer service; as such many of the employee reductions were made in areas not affecting our service delivery. In some circumstances resources have been re-aligned to better serve our customer base, or to assist in non-performing loan management. As we continue to actively manage our non-performing asset portfolio, we expect to hire additional employees and experts to assist where necessary. These additional resources may offset a portion of our previously expected savings.
	•		Net interest margin lower due to interest rate cuts and higher levels of non-accrual loans. Net interest margin decreased for the three and nine months ended September 30, 2009 compared to the same periods in 2008. During the three and nine months ended September 30, 2009, approximately $2.60 million and $11.90 million, respectively, of interest income was not recognized for loans on non-accrual status. This resulted in a 103 and 159 basis point reduction in our net interest margin for the three and nine months ended September 30, 2009, respectively. Lower deposit rates and repayment of higher cost brokered deposits partially offset the decrease in the net interest margin.

RESULTS OF OPERATIONS

Net Loss

Net loss for the three months ended September 30, 2009 totaled $21.91 million, or $2.18 per diluted share, which represents an increase of $7.82 million from a net loss of $14.09 million, or $1.41 per diluted share, for the three months ended September 30, 2008.

For the nine months ended September 30, 2009, net loss totaled $52.09 million, or $5.18 per diluted share, which represents an increase of $39.01 million from net loss of $13.08 million, or $1.31 per diluted share, for the same period in 2008.

Net Interest Income

Net interest income, our primary source of operating income, is the difference between interest income and interest expense. Interest income is earned primarily from our loan and investment security portfolios. Interest expense results primarily from customer deposits and borrowings from other sources, including Federal Home Loan Bank advances and wholesale deposits. Like most financial institutions, our net interest income increases when we are able to charge higher interest rates on loans while paying relatively lower interest rates on deposits and other borrowings.

The following table presents a comparison of average balances and interest rates:

Net Interest Income Average Balances and Rates:
(dollars in thousands)

		Three Months Ended September 30,												Three Months Ended September 30,
		Average Balances												Average Yields/Costs Tax Equivalent
		2009				2008				Change				2009				2008				Change
Taxable securities		$	34,467			$	14,505			$	19,962				2.88	%			4.41	%			-1.53	%
Nontaxable securities (1)			4,284				8,567				(4,283	)			6.42	%			6.95	%			-0.53	%
Interest bearing deposits			188,240				27,944				160,296				0.28	%			2.18	%			-1.90	%
Federal funds sold			326				54,371				(54,045	)			1.53	%			1.77	%			-0.24	%
Loans (2) (3)			772,716				948,689				(175,973	)			5.88	%			6.51	%			-0.63	%
Interest earning assets			1,000,033				1,054,076				(54,043	)			4.72	%			6.13	%			-1.41	%
Non-earning assets			66,462				65,624				838
Total assets		$	1,066,495			$	1,119,700			$	(53,205	)
Savings & interest bearing deposits		$	313,937			$	347,087			$	(33,150	)			1.21	%			1.75	%			-0.54	%
Time certificates			498,443				400,027				98,416				3.17	%			4.03	%			-0.86	%
Borrowed funds			19,223				58,470				(39,247	)			2.90	%			2.84	%			0.06	%
Interest bearing liabilities			831,603				805,584				26,019				2.42	%			2.96	%			-0.54	%
Non-interest bearing demand deposits			189,569				211,394				(21,825	)
Other liabilities			6,103				8,693				(2,590	)
Shareholders’ equity			39,220				94,029				(54,809	)
Total liabilities and shareholders’ equity		$	1,066,495			$	1,119,700			$	(53,205	)