2014

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

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

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