Columbia Banking System Announces Strong Second Quarter 2013 Results and Declares Cash Dividend

Highlights for the quarter include closing the West Coast Bancorp ("West Coast") acquisition, increased operating net interest margin and sustained organic loan growth

Jul 25, 2013, 09:15 ET from Columbia Banking System, Inc.

TACOMA, Wash., July 25, 2013 /PRNewswire/ -- 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 second quarter 2013 earnings, "Taking into account the financial impact associated with closing our acquisition of West Coast, I'm very pleased with our results for the quarter.  Acquisition-related expenses lowered our earnings per share by $0.11, bringing our reported diluted earnings per share to $0.28 during the quarter.  It's also notable that our operating net interest margin increased for the second consecutive quarter and we continued to experience organic loan growth."

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Net income for the current quarter was $14.6 million, a 23% increase compared to net income of $11.9 million for the second quarter 2012.  Earnings were impacted by $9.2 million in pre-tax acquisition-related expenses resulting from the West Coast transaction. Earnings per diluted common share declined 7% to $0.28, as compared to $0.30 per common share for the second quarter 2012.

Significant Influences on the Quarter Ended June 30, 2013

Acquisition of West Coast Bancorp    Ms. Dressel stated, "The acquisition of West Coast, which we completed on April 1, 2013, had a significant influence on our financial results."  The table below summarizes the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed:

April 1, 2013

(in thousands)

Purchase price as of April 1, 2013

$

540,791

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:

Cash and cash equivalents

$

110,440

Investment securities

730,842

Federal Home Loan Bank stock

11,824

Acquired loans

1,407,798

Premises and equipment

35,884

Other real estate owned

14,708

Core deposit intangible

15,257

Other assets

76,710

Deposits

(1,883,407)

Federal Home Loan Bank advances

(128,885)

Junior subordinated debentures

(51,000)

Other liabilities

(30,199)

    Total fair value of identifiable net assets

309,972

Goodwill

$

230,819

Related to the acquisition of West Coast, the Company recorded $9.2 million (pre-tax) in acquisition-related expenses during the current quarter and $10.0 million (pre-tax) in acquisition-related expenses for the six months ended June 30, 2013.

Net Interest Margin ("NIM") Columbia's net interest margin increased to 5.19% for the second quarter of 2013, up from 5.06% for the first quarter of 2013.  Columbia's net interest margin is impacted significantly by the accounting for acquired loans. The increase in the net interest margin for the current quarter compared to the first quarter of 2013 reflects the impact of discount accretion on the West Coast acquired loan portfolio, partially offset by the moderating trend in the incremental accretion income related to the FDIC acquired loans, which was substantially higher during the second quarter of 2012, as shown in the table on the following page.

Columbia's operating net interest margin, which excludes incremental accretion income on acquired loans, premium amortization on acquired securities, interest reversals on nonaccrual loans and prepayment charges on Federal Home Loan Bank advances, increased to 4.34% for the second quarter of 2013, up from 4.21% for the first quarter of 2013.  The operating net interest margin for the current quarter improved due in large part to the lower amount of cash held in overnight funds that were deployed in the acquisition of West Coast.  The operating net interest margin was down a modest 10 basis points from 4.44% for the same period last year.  Compared to the prior year period, the operating net interest margin was negatively impacted by the overall decreasing trend in rates, impacting both the loan and investment portfolios.  The average yield on investments declined as portfolio cash flows were reinvested at lower prevailing rates. 

Ms. Dressel commented, "The relative resiliency of our operating net interest margin continues to underscore the strength of Columbia's balance sheet.  Our diversified loan portfolio and stable core deposit base were important contributors to our ability to increase our operating net interest margin for the second consecutive quarter." 

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

Three Months Ended

Six Months Ended

June 30, 2013

June 30, 2012

June 30, 2013

June 30, 2012

(dollars in thousands)

Interest income as recorded

$

41,931

$

24,486

$

58,420

$

57,389

Less: Interest income at stated note rate

23,821

9,474

30,865

19,955

    Incremental accretion income

$

18,110

$

15,012

$

27,555

$

37,434

Incremental accretion income due to:

    FDIC acquired impaired loans

$

7,837

$

13,875

$

16,212

$

33,196

    Other FDIC acquired loans

638

1,137

1,708

4,238

    Other acquired loans

9,635

9,635

Incremental accretion income

$

18,110

$

15,012

$

27,555

$

37,434

Reported net interest margin

5.19%

5.88%

5.13%

6.27%

Operating net interest margin, excluding incremental accretion income on acquired loans, premium amortization on acquired securities, interest reversals on nonaccrual loans and prepayment charges on FHLB advances

4.34%

4.44%

4.28%

4.46%

Balance Sheet

Ms. Dressel commented, "We continued to see good organic loan growth of more than $141 million or approximately 5.4% for the quarter.  I'm especially pleased with the growth this quarter because it demonstrates that our bankers have remained focused on sustaining and developing relationships." 

Noncovered loans were $4.18 billion at June 30, 2013, up 60%, or $1.56 billion from March 31, 2013 and up 66%, or $1.66 billion, from $2.53 billion at prior year end due to the acquisition of West Coast. In addition to the increase from the acquisition, noncovered loans had organic growth of $141.3 million during the current quarter.  The organic growth in noncovered loans for the quarter was centered in commercial business and commercial and multifamily residential real estate loans.  At June 30, 2013, Columbia's total assets were $7.07 billion, an increase of $2.17 billion from March 31, 2013 and an increase of $2.16 billion from December 31, 2012, due to the acquisition of West Coast.  Securities, including FHLB stock, were $1.54 billion at June 30, 2013, an increase of $507.3 million from $1.03 billion at March 31, 2013, also reflecting the acquisition of West Coast.

Total deposits at June 30, 2013 were $5.75 billion, an increase of $1.70 billion, or 42% from $4.05 billion at March 31, 2013.  Core deposits comprised 95% of total deposits, and were $5.47 billion at June 30, 2013. Excluding the deposits from the West Coast acquisition, deposits declined $163.2 million, or 4%, from March 31, 2013.  The decline was largely due to a planned decrease in public funds.

Asset Quality

At June 30, 2013, nonperforming assets to noncovered assets were 1.01% or $68.0 million, up slightly from 0.99%, or $44.9 million, at March 31, 2013.  This increase was due to the acquisition of West Coast, which added $18.9 million of nonaccrual loans and $14.7 million of OREO at the beginning of the period.  Subsequent to the West Coast acquisition, nonaccrual loans decreased $8.1 million during the second quarter.  The decrease in nonaccrual loans for the quarter was driven by payments of $5.0 million, charge-offs of $1.8 million, the return of $5.3 million of nonaccrual loans to accrual status, and $2.1 million of loans transferred to other real estate owned ("OREO"), partially offset by $6.1 million of new nonaccrual loans.  Subsequent to the West Coast acquisition, OREO and other personal property owned ("OPPO") decreased by $2.4 million during the second quarter, as a result of $3.8 million in sales and $477 thousand in write-downs, partially offset by loan foreclosures of $2.1 million

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

June 30, 2013

March 31, 2013

December 31, 2012

(dollars in thousands)

Nonaccrual noncovered loans:

Commercial business

$

14,649

$

9,504

$

9,299

Real estate:

One-to-four family residential

3,805

1,684

2,349

Commercial and multifamily residential

17,045

17,402

19,204

    Total real estate

20,850

19,086

21,553

Real estate construction:

One-to-four family residential

4,753

3,034

4,900

    Total real estate construction

4,753

3,034

4,900

Consumer

3,358

1,262

1,643

Total nonaccrual loans

43,610

32,886

37,395

Noncovered other real estate owned and other personal property owned

24,423

12,000

11,108

Total nonperforming noncovered assets

$

68,033

$

44,886

$

48,503

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,

2013

2012

2013

2012

(in thousands)

Beginning balance

$

51,119

$

52,283

$

52,244

$

53,041

Charge-offs:

Commercial business

(961)

(2,044)

(2,275)

(4,403)

One-to-four family residential real estate

(28)

(334)

(144)

(449)

Commercial and multifamily residential real estate

(614)

(1,839)

(1,397)

(4,516)

One-to-four family residential real estate construction

(897)

(133)

(1,102)

Commercial and multifamily residential real estate construction

(93)

(93)

Consumer

(638)

(374)

(809)

(1,467)

    Total charge-offs

(2,241)

(5,581)

(4,758)

(12,030)

Recoveries:

Commercial business

352

378

465

1,036

One-to-four family residential real estate

141

2

141

45

Commercial and multifamily residential real estate

84

822

177

892

One-to-four family residential real estate construction

49

455

2,188

502

Commercial and multifamily residential real estate construction

1

1

Consumer

194

86

241

459

    Total recoveries

820

1,744

3,212

2,935

Net charge-offs

(1,421)

(3,837)

(1,546)

(9,095)

Provision (recapture) for loan and lease losses

2,000

3,750

1,000

8,250

Ending balance

$

51,698

$

52,196

$

51,698

$

52,196

Columbia's allowance for loan losses to nonperforming, noncovered loans ratio was 119% for the quarter, down from 155% for the first quarter 2013 and up from 106% for the same period last year. The allowance for noncovered loan losses to period end loans was 1.24% at June 30, 2013 compared to 1.95% at March 31, 2013 and 2.07% at December 31, 2012. The decrease in the allowance percentage resulted from including acquired loans in the ratio, for which no allowance was estimated at quarter-end given management's judgment that net acquisition accounting adjustments adequately address the estimated losses in acquired loans. Excluding acquired loans, the allowance at June 30, 2013 represented 1.87% of noncovered loans. This decrease reflects improvements in core asset quality during the current quarter.

For the second quarter of 2013, Columbia had a provision of $2.0 million for noncovered loan losses.  For the comparable quarter last year the company made a provision of $3.8 million.  The provision for noncovered loan losses during the current quarter was primarily driven by net charge-offs experienced in the quarter and to a lesser extent by the $141.3 million in core noncovered loan growth in 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

Six Months Ended

June 30, 2013

June 30, 2012

June 30, 2013

June 30, 2012

(in thousands)

Incremental accretion income on FDIC acquired impaired loans

$

7,837

$

13,875

$

16,212

$

33,196

Incremental accretion income on other FDIC acquired loans

638

1,137

1,708

4,238

Recapture (provision) for losses on covered loans

1,712

(11,688)

732

(27,373)

Change in FDIC loss-sharing asset

(13,137)

(168)

(23,620)

(1,836)

Claw back liability benefit (expense)

(199)

208

(430)

234

Pre-tax earnings impact

$

(3,149)

$

3,364

$

(5,398)

$

8,459

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 June 30, 2013, the accretable yield on acquired impaired loans was $140.5 million and the net discount on other FDIC acquired loans was $646 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 re-measured by Columbia on a quarterly basis. 

The $1.7 million net provision recapture for losses on covered loans in the current period is substantially offset by an 80%, or $1.4 million, charge to the change in the FDIC loss-sharing asset, resulting in a positive net pre-tax earnings impact of $342 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 $13.1 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consists of $9.8 million of amortization expense, approximately $1.9 million of expense related to covered other real estate owned, and the $1.4 million unfavorable adjustment described above.  Columbia recorded $3.2 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.

Second Quarter 2013 Operating Results

Quarter ended June 30, 2013

Net Interest Income Net interest income for the second quarter of 2013 was $80.0 million, an increase of $20.3 million from $59.7 million for the same quarter in 2012, primarily due to the interest income and accretion income recorded during the second quarter of 2013 related to the West Coast acquisition. During the second quarter of 2013, the Company recorded $23.8 million in interest income and $18.1 million in incremental accretion income on acquired loans compared to $9.5 million and $15.0 million, respectively for the second quarter of 2012, a total increase of $17.4 million.

Compared to the first quarter of 2013, net interest income increased $26.5 million from $53.5 million due to $25.4 million in interest income related to our acquired loan portfolios.

Noninterest Income Total noninterest income was $6.8 million for the second quarter of 2013, compared to $11.8 million for the second quarter of 2012.  The decrease from the prior-year period was due to the change in the FDIC loss-sharing asset, which decreased noninterest income by $13.0 million, partially offset by an increase in service charges and other fees of $6.1 million due to the increased customer base from the West Coast acquisition.

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

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

(in thousands)

Adjustments reflected in income

Amortization, net

(9,801)

(9,851)

(19,580)

(23,725)

Loan impairment

(1,370)

9,350

(585)

21,898

Sale of other real estate

(2,251)

(1,498)

(3,597)

(3,565)

Write-downs of other real estate

102

1,732

154

3,362

Other

183

99

(12)

194

Change in FDIC loss-sharing asset

$

(13,137)

$

(168)

$

(23,620)

$

(1,836)

Noninterest Expense Total noninterest expense for the second quarter of 2013 was $64.5 million, an increase of $24.7 million, or 62% from $39.8 million for the same quarter in 2012.  The increase from the prior-year period was primarily due to the acquisition-related expenses of $9.2 million for the current quarter as well as additional ongoing noninterest expense resulting from the West Coast acquisition.

Compared to the first quarter of 2013, noninterest expense increased $26.5 million, or 70%.  The increase was attributable to the current quarter acquisition-related expenses of $9.2 million, which were only $723 thousand in the first quarter of 2013 as well as additional ongoing noninterest expense resulting from the West Coast acquisition.

Ms. Dressel commented "I am pleased with where we are operationally with the integration of West Coast and it is beginning to show in our financial results.  As expected, the West Coast acquisition was immediately accretive to earnings.  The integration is progressing well and we are now just a few short weeks away from the core system conversion."

Dividend The Board of Directors announced that a quarterly cash dividend of $0.10 per common share, and per common share equivalent for holders of preferred stock, will be paid on August 21, 2013 to shareholders of record as of the close of business on August 7, 2013.  The $0.10 cash dividend represents a payout ratio of 36%.

Conference Call Columbia's management will discuss the second quarter 2013 results on a conference call scheduled for Thursday, July 25, 2013 at 1:00 p.m. PDT (4:00 pm EDT).   Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #16561845.

A conference call replay will be available from approximately 4:00 p.m. PDT on July 25, 2013 through midnight PDT on August 1, 2013.  The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #16561845.

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.  Columbia recently received a 2013 "Top Places to Work" award from the South Sound Business Examiner and was named for the seventh consecutive year  as one of Puget Sound Business Journal's 2013 "Washington's Best Workplaces."

With the recent acquisition of West Coast Bancorp, Columbia Banking System has 156 banking offices, including 86 branches in Washington State and 70 branches in Oregon. Columbia State 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, Executive Vice President

and Chief Financial Officer

(253) 593-8304

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Three Months Ended

Six Months Ended

Unaudited

June 30,

June 30,

2013

2012

2013

2012

Earnings

(dollars in thousands except per share amounts)

Net interest income

$

79,989

$

59,701

$

133,471

$

126,764

Provision for loan and lease losses

$

2,000

$

3,750

$

1,000

$

8,250

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

$

(1,712)

$

11,688

$

(732)

$

27,373

Noninterest income

$

6,808

$

11,828

$

8,466

$

21,402

Noninterest expense

$

64,504

$

39,825

$

102,553

$

84,177

Acquisition-related expense (included in noninterest expense)

$

9,234

$

$

9,957

$

Net income

$

14,591

$

11,899

$

26,767

$

20,801

Per Common Share

Earnings (basic)

$

0.28

$

0.30

$

0.59

$

0.52

Earnings (diluted)

$

0.28

$

0.30

$

0.58

$

0.52

Book value

$

20.07

$

19.13

$

20.07

$

19.13

Averages

Total assets

$

7,110,957

$

4,788,723

$

5,987,243

$

4,782,454

Interest-earning assets

$

6,284,281

$

4,194,281

$

5,316,008

$

4,167,048

Loans, including covered loans

$

4,571,181

$

2,895,436

$

3,771,314

$

2,877,980

Securities

$

1,665,180

$

1,029,337

$

1,360,114

$

1,027,385

Deposits

$

5,824,802

$

3,823,985

$

4,912,533

$

3,814,655

Core deposits

$

5,526,238

$

3,555,279

$

4,638,593

$

3,533,885

Interest-bearing deposits

$

3,986,581

$

2,682,092

$

3,366,784

$

2,677,502

Interest-bearing liabilities

$

4,161,095

$

2,820,857

$

3,470,257

$

2,818,359

Noninterest-bearing deposits

$

1,838,221

$

1,141,893

$

1,545,749

$

1,137,153

Shareholders' equity

$

1,051,380

$

758,391

$

910,667

$

760,038

Financial Ratios

Return on average assets

0.82%

1.00%

0.89%

0.87%

Return on average common equity

5.56%

6.31%

5.88%

5.50%

Average equity to average assets

14.79%

15.84%

15.21%

15.89%

Net interest margin

5.19%

5.88%

5.13%

6.27%

Efficiency ratio (tax equivalent)(2)

65.54%

68.54%

66.78%

70.00%

June 30,

December 31,

Period end

2013

2012

2012

Total assets

$

7,070,465

$

4,789,413

$

4,906,335

Covered assets, net

$

351,545

$

482,073

$

407,648

Loans, excluding covered loans, net

$

4,181,018

$

2,436,961

$

2,525,710

Allowance for noncovered loan and lease losses

$

51,698

$

52,196

$

52,244

Securities

$

1,541,039

$

1,019,978

$

1,023,484

Deposits

$

5,747,861

$

3,830,817

$

4,042,085

Core deposits

$

5,467,899

$

3,568,307

$

3,802,366

Shareholders' equity

$

1,030,674

$

758,712

$

764,008

Nonperforming, noncovered assets

Nonaccrual loans

$

43,610

$

49,465

$

37,395

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

24,423

17,608

11,108

    Total nonperforming, noncovered assets

$

68,033

$

67,073

$

48,503

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

1.62%

2.73%

1.91%

Nonperforming loans to period-end noncovered loans

1.04%

2.03%

1.48%

Nonperforming assets to period-end noncovered assets

1.01%

1.56%

1.08%

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

1.24%

2.14%

2.07%

Allowance for loan and lease losses to nonperforming noncovered loans

118.55%

105.52%

139.71%

Net noncovered loan charge-offs

$

1,546

(3)

$

9,094

(4)

$

14,272

(5)

(1) Provision(recapture) for losses on covered loans was partially offset by $1.4 million in expense and $9.4 million in income recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended June 30, 2013 and 2012, respectively. For the six months ended June 30, 2013 and 2012, provision(recapture) for losses on covered loans was partially offset by $586 thousand in expense and $21.9 million in income, respectively.

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

(3)  For the six months ended June 30, 2013.

(4)  For the six months ended June 30, 2012.

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

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

June 30,

December 31,

2013

2012

Loan Portfolio Composition

(dollars in thousands)

Noncovered loans:

Commercial business

$

1,587,572

38.0%

$

1,155,158

45.7%

Real estate:

One-to-four family residential

97,974

2.3%

43,922

1.7%

Commercial and multifamily residential

2,038,278

48.8%

1,061,201

42.0%

    Total real estate

2,136,252

51.1%

1,105,123

43.7%

Real estate construction:

One-to-four family residential

53,173

1.3%

50,602

2.0%

Commercial and multifamily residential

110,226

2.6%

65,101

2.7%

    Total real estate construction

163,399

3.9%

115,703

4.7%

Consumer

379,858

9.1%

157,493

6.2%

Subtotal loans

4,267,081

102.1%

2,533,477

100.3%

Less:  Net unearned income

(86,063)

(2.1)%

(7,767)

(0.3)%

Total noncovered loans, net of unearned income

4,181,018

100.0%

2,525,710

100.0%

Less:  Allowance for loan and lease losses

(51,698)

(52,244)

Noncovered loans, net

4,129,320

2,473,466

Covered loans, net of allowance for loan losses of ($26,135) and ($30,056), respectively

338,661

391,337

Total loans, net

$

4,467,981

$

2,864,803

Loans held for sale

$

2,150

$

2,563

June 30,

December 31,

2013

2012

Deposit Composition

(dollars in thousands)

Core deposits:

Demand and other non-interest bearing

$

1,961,244

34.1%

$

1,321,171

32.7%

Interest bearing demand

1,108,125

19.3%

870,821

21.5%

Money market

1,605,012

27.9%

1,043,459

25.8%

Savings

478,900

8.3%

314,371

7.8%

Certificates of deposit less than $100,000

314,618

5.6%

252,544

6.2%

    Total core deposits

5,467,899

95.2%

3,802,366

94.0%

Certificates of deposit greater than $100,000

218,950

3.8%

212,924

5.3%

Certificates of deposit insured by CDARS®

25,273

0.4%

26,720

0.7%

Brokered money market accounts

35,173

0.6%

—%

Subtotal

5,747,295

100.0%

4,042,010

100.0%

    Premium resulting from acquisition date fair value adjustment

566

75

Total deposits

$

5,747,861

$

4,042,085

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

June 30,

December 31,

2013

2012

OREO

OPPO

OREO

OPPO

OREO and OPPO Composition

(in thousands)

Covered

$

12,854

$

30

$

16,311

$

45

Noncovered

24,339

84

10,676

432

Total

$

37,193

$

114

$

26,987

$

477

Three Months Ended

Six Months Ended

June 30,

June 30,

2013

2012

2013

2012

OREO and OPPO Earnings Impact

(in thousands)

Net cost of operation of noncovered OREO

$

393

$

1,472

$

339

$

4,165

Net benefit of operation of covered OREO

(3,221)

(1,849)

(5,668)

(3,632)

Net cost (benefit) of operation of OREO

$

(2,828)

$

(377)

$

(5,329)

$

533

Noncovered OPPO cost (benefit), net

$

8

$

187

$

(96)

$

2,341

Covered OPPO benefit, net

(10)

(8)

OPPO cost (benefit), net (1)

$

8

$

177

$

(96)

$

2,333

(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 previous five quarters:

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

(in thousands)

Pre-tax earnings impact - income (expense)

$

(3,149)

$

(2,249)

$

(166)

$

2,580

$

3,364

Balance sheet components:

Covered loans, net of allowance

$

338,661

$

363,213

$

391,337

$

429,286

$

462,994

Covered OREO

12,854

13,811

16,311

16,511

19,079

FDIC loss-sharing asset

67,374

83,115

96,354

111,677

140,003

QUARTERLY FINANCIAL STATISTICS

Columbia Banking System, Inc.

Three Months Ended

Unaudited

June 30,

March 31,

December 31,

September 30,

June 30,

2013

2013

2012

2012

2012

(dollars in thousands except per share)

Earnings

Net interest income

$

79,989

$

53,482

$

54,898

$

57,265

$

59,701

Provision (recapture) for loan and lease losses

$

2,000

$

(1,000)

$

2,350

$

2,875

$

3,750

Provision (recapture) for losses on covered loans

$

(1,712)

$

980

$

2,511

$

(3,992)

$

11,688

Noninterest income (loss)

$

6,808

$

1,658

$

6,567

$

(911)

$

11,828

Noninterest expense

$

64,504

$

38,049

$

37,800

$

40,936

$

39,825

Acquisition-related expense (included in noninterest expense)

$

9,234

$

723

$

649

$

1,131

$

Net income

$

14,591

$

12,176

$

13,462

$

11,880

$

11,899

Per Common Share

Earnings (basic)

$

0.28

$

0.31

$

0.34

$

0.30

$

0.30

Earnings (diluted)

$

0.28

$

0.31

$

0.34

$

0.30

$

0.30

Book value

$

20.07

$

19.32

$

19.25

$

19.20

$

19.13

Averages

Total assets

$

7,110,957

$

4,851,044

$

4,925,736

$

4,828,102

$

4,788,723

Interest-earning assets

$

6,284,281

$

4,336,978

$

4,388,487

$

4,263,414

$

4,194,281

Loans, including covered loans

$

4,571,181

$

2,962,559

$

2,926,825

$

2,919,520

$

2,895,436

Securities

$

1,665,180

$

1,051,657

$

1,007,059

$

983,815

$

1,029,337

Deposits

$

5,824,802

$

3,990,127

$

4,012,764

$

3,859,284

$

3,823,985

Core deposits

$

5,526,238

$

3,741,086

$

3,769,409

$

3,599,246

$

3,555,279

Interest-bearing deposits

$

3,986,581

$

2,740,100

$

2,714,292

$

2,665,094

$

2,682,092

Interest-bearing liabilities

$

4,161,095

$

2,771,743

$

2,796,155

$

2,803,201

$

2,820,857

Noninterest-bearing deposits

$

1,838,221

$

1,250,027

$

1,298,472

$

1,194,190

$

1,141,893

Shareholders' equity

$

1,051,380

$

768,390

$

767,781

$

761,281

$

758,391

Financial Ratios

Return on average assets

0.82%

1.02%

1.09%

0.98%

1.00%

Return on average common equity

5.56%

6.43%

6.98%

6.21%

6.31%

Average equity to average assets

14.79%

15.84%

15.59%

15.77%

15.84%

Net interest margin

5.19%

5.06%

5.15%

5.52%

5.88%

Efficiency ratio (tax equivalent)

65.54%

68.68%

68.26%

68.46%

68.54%

Period end

Total assets

$

7,070,465

$

4,905,011

$

4,906,335

$

4,903,049

$

4,789,413

Covered assets, net

$

351,545

$

377,024

$

407,648

$

445,797

$

482,073

Loans, excluding covered loans, net

$

4,181,018

$

2,621,212

$

2,525,710

$

2,476,844

$

2,436,961

Allowance for noncovered loan and lease losses

$

51,698

$

51,119

$

52,244

$

51,527

$

52,196

Securities

$

1,541,039

$

1,033,783

$

1,023,484

$

965,641

$

1,019,978

Deposits

$

5,747,861

$

4,046,539

$

4,042,085

$

3,938,855

$

3,830,817

Core deposits

$

5,467,899

$

3,796,574

$

3,802,366

$

3,685,844

$

3,568,307

Shareholders' equity

$

1,030,674

$

769,660

$

764,008

$

761,977

$

758,712

Nonperforming, noncovered assets

Nonaccrual loans

$

43,610

$

32,886

$

37,395

$

41,589

$

49,465

OREO and OPPO

24,423

12,000

11,108

11,749

17,608

    Total nonperforming, noncovered assets

$

68,033

$

44,886

$

48,503

$

53,338

$

67,073

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

1.62%

1.70%

1.91%

2.14%

2.73%

Nonperforming loans to period-end noncovered loans

1.04%

1.25%

1.48%

1.68%

2.03%

Nonperforming assets to period-end noncovered assets

1.01%

0.99%

1.08%

1.20%

1.56%

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

1.24%

1.95%

2.07%

2.08%

2.14%

Allowance for loan and lease losses to nonperforming noncovered loans

118.55%

155.44%

139.71%

123.90%

105.52%

Net noncovered loan charge-offs

$

1,421

$

125

$

1,633

$

3,544

$

3,836

CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.

Three Months Ended

Six Months Ended

Unaudited

June 30,

June 30,

2013

2012

2013

2012

(in thousands except per share)

Interest Income

Loans

$

74,837

$

54,498

$

122,865

$

116,275

Taxable securities

4,890

4,951

9,124

10,196

Tax-exempt securities

2,508

2,495

4,806

5,020

Federal funds sold and deposits in banks

33

170

234

335

Total interest income

82,268

62,114

137,029

131,826

Interest Expense

Deposits

1,054

1,561

2,143

3,340

Federal Home Loan Bank advances

(699)

734

(628)

1,484

Prepayment charge on Federal Home Loan Bank advances

1,548

1,548

Other borrowings

376

118

495

238

Total interest expense

2,279

2,413

3,558

5,062

Net Interest Income

79,989

59,701

133,471

126,764

Provision for loan and lease losses

2,000

3,750

1,000

8,250

Provision (recapture) for losses on covered loans, net

(1,712)

11,688

(732)

27,373

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

79,701

44,263

133,203

91,141

Noninterest Income

Service charges and other fees

13,560

7,436

21,154

14,613

Merchant services fees

2,013

2,095

3,864

4,113

Investment securities gains, net

92

462

62

Bank owned life insurance

1,008

719

1,706

1,430

Change in FDIC loss-sharing asset

(13,137)

(168)

(23,620)

(1,836)

Other

3,272

1,746

4,900

3,020

Total noninterest income

6,808

11,828

8,466

21,402

Noninterest Expense

Compensation and employee benefits

35,657

20,966

57,310

42,961

Occupancy

7,543

5,091

12,296

10,424

Merchant processing

852

930

1,709

1,803

Advertising and promotion

1,160

1,119

2,030

2,001

Data processing and communications

3,638

2,551

6,218

4,764

Legal and professional fees

5,504

1,829

7,554

3,438

Taxes, licenses and fees

1,204

1,115

2,591

2,470

Regulatory premiums

1,177

925

2,034

1,785

Net cost (benefit) of operation of other real estate

(2,828)

(377)

(5,329)

533

Amortization of intangibles

1,693

1,119

2,722

2,269

FDIC clawback liability expense (recovery)

199

(208)

430

(234)

Other

8,705

4,765

12,988

11,963

Total noninterest expense

64,504

39,825

102,553

84,177

Income before income taxes

22,005

16,266

39,116

28,366

Provision for income taxes

7,414

4,367

12,349

7,565

Net Income

$

14,591

$

11,899

$

26,767

$

20,801

Earnings per common share

Basic

$

0.28

$

0.30

$

0.59

$

0.52

Diluted

$

0.28

$

0.30

$

0.58

$

0.52

Dividends paid per common share

$

0.10

$

0.22

$

0.20

$

0.59

Weighted average number of common shares outstanding

50,788

39,260

45,099

39,228

Weighted average number of diluted common shares outstanding

52,125

39,308

45,758

39,306

CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited

June 30,

December 31,

2013

2012

(in thousands)

ASSETS

Cash and due from banks

$

154,407

$

124,573

Interest-earning deposits with banks and federal funds sold

38,302

389,353

    Total cash and cash equivalents

192,709

513,926

Securities available for sale at fair value (amortized cost of $1,519,951 and $969,359, respectively)

1,507,900

1,001,665

Federal Home Loan Bank stock at cost

33,139

21,819

Loans held for sale

2,150

2,563

Loans, excluding covered loans, net of unearned income of ($86,062) and ($7,767), respectively

4,181,018

2,525,710

Less: allowance for loan and lease losses

51,698

52,244

    Loans, excluding covered loans, net

4,129,320

2,473,466

Covered loans, net of allowance for loan losses of ($26,135) and ($30,056), respectively

338,661

391,337

Total loans, net

4,467,981

2,864,803

FDIC loss-sharing asset

67,374

96,354

Interest receivable

23,118

14,268

Premises and equipment, net

158,776

118,708

Other real estate owned ($12,854 and $16,311 covered by FDIC loss-share, respectively)

37,193

26,987

Goodwill

346,373

115,554

Other intangible assets, net

29,170

15,721

Other assets

204,582

113,967

    Total assets

$

7,070,465

$

4,906,335

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing

$

1,961,244

$

1,321,171

Interest-bearing

3,786,617

2,720,914

    Total deposits

5,747,861

4,042,085

Federal Home Loan Bank advances

179,680

6,644

Securities sold under agreements to repurchase

25,000

25,000

Other liabilities

87,250

68,598

    Total liabilities

6,039,791

4,142,327

Commitments and contingent liabilities

June 30,

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

51,237

39,686

857,615

581,471

Retained earnings

180,052

162,388

Accumulated other comprehensive income

(9,210)

20,149

    Total shareholders' equity

1,030,674

764,008

    Total liabilities and shareholders' equity

$

7,070,465

$

4,906,335

 

 

SOURCE Columbia Banking System, Inc.



RELATED LINKS

http://www.columbiabank.com