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

Jan 23, 2014, 09:15 ET from Columbia Banking System, Inc.

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.



RELATED LINKS

http://www.columbiabank.com