2014

Columbia Banking System Announces Fourth Quarter and Full Year 2013 Earnings and Declares Increased Dividend

TACOMA, Wash., Jan. 23, 2014 /PRNewswire/ --

Highlights

  • Fourth quarter 2013: Net income of $20.0 million and diluted earnings per share of $0.38, compared to net income of $13.5 million and diluted earnings per share of $0.34 for the prior year period
  • Full year 2013: Net income of $60.0 million and diluted earnings per share of $1.21 compared to net income of $46.1 million and diluted earnings per share of $1.16 for the prior year period
  • Excellent loan production of over $240 million during the quarter
  • Nonperforming assets to period end noncovered assets reduced to 0.84%
  • Solid core deposits at 96% of total deposits

Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB ("Columbia") said today upon the release of Columbia's fourth quarter 2013 earnings, "Our results for the quarter reflect the positive impact we expected the West Coast merger to have on our financial performance.  After only three quarters we have exceeded our earnings accretion estimate for the first full year.  Loan originations have been strong throughout our entire footprint and continued to build in each successive quarter of 2013, achieving record production during the fourth quarter.  I'm also pleased that our bankers continue to build relationships that result in continued core deposit growth."

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Significant Influences on the Quarter Ended December 31, 2013

Net Interest Margin ("NIM")

Columbia's net interest margin decreased to 5.03% for the fourth quarter of 2013, down from 5.37% for the third quarter of 2013. The decrease in the net interest margin for the current quarter compared to the third quarter of 2013 was due to a decrease of $4.0 million in accretion related to acquired loan portfolios, and to a lesser degree, current period loan originations occurring at rates below the existing portfolio yield.

Columbia's operating net interest margin(1), decreased to 4.31% for the fourth quarter of 2013, compared to 4.41% for the third quarter of 2013. From the same period last year, the operating net interest margin increased 17 basis points, up from 4.14%, primarily due to smaller balances being held in lower yielding overnight funds during the current period.

The following table shows the impact to interest income resulting from accretion of income on acquired loan portfolios as well as the net interest margin and operating net interest margin for the periods presented:













Three Months Ended


Twelve Months Ended



December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2012



(dollars in thousands)

Incremental accretion income due to:









FDIC acquired impaired loans


$

6,540



$

10,850



$

29,815



$

55,305


Other FDIC acquired loans


237



1,021



2,211



5,872


Other acquired loans


6,540





26,200




Incremental accretion income


$

13,317



$

11,871



$

58,226



$

61,177











Reported net interest margin


5.03

%


5.15

%


5.16

%


5.77

%

Operating net interest margin (1)


4.31

%


4.14

%


4.32

%


4.36

%














(1) Operating net interest margin is a non-GAAP financial measure. See section titled "Non-GAAP Financial Measures" on the last page of this earnings release for the reconciliation of operating net interest margin to net interest margin.



Balance Sheet

Ms. Dressel commented, "Although the integration of West Coast was a major priority during 2013, I was pleased that both our longstanding bankers and those newest members of the team who joined us during the merger, remained externally focused which really enabled us to fire on all cylinders from a production point of view."  Ms. Dressel continued, "A significant portion of our loan production during the quarter was offset by pay downs and prepayments."

At December 31, 2013, Columbia's total assets were $7.16 billion, an increase of $11.3 million from September 30, 2013 and an increase of $2.26 billion from December 31, 2012, primarily due to the acquisition of West Coast. Noncovered loans were $4.22 billion at December 31, 2013, up $25.7 million from September 30, 2013 and up 67%, or $1.69 billion, from $2.53 billion at prior year end due in large part to the acquisition of West Coast which added $1.41 billion in loans. Securities were $1.70 billion at December 31, 2013, an increase of $94.2 million, or 6% from $1.60 billion at September 30, 2013. The increase in the securities portfolio was a result of strong core deposit growth experienced late in the third quarter and early in the current period.

Total deposits at December 31, 2013 were $5.96 billion, relatively unchanged from $5.95 billion at September 30, 2013. Core deposits comprised 96% of total deposits, and were $5.70 billion at December 31, 2013.

Asset Quality

At December 31, 2013, nonperforming assets to noncovered assets were 0.84% or $57.9 million, down from 0.87%, or $59.6 million, at September 30, 2013. Nonaccrual loans decreased $1.9 million during the fourth quarter. The decrease in nonaccrual loans for the quarter was driven by payments of $5.6 million, charge-offs of $2.9 million, the return of $3.4 million of nonaccrual loans to accrual status, and $83 thousand of loans transferred to other real estate owned ("OREO"), partially offset by $10.1 million of new nonaccrual loans. Noncovered OREO and other personal property owned ("OPPO") increased by $277 thousand during the fourth quarter, as a result of loan foreclosures of $83 thousand and paying off $3.6 million of third-party liens on existing OREO, partially offset by $3.3 million in sales and $117 thousand in write-downs. 

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

















December 31, 2013


September 30, 2013


December 31, 2012



(dollars in thousands)

Nonaccrual noncovered loans:







Commercial business


$

12,609



$

11,995



$

9,299


Real estate:







One-to-four family residential


2,667



2,220



2,349


Commercial and multifamily residential


11,043



14,025



19,204


Total real estate


13,710



16,245



21,553


Real estate construction:







One-to-four family residential


3,705



3,685



4,900


Total real estate construction


3,705



3,685



4,900


Consumer


3,991



4,036



1,643


Total nonaccrual loans


34,015



35,961



37,395


Noncovered other real estate owned and other personal property owned


23,918



23,641



11,108


Total nonperforming noncovered assets


$

57,933



$

59,602



$

48,503




























The increase in nonperforming noncovered assets from December 31, 2012 to December 31, 2013 was largely attributable to the nonperforming assets acquired from West Coast, which consisted of $9.4 million of nonaccrual loans and $6.9 million of OREO at December 31, 2013.

The following table provides an analysis of the Company's allowance for loan and lease losses ("ALLL") at the dates and the periods indicated:





Three Months Ended
December 31,


Twelve Months Ended
December 31,



2013


2012


2013


2012



(in thousands)

Beginning balance


$

55,844



$

51,527



$

52,244



$

53,041


Charge-offs:









Commercial business


(1,912)



(1,903)



(4,942)



(10,173)


One-to-four family residential real estate


(37)



(50)



(228)



(549)


Commercial and multifamily residential real estate


(489)



(365)



(2,543)



(5,474)


One-to-four family residential real estate construction




(181)



(133)



(1,606)


Commercial and multifamily residential real estate construction








(93)


Consumer


(980)



(658)



(2,242)



(2,534)


Total charge-offs


(3,418)



(3,157)



(10,088)



(20,429)


Recoveries:









Commercial business


1,124



234



2,444



1,548


One-to-four family residential real estate


90



83



270



285


Commercial and multifamily residential real estate


524



261



1,033



1,599


One-to-four family residential real estate construction


16



582



2,665



1,488


Commercial and multifamily residential real estate construction




2





66


Consumer


200



362



552



1,171


Total recoveries


1,954



1,524



6,964



6,157


Net charge-offs


(1,464)



(1,633)



(3,124)



(14,272)


Provision for loan and lease losses


(2,100)



2,350



3,160



13,475


Ending balance


$

52,280



$

52,244



$

52,280



$

52,244




Columbia's allowance for loan losses to nonperforming, noncovered loans ratio was 154% for the quarter, slightly down from 155% for the third quarter 2013 and up from 140% for the same period last year. The allowance for noncovered loan losses to period end loans was 1.24% at December 31, 2013 compared to 1.33% at September 30, 2013 and 2.07% at December 31, 2012. The decrease in the allowance percentage compared to December 31, 2012 resulted from including acquired loans in the ratio, for which only a small allowance was estimated at quarter-end given management's judgment that the remaining discount on the loans still significantly addresses the estimated credit losses in acquired loans. Excluding acquired loans, the allowance at December 31, 2013 represented 1.58% of noncovered loans, compared to 1.73% of noncovered loans at September 30, 2013. The decline reflects strong organic loan growth as well as continued improvement in the Company's core asset quality.

For the fourth quarter of 2013, Columbia had a provision recapture of $2.1 million for noncovered loans. For the comparable quarter last year the company had a provision of $2.4 million.

Andy McDonald, Columbia's Chief Credit Officer, commented, "We continue to see a declining trend in net loan charge-offs, along with positive migration in the loan portfolio as loans move from substandard to pass or exit the bank. This trend, coupled with declining loss rates within our ALLL model, resulted in a release of provision during the current quarter."

Impact of FDIC Acquired Loan Accounting

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



FDIC Acquired Loan Activity












Three Months Ended


Twelve Months Ended



December 31, 2013


December 31, 2012


December 31, 2013


December 31, 2012



(in thousands)

Incremental accretion income on FDIC acquired impaired loans


$

6,540



$

10,850



$

29,815



$

55,305


Incremental accretion income on other FDIC acquired loans


237



1,021



2,211



5,872


Recapture (provision) for losses on covered loans


1,582



(2,511)



3,261



(25,892)


Change in FDIC loss-sharing asset


(9,571)



(9,680)



(45,017)



(24,467)


Claw back liability benefit (expense)


(36)



154



(278)



54


Pre-tax earnings impact


$

(1,248)



$

(166)



$

(10,008)



$

10,872




































The incremental accretion income in the table above represents the amount of income recorded on acquired loans above the contractual rate stated in the individual loan notes and stems from the discount established at the time these loan portfolios were acquired. At December 31, 2013, the accretable yield on acquired impaired loans was $103.9 million and the net discount on other FDIC acquired loans was $144 thousand. The accretable yield and net discount represent income to be recorded by Columbia over the remaining life of the acquired loans. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis. 

The $1.6 million net provision recapture for losses on covered loans in the current period is substantially offset by an 80%, or $1.3 million, charge to the change in the FDIC loss-sharing asset, resulting in a positive net pre-tax earnings impact of $317 thousand. The provision recapture for losses on covered loans was primarily due to increased expected future cash flows as remeasured during the current quarter when compared to the prior quarter's remeasurement. 

The $9.6 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consists of $7.3 million of amortization expense, approximately $1.0 million of expense related to covered other real estate owned, and the $1.3 million adjustment described above. Included in amortization expense was $2.4 million in additional FDIC loss-sharing asset amortization expense during the quarter due to the implementation of new accounting guidance related to indemnification asset accounting, which generally accelerates the amortization of the indemnification asset.  The new accounting guidance was adopted by Columbia at the beginning of 2013.

Fourth Quarter 2013 Results

Net Interest Income

Net interest income for the fourth quarter of 2013 was $77.2 million, an increase of $22.3 million from $54.9 million for the same quarter in 2012, primarily due to the interest and accretion income recorded during the fourth quarter of 2013 related to the West Coast acquisition, which closed on April 1, 2013.

Compared to the third quarter of 2013, net interest income decreased $3.2 million from $80.4 million primarily due to lower discount accretion recognized on the acquired loan portfolios. In the third quarter, Columbia recorded $10.0 million in discount accretion on the West Coast loan portfolio compared to only $6.5 million during the current quarter.

Noninterest Income

Total noninterest income was $10.6 million for the fourth quarter of 2013, compared to $6.6 million for the fourth quarter of 2012. The increase from the prior year period was primarily due to a $6.1 million increase in service charges and other fees resulting from the increased customer base from the West Coast acquisition.  This increase was partially offset by the $3.7 million gain on investment securities recorded during the fourth quarter of 2012, for which there was no gain recorded in the current quarter.

Compared to the prior quarter, noninterest income before change in loss-sharing asset increased $736 thousand to $20.2 million. Merchant services fees were up $808 thousand over the prior quarter. However, approximately $1.0 million of noninterest income was related to the integration of a West Coast operating platform and is not expected to continue.

The change in the FDIC loss-sharing asset is a significant component of noninterest income. The following table reflects the income statement components of the change in the FDIC loss-sharing asset for the three and twelve month periods indicated:













Three Months Ended


Twelve Months Ended



December 31,


December 31,



2013


2012


2013


2012



(in thousands)

Adjustments reflected in income









Amortization, net


(7,259)



(9,522)



(36,729)



(42,940)


Loan impairment (recapture)


(1,265)



2,009



(2,609)



20,714


Sale of other real estate


(1,101)



(2,908)



(6,177)



(7,789)


Write-downs of other real estate


(10)



687



364



5,190


Other


64



54



132



358


Change in FDIC loss-sharing asset


$

(9,571)



$

(9,680)



$

(45,019)



$

(24,467)





































Noninterest Expense

Total noninterest expense for the fourth quarter of 2013 was $63.6 million, an increase of $25.8 million, or 68% from $37.8 million for the same quarter in 2012. The increase from the prior year period was primarily due to additional ongoing noninterest expense resulting from the West Coast acquisition as well as the acquisition-related expenses of $7.9 million for the current quarter compared to only $649 thousand for the prior year period.

Compared to the third quarter of 2013, noninterest expense decreased $1.1 million. Excluding acquisition related expenses of $7.9 million for the current quarter and $7.6 million for the third quarter, total noninterest expense declined $1.4 million, primarily due to the benefit from the operation of OREO which was $518 thousand greater in the current quarter.

Clint Stein, Columbia's Chief Financial Officer, commented, "Our improving efficiency ratio is indicative of the steady progress we continue to make in enhancing our operating leverage."  Mr. Stein continued, "Through many of our performance metrics, we are now able to clearly see the benefit of the additional scale provided by the West Coast merger."

Dividend

The Board of Directors announced that a quarterly cash dividend of $0.12 per common share, and per common share equivalent for holders of preferred stock, will be paid on February 19, 2014 to shareholders of record on February 5, 2014.  The $0.12 cash dividend represents a 9% increase over the dividend paid for the prior quarter, and 20% for the same period a year ago. 

Organizational update

Ms. Dressel commented, "We continually evaluate our delivery channels as an important component of ongoing efforts to improve efficiencies without compromising customer service.  With the consolidation of overlapping locations as a result of the West Coast merger, we ended the year with 142 branches consisting of 80 locations in Washington and 62 in Oregon."

Conference Call

Columbia's management will discuss the fourth quarter 2013 results on a conference call scheduled for Thursday, January 23, 2014 at 1:00 p.m. PST (4:00 pm EST). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #35813170.

A conference call replay will be available from approximately 5:00 p.m. PST on January 23, 2014 through midnight PST on January 30, 2014. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #35813170.

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding Company of Columbia State Bank, a Washington state-chartered full-service commercial bank. For the seventh consecutive year, the bank was named in 2013 as one of Puget Sound Business Journal's "Washington's Best Workplaces."

More information about Columbia can be found on its website at www.columbiabank.com.

# # #

Note Regarding Forward-Looking Statements

This news release includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These forward looking statements describe Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words "will," "believe," "expect," "intend," "should," and "anticipate" and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely.  In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, including the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of 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




Clint E. Stein, Executive Vice President 


and Chief Financial Officer


(253) 593-8304





FINANCIAL STATISTICS


Columbia Banking System, Inc.


Unaudited


Three Months Ended


Twelve Months Ended



December 31,


December 31,



2013


2012


2013


2012

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

77,209



$

54,898



$

291,095



$

238,927


Provision (recapture) for loan and lease losses


$

(2,100)



$

2,350



$

3,160



$

13,475


Provision (recapture) for losses on covered loans, net (1)


$

(1,582)



$

2,511



$

(3,261)



$

25,892


Noninterest income


$

10,612



$

6,567



$

26,700



$

27,058


Noninterest expense


$

63,619



$

37,800



$

230,886



$

162,913


Acquisition-related expense (included in noninterest expense)


$

7,910



$

649



$

25,488



$

1,780


Net income


$

19,973



$

13,462



$

60,016



$

46,143


Per Common Share









Earnings (basic)


$

0.39



$

0.34



$

1.24



$

1.16


Earnings (diluted)


$

0.38



$

0.34



$

1.21



$

1.16


Book value


$

20.50



$

19.25



$

20.50



$

19.25


Averages









Total assets


$

7,192,084



$

4,925,736



$

6,558,517



$

4,826,283


Interest-earning assets


$

6,269,894



$

4,388,487



$

5,754,543



$

4,246,724


Loans, including covered loans


$

4,504,587



$

2,926,825



$

4,140,826



$

2,900,520


Securities


$

1,662,720



$

1,007,059



$

1,474,744



$

1,011,294


Deposits


$

6,003,657



$

4,012,764



$

5,420,577



$

3,875,666


Core deposits


$

5,735,099



$

3,769,409



$

5,146,776



$

3,609,467


Interest-bearing deposits


$

3,839,060



$

2,714,292



$

3,596,343



$

2,683,630


Interest-bearing liabilities


$

3,886,126



$

2,796,155



$

3,683,145



$

2,808,968


Noninterest-bearing deposits


$

2,164,597



$

1,298,472



$

1,824,234



$

1,192,036


Shareholders' equity


$

1,056,694



$

767,781



$

979,099



$

761,185


Financial Ratios









Return on average assets


1.11

%


1.09

%


0.92

%


0.96

%

Return on average common equity


7.57

%


6.98

%


6.14

%


6.06

%

Average equity to average assets


14.69

%


15.59

%


14.93

%


15.77

%

Net interest margin


5.03

%


5.15

%


5.16

%


5.77

%

Efficiency ratio (tax equivalent)(2)


64.83

%


68.26

%


66.16

%


69.17

%












December 31,





Period end


2013


2012





Total assets


$

7,161,582



$

4,906,335








Covered assets, net


$

289,790



$

407,648








Loans, excluding covered loans, net


$

4,219,451



$

2,525,710








Allowance for noncovered loan and lease losses


$

52,280



$

52,244








Securities


$

1,696,640



$

1,023,484








Deposits


$

5,959,475



$

4,042,085








Core deposits


$

5,696,357



$

3,802,366








Shareholders' equity


$

1,053,249



$

764,008








Nonperforming, noncovered assets









Nonaccrual loans


$

34,015



$

37,395








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


23,918



11,108







Total nonperforming, noncovered assets


$

57,933



$

48,503








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


1.37

%


1.91

%






Nonperforming loans to period-end noncovered loans


0.81

%


1.48

%






Nonperforming assets to period-end noncovered assets


0.84

%


1.08

%






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


1.24

%


2.07

%






Allowance for loan and lease losses to nonperforming noncovered loans


153.70

%


139.71

%






Net noncovered loan charge-offs


$

3,124


(3)

$

14,272


(4)















(1) Provision(recapture) for losses on covered loans was partially offset by $1.3 million in expense and $2.0 million in income recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended December 31, 2013 and 2012, respectively. For the year ended December 31, 2013 and 2012, provision(recapture) for losses on covered loans was partially offset by $2.6 million in expense and $20.7 million in income, respectively.

(2) Noninterest expense, excluding net benefit of operation of other real estate and other personal property, FDIC clawback liability and acquisition-related expenses, divided by the sum of (1)net interest income on a tax equivalent basis, excluding incremental accretion income on the acquired loan portfolio, premium amortization on acquired securities, interest reversals on nonaccrual loans, and prepayment expenses on FHLB advances, and (2)noninterest income on a tax equivalent basis, excluding gain/loss on investment securities and the change in FDIC loss-sharing asset.

(3)  For the twelve months ended December 31, 2013.


(4)  For the twelve months ended December 31, 2012.












FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited


December 31,


December 31,



2013


2012

Loan Portfolio Composition


(dollars in thousands)

Noncovered loans:









Commercial business


$

1,561,782



37.0

%


$

1,155,158



45.7

%

Real estate:













One-to-four family residential


108,317



2.6

%


43,922



1.7

%

Commercial and multifamily residential


2,080,075



49.2

%


1,061,201



42.0

%

Total real estate


2,188,392



51.8

%


1,105,123



43.7

%

Real estate construction:













One-to-four family residential


54,155



1.3

%


50,602



2.0

%

Commercial and multifamily residential


126,390



3.0

%


65,101



2.7

%

Total real estate construction


180,545



4.3

%


115,703



4.7

%

Consumer


357,014



8.5

%


157,493



6.2

%

Subtotal loans


4,287,733



101.6

%


2,533,477



100.3

%

Less:  Net unearned income


(68,282)



(1.6)

%


(7,767)



(0.3)

%

Total noncovered loans, net of unearned income


4,219,451



100.0

%


2,525,710



100.0

%

Less:  Allowance for loan and lease losses


(52,280)





(52,244)




Noncovered loans, net


4,167,171





2,473,466




Covered loans, net of allowance for loan losses of ($20,174) and ($30,056), respectively


277,671





391,337




Total loans, net


$

4,444,842





$

2,864,803




Loans held for sale


$

735





$

2,563

















December 31,


December 31,



2013


2012

Deposit Composition


(dollars in thousands)

Core deposits:









Demand and other non-interest bearing


$

2,171,703



36.4

%


$

1,321,171



32.7

%

Interest bearing demand


1,170,006



19.6

%


870,821



21.5

%

Money market


1,569,261



26.3

%


1,043,459



25.8

%

Savings


496,444



8.3

%


314,371



7.8

%

Certificates of deposit less than $100,000


288,943



4.9

%


252,544



6.2

%

Total core deposits


5,696,357



95.5

%


3,802,366



94.0

%














Certificates of deposit greater than $100,000


201,498



3.5

%


212,924



5.3

%

Certificates of deposit insured by CDARS®


19,488



0.3

%


26,720



0.7

%

Brokered money market accounts


41,765



0.7

%




%

Subtotal


5,959,108



100.0

%


4,042,010



100.0

%

Premium resulting from acquisition date fair value adjustment


367






75





Total deposits


$

5,959,475






$

4,042,085























FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited










December 31,


December 31,



2013


2012



OREO


OPPO


OREO


OPPO

OREO and OPPO Composition


(in thousands)

Covered


$

12,093



$

26



$

16,311



$

45


Noncovered


23,834



84



10,676



432


Total


$

35,927



$

110



$

26,987



$

477













Three Months Ended


Twelve Months Ended



December 31,


December 31,



2013


2012


2013


2012

OREO and OPPO Earnings Impact


(in thousands)

Net cost of operation of noncovered OREO


$

59



$

664



$

1,249



$

4,766


Net benefit of operation of covered OREO


(1,354)



(2,097)



(8,650)



(6,735)


Net benefit of operation of OREO


$

(1,295)



$

(1,433)



$

(7,401)



$

(1,969)











Noncovered OPPO cost (benefit), net


$

(4)



$

(271)



$

(129)



$

1,971


Covered OPPO benefit, net


(9)



(197)



(9)



(213)


OPPO cost (benefit), net (1)


$

(13)



$

(468)



$

(138)



$

1,758











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



 The following table shows a summary of FDIC acquired loan accounting for the five most recent quarters:




Three Months Ended



December 31,


September 30,


June 30,


March 31,


December 31,



2013


2013


2013


2013


2012



(in thousands)

Expense to pre-tax earnings


$

(1,248)



$

(3,362)



$

(3,149)



$

(2,249)



$

(166)













Balance sheet components:











Covered loans, net of allowance


$

277,671



$

302,160



$

338,661



$

363,213



$

391,337


Covered OREO


12,093



12,730



12,854



13,811



16,311


FDIC loss-sharing asset


39,846



53,559



67,374



83,115



96,354
























QUARTERLY FINANCIAL STATISTICS



Columbia Banking System, Inc.



Unaudited


Three Months Ended



December 31,


September 30,


June 30,


March 31,


December 31,



2013


2013


2013


2013


2012



(dollars in thousands except per share)

Earnings



Net interest income


$

77,209



$

80,415



$

79,989



$

53,482



$

54,898


Provision (recapture) for loan and lease losses


$

(2,100)



$

4,260



$

2,000



$

(1,000)



$

2,350


Provision (recapture) for losses on covered loans


$

(1,582)



$

(947)



$

(1,712)



$

980



$

2,511


Noninterest income


$

10,612



$

7,622



$

6,808



$

1,658



$

6,567


Noninterest expense


$

63,619



$

64,714



$

64,504



$

38,049



$

37,800


Acquisition-related expense (included in noninterest expense)


$

7,910



$

7,621



$

9,234



$

723



$

649


Net income


$

19,973



$

13,276



$

14,591



$

12,176



$

13,462


Per Common Share











Earnings (basic)


$

0.39



$

0.26



$

0.28



$

0.31



$

0.34


Earnings (diluted)


$

0.38



$

0.25



$

0.28



$

0.31



$

0.34


Book value


$

20.50



$

20.35



$

20.07



$

19.32



$

19.25


Averages











Total assets


$

7,192,084



$

7,048,864



$

7,110,957



$

4,851,044



$

4,925,736


Interest-earning assets


$

6,269,894



$

6,101,960



$

6,284,281



$

4,336,978



$

4,388,487


Loans, including covered loans


$

4,504,587



$

4,504,040



$

4,571,181



$

2,962,559



$

2,926,825


Securities


$

1,662,720



$

1,512,292



$

1,665,180



$

1,051,657



$

1,007,059


Deposits


$

6,003,657



$

5,837,018



$

5,824,802



$

3,990,127



$

4,012,764


Core deposits


$

5,735,099



$

5,558,246



$

5,526,238



$

3,741,086



$

3,769,409


Interest-bearing deposits


$

3,839,060



$

3,805,260



$

3,986,581



$

2,740,100



$

2,714,292


Interest-bearing liabilities


$

3,886,126



$

3,898,997



$

4,161,095



$

2,771,743



$

2,796,155


Noninterest-bearing deposits


$

2,164,597



$

2,031,758



$

1,838,221



$

1,250,027



$

1,298,472


Shareholders' equity


$

1,056,694



$

1,036,134



$

1,051,380



$

768,390



$

767,781


Financial Ratios











Return on average assets


1.11

%


0.75

%


0.82

%


1.02

%


1.09

%

Return on average common equity


7.57

%


5.13

%


5.56

%


6.43

%


6.98

%

Average equity to average assets


14.69

%


14.70

%


14.79

%


15.84

%


15.59

%

Net interest margin


5.03

%


5.37

%


5.19

%


5.06

%


5.15

%

Efficiency ratio (tax equivalent)


64.83

%


66.59

%


65.54

%


68.68

%


68.26

%

Period end











Total assets


$

7,161,582



$

7,150,297



$

7,070,465



$

4,905,011



$

4,906,335


Covered assets, net


$

289,790



$

314,898



$

351,545



$

377,024



$

407,648


Loans, excluding covered loans, net


$

4,219,451



$

4,193,732



$

4,181,018



$

2,621,212



$

2,525,710


Allowance for noncovered loan and lease losses


$

52,280



$

55,844



$

51,698



$

51,119



$

52,244


Securities


$

1,696,640



$

1,602,484



$

1,541,039



$

1,033,783



$

1,023,484


Deposits


$

5,959,475



$

5,948,967



$

5,747,861



$

4,046,539



$

4,042,085


Core deposits


$

5,696,357



$

5,662,958



$

5,467,899



$

3,796,574



$

3,802,366


Shareholders' equity


$

1,053,249



$

1,045,797



$

1,030,674



$

769,660



$

764,008


Nonperforming, noncovered assets











Nonaccrual loans


$

34,015



$

35,961



$

43,610



$

32,886



$

37,395


OREO and OPPO


23,918



23,641



24,423



12,000



11,108


Total nonperforming, noncovered assets


$

57,933



$

59,602



$

68,033



$

44,886



$

48,503


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


1.37

%


1.41

%


1.62

%


1.70

%


1.91

%

Nonperforming loans to period-end noncovered loans


0.81

%


0.86

%


1.04

%


1.25

%


1.48

%

Nonperforming assets to period-end noncovered assets


0.84

%


0.87

%


1.01

%


0.99

%


1.08

%

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


1.24

%


1.33

%


1.24

%


1.95

%


2.07

%

Allowance for loan and lease losses to nonperforming noncovered loans


153.70

%


155.29

%


118.55

%


155.44

%


139.71

%

Net noncovered loan charge-offs


$

1,464



$

114



$

1,421



$

125



$

1,633
















CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.

Unaudited


Three Months Ended


Twelve Months Ended



December 31,


December 31,



2013


2012


2013


2012



(in thousands except per share)

Interest Income









Loans


$

69,294



$

50,558



$

266,284



$

219,433


Taxable securities


6,400



3,862



20,459



18,276


Tax-exempt securities


2,548



2,499



9,837



9,941


Federal funds sold and deposits in banks


65



290



355



854


Total interest income


78,307



57,209



296,935



248,504


Interest Expense









Deposits


890



1,208



3,962



5,887


Federal Home Loan Bank advances


89



379



(404)



2,608


Prepayment charge on Federal Home Loan Bank advances




603



1,548



603


Other borrowings


119



121



734



479


Total interest expense


1,098



2,311



5,840



9,577


Net Interest Income


77,209



54,898



291,095



238,927


Provision (recapture) for loan and lease losses


(2,100)



2,350



3,160



13,475


Provision (recapture) for losses on covered loans, net


(1,582)



2,511



(3,261)



25,892


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


80,891



50,037



291,196



199,560


Noninterest Income









Service charges and other fees


13,840



7,776



48,351



29,998


Merchant services fees


2,878



1,987



8,812



8,154


Investment securities gains, net




3,671



462



3,733


Bank owned life insurance


960



684



3,570



2,861


Change in FDIC loss-sharing asset


(9,571)



(9,680)



(45,017)



(24,467)


Other


2,505



2,129



10,522



6,779


Total noninterest income


10,612



6,567



26,700



27,058


Noninterest Expense









Compensation and employee benefits


34,835



20,950



125,432



85,434


Occupancy


11,494



4,721



33,054



20,031


Merchant processing


891



888



3,551



3,612


Advertising and promotion


895



308



4,090



3,650


Data processing and communications


3,573



2,451



14,076



9,714


Legal and professional fees


2,363



2,694



12,338



8,915


Taxes, licenses and fees


996



1,142



5,033



4,736


Regulatory premiums


1,300



824



4,706



3,384


Net benefit of operation of other real estate


(1,295)



(1,433)



(7,401)



(1,969)


Amortization of intangibles


1,657



1,083



6,045



4,445


FDIC clawback liability expense (recovery)


36



(154)



278



(54)


Other


6,874



4,326



29,684



21,015


Total noninterest expense


63,619



37,800



230,886



162,913


Income before income taxes


27,884



18,804



87,010



63,705


Provision for income taxes


7,911



5,342



26,994



17,562


Net Income


$

19,973



$

13,462



$

60,016



$

46,143


Earnings per common share









Basic


$

0.39



$

0.34



$

1.24



$

1.16


Diluted


$

0.38



$

0.34



$

1.21



$

1.16


Dividends paid per common share


$

0.11



$

0.09



$

0.41



$

0.98


Weighted average number of common shares outstanding


50,847



39,295



47,993



39,260


Weighted average number of diluted common shares outstanding


52,358



39,297



49,051



39,263


















CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited





December 31,


December 31,






2013


2012






(in thousands)

ASSETS




Cash and due from banks



$

165,030



$

124,573


Interest-earning deposits with banks



14,531



389,353


Total cash and cash equivalents



179,561



513,926


Securities available for sale at fair value (amortized cost of $1,680,491 and $969,359, respectively)



1,664,111



1,001,665


Federal Home Loan Bank stock at cost



32,529



21,819


Loans held for sale



735



2,563


Loans, excluding covered loans, net of unearned income of ($68,282) and ($7,767), respectively



4,219,451



2,525,710


Less: allowance for loan and lease losses



52,280



52,244


Loans, excluding covered loans, net



4,167,171



2,473,466


Covered loans, net of allowance for loan losses of ($20,174) and ($30,056), respectively



277,671



391,337


Total loans, net



4,444,842



2,864,803


FDIC loss-sharing asset



39,846



96,354


Interest receivable



22,206



14,268


Premises and equipment, net



154,732



118,708


Other real estate owned ($12,093 and $16,311 covered by FDIC loss-share, respectively)



35,927



26,987


Goodwill



343,429



115,554


Other intangible assets, net



25,852



15,721


Other assets



217,812



113,967


Total assets



$

7,161,582



$

4,906,335


LIABILITIES AND SHAREHOLDERS' EQUITY






Deposits:






Noninterest-bearing



$

2,171,703



$

1,321,171


Interest-bearing



3,787,772



2,720,914


Total deposits



5,959,475



4,042,085


Federal Home Loan Bank advances



36,606



6,644


Securities sold under agreements to repurchase



25,000



25,000


Other liabilities



87,252



68,598


Total liabilities



6,108,333



4,142,327


Commitments and contingent liabilities









December 31,


December 31,






2013


2012





Preferred stock (no par value)








Authorized shares

2,000








Issued and outstanding

9





2,217




Common stock (no par value)








Authorized shares

63,033



63,033






Issued and outstanding

51,265



39,686



860,562



581,471


Retained earnings



202,514



162,388


Accumulated other comprehensive income (loss)



(12,044)



20,149


Total shareholders' equity



1,053,249



764,008


Total liabilities and shareholders' equity



$

7,161,582



$

4,906,335




Non-GAAP Financial Measures

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

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



Three Months Ended December 31,



Twelve Months Ended December 31,




2013


2012


2013


2012










Net interest margin


5.03

%


5.15

%


5.16

%


5.77

%

Adjustments to net interest margin to arrive at operating net interest margin:









Incremental accretion income on FDIC acquired impaired loans


(0.42)

%


(0.99)

%


(0.52)

%


(1.30)

%

Incremental accretion income on other FDIC acquired loans


(0.01)

%


(0.09)

%


(0.04)

%


(0.14)

%

Incremental accretion income on other acquired loans


(0.42)

%


%


(0.46)

%


%

Premium amortization on acquired securities


0.12

%


%


0.13

%


%

Interest reversals on nonaccrual loans


0.01

%


0.02

%


0.02

%


0.02

%

Prepayment charges on FHLB advances


%


0.05

%


0.03

%


0.01

%

Operating net interest margin


4.31

%


4.14

%


4.32

%


4.36

%

SOURCE Columbia Banking System, Inc.



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