EX-99.1 2 a991colb3312014earnings.htm EARNINGS PRESS RELEASE 99.1 COLB 3.31.2014 Earnings


Exhibit 99.1

FOR IMMEDIATE RELEASE
April 23, 2014

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 2014 Earnings

Highlights

•
Net income of $19.8 million and diluted earnings per share of $0.37, net of a reduction in net income of $1.1 million, or $0.03 per diluted share, associated with acquisition-related expenses and FDIC acquired loan accounting.
•
New loan production of over $210 million during the quarter
•
Nonperforming assets to period end noncovered assets reduced to 0.75%, a decrease of 9 basis points from year-end
•
Solid core deposits at 96% of total deposits
 
TACOMA, Washington, April 23, 2014 -- 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 2014 earnings, “Our results for the quarter reflect continued strong loan production throughout our footprint. This is the second consecutive quarter with over $200 million in new loan originations. It is encouraging to see more of our loan production translating to net bottom line portfolio growth. In addition, our integration of West Coast is essentially complete. Due in part to the accelerated implementation of our cost savings measures, we are ahead of schedule for achieving the full benefit of our projected accretion to earnings during the first full year following the acquisition.”

1


Significant Influences on the Quarter Ended March 31, 2014
Balance Sheet
At March 31, 2014, Columbia's total assets were $7.24 billion, an increase of $75.5 million from December 31, 2013. Noncovered loans were $4.30 billion at March 31, 2014, up $77.6 million, or 2% from $4.22 billion at December 31, 2013. The increase in noncovered loans was driven by originations of over $210 million during the current quarter. Securities were $1.67 billion at March 31, 2014, a decrease of $25.0 million, or 1% from $1.70 billion at December 31, 2013.
Total deposits at March 31, 2014 were $6.04 billion, an increase of $84.9 million, or 1% from $5.96 billion at December 31, 2013. Core deposits comprised 96% of total deposits and were $5.77 billion at March 31, 2014.
    
Asset Quality
At March 31, 2014, nonperforming assets to noncovered assets were 0.75% or $52.3 million, down from 0.84%, or $57.9 million, at December 31, 2013. Nonaccrual loans increased $2.4 million during the first quarter driven by $8.4 million of new nonaccrual loans, partially offset by payments of $2.4 million, the return of $2.0 million of nonaccrual loans to accrual status, charge-offs of $1.4 million, and $244 thousand of loans transferred to other real estate owned ("OREO"). Noncovered OREO and other personal property owned ("OPPO") decreased by $8.0 million during the first quarter, primarily due to $7.3 million in sales and $929 thousand in write-downs, partially offset by the previously mentioned $244 thousand transferred from loans.

2


The following table sets forth, at the dates indicated, information regarding noncovered nonaccrual loans and total noncovered nonperforming assets:
 
 
March 31, 2014
 
December 31, 2013
 
 
(dollars in thousands)
Nonaccrual noncovered loans:
 
 
 
 
Commercial business
 
$
14,541

 
$
12,609

Real estate:
 
 
 
 
One-to-four family residential
 
2,900

 
2,667

Commercial and multifamily residential
 
11,050

 
11,043

Total real estate
 
13,950

 
13,710

Real estate construction:
 
 
 
 
One-to-four family residential
 
3,026

 
3,705

Total real estate construction
 
3,026

 
3,705

Consumer
 
4,880

 
3,991

Total nonaccrual loans
 
36,397

 
34,015

Noncovered other real estate owned and other personal property owned
 
15,924

 
23,918

Total nonperforming noncovered assets
 
$
52,321

 
$
57,933

The following table provides an analysis of the Company's allowance for loan and lease losses ("ALLL") at the dates and the periods indicated:
 
 
Three Months Ended March 31,
 
 
2014
 
2013
 
 
(in thousands)
Beginning balance
 
$
52,280

 
$
52,244

Charge-offs:
 
 
 
 
Commercial business
 
(233
)
 
(1,314
)
One-to-four family residential real estate
 
(207
)
 
(116
)
Commercial and multifamily residential real estate
 
(1,023
)
 
(783
)
One-to-four family residential real estate construction
 
—

 
(133
)
Consumer
 
(727
)
 
(171
)
Total charge-offs
 
(2,190
)
 
(2,517
)
Recoveries:
 
 
 
 
Commercial business
 
490

 
113

One-to-four family residential real estate
 
28

 
—

Commercial and multifamily residential real estate
 
39

 
93

One-to-four family residential real estate construction
 
42

 
2,139

Consumer
 
253

 
47

Total recoveries
 
852

 
2,392

Net charge-offs
 
(1,338
)
 
(125
)
Recapture of provision for loan and lease losses
 
(500
)
 
(1,000
)
Ending balance
 
$
50,442

 
$
51,119



3


Columbia's allowance for loan losses to nonperforming, noncovered loans ratio was 139% at March 31, 2014, down from 154% at December 31, 2013 and down from 155% at March 31, 2013. The allowance for noncovered loan losses to period end loans was 1.17% at March 31, 2014 compared to 1.24% at December 31, 2013 and 1.95% at March 31, 2013. The decrease in the allowance percentage compared to March 31, 2013 reflected the inclusion of acquired loans in the ratio, for which only a small allowance was estimated at quarter-end given management's judgment that the remaining discount on the loans still significantly addresses the estimated credit losses in acquired loans. Excluding acquired loans, the allowance at March 31, 2014 represented 1.46% of noncovered loans, compared to 1.58% of noncovered loans at December 31, 2013. The decline reflects strong organic loan growth as well as continued improvement in the Company's asset quality metrics.
For the first quarter of 2014, Columbia had a recapture of provision of $500 thousand for noncovered loans. For the comparable quarter last year the company had a recapture of provision of $1.0 million.

Net Interest Margin ("NIM")
Columbia's net interest margin decreased to 4.85% for the first quarter of 2014, down from 5.03% for the fourth quarter of 2013. The 18 basis point decline in the net interest margin for the current quarter was primarily due to fewer accruing days in the current quarter, which negatively impacted the net interest margin by approximately 11 basis points. The remaining decrease can be attributed to the continuing low interest rate environment which negatively impacted yields on new floating rate loan originations priced off of Libor and other indices.
Compared to the first quarter of 2013, Columbia's net interest margin decreased 21 basis points. Approximately 10 basis points of the decrease was due to net premium amortization recorded during the current quarter stemming from the West Coast investment portfolio, which was acquired on April 1, 2013. The remaining decrease can be attributed to the continuing low interest rate environment.
Columbia's operating net interest margin(1) decreased to 4.19% for the first quarter of 2014, compared to 4.31% for the fourth quarter of 2013. The decrease was primarily due to fewer accruing days in the current quarter compared to the fourth quarter of 2013. The operating net interest margin was relatively flat compared to the first quarter of 2013, decreasing only 2 basis points from 4.21%.

4


The following table shows the impact to interest income resulting from accretion of income on acquired loan portfolios as well as the net interest margin and operating net interest margin for the periods presented:
 
 
Three Months Ended
 
 
March 31, 2014
 
March 31, 2013
 
 
(dollars in thousands)
Incremental accretion income due to:
 
 
 
 
FDIC acquired impaired loans
 
$
6,489

 
$
8,375

Other FDIC acquired loans
 
204

 
1,070

Other acquired loans
 
5,615

 
—

Incremental accretion income
 
$
12,308

 
$
9,445

 
 
 
 
 
Reported net interest margin
 
4.85
%
 
5.06
%
Operating net interest margin (1)
 
4.19
%
 
4.21
%
__________
(1) Operating net interest margin is a non-GAAP financial measure. See section titled "Non-GAAP Financial Measures" on the last page of this earnings release for the reconciliation of operating net interest margin to net interest margin.
Impact of FDIC Acquired Loan Accounting
The following table illustrates the impact to earnings associated with Columbia's FDIC acquired loan portfolios:
FDIC Acquired Loan Activity
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31, 2014
 
March 31, 2013
 
 
(in thousands)
Incremental accretion income on FDIC acquired impaired loans
 
$
6,489

 
$
8,375

Incremental accretion income on other FDIC acquired loans
 
204

 
1,070

Recapture (provision) for losses on covered loans
 
(2,422
)
 
(980
)
Change in FDIC loss-sharing asset
 
(4,819
)
 
(10,483
)
Claw back liability expense
 
(204
)
 
(231
)
Pre-tax earnings impact
 
$
(752
)
 
$
(2,249
)
The incremental accretion income on FDIC acquired impaired loans 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, 2014, the accretable yield on acquired impaired loans was $101.5 million. The accretable yield represents 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 remeasured by Columbia on a quarterly basis.

5


The $2.4 million net provision for losses on covered loans in the current period is substantially offset by an 80%, or $1.9 million, benefit to the change in the FDIC loss-sharing asset, resulting in a negative net pre-tax earnings impact of $484 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 $4.8 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consists of $6.5 million of amortization expense and approximately $305 thousand of expense related to covered other real estate owned, partially offset by the $1.9 million adjustment described above.
First Quarter 2014 Results

Net Interest Income
Net interest income for the first quarter of 2014 was $73.9 million, an increase of $20.4 million from $53.5 million for the same quarter in 2013. The increase over the prior year period is primarily due to the interest and accretion income recorded during the first quarter of 2014 related to the West Coast acquisition, which closed on April 1, 2013. Compared to the fourth quarter of 2013, net interest income decreased $3.3 million from $77.2 million due to fewer accruing days in the current quarter, which negatively impacted net interest income by approximately $1.6 million, as well as lower rates on loans and $1.0 million less accretion recognized on the acquired loan portfolios.
Noninterest Income
Total noninterest income was $14.0 million for the first quarter of 2014, compared to $1.7 million for the first quarter of 2013. The increase from the prior year period was due to a $5.3 million increase in service charges and other fees resulting from the increased customer base from the acquisition of West Coast. In addition, , the expense recorded for the change in FDIC loss-sharing asset was $5.7 million less in the current quarter compared to the first quarter of 2013. Compared to the prior quarter, noninterest income before change in loss-sharing asset decreased $1.4 million, primarily due to $1.0 million of noninterest income recorded in the fourth quarter of 2013 related to the integration of a West Coast operating platform.

6


The change in the FDIC loss-sharing asset is a significant component of noninterest income. The following table reflects the income statement components of the change in the FDIC loss-sharing asset for the three month periods indicated:
 
 
Three Months Ended
 
 
March 31,
 
 
2014
 
2013
 
 
(in thousands)
Adjustments reflected in income
 
 
 
 
Amortization, net
 
(6,452
)
 
(9,779
)
Loan impairment
 
1,938

 
784

Sale of other real estate
 
(756
)
 
(1,346
)
Write-downs of other real estate
 
516

 
52

Other
 
(65
)
 
(194
)
Change in FDIC loss-sharing asset
 
$
(4,819
)
 
$
(10,483
)
Noninterest Expense
Total noninterest expense for the first quarter of 2014 was $57.4 million, an increase of $19.3 million, or 51% from $38.0 million for the same quarter in 2013. The increase from the prior year period was primarily due to additional ongoing noninterest expense stemming from the growth resulting from the West Coast acquisition. In addition, acquisition-related expenses were $966 thousand for the current quarter compared to $723 thousand for the prior year period.
Compared to the fourth quarter of 2013, noninterest expense decreased $6.2 million. The decrease was primarily due to the decline in acquisition-related costs, which were $966 thousand for the current period, compared to $7.9 million for the fourth quarter of 2013.
Clint Stein, Columbia's Chief Financial Officer, commented, “We continue to show improvement in our controllable expenses and that is evident in our current period financial results. With the West Coast integration behind us, we believe we can gain further operating efficiencies which, despite ongoing upward expense pressure, should allow us to make additional progress towards lowering our future expense run rate.”


7


Organizational Update
Melanie Dressel commented, “We continue to pursue initiatives designed to improve our operating efficiency without sacrificing our core value of providing customer satisfaction. We have completed the planned consolidations of overlapping locations as a result of the West Coast acquisition, and currently operate 140 branches throughout our footprint. We have also taken a strategic look at where our branches should be to best serve our customers efficiently and effectively. As a result, during the first quarter we relocated a branch in Bellevue and a branch in Federal Way to new locations. In addition, during the second quarter we will merge two of our Tacoma branches."
Conference Call
Columbia's management will discuss the first quarter 2014 results on a conference call scheduled for Thursday, April 24, 2014 at 1:00 p.m. PST (4:00 pm EST). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #22707799.

A conference call replay will be available from approximately 5:00 p.m. PST on April 24, 2014 through midnight PST on May 1, 2014. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #22707799.

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. For the seventh consecutive year, the bank was named in 2013 as one of Puget Sound Business Journal's "Washington's Best Workplaces."

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

8


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.


9



FINANCIAL STATISTICS
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
 
 
Unaudited
 
March 31,
 
 
 
 
 
2014
 
2013
 
 
 
Earnings
 
(dollars in thousands except per share amounts)
 
 
 
Net interest income
 
$
73,940

 
$
53,482

 
 
 
Recapture of provision for loan and lease losses
 
$
(500
)
 
$
(1,000
)
 
 
 
Provision for losses on covered loans, net (1)
 
$
2,422

 
$
980

 
 
 
Noninterest income
 
$
14,008

 
$
1,658

 
 
 
Noninterest expense
 
$
57,386

 
$
38,049

 
 
 
Acquisition-related expense (included in noninterest expense)
 
$
966

 
$
723

 
 
 
Net income
 
$
19,844

 
$
12,176

 
 
 
Per Common Share
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.38

 
$
0.31

 
 
 
Earnings (diluted)
 
$
0.37

 
$
0.31

 
 
 
Book value
 
$
20.39

 
$
19.32

 
 
 
Averages
 
 
 
 
 
 
 
Total assets
 
$
7,143,759

 
$
4,851,044

 
 
 
Interest-earning assets
 
$
6,244,692

 
$
4,336,978

 
 
 
Loans, including covered loans
 
$
4,537,107

 
$
2,962,559

 
 
 
Securities
 
$
1,682,370

 
$
1,051,657

 
 
 
Deposits
 
$
5,901,838

 
$
3,990,127

 
 
 
Core deposits
 
$
5,637,926

 
$
3,741,086

 
 
 
Interest-bearing deposits
 
$
3,772,370

 
$
2,740,100

 
 
 
Interest-bearing liabilities
 
$
3,868,060

 
$
2,771,743

 
 
 
Noninterest-bearing deposits
 
$
2,129,468

 
$
1,250,027

 
 
 
Shareholders' equity
 
$
1,067,353

 
$
768,390

 
 
 
Financial Ratios
 
 
 
 
 
 
 
Return on average assets
 
1.11
%
 
1.02
%
 
 
 
Return on average common equity
 
7.45
%
 
6.43
%
 
 
 
Average equity to average assets
 
14.94
%
 
15.84
%
 
 
 
Net interest margin
 
4.85
%
 
5.06
%
 
 
 
Efficiency ratio (tax equivalent)(2)
 
66.49
%
 
68.68
%
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
Period end
 
2014
 
2013
 
2013
 
Total assets
 
$
7,237,053

 
$
4,905,011

 
$
7,161,582

 
Covered assets, net
 
$
274,896

 
$
377,024

 
$
289,790

 
Loans, excluding covered loans, net
 
$
4,297,076

 
$
2,621,212

 
$
4,219,451

 
Allowance for noncovered loan and lease losses
 
$
50,442

 
$
51,119

 
$
52,280

 
Securities
 
$
1,671,594

 
$
1,033,783

 
$
1,696,640

 
Deposits
 
$
6,044,416

 
$
4,046,539

 
$
5,959,475

 
Core deposits
 
$
5,768,434

 
$
3,796,574

 
$
5,696,357

 
Shareholders' equity
 
$
1,074,491

 
$
769,660

 
$
1,053,249

 
Nonperforming, noncovered assets
 
 
 
 
 
 
 
Nonaccrual loans
 
$
36,397

 
$
32,886

 
$
34,015

 
Other real estate owned ("OREO") and other personal property owned ("OPPO")
 
15,924

 
12,000

 
23,918

 
Total nonperforming, noncovered assets
 
$
52,321

 
$
44,886

 
$
57,933

 
Nonperforming assets to period-end noncovered loans + OREO and OPPO
 
1.21
%
 
1.70
%
 
1.37
%
 
Nonperforming loans to period-end noncovered loans
 
0.85
%
 
1.25
%
 
0.81
%
 
Nonperforming assets to period-end noncovered assets
 
0.75
%
 
0.99
%
 
0.84
%
 
Allowance for loan and lease losses to period-end noncovered loans
 
1.17
%
 
1.95
%
 
1.24
%
 
Allowance for loan and lease losses to nonperforming noncovered loans
 
138.59
%
 
155.44
%
 
153.70
%
 
Net noncovered loan charge-offs
 
$
1,338

(3) 
$
125

(4) 
$
3,124

(5) 
 
 
 
 
 
 
 
 
(1) Provision(recapture) for losses on covered loans was partially offset by $1.9 million and $784 thousand in income recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended March 31, 2014 and 2013, respectively.
(2) Noninterest expense, excluding net benefit of operation of other real estate and other personal property, FDIC clawback liability and acquisition-related expenses, divided by the sum of (1)net interest income on a tax equivalent basis, excluding incremental accretion income on the acquired loan portfolio, premium amortization on acquired securities, interest reversals on nonaccrual loans, and prepayment expenses on FHLB advances, and (2)noninterest income on a tax equivalent basis, excluding gain/loss on investment securities and the change in FDIC loss-sharing asset.
(3) For the three months ended March 31, 2014.
 
 
 
 
 
 
 
(4) For the three months ended March 31, 2013.
 
 
 
 
 
 
 
(5) For the twelve months ended December 31, 2013.
 
 
 
 
 
 
 

10


FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
Unaudited
 
March 31,
 
December 31,
 
 
2014
 
2013
Loan Portfolio Composition
 
(dollars in thousands)
Noncovered loans:
 
 
 
 
 
 
 
 
Commercial business
 
$
1,601,676

 
37.3
 %
 
$
1,561,782

 
37.0
 %
Real estate:
 
 
 
 
 
 
 
 
One-to-four family residential
 
105,141

 
2.4
 %
 
108,317

 
2.6
 %
Commercial and multifamily residential
 
2,113,609

 
49.3
 %
 
2,080,075

 
49.2
 %
Total real estate
 
2,218,750

 
51.7
 %
 
2,188,392

 
51.8
 %
Real estate construction:
 
 
 
 
 
 
 
 
One-to-four family residential
 
57,310

 
1.3
 %
 
54,155

 
1.3
 %
Commercial and multifamily residential
 
130,809

 
3.0
 %
 
126,390

 
3.0
 %
Total real estate construction
 
188,119

 
4.3
 %
 
180,545

 
4.3
 %
Consumer
 
351,255

 
8.2
 %
 
357,014

 
8.5
 %
Subtotal loans
 
4,359,800

 
101.5
 %
 
4,287,733

 
101.6
 %
Less: Net unearned income
 
(62,724
)
 
(1.5
)%
 
(68,282
)
 
(1.6
)%
Total noncovered loans, net of unearned income
 
4,297,076

 
100.0
 %
 
4,219,451

 
100.0
 %
Less: Allowance for loan and lease losses
 
(50,442
)
 
 
 
(52,280
)
 
 
Noncovered loans, net
 
4,246,634

 
 
 
4,167,171

 
 
Covered loans, net of allowance for loan losses of ($20,129) and ($20,174), respectively
 
260,158

 
 
 
277,671

 
 
Total loans, net
 
$
4,506,792

 
 
 
$
4,444,842

 
 
Loans held for sale
 
$
—

 
 
 
$
735

 
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
2014
 
2013
Deposit Composition
 
(dollars in thousands)
Core deposits:
 
 
 
 
 
 
 
 
Demand and other non-interest bearing
 
$
2,225,212

 
36.8
 %
 
$
2,171,703

 
36.4
 %
Interest bearing demand
 
1,188,109

 
19.7
 %
 
1,170,006

 
19.6
 %
Money market
 
1,545,802

 
25.6
 %
 
1,569,261

 
26.3
 %
Savings
 
530,112

 
8.8
 %
 
496,444

 
8.3
 %
Certificates of deposit less than $100,000
 
279,199

 
4.6
 %
 
288,943

 
4.9
 %
Total core deposits
 
5,768,434

 
95.5
 %
 
5,696,357

 
95.5
 %
 
 
 
 
 
 
 
 
 
Certificates of deposit greater than $100,000
 
191,175

 
3.1
 %
 
201,498

 
3.5
 %
Certificates of deposit insured by CDARS®
 
19,380

 
0.3
 %
 
19,488

 
0.3
 %
Brokered money market accounts
 
65,138

 
1.1
 %
 
41,765

 
0.7
 %
Subtotal
 
6,044,127

 
100.0
 %
 
5,959,108

 
100.0
 %
Premium resulting from acquisition date fair value adjustment
 
289

 
 
 
367

 
 
Total deposits
 
$
6,044,416

 
 
 
$
5,959,475

 
 



11


FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
2014
 
2013
 
 
OREO
 
OPPO
 
OREO
 
OPPO
OREO and OPPO Composition
 
(in thousands)
Covered
 
$
14,712

 
$
26

 
$
12,093

 
$
26

Noncovered
 
15,840

 
84

 
23,834

 
84

Total
 
$
30,552

 
$
110

 
$
35,927

 
$
110

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
 
 
March 31,
 
 
 
 
2014
 
2013
 
 
 
 
OREO and OPPO Earnings Impact
 
(in thousands)
 
 
 
 
Net cost (benefit) of operation of noncovered OREO
 
$
327

 
$
(54
)
 
 
 
 
Net benefit of operation of covered OREO
 
(181
)
 
(2,447
)
 
 
 
 
Net cost (benefit) of operation of OREO
 
$
146

 
$
(2,501
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncovered OPPO benefit, net
 
$
(125
)
 
$
(104
)
 
 
 
 
Covered OPPO cost, net
 
1

 
—

 
 
 
 
OPPO benefit, net (1)
 
$
(124
)
 
$
(104
)
 
 
 
 
 
 
 
 
 
 
 
 
 
(1) OPPO benefit, net is included in Other noninterest expense in the Consolidated Statements of Income.

    


The following table shows a summary of FDIC acquired loan accounting for the five most recent quarters:
 
 
Three Months Ended
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2014
 
2013
 
2013
 
2013
 
2013
 
 
(in thousands)
Expense to pre-tax earnings (1)
 
$
(752
)
 
$
(1,248
)
 
$
(3,362
)
 
$
(3,149
)
 
$
(2,249
)
 
 
 
 
 
 
 
 
 
 
 
Balance sheet components:
 
 
 
 
 
 
 
 
 
 
Covered loans, net of allowance
 
$
260,158

 
$
277,671

 
$
302,160

 
$
338,661

 
$
363,213

Covered OREO
 
14,712

 
12,093

 
12,730

 
12,854

 
13,811

FDIC loss-sharing asset
 
36,837

 
39,846

 
53,559

 
67,374

 
83,115

 
 
 
 
 
 
 
 
 
 
 
(1) For details of the components of expense to pre-tax earnings related to FDIC acquired loan accounting, see previous table entitled "FDIC Acquired Loan Activity."


12


QUARTERLY FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2014
 
2013
 
2013
 
2013
 
2013
 
 
(dollars in thousands except per share)
Earnings
 
 
Net interest income
 
$
73,940

 
$
77,209

 
$
80,415

 
$
79,989

 
$
53,482

Provision (recapture) for loan and lease losses
 
$
(500
)
 
$
(2,100
)
 
$
4,260

 
$
2,000

 
$
(1,000
)
Provision (recapture) for losses on covered loans
 
$
2,422

 
$
(1,582
)
 
$
(947
)
 
$
(1,712
)
 
$
980

Noninterest income
 
$
14,008

 
$
10,612

 
$
7,622

 
$
6,808

 
$
1,658

Noninterest expense
 
$
57,386

 
$
63,619

 
$
64,714

 
$
64,504

 
$
38,049

Acquisition-related expense (included in noninterest expense)
 
$
966

 
$
7,910

 
$
7,621

 
$
9,234

 
$
723

Net income
 
$
19,844

 
$
19,973

 
$
13,276

 
$
14,591

 
$
12,176

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.38

 
$
0.39

 
$
0.26

 
$
0.28

 
$
0.31

Earnings (diluted)
 
$
0.37

 
$
0.38

 
$
0.25

 
$
0.28

 
$
0.31

Book value
 
$
20.39

 
$
20.50

 
$
20.35

 
$
20.07

 
$
19.32

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
7,143,759

 
$
7,192,084

 
$
7,048,864

 
$
7,110,957

 
$
4,851,044

Interest-earning assets
 
$
6,244,692

 
$
6,269,894

 
$
6,101,960

 
$
6,284,281

 
$
4,336,978

Loans, including covered loans
 
$
4,537,107

 
$
4,504,587

 
$
4,504,040

 
$
4,571,181

 
$
2,962,559

Securities
 
$
1,682,370

 
$
1,662,720

 
$
1,512,292

 
$
1,665,180

 
$
1,051,657

Deposits
 
$
5,901,838

 
$
6,003,657

 
$
5,837,018

 
$
5,824,802

 
$
3,990,127

Core deposits
 
$
5,637,926

 
$
5,735,099

 
$
5,558,246

 
$
5,526,238

 
$
3,741,086

Interest-bearing deposits
 
$
3,772,370

 
$
3,839,060

 
$
3,805,260

 
$
3,986,581

 
$
2,740,100

Interest-bearing liabilities
 
$
3,868,060

 
$
3,886,126

 
$
3,898,997

 
$
4,161,095

 
$
2,771,743

Noninterest-bearing deposits
 
$
2,129,468

 
$
2,164,597

 
$
2,031,758

 
$
1,838,221

 
$
1,250,027

Shareholders' equity
 
$
1,067,353

 
$
1,056,694

 
$
1,036,134

 
$
1,051,380

 
$
768,390

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.11
%
 
1.11
%
 
0.75
%
 
0.82
%
 
1.02
%
Return on average common equity
 
7.45
%
 
7.57
%
 
5.13
%
 
5.56
%
 
6.43
%
Average equity to average assets
 
14.94
%
 
14.69
%
 
14.70
%
 
14.79
%
 
15.84
%
Net interest margin
 
4.85
%
 
5.03
%
 
5.37
%
 
5.19
%
 
5.06
%
Efficiency ratio (tax equivalent)
 
66.49
%
 
64.83
%
 
66.59
%
 
65.54
%
 
68.68
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
7,237,053

 
$
7,161,582

 
$
7,150,297

 
$
7,070,465

 
$
4,905,011

Covered assets, net
 
$
274,896

 
$
289,790

 
$
314,898

 
$
351,545

 
$
377,024

Loans, excluding covered loans, net
 
$
4,297,076

 
$
4,219,451

 
$
4,193,732

 
$
4,181,018

 
$
2,621,212

Allowance for noncovered loan and lease losses
 
$
50,442

 
$
52,280

 
$
55,844

 
$
51,698

 
$
51,119

Securities
 
$
1,671,594

 
$
1,696,640

 
$
1,602,484

 
$
1,541,039

 
$
1,033,783

Deposits
 
$
6,044,416

 
$
5,959,475

 
$
5,948,967

 
$
5,747,861

 
$
4,046,539

Core deposits
 
$
5,768,434

 
$
5,696,357

 
$
5,662,958

 
$
5,467,899

 
$
3,796,574

Shareholders' equity
 
$
1,074,491

 
$
1,053,249

 
$
1,045,797

 
$
1,030,674

 
$
769,660

Nonperforming, noncovered assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
36,397

 
$
34,015

 
$
35,961

 
$
43,610

 
$
32,886

OREO and OPPO
 
15,924

 
23,918

 
23,641

 
24,423

 
12,000

Total nonperforming, noncovered assets
 
$
52,321

 
$
57,933

 
$
59,602

 
$
68,033

 
$
44,886

Nonperforming assets to period-end noncovered loans + OREO and OPPO
 
1.21
%
 
1.37
%
 
1.41
%
 
1.62
%
 
1.70
%
Nonperforming loans to period-end noncovered loans
 
0.85
%
 
0.81
%
 
0.86
%
 
1.04
%
 
1.25
%
Nonperforming assets to period-end noncovered assets
 
0.75
%
 
0.84
%
 
0.87
%
 
1.01
%
 
0.99
%
Allowance for loan and lease losses to period-end noncovered loans
 
1.17
%
 
1.24
%
 
1.33
%
 
1.24
%
 
1.95
%
Allowance for loan and lease losses to nonperforming noncovered loans
 
138.59
%
 
153.70
%
 
155.29
%
 
118.55
%
 
155.44
%
Net noncovered loan charge-offs
 
$
1,338

 
$
1,464

 
$
114

 
$
1,421

 
$
125


13


CONSOLIDATED STATEMENTS OF INCOME
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
March 31,
 
 
2014
 
2013
 
 
(in thousands except per share)
Interest Income
 
 
 
 
Loans
 
$
65,541

 
$
48,028

Taxable securities
 
6,752

 
4,234

Tax-exempt securities
 
2,618

 
2,298

Federal funds sold and deposits in banks
 
14

 
201

Total interest income
 
74,925

 
54,761

Interest Expense
 
 
 
 
Deposits
 
752

 
1,089

Federal Home Loan Bank advances
 
114

 
71

Other borrowings
 
119

 
119

Total interest expense
 
985

 
1,279

Net Interest Income
 
73,940

 
53,482

Recapture of provision for loan and lease losses
 
(500
)
 
(1,000
)
Provision for losses on covered loans, net
 
2,422

 
980

Net interest income after provision (recapture) for loan and lease losses
 
72,018

 
53,502

Noninterest Income
 
 
 
 
Service charges and other fees
 
12,936

 
7,594

Merchant services fees
 
1,870

 
1,851

Investment securities gains, net
 
223

 
370

Bank owned life insurance
 
965

 
698

Change in FDIC loss-sharing asset
 
(4,819
)
 
(10,483
)
Other
 
2,833

 
1,628

Total noninterest income
 
14,008

 
1,658

Noninterest Expense
 
 
 
 
Compensation and employee benefits
 
31,338

 
21,653

Occupancy
 
8,244

 
4,753

Merchant processing
 
980

 
857

Advertising and promotion
 
769

 
870

Data processing and communications
 
3,520

 
2,580

Legal and professional fees
 
2,169

 
2,050

Taxes, licenses and fees
 
1,180

 
1,387

Regulatory premiums
 
1,176

 
857

Net cost (benefit) of operation of other real estate
 
146

 
(2,501
)
Amortization of intangibles
 
1,580

 
1,029

Other
 
6,284

 
4,514

Total noninterest expense
 
57,386

 
38,049

Income before income taxes
 
28,640

 
17,111

Provision for income taxes
 
8,796

 
4,935

Net Income
 
$
19,844

 
$
12,176

Earnings per common share
 
 
 
 
Basic
 
$
0.38

 
$
0.31

Diluted
 
$
0.37

 
$
0.31

Dividends paid per common share
 
$
0.12

 
$
0.10

Weighted average number of common shares outstanding
 
51,097

 
39,348

Weighted average number of diluted common shares outstanding
 
52,433

 
39,351



14


CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
Unaudited
 
 
 
 
March 31,
 
December 31,
 
 
 
 
 
2014
 
2013
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
$
191,706

 
$
165,030

Interest-earning deposits with banks
 
45,083

 
14,531

Total cash and cash equivalents
 
236,789

 
179,561

Securities available for sale at fair value (amortized cost of $1,644,805 and $1,680,491, respectively)
 
1,639,370

 
1,664,111

Federal Home Loan Bank stock at cost
 
32,224

 
32,529

Loans held for sale
 
—

 
735

Loans, excluding covered loans, net of unearned income of ($62,724) and ($68,282), respectively
 
4,297,076

 
4,219,451

Less: allowance for loan and lease losses
 
50,442

 
52,280

Loans, excluding covered loans, net
 
4,246,634

 
4,167,171

Covered loans, net of allowance for loan losses of ($20,129) and ($20,174), respectively
 
260,158

 
277,671

Total loans, net
 
4,506,792

 
4,444,842

FDIC loss-sharing asset
 
36,837

 
39,846

Interest receivable
 
23,600

 
22,206

Premises and equipment, net
 
156,836

 
154,732

Other real estate owned ($14,712 and $12,093 covered by FDIC loss-share, respectively)
 
30,552

 
35,927

Goodwill
 
343,952

 
343,952

Other intangible assets, net
 
24,273

 
25,852

Other assets
 
205,828

 
217,289

Total assets
 
$
7,237,053

 
$
7,161,582

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
Deposits:
 
 
 
 
Noninterest-bearing
 
$
2,225,212

 
$
2,171,703

Interest-bearing
 
3,819,204

 
3,787,772

Total deposits
 
6,044,416

 
5,959,475

Federal Home Loan Bank advances
 
6,597

 
36,606

Securities sold under agreements to repurchase
 
25,000

 
25,000

Other liabilities
 
86,549

 
87,252

Total liabilities
 
6,162,562

 
6,108,333

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
 
 
 
 
2014
 
2013
 
 
 
 
Preferred stock (no par value)
 
 
 
 
 
 
 
Authorized shares
2,000

 
2,000

 
 
 
 
Issued and outstanding
9

 
9

 
2,217

 
2,217

Common stock (no par value)
 
 
 
 
 
 
 
Authorized shares
63,033

 
63,033

 
 
 
 
Issued and outstanding
52,600

 
51,265

 
861,125

 
860,562

Retained earnings
 
216,192

 
202,514

Accumulated other comprehensive loss
 
(5,043
)
 
(12,044
)
Total shareholders' equity
 
1,074,491

 
1,053,249

Total liabilities and shareholders' equity
 
$
7,237,053

 
$
7,161,582



15


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended March 31,
 
Three Months Ended March 31,
 
 
2014
 
2013
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, excluding covered loans, net (1) (3)
 
$
4,248,105

 
$
54,946

 
5.17
%
 
$
2,559,177

 
$
33,163

 
5.18
%
Covered loans, net (2)
 
289,002

 
10,952

 
15.16
%
 
403,382

 
14,992

 
14.87
%
Taxable securities
 
1,329,679

 
6,752

 
2.03
%
 
782,158

 
4,234

 
2.17
%
Tax exempt securities (3)
 
352,691

 
4,109

 
4.66
%
 
269,499

 
3,566

 
5.29
%
Interest-earning deposits with banks and federal funds sold
 
25,215

 
14

 
0.23
%
 
322,761

 
201

 
0.25
%
Total interest-earning assets
 
6,244,692

 
$
76,773

 
4.92
%
 
4,336,977

 
$
56,156

 
5.18
%
Other earning assets
 
126,924

 
 
 
 
 
80,604

 
 
 
 
Noninterest-earning assets
 
772,143

 
 
 
 
 
433,463

 
 
 
 
Total assets
 
$
7,143,759

 
 
 
 
 
$
4,851,044

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit
 
$
503,129

 
$
362

 
0.29
%
 
$
482,644

 
$
580

 
0.48
%
Savings accounts
 
513,911

 
13

 
0.01
%
 
326,760

 
16

 
0.02
%
Interest-bearing demand
 
1,168,708

 
109

 
0.04
%
 
839,716

 
179

 
0.09
%
Money market accounts
 
1,586,622

 
268

 
0.07
%
 
1,090,980

 
314

 
0.12
%
Total interest-bearing deposits
 
3,772,370

 
752

 
0.08
%
 
2,740,100

 
1,089

 
0.16
%
Federal Home Loan Bank advances
 
70,690

 
114

 
0.65
%
 
6,643

 
71

 
4.26
%
Other borrowings
 
25,000

 
119

 
1.90
%
 
25,000

 
119

 
1.90
%
Total interest-bearing liabilities
 
3,868,060

 
$
985

 
0.10
%
 
2,771,743

 
$
1,279

 
0.18
%
Noninterest-bearing deposits
 
2,129,468

 
 
 
 
 
1,250,028

 
 
 
 
Other noninterest-bearing liabilities
 
78,878

 
 
 
 
 
60,883

 
 
 
 
Shareholders’ equity
 
1,067,353

 
 
 
 
 
768,390

 
 
 
 
Total liabilities & shareholders’ equity
 
$
7,143,759

 
 
 
 
 
$
4,851,044

 
 
 
 
Net interest income
 
$
75,788

 
 
 
 
 
$
54,877

 
 
Net interest margin
 
4.85
%
 
 
 
 
 
5.06
%

(1)
Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on certain acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $983 thousand and $661 thousand for the three months ended March 31, 2014 and 2013, respectively. The accretion of net unearned discounts on certain acquired loans was $5.8 million and $1.1 million for the three months ended March 31, 2014 and 2013, respectively.
(2)
Incremental accretion on acquired impaired loans is included in covered loan interest earned. The incremental accretion income on acquired impaired loans was $6.5 million and $8.4 million for the three months ended March 31, 2014 and 2013, respectively.
(3)
Yields on a fully tax equivalent basis, based on a marginal tax rate of 35% for 2013 and 36% for 2014. The tax equivalent yield adjustment to interest earned on noncovered loans was $357 thousand and $127 thousand for the three months ended March 31, 2014 and 2013, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million and $1.3 million for the three months ended March 31, 2014 and 2013, respectively.


16


Non-GAAP Financial Measures

The Company considers operating net interest margin to be an important measurement as it more closely reflects the ongoing operating performance of the Company. Despite the importance of the operating net interest margin to the Company, there is no standardized definition for it and, as a result, the Company's calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of this measure to investors. As a result, the Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the operating net interest margin to the net interest margin:

 
 
Three Months Ended March 31,
 
 
2014
 
2013
 
 
 
 
 
Net interest margin
 
4.85
 %
 
5.06
 %
Adjustments to net interest margin to arrive at operating net interest margin:
 
 
 
 
Incremental accretion income on FDIC acquired impaired loans
 
(0.41
)%
 
(0.77
)%
Incremental accretion income on other FDIC acquired loans
 
(0.01
)%
 
(0.10
)%
Incremental accretion income on other acquired loans
 
(0.36
)%
 
—
 %
Premium amortization on acquired securities
 
0.10
 %
 
—
 %
Interest reversals on nonaccrual loans
 
0.02
 %
 
0.02
 %
Operating net interest margin
 
4.19
 %
 
4.21
 %
 

17