By Ratul Ray Chaudhuri

BANGALORE (Reuters) - Columbia Bancorp (CBBO.O: Quote, Profile, Research) forecast first-quarter profit below market estimates, citing a three-fold increase in provision for bad loans and lower net interest margin, sending its shares down as much as 17 percent.

The holding company for Columbia River Bank expects earnings of 11 cents to 13 cents a share, significantly below analysts' average estimate of 35 cents.

The company expects to set aside about $3.00 million to $3.20 million for bad loans in the quarter, hurt in part by the downgrade of credit ratings of certain central Oregon real estate development loans on declining values.

Banks such as Cascade Bancorp (CACB.O: Quote, Profile, Research), West Coast Bancorp (WCBO.O: Quote, Profile, Research) and Umpqua Holdings Corp (UMPQ.O: Quote, Profile, Research) have already had some issues with residential construction and land development loans in the Oregon market.

"This (Oregon) market has softened and recent appraised values on property related to problem credits have dropped, causing more loss severity," said D.A. Davidson & Co analyst Jim Bradshaw.

Columbia operates 22 branches of which 15 are in Oregon and the rest in Washington.

The Dalles, Oregon-based company's shares, which had fallen to a low of $13.35 earlier, pared some losses and were trading down 11 percent at $14.20 in afternoon trade. The stock was one of the top losers on Nasdaq.

"The market does not like negative credit surprises," RBC Capital Markets analyst Joe Morford said in an e-mail to Reuters.