-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, A9scjiDKCQ+8vJHUYhH0EZCdoHKSWAUW6jNucD38kBj5p0ZkdA03OHp+/EwqJOPE 2uO0hVTFWYemVwX5Im5Aiw== 0000887343-97-000009.txt : 19970515 0000887343-97-000009.hdr.sgml : 19970515 ACCESSION NUMBER: 0000887343-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLUMBIA BANKING SYSTEM INC CENTRAL INDEX KEY: 0000887343 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 911422237 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20288 FILM NUMBER: 97605614 BUSINESS ADDRESS: STREET 1: 1102 BROADWAY PLAZA CITY: TACOMA STATE: WA ZIP: 98402 BUSINESS PHONE: 2063051900 MAIL ADDRESS: STREET 1: 1102 BROADWAY PLAZA CITY: TACOMA STATE: WA ZIP: 98402 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997. / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________. Commission File Number 0-20288 COLUMBIA BANKING SYSTEM, INC. (Exact name of small business issuer as specified in its charter) Washington 91-1422237 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1102 Broadway Plaza Tacoma, Washington 98402 (Address of principal executive offices) (Zip Code) (206) 305-1900 (Issuer's telephone number, including area code) (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the issuer: (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 X No The number of shares of the issuer's Common Stock outstanding at April 30, 1997 was 5,225,578. TABLE OF CONTENTS PART I -- FINANCIAL INFORMATION Page Item 1. Financial statements Consolidated Statements of Operations - three months ended March 31, 1997 and 1996 2 Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 3 Consolidated Statements of Shareholders' Equity - twelve months ended December 31, 1996 and three months ended March 31, 1997 4 Consolidated Statements of Cash Flows - three months ended March 31, 1997 and 1996 5 Notes to consolidated financial statements 6 Item 2. Management Discussion and Analysis of Financial 8 Condition and Results of Operations PART II -- OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K 16 Signatures 16 1 CONSOLIDATED STATEMENTS OF OPERATIONS Columbia Banking System, Inc.
Three Months Ended March 31, (in thousands except per share) 1997 1996 - ----------------------------------------------------------------------------- Interest Income Loans $10,293 $ 8,198 Securities available for sale 683 410 Deposits with banks 377 178 - ----------------------------------------------------------------------------- Total interest income 11,353 8,786 Interest Expense Deposits 4,649 3,795 Federal Home Loan Bank advances 430 437 Other borrowings 64 - ----------------------------------------------------------------------------- Total interest expense 5,079 4,296 - ----------------------------------------------------------------------------- Net Interest Income 6,274 4,490 Provision for loan losses 400 330 - ----------------------------------------------------------------------------- Net interest income after provision for loan losses 5,874 4,160 Noninterest Income Service charges and other fees 727 551 Mortgage banking 93 160 Credit card fees and other 670 454 - ----------------------------------------------------------------------------- Total noninterest income 1,490 1,165 Noninterest Expense Compensation and employee benefits 2,638 1,819 Occupancy 879 816 Professional services 112 124 Advertising and promotion 221 180 Printing and supplies 155 89 Regulatory premiums and assessments 39 64 Data processing 269 158 Gains on, and net cost of, real estate owned (3) Other 1,575 1,267 - ----------------------------------------------------------------------------- Total noninterest expense 5,885 4,517 - ----------------------------------------------------------------------------- Income before income taxes 1,479 808 Provision for income taxes 426 - ----------------------------------------------------------------------------- Net Income $ 1,053 $ 808 ============================================================================= Per share (on average shares outstanding): Net Income $ 0.19 $ 0.22 Fully diluted net income 0.19 0.22 Average number of common and common equivalent shares outstanding 5,604 3,720 Fully diluted average common and common equivalent shares oustanding 5,609 3,986 See accompanying notes to consolidated financial statements.
2 CONSOLIDATED BALANCE SHEETS Columbia Banking System, Inc.
March 31, December 31, (in thousands) 1997 1996 - ----------------------------------------------------------------------------- Assets Cash and due from banks $ 27,522 $ 32,092 Interest-earning deposits with banks 28,069 38,086 Securities available for sale: U.S. Treasury & Government Agencies 30,467 30,481 Mortgage-backed 10,334 10,760 FHLB stock 4,324 4,248 - ----------------------------------------------------------------------------- Total securities available for sale 45,125 45,489 Loans held for sale 11,503 11,341 Loans 476,607 446,095 Less: allowance for loan losses 4,806 4,504 - ----------------------------------------------------------------------------- Loans, net 471,801 441,591 Interest Receivable 3,450 3,347 Premises and equipment, net 18,736 15,250 Real estate owned 260 40 Other 2,041 1,680 - ----------------------------------------------------------------------------- Total Assets $608,507 $588,916 ============================================================================= Liabilities and Shareholders' Equity Deposits: Noninterest-bearing $ 91,512 $ 83,983 Interest-bearing 430,407 409,239 - ----------------------------------------------------------------------------- Total Deposits 521,919 493,222 Federal Home Loan Bank advances 22,000 32,000 Other liabilities 4,582 4,734 - ---------------------------------------------------------------------------- Total liabilities 548,501 529,956 Shareholders' equity: Preferred stock (no par value) Authorized, 2,000,000 shares; None outstanding March 31, December 31, Common stock (no par value) 1997 1996 --------- ---------- Authorized shares 10,000 10,000 Issued and outstanding 5,207 5,185 56,446 56,340 Retained Earnings 3,747 2,694 Unrealized losses on securities available for sale, net of tax (187) (74) - ----------------------------------------------------------------------------- Total shareholders' equity 60,006 58,960 - ----------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $608,507 $588,916 =============================================================================
See accompanying notes to consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Columbia Banking System, Inc.
Common stock Unrealized Total Number of Retained Gains and Shareholders' (in thousands) Shares Amount Earnings (Losses) Equity - ----------------------------------------------------------------------------- Balance at December 31, 1995 3,274 $30,806 $1,274 ($113) $31,967 Net income 3,577 3,577 Issuance of shares of common stock, net 1,492 20,868 20,868 Issuance of shares of common stock - 5% stock dividend 164 2,157 (2,157) Conversion of Convertible Subordinated Notes 255 2,509 2,509 Change in unrealized gains and (losses) 39 39 - ----------------------------------------------------------------------------- Balance at December 31, 1996 5,185 56,340 2,694 (74) 58,960 Net income 1,053 1,053 Issuance of shares of common stock, net 22 106 106 Change in unrealized gains and (losses),net of tax (113) (113) - ----------------------------------------------------------------------------- Balance at March 31, 1997 5,207 $56,446 $3,747 ($187) $60,006 =============================================================================
See accompanying notes to consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF CASH FLOWS Columbia Banking System, Inc.
Three Months Ended March 31, (in thousands) 1997 1996 - ----------------------------------------------------------------------------- Operating Activities Net income $ 1,053 $ 808 Adjustments to reconcile net income to net cash provided (used) by operating activities: Provision for loan losses 400 330 Losses on real estate owned 3 41 Depreciation and amortization 600 464 Deferred income taxes 186 Net realized losses (gains) on sale of investments (4) 40 Increase in loans held for sale (162) (1,178) Increase in interest receivable (103) (48) Increase in interest payable 175 49 Net changes in other assets and liabilities (797) (1,017) - ----------------------------------------------------------------------------- Net cash provided (used) by operating activities 1,351 (511) Investing Activities Proceeds from maturities of securities available for sale 21 207 Purchases of securities available for sale (271) (10,626) Proceeds from maturities of mortgage-backed securities available for sale 385 333 Loans originated and acquired, net of principal collected (31,014) (17,201) Purchases of premises and equipment (3,899) (275) Proceeds from disposal of premises and equipment 5 140 Proceeds from sale of real estate owned 32 3,263 - ----------------------------------------------------------------------------- Net cash used by investing activities (34,741) (24,159) Financing Activities Net increase in deposits 28,967 23,854 Proceeds from FHLB advances and other long-term debt 10,000 Repayment of FHLB advances and other long-term debt (10,000) Proceeds from issuance of common stock 106 53 - ----------------------------------------------------------------------------- Net cash provided by financing activities 18,803 33,907 - ----------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (14,587) 9,237 Cash and cash equivalents at beginning of period 70,178 30,879 - ----------------------------------------------------------------------------- Cash and cash equivalents at end of period $ 55,591 $ 40,116 ============================================================================= Supplemental information: Cash paid for interest $ 4,904 $ 4,246 Loans foreclosed and transferred to real estate owned 260 Issuance of common stock from conversion of convertible subordinated notes 14 See accompanying notes to consolidated financial statements.
5 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Columbia Banking System, Inc. 1. Basis of Presentation The interim unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments including normal recurring accruals necessary for a fair presentation of results of operations for the interim periods included herein have been made. The results of operations for the three months ended March 31, 1997, are not necessarily indicative of results to be anticipated for the year ending December 31, 1997. Certain amounts in the 1996 financial statements have been reclassified to conform with the 1997 presentation. For additional information, refer to the consolidated financial statements and footnotes thereto included in the Columbia Banking System's (the Company) annual report on Form 10-K for the year ended December 31, 1996. 2. Summary of Significant Accounting Changes In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). The statement is effective for years ending after December 15, 1997, for both interim and annual periods, and replaces the presentation of primary and fully diluted earnings per share with a presentation of basic and diluted earnings per share. The adoption of this Statement is not expected to have a material impact on earnings per share reported by the Company. 3. Sale of Bank Card Operations During the first quarter, the Company signed an agreement to sell its VISA card operation and related loan portfolio to The Columbus Bank and Trust Company. The sale, which closed on April 7, 1997, will result in a one-time gain of approximately $1.0 million. The sale of the business is not expected to have a material effect on results of operations in future periods. The proceeds of the sale will be invested principally in loans to local businesses and consumers. 4. Subsequent Event - Stock Dividend On April 23, 1997, the Company announced a 5% stock dividend payable on May 22, 1997, to shareholders of record on May 8, 1997. Average shares outstanding, net income per share and book value per share have been adjusted to give retroactive effect to all periods presented. 6 CONSOLIDATED AVERAGE BALANCES--NET CHANGES Columbia Banking System, Inc.
Three Months Ended Increase March 31, (Decrease) (in thousands) 1997 1996 Amount - -------------------------------------------------------------------------------- ASSETS Loans $469,076 $364,528 $104,548 Securities 45,323 28,748 16,575 Interest-earning deposits with banks 29,160 13,236 15,924 - -------------------------------------------------------------------------------- Total interest-earning assets 543,559 406,512 137,047 Noninterest-earning assets 41,075 29,073 12,002 - -------------------------------------------------------------------------------- Total assets $584,634 $435,585 $149,049 ================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing deposits $412,797 $316,817 $ 95,980 Federal Home Loan Bank advances 30,778 31,295 (517) Convertible subordinated notes 2,684 (2,684) - -------------------------------------------------------------------------------- Total interest-bearing liabilities $443,575 350,796 92,779 Noninterest-bearing deposits 77,578 49,837 27,741 Other noninterest-bearing liabilities 3,758 2,951 807 Shareholders' Equity 59,723 32,001 27,722 - -------------------------------------------------------------------------------- Total liabilities and shareholders'equity $584,634 $435,585 $149,049 ================================================================================
7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Columbia Banking System, Inc. This discussion contains certain forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of certain events could differ materially from those projected in the forward-looking statements due to a number of factors. Earnings Summary Net income for the three months ended March 31, 1997 was $1.1 million, or $0.19 per share, compared to $808,000, or $0.22 per share, for the same period in 1996, an increase in net income of 30.3%. The increase in net income was primarily due to increased revenue resulting from continued loan and deposit growth. While net income increased, earnings per share decreased 13.6% reflecting the issuance of 1.445 million shares of Common Stock in the fourth quarter of 1996. During 1996, the Company benefited from utilization of its net operating loss carryforwards for federal income tax purposes. Therefore, the Company had no federal income tax provision for the three months ended March 31, 1996. Had the earnings been fully taxed, net income for the three months ended March 31, 1996 would have been approximately $520,000 or $0.15 per share. On a comparable fully taxed basis, net income increased to $1,053,000 in the first quarter of 1997, from $520,000 for the first quarter of 1996, an increase of $533,000 or 103%. Income before income taxes for the first quarter of 1997 was $1.5 million, an increase of 86% over $808,000 for the same period one year ago. The Company's goal is to create, over the next several years, a well-capitalized, customer focused, Pacific Northwest commercial banking institution with a significant presence in selected markets and total assets in excess of $1.0 billion. The Company intends to effect this growth strategy through a combination of growth at existing branch offices, new branch openings (usually following the hiring of an experienced branch manager and/or lending officer with strong community ties and banking relationships) and acquisitions. In particular, the Company anticipates continued expansion in Pierce County, north into King County (the location of Seattle and Bellevue) and south into Thurston County (the location of the state capital, Olympia). In order to fund its commercial and consumer lending activities and to allow for increased contact with customers, the Company is establishing a branch system catering primarily to retail depositors, supplemented by business banking customer deposits and other borrowings. The Company believes this mix of funding sources will enable it to expand its commercial lending activities rapidly while attracting a stable core deposit base. During the first quarter of 1997, the Company opened a second Bellevue branch and a new branch in Kent. Columbia Bank has opened 14 branch locations since beginning its major Pierce County expansion in August 1993, and now has 18 branches, 3 in Cowlitz County, 4 in King County and 11 in Pierce County. The Company has regulatory approval to open three additional branches in Pierce County and one in King County. During 1997, the Company anticipates the establishment of new branches and the relocation of the Spanaway, Edgewood, and Kent branches from temporary to permanent facilities. New branches normally do not contribute to net income for many months after opening. 8 Net Interest Income Net interest income for the first quarter of 1997 increased to $6.3 million, or 39.7%, from $4.5 million in the first quarter of 1996. The increase in net interest income in the first quarter of 1997 is largely due to the overall growth of the Company. Net interest income was favorably affected by average interest-earning assets increasing more rapidly than average interest-bearing liabilities, with the difference funded by noninterest-bearing deposits and shareholders' equity. Average interest-earning assets increased $137.0 million, while average interest-bearing liabilities increased $92.8 million compared with the same period in 1996. Net interest margin (net interest income divided by average interest-earning assets) increased to 4.68% in the first quarter of 1997 from 4.43% in the first quarter of 1996. The increase in net interest margin is primarily the result of the growth in earning assets at increased spreads. While interest-earning assets grew, the average yield decreased 0.20% to 8.47% for the first quarter of 1997 from 8.67% in the same period of 1996. The average cost of interest-bearing liabilities decreased 0.27% to 4.64% for the first quarter of 1997 from 4.91% in the same period of 1996. Noninterest Income and Expense Total noninterest income increased $325,000, or 27.9%, in the first quarter of 1997, compared with the same period in 1996. Increases in noninterest income in the first quarter of 1997 were made up of account service charges, and bank card revenue. Total noninterest expense increased $1.4 million, or 30.3% in the first quarter of 1997, compared with the same period in 1996. The increase is primarily due to expenses associated with the expansion of Columbia Bank. Total noninterest expense was 75.8% and 79.9% of total revenues (the sum of net interest income plus noninterest income less nonrecurring gains) for the first quarter of 1997 and 1996, respectively. Increases in noninterest expense are centered in compensation (offset in part by deferrals related to loan originations), occupancy, advertising, printing and supplies, data processing and other expense. In general, increases in noninterest expense are due to the growth of the Company, establishment of branches, and the associated "volume driven" expenses. Total noninterest expense for the Company is expected to decline in relation to revenues as the Company pursues its commitment to more efficient operations and as projected asset growth materializes. During the first quarter, the Company signed an agreement to sell its VISA card operation and related loan portfolio to The Columbus Bank and Trust Company. The sale, which closed on April 7, 1997, will result in a one-time gain of approximately $1.0 million. The sale of the business is not expected to have a material effect on results of operations in future periods. Noninterest income and expense levels will decline in future periods as a result of the sale of the card operations. For the first quarter, VISA card operations recorded $107,000 of noninterest income and $66,000 of noninterest expense. The proceeds of the sale will be invested principally in loans to local businesses and consumers. 9 Income Taxes Prior to December 31, 1996, for federal income tax purposes, the Company had net operating loss ("NOL") carryforwards. The carryforwards were used, subject to certain restrictions and limitations, to offset taxable income and the tax liability of the Company. At December 31, 1996, all available NOL carryforwards had been utilized to offset taxable income and the Company is now fully taxable. For the first quarter of 1997, the Company recorded an income tax provision of $426,000. Lending Activities The Company originates a wide variety of loans. Consistent with the trend beginning in 1993, the Company continues to increase commercial business loans and consumer loans as a percentage of its total loan portfolio. The Company also emphasizes its private banking services to high income and high net worth individuals. Loan Portfolio The following table sets forth at the dates indicated the Company's loan portfolio composition by type of loan:
March 31, % of December 31, % of (in thousands) 1997 Total 1996 Total - ----------------------------------------------------------------------------- Commercial $188,069 39.5% $169,318 38.0% Real estate: One-to four-family residential 59,065 12.4 67,709 15.1 Five or more family residential and commercial properties 141,255 29.6 128,803 28.9 - ----------------------------------------------------------------------------- Total real estate 200,320 42.0 196,512 44.0 Real estate construction: One-to four-family residential 19,105 4.0 21,380 4.8 Five or more family residential and commercial properties 18,103 3.8 10,680 2.4 - ----------------------------------------------------------------------------- Total real estate construction 37,208 7.8 32,060 7.2 Consumer 51,744 10.9 48,807 10.9 - ----------------------------------------------------------------------------- Sub-total loans 477,340 100.2 446,697 100.1 Less: Deferred loan fees (734) (0.2) (602) (0.1) - ----------------------------------------------------------------------------- Total loans $476,607 100.0% $446,095 100.0% ============================================================================= Loans held for sale $ 11,503 $ 11,341 =============================================================================
Total loans increased $30.5 million, or 6.8%, to $476.6 million from year-end 1996. All categories contributed to the increase except for the one- to four-family residential category which experiences seasonal declines during the first quarter. 10 Commercial and Private Banking Lending Commercial loans increased to $188.1 million at March 31, 1997, representing 39.5% of total loans, from $169.3 million at December 31, 1996. This increase reflects management's commitment to provide competitive commercial lending in the Company's primary market area. The Company expects to continue to expand its commercial lending products and emphasize in particular its relationship banking with businesses, business owners and professional individuals. Real Estate Lending One- to Four-Family Residential Real Estate Lending. Residential one- to four-family loans amounted to $59.1 million at March 31, 1997, representing 12.4% of total loans, compared to $67.7 million at December 31, 1996. These loans are used by the Company to collateralize advances from the FHLB. The Company's underwriting standards require that one- to four-family portfolio loans generally be owner-occupied and that loan amounts not exceed 80% (90% with private mortgage insurance) of the appraised value or cost, whichever is lower, of the underlying collateral at origination. Generally, management's policy is to originate for sale to third parties residential loans secured by properties located within the Company's primary market areas. Multi-family and Commercial Real Estate Lending. The Company makes multi-family and commercial real estate loans in its primary market areas. Multi-family and commercial real estate lending increased to $141.3 million at March 31, 1997, representing 29.6% of total loans, from $128.8 million at December 31, 1996. The Company's underwriting standards generally require that the loan-to-value ratio for multi-family and commercial loans not exceed 75% of appraised value or cost, whichever is lower, and that commercial properties maintain debt coverage ratios (net operating income divided by annual debt servicing) of 1.2 or better. Construction Lending. One- to Four-Family Residential Real Estate Construction Lending. The Company originates one- to four-family residential construction loans for the construction of custom homes (where the home buyer is the borrower) and provides financing to builders for the construction of pre-sold homes and speculative residential construction. The Company endeavors to limit its construction lending risk through adherence to strict underwriting procedures. Construction loans on one- to four-family residences decreased to $19.1 million at March 31, 1997, representing 4.0% of total loans, from $21.4 million at December 31, 1996. Multi-family and Commercial Real Estate Construction Lending. Multi-family and commercial real estate construction loans increased $7.4 million to $18.1 million at March 31, 1997, representing 3.8% of total loans, from $10.7 million at December 31, 1996. Consumer Lending. At March 31, 1997, the Company had $51.7 million of consumer loans outstanding, representing 10.9% of total loans, as compared with $48.8 million at December 31, 1996. Consumer loans made by the Company include automobile loans, boat and recreational vehicle financing, home equity and home improvement loans and miscellaneous personal loans. At March 31, 1997, the Company had no foreign loans or loans related to highly leveraged transactions. 11 Nonperforming Assets The following table sets forth at the dates indicated an analysis of the composition of the Company's nonperforming assets:
March 31, December 31, (in thousands) 1997 1996 - ----------------------------------------------------------------------------- Nonaccrual: One-to four-family residential $1,095 $1,645 Commercial land 61 Commercial business 400 385 Consumer 165 197 - ----------------------------------------------------------------------------- Total $1,721 $2,227 - ----------------------------------------------------------------------------- Restructured: One-to four-family residential $ 24 $ 25 - ----------------------------------------------------------------------------- Total $ 24 $ 25 - ----------------------------------------------------------------------------- Total nonperforming loans $1,745 $2,252 ============================================================================= Real estate owned: One-to four-family residential construction $ 260 Five or more family residential and commercial properties $ 40 - ----------------------------------------------------------------------------- Total $ 260 $ 40 ============================================================================= Total nonperforming assets $2,005 $2,292 =============================================================================
The policy of the Company generally is to discontinue the accrual of interest on all loans past due 90 days or more and place them on nonaccrual status. Nonperforming loans decreased to $1.7 million, or 0.37% of total loans (excluding loans held for sale), at March 31, 1997 from $2.3 million, or 0.51% of total loans at December 31, 1996 due principally to the reduction of nonperforming loans secured by real estate. During the first quarter of 1997, the Company foreclosed on $260,000 of loans collaterlalized by real estate and transferred them to real estate owned. Total nonperforming assets decreased to $2.0 million, or 0.33% of period-end assets at March 31, 1997 from $2.3 million, or 0.39% of period-end assets at December 31, 1996. 12 Analysis of Allowance for Loan Losses The allowance for loan losses is maintained at a level considered by management to be adequate to provide for anticipated loan losses based on management's assessment of various factors affecting the loan portfolio. This includes a review of problem loans, business conditions and loss experience, and overall evaluation of the quality of the underlying collateral, holding and disposal costs and costs of capital. The allowance is increased by provisions charged to operations, and is reduced by loans charged off, net of recoveries. While management believes that it uses reasonable information to determine the allowance for loan losses, unforeseen market conditions could result in adjustments to the allowance for loan losses, and net income could be significantly affected, if circumstances differ substantially from the assumptions used in determining the allowance. The allowance for loan losses at March 31, 1997 remained at 1.01% of loans (excluding loans held for sale at each date), the same as at December 31, 1996. Although the allowance for loan losses increased by $302,000 during the first quarter of 1997, a $36,000 increase in net loan charge-offs compared with the first quarter of 1996 and a $30.5 million, or 6.8%, increase in loans since year-end 1996 left the ratio unchanged. Net loan charge-offs amounted to $99,000 for the first quarter of 1997 compared with net loan charge-offs of $63,000 for the same period in 1996. The Company's provision for loan losses was $400,000 for the first quarter of 1997, compared with $330,000 for the first quarter of 1996. The following table sets forth at the dates indicated the changes in the Company's allowance for loan losses:
Three Months Ended March 31, (in thousands) 1997 1996 - ---------------------------------------------------------------------------- Beginning balance $4,504 $3,748 Charge offs: Commercial business (26) Consumer (117) (39) - ---------------------------------------------------------------------------- Total charge-offs (117) (65) Recoveries: Commercial business 18 2 Consumer 1 - ---------------------------------------------------------------------------- Total recoveries 19 2 - ---------------------------------------------------------------------------- Net (charge-offs) recoveries (99) (63) Provision charged to expense 400 330 - ---------------------------------------------------------------------------- Ending balance $4,806 $4,015 ============================================================================
13 Liquidity and Sources of Funds The Company's primary sources of funds are customer deposits, brokered deposits and advances from Federal Home Loan Bank of Seattle (the "FHLB"). These funds, together with loan repayments, loan sales, retained earnings, equity and other borrowed funds, are used to make loans, to acquire securities and other assets and to fund continuing operations. Deposit Activities The Company's deposit products include a wide variety of transaction accounts, savings accounts and certificates of deposit. Total deposits increased 5.8% to $521.9 million at March 31, 1997, from $493.2 million at December 31, 1996. To fund the growth of the Company, management's strategy has been to make use of brokered and other wholesale deposits while working to build core deposits as rapidly as possible through the Company's development of commercial banking relationships and its branch network. The Company's use of brokered and other wholesale deposits has decreased since year-end 1996, though management anticipates continued, and perhaps increasing, use of such deposits to fund increasing loan demand. The deposit increase of $28.7 million during the first quarter of 1997 occurred entirely in "core deposits". Brokered and other wholesale deposits (excluding public deposits) decreased $17.6 million to $12.7 million, or 2.4% of total deposits, at March 31, 1997, from $30.3 million, or 6.1% of total deposits, at December 31, 1996. Borrowings The Company relies on advances from the FHLB to supplement its funding sources. FHLB advances decreased $10.0 million during the first quarter of 1997 to $22.0 million. FHLB advances are secured by one- to four-family real estate mortgages and certain other assets. 14 Capital Shareholders' equity at March 31, 1997 was $60.0 million compared with $59.0 million at December 31, 1996. The increase is due to improved net income during the first quarter of 1997. Shareholders' equity was 9.9% and 10.0% of total period-end assets at March 31, 1997 and December 31, 1996, respectively. Banking regulations require bank holding companies and banks to maintain a minimum "leverage" ratio of core capital to adjusted quarterly average total assets of at least 3%. At March 31, 1997, the Company's leverage ratio was 10.27%, compared with 10.62% at December 31, 1996. In addition, banking regulators have adopted risk-based capital guidelines, under which risk percentages are assigned to various categories of assets and off-balance sheet items to calculate a risk-adjusted capital ratio. Tier I capital generally consists of common shareholders' equity (which does not include unrealized gains and losses on securities), less goodwill and certain identifiable intangible assets, while Tier II capital includes the allowance for loan losses and subordinated debt, both subject to certain limitations. Regulatory minimum risk-based capital guidelines require Tier I capital of 4% of risk-adjusted assets and total capital (combined Tier I and Tier II) of 8%. The Company's Tier I and total capital ratios were 12.11% and 13.08%, respectively, at March 31, 1997, compared with 12.81% and 13.79%, respectively, at December 31, 1996. During 1992, the Federal Deposit Insurance Corporation (the "FDIC") published the qualifications necessary to be classified as a "well-capitalized" bank, primarily for assignment of FDIC insurance premium rates beginning in 1993. To qualify as "well-capitalized," banks must have a Tier I risk-adjusted capital ratio of at least 6%, a total risk-adjusted capital ratio of at least 10%, and a leverage ratio of at least 5%. Columbia Bank qualified as "well-capitalized" at March 31, 1997. Federal laws generally bar institutions which are not well-capitalized from accepting brokered deposits. The FDIC has issued rules which prohibit under-capitalized institutions from soliciting or accepting such deposits. Adequately capitalized institutions are allowed to solicit such deposits, but only to accept them if a waiver is obtained from the FDIC. Applicable federal and Washington state regulations restrict capital distributions by institutions such as Columbia Bank, including dividends. Such restrictions are tied to the institution's capital levels after giving effect to distributions. The Company's ability to pay cash dividends is substantially dependent upon receipt of dividends from the Bank. The Company presently intends to retain earnings to support anticipated growth. Accordingly, the Company does not intend to pay cash dividends on its common stock in the foreseeable future. On April 23, 1997, the Company announced a 5% stock dividend payable on May 22, 1997, to shareholders of record on May 8, 1997. Average shares outstanding, net income per share and book value per share have been adjusted to give retroactive effect to all periods presented. The retroactive impact on earnings per share for the three months ended March 31, 1997 and 1996, is a reduction of $.01 per share. 15 PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits See Exhibit 3 - Restated Bylaws of the Company See Exhibit 11 - Computation of Fully Diluted Earnings per Common Share See Exhibit 27 - Financial Data Schedule (b) On March 14, 1997, the Company filed a Form 8-K/A, Amendment No.1 to Form 8-K filed March 5, 1997 announcing a change in the Company's Certifying Accountant. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COLUMBIA BANKING SYSTEM, INC. (Registrant) Date May 9, 1997 By /s/ A. G. Espe ----------------------------- ----------------------------- A. G. Espe Chairman and Chief Executive Officer Date May 9, 1997 By /s/ Gary R. Schminkey ----------------------------- ----------------------------- Gary R. Schminkey Senior Vice President and Chief Financial Officer (Principal Financial Officer) 16 Exhibit 3 RESTATED BYLAWS OF COLUMBIA BANKING SYSTEM, INC. February 26, 1997 TABLE OF CONTENTS Page ARTICLE 1 - MEETINGS OF SHAREHOLDERS 1 Section 1.1 - Shareholder Meetings 1 Section 1.2 - Annual Meeting 1 Section 1.3 - Special Meetings 1 Section 1.4 - Notice 1 Section 1.5 - Quorum 2 Section 1.6 - Adjournment 2 Section 1.7 - Chairman of Meeting 2 Section 1.8 - Secretary of Meeting 2 Section 1.9 - Conduct of Meetings 2 Section 1.10 - Consent to Action 2 Section 1.11 - Proxies 2 Section 1.12 - Shareholder Advisor 3 Section 1.13 - Recording of Proceedings 3 Section 1.14 - Record Date 3 Section 1.15 - List of Shareholders 3 ARTICLE 2 - DIRECTORS 4 Section 2.1 - Management of Corporation 4 Section 2.2 - Number of Directors 4 Section 2.3 - Qualifications and Nominations of Directors 4 Section 2.4 - Annual Meetings 4 Section 2.5 - Place of Meetings 4 Section 2.6 - Regular Meetings 4 Section 2.7 - Special Meetings 4 Section 2.8 - Notices 4 Section 2.9 - Quorum 5 Section 2.10 - Attendance by Conference Telecommunication 5 Section 2.11 - Consent to Action 5 Section 2.12 - Compensation 5 Section 2.13 - Manifestation of Dissent 6 i ARTICLE 3 - COMMITTEES OF THE BOARD OF DIRECTORS 6 Section 3.1 - Executive Committee 5 Section 3.2 - Audit Committee 6 Section 3.3 - Other Committees 7 Section 3.4 - Rules of Procedure 7 ARTICLE 4 - OFFICERS AND EMPLOYEES 7 Section 4.1 - Officers 7 Section 4.2 - Election 7 Section 4.3 - Removal and Vacancy 8 Section 4.4 - Compensation 8 Section 4.5 - Exercise of Rights as Stockholders 8 Section 4.6 - Duties of Chairman of the Board 8 Section 4.7 - Duties of Vice Chairman 9 Section 4.8 - Duties of President 9 Section 4.9 - Duties of Vice President 9 Section 4.10 - Duties of Secretary 9 Section 4.11 - Duties of Treasurer 9 Section 4.11 - Other Officers 9 Section 4.12 - Clerks and Agents 10 ARTICLE 5 - SHARES AND CERTIFICATES FOR SHARES 10 Section 5.1 - Consideration 10 Section 5.2 - Stock Certificates 10 Section 5.3 - Lost Certificates 10 Section 5.4 - Transfer of Shares 11 Section 5.5 - Holder of Record 11 Section 5.6 - Issuance of Shares 11 Section 5.7 - Subscriptions 11 Section 5.8 - Payment of Subscriptions 11 Section 5.9 - Default in Payment of Subscriptions 12 ARTICLE 6 - SEAL 12 Section 6.1 - Corporate Seal 12 ARTICLE 7 - MISCELLANEOUS PROVISIONS 12 Section 7.1 - Fiscal Year 12 Section 7.2 - Records 12 ii ARTICLE 8 - BYLAWS 13 Section 8.1 - Inspection 13 Section 8.2 - Amendments 13 iii RESTATED BYLAWS OF COLUMBIA BANKING SYSTEM, INC. ARTICLE 1 Meetings of Shareholders SECTION 1.1 - Shareholder Meetings. Shareholder meetings shall be held at the principal office of the corporation, or at such other location within or without the State of Washington as shall be determined by the Board of Directors and stated in the Notice of Meeting. SECTION 1.2 - Annual Meeting. The regular annual meeting of the shareholders for the election of directors and for the transaction of such other business as may properly be brought before the meeting shall be held on such day and at such time following the close of the corporation's fiscal year as shall be determined each year by the Board of Directors. If such annual meeting is omitted by oversight or otherwise during such period, a subsequent annual meeting may nonetheless be held, and any business transacted or elections held at such meeting shall be as valid as if the annual meeting had been held during the period provided above. SECTION 1.3 - Special Meetings. Special meetings of the shareholders may be called at any time by the Chairman, the President, a majority of the Board of Directors, or any shareholder or shareholders holding in the aggregate not less than one-tenth of all shares entitled to vote at the special meeting. Shareholders may hold a meeting at any time and place without notice or call, upon appropriate waivers signed by all shareholders who are entitled to vote at a shareholders' meeting. SECTION 1.4 - Notice. Written notice stating the place, day, and hour of the meeting, and in case of a special meeting the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days nor more that sixty (60) days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the person or persons calling the meeting to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation. Each shareholder shall be responsible for providing the Secretary with the shareholder's current mailing address to which notices of meetings 1 and all other corporate notices may be sent. A shareholder may waive any notice required for any meeting by executing a written waiver of notice either before or after said meeting and such waiver shall be equivalent to the giving of such notice. The attendance of a shareholder at a shareholders' meeting, in person or by proxy, shall constitute a waiver of notice of the meeting. SECTION 1.5 - Quorum. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. When a quorum is present at any meeting, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless otherwise provided by law. SECTION 1.6 - Adjournment. A majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. SECTION 1.7 - Chairman of Meeting. The Chairman, or in his absence, the President or the Vice Chairman, shall preside at all meetings of the shareholders unless the Board of Directors shall otherwise determine. The Board of Directors may appoint any shareholder to act as chairman of the meeting. SECTION 1.8 - Secretary of Meeting. The Secretary shall act as a secretary at all meeting of the shareholders, and in his absence, the presiding officer may appoint any person to act as secretary. SECTION 1.9 - Conduct of Meetings. Shareholder meetings shall be conducted in an orderly and fair manner, but the presiding officer shall not be bound by any technical rules of parliamentary procedure. SECTION 1.10 - Voting. Each outstanding share shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholder. SECTION 1.11 - Proxies. At all meetings of shareholders, a shareholder may vote by proxy executed in writing by the shareholder of by his duly authorized attorney in fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. 2 SECTION 1.12 - Shareholder Advisor. A shareholder or holder of a valid proxy may be accompanied at any shareholders' meeting by one personal advisor, but no such advisor may address the meeting without the consent of the presiding officer. SECTION 1.13 - Recording of Proceedings. The proceedings of a shareholders' meeting may not be mechanically or electronically recorded other than by the Secretary or acting secretary without the express approval of all individuals in attendance at the meeting. SECTION 1.14 - Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders. Such date in any case shall not be more than sixty (60) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed by the Board of Directors, the date on which notice of the meeting is mailed or the date on which the resolution of the Board declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 1.15 - List of Shareholders. The Secretary of the corporation shall make a complete record of the shareholders entitled to vote at a meeting of shareholders, or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each as shown on the corporation's stock transfer books on the record date. Such record shall be kept on file a the registered office of the corporation for a period of ten (10) days prior to the meeting of shareholders. Such record shall be produced and kept open at the time and place of the shareholders' meeting and shall be subject to the inspection of any shareholder during the meeting for any proper purpose. 3 ARTICLE 2 Directors SECTION 2.1 - Management of Corporation. All corporate powers shall be exercised by, or under authority of, and the business and affairs of the corporation shall be managed under the direction of the Board of Directors (hereinafter sometimes referred to as the "Board"). SECTION 2.2 - Number of Directors. The initial number of directors is stated in the Articles of Incorporation. The number to be elected by the shareholders shall consist of not less than five (5) nor more than twenty-five (25) persons. The exact number within such minimum and maximum limits shall be fixed and determined by resolution of the Board of Directors. SECTION 2.3 - Qualifications and Nominations of Directors. Any person who will not attain the age of 75 before the meeting of shareholders at which elected (or had not attained that age by the date of the last annual meeting of shareholders, if appointed) may become a director of this corporation; provided that this provision shall not become effective until January 1, 1996. Any nomination to the Board of Directors (other than one proposed by the existing Board of the corporation) must be made in the manner set forth in the Articles of Incorporation. SECTION 2.4 - Annual Meetings. Immediately after the annual meeting of shareholders, the Directors shall meet to elect officers and transact any other business. SECTION 2.5 - Place of Meetings. Meetings of the Board of Directors, regular or special, may be held within or without this state. SECTION 2.6 - Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and at such place as the Board may by vote from time to time designate. SECTION 2.7 - Special Meetings. Special meetings of the Board of Directors may be called by the Chairman, the President or the Vice Chairman or by any two (2) directors. SECTION 2.8 - Notices. Notices of special meetings of the Board of Directors stating the date, time, place and in general terms the purpose or purposes thereof shall be delivered to each director, by mailing written notice at least 4 two (2) days before the meeting or by telephoning, telegraphing or personally advising each director at least one (1) day before the meeting. A special meeting shall be held not more than twenty (20) days after the delivery of said notice. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the director at the address provided to the Secretary. An entry of the service of notice, given in the manner above provided, shall be made in the minutes of the proceedings of the Board of Directors, and such entry, if read and approved at the subsequent meeting of the Board, shall be conclusive on the question of service. Attendance of a director at a special meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. A director also may waive any notice required for any meeting by executing a written waiver of notice either before or after said meeting, and such waiver shall be equivalent to the giving of such notice. SECTION 2.9 Quorum. A majority of the directors shall constitute a quorum for the transaction of business. Unless otherwise provided in the Articles of Incorporation or these Bylaws, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. A majority of those present at the time and place of any regular or special meeting, although less than a quorum, may adjourn from time to time, without further notice, until a quorum shall attend. When a quorum shall attend, any business may be transacted which might have been transacted at the meeting had the same been held on the date stated in the notice of meeting. SECTION 2.10 - Attendance by Conference Telecommunication. Members of the Board of Directors may participate in a meeting of such Board by means of a conference telephone or similar communications equipment, by means of which all person participating in the meeting can hear each other at the same time, and participation by such means shall constitute presence in person at a meeting. SECTION 2.11 - Consent to Action. Any action which may be taken at a meeting of the Board of Directors, or at a meeting of any committee of the Board, may be taken without a meeting if a consent in writing, setting forth the action so taken shall be signed by all of the directors or all the members of the committee. Such consent shall have the same force and effect as a unanimous vote at a duly convened meeting. SECTION 2.12 - Compensation. The directors shall receive such reasonable compensation for their services as directors and as members of any committee appointed by the Board as may be prescribed by the Board of Directors, and may 5 be reimbursed by the corporation for ordinary and reasonable expenses incurred in the performance of their duties. SECTION 2.13 - Manifestation of Dissent. A director of the corporation who is present at a meeting of the Board at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. ARTICLE 3 Committees of the Board of Directors SECTION 3.1 - Executive Committee. By resolution adopted by a majority of the entire Board of Directors, the Board may designate from among its members an Executive Committee of not less than three (3) nor more than seven (7) members, one of whom shall be the Chairman, who shall also act as chairman of the Executive Committee. Any member of the Board may serve as an alternate member of the Executive Committee in the absence of a regular member or members. The Executive Committee shall have and may exercise all of the authority of the Board of Directors during the intervals between meetings of the Bank, except that the committee shall not have the authority to: (1) authorize or approve a distribution or issuance of shares, except according to a general formula or method prescribed by the Board of Directors, (2) approve or propose to shareholders actions or proposals requiring shareholder approval, (3) fill vacancies on the Board of Directors or any committee thereof, (4) amend the Articles of Incorporation pursuant to RCW 23B.10.020, (5) adopt, amend or repeal Bylaws, (6) approve a plan of merger not requiring shareholder approval, or (7) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except within certain limits specifically prescribed by the Board of Directors. SECTION 3.2 - Audit Committee. By resolution adopted by a majority of the entire Board of Directors, the Board may appoint from among its members an Audit Committee of three (3) or more, none of whom shall be active officers of the corporation, and may designate one (l) of such members as chairman of the Committee. The Board may also designate one or more directors as alternates to serve as a member or members of the Committee in the absence of a regular 6 member or members. The Committee shall establish and maintain continuing communications between the Board and the corporation's independent auditors, internal auditors, and members of financial management with respect to the audit of the corporation's accounts and financial affairs and the audit of the corporation's controlled subsidiaries. The Committee shall have such other powers and perform such other duties as may from time to time be prescribed by the Board of Directors. SECTION 3.3 - Other Committees. By resolution adopted by a majority of the entire Board of Directors, the Board may designate from among its members such other committees as it may deem necessary, each of which shall consist of not less than two (2) directors and have such powers and duties as may from time to time be prescribed by the Board. SECTION 3.4 - Rules of Procedure. The majority of the members of any committee may fix its rules of procedure. All actions by any committee shall be reported in written minutes available at any reasonable time to any Board member. Such actions shall be subject to revision, alteration and approval by the Board of Directors; provided, that no rights or acts of third parties who have relied in good faith on the authority granted herein shall be affected by such revision or alteration. ARTICLE 4 Officers and Employees SECTION 4.1 - Officers. The Board of Directors may elect a Chairman and a Vice Chairman of the Board and shall elect a President. It shall also elect one or more Vice Presidents, a Secretary and a Treasurer and such additional officers as in the opinion of the Board the business of the corporation requires. The Board may also elect or appoint, or in its discretion delegate to the Chairman the authority to appoint, from time to time such other or additional officers as are desirable for the conduct of the business of the corporation. SECTION 4.2 - Election. None of the officers, except the Chairman, Vice Chairman, and President, need be directors. The officers shall be elected annually by the Board of Directors at the meeting of the Board following the annual meeting of shareholders, and they shall hold office at the pleasure of the Board of Directors. SECTION 4.3 - Removal and Vacancy. Any officer, agent, or employee of the corporation may be removed by the Board of Directors at any time with or without cause. Such removal, however, shall be without prejudice to the contract rights, if any, of the persons so removed. Election or appointment of an officer or agent or employee shall not of itself create contract rights. 7 If any corporate office becomes vacant by reason of death, resignation, removal or otherwise, the Board of Directors or the executive officer possessing delegated authority to appoint such an officer, shall have power to fill such vacancies. In case of the absence or disability of any officer, the Board of Directors or the Chairman may delegate the powers or duties of any such officer to another officer for the time being. SECTION 4.4 - Compensation. The compensation of the Chairman shall be fixed by the Board of Directors. Unless fixed by the Board of Directors, the compensation for all other officers, employees or agents of the corporation shall be established by or at the direction of the Chairman. SECTION 4.5 - Exercise of Rights as Stockholders. Unless otherwise ordered by the Board of Directors, the Chairman or his designee acting by written designation, shall have full power and authority on behalf of the corporation to attend and to vote at any meeting of shareholders of any corporation in which this corporation may hold stock, other than in a fiduciary capacity, and may exercise on behalf of this corporation any and all of the rights and powers incident to the ownership of such stock at any such meeting, and shall have power and authority to execute and deliver proxies and consents on behalf of this corporation in connection with the exercise by this corporation of the rights and powers incident to the ownership of such stock. The Board of Directors, from time to time, may confer like powers upon any other person or persons. SECTION 4.6 - Duties of Chairman of the Board. Unless the Board shall otherwise determine, the Chairman shall preside at all meetings of the shareholders and at meetings of the Board of Directors and the Executive Committee. The Chairman shall see that all orders and resolutions of the Board of Directors and the Executive Committee are carried into effect and shall be the person to whom the Vice Chairman and President, and all other officers designated by the Chairman, shall report. The Chairman may delegate such duties as he sees fit to delegate to the Vice Chairman, the President, or other officers of the corporation. The Chairman may appoint agents or employees other than those appointed by the Board of Directors, and shall perform such other duties as may be prescribed from time to time by the Board of Directors or by the Bylaws. 8 SECTION 4.7 - Duties of Vice Chairman. The Vice Chairman may assist the Chairman in the performance of the Chairman's duties and shall have such powers and exercise such other duties as shall be delegated to such officer by the Chairman or the Board. In the absence of the Chairman, the Vice Chairman shall perform all of the duties and assume all of the responsibilities of the Chairman. SECTION 4.8 - Duties of President. The President shall, subject to the authority granted to the Chairman and the Vice Chairman, be the chief operating officer of the corporation and shall have general supervision over the day-to-day business of the corporation. The President shall have such other authority and shall exercise such other duties as shall, from time to time, be delegated to such officer by the Chairman or by the Board. SECTION 4.9 - Duties of Vice President. The Vice Presidents shall have such powers and perform such duties as may be assigned to them by the Board of Directors or the Chairman. A Vice President designated by the Board of Directors shall perform all of the duties of the President in case of absence or disability of the President SECTION 4.10 - Duties of Secretary. The Secretary shall, subject to the direction of the Chairman keep the minutes of all meetings of the shareholders and of the Board of Directors, and to the extent ordered by the Board of Directors or the Chairman the minutes of all meetings of all committees. He shall cause notice to be given of the meetings of the shareholders, of the Board of Directors, and of any committee appointed by the Board. He shall have custody of the corporate seal and general charge of the records, documents, and papers of the corporation not pertaining to the performance of the duties vested in other officers, which shall at all reasonable times be open to the examination of any director. Without limiting the generality of the foregoing, the Secretary shall have charge (directly or through such transfer agents or registrars as the Board of Directors may appoint) of the issuance, transfer, and registration of certificates for shares of the corporation and of the records pertaining thereto. Said records shall be kept in such manner as to show at any time the number of shares of the corporation issued and outstanding, the manner in which and the time when such shares were paid for, the names and addresses of the holders of record thereof, the numbers and classes of shares held by each, and the time when each became such holder of record. He shall perform such other duties as may be assigned to him by the Board of Directors or the Chairman. SECTION 4.11 - Duties of Treasurer. Except as otherwise set forth herein, the Treasurer shall, subject to the direction of the Chairman have general 9 custody of all the property, funds and securities of the corporation and have general supervision of the collection and disbursement of funds of the corporation. He shall provide for the keeping of proper records of all transactions of the corporation. He shall perform such other duties as may be assigned to him by the Board of Directors or the Chairman. SECTION 4.12 - Other Officers. Such other officers as shall be appointed by the Board of Directors, or the Chairman, acting pursuant to delegated authority of the Board, shall exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon, or assigned to, them by the Board of Directors or the Chairman or his designee. SECTION 4.13 - Clerks and Agents. The Chairman, or any other officer of the corporation authorized by him, may, subject to the supervision of the Board of Directors, appoint such custodians, bookkeepers and other clerks, agents, and employees as he shall deem advisable for the prompt and orderly transaction of the business of the corporation and shall define their duties, fix the salaries to be paid to them and dismiss them. ARTICLE 5 Shares and Certificates for Shares SECTION 5.1 - Consideration. Certificates for shares of the corporation shall be issued only when fully paid for. SECTION 5.2 - Stock Certificates. The certificates shall be in such form as designated by the Board of Directors, shall be numbered in the order in which they shall be issued, and shall be signed, either manually or in facsimile, by the President and by the Secretary, or by such officers as may be designated by the Board of Directors. If a corporate seal is maintained, it or a facsimile thereof may be affixed to the certificates. Each certificate shall state upon its face the name of the corporation and that the corporation is organized under the laws of the State of Washington, the name of the person to whom it is issued, and the number and class of shares and the designation of the series, if any, the certificate represents. SECTION 5.3 - Lost Certificates. No new certificates shall be issued until the former certificate for the shares represented thereby shall have been surrendered and cancelled, except in the case of lost or destroyed certificates, and in that case only after the receipt of a bond or other security by the corporation, satisfactory to the Board of Directors, 10 indemnifying the corporation and all persons against loss in consequence of the issuance of such new certificate. SECTION 5.4 - Transfer of Shares. Shares of the corporation may be transferred by endorsement by the signature of the owner, his agent, attorney or legal representative, and the delivery of the certificate; but no transfer shall be valid except between the parties thereto, until the same shall have been entered upon the books of the corporation, so as to show the names of the parties, by and to whom transferred, the numbers and designation of the shares and the date of transfer. SECTION 5.5 - Holder of Record. The person registered on the books of the corporation as the owner of the issued shares shall be recognized by the corporation as the person exclusively entitled to have and to exercise the rights and privileges incident to the ownership of such shares. Notwithstanding the preceding sentence, the Board of Directors may adopt by resolution a procedure whereby a shareholder may certify in writing to the corporation that all or a portion of the shares registered in the name of such shareholder are held for the account of a specified person or persons. Upon receipt by the corporation of a certification complying with such an adopted procedure, the person specified in the certification shall be deemed, for the purpose or purposes set forth in the certification, to be the holders of record of the number of shares specified in place of the shareholder making the certification. SECTION 5.6 - Issuance of Shares. Any shares authorized but not issued by this corporation shall be issued, sold, or otherwise transferred by this corporation only upon authorization of the Board of Directors. SECTION 5.7 - Subscriptions. A subscription for shares of this corporation shall be in writing and upon such terms as may be approved by the Board of Directors. SECTION 5.8 - Payment of Subscriptions. A subscription for shares shall be paid in accordance with the terms set forth in the subscription or related subscription agreement, if any. If the subscription or subscription agreement does not require payment on or before a stated date or at a fixed period after a stated date, then payment shall be made in such manner and at such times as may be determined by the Board of Directors and expressed by it in a written call for payment; provided that the call shall be uniform as to all shares of the same class or series and that the call shall be mailed to each subscriber at his last post office address known to the corporation at least thirty (30) days in advance of the date upon which 11 payment or the first installment, if installment payments are called for, is due. SECTION 5.9 - Default in Payment of Subscriptions. If a payment required by a subscription, a subscription agreement, or a call of the Board of Directors is not paid when due, then the corporation may make written demand for payment upon the defaulting subscriber by personal service or by mailing a copy of the demand to the subscriber at his last post office address known to the corporation. If the payment is not made within twenty (20) days of the serving or mailing of the demand for payment, the corporation may terminate the subscription, forfeit the subscriber's rights thereunder, retain as liquidated damages any sums previously paid on the subscription, and hold and dispose of the shares as though never subject to the subscription. In lieu of forfeiture, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE 6 Seal SECTION 6.1 - Corporate Seal. In the exercise of its discretion the Board of Directors may adopt and maintain a suitable seal for the corporation. ARTICLE 7 Miscellaneous Provisions SECTION 7.1 - Fiscal Year. The fiscal year of the corporation shall be the calendar year. SECTION 7.2 - Records. The Articles of Incorporation, the Bylaws, and the proceedings of all meetings of the shareholders, the Board of Directors and standing committees of the Board shall be recorded in appropriate minute books provided for that purpose. The minutes of each meeting shall be signed by the Secretary or other officer appointed to act as Secretary. 12 ARTICLE 8 Bylaws SECTION 8.1 - Inspection. A copy of the Bylaws, with all amendments thereto, shall at all times be kept in a convenient place at the principal office of the corporation, and shall be open for inspection of all shareholders during normal business hours. SECTION 8.2 - Amendments. The Bylaws may be amended, altered or repealed, at any regular meeting of the Board of Directors, by a vote of the majority of the whole Board of Directors, provided that a written statement of the proposed action shall have been personally delivered or mailed to all directors at least two (2) days prior to any such meeting. I HEREBY CERTIFY that the foregoing are the Restated Bylaws of Columbia Banking System, Inc in effect on this 26th day of February, 1997. /s/ Jill L. Myers ----------------------------- Jill L. Myers Secretary 13 Exhibit 11 Computation of Fully Diluted Earnings per Common Share Columbia Banking System, Inc.
Three Months Ended March 31, (in thousands, except per share data) 1997 1996 - -------------------------------------------------------------------------------- Earnings Net income applicable to common stock $1,053 $ 808 Interest on convertible subordinated notes, net of income tax effects--Note 1 60 - -------------------------------------------------------------------------------- Pro forma net income available to common stock $1,053 $ 868 ================================================================================ Shares Average number of common and common equivalent shares outstanding 5,604 3,720 Additional shares assuming conversion of convertible subordinated notes--Note 1 266 Incremental shares attributed to outstanding options 5 - -------------------------------------------------------------------------------- Fully diluted average common and common equivalent shares outstanding 5,609 3,986 ================================================================================ Fully diluted earnings per share - as reported $0.19 $0.22 ================================================================================ Fully diluted earnings per share - as calculated $0.19 $0.22 ================================================================================
Note 1. Earnings per share and fully diluted earnings per share are reported as the same for the three months ended March 31, 1996. The inclusion of convertible subordinated notes would have produced an antidilutive effect. Additional average shares, assuming the conversion of convertible subordinated notes, represent 253,742 for the three months ended March 31, 1996. The related interest expense on these notes (net of income tax effects) was $60,265 for the three months ended March 31, 1996. On April 23, 1997, the Company announced a 5% stock dividend payable on May 22, 1997, to shareholders of record on May 8, 1997. Average shares outstanding, net income per share and book value per share have been adjusted to give retroactive effect to all periods presented. On June 3, 1996, the Company gave notice that it would redeem all of its issued and outstanding 7.85% Convertible Subordinated Notes (the "Notes") on August 1, 1996. The Notes were convertible in whole or in part, in multiples of $1,000 principal amount, at 100% of the principal amount of the Note (or portion thereof), at the conversion price per share of common stock of $10.56. Prior to August 1, 1996, all of the Notes were converted into 223,743 shares of common stock. For additional information on earnings per share, please see the "Capital" section of the "Management Discussion and Analysis of Financial Condition and Results of Operations". EX-27 2
9 FINANCIAL DATA SCHEDULE Columbia Banking System, Inc. (in thousands except per share) 0000887343 COLUMBIA BANKING SYSTEM, INC. 1000 $ 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 1 27522 28069 0 0 45125 0 0 476607 4806 608507 521919 0 4582 22000 0 0 56446 3560 608507 10293 683 377 11353 4649 5079 6274 400 0 5885 1479 1053 0 0 1053 .19 .19 4.68 1721 0 24 0 4504 117 19 4806 4806 0 (139)
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