EX-99.1 2 a991colb3312013earnings.htm EARNINGS PRESS RELEASE 99.1 COLB 3.31.2013 Earnings


Exhibit 99.1


FOR IMMEDIATE RELEASE
April 24, 2013

Contacts:     Melanie J. Dressel, President and Chief Executive Officer
(253) 305-1911

Clint E. Stein, Executive Vice President
and Chief Financial Officer
(253) 593-8304

Columbia Banking System Announces First Quarter 2013 Earnings

Highlights for the quarter include strong loan growth, increased operating net interest margin, and continued credit quality improvement
 
TACOMA, Washington, April 24, 2013 -- Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB (“Columbia”) said today upon the release of Columbia's first quarter 2013 earnings, “The results for the quarter reflect our emphasis on strategic initiatives to further improve our core performance measures. The 4% increase in our loan portfolio since the end of last year, as well as improved credit quality and reduced expenses, contributed significantly to our improved performance over the first quarter of last year.”
•
Net income increased to $12.2 million, or 37%, compared to net income of $8.9 million for the first quarter 2012. Net income per diluted common share rose 41% to $0.31, as compared to $0.22 per common share for the first quarter 2012. The increase in earnings was driven by substantial decreases in noninterest expense and provision for loan losses.
•
Noncovered loans increased 11% from the first quarter 2012 and 4% from year end 2012. Business loans also increased 4% since year-end 2012, and were up 12% from the first quarter 2012.
•
Credit metrics continued to improve; noncovered nonperforming assets decreased 7% from year-end 2012, and 43% from the first quarter 2012.
•
Our merger with West Coast Bancorp was completed on April 1, 2013, adding approximately $2.4 billion in assets, resulting in a Pacific Northwest regional community bank with over $7 billion in assets and 157 branches throughout Washington and Oregon.

1


Significant Influences on the Quarter Ended March 31, 2013
    
Balance Sheet
Ms. Dressel commented, "We are pleased with our loan growth for the quarter, which continues the momentum generated by our bankers during the second half of last year." Noncovered loans were $2.62 billion at March 31, 2013, up 4%, or $95.5 million, from $2.53 billion at prior year end. The growth in noncovered loans for the quarter was centered in commercial business and commercial and multifamily residential real estate loans. At March 31, 2013, Columbia's total assets were $4.91 billion, relatively unchanged from December 31, 2012. Securities, including FHLB stock, were $1.03 billion at March 31, 2013, up 1% from $1.02 billion at prior year end.

Total deposits at March 31, 2013 were $4.05 billion, essentially unchanged from $4.04 billion at December 31, 2012. Core deposits comprised 94% of total deposits, and were $3.80 billion at March 31, 2013, relatively unchanged from prior year end.
    
    
Asset Quality

At March 31, 2013, nonperforming noncovered assets were $44.9 million, a decrease of 7% from $48.5 million at December 31, 2012. Nonaccrual loans declined $4.5 million during the first quarter. The decrease in nonaccrual loans for the quarter was driven by payments of $3.6 million, charge-offs of $1.1 million, the return of $2.1 million of nonaccrual loans to accrual status, and $2.7 million of loans transferred to other real estate owned ("OREO"), partially offset by $5.0 million of new nonaccrual loans. OREO and other personal property owned ("OPPO") increased by $892 thousand during the first quarter, as a result of loan foreclosures of $2.7 million, partially offset by $1.7 million in sales and $93 thousand in write-downs. Columbia's allowance for loan losses to nonperforming, noncovered loans ratio was 155% for the quarter, up from 140% for the fourth quarter 2012 and 91% for the same period last year.
 

2


The following table sets forth, at the dates indicated, information regarding noncovered nonaccrual loans and total noncovered nonperforming assets.

 
 
March 31, 2013
 
December 31, 2012
 
 
(dollars in thousands)
Nonaccrual noncovered loans:
 
 
 
 
Commercial business
 
$
9,504

 
$
9,299

Real estate:
 
 
 
 
One-to-four family residential
 
1,684

 
2,349

Commercial and multifamily residential
 
17,402

 
19,204

Total real estate
 
19,086

 
21,553

Real estate construction:
 
 
 
 
One-to-four family residential
 
3,034

 
4,900

Commercial and multifamily residential
 
—

 
—

Total real estate construction
 
3,034

 
4,900

Consumer
 
1,262

 
1,643

Total nonaccrual loans
 
32,886

 
37,395

Noncovered other real estate owned and other personal property owned
 
12,000

 
11,108

Total nonperforming noncovered assets
 
$
44,886

 
$
48,503


For the quarter ended March 31, 2013, net loan charge-offs were $125 thousand, compared to $5.3 million for the same period a year ago, and $1.6 million last quarter.

3


The following table provides an analysis of the Company's allowance for loan and lease losses at the dates and the periods indicated.

 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(in thousands)
Beginning balance
 
$
52,244

 
$
53,041

Charge-offs:
 
 
 
 
Commercial business
 
(1,314
)
 
(2,359
)
One-to-four family residential real estate
 
(116
)
 
(116
)
Commercial and multifamily residential real estate
 
(783
)
 
(2,678
)
One-to-four family residential real estate construction
 
(133
)
 
(204
)
Consumer
 
(171
)
 
(1,093
)
Total charge-offs
 
(2,517
)
 
(6,450
)
Recoveries:
 
 
 
 
Commercial business
 
113

 
658

One-to-four family residential real estate
 
—

 
43

Commercial and multifamily residential real estate
 
93

 
71

One-to-four family residential real estate construction
 
2,139

 
47

Commercial and multifamily residential real estate construction
 
—

 
—

Consumer
 
47

 
373

Total recoveries
 
2,392

 
1,192

Net charge-offs
 
(125
)
 
(5,258
)
Provision (recapture) for loan and lease losses
 
(1,000
)
 
4,500

Ending balance
 
$
51,119

 
$
52,283


For the first quarter of 2013, Columbia had a provision recapture of $1.0 million for noncovered loan losses. For the comparable quarter last year the company made a provision of $4.5 million. The provision recapture for noncovered loan losses during the current quarter reflected continued credit quality improvement within the noncovered loan portfolio as well as a $2.0 million recovery experienced during the current quarter related to a single borrowing relationship.

The allowance for noncovered loan losses to period end loans was 1.95% at March 31, 2013 compared to 2.07% at December 31, 2012.

4


Net Interest Margin ("NIM")

Columbia's net interest margin decreased to 5.06% for the first quarter of 2013, down from 6.67% for the same period last year and down from 5.15% for the fourth quarter of 2012. Columbia's net interest margin is impacted significantly by the accounting for acquired loans. The net interest margin for the current quarter reflects the continuation of a moderating trend in the incremental accretion income related to the acquired loans, which was substantially higher during the first quarter of 2012, as shown in the table on the following page.

Columbia's operating net interest margin, which excludes incremental accretion income, interest reversals on nonaccrual loans and prepayment charges on Federal Home Loan Bank advances, increased to 4.21% for the first quarter of 2013, up from 4.14% for the fourth quarter of 2012. The operating net interest margin for the current quarter improved due in part to the lower amount of cash held in overnight funds during the current quarter. The operating net interest margin was down from 4.49% for the same period last year. Compared to the prior year period, the operating net interest margin was negatively impacted by the overall decreasing trend in rates, impacting both the loan and investment portfolios. The average yield on investments declined as portfolio cash flows were reinvested at lower prevailing rates. Also contributing to the lower operating net interest margin compared to the prior year was the additional cash held in overnight funds in anticipation of payment of the cash portion of the West Coast Bancorp merger consideration.

Ms. Dressel commented, “The seven basis point improvement in our operating net interest margin during the current quarter was the result of our NIM optimization efforts during the fourth quarter of 2012 and the early part of the current period. As we fine-tuned our short-term cash needs to complete the West Coast Bancorp acquisition, we were able to lower our overnight funds balance. The combination of these two items gave us a nice boost to the margin.”


5


The following table shows the impact to interest income and the related impact to the net interest margin resulting from accretion of income on acquired loan portfolios for the periods presented.

 
 
Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
 
 
(dollars in thousands)
Interest income as recorded
 
$
16,489

 
$
32,902

Less: Interest income at stated note rate
 
7,044

 
10,481

Incremental accretion income
 
$
9,445

 
$
22,421

Incremental accretion income due to:
 
 
 
 
Acquired impaired loans
 
$
8,375

 
$
19,320

Other acquired loans
 
1,070

 
3,101

Incremental accretion income
 
$
9,445

 
$
22,421

Reported net interest margin
 
5.06
%
 
6.67
%
Operating net interest margin, excluding incremental accretion income, interest reversals on nonaccrual loans and prepayment charges on FHLB advances
 
4.21
%
 
4.49
%

Impact of Acquired Loan Accounting
The following table illustrates the impact to earnings associated with Columbia's acquired loan portfolios:

Acquired Loan Portfolio Activity
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31, 2013
 
March 31, 2012
 
 
(in thousands)
Incremental accretion income on acquired impaired loans
 
$
8,375

 
$
19,320

Incremental accretion income on other acquired loans
 
1,070

 
3,101

Provision for losses on covered loans
 
(980
)
 
(15,685
)
Change in FDIC loss-sharing asset
 
(10,483
)
 
(1,668
)
Claw back liability benefit (expense)
 
(231
)
 
26

Pre-tax earnings impact - income (expense)
 
$
(2,249
)
 
$
5,094


The incremental accretion income in the table above represents the amount of income recorded on acquired loans above the contractual rate stated in the individual loan notes and stems from the discount established at the time these loan portfolios were acquired. At March 31, 2013, the accretable yield on acquired impaired loans was $158.8 million and the net discount on other acquired loans was $1.3 million.

6


The accretable yield and net discount represent income to be recorded by Columbia over the remaining life of the acquired loans. Accretable yield is subject to change based upon expected future loan cash flows, which are re-measured by Columbia on a quarterly basis.

The $980 thousand net provision for losses on covered loans in the current period is substantially offset by an 80%, or $784 thousand, benefit to the change in the FDIC loss-sharing asset, resulting in a negative net pre-tax earnings impact of $196 thousand. The provision for losses on covered loans was primarily due to decreased expected future cash flows as remeasured during the current quarter when compared to the prior quarter's remeasurement.
  
The $10.5 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consists of $9.8 million of amortization expense and approximately $1.5 million of expense related to covered other real estate owned partially offset by the $784 thousand favorable adjustment described above. Columbia recorded $2.5 million in additional FDIC loss-sharing asset amortization expense during the quarter due to the implementation of new accounting guidance related to indemnification asset accounting, which generally accelerates the amortization of the indemnification asset.



7


First Quarter 2013 Operating Results

Quarter ended March 31, 2013
Net Interest Income
Net interest income for the first quarter of 2013 was $53.5 million, a decrease of $13.6 million from $67.1 million for the same quarter in 2012, primarily due to the accretion income recorded during the first quarter of 2012 related to our acquired loan portfolios. During the first quarter of 2013, the Company recorded $9.4 million in incremental accretion income on acquired loans compared to $22.4 million for the first quarter of 2012, a decrease of $13.0 million.

Compared to the fourth quarter of 2012, net interest income decreased $1.4 million from $54.9 million due to $2.4 million in lower accretion income related to our acquired loan portfolios.
 
Noninterest Income
Total noninterest income was $1.7 million for the first quarter of 2013, compared to $9.6 million for the first quarter of 2012. The decrease from the prior-year period was primarily due to the change in the FDIC loss-sharing asset, which accounted for $8.8 million of the decrease, partially offset by increases in service charges and other fees of $417 thousand and investment securities gains of $308 thousand.
    
The following table reflects the components of the change in the FDIC loss-sharing asset for the three month periods indicated.
 
 
Three Months Ended
 
 
March 31,
 
 
2013
 
2012
 
 
(in thousands)
Adjustments reflected in income
 
 
 
 
Amortization, net
 
(9,779
)
 
(13,873
)
Loan impairment
 
784

 
12,548

Sale of other real estate
 
(1,346
)
 
(2,067
)
Write-downs of other real estate
 
52

 
1,629

Other
 
(194
)
 
95

Change in FDIC loss-sharing asset
 
$
(10,483
)
 
$
(1,668
)



8


Noninterest Expense
Total noninterest expense for the first quarter of 2013 was $38.0 million, a decrease of 14% from $44.4 million for the same quarter in 2012. The decrease from the prior-year period was due to a decrease of $2.7 million in other noninterest expense as well as a decrease of $3.4 million in net cost (benefit) of operation of other real estate. The decrease in other noninterest expense was primarily due to the Company recording $2.2 million in OPPO write-downs during the prior year period. The decrease in net cost (benefit) of operation of OREO was due to substantial write-downs recorded in the prior year period. These decreases were partially offset by a $441 thousand increase in legal and professional expenses, which includes $508 thousand during the current quarter related to the acquisition of West Coast Bancorp. Total merger related expense for the current quarter was $723 thousand.

Compared to the fourth quarter of 2012, noninterest expense increased $249 thousand, or 1%. The increase was attributable to an increase of $703 thousand in compensation and employee benefits.
 
Recent Acquisition

On April 1, 2013, Columbia completed its acquisition of West Coast Bancorp, the parent company of West Coast Bank, creating the largest independent community bank in the Pacific Northwest. With the completion of the merger, Columbia's total assets exceed $7 billion, with 157 branches in 38 counties. Melanie Dressel commented, “We are delighted to welcome West Coast customers, employees, and shareholders to the Columbia family. The combined company leverages the strengths of the two organizations, which we believe will provide added convenience for our customers and enhance shareholder value.”
     
Conference Call
Columbia's management will discuss the first quarter 2013 results on a conference call scheduled for Thursday, April 25, 2013 at 1:00 p.m. PDT (4:00 pm EDT). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #34588953.

A conference call replay will be available from approximately 4:00 p.m. PDT on April 25, 2013 through midnight PDT on May 1, 2013. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #34588953.

9



About Columbia
Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding Company of Columbia State Bank, a Washington state-chartered full-service commercial bank. Columbia recently received a 2013 “Top Places to Work” award from the South Sound Business Examiner and was named for the sixth consecutive year as one of Puget Sound Business Journal's 2012 “Washington's Best Workplaces.”

With the recent acquisition of West Coast Bancorp, Columbia Banking System has 157 banking offices, including 86 branches in Washington State and 71 branches in Oregon. Columbia State Bank does business under the Bank of Astoria name in Astoria, Warrenton, Seaside, Cannon Beach, Manzanita and Tillamook in Oregon. More information about Columbia can be found on its website at www.columbiabank.com.

# # #

Note Regarding Forward-Looking Statements
This news release includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These forward looking statements describe Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “intend,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, including the “Risk Factors,” “Business” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q, factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates may reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) costs or difficulties related to the integration of acquisitions may be greater than expected; (5) competitive pressure among financial institutions may increase significantly; and (6) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

10



FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
 
 
 
 
 
 
 
Unaudited
 
March 31,
 
 
 
 
 
 
 
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
Earnings
 
(dollars in thousands except per share amounts)
 
 
 
 
 
 
 
 
Net interest income
 
$
53,482

 
$
67,063

 
 
 
 
 
 
 
 
Provision (recapture) for loan and lease losses
 
$
(1,000
)
 
$
4,500

 
 
 
 
 
 
 
 
Provision for losses on covered loans, net (1)
 
$
980

 
$
15,685

 
 
 
 
 
 
 
 
Noninterest income
 
$
1,658

 
$
9,574

 
 
 
 
 
 
 
 
Noninterest expense
 
$
38,049

 
$
44,352

 
 
 
 
 
 
 
 
Merger-related expense (included in noninterest expense)
 
$
723

 
$
—

 
 
 
 
 
 
 
 
Net income
 
$
12,176

 
$
8,902

 
 
 
 
 
 
 
 
Per Common Share
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.31

 
$
0.22

 
 
 
 
 
 
 
 
Earnings (diluted)
 
$
0.31

 
$
0.22

 
 
 
 
 
 
 
 
Book value
 
$
19.32

 
$
18.97

 
 
 
 
 
 
 
 
Averages
 
 
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
4,851,044

 
$
4,776,186

 
 
 
 
 
 
 
 
Interest-earning assets
 
$
4,336,978

 
$
4,137,449

 
 
 
 
 
 
 
 
Loans, including covered loans
 
$
2,962,559

 
$
2,860,524

 
 
 
 
 
 
 
 
Securities
 
$
1,051,657

 
$
1,023,067

 
 
 
 
 
 
 
 
Deposits
 
$
3,990,127

 
$
3,805,324

 
 
 
 
 
 
 
 
Core deposits
 
$
3,741,086

 
$
3,512,490

 
 
 
 
 
 
 
 
Interest-bearing deposits
 
$
2,740,100

 
$
2,672,911

 
 
 
 
 
 
 
 
Interest-bearing liabilities
 
$
2,771,743

 
$
2,815,753

 
 
 
 
 
 
 
 
Noninterest-bearing deposits
 
$
1,250,027

 
$
1,132,413

 
 
 
 
 
 
 
 
Shareholders' equity
 
$
768,390

 
$
761,686

 
 
 
 
 
 
 
 
Financial Ratios
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.02
%
 
0.75
%
 
 
 
 
 
 
 
 
Return on average common equity
 
6.43
%
 
4.70
%
 
 
 
 
 
 
 
 
Average equity to average assets
 
15.84
%
 
15.95
%
 
 
 
 
 
 
 
 
Net interest margin
 
5.06
%
 
6.67
%
 
 
 
 
 
 
 
 
Efficiency ratio (tax equivalent)(2)
 
68.68
%
 
71.48
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
 
 
 
 
Period end
 
2013
 
2012
 
2012
 
 
 
 
 
 
Total assets
 
$
4,905,011

 
$
4,815,432

 
$
4,906,335

 
 
 
 
 
 
Covered assets, net
 
$
377,024

 
$
526,043

 
$
407,648

 
 
 
 
 
 
Loans, excluding covered loans, net
 
$
2,621,212

 
$
2,371,818

 
$
2,525,710

 
 
 
 
 
 
Allowance for noncovered loan and lease losses
 
$
51,119

 
$
52,283

 
$
52,244

 
 
 
 
 
 
Securities
 
$
1,033,783

 
$
1,021,428

 
$
1,023,484

 
 
 
 
 
 
Deposits
 
$
4,046,539

 
$
3,865,445

 
$
4,042,085

 
 
 
 
 
 
Core deposits
 
$
3,796,574

 
$
3,591,663

 
$
3,802,366

 
 
 
 
 
 
Shareholders' equity
 
$
769,660

 
$
752,703

 
$
764,008

 
 
 
 
 
 
Nonperforming, noncovered assets
 
 
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
32,886

 
$
57,552

 
$
37,395

 
 
 
 
 
 
Other real estate owned ("OREO") and other personal property owned ("OPPO")
 
12,000

 
21,571

 
11,108

 
 
 
 
 
 
Total nonperforming, noncovered assets
 
$
44,886

 
$
79,123

 
$
48,503

 
 
 
 
 
 
Nonperforming assets to period-end noncovered loans + OREO and OPPO
 
1.70
%
 
3.31
%
 
1.91
%
 
 
 
 
 
 
Nonperforming loans to period-end noncovered loans
 
1.25
%
 
2.43
%
 
1.48
%
 
 
 
 
 
 
Nonperforming assets to period-end noncovered assets
 
0.99
%
 
1.84
%
 
1.08
%
 
 
 
 
 
 
Allowance for loan and lease losses to period-end noncovered loans
 
1.95
%
 
2.20
%
 
2.07
%
 
 
 
 
 
 
Allowance for loan and lease losses to nonperforming noncovered loans
 
155.44
%
 
90.84
%
 
139.71
%
 
 
 
 
 
 
Net noncovered loan charge-offs
 
$
125

(3) 
$
5,258

(4) 
$
14,272

(5) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) Provision for losses on covered loans was partially offset by $784 thousand and $12.5 million in income recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended March 31, 2013 and 2012, respectively.
 
 
 
 
 
(2) Noninterest expense, excluding net cost of operation of other real estate, FDIC clawback liability expense and merger related expenses, divided by the sum of net interest income, excluding incremental accretion income on the acquired loan portfolio and prepayment expenses on FHLB advances, and noninterest income on a tax equivalent basis, excluding gain/loss on investment securities, gain on bank acquisition, and the change in FDIC loss-sharing asset.
(3) For the three months ended March 31, 2013.
 
 
 
 
 
 
 
 
 
 
 
 
(4) For the three months ended March 31, 2012.
 
 
 
 
 
 
 
 
 
 
 
 
(5) For the twelve months ended December 31, 2012.
 
 
 
 
 
 
 
 
 
 
 
 

11


FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
Unaudited
 
March 31,
 
December 31,
 
 
2013
 
2012
Loan Portfolio Composition
 
(dollars in thousands)
Noncovered loans:
 
 
 
 
 
 
 
 
Commercial business
 
$
1,204,760

 
46.0
 %
 
$
1,155,158

 
45.7
 %
Real estate:
 
 
 
 
 
 
 
 
One-to-four family residential
 
43,604

 
1.7
 %
 
43,922

 
1.7
 %
Commercial and multifamily residential
 
1,106,987

 
42.2
 %
 
1,061,201

 
42.0
 %
Total real estate
 
1,150,591

 
43.9
 %
 
1,105,123

 
43.7
 %
Real estate construction:
 
 
 
 
 
 
 
 
One-to-four family residential
 
52,946

 
2.0
 %
 
50,602

 
2.0
 %
Commercial and multifamily residential
 
67,213

 
2.6
 %
 
65,101

 
2.7
 %
Total real estate construction
 
120,159

 
4.6
 %
 
115,703

 
4.7
 %
Consumer
 
152,687

 
5.8
 %
 
157,493

 
6.2
 %
Subtotal loans
 
2,628,197

 
100.3
 %
 
2,533,477

 
100.3
 %
Less: Net unearned income
 
(6,985
)
 
(0.3
)%
 
(7,767
)
 
(0.3
)%
Total noncovered loans, net of unearned income
 
2,621,212

 
100.0
 %
 
2,525,710

 
100.0
 %
Less: Allowance for loan and lease losses
 
(51,119
)
 
 
 
(52,244
)
 
 
Noncovered loans, net
 
2,570,093

 
 
 
2,473,466

 
 
Covered loans, net of allowance for loan losses of ($29,489) and ($30,056), respectively
 
363,213

 
 
 
391,337

 
 
Total loans, net
 
$
2,933,306

 
 
 
$
2,864,803

 
 
Loans held for sale
 
$
888

 
 
 
$
2,563

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
2013
 
2012
Deposit Composition
 
(dollars in thousands)
Core deposits:
 
 
 
 
 
 
 
 
Demand and other non-interest bearing
 
$
1,274,330

 
31.5
 %
 
$
1,321,171

 
32.7
 %
Interest bearing demand
 
846,515

 
20.9
 %
 
870,821

 
21.5
 %
Money market
 
1,096,274

 
27.1
 %
 
1,043,459

 
25.8
 %
Savings
 
337,251

 
8.3
 %
 
314,371

 
7.8
 %
Certificates of deposit less than $100,000
 
242,204

 
6.0
 %
 
252,544

 
6.2
 %
Total core deposits
 
3,796,574

 
93.8
 %
 
3,802,366

 
94.0
 %
 
 
 
 
 
 
 
 
 
Certificates of deposit greater than $100,000
 
204,487

 
5.1
 %
 
212,924

 
5.3
 %
Certificates of deposit insured by CDARS®
 
26,093

 
0.6
 %
 
26,720

 
0.7
 %
Brokered money market accounts
 
19,330

 
0.5
 %
 
—

 
—
 %
Subtotal
 
4,046,484

 
100.0
 %
 
4,042,010

 
100.0
 %
Premium resulting from acquisition date fair value adjustment
 
55

 
 
 
75

 
 
Total deposits
 
$
4,046,539

 
 
 
$
4,042,085

 
 



12


FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
2013
 
2012
 
 
OREO
 
OPPO
 
OREO
 
OPPO
OREO and OPPO Composition
 
(in thousands)
Covered
 
$
13,811

 
$
44

 
$
16,311

 
$
45

Noncovered
 
11,916

 
84

 
10,676

 
432

Total
 
$
25,727

 
$
128

 
$
26,987

 
$
477

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
 
 
March 31,
 
 
 
 
 
 
2013
 
2012
 
 
 
 
OREO and OPPO Earnings Impact
 
(in thousands)
 
 
 
 
Net cost (benefit) of operation of noncovered OREO
 
$
(54
)
 
$
2,693

 
 
 
 
Net benefit of operation of covered OREO
 
(2,447
)
 
(1,783
)
 
 
 
 
Net cost (benefit) of operation of OREO
 
$
(2,501
)
 
$
910

 
 
 
 
 
 
 
 
 
 
 
 
 
Noncovered OPPO cost (benefit), net
 
$
(104
)
 
$
2,154

 
 
 
 
Covered OPPO cost, net
 
—

 
2

 
 
 
 
OPPO cost (benefit), net (1)
 
$
(104
)
 
$
2,156

 
 
 
 
 
 
 
 
 
 
 
 
 
(1) OPPO cost (benefit), net is included in Other noninterest expense in the Consolidated Statements of Income.

    


The following table shows a summary of acquired loan accounting for the previous five quarters:
 
 
Three Months Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2013
 
2012
 
2012
 
2012
 
2012
 
 
(in thousands)
Pre-tax earnings impact - income (expense)
 
$
(2,249
)
 
$
(166
)
 
$
2,580

 
$
3,364

 
$
5,094

 
 
 
 
 
 
 
 
 
 
 
Balance sheet components:
 
 
 
 
 
 
 
 
 
 
Covered loans, net of allowance
 
$
363,213

 
$
391,337

 
$
429,286

 
$
462,994

 
$
501,613

Covered OREO
 
13,811

 
16,311

 
16,511

 
19,079

 
24,430

FDIC loss-sharing asset
 
83,115

 
96,354

 
111,677

 
140,003

 
159,061



13


QUARTERLY FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2013
 
2012
 
2012
 
2012
 
2012
 
 
(dollars in thousands except per share)
Earnings
 
 
Net interest income
 
$
53,482

 
$
54,898

 
$
57,265

 
$
59,701

 
$
67,063

Provision (recapture) for loan and lease losses
 
$
(1,000
)
 
$
2,350

 
$
2,875

 
$
3,750

 
$
4,500

Provision (recapture) for losses on covered loans
 
$
980

 
$
2,511

 
$
(3,992
)
 
$
11,688

 
$
15,685

Noninterest income (loss)
 
$
1,658

 
$
6,567

 
$
(911
)
 
$
11,828

 
$
9,574

Noninterest expense
 
$
38,049

 
$
37,800

 
$
40,936

 
$
39,825

 
$
44,352

Merger-related expense (included in noninterest expense)
 
$
723

 
$
649

 
$
1,131

 
$
—

 
$
—

Net income
 
$
12,176

 
$
13,462

 
$
11,880

 
$
11,899

 
$
8,902

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.31

 
$
0.34

 
$
0.30

 
$
0.30

 
$
0.22

Earnings (diluted)
 
$
0.31

 
$
0.34

 
$
0.30

 
$
0.30

 
$
0.22

Book value
 
$
19.32

 
$
19.25

 
$
19.20

 
$
19.13

 
$
18.97

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
4,851,044

 
$
4,925,736

 
$
4,828,102

 
$
4,788,723

 
$
4,776,186

Interest-earning assets
 
$
4,336,978

 
$
4,388,487

 
$
4,263,414

 
$
4,194,281

 
$
4,137,449

Loans, including covered loans
 
$
2,962,559

 
$
2,926,825

 
$
2,919,520

 
$
2,895,436

 
$
2,860,524

Securities
 
$
1,051,657

 
$
1,007,059

 
$
983,815

 
$
1,029,337

 
$
1,023,067

Deposits
 
$
3,990,127

 
$
4,012,764

 
$
3,859,284

 
$
3,823,985

 
$
3,805,324

Core deposits
 
$
3,741,086

 
$
3,769,409

 
$
3,599,246

 
$
3,555,279

 
$
3,512,490

Interest-bearing deposits
 
$
2,740,100

 
$
2,714,292

 
$
2,665,094

 
$
2,682,092

 
$
2,672,911

Interest-bearing liabilities
 
$
2,771,743

 
$
2,796,155

 
$
2,803,201

 
$
2,820,857

 
$
2,815,753

Noninterest-bearing deposits
 
$
1,250,027

 
$
1,298,472

 
$
1,194,190

 
$
1,141,893

 
$
1,132,413

Shareholders' equity
 
$
768,390

 
$
767,781

 
$
761,281

 
$
758,391

 
$
761,686

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.02
%
 
1.09
%
 
0.98
%
 
1.00
%
 
0.75
%
Return on average common equity
 
6.43
%
 
6.98
%
 
6.21
%
 
6.31
%
 
4.70
%
Average equity to average assets
 
15.84
%
 
15.59
%
 
15.77
%
 
15.84
%
 
15.95
%
Net interest margin
 
5.06
%
 
5.15
%
 
5.52
%
 
5.88
%
 
6.67
%
Efficiency ratio (tax equivalent)
 
68.68
%
 
68.26
%
 
68.46
%
 
68.54
%
 
71.48
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
4,905,011

 
$
4,906,335

 
$
4,903,049

 
$
4,789,413

 
$
4,815,432

Covered assets, net
 
$
377,024

 
$
407,648

 
$
445,797

 
$
482,073

 
$
526,043

Loans, excluding covered loans, net
 
$
2,621,212

 
$
2,525,710

 
$
2,476,844

 
$
2,436,961

 
$
2,371,818

Allowance for noncovered loan and lease losses
 
$
51,119

 
$
52,244

 
$
51,527

 
$
52,196

 
$
52,283

Securities
 
$
1,033,783

 
$
1,023,484

 
$
965,641

 
$
1,019,978

 
$
1,021,428

Deposits
 
$
4,046,539

 
$
4,042,085

 
$
3,938,855

 
$
3,830,817

 
$
3,865,445

Core deposits
 
$
3,796,574

 
$
3,802,366

 
$
3,685,844

 
$
3,568,307

 
$
3,591,663

Shareholders' equity
 
$
769,660

 
$
764,008

 
$
761,977

 
$
758,712

 
$
752,703

Nonperforming, noncovered assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
32,886

 
$
37,395

 
$
41,589

 
$
49,465

 
$
57,552

OREO and OPPO
 
12,000

 
11,108

 
11,749

 
17,608

 
21,571

Total nonperforming, noncovered assets
 
$
44,886

 
$
48,503

 
$
53,338

 
$
67,073

 
$
79,123

Nonperforming assets to period-end noncovered loans + OREO and OPPO
 
1.70
%
 
1.91
%
 
2.14
%
 
2.73
%
 
3.31
%
Nonperforming loans to period-end noncovered loans
 
1.25
%
 
1.48
%
 
1.68
%
 
2.03
%
 
2.43
%
Nonperforming assets to period-end noncovered assets
 
0.99
%
 
1.08
%
 
1.20
%
 
1.56
%
 
1.84
%
Allowance for loan and lease losses to period-end noncovered loans
 
1.95
%
 
2.07
%
 
2.08
%
 
2.14
%
 
2.20
%
Allowance for loan and lease losses to nonperforming noncovered loans
 
155.44
%
 
139.71
%
 
123.90
%
 
105.52
%
 
90.84
%
Net noncovered loan charge-offs
 
$
125

 
$
1,633

 
$
3,544

 
$
3,836

 
$
5,258


14


CONSOLIDATED STATEMENTS OF INCOME
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
March 31,
 
 
2013
 
2012
 
 
(in thousands except per share)
Interest Income
 
 
 
 
Loans
 
$
48,028

 
$
61,777

Taxable securities
 
4,234

 
5,245

Tax-exempt securities
 
2,298

 
2,525

Federal funds sold and deposits in banks
 
201

 
165

Total interest income
 
54,761

 
69,712

Interest Expense
 
 
 
 
Deposits
 
1,089

 
1,779

Federal Home Loan Bank advances
 
71

 
750

Other borrowings
 
119

 
120

Total interest expense
 
1,279

 
2,649

Net Interest Income
 
53,482

 
67,063

Provision (recapture) for loan and lease losses
 
(1,000
)
 
4,500

Provision for losses on covered loans, net
 
980

 
15,685

Net interest income after provision (recapture) for loan and lease losses
 
53,502

 
46,878

Noninterest Income
 
 
 
 
Service charges and other fees
 
7,594

 
7,177

Merchant services fees
 
1,851

 
2,018

Investment securities gains, net
 
370

 
62

Bank owned life insurance
 
698

 
711

Change in FDIC loss-sharing asset
 
(10,483
)
 
(1,668
)
Other
 
1,628

 
1,274

Total noninterest income
 
1,658

 
9,574

Noninterest Expense
 
 
 
 
Compensation and employee benefits
 
21,653

 
21,995

Occupancy
 
4,753

 
5,333

Merchant processing
 
857

 
873

Advertising and promotion
 
870

 
882

Data processing and communications
 
2,580

 
2,213

Legal and professional fees
 
2,050

 
1,609

Taxes, licenses and fees
 
1,387

 
1,355

Regulatory premiums
 
857

 
860

Net cost (benefit) of operation of other real estate
 
(2,501
)
 
910

Amortization of intangibles
 
1,029

 
1,150

Other
 
4,514

 
7,172

Total noninterest expense
 
38,049

 
44,352

Income before income taxes
 
17,111

 
12,100

Provision for income taxes
 
4,935

 
3,198

Net Income
 
$
12,176

 
$
8,902

Earnings per common share
 
 
 
 
Basic
 
$
0.31

 
$
0.22

Diluted
 
$
0.31

 
$
0.22

Dividends paid per common share
 
$
0.10

 
$
0.37

Weighted average number of common shares outstanding
 
39,348

 
39,195

Weighted average number of diluted common shares outstanding
 
39,351

 
39,298



15


CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
Unaudited
 
 
 
 
March 31,
 
December 31,
 
 
 
 
 
2013
 
2012
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
$
91,889

 
$
124,573

Interest-earning deposits with banks and federal funds sold
 
356,056

 
389,353

Total cash and cash equivalents
 
447,945

 
513,926

Securities available for sale at fair value (amortized cost of $984,075 and $969,359, respectively)
 
1,012,162

 
1,001,665

Federal Home Loan Bank stock at cost
 
21,621

 
21,819

Loans held for sale
 
888

 
2,563

Loans, excluding covered loans, net of unearned income of ($6,985) and ($7,767), respectively
 
2,621,212

 
2,525,710

Less: allowance for loan and lease losses
 
51,119

 
52,244

Loans, excluding covered loans, net
 
2,570,093

 
2,473,466

Covered loans, net of allowance for loan losses of ($29,489) and ($30,056), respectively
 
363,213

 
391,337

Total loans, net
 
2,933,306

 
2,864,803

FDIC loss-sharing asset
 
83,115

 
96,354

Interest receivable
 
16,321

 
14,268

Premises and equipment, net
 
120,665

 
118,708

Other real estate owned ($13,811 and $16,311 covered by FDIC loss-share, respectively)
 
25,727

 
26,987

Goodwill
 
115,554

 
115,554

Core deposit intangible, net
 
14,693

 
15,721

Other assets
 
113,014

 
113,967

Total assets
 
$
4,905,011

 
$
4,906,335

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing
 
$
1,274,330

 
$
1,321,171

Interest-bearing
 
2,772,209

 
2,720,914

Total deposits
 
4,046,539

 
4,042,085

Federal Home Loan Bank advances
 
6,634

 
6,644

Securities sold under agreements to repurchase
 
25,000

 
25,000

Other liabilities
 
57,178

 
68,598

Total liabilities
 
4,135,351

 
4,142,327

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
 
 
 
2013
 
2012
 
 
 
 
Common stock (no par value)
 
 
 
 
 
 
 
Authorized shares
63,033

 
63,033

 
 
 
 
Issued and outstanding
39,844

 
39,686

 
582,348

 
581,471

Retained earnings
 
170,593

 
162,388

Accumulated other comprehensive income
 
16,719

 
20,149

Total shareholders' equity
 
769,660

 
764,008

Total liabilities and shareholders' equity
 
$
4,905,011

 
$
4,906,335



16