(Reuters) - Columbia Bancorp (CBBO.O), the holding company for Columbia River Bank, said it plans to close its mortgage banking division, affecting about 39 jobs, as it strives to cut costs amid a difficult mortgage market.

"Columbia's decision to no longer operate an in-house mortgage lending service was necessary because of the uncertainty in the mortgage markets and the risk associated with the industry," CEO Roger Christensen said.

The Dalles, Oregon-based company said it had notified its staff on Thursday of a reduction in workforce impacting about 20 other employees. About 15 additional positions have been eliminated through normal attrition, Columbia Bancorp said.

The move is the latest in a series of steps the bank holding company has taken following a surge in problem loans and increased provisions. In July, the bank, suspended payment of director's fees for the remainder of 2008 and also slashed its dividend to one cent per share.

Columbia expects to incur severance-related expense of about $139,000 in the third-quarter. The bank sees annual overall salary and benefit cost savings at $4.2 million from the latest actions.

Shares of Columbia Bancorp closed at $4.13 on Nasdaq Thursday.

(Reporting by Dinesh Nair; Editing by Jarshad Kakkrakandy)

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