Columbia Banking System Announces First Quarter 2012 Earnings

Apr 25, 2012, 16:00 ET from Columbia Banking System, Inc.

TACOMA, Wash., April 25, 2012 /PRNewswire/ -- Columbia Banking System, Inc. (NASDAQ: COLB) ("Columbia") today announced net income of $8.9 million for the quarter ended March 31, 2012, an increase of 54% compared to net income of $5.8 million for the same quarter of 2011.  Earnings per diluted common share rose 47% to $0.22 for the first quarter, compared with earnings of $0.15 per diluted common share a year earlier.

Loans not covered under the FDIC loss-sharing agreements ('noncovered loans") increased approximately $23 million during the quarter to $2.37 billion.  Total deposits increased $49.9 million to $3.87 billion.  Deposits increased in every category except certificates of deposit.

Melanie Dressel, President and Chief Executive Officer commented, "During the quarter, we continued to generate momentum as a result of our external focus on new and existing customers throughout our entire system.  From year-end 2011, our commercial business loans grew 4.6% and our impressive core deposits rose over 2%, now representing 93% of our total deposits."

Ms. Dressel continued, "As compared to fourth quarter, 2011, our first quarter results reflected expenses and write-downs associated with other real estate owned and other personal property owned.  Also impacting the quarter was lower accretion income from the Bank of Whitman discounted loan portfolio as these loans continue to pay off or refinance." 

Significant Influences on the Quarter Ended March 31, 2012       

Other Real Estate Owned and Other Personal Property Owned

Other real estate owned ("OREO") declined from $51.0 million at December 31, 2011 to $41.2 million at March 31, 2012.  The decline is due to property sales and write-downs of certain assets.  As a result of the asset write-downs and other operating expenses, the net cost of operation for noncovered OREO was $2.7 million for the first quarter as compared to $923,000 for the fourth quarter 2011.  These expenses were partially offset by the net benefit from covered OREO of $1.8 million for the first quarter 2012 as compared to $1.5 million for the fourth quarter 2011.

During the first quarter, other personal property owned ("OPPO"), declined from $9.0 million at December 31, 2011 to $4.8 million at March 31, 2012. Noncovered OPPO expense was $2.2 million for the first quarter as compared to $22,000 for the fourth quarter 2011. Substantially all of the expense recorded in the first quarter was the result of a write-down on one property due to an updated appraisal.

Andy McDonald, Executive Vice President and Chief Credit Officer commented, "We continued to see a positive trend during the quarter as we work to resolve issues surrounding our nonperforming assets.  As we move through this credit cycle, our provision for loan losses is more closely approximating our charge-offs, in line with our expectations.  While we were disappointed with the write-down on OPPO, it was isolated to a single asset, and was not indicative of any systemic issues within our loan, OREO or OPPO portfolios."

Impact of Acquired Loan Accounting

The following table illustrates the significant impact to earnings associated with certain of Columbia's acquired loan portfolios:

Acquired Loan Portfolio Activity

Three Months Ended

March 31, 2012

March 31, 2011

(in thousands)

Incremental accretion income on acquired impaired loans

$

19,320

$

12,371

Incremental accretion income on other acquired loans

3,101

(Provision) recapture for losses on covered loans

(15,685)

422

Change in FDIC loss sharing asset

(1,668)

(14,774)

Claw back liability expense (benefit)

26

(1,700)

Pre-tax earnings impact

$

5,094

$

(3,681)

The incremental accretion income in the table above represents the amount of income recorded on certain acquired loans above the contractual rate stated in the individual loan notes and stems from the discount established at the time these loan portfolios were acquired.  As of March 31, 2012, the remaining discount from the Bank of Whitman transaction was $8.2 million.  It is anticipated that this discount will continue to accrete to earnings throughout 2012 from normal amortization, early loan payoffs and contractual maturities.

The $15.7 million in provision for losses on covered loans in the current period was due to incremental loan losses incurred in the current period which were in excess of those expected from the re-measurement of cash flows during the fourth quarter of 2011.  These incremental loan losses reduced expected future cash flows and, when discounted at current yields, resulted in impairment.  The $15.7 million in provision expense is partially off-set by a $12.5 million favorable adjustment to the change in FDIC loss-sharing asset.

The $1.7 million change in the FDIC loss sharing asset in the current quarter affected noninterest income and consists of $13.9 million of scheduled amortization expense, the $12.5 million favorable adjustment described above and approximately $300 thousand of expense related to covered other real estate owned.

Net Interest Margin

Columbia's net interest margin increased to 6.67% in the first quarter of 2012, up from 5.80% for the same period last year and down from 7.14% for the fourth quarter 2011.  The Company's net interest margin is impacted significantly by the accounting for acquired loans. The net interest margin for the current quarter reflects additional loan volumes and higher loan yields arising, in part, from the three FDIC-assisted acquisitions completed in the second and third quarters of 2011.

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

Three Months Ended

March 31, 2012

March 31, 2011

(dollars in thousands)

Interest income as recorded

$

32,902

$

21,302

Less: Interest income at stated note rate

10,481

8,931

Incremental accretion income

$

22,421

$

12,371

Incremental accretion income due to:

Acquired impaired loans

$

19,320

$

12,371

Other acquired loans

3,101

Stated interest income at loan note rate

$

22,421

$

12,371

Reported net interest margin

6.67

%

5.80

%

Net interest margin excluding additional accretion income

4.49

%

4.42

%

The net interest margin was impacted favorably by reduced funding costs.  The average cost of interest-bearing deposits decreased to 0.27% for the current quarter from 0.51% for the prior-year period while the average cost of all interest-bearing liabilities decreased to 0.38% from 0.65%.

Balance Sheet

At March 31, 2012, Columbia's total assets were $4.82 billion, an increase of 13% from $4.26 billion at March 31, 2011, and 1% from $4.79 billion at December 31, 2011.  Total shareholders' equity at March 31, 2012 was $752.7 million, an increase of 5% from $714.1 million at March 31, 2011 and a decrease of 1% from $759.3 million at December 31, 2011.

Noncovered loans were $2.37 billion at March 31, 2012, up 26% from $1.88 billion at March 31, 2011 and up 1% from $2.35 billion at December 31, 2011.   The average yield on loans for the quarter ended March 31, 2012 was 8.7%, including additional accretion from the acquired loan portfolios.  Net noncovered loan growth for the first quarter 2012 was approximately $23 million.  Securities were $1.02 billion at March 31, 2012, compared to $1.05 billion at December 31, 2011.

Total deposits at March 31, 2012 increased 16% to $3.87 billion from $3.34 billion at March 31, 2011, and 1% from $3.82 billion at December 31, 2011.  Core deposits (defined as demand, savings, money market accounts and certificates of deposit under $100,000) comprised 93% of total deposits, and were $3.59 billion at March 31, 2012, an increase of 19% from $3.03 billion at March 31, 2011, and 2% from $3.51 billion at December 31, 2011. 

Asset Quality

At March 31, 2012, nonperforming noncovered assets were $79.1 million, compared to $85.4 million at December 31, 2011.  The balance of the originated and discounted loan portfolios remained stable for the quarter, with modest improvements in the 1-4 family real estate construction and consumer portfolios. 

For the quarter, the Company reduced noncovered other property owned (OPPO) and other real estate owned (OREO) by $14.1 million and placed $814 thousand of previously nonperforming loans back on accrual status.  In addition, the Company added $14.7 million in new nonperforming assets, experienced charge-offs associated with nonperforming assets of $3.5 million, and received payments of $2.5 million.

The table below sets forth information with respect to nonaccrual loans, restructured loans, total nonperforming loans and total nonperforming assets. 

March 31, 2012

December 31, 2011

(dollars in thousands)

Nonaccrual noncovered loans:

Commercial business

$

14,791

$

10,243

Real estate:

One-to-four family residential

2,624

2,696

Commercial and multifamily residential

24,872

19,485

Total real estate

27,496

22,181

Real estate construction:

One-to-four family residential

8,793

10,785

Commercial and multifamily residential

5,023

7,067

Total real estate construction

13,816

17,852

Consumer

1,449

3,207

Total nonaccrual loans

57,552

53,483

Noncovered other real estate owned and other personal property owned

21,571

31,905

Total nonperforming noncovered assets

$

79,123

$

85,388

Allowance for loan losses to period-end nonperforming noncovered loans

90.84

%

99.17

%

For the quarter ended March 31, 2012, net loan charge-offs were $5.3 million, compared to $5.7 million for the same period a year ago, and $2.1 million last quarter.  Net charge-offs were primarily centered in commercial business and commercial real estate loans.

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

Three Months Ended March 31,

2012

2011

(in thousands)

Beginning balance

$

53,041

$

60,993

Charge-offs:

Commercial business

(2,359)

(3,371)

One-to-four family residential real estate

(116)

(448)

Commercial and multifamily residential real estate

(2,678)

(365)

One-to-four family residential real estate construction

(204)

(1,427)

Commercial and multifamily residential real estate construction

(487)

Consumer

(1,093)

(925)

Total charge-offs

(6,450)

(7,023)

Recoveries:

Commercial business

658

105

One-to-four family residential real estate

43

Commercial and multifamily residential real estate

71

73

One-to-four family residential real estate construction

47

1,104

Commercial and multifamily residential real estate construction

Consumer

373

63

Total recoveries

1,192

1,345

Net charge-offs

(5,258)

(5,678)

Provision charged to expense

4,500

Ending balance

$

52,283

$

55,315

The provision for noncovered loan losses was primarily impacted by the Company's organic loan growth of $75 million in originated loans.  For the fourth quarter of 2011, the provision for noncovered loans was $4.75 million.

The allowance for noncovered loan losses to period end loans was 2.20% at March 31, 2012 compared to 2.26% at December 31, 2011 and 2.94% at March 31, 2011.

First Quarter 2012 Operating Results

Quarter ended March 31, 2012

Net Interest Income

Net interest income for the first quarter of 2012 was $67.1 million, an increase of 33% from $50.4 million for the same quarter in 2011, primarily due to organic loan growth and the impact of our FDIC-assisted transactions. 

Average interest-earning assets were $4.14 billion during the first quarter, an increase of 14% compared with $3.63 billion during the same quarter of 2011.   The yield on average interest-earning assets increased to 6.93% during the first quarter compared with 6.26% in the same quarter of 2011.  During the same period, average interest-bearing liabilities increased to $2.82 billion from $2.60 billion.

Noninterest Income (Loss)

Total noninterest income was $9.6 million for the first quarter of 2012, compared to a loss of $5.4 million a year earlier.  The increase for the three months ended March 31, 2012 was primarily due to the change in the FDIC loss-sharing asset, increased merchant services revenue, and improved realization of assessable service fee income across our acquired branch network.  Changes in the FDIC loss-sharing asset are primarily driven by amortization of the FDIC loss-sharing asset and provision for reimbursable losses on FDIC covered loans.  For the first three months of 2012, amortization of the FDIC loss-sharing asset was $13.9 million which was offset by a $12.5 million increase in the FDIC loss-sharing asset related to the provision for covered loan losses.  For the same period in 2011, $13.6 million of amortization was combined with a $338 thousand decrease of the FDIC loss sharing-asset related to a recapture of losses on covered loans. 

Noninterest Expense

Total noninterest expense for the first quarter of 2012 was $44.4 million, an increase of 19% from $37.3 million for the same quarter in 2011.   The increase was attributable to the additional operating expenses of the three FDIC-assisted bank acquisitions completed since May 2011.  The most significant increases were in compensation and employee benefits, occupancy, and other noninterest expense.  Compensation and employee benefits increased $3.1 million, primarily due to an increase in the number of employees related to our acquisitions as compared to the same period in 2011. Occupancy expense increased $936 thousand primarily as a result of the addition of 17 branch locations acquired.  Other noninterest expense increased $1.9 million, substantially due to $2.2 million in write-downs of OPPO. These increases were partially offset by a $1.3 million decrease in regulatory premiums due to a decrease in the assessment rate utilized in calculating premiums due.             

Strategic Focus

Ms. Dressel commented, "The Bank of Whitman integration was completed during the first quarter; all of our acquisitions are now fully integrated, both technically and culturally. Ms. Dressel continued, "Going forward in 2012, we will be externally focused on business development efforts to increase our market share, continuing to improve the credit metrics in our loan portfolio and improving the efficiency ratio of the Company, which includes growing into our new footprint."

Conference Call

Columbia's management will discuss the first quarter 2012 results on a conference call scheduled for Thursday, April 26, 2012 at 1:00 PDT.  Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #70317901.

A conference call replay will be available from approximately 4:00 p.m. PDT on April 26, 2012 through midnight PDT on May 26, 2012.  The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #70317901.

About Columbia       

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding Company of Columbia State Bank, a Washington state-chartered full-service commercial bank which was again awarded one of Seattle Business Magazine's 100 Best Companies to Work For 2011 and was designated one of  Puget Sound Business Journal's "Washington's Best Workplaces 2011." 

Columbia Banking System has 102 banking offices, including 77 branches in Washington State and 25 branches in Oregon. Columbia Bank does business under the Bank of Astoria name in Astoria, Warrenton, Seaside, Cannon Beach, Manzanita and Tillamook in Oregon. More information about Columbia can be found on its website at www.columbiabank.com.

Note Regarding Forward-Looking Statements

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

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

 

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Three Months Ended

Unaudited

March 31,

2012

2011

Earnings

(dollars in thousands except per share)

Net interest income

$

67,063

$

50,449

Provision for loan and lease losses

$

4,500

$

Provision (recapture) for losses on covered loans (5)

$

15,685

$

(422)

Noninterest income (loss)

$

9,574

$

(5,419)

Noninterest expense

$

44,352

$

37,346

Net income

$

8,902

$

5,779

Per Common Share

Earnings (basic)

$

0.22

$

0.15

Earnings (diluted)

$

0.22

$

0.15

Book value per common share

$

18.97

$

18.09

Averages

Total assets

$

4,776,186

$

4,268,348

Interest-earning assets

$

4,137,449

$

3,632,663

Loans, including covered loans

$

2,860,524

$

2,388,076

Securities

$

1,023,067

$

767,360

Deposits

$

3,805,324

$

3,306,168

Core deposits

$

3,512,490

$

2,989,825

Interest-bearing deposits

$

2,672,911

$

2,429,821

Interest-bearing liabilities

$

2,815,753

$

2,596,833

Noninterest-bearing deposits

$

1,132,413

$

876,347

Shareholders' equity

$

761,686

$

710,282

Financial Ratios

Return on average assets

0.75

%

0.55

%

Return on average common equity

4.70

%

3.30

%

Average equity to average assets

15.95

%

16.64

%

Net interest margin

6.67

%

5.80

%

Efficiency ratio (tax equivalent)(1)

71.48

%

73.33

%

March 31,

December 31,

Period end

2012

2011

2011

Total assets

$

4,815,432

$

4,264,319

$

4,785,945

Covered assets, net

$

526,043

$

499,872

$

560,055

Loans, excluding covered loans, net

$

2,371,818

$

1,884,206

$

2,348,371

Allowance for noncovered loan and lease losses

$

52,283

$

55,315

$

53,041

Securities

$

1,021,428

$

906,096

$

1,050,325

Deposits

$

3,865,445

$

3,336,213

$

3,815,529

Core deposits

$

3,591,663

$

3,027,898

$

3,510,435

Shareholders' equity

$

752,703

$

714,083

$

759,338

Nonperforming, noncovered assets

Nonaccrual loans

$

57,552

$

78,692

$

53,483

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

21,571

29,315

31,905

Total nonperforming, noncovered assets

$

79,123

$

108,007

$

85,388

Nonperforming assets to period-end noncovered loans + OREO and OPPO

3.31

%

5.64

%

3.59

%

Nonperforming loans to period-end noncovered loans

2.43

%

4.18

%

2.28

%

Nonperforming assets to period-end noncovered assets

1.84

%

2.87

%

2.02

%

Allowance for loan and lease losses to period-end noncovered loans

2.20

%

2.94

%

2.26

%

Allowance for loan and lease losses to nonperforming noncovered loans

90.84

%

70.29

%

99.17

%

Net noncovered loan charge-offs

$

5,258

(2)

$

5,678

(3)

$

15,352

(4)

(1)  Noninterest expense, excluding net cost of operation of other real estate and FDIC clawback liability expense, divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding gain/loss on sale of investment securities, impairment charge on investment securities, gain on bank acquisition, incremental accretion income on the acquired loan portfolio and the change in FDIC indemnification asset.

(2)  For the three months ended March 31, 2012.

(3)  For the three months ended March 31, 2011.

(4)  For the twelve months ended December 31, 2011.

(5) Provision (recapture) for losses on covered loans was partially offset by $12.5 million in income and $338 thousand in expense recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended March 31, 2012 and 2011, respectively.

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

March 31,

December 31,

2012

2011

Loan Portfolio Composition

(dollars in thousands)

Noncovered loans:

Commercial business

$

1,079,356

45.5

%

$

1,031,721

43.9

%

Real estate:

One-to-four family residential

58,843

2.5

%

64,491

2.8

%

Commercial and multifamily residential

992,403

41.8

%

998,165

42.5

%

Total real estate

1,051,246

44.3

%

1,062,656

45.3

%

Real estate construction:

One-to-four family residential

48,559

2.0

%

50,208

2.1

%

Commercial and multifamily residential

35,567

1.5

%

36,768

1.6

%

Total real estate construction

84,126

3.5

%

86,976

3.7

%

Consumer

169,955

7.2

%

183,235

7.8

%

Subtotal loans

2,384,683

100.5

%

2,364,588

100.7

%

Less:  Net unearned income

(12,865)

(0.5)

%

(16,217)

(0.7)

%

Total noncovered loans, net of unearned income

2,371,818

100.0

%

2,348,371

100.0

%

Less:  Allowance for loan and lease losses

(52,283)

(53,041)

Noncovered loans, net

2,319,535

2,295,330

Covered loans, net of allowance for loan losses of ($20,504) and ($4,944), respectively

501,613

531,929

Total loans, net

$

2,821,148

$

2,827,259

Loans held for sale

$

2,066

$

2,148

March 31,

December 31,

2012

2011

Deposit Composition

(dollars in thousands)

Core deposits:

Demand and other non-interest bearing

$

1,159,308

30.0

%

$

1,156,610

30.3

%

Interest bearing demand

794,157

20.5

%

735,340

19.3

%

Money market

1,053,120

27.2

%

1,031,664

27.0

%

Savings

296,138

7.7

%

283,416

7.4

%

Certificates of deposit less than $100,000

288,939

7.5

%

303,405

8.0

%

Total core deposits

3,591,662

92.9

%

3,510,435

92.0

%

Certificates of deposit greater than $100,000

247,886

6.4

%

262,731

6.9

%

Certificates of deposit insured by CDARS®

25,672

0.7

%

42,080

1.1

%

Subtotal

3,865,220

100.0

%

3,815,246

100.0

%

Premium resulting from acquisition date fair value adjustment

225

283

Total deposits

$

3,865,445

$

3,815,529

 

 

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

March 31,

December 31,

2012

2011

OREO and OPPO Composition

OREO

OPPO

OREO

OPPO

(in thousands)

Covered

$

24,430

$

$

28,126

$

Noncovered

16,744

4,827

22,893

9,011

Total

$

41,174

$

4,827

$

51,019

$

9,011

Three Months Ended

March 31,

December 31,

OREO and OPPO Earnings Impact

2012

2011

2011

Net cost of operation of noncovered OREO

$

2,693

$

2,118

$

923

Net benefit of operation of covered OREO

(1,783)

(2,560)

(1,522)

Net cost (benefit) of operation of OREO

$

910

$

(442)

$

(599)

Noncovered OPPO expense, net

$

2,154

$

$

22

Covered OPPO expense, net

2

OPPO expense, net (1)

$

2,156

$

$

22

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

 

 

QUARTERLY FINANCIAL STATISTICS

Columbia Banking System, Inc.

Three Months Ended

Unaudited

March 31,

December 31,

September 30,

June 30,

March 31,

2012

2011

2011

2011

2011

(dollars in thousands except per share)

Earnings

Net interest income

$

67,063

$

72,124

$

64,788

$

49,375

$

50,449

Provision for loan and lease losses

$

4,500

4,750

$

500

$

2,150

$

Provision (recapture) for losses on covered loans

$

15,685

$

(3,960)

$

433

$

2,301

$

(422)

Noninterest income (loss)

$

9,574

$

(9,602)

$

2,196

$

3,542

$

(5,419)

Noninterest expense

$

44,352

$

41,314

$

39,935

$

37,164

$

37,346

Net income

$

8,902

$

14,754

$

18,872

$

8,632

$

5,779

Per Common Share

Earnings (basic)

$

0.22

$

0.37

$

0.48

$

0.22

$

0.15

Earnings (diluted)

$

0.22

$

0.37

$

0.48

$

0.22

$

0.15

Book value

$

18.97

$

19.23

$

18.99

$

18.43

$

18.09

Averages

Total assets

$

4,776,186

$

4,755,222

$

4,680,901

$

4,324,390

$

4,268,348

Interest-earning assets

$

4,137,449

$

4,098,603

$

4,028,029

$

3,719,558

$

3,632,663

Loans, including covered loans

$

2,860,524

$

2,817,279

$

2,777,681

$

2,439,439

$

2,388,076

Securities

$

1,023,067

$

957,727

$

998,775

$

988,839

$

767,360

Deposits

$

3,805,324

$

3,791,169

$

3,678,931

$

3,382,486

$

3,306,168

Core deposits

$

3,512,490

$

3,472,023

$

3,332,234

$

3,073,068

$

2,989,825

Interest-bearing deposits

$

2,672,911

$

2,664,133

$

2,651,664

$

2,479,485

$

2,429,821

Interest-bearing liabilities

$

2,815,753

$

2,808,497

$

2,813,396

$

2,647,990

$

2,596,833

Noninterest-bearing deposits

$

1,132,413

$

1,127,036

$

1,027,268

$

903,001

$

876,347

Shareholders' equity

$

761,686

$

757,696

$

735,192

$

719,165

$

710,282

Financial Ratios

Return on average assets

0.75

%

1.23

%

1.60

%

0.80

%

0.55

%

Return on average common equity

4.70

%

7.73

%

10.18

%

4.81

%

3.30

%

Average equity to average assets

15.95

%

15.93

%

15.71

%

16.63

%

16.64

%

Net interest margin

6.67

%

7.14

%

6.53

%

5.49

%

5.80

%

Efficiency ratio (tax equivalent)

71.48

%

69.56

%

69.17

%

69.49

%

73.33

%

Period end

Total assets

$

4,815,432

$

4,785,945

$

4,755,832

$

4,429,143

$

4,264,319

Covered assets, net

$

526,043

$

560,055

$

595,640

$

631,549

$

499,872

Loans, excluding covered loans, net

$

2,371,818

$

2,348,371

$

2,257,899

$

1,987,474

$

1,884,206

Allowance for noncovered loan and lease losses

$

52,283

$

53,041

$

50,422

$

54,057

$

55,315

Securities

$

1,021,428

$

1,050,325

$

1,018,069

$

1,008,559

$

906,096

Deposits

$

3,865,445

$

3,815,529

$

3,795,499

$

3,475,167

$

3,336,213

Core deposits

$

3,591,663

$

3,510,435

$

3,464,705

$

3,142,975

$

3,027,898

Shareholders' equity

$

752,703

$

759,338

$

749,966

$

727,680

$

714,083

Nonperforming, noncovered assets

Nonaccrual loans

$

57,552

$

53,483

$

55,183

$

59,404

$

78,692

OREO and OPPO

21,571

31,905

34,069

37,116

29,315

Total nonperforming, noncovered assets

$

79,123

$

85,388

$

89,252

$

96,520

$

108,007

Nonperforming assets to period-end noncovered loans + OREO and OPPO

3.31

%

3.59

%

3.89

%

4.77

%

5.64

%

Nonperforming loans to period-end noncovered loans

2.43

%

2.28

%

2.44

%

2.99

%

4.18

%

Nonperforming assets to period-end noncovered assets

1.84

%

2.02

%

2.15

%

2.54

%

2.87

%

Allowance for loan and lease losses to period-end noncovered loans

2.20

%

2.26

%

2.23

%

2.72

%

2.94

%

Allowance for loan and lease losses to nonperforming noncovered loans

90.84

%

99.17

%

91.37

%

91.00

%

70.29

%

Net noncovered loan charge-offs

$

5,258

$

2,131

$

4,135

$

3,408

$

5,678

CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.

Three Months Ended

Unaudited

March 31,

2012

2011

(in thousands except per share)

Interest Income

Loans

$

61,777

$

47,429

Taxable securities

5,245

4,417

Tax-exempt securities

2,525

2,467

Federal funds sold and deposits in banks

165

298

Total interest income

69,712

54,611

Interest Expense

Deposits

1,779

3,079

Federal Home Loan Bank advances

750

694

Long-term obligations

251

Other borrowings

120

138

Total interest expense

2,649

4,162

Net Interest Income

67,063

50,449

Provision for loan and lease losses

4,500

Provision (recapture) for losses on covered loans

15,685

(422)

Net interest income after provision (recapture)

46,878

50,871

Noninterest Income (Loss)

Service charges and other fees

7,177

6,288

Merchant services fees

2,018

1,633

Gain on sale of investment securities, net

62

Bank owned life insurance

711

505

Change in FDIC loss-sharing asset

(1,668)

(14,774)

Other

1,274

929

Total noninterest income (loss)

9,574

(5,419)

Noninterest Expense

Compensation and employee benefits

21,995

18,921

Occupancy

5,333

4,397

Merchant processing

873

883

Advertising and promotion

882

901

Data processing and communications

2,213

1,924

Legal and professional fees

1,609

1,413

Taxes, licenses and fees

1,355

865

Regulatory premiums

860

2,195

Net cost (benefit) of operation of other real estate

910

(442)

Amortization of intangibles

1,150

984

Other

7,172

5,305

Total noninterest expense

44,352

37,346

Income before income taxes

12,100

8,106

Provision for income taxes

3,198

2,327

Net Income

$

8,902

$

5,779

Earnings per common share

Basic

$

0.22

$

0.15

Diluted

$

0.22

$

0.15

Dividends paid per common share

$

0.37

$

0.03

Weighted average number of common shares outstanding

39,195

39,043

Weighted average number of diluted common shares outstanding

39,298

39,156

 

CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited

March 31,

December 31,

2012

2011

(in thousands)

ASSETS

Cash and due from banks

$

93,904

$

91,364

Interest-earning deposits with banks and federal funds sold

297,553

202,925

Total cash and cash equivalents

391,457

294,289

Securities available for sale at fair value (amortized cost of $961,296 and $987,560, respectively)

999,213

1,028,110

Federal Home Loan Bank stock at cost

22,215

22,215

Loans held for sale

2,066

2,148

Loans, excluding covered loans, net of unearned income of ($12,865) and ($16,217), respectively

2,371,818

2,348,371

Less: allowance for loan and lease losses

52,283

53,041

Loans, excluding covered loans, net

2,319,535

2,295,330

Covered loans, net of allowance for loan losses of ($20,504) and ($4,944), respectively

501,613

531,929

Total loans, net

2,821,148

2,827,259

FDIC loss-sharing asset

159,061

175,071

Interest receivable

16,037

15,287

Premises and equipment, net

113,071

107,899

Other real estate owned ($24,430 and $28,126 covered by Federal Deposit Insurance Corporation loss share, respectively)

41,174

51,019

Goodwill

115,554

115,554

Core deposit intangible, net

19,016

20,166

Other assets

115,420

126,928

Total assets

$

4,815,432

$

4,785,945

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing

$

1,159,308

$

1,156,610

Interest-bearing

2,706,137

2,658,919

Total deposits

3,865,445

3,815,529

Federal Home Loan Bank advances

114,715

119,009

Securities sold under agreements to repurchase

25,000

25,000

Other liabilities

57,569

67,069

Total liabilities

4,062,729

4,026,607

Commitments and contingent liabilities

March 31,

December 31,

2012

2011

Common stock (no par value)

Authorized shares

63,033

63,033

Issued and outstanding

39,670

39,506

579,894

579,136

Retained earnings

149,348

155,069

Accumulated other comprehensive income

23,461

25,133

Total shareholders' equity

752,703

759,338

Total liabilities and shareholders' equity