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Columbia Banking System Announces Solid Second Quarter 2012 Earnings

Highlights

- Net income increased 38%, to $11.9 million compared to net income of $8.6 million for the 2nd quarter 2011

- Net income per diluted common share increased to $0.30, as compared to $0.22 per common share for the 2nd quarter 2011

- Noncovered loans increased 3% during the current quarter

- Business loans increased 8% from year-end 2011

- Credit metrics continue to improve; noncovered nonperforming assets decreased for the sixth consecutive quarter, falling 21% from year-end 2011

- Strong core deposits at 93% of total deposits

- Named one of Puget Sound Business Journal's "Washington's Best Workplaces" for the sixth consecutive year

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TACOMA, Wash., July 26, 2012 /PRNewswire/ -- Columbia Banking System, Inc. (NASDAQ: COLB) ("Columbia") today announced net income of $11.9 million for the quarter ended June 30, 2012, an increase of 38% compared to net income of $8.6 million for the same quarter of 2011.  Earnings per diluted common share rose 36% to $0.30 for the second quarter, compared with earnings of $0.22 per diluted common share a year earlier.

Melanie Dressel, President and Chief Executive Officer commented, "Our solid second quarter performance was achieved through our continued external focus on attracting and enhancing new and current customer relationships throughout our Pacific Northwest footprint.  We are pleased with our loan growth despite the unsettled economic environment and intensified competitive challenges.  Our commercial business loans have grown 8% and our total noncovered loan portfolio has grown 4% since year-end 2011."

Significant Influences on the Quarter Ended June 30, 2012

Impact of Acquired Loan Accounting

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

 

Acquired Loan Portfolio Activity












Three Months Ended


Six Months Ended



June 30, 2012


June 30, 2011


June 30, 2012


June 30, 2011



(in thousands)

Incremental accretion income on acquired impaired loans


$

13,875



$

8,883



$

33,196



$

21,254


Incremental accretion income on other acquired loans


1,137





4,238




(Provision) recapture for losses on covered loans


(11,688)



(2,301)



(27,373)



(1,879)


Change in FDIC loss-sharing asset


(168)



(6,419)



(1,836)



(21,193)


Claw back liability (expense) recapture


208



(448)



234



(2,148)


Pre-tax earnings impact


$

3,364



$

(285)



$

8,459



$

(3,966)


 

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.  As of June 30, 2012, the remaining accretable yield on acquired impaired loans was $214.1 million and the remaining loan discount on other acquired loans was $7.0 million, down from $239.7 million and $8.2 million, respectively at March 31, 2012.

The $11.7 million in provision expense on covered loans in the current period is offset by an 80%, or $9.4 million, favorable adjustment to the change in the FDIC loss-sharing asset resulting in a net pre-tax earnings impact of $2.3 million.  The provision for losses on covered loans 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 first quarter of 2012.  These incremental loan losses reduced expected future cash flows and, when discounted at current yields, resulted in impairment. 

The $168 thousand change in the FDIC loss sharing asset in the current quarter affected noninterest income and consists of $9.9 million of scheduled amortization expense, the $9.4 million favorable adjustment described above and approximately $300 thousand of income related to covered other real estate owned.

Net Interest Margin

Columbia's net interest margin increased to 5.88% in the second quarter of 2012, up from 5.49% for the same period last year and down from 6.67% for the first quarter of 2012.  The Company's net interest margin is impacted significantly by the accounting for acquired loans. The net interest margin for the current quarter reflects a moderating trend in the additional accretion income related to the acquired loans, which peaked during the last six months of 2011.

The Company's net interest margin, excluding incremental accretion income, decreased to 4.44% in the second quarter of 2012, down from 4.53% for the same period last year and down from 4.49% for the first quarter of 2012.  The net interest margin, excluding incremental accretion income, was adversely impacted during the second quarter of 2012 by the overall decreasing trend in rates, impacting both the Company's loan and investment portfolios.  Average noncovered loan yields have decreased due to a combination of repricing of existing loans and new originations at lower rates.  The average yield on investments declined as portfolio cash flows were reinvested at lower prevailing rates.

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

 



Three Months Ended


Six Months Ended



June 30, 2012


June 30, 2011


June 30, 2012


June 30, 2011



(dollars in thousands)

Interest income as recorded


$

24,486



$

16,782



$

57,389



$

38,084


Less: Interest income at stated note rate


9,474



7,899



19,955



16,830


Incremental accretion income


$

15,012



$

8,883



$

37,434



$

21,254


Incremental accretion income due to:









Acquired impaired loans


$

13,875



$

8,883



$

33,196



$

21,254


Other acquired loans


1,137





4,238




Incremental accretion income


$

15,012



$

8,883



$

37,434



$

21,254


Reported net interest margin


5.88

%


5.49

%


6.27

%


5.64

%

Net interest margin excluding additional accretion income


4.44

%


4.53

%


4.46

%


4.48

%

 

Balance Sheet

At June 30, 2012, Columbia's total assets were $4.79 billion, a slight decrease from $4.82 billion at March 31, 2012, and virtually unchanged from December 31, 2011. Noncovered loans were $2.44 billion at June 30, 2012, up 3% from $2.37 billion at March 31, 2012 and up 4% from $2.35 billion at December 31, 2011.   Net noncovered loan growth for the second quarter 2012 was approximately $65 million from March 31, 2012 and $89 million from year-end 2011.  Securities were $1.02 billion at June 30, 2012, relatively unchanged from March 31, 2012 and down 3% from $1.05 billion at December 31, 2011.

Total deposits at June 30, 2012 remained stable at $3.83 billion compared to $3.87 billion at March 31, 2012, and increased less than 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 $3.57 billion at June 30, 2012, relatively unchanged from $3.59 billion at March 31, 2012, and an increase of 2% from $3.51 billion at December 31, 2011. 

Total shareholder equity was $758.7 million at June 30, 2012, compared to $752.7 million and $759.3 million at March 30, 2012 and December 31, 2011, respectively. In accordance with the Company's recent capital and dividend strategies, total shareholders' equity has remained relatively unchanged over the past three quarters. Melanie Dressel commented, "Our high capital ratios put us in a good position to take advantage of strategic opportunities that may arise."

Asset Quality

At June 30, 2012, nonperforming noncovered assets were $67.1 million, decreases of 15% from $79.1 million at March 31, 2012, and 21% from $85.4 million at December 31, 2011.  The decrease in nonperforming loans for the quarter was driven by payments of $7.2 million, charge-offs of $4.6 million and the return of $1.4 million of nonperforming loans to accrual status.  In addition, noncovered other real estate owned (OREO) and other personal property owned (OPPO) were reduced by $5.5 million, as a result of $3.3 million in sales and $2.2 million in write-downs.  These reductions were partially offset by new additions to nonperforming assets of $6.7 million, resulting in a net decrease in nonperforming, noncovered assets of $12.0 million.

The following table sets forth, at the dates indicated, information with respect to noncovered nonaccrual loans and total noncovered nonperforming assets.

 



June 30,

 2012


March 31,

 2012


December 31,

 2011



(dollars in thousands)

Nonaccrual noncovered loans:







Commercial business


$

13,052



$

14,791



$

10,243


Real estate:







One-to-four family residential


2,244



2,624



2,696


Commercial and multifamily residential


23,302



24,872



19,485


Total real estate


25,546



27,496



22,181


Real estate construction:







One-to-four family residential


5,223



8,793



10,785


Commercial and multifamily residential


3,754



5,023



7,067


Total real estate construction


8,977



13,816



17,852


Consumer


1,890



1,449



3,207


Total nonaccrual loans


49,465



57,552



53,483


Noncovered other real estate owned and other personal property owned


17,608



21,571



31,905


Total nonperforming noncovered assets


$

67,073



$

79,123



$

85,388


 

For the quarter ended June 30, 2012, net loan charge-offs were $3.8 million, compared to $3.4 million for the same period a year ago, and $5.3 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 loan and lease losses at the dates and the periods indicated.

 



Three Months Ended June 30,


Six Months Ended June 30,



2012


2011


2012


2011



(in thousands)

Beginning balance


$

52,283



$

55,315



$

53,041



$

60,993


Charge-offs:









Commercial business


(2,044)



(834)



(4,403)



(4,205)


One-to-four family residential real estate


(334)



(216)



(449)



(664)


Commercial and multifamily residential real estate


(1,839)



(1,554)



(4,516)



(1,919)


One-to-four family residential real estate construction


(897)



(805)



(1,102)



(2,232)


Commercial and multifamily residential real estate construction


(93)



(1,078)



(93)



(1,565)


Consumer


(374)



(271)



(1,467)



(1,196)


Total charge-offs


(5,581)



(4,758)



(12,030)



(11,781)


Recoveries:









Commercial business


378



592



1,036



697


One-to-four family residential real estate


2





45




Commercial and multifamily residential real estate


822



13



892



86


One-to-four family residential real estate construction


455



700



502



1,804


Commercial and multifamily residential real estate construction


1





1




Consumer


86



45



459



108


Total recoveries


1,744



1,350



2,935



2,695


Net charge-offs


(3,837)



(3,408)



(9,095)



(9,086)


Provision charged to expense


3,750



2,150



8,250



2,150


Ending balance


$

52,196



$

54,057



$

52,196



$

54,057


 

For the second quarter of 2012, the company made a provision of $3.8 million for noncovered loan losses.  For the comparable quarter last year, the company made a provision of $2.2 million.  The provision for noncovered loan losses were primarily driven by net charge-offs experienced in the quarter and to a lesser extent by the $65 million in noncovered loan growth experienced during the quarter. The growth in noncovered loans was centered in commercial business loans and term commercial real estate loans.

The allowance for noncovered loan losses to period end noncovered loans was 2.14% at June 30, 2012 compared to 2.20% at March 31, 2012 and 2.26% at December 31, 2011.  

Andy McDonald, Executive Vice President and Chief Credit Officer commented, "We are encouraged with our improving credit metrics, resulting in a decrease in our nonperforming assets for the past six consecutive quarters.  However, with the ongoing lackluster national and international economies, we will continue to maintain a prudent level in our allowance for loan and lease losses."

Second Quarter 2012 Operating Results

Quarter ended June 30, 2012

Net Interest Income

Net interest income for the second quarter of 2012 was $59.7 million, an increase of 21% from $49.4 million for the same quarter in 2011, primarily due to organic loan growth and the impact of our 2011 FDIC-assisted transactions. 

Compared to the first quarter of 2012, net interest income decreased 11% from $67.1 million primarily due to the moderation of accretion income on acquired loans.  During the second quarter of 2012, the Company recorded $15.0 million in accretion income on acquired loans compared to $22.4 million for the first quarter of 2012.

Noninterest Income

Total noninterest income was $11.8 million for the second quarter of 2012, compared to $3.5 million a year earlier.  The increase from the prior year was primarily due to the change in the FDIC loss-sharing asset, which accounted for $6.3 million of the increase.  For the prior year period, the change in the FDIC loss-sharing asset was a $6.4 million reduction of noninterest income.  For the second quarter of 2012, the change in the FDIC loss-sharing asset was a reduction of noninterest income of only $168 thousand due to the increase in income related to the impairment on the covered loans.  Also contributing to the increase in noninterest income for the second quarter compared to the prior year was an increase in service charges and other fee income of $969 thousand. Service charges and other fee income increased due to the implementation of new fee schedules.

Compared to the first quarter of 2012, noninterest income increased 24%, from $9.6 million primarily due to the change in the FDIC loss-sharing asset, which accounted for $1.5 million of the increase. For the first quarter of 2012, the change in the FDIC loss-sharing asset was a reduction of noninterest income of $1.7 million, compared to $168 thousand for the second quarter of 2012.

The following table reflects the components of the change in the FDIC loss-sharing asset for the three month periods indicated.

 



Three Months Ended



June 30,


March 31,



2012


2011


2012



(in thousands)

Adjustments reflected in income





Amortization, net


(9,851)



(8,059)



(13,873)


Impairment


9,350



1,841



12,548


Sale of other real estate


(1,498)



(1,149)



(2,067)


Write-downs of other real estate


1,732



443



1,629


Other


99



505



95


Change in FDIC loss-sharing asset


$

(168)



$

(6,419)



$

(1,668)















Noninterest Expense

Total noninterest expense for the second quarter of 2012 was $39.8 million, an increase of 7% from $37.2 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 data processing. Compensation and employee benefits increased $1.5 million compared to the same period in 2011, primarily due to an increase in the number of employees related to our acquisitions.  Occupancy expense increased $703 thousand mainly as a result of the addition of 17 acquired branch locations. Data processing increased $638 thousand due to the additional data processing costs associated with the recent FDIC-assisted bank acquisitions.  These increases were partially offset by a $656 thousand reduction in FDIC clawback liability expense and a $591 thousand decrease in the cost of operation of other real estate owned.

Compared to the first quarter of 2012, noninterest expense declined $4.5 million, or 10%.  The decline was attributable to the decrease of $2.5 million in other noninterest expense, which was primarily due to lower OPPO expenses during the second quarter of 2012. Also contributing to the decrease was a reduction in the net cost of operation of other real estate owned of $1.3 million and a decrease of $1.0 million in compensation and benefits.                   

Conference Call

Columbia's management will discuss the second quarter 2012 results on a conference call scheduled for Thursday, July 26, 2012 at 1:00 p.m. PDT.   Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #92629197.

A conference call replay will be available from approximately 4:00 p.m. PDT on July 26, 2012 through midnight PDT on August 3, 2012.  The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #92629197.

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 sixth consecutive year, the bank was named in 2012 as one of Puget Sound Business Journal's "Washington's Best Workplaces."

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

Clint E. Stein, Senior Vice President
and Acting Chief Financial Officer
(253) 593-8304



FINANCIAL STATISTICS














Columbia Banking System, Inc.


Three Months Ended


Six Months Ended






Unaudited


June 30,


June 30,








2012


2011


2012


2011






Earnings


(in thousands except per share amounts)






Net interest income


$

59,701



$

49,375



$

126,764



$

99,824







Provision for loan and lease losses


$

3,750



$

2,150



$

8,250



$

2,150







Provision for losses on covered loans, net (5)


$

11,688



$

2,301



$

27,373



$

1,879







Noninterest income (loss)


$

11,828



$

3,542



$

21,402



$

(1,877)







Noninterest expense


$

39,825



$

37,164



$

84,177



$

74,510







Net income


$

11,899



$

8,632



$

20,801



$

14,411







Per Common Share














Earnings (basic)


$

0.30



$

0.22



$

0.52



$

0.37







Earnings (diluted)


$

0.30



$

0.22



$

0.52



$

0.36







Book value


$

19.13



$

18.43



$

19.13



$

17.97







Averages














Total assets


$

4,788,723



$

4,324,390



$

4,782,454



$

4,296,494







Interest-earning assets


$

4,194,281



$

3,719,558



$

4,167,048



$

3,676,351







Loans, including covered loans


$

2,895,436



$

2,439,439



$

2,877,980



$

2,413,899







Securities


$

1,029,337



$

988,839



$

1,027,385



$

878,712







Deposits


$

3,823,985



$

3,382,486



$

3,814,655



$

3,344,538







Core deposits


$

3,555,279



$

3,073,068



$

3,533,885



$

3,031,677







Interest-bearing deposits


$

2,682,092



$

2,479,485



$

2,677,502



$

2,454,790







Interest-bearing liabilities


$

2,820,857



$

2,647,990



$

2,818,359



$

2,621,987







Noninterest-bearing deposits


$

1,141,893



$

903,001



$

1,137,153



$

889,748







Shareholders' equity


$

758,391



$

719,165



$

760,038



$

714,748







Financial Ratios














Return on average assets


1.00

%


0.80

%


0.87

%


0.68

%






Return on average common equity


6.31

%


4.81

%


5.50

%


4.07

%






Average equity to average assets


15.84

%


16.63

%


15.89

%


16.64

%






Net interest margin


5.88

%


5.49

%


6.27

%


5.64

%






Efficiency ratio (tax equivalent)(1)


68.54

%


69.49

%


70.00

%


71.35

%






















June 30,


December 31,








Period end


2012


2011


2011








Total assets


$

4,789,413



$

4,429,143



$

4,785,945









Covered assets, net


$

482,073



$

631,549



$

560,055









Loans, excluding covered loans, net


$

2,436,961



$

1,987,474



$

2,348,371









Allowance for noncovered loan and lease losses


$

52,196



$

54,057



$

53,041









Securities


$

1,019,978



$

1,008,559



$

1,050,325









Deposits


$

3,830,817



$

3,475,167



$

3,815,529









Core deposits


$

3,568,307



$

3,142,975



$

3,510,435









Shareholders' equity


$

758,712



$

727,680



$

759,338









Nonperforming, noncovered assets














Nonaccrual loans


$

49,465



$

59,404



$

53,483









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


17,608



37,116



31,905









Total nonperforming, noncovered assets


$

67,073



$

96,520



$

85,388









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


2.73

%


4.77

%


3.59

%








Nonperforming loans to period-end noncovered loans


2.03

%


2.99

%


2.28

%








Nonperforming assets to period-end noncovered assets


1.56

%


2.54

%


2.02

%








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


2.14

%


2.72

%


2.26

%








Allowance for loan and lease losses to nonperforming noncovered loans


105.52

%


91.00

%


99.17

%








Net noncovered loan charge-offs


$

9,094


(2)

$

9,086


(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 six months ended June 30, 2012.














(3)  For the six months ended June 30, 2011.














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














(5) Provision for losses on covered loans was partially offset by $9.4 million in income and $1.8 million in income recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended June 30, 2012 and 2011, respectively.







FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited


June 30,


December 31,



2012


2011

Loan Portfolio Composition


(dollars in thousands)

Noncovered loans:









Commercial business


$

1,111,440



45.6

%


$

1,031,721



43.9

%

Real estate:









One-to-four family residential


55,883



2.3

%


64,491



2.8

%

Commercial and multifamily residential


1,017,736



41.8

%


998,165



42.5

%

Total real estate


1,073,619



44.1

%


1,062,656



45.3

%

Real estate construction:









One-to-four family residential


47,417



1.9

%


50,208



2.1

%

Commercial and multifamily residential


48,765



2.0

%


36,768



1.6

%

Total real estate construction


96,182



3.9

%


86,976



3.7

%

Consumer


167,387



6.9

%


183,235



7.8

%

Subtotal loans


2,448,628



100.5

%


2,364,588



100.7

%

Less:  Net unearned income


(11,667)



(0.5)

%


(16,217)



(0.7)

%

Total noncovered loans, net of unearned income


2,436,961



100.0

%


2,348,371



100.0

%

Less:  Allowance for loan and lease losses


(52,196)





(53,041)




Noncovered loans, net


2,384,765





2,295,330




Covered loans, net of allowance for loan losses of ($31,784) and ($4,944), respectively


462,994





531,929




Total loans, net


$

2,847,759





$

2,827,259




Loans held for sale


$

2,088





$

2,148















June 30,


December 31,



2012


2011

Deposit Composition


(dollars in thousands)

Core deposits:









Demand and other non-interest bearing


$

1,159,462



30.3

%


$

1,156,610



30.3

%

Interest bearing demand


794,430



20.7

%


735,340



19.3

%

Money market


1,040,787



27.2

%


1,031,664



27.0

%

Savings


296,679



7.7

%


283,416



7.4

%

Certificates of deposit less than $100,000


276,949



7.2

%


303,405



8.0

%

Total core deposits


3,568,307



93.1

%


3,510,435



92.0

%










Certificates of deposit greater than $100,000


239,279



6.3

%


262,731



6.9

%

Certificates of deposit insured by CDARS®


23,062



0.6

%


42,080



1.1

%

Subtotal


3,830,648



100.0

%


3,815,246



100.0

%

Premium resulting from acquisition date fair value adjustment


169





283




Total deposits


$

3,830,817





$

3,815,529




 


FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited








June 30,


December 31,



2012


2011



OREO


OPPO


OREO


OPPO

OREO and OPPO Composition


(in thousands)

Covered


$

19,079



$

45



$

28,126



$

45


Noncovered


13,925



3,683



22,893



8,966


Total


$

33,004



$

3,728



$

51,019



$

9,011













Three Months Ended





June 30,


March 31,



OREO and OPPO Earnings Impact


2012


2011


2012



Net cost of operation of noncovered OREO


$

1,472



$

2,440



$

2,693




Net benefit of operation of covered OREO


(1,849)



(2,226)



(1,783)




Net cost (benefit) of operation of OREO


$

(377)



$

214



$

910













Noncovered OPPO expense, net


$

187



$



$

2,154




Covered OPPO expense (benefit), net


(10)





2




OPPO expense, net (1)


$

177



$



$

2,156













(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


June 30,


March 31,


December 31,


September 30,


June 30,



2012


2012


2011


2011


2011



(dollars in thousands except per share)

Earnings



Net interest income


$

59,701



$

67,063



$

72,124



$

64,788



$

49,375


Provision for loan and lease losses


$

3,750



$

4,500



$

4,750



$

500



$

2,150


Provision (recapture) for losses on covered loans


$

11,688



$

15,685



$

(3,960)



$

433



$

2,301


Noninterest income (loss)


$

11,828



$

9,574



$

(9,602)



$

2,196



$

3,542


Noninterest expense


$

39,825



$

44,352



$

41,314



$

39,935



$

37,164


Net income


$

11,899



$

8,902



$

14,754



$

18,872



$

8,632


Per Common Share











Earnings (basic)


$

0.30



$

0.22



$

0.37



$

0.48



$

0.22


Earnings (diluted)


$

0.30



$

0.22



$

0.37



$

0.48



$

0.22


Book value


$

19.13



$

18.97



$

19.23



$

18.99



$

18.43


Averages











Total assets


$

4,788,723



$

4,776,186



$

4,755,222



$

4,680,901



$

4,324,390


Interest-earning assets


$

4,194,281



$

4,137,449



$

4,098,603



$

4,028,029



$

3,719,558


Loans, including covered loans


$

2,895,436



$

2,860,524



$

2,817,279



$

2,777,681



$

2,439,439


Securities


$

1,029,337



$

1,023,067



$

957,727



$

998,775



$

988,839


Deposits


$

3,823,985



$

3,805,324



$

3,791,169



$

3,678,931



$

3,382,486


Core deposits


$

3,555,279



$

3,512,490



$

3,472,023



$

3,332,234



$

3,073,068


Interest-bearing deposits


$

2,682,092



$

2,672,911



$

2,664,133



$

2,651,664



$

2,479,485


Interest-bearing liabilities


$

2,820,857



$

2,815,753



$

2,808,497



$

2,813,396



$

2,647,990


Noninterest-bearing deposits


$

1,141,893



$

1,132,413



$

1,127,036



$

1,027,268



$

903,001


Shareholders' equity


$

758,391



$

761,686



$

757,696



$

735,192



$

719,165


Financial Ratios











Return on average assets


1.00

%


0.75

%


1.23

%


1.60

%


0.80

%

Return on average common equity


6.31

%


4.70

%


7.73

%


10.18

%


4.81

%

Average equity to average assets


15.84

%


15.95

%


15.93

%


15.71

%


16.63

%

Net interest margin


5.88

%


6.67

%


7.14

%


6.53

%


5.49

%

Efficiency ratio (tax equivalent)


68.54

%


71.48

%


69.56

%


69.17

%


69.49

%

Period end











Total assets


$

4,789,413



$

4,815,432



$

4,785,945



$

4,755,832



$

4,429,143


Covered assets, net


$

482,073



$

526,043



$

560,055



$

595,640



$

631,549


Loans, excluding covered loans, net


$

2,436,961



$

2,371,818



$

2,348,371



$

2,257,899



$

1,987,474


Allowance for noncovered loan and lease losses


$

52,196



$

52,283



$

53,041



$

50,422



$

54,057


Securities


$

1,019,978



$

1,021,428



$

1,050,325



$

1,018,069



$

1,008,559


Deposits


$

3,830,817



$

3,865,445



$

3,815,529



$

3,795,499



$

3,475,167


Core deposits


$

3,568,307



$

3,591,663



$

3,510,435



$

3,464,705



$

3,142,975


Shareholders' equity


$

758,712



$

752,703



$

759,338



$

749,966



$

727,680


Nonperforming, noncovered assets











Nonaccrual loans


$

49,465



$

57,552



$

53,483



$

55,183



$

59,404


OREO and OPPO


17,608



21,571



31,905



34,069



37,116


Total nonperforming, noncovered assets


$

67,073



$

79,123



$

85,388



$

89,252



$

96,520


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


2.73

%


3.31

%


3.59

%


3.89

%


4.77

%

Nonperforming loans to period-end noncovered loans


2.03

%


2.43

%


2.28

%


2.44

%


2.99

%

Nonperforming assets to period-end noncovered assets


1.56

%


1.84

%


2.02

%


2.15

%


2.54

%

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


2.14

%


2.20

%


2.26

%


2.23

%


2.72

%

Allowance for loan and lease losses to nonperforming noncovered loans


105.52

%


90.84

%


99.17

%


91.37

%


91.00

%

Net noncovered loan charge-offs


$

3,836



$

5,258



$

2,131



$

4,135



$

3,408



CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.


Three Months Ended


Six Months Ended

Unaudited


June 30,


June 30,



2012


2011


2012


2011



(in thousands except per share)

Interest Income









Loans


$

54,498



$

44,362



$

116,275



$

91,791


Taxable securities


4,951



6,247



10,196



10,664


Tax-exempt securities


2,495



2,516



5,020



4,983


Federal funds sold and deposits in banks


170



184



335



482


Total interest income


62,114



53,309



131,826



107,920


Interest Expense









Deposits


1,561



2,848



3,340



5,927


Federal Home Loan Bank advances


734



714



1,484



1,408


Long-term obligations




253





504


Other borrowings


118



119



238



257


Total interest expense


2,413



3,934



5,062



8,096


Net Interest Income


59,701



49,375



126,764



99,824


Provision for loan and lease losses


3,750



2,150



8,250



2,150


Provision for losses on covered loans, net


11,688



2,301



27,373



1,879


Net interest income after provision


44,263



44,924



91,141



95,795


Noninterest Income (Loss)









Service charges and other fees


7,436



6,467



14,613



12,755


Merchant services fees


2,095



1,808



4,113



3,441


Gain on sale of investment securities, net






62




Bank owned life insurance


719



528



1,430



1,033


Change in FDIC loss-sharing asset


(168)



(6,419)



(1,836)



(21,193)


Other


1,746



1,158



3,020



2,087


Total noninterest income (loss)


11,828



3,542



21,402



(1,877)


Noninterest Expense









Compensation and employee benefits


20,966



19,459



42,961



38,380


Occupancy


5,091



4,388



10,424



8,785


Merchant processing


930



905



1,803



1,788


Advertising and promotion


1,119



1,012



2,001



1,913


Data processing and communications


2,551



1,913



4,764



3,837


Legal and professional fees


1,829



1,498



3,438



2,911


Taxes, licenses and fees


1,115



907



2,470



1,772


Regulatory premiums


925



1,279



1,785



2,979


Net cost (benefit) of operation of other real estate


(377)



214



533



(228)


Amortization of intangibles


1,119



955



2,269



1,939


FDIC clawback liability (recovery)


(208)



448



(234)



2,148


Other


4,765



4,186



11,963



8,286


Total noninterest expense


39,825



37,164



84,177



74,510


Income before income taxes


16,266



11,302



28,366



19,408


Provision for income taxes


4,367



2,670



7,565



4,997


Net Income


$

11,899



$

8,632



$

20,801



$

14,411


Earnings per common share









Basic


$

0.30



$

0.22



$

0.52



$

0.37


Diluted


$

0.30



$

0.22



$

0.52



$

0.36


Dividends paid per common share


$

0.22



$

0.05



$

0.59



$

0.08


Weighted average number of common shares outstanding


39,260



39,107



39,228



39,073


Weighted average number of diluted common shares outstanding


39,308



39,166



39,306



39,159



CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited





June 30,


December 31,






2012


2011






(in thousands)

ASSETS



Cash and due from banks


$

98,940



$

91,364


Interest-earning deposits with banks and federal funds sold


270,873



202,925


Total cash and cash equivalents


369,813



294,289


Securities available for sale at fair value (amortized cost of $956,636 and $987,560, respectively)


997,763



1,028,110


Federal Home Loan Bank stock at cost


22,215



22,215


Loans held for sale


2,088



2,148


Loans, excluding covered loans, net of unearned income of ($11,666) and ($16,217), respectively


2,436,961



2,348,371


Less: allowance for loan and lease losses


52,196



53,041


Loans, excluding covered loans, net


2,384,765



2,295,330


Covered loans, net of allowance for loan losses of ($31,784) and ($4,944), respectively


462,994



531,929


Total loans, net


2,847,759



2,827,259


FDIC loss-sharing asset


140,003



175,071


Interest receivable