Columbia Banking System Announces Fourth Quarter and Full Year 2009 Results; Declares Cash Dividend

Fourth Quarter Profitable, Business Fundamentals Remain Strong; Company is Very Well Capitalized, With Strong Liquidity and Excellent Core Deposit Base

Highlights for the Quarter

- Net Income of $447,000, or $0.02 per common share

- Remains very well capitalized at 19.60% total risk-based capital ratio

- Residential construction loans decline to 5.4% of total loans at December 31, 2009.

- Liquidity ratio of 51%, or over $1.6 billion of available funding from multiple sources

- Very strong core deposits at 83% of total deposits

- Stable net interest margin of 4.30%

- Vancouver, WA branch added; 52-branch network at year-end 2009.

- Columbia River Bank, The Dalles, Oregon, acquired on January 22, 2010 in FDIC-assisted transaction; brings network to 73 branches in Washington and Oregon.

Jan 28, 2010, 09:15 ET from Columbia Banking System, Inc.

TACOMA, Wash., Jan. 28 /PRNewswire-FirstCall/ -- Columbia Banking System, Inc. (Nasdaq: COLB) ("Columbia") today announced net income applicable to common shareholders of $447,000 for the quarter ended December 31, 2009, compared to $1.3  million for the same quarter of 2008.  On a diluted earnings per common share basis, net income was $0.02, compared with net income of $0.07 per share a year earlier. These results were achieved while the Company added $15.0 million to the provision for loan losses due to the continued decline in real estate values, principally relating to residential land, lots and lot development loans.  

The year 2009 resulted in a net loss applicable to common shareholders of $8.4 million, compared with earnings of $5.5 million for 2008, primarily reflecting a $63.5 million provision for loan losses in 2009.  On a diluted per common share basis, the net loss for 2009 was $0.38 compared with income of $0.30 a year earlier.

"We are pleased to have achieved a profitable fourth quarter in this continuing and difficult economic environment," said Melanie Dressel, President and Chief Executive Officer. "Despite our proactive concentration on managing credit issues, our 2009 earnings were obviously impacted by declining real estate values. However, our results for the quarter and the year serve to confirm our long-standing business model.  We remain very well capitalized, with multiple sources of liquidity and a diversified loan portfolio.  We have significantly reduced our exposure to residential construction loans.  Our core value of building relationships with our customers continues to generate an exceptional level of core deposits, which are an important factor in the relatively stable net interest margin we have maintained. We believe we are very well positioned to become even stronger as we navigate through this economic cycle."

Ms. Dressel continued, "Our strength and capital level also give us the ability to take advantage of opportunities to move further toward our goal of growing into a true Pacific Northwest regional community bank.  On January 22, 2010, we acquired Columbia River Bank through an FDIC-assisted transaction, significantly expanding our footprint in both Oregon and Washington."  

Revenue

Revenue (net interest income plus noninterest income) was $ 38.3 million for the fourth quarter of 2009, up 7% from $35.7 million one year ago.  The significant increase was primarily due to an additional $1.0 million impairment charge in the fourth quarter 2008 related to the decline in the fair value of an investment in preferred stock issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae"). Excluding the impairment charge in 2008, revenue for the fourth quarter 2009 was up 4% from fourth quarter 2008.,

Revenue for the year ended December 31, 2009 was $145.0 million, an increase of 8% from $134.4 million for the same period in 2008.  Excluding the 2008 impairment charge, redemption of Visa and MasterCard shares and gain on the sale of investment securities, revenue for the year 2009 was down 3% from 2008.

At December 31, 2009, Columbia's total assets were $3.2 billion, an increase of 3% from $3.10 billion at December 31, 2008.  Total loans were $2.01 billion at December 31, 2009, down 10% from $2.23 billion at year-end 2008.   Total securities increased $91.7 million to $631.6 million at December 31, 2009 as a result of management's asset/liability strategies. Total deposits were $2.48 billion at December 31, 2009, an increase of 4% from $2.38 billion at December 31, 2008, and an increase of 2% from $2.44 billion at September 30, 2009.  Core deposits, defined as demand, savings, money market accounts and certificates of deposit under $100,000, totaled $2.07 billion at December 31, 2009, comprising 83% of total deposits.

Ms. Dressel noted, "We have continued to focus on developing our customer relationships, resulting in core deposits that have helped us achieve a lower cost deposit mix.  The decrease in our total loans reflects the soft market and the resulting lower demand, as well as payoffs in the construction loan portfolio.  The decrease in our commercial business loans is primarily a result of loan pay-downs and a decrease in line of credit usage."

Acquisition of Columbia River Bank

On January 22, 2010, Columbia State Bank acquired all of the deposits and certain assets of Columbia River Bank from the Federal Deposit Insurance Corporation, which had been appointed receiver of the institution.  We acquired approximately $1 billion in assets and $980 million in deposits through 21 branches located in Oregon and Washington.  Columbia River Bank's approximately $700 million in loans are subject to a loss-sharing agreement with the FDIC.  We participated in a competitive bid process, whereby we agreed to assume all of the deposits and nearly all of the assets of Columbia River Bank.  The accepted bid included a 1% deposit premium on non-brokered deposits and a negative bid of $43.9 million.

Fourth Quarter 2009 Operating Results

Net Interest Income

Net interest income for the fourth quarter of 2009 increased $481,000, or 2%, from $29.3 million for the fourth quarter 2008, reflecting a $176,000 recovery related to a nonperforming loan and a decrease in interest expense on deposits.  For the year ended December 31, 2009, net interest income decreased 4% to $115.4 million from $119.5 million a year earlier, primarily due to a decrease in earning assets from the prior year.  

Columbia's net interest margin was 4.30% for the fourth quarter 2009, down from 4.39% for the fourth quarter of 2008.  On a quarterly basis, the net interest margin was 4.26% for the first quarter of 2009, 4.38% for the second quarter of 2009, and 4.34% in the third quarter of 2009. Interest reversals impacting the net interest margin for the fourth quarter 2009 were $194,569, representing approximately 2 basis points.  

Average interest-earning assets increased 4% to $2.87 billion in the fourth quarter of 2009, from $2.77 billion in the fourth quarter of 2008The yield on average interest-earning assets decreased 80 basis points to 5.12% in the fourth quarter of 2009, from 5.92% in the fourth quarter of 2008During the same period, average interest-bearing liabilities decreased to $2.04 billion from $2.19 billion last year. The cost of average interest-bearing liabilities decreased 77 basis points to 1.16% in the fourth quarter of 2009, compared with 1.93% in the fourth quarter of 2008.  Ms. Dressel noted, "These results reflect the rapid decline in interest rates during 2008.  The prime rate was 7.25% at the beginning of January 2008, and ended the year at 3.25%, the current rate."

For the year ending December 31, 2009, Columbia's net interest margin decreased to 4.33% from 4.38% a year earlier.   Average interest-earning assets decreased to $2.78 billion for the year 2009 from $2.85 billion for 2008.  The yield on average interest-earning assets decreased 101 basis points to 5.32% in 2009, from 6.33% in 2008.  Average interest-bearing liabilities were $2.07 billion compared to $2.28 billion for 2008.  The cost of average interest-bearing liabilities decreased 110 basis points to 1.34%   in 2009, compared with 2.44% for 2008.  Interest reversals impacting the net interest margin for 2009 were $2.1 million, representing approximately 7 basis points.

Noninterest income

Total noninterest income for the fourth quarter 2009 was $8.5 million, an increase of 35% from $6.3 million a year earlier.  The increase was primarily due to a $1 million impairment charge in the fourth quarter 2008 related to the decline in the fair value of an investment in preferred stock issued by the Federal Home Loan Mortgage Corporation ("Freddie Mac") and the Federal National Mortgage Association ("Fannie Mae").  Excluding the impact of the impairment charge and gains and losses on sales of securities, noninterest income was relatively unchanged from the prior-year quarter.  Other income was down approximately 22% from fourth quarter, 2008 primarily due to reduced fees from residential mortgage origination activity, as well as reduced income from the loan customer interest rate swap program.

For the year ended December 31, 2009, noninterest income was $29.7 million, an increase of $14.8 million, or 100%, from 2008.  The increase was primarily due to the $18.5 million impairment charge in the third quarter 2008 related to Freddie Mac and Fannie Mae investments as noted above.  Excluding the impact of the impairment charge, gains on sales of securities and proceeds from the redemption of Visa and MasterCard shares, noninterest income declined 6% from 2008.  Proceeds from the redemption of Visa and MasterCard shares for 2009 declined $3 million from 2008, and other income for 2009 declined $1.6 million, or 27% from 2008 partially due to the receipt of life insurance proceeds of $612,000 received in the prior year, as well as reduced fees from residential mortgage origination activity and less activity in the loan customer interest rate swap program.

Noninterest expense

Noninterest expense for the fourth quarter of 2009 was $22.8 million, an increase of 5% from $21.8 million a year earlier.  Decreases in compensation and benefits, advertising and promotion and other expenses resulting from the continued focus on expense control were offset by higher regulatory premiums and additional costs of operating other real estate owned.  Regulatory premiums increased $442,000, or 72%, from the fourth quarter of 2008, resulting from increased FDIC assessment rates.  Other real estate owned balances increased to $19.0 million at December 31, 2009, compared to $2.9 million at December 31, 2008, contributing to a $1.0 million increase in the cost of operating from December 31, 2008.

Total noninterest expense for 2009 was $94.5 million, an increase of $2.4 million, or 3%, from $92.1 million a year earlier.  Decreases of 4% in compensation and employee benefits, and 6% in occupancy expenses were again significantly offset by legal and professional fees and FDIC regulatory premium expenses.  Legal and professional fees were $3.9 million for 2009, compared to $2.0 million for 2008.  FDIC regulatory premium expenses were $5.8 million for 2009, compared to $2.1 million one year ago.

Nonperforming Assets and Loan Loss Provision

As of December 31, 2009, non-performing assets were $129.5 million, compared to $109.6 million at December 31, 2008 and down from $148.9 million at September 30, 2009.   1-4 Family Residential Construction assets continue to be the largest component of nonperforming assets; however, it was also the area where we saw the largest reduction in nonperforming assets.  The balance of the portfolio remained relatively stable.  Detail is provided in the table below.

    
    
                                                                 Multi-family
                                                   Multi-family   Residential
                                       1-4 Family    Residential       and
    Non Accrual &        1-4 Family   Residential      and         Commercial
    Restructured        Residential   Real Estate   Commercial    Real Estate
    Loans               Real Estate   Construction  Real Estate   Construction
    -----               -----------   ------------  -----------   ------------
    December 31, 2009        $1,860        $47,713      $24,354       $16,230 
    -----------------        ------        -------      -------       -------
    September 30, 2009       $2,665        $65,527      $26,650       $19,138 
    ------------------       ------        -------      -------       ------- 
    June 30, 2009            $1,879        $65,168      $24,256       $22,099 
    -------------            ------        -------      -------       ------- 
    December 31, 2008          $905        $69,667       $5,710       $25,752 
    -----------------          ----        -------       ------       -------
    
    OREO
    ----
    December 31, 2009            $0        $15,045       $3,195          $797 
    -----------------           ---        -------       ------          ---- 
    September 30, 2009           $0        $15,830       $1,510          $797 
    ------------------          ---        -------       ------          ---- 
    June 30, 2009                $0         $6,859       $1,510            $0 
    -------------               ---         ------       ------           --- 
    December 31, 2008            $0         $2,874           $0            $0 
    -----------------           ---         ------          ---           --- 
    
    Nonperforming Assets
    --------------------
    December 31, 2009        $1,860        $62,757      $27,550       $17,027 
    -----------------        ------        -------      -------       ------- 
    September 30, 2009       $2,665        $81,358      $28,160       $19,935 
    ------------------       ------        -------      -------       ------- 
    June 30, 2008            $1,879        $72,028      $25,766       $22,099 
    -------------            ------        -------      -------       ------- 
    December 31, 2008          $905        $72,541       $5,710       $25,752 
    -----------------          ----        -------       ------       ------- 
    
    
    Non Accrual & 
    Restructured          Commercial
    Loans                  Business     Consumer      Total
    -----                  --------     --------      -----
    
    December 31, 2009       $18,979       $1,355   $110,491
    -----------------       -------       ------   --------  
    September 30, 2009      $14,969       $1,769   $130,718
    ------------------      -------       ------   --------
    June 30, 2009           $12,198       $2,167   $127,767
    -------------           -------       ------   --------
    December 31, 2008        $3,563       $1,152   $106,750
    -----------------        ------       ------   --------
    
    OREO
    ----
    December 31, 2009            $0           $0    $19,037
    -----------------           ---          ---    -------  
    September 30, 2009           $0           $0    $18,137
    ------------------          ---          ---    -------     
    June 30, 2009                $0           $0     $8,369        
    -------------               ---          ---     ------
    December 31, 2008            $0           $0     $2,874
    -----------------           ---          ---     ------
    
    Nonperforming Assets
    --------------------
    December 31, 2009       $18,979       $1,355   $129,528
    -----------------       -------       ------   --------  
    September 30, 2009      $14,968       $1,769   $148,855
    ------------------      -------       ------   --------        
    June 30, 2008           $12,198       $2,167   $136,136     
    -------------           -------       ------   --------
    December 31, 2008        $3,563       $1,152   $109,624
    -----------------        ------       ------   --------
      

For the quarter ended December 31, 2009, net loan charge-offs were approximately $13.2 million, compared to $6.3 million for the same period a year ago, and $13.7 million during the third quarter of 2009.  Net charge-offs in the 1-4 family residential construction portfolio of $5.2 million for the quarter were centered in residential land and lot development loans.  Commercial real estate construction net charge-offs of $1.7 million were related to write-downs on condominium loans.  The commercial business pool had charge- offs of approximately $4.5 million, and continue to be centered in loans related to the construction and real estate development industries.  The consumer portfolio had $1.2 million in net charge-offs primarily centered in home equity lines of credit.  For the year ending December 31, 2009, net charges-offs were $52.7 million.  Most of the net charges were in the 1-4 family residential construction portfolio, followed by commercial business loans and commercial construction loan net charge-offs.  The breakout by portfolio is in the table below.

    
    
                                                                  Multi-family
                                                    Multi-family  Residential
                                      1-4 Family    Residential       and
                        1-4 Family    Residential      and         Commercial
                        Residential   Real Estate   Commercial    Real Estate
                        Real Estate   Construction  Real Estate   Construction
                        -----------   ------------  -----------   ------------
    2009 Net Loan
     Charge-Offs               $327       $26,878       $1,284         $9,297 
    -------------              ----       -------       ------         ------ 
    2008 Net Loan
     Charge-Offs                $46       $18,324         $662         $2,169 
    -------------               ---       -------         ----         ------ 
    
    
                          Commercial
                           Business       Consumer      Total
                           --------       --------      -----
    2009 Net Loan           
     Charge-Offs            $12,180        $2,803      $52,769
    -------------           -------        ------      -------
    2008 Net Loan            
     Charge-Offs             $2,547         1,280      $25,028
    -------------            ------         -----      -------

For the fourth quarter 2009, the provision for loan losses was $15.0 million compared to $13.3 million for the same quarter last year and $16.5 million for the third quarter of 2009.  The elevated levels of provisioning are related to continued weakness in the Pacific Northwest economy.  The allowance for loan losses as a percentage of outstanding loans at December 31, 2009 was 2.66% compared to 1.91% and 2.50% at December 31, 2008 and September 30, 2009, respectively.

Past due loans were $9.1 million, or 0.45% of total loans, as of December 31, 2009, compared to  $10.4 million or 0.46%, of total loans, at December 31, 2008 and $12.0 million or 0.58% as of September 30, 2009.

"Overall it was an improving quarter for credit quality," said Ms. Dressel. "Most importantly, we were able to reduce our level of nonperforming assets.  In addition, we continue to be pleased with our ability to reduce exposure in the areas of residential and commercial construction which declined by 18% or $33 million during the quarter."

Organizational Update

Ms. Dressel said, "During 2009, we moved forward with strategies designed to increase our resources and presence in markets where we were able to capitalize on opportunities to fill in our geographic footprint and increase market share.  We brought on board experienced teams of bankers, particularly in our Vancouver, Washington and Portland, Oregon markets, who have been able to take advantage of our capacity and willingness to lend."

Ms. Dressel noted, "We are very pleased with the progress of our new locations, including our Renton, Washington branch which opened in July, followed by an office in Vancouver in mid-December.  Our Portland office, which will house business bankers and a full-service branch in the Fox Tower, is scheduled to open in late first quarter of this year.  These growth initiatives, along with our acquisition of Columbia River Bank, help to offset the lower loan demand in the current economy, and position us well for the future."

Cash Dividend Announcement

The Board of Directors has announced a quarterly cash dividend of $0.01 per common share, which will be paid on February 24, 2010 to shareholders of record as of the close of business on February 10, 2010

Conference Call

Columbia's management will discuss the fourth quarter results on a conference call scheduled for January 28, 2010 at 1:00 p.m. PST (4:00 p.m. EST).     Interested parties may listen to this discussion by calling 1-888-318-7969; Conference ID code #49843829.  

A conference call replay will be available from approximately 4:00 p.m. PST on

January 28, 2010 through midnight PST on February 3, 2010.  The conference call replay can be accessed by dialing 1-800-642-1687 and entering Conference ID code #49843829.

Annual Meeting of Shareholders (New Location from previous Annual Meetings)

Columbia Banking System's Annual Meeting of Shareholders will be held at 1:00 PDT on April 28, 2010, at the William W. Philip Hall at the University of Washington Tacoma., 1900 Commerce Street, Tacoma, Washington 98402.  The Hall is named in honor of William W. "Bill" Philip, who had a seminal role in establishing UW Tacoma, and was a co-founder of Columbia Bank.

Directions and parking information are available at www.tacoma.washington.edu/conference.  

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank which was awarded second place in the large employer category by Seattle Business Magazine's 100 Best Companies to Work For 2009 and was designated one of  Puget Sound Business Journal's "Washington's Best Workplaces 2009."  With the January 22, 2010 FDIC-assisted acquisition of Columbia River Bank, Columbia Banking System has 73 banking offices in ten counties in Washington State, and eleven counties in Oregon. Columbia Bank does business under the Bank of Astoria name at the Bank of Astoria's former branches located in Astoria, Warrenton, Seaside and Cannon Beach in Clatsop County and in Manzanita and Tillamook in Tillamook County. 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, which management believes are a benefit to shareholders.  These forward looking statements describe management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of our style of banking and the strength of the local economy. The words "will," "believe," "expect," "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 our filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local and national economic conditions are less favorable than expected or have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets; (2) a continued decline in the housing/real estate market; (3) changes in interest rates significantly reduce interest margins and negatively affect funding sources; (4) deterioration of credit quality that could, among other things, increase defaults and delinquency risks in the Banks' loan portfolios (5) projected business increases following strategic expansion activities are lower than expected; (6) competitive pressure among financial institutions increases significantly; (7) legislation or regulatory requirements or changes adversely affect the businesses in which we are engaged; and (8) our ability to realize the efficiencies we expect to receive from our investments in personnel, acquisitions and infrastructure

    
    
    FINANCIAL STATISTICS                                                     
    Columbia Banking System, Inc.  Three Months Ended     Twelve Months Ended 
    Unaudited                        December 31,             December 31,   
                                     ------------             ------------   
    (dollars in thousands 
     except per share)             2009         2008       2009         2008 
                                   ----         ----       ----         ---- 
    Earnings                                                                 
    --------                                                                 
      Net interest income       $29,800      $29,319    $115,352     $119,513 
      Provision for loan and 
       lease losses             $15,000      $13,250     $63,500      $41,176 
      Noninterest income         $8,526       $6,334     $29,690      $14,850 
      Noninterest expense       $22,847      $21,813     $94,488      $92,125 
      Net income (loss)          $1,552       $1,814     $(3,968)      $5,968 
      Net income (loss)                                                
       applicable to common                                                  
       shareholders                $447       $1,344     $(8,371)      $5,498 
                                                                             
    Per Common Share                                                         
    -----------------                                                        
      Earnings (loss) 
      (basic)                     $0.02        $0.07      $(0.38)       $0.30 
      Earnings (loss) 
      (diluted)                   $0.02        $0.07      $(0.38)       $0.30 
                                                                             
    Averages                                                                 
    --------                                                                 
      Total assets           $3,177,098   $3,061,867  $3,084,421   $3,134,054 
      Interest- earning 
       assets                $2,872,842   $2,767,854  $2,783,862   $2,851,555 
      Loans                  $2,034,903   $2,214,918  $2,124,574   $2,264,486 
      Securities               $643,716     $535,763    $584,028     $565,299 
      Deposits               $2,453,553   $2,297,422  $2,378,176   $2,382,484 
      Core deposits          $2,039,533   $1,865,402  $1,945,039   $1,911,897 
      Interest-bearing                                                      
       deposits              $1,890,479   $1,837,166  $1,866,917   $1,921,737 
      Interest-bearing                                                     
       liabilities           $2,041,761   $2,193,437  $2,067,014   $2,277,422 
      Noninterest-bearing                                                   
       deposits                $563,074     $460,257    $511,259     $460,747 
      Shareholders' equity     $530,804     $368,184    $462,167     $354,387 
                                                                             
    Financial Ratios                                                         
    ----------------                                                         
      Return on average 
       assets                      0.19%        0.24%      (0.13%)       0.19%
      Return on average 
       common equity               0.39%        1.60%      (2.16%)       1.59%
      Average equity to 
       average assets             16.71%       12.02%      14.98%       11.31%
      Net interest margin          4.30%        4.39%       4.33%        4.38%
      Efficiency ratio (tax                                                
       equivalent)(1)             58.12%       57.62%      61.53%       59.88%
                                                                             
                                     December 31,                              
                                     ------------                              
    Period end                    2009         2008                        
    ----------                    ----         ----                        
      Total assets          $3,200,930    $3,097,079                        
      Loans                 $2,008,884    $2,232,332                        
      Allowance for loan 
       and lease losses        $53,478       $42,747                        
      Securities              $631,645      $540,525                        
      Deposits              $2,482,705    $2,382,151                        
      Core deposits         $2,072,821    $1,941,047                        
      Shareholders' equity    $528,139      $415,385                        
                                                                       
    Book value per common 
     share                      $16.13        $18.82                        
                                                                       
    Nonperforming assets                                               
    --------------------                                               
      Nonaccrual loans        $110,431      $106,163                        
      Restructured loans 
       accruing interest            60           587                        
      Other real estate 
       owned                    19,037         2,874                        
                                ------         -----                        
        Total 
         nonperforming 
         assets               $129,528      $109,624                        
                              --------      --------                        
    Nonperforming loans to 
     period-end loans             5.50%         4.78%                       
    Nonperforming assets to
     period-end assets            4.05%         3.54%                       
    Allowance for loan and 
     lease losses to period-                                             
     end loans                    2.66%         1.91%               
    Allowance for loan and
     lease losses to                                                   
     nonperforming loans         48.40%        40.04%                 
    Allowance for loan and 
     lease losses to                                                   
     nonperforming assets        41.29%        38.99%                 
    Net loan charges-offs      $52,769 (2)   $25,028 (3)           
                                 
                                                
    (1)  Noninterest expense divided by the sum of net interest income and
         noninterest income on a tax equivalent basis, excluding gain/loss 
         on sale of investment securities, net cost (gain) of OREO, proceeds 
         from redemption of Visa and Mastercard shares, reversal of 
         previously accrued Visa litigation expense, net income from BOLI 
         policy swap transactions, death benefit insurance proceeds and 
         other than temporary security impairment charge. 
    (2)  For the twelve months ended December 31, 2009. 
    (3)  For the twelve months ended December 31, 2008. 
    
    
    
    FINANCIAL STATISTICS                                                     
    Columbia Banking System, Inc.                                            
    Unaudited                                         December 31,           
                                                      ------------           
    (dollars in thousands)                       2009              2008 
                                           ---------------   ---------------
    Loan Portfolio Composition                                               
    --------------------------                                               
      Commercial business                 $744,440   37.0%   $810,922   36.3%
                                                                             
      Real Estate:                                                           
        One-to-four family residential      63,364    3.1%     57,237    2.6%
        Five or more family residential 
         and commercial                    856,260   42.6%    862,595   38.7%
                                           -------   ----     -------   ---- 
          Total Real Estate                919,624   45.7%    919,832   41.3%
                                                                             
      Real Estate Construction:                                              
        One-to-four family residential     107,620    5.4%    209,682    9.4%
        Five or more family residential 
         and commercial                     41,829    2.1%     81,176    3.6%
                                            ------    ---      ------    --- 
          Total Real Estate                                                  
           Construction                    149,449    7.5%    290,858   13.0%
                                                                             
      Consumer                             199,987   10.0%    214,753    9.6%
                                           -------   ----     -------    --- 
          Subtotal loans                 2,013,500  100.2%  2,236,365  100.2%
      Less:  Deferred loan fees             (4,616)  -0.2%     (4,033)  -0.2%
                                            ------   ----      ------   ---- 
      Total loans                       $2,008,884  100.0% $2,232,332  100.0%
                                        ==========  =====  ==========  ===== 
                                                                             
      Loans held for sale                       $-             $1,964        
                                                ==             ======        
                                                                             
                                                                             
                                                      December 31,           
                                                      ------------           
                                                 2009              2008 
                                            ---------------  --------------- 
    Deposit Composition                                                      
    -------------------                                                      
    Core deposits:                                                           
      Demand and other noninterest-                                          
       bearing                            $574,687   23.1%   $466,078   19.6%
      Interest-bearing demand              499,922   20.1%    519,124   21.8%
      Money market                         604,229   24.3%    530,065   22.3%
      Savings                              139,406    5.6%    122,076    5.1%
      Certificates of deposit less                                           
       than $100,000                       254,577   10.3%    303,704   12.7%
                                           -------   ----     -------   ---- 
        Total core deposits              2,072,821   83.4%  1,941,047   81.5%
                                                                             
    Certificates of deposit greater                                          
     than $100,000                         259,794   10.5%    338,971   14.2%
    Wholesale certificates of deposit                                        
     (CDARS( R ))                           96,314    3.9%     39,903    1.7%
    Wholesale certificates of deposit       53,776    2.2%     62,230    2.6%
                                            ------    ---      ------    --- 
    Total deposits                      $2,482,705  100.0% $2,382,151  100.0%
                                        ==========  =====  ==========  ===== 
    
    
    
    QUARTERLY FINANCIAL STATISTICS                                            
    Columbia Banking System, Inc.                   Three Months Ended        
                                                    ------------------        
    Unaudited                                 Dec 31      Sep 30       Jun 30 
    (dollars in thousands except per share)    2009        2009         2009  
                                               ----        ----         ----  
    Earnings                                                                  
    --------                                                                  
      Net interest income                   $29,800     $29,118      $28,531  
      Provision for loan and lease                                            
       losses                               $15,000     $16,500      $21,000  
      Noninterest income                     $8,526      $7,190       $7,000  
      Noninterest expense                   $22,847     $23,146      $25,314  
      Net income (loss)                      $1,552     $(1,502)     $(5,530) 
      Net income (loss) applicable to                                         
       common shareholders                     $447     $(2,605)     $(6,631) 
                                                                              
    Per Common Share                                                          
    -----------------                                                         
      Earnings (loss) (basic)                 $0.02      $(0.11)      $(0.37) 
      Earnings (loss) (diluted)               $0.02      $(0.11)      $(0.37) 
      Book value                             $16.13      $16.15       $18.50  
                                                                              
    Averages                                                                  
    --------                                                                  
      Total assets                       $3,177,098  $3,077,005   $3,024,491  
      Interest-earning assets            $2,872,842  $2,783,121   $2,728,086  
      Loans                              $2,034,903  $2,088,478   $2,159,415  
      Securities                           $643,716    $593,516     $554,270  
      Deposits                           $2,453,553  $2,395,311   $2,337,385  
      Core deposits                      $2,039,533  $1,977,977   $1,893,419  
      Interest-bearing deposits          $1,890,479  $1,857,708   $1,850,193  
      Interest-bearing liabilities       $2,041,761  $2,019,051   $2,073,750  
      Noninterest-bearing deposits         $563,074    $537,603     $487,192  
      Shareholders' equity                 $530,804    $478,589     $417,961  
                                                                              
    Financial Ratios                                                          
    ----------------                                                          
      Return on average assets                 0.19%      (0.19%)      (0.73%)
      Return on average common equity          0.39%      (2.56%)      (7.73%)
      Average equity to average assets        16.71%      15.55%       13.82% 
      Net interest margin                      4.30%       4.34%        4.38% 
      Efficiency ratio (tax equivalent)       58.12%      60.85%       63.79% 
                                                                              
    Period end                                                                
    ----------                                                                
      Total assets                       $3,200,930  $3,167,028   $3,021,857  
      Loans                              $2,008,884  $2,063,398   $2,119,443  
      Allowance for loan and lease                                            
       losses                               $53,478     $51,688      $48,880  
      Securities                           $631,645    $658,227     $558,011  
      Deposits                           $2,482,705  $2,443,567   $2,353,326  
      Core deposits                      $2,072,821  $2,027,482   $1,932,771  
      Shareholders' equity                 $528,139    $527,920     $411,871  
                                                                              
                                                                              
    Nonperforming assets                                                      
    --------------------                                                      
      Nonaccrual loans                     $110,431    $130,718     $127,767  
      Restructured loans accruing                                             
       interest                                  60           -            -  
      Other real estate owned                19,037      18,137        8,369  
                                             ------      ------        -----  
        Total nonperforming assets         $129,528    $148,855     $136,136  
                                           --------    --------     --------  
    Nonperforming loans to period-end                                         
     loans                                     5.50%       6.34%        6.03% 
    Nonperforming assets to period-end                                        
     assets                                    4.05%       4.70%        4.51% 
    Allowance for loan and lease losses                                       
     to period-end loans                       2.66%       2.50%        2.31% 
    Allowance for loan and lease losses                                       
     to nonperforming loans                   48.40%      39.54%       38.26% 
    Allowance for loan and lease losses                                       
     to nonperforming assets                  41.29%      34.72%       35.91% 
    Net loan charge-offs                    $13,210     $13,692      $16,369  
                                                                              
                                                                              
                                                                              
    Columbia Banking System, Inc.            Three Months Ended             
                                             ------------------              
    Unaudited                                 Mar 31      Dec 31            
    (dollars in thousands except per share)    2009        2008               
                                               ----        ----               
    Earnings                                                                  
    --------                                                                  
      Net interest income                   $27,903     $29,319               
      Provision for loan and lease                                            
       losses                               $11,000     $13,250               
      Noninterest income                     $6,974      $6,334               
      Noninterest expense                   $23,181     $21,813               
      Net income (loss)                      $1,512      $1,814               
      Net income (loss) applicable to                                         
       common shareholders                     $419      $1,344               
                                                                              
    Per Common Share                                                          
    -----------------                                                         
      Earnings (loss) (basic)                 $0.02       $0.07               
      Earnings (loss) (diluted)               $0.02       $0.07               
      Book value                             $18.73      $18.82               
                                                                              
    Averages                                                                  
    --------                                                                  
      Total assets                       $3,057,861  $3,061,867               
      Interest-earning assets            $2,774,259  $2,767,854               
      Loans                              $2,217,908  $2,214,918               
      Securities                           $543,403    $535,763               
      Deposits                           $2,324,853  $2,297,422               
      Core deposits                      $1,867,001  $1,865,402               
      Interest-bearing deposits          $1,869,155  $1,837,166               
      Interest-bearing liabilities       $2,135,045  $2,193,437               
      Noninterest-bearing deposits         $455,698    $460,257               
      Shareholders' equity                 $419,752    $368,184               
                                                                              
    Financial Ratios                                                          
    ----------------                                                          
      Return on average assets                 0.20%       0.24%              
      Return on average common equity          0.49%       1.60%              
      Average equity to average assets        13.73%      12.02%              
      Net interest margin                      4.26%       4.39%              
      Efficiency ratio (tax equivalent)       63.59%      57.62%              
                                                                              
    Period end                                                                
    ----------                                                                
      Total assets                       $3,045,757  $3,097,079               
      Loans                              $2,185,755  $2,232,332               
      Allowance for loan and lease                                            
       losses                               $44,249     $42,747               
      Securities                           $555,974    $540,525               
      Deposits                           $2,344,406  $2,382,151               
      Core deposits                      $1,873,626  $1,941,047               
      Shareholders' equity                 $415,717    $415,385               
                                                                              
                                                                              
    Nonperforming assets                                                      
    --------------------                                                      
      Nonaccrual loans                     $117,340    $106,163               
      Restructured loans accruing                                             
       interest                                   -         587               
      Other real estate owned                 4,312       2,874               
                                              -----       -----               
        Total nonperforming assets         $121,652    $109,624               
                                           --------    --------               
    Nonperforming loans to period-end                                         
     loans                                     5.37%       4.78%              
    Nonperforming assets to period-end                                        
     assets                                    3.99%       3.54%              
    Allowance for loan and lease losses                                       
     to period-end loans                       2.02%       1.91%              
    Allowance for loan and lease losses                                       
     to nonperforming loans                   37.71%      40.04%              
    Allowance for loan and lease losses                                       
     to nonperforming assets                  36.37%      38.99%              
    Net loan charge-offs                     $9,498      $6,317               
    
    
    
    CONSOLIDATED CONDENSED STATEMENTS OF INCOME  
                               
                                          Three Months       Twelve Months  
    Columbia Banking System, Inc.            Ended              Ended 
    (Unaudited)                           December 31,       December 31,   
                                          ------------       ------------   
    (in thousands except per share)       2009     2008      2009      2008 
    -------------------------------       ----     ----      ----      ---- 
    Interest Income                                                         
    Loans                              $28,860  $33,603  $117,062  $147,830 
    Taxable securities                   4,570    4,362    17,300    18,852 
    Tax-exempt securities                2,200    1,979     8,458     7,976 
    Federal funds sold and deposits                                         
     in banks                              146       23       215       402 
    -------------------------------        ---       --       ---       --- 
      Total interest income             35,776   39,967   143,035   175,060 
                                                                            
    Interest Expense                                                        
    Deposits                             4,953    8,863    23,250    45,307 
    Federal Home Loan Bank and                                              
     Federal Reserve Bank borrowings       643    1,109     2,759     7,573 
    Long-term obligations                  260      461     1,197     1,800 
    Other borrowings                       120      215       477       867 
    ----------------                       ---      ---       ---       --- 
      Total interest expense             5,976   10,648    27,683    55,547 
      ----------------------             -----   ------    ------    ------ 
                                                                            
    Net Interest Income                 29,800   29,319   115,352   119,513 
    Provision for loan and lease                                            
     losses                             15,000   13,250    63,500    41,176 
    ----------------------------        ------   ------    ------    ------ 
      Net interest income after                                             
       provision for loan and lease                                         
       losses                           14,800   16,069    51,852    78,337 
                                                                            
    Noninterest Income                                                      
    Service charges and other fees       4,199    3,684    15,181    14,813 
    Merchant services fees               1,714    1,881     7,321     8,040 
    Redemption of Visa and Mastercard                                       
     shares                                  -        -        49     3,028 
    Gain (loss) on sale of investment                                       
     securities, net                     1,077      (36)    1,077       846 
    Impairment charge on investment                                         
     securities                              -   (1,024)        -   (19,541)
    Bank owned life insurance ("BOLI")     491      488     2,023     2,075 
    Other                                1,045    1,341     4,039     5,589 
    -----                                -----    -----     -----     ----- 
      Total noninterest income           8,526    6,334    29,690    14,850 
                                                                            
    Noninterest Expense                                                     
    Compensation and employee benefits  11,258   11,398    47,275    49,315 
    Occupancy                            3,123    3,132    12,128    12,838 
    Merchant processing                    860      827     3,449     3,558 
    Advertising and promotion              268      527     1,943     2,324 
    Data processing                      1,073      979     4,047     3,486 
    Legal and professional fees          1,092      490     3,871     1,969 
    Taxes, licenses and fees               503      650     2,478     2,917 
    Regulatory premiums                  1,058      616     5,777     2,141 
    Net cost of operation of other                                          
     real estate                           271      (30)      861       (49)
    Other                                3,341    3,224    12,659    13,626 
    -----                                -----    -----    ------    ------ 
      Total noninterest expense         22,847   21,813    94,488    92,125 
      -------------------------         ------   ------    ------    ------ 
                                                                            
    Income (loss) before income taxes      479      590   (12,946)    1,062 
    Income tax benefit                  (1,073)  (1,224)   (8,978)   (4,906)
    ------------------                  ------   ------    ------    ------ 
                                                                            
    Net Income (Loss)                   $1,552   $1,814   $(3,968)   $5,968 
    =================                   ======   ======   =======    ====== 
    Net Income (Loss) Applicable to                                         
     Common Shareholders                  $447   $1,344   $(8,371)   $5,498 
    ===============================       ====   ======   =======    ====== 
                                                                            
    Earnings (loss) per common share (1)                                    
      Basic                              $0.02    $0.07    $(0.38)    $0.30 
      Diluted                            $0.02    $0.07    $(0.38)    $0.30 
    Dividends paid per common share      $0.01    $0.07     $0.07     $0.58 
    Weighted average common shares                                          
     outstanding                        27,841   17,959    21,854    17,914 
    Weighted average diluted common                                         
     shares outstanding                 27,924   17,972    21,854    18,010 
                                                                            
    (1)  The Company adopted authoritative guidance in the Earnings per Share
         topic of the FASB Accounting Standards Codification on January 1, 
         2009.  All prior periods have been restated to the current period's 
         presentation.   The adoption of the authoritative guidance resulted
         in a $0.01 per share reduction in basic and diluted EPS for the year
         ended December 31, 2008 
    
    
    
    CONSOLIDATED CONDENSED BALANCE SHEETS                                     
    Columbia Banking System, Inc.                                             
    (Unaudited)                                                  December 31, 
                                                                ------------- 
    (in thousands)                                             2009       2008
    --------------                                             ----       ----
                           ASSETS                                             
    Cash and due from banks                                 $55,802    $84,787
    Interest-earning deposits with banks                    249,272      3,943
    ------------------------------------                    -------      -----
          Total cash and cash equivalents                   305,074     88,730
    Securities available for sale at fair value                               
     (amortized cost of $602,675 and $525,110,                                
     respectively)                                          620,038    528,918
    Federal Home Loan Bank stock at cost                     11,607     11,607
    Loans held for sale                                           -      1,964
    Loans, net of deferred loan fees of ($4,616) and                          
     ($4,033), respectively                               2,008,884  2,232,332
        Less: allowance for loan and lease losses            53,478     42,747
        -----------------------------------------            ------     ------
          Loans, net                                      1,955,406  2,189,585
    Interest receivable                                      10,335     11,646
    Premises and equipment, net                              62,670     61,139
    Other real estate owned                                  19,037      2,874
    Goodwill                                                 95,519     95,519
    Core deposit intangible, net                              4,863      5,908
    Other assets                                            116,381     99,189
    ------------                                            -------     ------
          Total Assets                                   $3,200,930 $3,097,079
          ============                                   ========== ==========
            LIABILITIES AND SHAREHOLDERS' EQUITY                              
    Deposits:                                                                 
    Noninterest-bearing                                    $574,687   $466,078
    Interest-bearing                                      1,908,018  1,916,073
    ----------------                                      ---------  ---------
          Total deposits                                  2,482,705  2,382,151
    Federal Home Loan Bank and Federal Reserve Bank                           
     borrowings                                             100,000    200,000
    Securities sold under agreements to repurchase           25,000     25,000
    Other borrowings                                             86        201
    Long-term subordinated debt                              25,669     25,603
    Other liabilities                                        39,331     48,739
    -----------------                                        ------     ------
          Total liabilities                               2,672,791  2,681,694
    Commitments and contingent liabilities                                    
                                             December 31,                    
                                             ------------                   
                                            2009      2008                   
                                            ----      ----                   
    Preferred stock (no par value, 
     76,898 aggregate liquidation 
     preference)   
        Authorized shares                  2,000     2,000                    
        Issued and outstanding                77        77   74,301     73,743
    Common Stock (no par value)                                               
        Authorized shares                 63,033    63,033                    
        Issued and outstanding            28,129    18,151  348,706    233,192
    Retained earnings                                        93,316    103,061
    Accumulated other comprehensive income                   11,816      5,389
    --------------------------------------                   ------      -----
          Total shareholders' equity                        528,139    415,385
          --------------------------                        -------    -------
          Total Liabilities and Shareholders' Equity     $3,200,930 $3,097,079
          ==========================================     ========== ==========

Contacts:

Melanie J. Dressel, President and Chief Executive Officer

(253) 305-1911


Gary R. Schminkey, Executive Vice President and Chief Financial Officer

(253) 305-1966


SOURCE Columbia Banking System, Inc.



RELATED LINKS

http://www.columbiabank.com