Columbia Banking System Announces Third Quarter 2013 Results

Highlights for the quarter include increased operating net interest margin and completion of the West Coast Bancorp ("West Coast") core operating system conversion

Oct 24, 2013, 09:15 ET from Columbia Banking System, Inc.

TACOMA, Wash., Oct. 24, 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 third quarter 2013 earnings, "We continued to make significant progress in our integration of West Coast and are seeing the anticipated benefits of the acquisition materialize.  We had a solid quarter resulting in an expanded net interest margin and increased loan originations."

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Net income for the current quarter was $13.3 million, a 12% increase compared to net income of $11.9 million for the third quarter of 2012.  Ms. Dressel continued, "Diluted earnings per share of $0.25 for the third quarter were down from $0.28 in the second quarter this year.  Acquisition-related expenses of $7.6 million, combined with the impact from FDIC acquired loan accounting, lowered our earnings per share by $0.14.  Our earnings were also reduced by $0.05 per share as a result of a $4.3 million pre-tax provision for the allowance for loan losses related to the acquired West Coast loan portfolio.  It is important to note that the provision is not the result of deterioration in the overall quality of this portfolio, but rather a function of transitioning from the initial measurement of the acquired loans to our standard allowance methodology."

Significant Influences on the Quarter Ended September 30, 2013

Net Interest Margin ("NIM") Columbia's net interest margin increased to 5.37% for the third quarter of 2013, up from 5.19% for the second quarter of 2013. The increase in the net interest margin for the current quarter compared to the second quarter of 2013 was due to a 21 basis point increase in the yield on the securities portfolio as well as the prepayment charge of $1.5 million on Federal Home Loan Bank advances incurred during the second quarter, whereas a similar charge was not incurred in the current quarter.

Columbia's operating net interest margin(1), increased to 4.41% for the third quarter of 2013, up from 4.34% for the second quarter of 2013. The operating net interest margin for the current quarter improved due to increased yield on the securities portfolio. The operating net interest margin was relatively flat compared to 4.40% for the same period last year.

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

Nine Months Ended

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2012

(dollars in thousands)

Incremental accretion income due to:

FDIC acquired impaired loans

$

7,063

$

11,260

$

23,275

$

44,455

Other FDIC acquired loans

266

613

1,974

4,851

Other acquired loans

10,025

19,660

Incremental accretion income

$

17,354

$

11,873

$

44,909

$

49,306

Reported net interest margin

5.37%

5.52%

5.21%

5.99%

Operating net interest margin (1)

4.41%

4.40%

4.33%

4.43%

(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, "We continued to see good loan production during the quarter as our bankers remained focused on developing new relationships while deepening our existing ones.  Our organic loan growth was muted by cyclical pay downs in sectors affected by slowing residential mortgage originations.  While it didn't translate into substantial bottom line growth, I'm pleased with the loan production this quarter because our originations were up slightly over the prior quarter, during which we showed substantial portfolio growth."

At September 30, 2013, Columbia's total assets were $7.15 billion, an increase of $79.8 million from June 30, 2013 and an increase of $2.24 billion from December 31, 2012, primarily due to the acquisition of West Coast.  Noncovered loans were $4.19 billion at September 30, 2013, up $12.7 million from June 30, 2013 and up 66%, or $1.67 billion, from $2.53 billion at prior year end due in large part to the acquisition of West Coast.  Securities, including FHLB stock, were $1.60 billion at September 30, 2013, an increase of $61.4 million, or 4% from $1.54 billion at June 30, 2013. The increase in the securities portfolio was a result of strong core deposit growth experienced throughout the quarter while overnight funds increased due to deposit growth that occurred near the end of the quarter.

Total deposits at September 30, 2013 were $5.95 billion, an increase of $201.1 million, or 3% from $5.75 billion at June 30, 2013. Core deposits comprised 95% of total deposits, and were $5.66 billion at September 30, 2013.

Asset Quality Andy McDonald, Columbia's Chief Credit Officer, commented, "During the third quarter we experienced a general improvement in the quality of our loan portfolios.  Nonperforming assets continued their downward trend and net noncovered loan charge-offs hit their lowest quarterly level since before the start of the great recession."  Mr. McDonald remarked, "I'm pleased with the positive trends our credit metrics have displayed but, as the numbers indicate, we still have room for improvement to get to our pre-2008 levels."

At September 30, 2013, nonperforming assets to noncovered assets were 0.87% or $59.6 million, down from 1.01%, or $68.0 million, at June 30, 2013. Nonaccrual loans decreased $7.6 million during the third quarter. The decrease in nonaccrual loans for the quarter was driven by payments of $6.4 million, charge-offs of $928 thousand, the return of $6.0 million of nonaccrual loans to accrual status, and $4.5 million of loans transferred to other real estate owned ("OREO"), partially offset by $10.2 million of new nonaccrual loans. OREO and other personal property owned ("OPPO") decreased by $782 thousand during the third quarter, as a result of $4.1 million in sales and $1.1 million in write-downs, partially offset by loan foreclosures of $4.4 million

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

September 30, 2013

June 30, 2013

December 31, 2012

(dollars in thousands)

Nonaccrual noncovered loans:

Commercial business

$

11,995

$

14,649

$

9,299

Real estate:

One-to-four family residential

2,220

3,805

2,349

Commercial and multifamily residential

14,025

17,045

19,204

Total real estate

16,245

20,850

21,553

Real estate construction:

One-to-four family residential

3,685

4,753

4,900

Total real estate construction

3,685

4,753

4,900

Consumer

4,036

3,358

1,643

Total nonaccrual loans

35,961

43,610

37,395

Noncovered other real estate owned and other personal property owned

23,641

24,423

11,108

Total nonperforming noncovered assets

$

59,602

$

68,033

$

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 September 30,

Nine Months Ended September 30,

2013

2012

2013

2012

(in thousands)

Beginning balance

$

51,698

$

52,196

$

52,244

$

53,041

Charge-offs:

Commercial business

(755)

(3,775)

(3,030)

(8,178)

One-to-four family residential real estate

(47)

(49)

(191)

(499)

Commercial and multifamily residential real estate

(657)

(592)

(2,054)

(5,108)

One-to-four family residential real estate construction

(325)

(133)

(1,426)

Commercial and multifamily residential real estate construction

(93)

Consumer

(453)

(500)

(1,262)

(1,968)

Total charge-offs

(1,912)

(5,241)

(6,670)

(17,272)

Recoveries:

Commercial business

854

277

1,319

1,314

One-to-four family residential real estate

39

157

180

202

Commercial and multifamily residential real estate

332

446

509

1,338

One-to-four family residential real estate construction

461

404

2,649

906

Commercial and multifamily residential real estate construction

63

64

Consumer

112

350

353

809

Total recoveries

1,798

1,697

5,010

4,633

Net charge-offs

(114)

(3,544)

(1,660)

(12,639)

Provision for loan and lease losses

4,260

2,875

5,260

11,125

Ending balance

$

55,844

$

51,527

$

55,844

$

51,527

Columbia's allowance for loan losses to nonperforming, noncovered loans ratio was 155% for the quarter, up from 119% for the second quarter 2013 and up from 124% for the same period last year. The allowance for noncovered loan losses to period end loans was 1.33% at September 30, 2013 compared to 1.24% at June 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 current net acquisition accounting adjustments still significantly address the estimated credit losses in acquired loans. Excluding acquired loans, the allowance at September 30, 2013 represented 1.73% of noncovered loans, compared to 1.87% of noncovered loans at June 30, 2013. This decrease reflects improvements in core asset quality during the current quarter.

For the third quarter of 2013, Columbia had a provision of $4.3 million for noncovered loan losses. For the comparable quarter last year the company had a provision of $2.9 million. The provision for noncovered loan losses during the current quarter was the result of moving from the initial fair value accounting for the acquired loans to our standard allowance methodology.

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

Nine Months Ended

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2012

(in thousands)

Incremental accretion income on FDIC acquired impaired loans

$

7,063

$

11,260

$

23,275

$

44,455

Incremental accretion income on other FDIC acquired loans

266

613

1,974

4,851

Recapture (provision) for losses on covered loans

947

3,992

1,679

(23,381)

Change in FDIC loss-sharing asset

(11,826)

(12,951)

(35,446)

(14,787)

Claw back liability benefit (expense)

188

(334)

(242)

(100)

Pre-tax earnings impact

$

(3,362)

$

2,580

$

(8,760)

$

11,038

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 September 30, 2013, the accretable yield on acquired impaired loans was $119.5 million and the net discount on other FDIC acquired loans was $381 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 $947 thousand net provision recapture for losses on covered loans in the current period is substantially offset by an 80%, or $758 thousand, charge to the change in the FDIC loss-sharing asset, resulting in a positive net pre-tax earnings impact of $189 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 $11.8 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consists of $9.9 million of amortization expense, approximately $1.2 million of expense related to covered other real estate owned, and the $758 thousand adjustment described above. Columbia recorded $4.2 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.

Third Quarter 2013 Operating Results

Quarter ended September 30, 2013

Net Interest Income Net interest income for the third quarter of 2013 was $80.4 million, an increase of $23.2 million from $57.3 million for the same quarter in 2012, primarily due to the interest income and accretion income recorded during the third quarter of 2013 related to the West Coast acquisition, which closed on April 1, 2013.

Compared to the second quarter of 2013, net interest income increased $426 thousand from $80.0 million primarily due to lower interest expense. In the second quarter, Columbia recognized a $1.5 million prepayment charge on FHLB advances, which was partially offset by lower accretion income on the acquired loan portfolios during the current quarter.

Noninterest Income (Loss) Total noninterest income was $7.6 million for the third quarter of 2013, compared to a $911 thousand loss for the third quarter of 2012. The increase from the prior-year period was primarily due to a $5.7 million increase in service charges and other fees due to the increased customer base from the West Coast acquisition.

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

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

(in thousands)

Adjustments reflected in income

Amortization, net

(9,890)

(9,694)

(29,470)

(33,418)

Loan impairment (recapture)

(758)

(3,193)

(1,343)

18,705

Sale of other real estate

(1,479)

(1,315)

(5,076)

(4,881)

Write-downs of other real estate

220

1,141

373

4,503

Other

81

110

70

304

Change in FDIC loss-sharing asset

$

(11,826)

$

(12,951)

$

(35,446)

$

(14,787)

Noninterest Expense Total noninterest expense for the third quarter of 2013 was $64.7 million, an increase of $23.8 million, or 58% from $40.9 million for the same quarter in 2012. The increase from the prior-year period was primarily due to the acquisition-related expenses of $7.6 million for the current quarter as well as additional ongoing noninterest expense resulting from the West Coast acquisition.

Compared to the second quarter of 2013, noninterest expense was relatively flat, with a modest increase of $210 thousand.  The increase in noninterest expense was attributable to a decrease in net benefit from the operation of other real estate owned, partially offset by lower current quarter acquisition-related expenses of $7.6 million, compared to $9.2 million in the second quarter of 2013.

Ms. Dressel commented, "We continue to make progress with improving our operating leverage.  If you remove the noise created by non-core line items such as acquisition-related expenses and the gains from OREO dispositions, our level of quarterly noninterest expenses has actually declined from the previous quarter. As of the end of the current quarter, we have incurred a little over $19 million in acquisition-related expenses, or approximately two/thirds of our initial estimate. "

Ms. Dressel continued, "We are well down the path toward full integration, with the planned branch consolidations, core operating and other critical system conversions completed."

Conference Call Columbia's management will discuss the third quarter 2013 results on a conference call scheduled for Thursday, October 24, 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 #85631067.

A conference call replay will be available from approximately 4:00 p.m. PDT on October 24, 2013 through midnight PDT on October 31, 2013. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #85631067.

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."

With the recent acquisition of West Coast Bancorp, Columbia Banking System has 145 banking offices, including 80 branches in Washington State and 65 branches 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

Nine Months Ended

Unaudited

September 30,

September 30,

2013

2012

2013

2012

Earnings

(dollars in thousands except per share amounts)

Net interest income

$

80,415

$

57,265

$

213,886

$

184,029

Provision for loan and lease losses

$

4,260

$

2,875

$

5,260

$

11,125

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

$

(947)

$

(3,992)

$

(1,679)

$

23,381

Noninterest income (loss)

$

7,622

$

(911)

$

16,088

$

20,491

Noninterest expense

$

64,714

$

40,936

$

167,267

$

125,113

Acquisition-related expense (included in noninterest expense)

$

7,621

$

1,131

$

17,578

$

1,131

Net income

$

13,276

$

11,880

$

40,043

$

32,681

Per Common Share

Earnings (basic)

$

0.26

$

0.30

$

0.84

$

0.82

Earnings (diluted)

$

0.25

$

0.30

$

0.83

$

0.82

Book value

$

20.35

$

19.20

$

20.35

$

19.20

Averages

Total assets

$

7,048,864

$

4,828,102

$

6,345,006

$

4,797,543

Interest-earning assets

$

6,101,960

$

4,263,414

$

5,580,871

$

4,199,125

Loans, including covered loans

$

4,504,040

$

2,919,520

$

4,018,240

$

2,891,688

Securities

$

1,512,292

$

983,815

$

1,411,397

$

1,012,716

Deposits

$

5,837,018

$

3,859,284

$

5,224,081

$

3,829,640

Core deposits

$

5,558,246

$

3,599,246

$

4,948,513

$

3,555,936

Interest-bearing deposits

$

3,805,260

$

2,665,094

$

3,514,549

$

2,673,335

Interest-bearing liabilities

$

3,898,997

$

2,803,201

$

3,614,742

$

2,813,269

Noninterest-bearing deposits

$

2,031,758

$

1,194,190

$

1,709,532

$

1,156,304

Shareholders' equity

$

1,036,134

$

761,281

$

952,949

$

760,217

Financial Ratios

Return on average assets

0.75%

0.98%

0.84%

0.91%

Return on average common equity

5.13%

6.21%

5.61%

5.74%

Average equity to average assets

14.70%

15.77%

15.02%

15.85%

Net interest margin

5.37%

5.52%

5.21

5.99%

Efficiency ratio (tax equivalent)(2)

66.59%

68.46%

66.65%

69.47%

September 30,

December 31,

Period end

2013

2012

2012

Total assets

$

7,150,297

$

4,903,049

$

4,906,335

Covered assets, net

$

314,898

$

445,797

$

407,648

Loans, excluding covered loans, net

$

4,193,732

$

2,476,844

$

2,525,710

Allowance for noncovered loan and lease losses

$

55,844

$

51,527

$

52,244

Securities

$

1,602,484

$

965,641

$

1,023,484

Deposits

$

5,948,967

$

3,938,855

$

4,042,085

Core deposits

$

5,662,958

$

3,685,844

$

3,802,366

Shareholders' equity

$

1,045,797

$

761,977

$

764,008

Nonperforming, noncovered assets

Nonaccrual loans

$

35,961

$

41,589

$

37,395

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

23,641

11,749

11,108

Total nonperforming, noncovered assets

$

59,602

$

53,338

$

48,503

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

1.41%

2.14%

1.91%

Nonperforming loans to period-end noncovered loans

0.86%

1.68%

1.48%

Nonperforming assets to period-end noncovered assets

0.87%

1.20%

1.08%

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

1.33%

2.08%

2.07%

Allowance for loan and lease losses to nonperforming noncovered loans

155.29%

123.90%

139.71%

Net noncovered loan charge-offs

$

1,660

(3)

$

12,639

(4)

$

14,272

(5)

(1) Provision(recapture) for losses on covered loans was partially offset by $758 thousand and $3.2 million in expense recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended September 30, 2013 and 2012, respectively. For the nine months ended September 30, 2013 and 2012, provision(recapture) for losses on covered loans was partially offset by $1.3 million in expense and $18.7 million in income, respectively.

(2) Noninterest expense, excluding net cost 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 nine months ended September 30, 2013.

(4)  For the nine months ended September 30, 2012.

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

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

September 30,

December 31,

2013

2012

Loan Portfolio Composition

(dollars in thousands)

Noncovered loans:

Commercial business

$

1,569,343

37.4%

$

1,155,158

45.7%

Real estate:

One-to-four family residential

106,686

2.5%

43,922

1.7%

Commercial and multifamily residential

2,048,910

48.8%

1,061,201

42.0%

Total real estate

2,155,596

51.3%

1,105,123

43.7%

Real estate construction:

One-to-four family residential

53,158

1.3%

50,602

2.0%

Commercial and multifamily residential

128,120

3.1%

65,101

2.7%

Total real estate construction

181,278

4.4%

115,703

4.7%

Consumer

362,808

8.7%

157,493

6.2%

Subtotal loans

4,269,025

101.8%

2,533,477

100.3%

Less:  Net unearned income

(75,293)

(1.8)%

(7,767)

(0.3)%

Total noncovered loans, net of unearned income

4,193,732

100.0%

2,525,710

100.0%

Less:  Allowance for loan and lease losses

(55,844)

(52,244)

Noncovered loans, net

4,137,888

2,473,466

Covered loans, net of allowance for loan losses of ($22,737) and ($30,056), respectively

302,160

391,337

Total loans, net

$

4,440,048

$

2,864,803

Loans held for sale

$

840

$

2,563

September 30,

December 31,

2013

2012

Deposit Composition

(dollars in thousands)

Core deposits:

Demand and other non-interest bearing

$

2,110,887

35.5%

$

1,321,171

32.7%

Interest bearing demand

1,156,045

19.4%

870,821

21.5%

Money market

1,604,256

27.0%

1,043,459

25.8%

Savings

488,985

8.2%

314,371

7.8%

Certificates of deposit less than $100,000

302,785

5.1%

252,544

6.2%

Total core deposits

5,662,958

95.2%

3,802,366

94.0%

Certificates of deposit greater than $100,000

209,059

3.5%

212,924

5.3%

Certificates of deposit insured by CDARS®

23,566

0.4%

26,720

0.7%

Brokered money market accounts

52,937

0.9%

—%

Subtotal

5,948,520

100.0%

4,042,010

100.0%

Premium resulting from acquisition date fair value adjustment

447

75

Total deposits

$

5,948,967

$

4,042,085

FINANCIAL STATISTICS

Columbia Banking System, Inc.

Unaudited

September 30,

December 31,

2013

2012

OREO

OPPO

OREO

OPPO

OREO and OPPO Composition

(in thousands)

Covered

$

12,730

$

8

$

16,311

$

45

Noncovered

23,543

98

10,676

432

Total

$

36,273

$

106

$

26,987

$

477

Three Months Ended

Nine Months Ended

September 30,

September 30,

2013

2012

2013

2012

OREO and OPPO Earnings Impact

(in thousands)

Net cost (benefit) of operation of noncovered OREO

$

851

$

(63)

$

1,190

$

4,102

Net benefit of operation of covered OREO

(1,628)

(1,006)

(7,296)

(4,638)

Net benefit of operation of OREO

$

(777)

$

(1,069)

$

(6,106)

$

(536)

Noncovered OPPO cost (benefit), net

$

(29)

$

(100)

$

(125)

$

2,242

Covered OPPO benefit, net

(8)

(16)

OPPO cost (benefit), net (1)

$

(29)

$

(108)

$

(125)

$

2,226

(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

September 30,

June 30,

March 31,

December 31,

September 30,

2013

2013

2013

2012

2012

(in thousands)

Pre-tax earnings impact - income (expense)

$

(3,362)

$

(3,149)

$

(2,249)

$

(166)

$

2,580

Balance sheet components:

Covered loans, net of allowance

$

302,160

$

338,661

$

363,213

$

391,337

$

429,286

Covered OREO

12,730

12,854

13,811

16,311

16,511

FDIC loss-sharing asset

53,559

67,374

83,115

96,354

111,677

QUARTERLY FINANCIAL STATISTICS

Columbia Banking System, Inc.

Three Months Ended

Unaudited

September 30,

June 30,

March 31,

December 31,

September 30,

2013

2013

2013

2012

2012

(dollars in thousands except per share)

Earnings

Net interest income

$

80,415

$

79,989

$

53,482

$

54,898

$

57,265

Provision (recapture) for loan and lease losses

$

4,260

$

2,000

$

(1,000)

$

2,350

$

2,875

Provision (recapture) for losses on covered loans

$

(947)

$

(1,712)

$

980

$

2,511

$

(3,992)

Noninterest income (loss)

$

7,622

$

6,808

$

1,658

$

6,567

$

(911)

Noninterest expense

$

64,714

$

64,504

$

38,049

$

37,800

$

40,936

Acquisition-related expense (included in noninterest expense)

$

7,621

$

9,234

$

723

$

649

$

1,131

Net income

$

13,276

$

14,591

$

12,176

$

13,462

$

11,880

Per Common Share

Earnings (basic)

$

0.26

$

0.28

$

0.31

$

0.34

$

0.30

Earnings (diluted)

$

0.25

$

0.28

$

0.31

$

0.34

$

0.30

Book value

$

20.35

$

20.07

$

19.32

$

19.25

$

19.20

Averages

Total assets

$

7,048,864

$

7,110,957

$

4,851,044

$

4,925,736

$

4,828,102

Interest-earning assets

$

6,101,960

$

6,284,281

$

4,336,978

$

4,388,487

$

4,263,414

Loans, including covered loans

$

4,504,040

$

4,571,181

$

2,962,559

$

2,926,825

$

2,919,520

Securities

$

1,512,292

$

1,665,180

$

1,051,657

$

1,007,059

$

983,815

Deposits

$

5,837,018

$

5,824,802

$

3,990,127

$

4,012,764

$

3,859,284

Core deposits

$

5,558,246

$

5,526,238

$

3,741,086

$

3,769,409

$

3,599,246

Interest-bearing deposits

$

3,805,260

$

3,986,581

$

2,740,100

$

2,714,292

$

2,665,094

Interest-bearing liabilities

$

3,898,997

$

4,161,095

$

2,771,743

$

2,796,155

$

2,803,201

Noninterest-bearing deposits

$

2,031,758

$

1,838,221

$

1,250,027

$

1,298,472

$

1,194,190

Shareholders' equity

$

1,036,134

$

1,051,380

$

768,390

$

767,781

$

761,281

Financial Ratios

Return on average assets

0.75%

0.82%

1.02%

1.09%

0.98%

Return on average common equity

5.13%

5.56%

6.43%

6.98%

6.21%

Average equity to average assets

14.70%

14.79%

15.84%

15.59%

15.77%

Net interest margin

5.37%

5.19%

5.06%

5.15%

5.52%

Efficiency ratio (tax equivalent)

66.59%

65.54%

68.68%

68.26%

68.46%

Period end

Total assets

$

7,150,297

$

7,070,465

$

4,905,011

$

4,906,335

$

4,903,049

Covered assets, net

$

314,898

$

351,545

$

377,024

$

407,648

$

445,797

Loans, excluding covered loans, net

$

4,193,732

$

4,181,018

$

2,621,212

$

2,525,710

$

2,476,844

Allowance for noncovered loan and lease losses

$

55,844

$

51,698

$

51,119

$

52,244

$

51,527

Securities

$

1,602,484

$

1,541,039

$

1,033,783

$

1,023,484

$

965,641

Deposits

$

5,948,967

$

5,747,861

$

4,046,539

$

4,042,085

$

3,938,855

Core deposits

$

5,662,958

$

5,467,899

$

3,796,574

$

3,802,366

$

3,685,844

Shareholders' equity

$

1,045,797

$

1,030,674

$

769,660

$

764,008

$

761,977

Nonperforming, noncovered assets

Nonaccrual loans

$

35,961

$

43,610

$

32,886

$

37,395

$

41,589

OREO and OPPO

23,641

24,423

12,000

11,108

11,749

Total nonperforming, noncovered assets

$

59,602

$

68,033

$

44,886

$

48,503

$

53,338

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

1.41%

1.62%

1.70%

1.91%

2.14%

Nonperforming loans to period-end noncovered loans

0.86%

1.04%

1.25%

1.48%

1.68%

Nonperforming assets to period-end noncovered assets

0.87%

1.01%

0.99%

1.08%

1.20%

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

1.33%

1.24%

1.95%

2.07%

2.08%

Allowance for loan and lease losses to nonperforming noncovered loans

155.29%

118.55%

155.44%

139.71%

123.90%

Net noncovered loan charge-offs

$

114

$

1,421

$

125

$

1,633

$

3,544

CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.

Three Months Ended

Nine Months Ended

Unaudited

September 30,

September 30,

2013

2012

2013

2012

(in thousands except per share)

Interest Income

Loans

$

74,125

$

52,600

$

196,990

$

168,875

Taxable securities

4,935

4,218

14,059

14,414

Tax-exempt securities

2,483

2,422

7,289

7,442

Federal funds sold and deposits in banks

56

229

290

564

Total interest income

81,599

59,469

218,628

191,295

Interest Expense

Deposits

929

1,339

3,072

4,679

Federal Home Loan Bank advances

135

745

(493)

2,229

Prepayment charge on Federal Home Loan Bank advances

1,548

Other borrowings

120

120

615

358

Total interest expense

1,184

2,204

4,742

7,266

Net Interest Income

80,415

57,265

213,886

184,029

Provision for loan and lease losses

4,260

2,875

5,260

11,125

Provision (recapture) for losses on covered loans, net

(947)

(3,992)

(1,679)

23,381

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

77,102

58,382

210,305

149,523

Noninterest Income (Loss)

Service charges and other fees

13,357

7,609

34,511

22,222

Merchant services fees

2,070

2,054

5,934

6,167

Investment securities gains, net

462

62

Bank owned life insurance

904

747

2,610

2,177

Change in FDIC loss-sharing asset

(11,826)

(12,951)

(35,446)

(14,787)

Other

3,117

1,630

8,017

4,650

Total noninterest income (loss)

7,622

(911)

16,088

20,491

Noninterest Expense

Compensation and employee benefits

33,287

21,523

90,597

64,484

Occupancy

9,264

4,886

21,560

15,310

Merchant processing

951

921

2,660

2,724

Advertising and promotion

1,165

1,341

3,195

3,342

Data processing and communications

4,285

2,499

10,503

7,263

Legal and professional fees

2,421

2,783

9,975

6,221

Taxes, licenses and fees

1,446

1,124

4,037

3,594

Regulatory premiums

1,372

775

3,406

2,560

Net benefit of operation of other real estate

(777)

(1,069)

(6,106)

(536)

Amortization of intangibles

1,666

1,093

4,388

3,362

FDIC clawback liability expense (recovery)

(188)

334

242

100

Other

9,822

4,726

22,810

16,689

Total noninterest expense

64,714

40,936

167,267

125,113

Income before income taxes

20,010

16,535

59,126

44,901

Provision for income taxes

6,734

4,655

19,083

12,220

Net Income

$

13,276

$

11,880

$

40,043

$

32,681

Earnings per common share

Basic

$

0.26

$

0.30

$

0.84

$

0.82

Diluted

$

0.25

$

0.30

$

0.83

$

0.82

Dividends paid per common share

$

0.10

$

0.30

$

0.30

$

0.89

Weighted average number of common shares outstanding

50,834

39,289

47,032

39,248

Weighted average number of diluted common shares outstanding

52,297

39,291

47,947

39,251

CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited

September 30,

December 31,

2013

2012

(in thousands)

ASSETS

Cash and due from banks

$

200,282

$

124,573

Interest-earning deposits with banks

54,470

389,353

Total cash and cash equivalents

254,752

513,926

Securities available for sale at fair value (amortized cost of $1,572,523 and $969,359, respectively)

1,569,651

1,001,665

Federal Home Loan Bank stock at cost

32,833

21,819

Loans held for sale

840

2,563

Loans, excluding covered loans, net of unearned income of ($75,293) and ($7,767), respectively

4,193,732

2,525,710

Less: allowance for loan and lease losses

55,844

52,244

Loans, excluding covered loans, net

4,137,888

2,473,466

Covered loans, net of allowance for loan losses of ($22,737) and ($30,056), respectively

302,160

391,337

Total loans, net

4,440,048

2,864,803

FDIC loss-sharing asset

53,559

96,354

Interest receivable

24,114

14,268

Premises and equipment, net

158,375

118,708

Other real estate owned ($12,730 and $16,311 covered by FDIC loss-share, respectively)

36,273

26,987

Goodwill

345,231

115,554

Other intangible assets, net

27,509

15,721

Other assets

207,112

113,967

Total assets

$

7,150,297

$

4,906,335

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing

$

2,110,887

$

1,321,171

Interest-bearing

3,838,080

2,720,914

Total deposits

5,948,967

4,042,085

Federal Home Loan Bank advances

34,632

6,644

Securities sold under agreements to repurchase

25,000

25,000

Other liabilities

95,901

68,598

Total liabilities

6,104,500

4,142,327

Commitments and contingent liabilities

September 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

51,271

39,686

858,596

581,471

Retained earnings

188,192

162,388

Accumulated other comprehensive income (loss)

(3,208)

20,149

Total shareholders' equity

1,045,797

764,008

Total liabilities and shareholders' equity

$

7,150,297

$

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 September 30,

Nine Months Ended September 30,

2013

2012

2013

2012

Net interest margin

5.37%

5.52%

5.21%

5.99%

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

Incremental accretion income on FDIC acquired impaired loans

(0.46)%

(1.06)%

(0.55)%

(1.41)%

Incremental accretion income on other FDIC acquired loans

(0.02)%

(0.06)%

(0.05)%

(0.15)%

Incremental accretion income on other acquired loans

(0.66)%

—%

(0.47)%

—%

Premium amortization on acquired securities

0.16%

—%

0.13%

—%

Interest reversals on nonaccrual loans

0.02%

—%

0.02%

—%

Prepayment charges on FHLB advances

—%

—%

0.04%

—%

Operating net interest margin

4.41%

4.40%

4.33%

4.43%

SOURCE Columbia Banking System, Inc.



RELATED LINKS

http://www.columbiabank.com