EX-99.1 2 dex991.htm PRESS RELEASE Press Release

Exhibit 99.1

FOR IMMEDIATE RELEASE

April 26, 2006

 

Contacts:   Melanie J. Dressel, President and
  Chief Executive Officer
  (253) 305-1911
  Gary R. Schminkey, Executive Vice President
  and Chief Financial Officer
  (253) 305-1966

COLUMBIA BANKING SYSTEM ANNOUNCES

RECORD FIRST QUARTER 2006 EARNINGS

1st QUARTER 2006 HIGHLIGHTS

 

  •   Earnings of $8.2 million, up 30% from $6.3 million in 2005

 

  •   Diluted earnings per share of $0.51, up 28% from $0.40 in 2005

 

  •   Return on average assets of 1.39% improved from 1.15% in 2005.

 

  •   Return on average equity of 14.37%, up from 12.37% a year ago.

 

  •   Return on average tangible equity of 17.00%, up from 15.09% in 2005

 

  •   Net interest margin improved to 4.65%, up from 4.35% in 2005

TACOMA, Washington — Columbia Banking System, Inc. (“Columbia”; Nasdaq: COLB) today announced earnings for the first quarter 2006 of $8.2 million, up 30% from $6.3 million for the first quarter of 2005. For the same period, earnings per share increased to $0.51 per diluted share, an increase of 28% from $0.40 per diluted share one year ago.

Return on average tangible equity for the quarter improved to 17.00%, compared to 15.09% for the same quarter last year. Return on average tangible equity, a non-GAAP performance measure, is used by Columbia’s management in recognition of the goodwill created by the fourth quarter 2004 acquisition of Bank of Astoria, providing a more consistent comparison with pre-acquisition performance.

“We are pleased to see profitability continue to increase,” stated Melanie Dressel, President and Chief Executive Officer. “Rising short-term interest rates, continued loan growth, increased interest income and expense control all contributed to our first quarter results. Our net interest margin has shown continued improvement, rising to 4.65% for the quarter, up from 4.61% at December 31,

2005, and 4.35% for the 1st quarter of last year. While loan growth moderated as expected, we reached $1.6 billion in total loans and have maintained good asset quality.”

Ms. Dressel continued, “Interest rates continued on their upward path during the first quarter, and had a positive impact on our net interest margin, as over 40% of our loans are tied to prime and other related indices. Core deposits comprised a healthy 73% of total deposits for the first quarter, providing a stable source of funding at relatively low costs.”

Return on average assets and return on average equity for the first quarter 2006 were 1.39% and 14.37%, respectively, compared to 1.15% and 12.37%, respectively, for the first quarter of the prior year. With revenue (net interest income plus noninterest income) growing faster than expenses, the efficiency ratio improved to 58.64% at March 31, 2006, compared to 62.18% for the same period in 2005.

At March 31, 2006, Columbia’s total assets were $2.46 billion, an increase of 10% from $2.24 billion at March 31, 2005, and 3% from $2.38 billion at December 31, 2005. Total loans were $1.60 billion at March 31, 2006, up 11% from $1.44 billion for the same period last year, and up 3% from $1.56 billion at year-end 2005. Total deposits were $2.0 billion at March 31, 2006, an increase of 6% from March 31, 2005. Most of the growth occurred in core deposits, which were $1.46 billion at quarter-end 2006, up 5% from $1.39 billion at quarter-end 2005. Core deposits were 73% of total deposits at March 31, 2006.

First Quarter 2006 Operating Results

Net Interest Income

Net interest income increased $3.0 million, or 14%, in the first quarter 2006 compared to the first quarter 2005 due to loan growth and rising short-term interest rates. The increases in short-term rates had a positive impact on net interest income as over 40% of Columbia’s loans are tied to prime and other related indices, but the effect of these increases was partially offset by relatively lower long-term rates. The Company’s net interest margin increased to 4.65% in the first quarter 2006, compared with 4.35% in the first quarter 2005.

Average interest-earning assets increased to $2.19 billion, or 7%, during the first quarter of 2006, compared with $2.04 billion at the end of the first quarter 2005. The yield on average interest-

earning assets increased 105 basis points to 6.64% at March 31, 2005, from 5.59% at March 31, 2005. Average interest-bearing liabilities increased 6% to $1.69 billion from $1.60 billion last year. The cost of average interest-bearing liabilities increased 100 basis points to 2.59% in the first quarter of 2006, compared to 1.59% in the first quarter of 2005.

Noninterest income

Total noninterest income for the first quarter 2006 increased to $6.0 million, or 5%, from $5.7 million a year ago. The increase in noninterest income during the first quarter of 2006 as compared to first quarter 2005 was due to merchant services income as well as service charges and other fees resulting from the growth in core deposits. Income from residential mortgage loan originations and refinancing activity continued its anticipated downward trend. The Company is currently transitioning to a mortgage processing system designed to expand product offerings, enhance service levels and improve efficiencies.

Noninterest expense

Noninterest expense for the first quarter of 2006 was $18.3 million, an increase of 6% from $17.3 million for the same period in 2005. This increase was in part due to expenses that have historically been heavily weighted to the first quarter, such as increased compensation and employee benefits, as well as advertising and promotional expenses resulting from television commercial production. Occupancy expenses and volume-related merchant services processing expenses also contributed to the moderate increase in noninterest expense.

The Company’s efficiency ratio was 58.64% for the first quarter 2006 compared with 62.18% for the same period in 2005. Ms. Dressel noted, “We were pleased with this improvement, reaching our interim goal of an efficiency ratio under 60% during the first quarter. We will continue to challenge ourselves in this area, as we maintain our concerted effort to achieve an efficiency ratio in the mid-50’s over the longer term.”

Nonperforming Assets and Loan Loss Provision

The Company made a provision for loan losses of $215,000 for the first quarter of 2006, compared with $890,000 for the first quarter of 2005, and $15,000 for the quarter ending December 31, 2005. The decrease in the provision over the same period last year was primarily due to moderating

loan growth and a maturing of the commercial loan portfolio. The provision increased over the fourth quarter 2005 as the rate of improvement in credit quality slowed in the commercial portfolio.

The allowance for loan and lease losses as a percentage of loans (excluding loans held for sale at each date) decreased to 1.30% at March 31, 2006 as compared to 1.33% at year-end 2005. For the quarters ended March 31, 2006 and 2005, net loan charge-offs amounted to $353,000 and $592,000 respectively, or approximately two basis points and four basis points of total loans at the end of each respective period. Ms. Dressel said, “We are pleased with the way our loan portfolio is performing and we believe that the bank’s current reserves for loan losses are sufficient. However, due to the cyclical nature of our industry, we will remain conservative going forward as we evaluate the level of reserves needed to support future loan growth.”

Expansion Activity

Ms. Dressel commented, “As always, we strive to be the community bank in every community we serve, and will continue our strategy of focusing our efforts on increasing market share in these communities. New markets and branch locations are considered on an ongoing basis. We begin this process with the market maker – an experienced, local banker around whom we can build a branch and relationships with the community. We are developing a new branch location in Lacey, just east of Olympia, Washington, which we expect to open in early 2007. We will also take advantage of other strategic opportunities to expand our footprint that make economic sense for the organization.”

Columbia Banking System, Inc. is a Tacoma-based bank holding company whose wholly owned banking subsidiaries are Columbia Bank and Bank of Astoria. Columbia Bank is a Washington state-chartered full-service commercial bank with 35 banking offices in Pierce, King, Cowlitz, Kitsap and Thurston counties. Bank of Astoria, a federally insured commercial bank headquartered in Astoria, Oregon, operates four branches in Clatsop County: Astoria, Warrenton, Seaside and Cannon Beach; and one branch in Manzanita in Tillamook County. 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, 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,” “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 SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national and international economic conditions are 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 reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which Columbia is engaged.

FINANCIAL STATISTICS

Columbia Banking System, Inc.

     Three Months Ended  

Unaudited

(in thousands, except per share amounts)

    March 31,  
   2006     2005  

Earnings

     

Net interest income

    $ 24,306     $ 21,301  

Provision for loan and lease losses

    $ 215     $ 890  

Noninterest income

    $ 5,973     $ 5,674  

Noninterest expense

    $ 18,340     $ 17,277  

Net income

    $ 8,188     $ 6,298  

Per Share

     

Net income (basic)

    $ 0.52     $ 0.40  

Net income (diluted)

    $ 0.51     $ 0.40  

Averages

     

Total assets

    $ 2,388,680     $ 2,222,355  

Interest-earning assets

    $ 2,190,872     $ 2,042,917  

Loans

    $ 1,567,615     $ 1,409,119  

Securities

    $ 619,428     $ 632,410  

Deposits

    $ 1,955,851     $ 1,864,610  

Core deposits

    $ 1,425,442     $ 1,378,695  

Shareholders’ Equity

    $ 231,080     $ 206,511  

Financial Ratios

     

Return on average assets

      1.39 %     1.15 %

Return on average equity

      14.37 %     12.37 %

Return on average tangible equity(1)

      17.00 %     15.09 %

Average equity to average assets

      9.67 %     9.29 %

Net interest margin

      4.65 %     4.35 %

Efficiency ratio (tax equivalent) (2)

      58.64 %     62.18 %

 

     March 31,     December 31,  
      2006     2005     2005  

Period end

       

Total assets

    $ 2,460,453     $ 2,243,469     $ 2,377,322  

Loans

    $ 1,595,262     $ 1,436,820     $ 1,564,704  

Allowance for loan and lease losses

    $ 20,691     $ 20,179     $ 20,829  

Securities

    $ 634,620     $ 619,140     $ 585,332  

Deposits

    $ 1,990,363     $ 1,869,173     $ 2,005,489  

Core deposits

    $ 1,455,390     $ 1,392,772     $ 1,478,090  

Shareholders’ equity

    $ 231,137     $ 204,754     $ 226,242  

Book value per share

    $ 14.47     $ 13.11     $ 14.29  

Tangible book value per share

    $ 12.41     $ 10.96     $ 12.20  

Nonperforming assets

       

Nonaccrual loans

    $ 5,115     $ 7,183     $ 4,733  

Restructured loans

      1,146       205       124  

Personal property owned

      —         —         —    

Real estate owned

      18       —         18  
                        

Total nonperforming assets

    $ 6,279     $ 7,388     $ 4,875  
                        

Nonperforming loans to period-end loans

      0.39 %     0.51 %     0.31 %

Nonperforming assets to period-end assets

      0.26 %     0.33 %     0.21 %

Allowance for loan and lease losses to period-end loans

      1.30 %     1.40 %     1.33 %

Allowance for loan and lease losses to nonperforming loans

      330.47 %     273.13 %     428.84 %

Allowance for loan and lease losses to nonperforming assets

      329.53 %     273.13 %     427.26 %

Net loan charge-offs

    $ 353 (3)   $ 592 (4)   $ 572 (5)

QUARTERLY FINANCIAL STATISTICS

Columbia Banking System, Inc.

      Three Months Ended  

Unaudited

(in thousands, except per share amounts)

   

Mar 31

2006

    

Dec 31

2005

    

Sept 30

2005

    

Jun 30

2005

    

Mar 31

2005

  

Earnings

           

Net interest income

    $ 24,306     $ 23,934     $ 23,331     $ 22,346     $ 21,301  

Provision for loan and lease losses

    $ 215     $ 15     $ 245     $ 370     $ 890  

Noninterest income

    $ 5,973     $ 6,468     $ 6,516     $ 6,128     $ 5,674  

Noninterest expense

    $ 18,340     $ 18,271     $ 18,793     $ 18,514     $ 17,277  

Net income

    $ 8,188     $ 8,583     $ 7,952     $ 6,798     $ 6,298  

Per Share

           

Net income [basic]

    $ 0.52     $ 0.55     $ 0.50     $ 0.44     $ 0.40  

Net income [diluted]

    $ 0.51     $ 0.54     $ 0.50     $ 0.43     $ 0.40  

Averages

           

Total assets

    $ 2,388,680     $ 2,316,654     $ 2,325,262     $ 2,297,297     $ 2,222,355  

Interest-earning assets

    $ 2,190,872     $ 2,116,345     $ 2,136,229     $ 2,113,384     $ 2,042,917  

Loans

    $ 1,567,615     $ 1,534,068     $ 1,534,281     $ 1,498,990     $ 1,409,119  

Securities

    $ 619,428     $ 579,177     $ 598,204     $ 612,455     $ 632,410  

Deposits

    $ 1,955,851     $ 2,006,448     $ 1,948,022     $ 1,874,208     $ 1,864,610  

Core deposits

    $ 1,425,442     $ 1,467,077     $ 1,451,054     $ 1,397,353     $ 1,378,695  

Shareholders’ Equity

    $ 231,080     $ 223,538     $ 218,308     $ 209,864     $ 206,511  

Financial Ratios

           

Return on average assets

      1.39 %     1.47 %     1.36 %     1.19 %     1.15 %

Return on average equity

      14.37 %     15.23 %     14.45 %     12.99 %     12.37 %

Return on average tangible equity

      17.00 %     18.17 %     17.35 %     15.76 %     15.09 %

Average equity to average assets

      9.67 %     9.65 %     9.39 %     9.14 %     9.29 %

Net interest margin

      4.65 %     4.61 %     4.45 %     4.36 %     4.35 %

Efficiency ratio (tax equivalent)

      58.64 %     58.46 %     61.26 %     63.22 %     62.18 %

Period end

           

Total assets

    $ 2,460,453     $ 2,377,322     $ 2,322,896     $ 2,326,252     $ 2,243,469  

Loans

    $ 1,595,262     $ 1,564,704     $ 1,511,386     $ 1,510,043     $ 1,436,820  

Allowance for loan and lease losses

    $ 20,691     $ 20,829     $ 20,790     $ 20,587     $ 20,179  

Securities

    $ 634,620     $ 585,332     $ 592,467     $ 609,574     $ 619,140  

Deposits

    $ 1,990,363     $ 2,005,489     $ 1,992,238     $ 1,897,854     $ 1,869,173  

Core deposits

    $ 1,455,390     $ 1,478,090     $ 1,493,925     $ 1,416,421     $ 1,392,772  

Shareholders’ equity

    $ 231,137     $ 226,242     $ 221,873     $ 214,788     $ 204,754  

Book value per share

    $ 14.47     $ 14.29     $ 14.04     $ 13.68     $ 13.11  

Tangible book value per share

    $ 12.41     $ 12.20     $ 11.93     $ 11.56     $ 10.96  

Nonperforming assets

           

Nonaccrual loans

    $ 5,115     $ 4,733     $ 6,165     $ 6,304     $ 7,183  

Restructured loans

      1,146       124       151       178       205  

Personal property owned

      —         —         —         —         —    

Real estate owned

      18       18       —         —         —    
                                        

Total nonperforming assets

    $ 6,279     $ 4,875     $ 6,316     $ 6,482     $ 7,388  
                                        

Nonperforming loans to period-end loans

      0.39 %     0.31 %     0.42 %     0.43 %     0.51 %

Nonperforming assets to period-end assets

      0.26 %     0.21 %     0.27 %     0.28 %     0.33 %

Allowance for loan and lease losses to period-end loans

      1.30 %     1.33 %     1.38 %     1.36 %     1.40 %

Allowance for loan and lease losses to nonperforming loans

      330.47 %     428.84 %     329.16 %     317.60 %     273.13 %

Allowance for loan and lease losses to nonperforming assets

      329.53 %     427.26 %     329.16 %     317.60 %     273.13 %

Net loan charge-offs (recoveries)

    $ 353     $ (24 )   $ 42     $ (38 )   $ 592  

 

(1) Annualized net income, excluding core deposit intangible asset amortization, divided by average daily shareholders’ equity, excluding average goodwill and average core deposit intangible asset.

 

(2) Noninterest expense divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding nonrecurring income and expense, such as gains/losses on investment securities and net cost (gain) of OREO.

 

(3) For the three months ended March 31, 2006.

 

(4) For the three months ended March 31, 2005.

 

(5) For the twelve months ended December 31, 2005.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

Columbia Banking System, Inc.

 

(Unaudited)

(in thousands except per share)

   

Three Months Ended

March 31,

  
   2006    2005  

Interest Income

      

Loans

    $ 28,644    $ 21,822  

Taxable securities

      4,958      4,657  

Tax-exempt securities

      1,427      1,082  

Deposits with banks

      29      9  

Federal funds sold

      11      —    
               

Total interest income

      35,069      27,570  

Interest Expense

      

Deposits

      8,491      5,182  

Federal Home Loan Bank advances

      1,768      706  

Long-term obligations

      459      347  

Other borrowings

      45      34  
               

Total interest expense

      10,763      6,269  
               

Net Interest Income

      24,306      21,301  

Provision for loan and lease losses

      215      890  
               

Net interest income after provision for loan and lease losses

      24,091      20,411  

Noninterest Income

      

Service charges and other fees

      2,834      2,636  

Mortgage banking

      147      422  

Merchant services fees

      2,038      1,789  

Gain on sale of investment securities, net

      10      —    

Bank owned life insurance (“BOLI”)

      399      373  

Other

      545      454  
               

Total noninterest income

      5,973      5,674  

Noninterest Expense

      

Compensation and employee benefits

      9,669      9,268  

Occupancy

      2,648      2,332  

Merchant processing

      784      707  

Advertising and promotion

      652      504  

Data processing

      800      707  

Legal & professional services

      230      764  

Taxes, licenses & fees

      596      465  

Net gain of other real estate owned

      —        (2 )

Other

      2,961      2,532  
               

Total noninterest expense

      18,340      17,277  
               

Income before income taxes

      11,724      8,808  

Provision for income taxes

      3,536      2,510  
               

Net Income

    $ 8,188    $ 6,298  
               

Net income per common share:

      

Basic

    $ 0.52    $ 0.40  

Diluted

    $ 0.51    $ 0.40  

Dividend paid per common share

    $ 0.13    $ 0.07  

Average number of common

shares outstanding

      15,860      15,606  

Average number of diluted common

shares outstanding

      16,101      15,852  

CONSOLIDATED CONDENSED BALANCE SHEETS

Columbia Banking System, Inc.

(Unaudited)

(in thousands)

   

March 31,

2006

   

December 31,

2005

Assets

      

Cash and due from banks

    $ 88,303    $ 96,787

Interest-earning deposits with banks

      8,304      3,619
             

Total cash and cash equivalents

      96,607      100,406

Securities available for sale at fair value (amortized cost of $629,992 and $576,619 respectively)

      621,643      572,355

Securities held to maturity (fair value of $2,582 and $2,587 respectively)

      2,524      2,524

Federal Home Loan Bank stock

      10,453      10,453

Loans held for sale

      1,737      1,850

Loans, net of unearned income of ($2,215) and ($2,870) respectively

      1,595,262      1,564,704

Less: allowance for loan and lease losses

      20,691      20,829
             

Loans, net

      1,574,571      1,543,875

Interest receivable

      11,989      11,671

Premises and equipment, net

      44,760      44,690

Real estate owned

      18      18

Goodwill

      29,723      29,723

Other assets

      66,428      59,757
             

Total Assets

    $ 2,460,453    $ 2,377,322
             

Liabilities and Shareholders’ Equity

      

Deposits:

      

Noninterest-bearing

    $ 448,664    $ 455,838

Interest-bearing

      1,541,699      1,549,651
             

Total deposits

      1,990,363      2,005,489

Federal Home Loan Bank advances

      188,850      94,400

Other borrowings

      293      2,572

Long-term subordinated debt

      22,328      22,312

Other liabilities

      27,482      26,307
             

Total liabilities

      2,229,316      2,151,080

 

Shareholders’ equity:

           

Preferred stock (no par value)

           

Authorized, 2 million shares; none outstanding

           
      March 31,
2006		    December 31,
2005		             

Common stock (no par value)

          

Authorized shares

    63,034    63,034     

Issued and outstanding

    15,969    15,831      164,363       162,973  

Retained earnings

            72,176       66,051  

Accumulated other comprehensive income -

           

Unrealized losses on securities available for sale, net of tax

            (5,402 )     (2,782 )
                      

Total shareholders’ equity

            231,137       226,242  
                      

Total Liabilities and Shareholders’ Equity

          $ 2,460,453     $ 2,377,322