Attached files
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| 8-K - 8-K - COLUMBIA BANKING SYSTEM, INC. | colb8-k9302012.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
October 25, 2012
Contacts: Melanie J. Dressel, President and Chief Executive Officer
(253) 305-1911
Clint Stein, Executive Vice President
and Chief Financial Officer
(253) 593-8304
Columbia Banking System Announces Third Quarter 2012 Earnings
and Quarterly Cash Dividend
TACOMA, Washington, October 25, 2012 -- Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB (“Columbia”) said today upon the release of third quarter 2012 earnings, “Our earnings for the quarter reflected the relative strength of our net interest margin despite ongoing rate challenges in our industry, a rise in our merchant card services and fee income, as well as the continued favorable downward trend in our nonperforming assets. Our focus on developing and enhancing customer relationships resulted in 5% growth in noncovered loans and an 11% increase in our business loans from the end of last year.”
Ms. Dressel also noted, "We were excited to announce our merger agreement with West Coast Bancorp during the quarter. This is an exciting opportunity to unite two community banks who share a long-held commitment to both relationship-based customer service and the communities we serve."
Columbia's net income was $11.9 million for the quarter ended September 30, 2012 compared to net income of $18.9 million for the same quarter of 2011. Earnings per diluted common share were $0.30 for the third quarter, compared with earnings of $0.48 per diluted common share a year earlier. The decline in earnings was due to the enhanced benefits realized in the third quarter of 2011 from Columbia's FDIC-assisted transactions.
1
Significant Influences on the Quarter Ended September 30, 2012
Net Interest Margin
Columbia's net interest margin decreased to 5.52% for the third quarter of 2012, down from 6.53% for the same period last year and down from 5.88% for the second quarter of 2012. Columbia's net interest margin is impacted significantly by the accounting for acquired loans. The net interest margin for the current quarter reflects a moderating trend in the incremental accretion income related to the acquired loans, which peaked during the last six months of 2011.
Columbia's net interest margin, excluding incremental accretion income, decreased to 4.40% for the third quarter of 2012, down from 4.59% for the same period last year and down from 4.44% for the second quarter of 2012. The net interest margin, excluding incremental accretion income, was negatively impacted during the third quarter of 2012 by the overall decreasing trend in rates, impacting both the loan and investment portfolios. Average noncovered loan yields have decreased due to a combination of repricing of existing loans and new loan originations at lower rates. The average yield on investments declined as portfolio cash flows were reinvested at lower prevailing rates.
The following table shows the impact to interest income and the related impact to the net interest margin resulting from accretion of income on acquired loan portfolios for the periods presented.
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2012 | September 30, 2011 | September 30, 2012 | September 30, 2011 | |||||||||||||
(dollars in thousands) | ||||||||||||||||
Interest income as recorded | $ | 21,476 | $ | 31,543 | $ | 78,864 | $ | 70,859 | ||||||||
Less: Interest income at stated note rate | 9,603 | 11,843 | 29,558 | 29,905 | ||||||||||||
Incremental accretion income | $ | 11,873 | $ | 19,700 | $ | 49,306 | $ | 40,954 | ||||||||
Incremental accretion income due to: | ||||||||||||||||
Acquired impaired loans | $ | 11,260 | $ | 14,604 | $ | 44,455 | $ | 35,858 | ||||||||
Other acquired loans | 613 | 5,096 | 4,851 | 5,096 | ||||||||||||
Incremental accretion income | $ | 11,873 | $ | 19,700 | $ | 49,306 | $ | 40,954 | ||||||||
Reported net interest margin | 5.52 | % | 6.53 | % | 5.99 | % | 5.96 | % | ||||||||
Net interest margin excluding incremental accretion income | 4.40 | % | 4.59 | % | 4.43 | % | 4.52 | % | ||||||||
2
Asset Quality
At September 30, 2012, nonperforming noncovered assets were $53.3 million, a decrease of 20% from $67.1 million at June 30, 2012, and 38% from $85.4 million at December 31, 2011. Nonaccrual loans declined $7.9 million during the third quarter. The decrease in nonaccrual loans for the quarter was driven by payments of $9.4 million, charge-offs of $2.0 million and the return of $2.0 million of nonaccrual loans to accrual status, partially offset by $5.5 million of new nonaccrual loans. Noncovered other real estate owned (OREO) and other personal property owned (OPPO) were reduced by $5.9 million, as a result of $5.5 million in sales and $458 thousand in write-downs. Columbia's allowance for loan losses to nonperforming, noncovered loans ratio improved to 124% for the quarter, up from 106% for the second quarter 2012 and 91% for the same period last year.
The following table sets forth, at the dates indicated, information with respect to noncovered nonaccrual loans and total noncovered nonperforming assets.
September 30, 2012 | June 30, 2012 | December 31, 2011 | ||||||||||
(dollars in thousands) | ||||||||||||
Nonaccrual noncovered loans: | ||||||||||||
Commercial business | $ | 12,564 | $ | 13,052 | $ | 10,243 | ||||||
Real estate: | ||||||||||||
One-to-four family residential | 2,220 | 2,244 | 2,696 | |||||||||
Commercial and multifamily residential | 19,459 | 23,302 | 19,485 | |||||||||
Total real estate | 21,679 | 25,546 | 22,181 | |||||||||
Real estate construction: | ||||||||||||
One-to-four family residential | 5,359 | 5,223 | 10,785 | |||||||||
Commercial and multifamily residential | — | 3,754 | 7,067 | |||||||||
Total real estate construction | 5,359 | 8,977 | 17,852 | |||||||||
Consumer | 1,987 | 1,890 | 3,207 | |||||||||
Total nonaccrual loans | 41,589 | 49,465 | 53,483 | |||||||||
Noncovered other real estate owned and other personal property owned | 11,749 | 17,608 | 31,905 | |||||||||
Total nonperforming noncovered assets | $ | 53,338 | $ | 67,073 | $ | 85,388 | ||||||
For the quarter ended September 30, 2012, net loan charge-offs were $3.5 million, compared to $4.1 million for the same period a year ago, and $3.8 million last quarter. Net charge-offs during the current quarter were primarily centered in commercial business loans.
3
The following table provides an analysis of the Company's allowance loan and lease losses at the dates and the periods indicated.
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Beginning balance | $ | 52,196 | $ | 54,057 | $ | 53,041 | $ | 60,993 | ||||||||
Charge-offs: | ||||||||||||||||
Commercial business | (3,775 | ) | (1,946 | ) | (8,178 | ) | (6,151 | ) | ||||||||
One-to-four family residential real estate | (49 | ) | (53 | ) | (499 | ) | (717 | ) | ||||||||
Commercial and multifamily residential real estate | (592 | ) | (443 | ) | (5,108 | ) | (2,362 | ) | ||||||||
One-to-four family residential real estate construction | (325 | ) | (183 | ) | (1,426 | ) | (2,415 | ) | ||||||||
Commercial and multifamily residential real estate construction | — | (145 | ) | (93 | ) | (1,710 | ) | |||||||||
Consumer | (500 | ) | (2,102 | ) | (1,968 | ) | (3,298 | ) | ||||||||
Total charge-offs | (5,241 | ) | (4,872 | ) | (17,272 | ) | (16,653 | ) | ||||||||
Recoveries: | ||||||||||||||||
Commercial business | 277 | 460 | 1,314 | 1,157 | ||||||||||||
One-to-four family residential real estate | 157 | 78 | 202 | 78 | ||||||||||||
Commercial and multifamily residential real estate | 446 | 10 | 1,338 | 96 | ||||||||||||
One-to-four family residential real estate construction | 404 | 119 | 906 | 1,923 | ||||||||||||
Commercial and multifamily residential real estate construction | 63 | — | 64 | — | ||||||||||||
Consumer | 350 | 70 | 809 | 178 | ||||||||||||
Total recoveries | 1,697 | 737 | 4,633 | 3,432 | ||||||||||||
Net charge-offs | (3,544 | ) | (4,135 | ) | (12,639 | ) | (13,221 | ) | ||||||||
Provision charged to expense | 2,875 | 500 | 11,125 | 2,650 | ||||||||||||
Ending balance | $ | 51,527 | $ | 50,422 | $ | 51,527 | $ | 50,422 | ||||||||
For the third quarter of 2012, Columbia made a provision of $2.9 million for noncovered loan losses. For the comparable quarter last year the company made a provision of $500 thousand. The provision for noncovered loan losses during the current quarter was primarily driven by net charge-offs experienced in the quarter and to a lesser extent by the $40 million in noncovered loan growth experienced during the quarter, partially offset by improved credit quality in the noncovered portfolio. The growth in noncovered loans was centered in commercial business loans and term commercial real estate loans.
The allowance for noncovered loan losses to period end loans was 2.08% at September 30, 2012 compared to 2.14% at June 30, 2012 and 2.26% at December 31, 2011.
4
Impact of Acquired Loan Accounting
The following table illustrates the significant impact to earnings associated with Columbia's acquired loan portfolios:
Acquired Loan Portfolio Activity | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, 2012 | September 30, 2011 | September 30, 2012 | September 30, 2011 | |||||||||||||
(in thousands) | ||||||||||||||||
Incremental accretion income on acquired impaired loans | $ | 11,260 | $ | 14,604 | $ | 44,455 | $ | 35,858 | ||||||||
Incremental accretion income on other acquired loans | 613 | 5,096 | 4,851 | 5,096 | ||||||||||||
(Provision) recapture for losses on covered loans | 3,992 | (433 | ) | (23,381 | ) | (2,312 | ) | |||||||||
Change in FDIC loss-sharing asset | (12,951 | ) | (10,855 | ) | (14,787 | ) | (32,048 | ) | ||||||||
Claw back liability expense | (334 | ) | (1,146 | ) | (100 | ) | (3,294 | ) | ||||||||
Pre-tax earnings impact | $ | 2,580 | $ | 7,266 | $ | 11,038 | $ | 3,300 | ||||||||
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, 2012, the accretable yield on acquired impaired loans was $188.5 million and the net discount on other acquired loans was $6.4 million. 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 $4.0 million net recapture of provision for losses on covered loans in the current period is partially offset by an 80%, or $3.2 million, adjustment to the change in the FDIC loss-sharing asset, resulting in a favorable net pre-tax earnings impact of $800 thousand. The recapture for losses on covered loans was primarily due to increased expected future cash flows as re-measured during the current quarter when compared to the prior quarter's re-measurement.
The $13.0 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consists of $9.7 million of scheduled amortization expense, the $3.2 million unfavorable adjustment described above and approximately $64 thousand of expense related to covered other real estate owned.
5
Balance Sheet
At September 30, 2012, Columbia's total assets were $4.90 billion, a 2% increase from $4.79 billion in total assets at both June 30, 2012 and December 31, 2011. Noncovered loans were $2.48 billion at September 30, 2012, up 2% from $2.44 billion at June 30, 2012 and up 5% from $2.35 billion at December 31, 2011. Net noncovered loan growth was approximately $40 million from June 30, 2012 and $128 million from year-end 2011. Securities, including FHLB stock, were $965.6 million at September 30, 2012, down 5% from $1.02 billion at June 30, 2012 and down 8% from $1.05 billion at December 31, 2011.
Total deposits at September 30, 2012 were $3.94 billion, a 3% increase from $3.83 billion at June 30, 2012, and a 3% increase from $3.82 billion at December 31, 2011. Core deposits comprised 94% of total deposits, and were $3.69 billion at September 30, 2012, an increase of 3% from $3.57 billion at June 30, 2012, and an increase of 5% from $3.51 billion at December 31, 2011.
Total shareholders' equity was $762.0 million at September 30, 2012, compared to $758.7 million and $759.3 million at June 30, 2012 and December 31, 2011, respectively. In accordance with the Columbia's recent capital and dividend strategies, total shareholders' equity has remained relatively unchanged over the past four quarters.
Third Quarter 2012 Operating Results
Quarter ended September 30, 2012
Net Interest Income
Net interest income for the third quarter of 2012 was $57.3 million, a decrease of 12% from $64.8 million for the same quarter in 2011, primarily due to the accretion income recorded during the third quarter of 2011 related to our acquired loan portfolios.
Compared to the second quarter of 2012, net interest income decreased 4% from $59.7 million primarily due to the continued moderation of accretion income on acquired loans. During the third quarter of 2012, the Company recorded $11.9 million in incremental accretion income on acquired loans compared to $15.0 million for the second quarter of 2012.
6
Noninterest Income (Loss)
Total noninterest income was a loss of $911 thousand for the third quarter of 2012, compared to income of $2.2 million a year earlier. The decrease from the prior-year period was primarily due to the change in the FDIC loss-sharing asset, which, when combined with the gain on bank acquisition recorded in August 2011, accounted for $3.9 million.
Excluding these two items, noninterest income was up approximately $800 thousand, or 7%, with approximately half of the increase driven by merchant card services volume, and the other half from fees on deposit accounts. On a year-to-date basis, noninterest income was up 16% compared to the same period in 2011.
Prior to the change in the FDIC loss-sharing asset, noninterest income was up approximately $100 thousand in the third quarter 2012 on a linked-quarter basis compared to the second quarter 2012. The change in the FDIC loss-sharing asset was a decrease of $12.8 million which resulted in an overall noninterest income decline of $12.7 million.
The following table reflects the components of the change in the FDIC loss-sharing asset for the three month periods indicated.
Three Months Ended | ||||||||||||
September 30, | June 30, | |||||||||||
2012 | 2011 | 2012 | ||||||||||
(in thousands) | ||||||||||||
Adjustments reflected in income | ||||||||||||
Amortization, net | (9,694 | ) | (10,928 | ) | (9,851 | ) | ||||||
Loan impairment (recapture) | (3,193 | ) | 921 | 9,350 | ||||||||
Sale of other real estate | (1,315 | ) | (1,471 | ) | (1,498 | ) | ||||||
Write-downs of other real estate | 1,141 | 467 | 1,732 | |||||||||
Other | 110 | 156 | 99 | |||||||||
Change in FDIC loss-sharing asset | $ | (12,951 | ) | $ | (10,855 | ) | $ | (168 | ) | |||
Noninterest Expense
Total noninterest expense for the third quarter of 2012 was $40.9 million, an increase of 3% from $39.9 million for the same quarter in 2011. The increase from the prior-year period was due to a rise in legal and professional costs of $826 thousand, which includes $1.1 million of costs related to the recently announced merger with West Coast Bancorp, as well as an increase in other noninterest expense of $1.2 million. The increase in other noninterest expense was primarily due to $1.2 million in expense recapture from other personal property owned for the third quarter of last year compared to just $108 thousand in the current quarter. These increases were partially offset by an $812 thousand reduction in FDIC clawback liability expense and an $874 thousand decrease in the net cost of operation of other real estate owned.
7
Compared to the second quarter of 2012, noninterest expense increased $1.1 million, or 3%. The increase was attributable to the previously mentioned expenses associated with the recently announced merger with West Coast Bancorp.
Merger Activity
In September, 2012, Columbia announced the signing of a definitive merger agreement with West Coast Bancorp ("West Coast"), headquartered in Lake Oswego, Oregon. The agreement was unanimously approved by the Board of Directors of each company. The transaction is expected to be completed in the first quarter of 2013, after obtaining the approval of the shareholders of each company and the necessary regulatory approvals. Ms. Dressel commented, "After the merger, Columbia will rank as the number one community bank in deposit market share in both Oregon and Washington. We will have extensive coverage throughout both states, with over 150 branches, about $7.2 billion in assets, and continued strong capital levels. Customers of both banks will enjoy increased convenience and a broader array of product offerings, further enhancing our style of banking."
Cash Dividend Announcement
Melanie Dressel commented, “For the past four quarters, we have provided a full payout of earnings with our regular and special dividends as we did not see the need to accumulate capital. As a result of our recent acquisition announcement, we are discontinuing our special dividend. We will pay a regular cash dividend of $0.09 per common share on November 21, 2012 to shareholders of record as of the close of business on November 7, 2012.”
Conference Call
Columbia's management will discuss the third quarter 2012 results on a conference call scheduled for Thursday, October 25, 2012 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 #41231628.
A conference call replay will be available from approximately 4:00 p.m. PDT on October 25, 2012 through midnight PDT on November 1, 2012. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #41231628.
8
About Columbia
Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding Company of Columbia State Bank, a Washington state-chartered full-service commercial bank. For the sixth consecutive year, the bank was named in 2012 as one of Puget Sound Business Journal's “Washington's Best Workplaces.”
Columbia Banking System has 101 banking offices, including 76 branches in Washington State and 25 branches in Oregon. Columbia Bank does business under the Bank of Astoria name in Astoria, Warrenton, Seaside, Cannon Beach, Manzanita and Tillamook in Oregon. More information about Columbia can be found on its website at www.columbiabank.com.
# # #
Note Regarding Forward-Looking Statements
This news release includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These forward looking statements describe Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “intend,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, including the “Risk Factors,” “Business” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q, factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates may reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) the proposed merger with West Coast Bancorp may not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, which may have an effect on the trading prices of Columbia's stock; (5) costs or difficulties related to the integration of acquisitions may be greater than expected; (6) competitive pressure among financial institutions may increase significantly; and (7) 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.
9
FINANCIAL STATISTICS | |||||||||||||||||||||
Columbia Banking System, Inc. | Three Months Ended | Nine Months Ended | |||||||||||||||||||
Unaudited | September 30, | September 30, | |||||||||||||||||||
2012 | 2011 | 2012 | 2011 | ||||||||||||||||||
Earnings | (dollars in thousands except per share amounts) | ||||||||||||||||||||
Net interest income | $ | 57,265 | $ | 64,788 | $ | 184,029 | $ | 164,612 | |||||||||||||
Provision for loan and lease losses | $ | 2,875 | $ | 500 | $ | 11,125 | $ | 2,650 | |||||||||||||
Provision (recapture) for losses on covered loans, net (1) | $ | (3,992 | ) | $ | 433 | $ | 23,381 | $ | 2,312 | ||||||||||||
Noninterest income (loss) | $ | (911 | ) | $ | 2,196 | $ | 20,491 | $ | 319 | ||||||||||||
Noninterest expense | $ | 40,936 | $ | 39,935 | $ | 125,113 | $ | 114,445 | |||||||||||||
Net income | $ | 11,880 | $ | 18,872 | $ | 32,681 | $ | 33,283 | |||||||||||||
Per Common Share | |||||||||||||||||||||
Earnings (basic) | $ | 0.30 | $ | 0.48 | $ | 0.82 | $ | 0.84 | |||||||||||||
Earnings (diluted) | $ | 0.30 | $ | 0.48 | $ | 0.82 | $ | 0.84 | |||||||||||||
Book value | $ | 19.20 | $ | 18.99 | $ | 19.20 | $ | 18.99 | |||||||||||||
Averages | |||||||||||||||||||||
Total assets | $ | 4,828,102 | $ | 4,680,901 | $ | 4,797,543 | $ | 4,426,037 | |||||||||||||
Interest-earning assets | $ | 4,263,414 | $ | 4,028,029 | $ | 4,199,125 | $ | 3,794,865 | |||||||||||||
Loans, including covered loans | $ | 2,919,520 | $ | 2,777,681 | $ | 2,891,688 | $ | 2,536,492 | |||||||||||||
Securities | $ | 983,815 | $ | 998,775 | $ | 1,012,716 | $ | 919,173 | |||||||||||||
Deposits | $ | 3,859,284 | $ | 3,678,931 | $ | 3,829,640 | $ | 3,457,227 | |||||||||||||
Core deposits | $ | 3,599,246 | $ | 3,332,234 | $ | 3,555,936 | $ | 3,132,963 | |||||||||||||
Interest-bearing deposits | $ | 2,665,094 | $ | 2,651,664 | $ | 2,673,335 | $ | 2,521,136 | |||||||||||||
Interest-bearing liabilities | $ | 2,803,201 | $ | 2,813,396 | $ | 2,813,269 | $ | 2,686,491 | |||||||||||||
Noninterest-bearing deposits | $ | 1,194,190 | $ | 1,027,268 | $ | 1,156,304 | $ | 936,091 | |||||||||||||
Shareholders' equity | $ | 761,281 | $ | 735,192 | $ | 760,217 | $ | 721,638 | |||||||||||||
Financial Ratios | |||||||||||||||||||||
Return on average assets | 0.98 | % | 1.60 | % | 0.91 | % | 1.01 | % | |||||||||||||
Return on average common equity | 6.21 | % | 10.18 | % | 5.74 | % | 6.17 | % | |||||||||||||
Average equity to average assets | 15.77 | % | 15.71 | % | 15.85 | % | 16.30 | % | |||||||||||||
Net interest margin | 5.52 | % | 6.53 | % | 5.99 | % | 5.96 | % | |||||||||||||
Efficiency ratio (tax equivalent)(2) | 68.46 | % | 69.17 | % | 69.47 | % | 68.62 | % | |||||||||||||
September 30, | December 31, | ||||||||||||||||||||
Period end | 2012 | 2011 | 2011 | ||||||||||||||||||
Total assets | $ | 4,903,049 | $ | 4,755,832 | $ | 4,785,945 | |||||||||||||||
Covered assets, net | $ | 445,797 | $ | 595,640 | $ | 560,055 | |||||||||||||||
Loans, excluding covered loans, net | $ | 2,476,844 | $ | 2,257,899 | $ | 2,348,371 | |||||||||||||||
Allowance for noncovered loan and lease losses | $ | 51,527 | $ | 50,422 | $ | 53,041 | |||||||||||||||
Securities | $ | 965,641 | $ | 1,018,069 | $ | 1,050,325 | |||||||||||||||
Deposits | $ | 3,938,855 | $ | 3,795,499 | $ | 3,815,529 | |||||||||||||||
Core deposits | $ | 3,685,844 | $ | 3,464,705 | $ | 3,510,435 | |||||||||||||||
Shareholders' equity | $ | 761,977 | $ | 749,966 | $ | 759,338 | |||||||||||||||
Nonperforming, noncovered assets | |||||||||||||||||||||
Nonaccrual loans | $ | 41,589 | $ | 55,183 | $ | 53,483 | |||||||||||||||
Other real estate owned ("OREO") and other personal property owned ("OPPO") | 11,749 | 34,069 | 31,905 | ||||||||||||||||||
Total nonperforming, noncovered assets | $ | 53,338 | $ | 89,252 | $ | 85,388 | |||||||||||||||
Nonperforming assets to period-end noncovered loans + OREO and OPPO | 2.14 | % | 3.89 | % | 3.59 | % | |||||||||||||||
Nonperforming loans to period-end noncovered loans | 1.68 | % | 2.44 | % | 2.28 | % | |||||||||||||||
Nonperforming assets to period-end noncovered assets | 1.20 | % | 2.15 | % | 2.02 | % | |||||||||||||||
Allowance for loan and lease losses to period-end noncovered loans | 2.08 | % | 2.23 | % | 2.26 | % | |||||||||||||||
Allowance for loan and lease losses to nonperforming noncovered loans | 123.90 | % | 91.37 | % | 99.17 | % | |||||||||||||||
Net noncovered loan charge-offs | $ | 12,639 | (3) | $ | 13,221 | (4) | $ | 15,352 | (5) | ||||||||||||
(1) Provision (recapture) for losses on covered loans was partially offset by $3.2 million in expense and $346 thousand in income recorded to Change in FDIC loss-sharing asset in the Consolidated Statements of Income for the three months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012 and 2011, provision (recapture) for losses on covered loans was partially offset by $18.7 million in income and $1.8 million in income, respectively. | |||||||||||||||||||||
(2) Noninterest expense, excluding net cost of operation of other real estate, FDIC clawback liability expense and merger related expenses, divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding gain/loss on sale of investment securities, impairment charge on investment securities, gain on bank acquisition, incremental accretion income on the acquired loan portfolio and the change in FDIC loss-sharing asset. | |||||||||||||||||||||
(3) For the nine months ended September 30, 2012. | |||||||||||||||||||||
(4) For the nine months ended September 30, 2011. | |||||||||||||||||||||
(5) For the twelve months ended December 31, 2011. | |||||||||||||||||||||
10
FINANCIAL STATISTICS | ||||||||||||||
Columbia Banking System, Inc. | ||||||||||||||
Unaudited | September 30, | December 31, | ||||||||||||
2012 | 2011 | |||||||||||||
Loan Portfolio Composition | (dollars in thousands) | |||||||||||||
Noncovered loans: | ||||||||||||||
Commercial business | $ | 1,142,737 | 46.1 | % | $ | 1,031,721 | 43.9 | % | ||||||
Real estate: | ||||||||||||||
One-to-four family residential | 47,656 | 1.9 | % | 64,491 | 2.8 | % | ||||||||
Commercial and multifamily residential | 1,035,356 | 41.9 | % | 998,165 | 42.5 | % | ||||||||
Total real estate | 1,083,012 | 43.8 | % | 1,062,656 | 45.3 | % | ||||||||
Real estate construction: | ||||||||||||||
One-to-four family residential | 50,381 | 2.0 | % | 50,208 | 2.1 | % | ||||||||
Commercial and multifamily residential | 51,466 | 2.1 | % | 36,768 | 1.6 | % | ||||||||
Total real estate construction | 101,847 | 4.1 | % | 86,976 | 3.7 | % | ||||||||
Consumer | 160,771 | 6.5 | % | 183,235 | 7.8 | % | ||||||||
Subtotal loans | 2,488,367 | 100.5 | % | 2,364,588 | 100.7 | % | ||||||||
Less: Net unearned income | (11,523 | ) | (0.5 | )% | (16,217 | ) | (0.7 | )% | ||||||
Total noncovered loans, net of unearned income | 2,476,844 | 100.0 | % | 2,348,371 | 100.0 | % | ||||||||
Less: Allowance for loan and lease losses | (51,527 | ) | (53,041 | ) | ||||||||||
Noncovered loans, net | 2,425,317 | 2,295,330 | ||||||||||||
Covered loans, net of allowance for loan losses of ($29,157) and ($4,944), respectively | 429,286 | 531,929 | ||||||||||||
Total loans, net | $ | 2,854,603 | $ | 2,827,259 | ||||||||||
Loans held for sale | $ | 3,600 | $ | 2,148 | ||||||||||
September 30, | December 31, | |||||||||||||
2012 | 2011 | |||||||||||||
Deposit Composition | (dollars in thousands) | |||||||||||||
Core deposits: | ||||||||||||||
Demand and other non-interest bearing | $ | 1,270,321 | 32.3 | % | $ | 1,156,610 | 30.3 | % | ||||||
Interest bearing demand | 804,578 | 20.4 | % | 735,340 | 19.3 | % | ||||||||
Money market | 1,045,551 | 26.5 | % | 1,031,664 | 27.0 | % | ||||||||
Savings | 300,800 | 7.6 | % | 283,416 | 7.4 | % | ||||||||
Certificates of deposit less than $100,000 | 264,594 | 6.7 | % | 303,405 | 8.0 | % | ||||||||
Total core deposits | 3,685,844 | 93.5 | % | 3,510,435 | 92.0 | % | ||||||||
Certificates of deposit greater than $100,000 | 228,052 | 5.9 | % | 262,731 | 6.9 | % | ||||||||
Certificates of deposit insured by CDARS® | 24,846 | 0.6 | % | 42,080 | 1.1 | % | ||||||||
Subtotal | 3,938,742 | 100.0 | % | 3,815,246 | 100.0 | % | ||||||||
Premium resulting from acquisition date fair value adjustment | 113 | 283 | ||||||||||||
Total deposits | $ | 3,938,855 | $ | 3,815,529 | ||||||||||
11
FINANCIAL STATISTICS | ||||||||||||||||
Columbia Banking System, Inc. | ||||||||||||||||
Unaudited | ||||||||||||||||
September 30, | December 31, | |||||||||||||||
2012 | 2011 | |||||||||||||||
OREO | OPPO | OREO | OPPO | |||||||||||||
OREO and OPPO Composition | (in thousands) | |||||||||||||||
Covered | $ | 16,511 | $ | 45 | $ | 28,126 | $ | 45 | ||||||||
Noncovered | 10,875 | 874 | 22,893 | 8,966 | ||||||||||||
Total | $ | 27,386 | $ | 919 | $ | 51,019 | $ | 9,011 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
OREO and OPPO Earnings Impact | (in thousands) | |||||||||||||||
Net cost (benefit) of operation of noncovered OREO | $ | (63 | ) | $ | 1,291 | $ | 4,102 | $ | 5,849 | |||||||
Net benefit of operation of covered OREO | (1,006 | ) | (1,486 | ) | (4,638 | ) | (6,272 | ) | ||||||||
Net benefit of operation of OREO | $ | (1,069 | ) | $ | (195 | ) | $ | (536 | ) | $ | (423 | ) | ||||
Noncovered OPPO cost (benefit), net | $ | (100 | ) | $ | (1,108 | ) | $ | 2,242 | $ | (1,108 | ) | |||||
Covered OPPO benefit, net | (8 | ) | (104 | ) | (16 | ) | (104 | ) | ||||||||
OPPO expense, net (1) | $ | (108 | ) | $ | (1,212 | ) | $ | 2,226 | $ | (1,212 | ) | |||||
(1) OPPO expense, net is included in Other noninterest expense in the Consolidated Statements of Income. | ||||||||||||||||
12
QUARTERLY FINANCIAL STATISTICS | ||||||||||||||||||||
Columbia Banking System, Inc. | Three Months Ended | |||||||||||||||||||
Unaudited | September 30, | June 30, | March 31, | December 31, | September 30, | |||||||||||||||
2012 | 2012 | 2012 | 2011 | 2011 | ||||||||||||||||
(dollars in thousands except per share) | ||||||||||||||||||||
Earnings | ||||||||||||||||||||
Net interest income | $ | 57,265 | $ | 59,701 | $ | 67,063 | $ | 72,124 | $ | 64,788 | ||||||||||
Provision for loan and lease losses | $ | 2,875 | $ | 3,750 | $ | 4,500 | $ | 4,750 | $ | 500 | ||||||||||
Provision (recapture) for losses on covered loans | $ | (3,992 | ) | $ | 11,688 | $ | 15,685 | $ | (3,960 | ) | $ | 433 | ||||||||
Noninterest income (loss) | $ | (911 | ) | $ | 11,828 | $ | 9,574 | $ | (9,602 | ) | $ | 2,196 | ||||||||
Noninterest expense | $ | 40,936 | $ | 39,825 | $ | 44,352 | $ | 41,314 | $ | 39,935 | ||||||||||
Net income | $ | 11,880 | $ | 11,899 | $ | 8,902 | $ | 14,754 | $ | 18,872 | ||||||||||
Per Common Share | ||||||||||||||||||||
Earnings (basic) | $ | 0.30 | $ | 0.30 | $ | 0.22 | $ | 0.37 | $ | 0.48 | ||||||||||
Earnings (diluted) | $ | 0.30 | $ | 0.30 | $ | 0.22 | $ | 0.37 | $ | 0.48 | ||||||||||
Book value | $ | 19.20 | $ | 19.13 | $ | 18.97 | $ | 19.23 | $ | 18.99 | ||||||||||
Averages | ||||||||||||||||||||
Total assets | $ | 4,828,102 | $ | 4,788,723 | $ | 4,776,186 | $ | 4,755,222 | $ | 4,680,901 | ||||||||||
Interest-earning assets | $ | 4,263,414 | $ | 4,194,281 | $ | 4,137,449 | $ | 4,098,603 | $ | 4,028,029 | ||||||||||
Loans, including covered loans | $ | 2,919,520 | $ | 2,895,436 | $ | 2,860,524 | $ | 2,817,279 | $ | 2,777,681 | ||||||||||
Securities | $ | 983,815 | $ | 1,029,337 | $ | 1,023,067 | $ | 957,727 | $ | 998,775 | ||||||||||
Deposits | $ | 3,859,284 | $ | 3,823,985 | $ | 3,805,324 | $ | 3,791,169 | $ | 3,678,931 | ||||||||||
Core deposits | $ | 3,599,246 | $ | 3,555,279 | $ | 3,512,490 | $ | 3,472,023 | $ | 3,332,234 | ||||||||||
Interest-bearing deposits | $ | 2,665,094 | $ | 2,682,092 | $ | 2,672,911 | $ | 2,664,133 | $ | 2,651,664 | ||||||||||
Interest-bearing liabilities | $ | 2,803,201 | $ | 2,820,857 | $ | 2,815,753 | $ | 2,808,497 | $ | 2,813,396 | ||||||||||
Noninterest-bearing deposits | $ | 1,194,190 | $ | 1,141,893 | $ | 1,132,413 | $ | 1,127,036 | $ | 1,027,268 | ||||||||||
Shareholders' equity | $ | 761,281 | $ | 758,391 | $ | 761,686 | $ | 757,696 | $ | 735,192 | ||||||||||
Financial Ratios | ||||||||||||||||||||
Return on average assets | 0.98 | % | 1.00 | % | 0.75 | % | 1.23 | % | 1.60 | % | ||||||||||
Return on average common equity | 6.21 | % | 6.31 | % | 4.70 | % | 7.73 | % | 10.18 | % | ||||||||||
Average equity to average assets | 15.77 | % | 15.84 | % | 15.95 | % | 15.93 | % | 15.71 | % | ||||||||||
Net interest margin | 5.52 | % | 5.88 | % | 6.67 | % | 7.14 | % | 6.53 | % | ||||||||||
Efficiency ratio (tax equivalent) | 68.46 | % | 68.54 | % | 71.48 | % | 69.56 | % | 69.17 | % | ||||||||||
Period end | ||||||||||||||||||||
Total assets | $ | 4,903,049 | $ | 4,789,413 | $ | 4,815,432 | $ | 4,785,945 | $ | 4,755,832 | ||||||||||
Covered assets, net | $ | 445,797 | $ | 482,073 | $ | 526,043 | $ | 560,055 | $ | 595,640 | ||||||||||
Loans, excluding covered loans, net | $ | 2,476,844 | $ | 2,436,961 | $ | 2,371,818 | $ | 2,348,371 | $ | 2,257,899 | ||||||||||
Allowance for noncovered loan and lease losses | $ | 51,527 | $ | 52,196 | $ | 52,283 | $ | 53,041 | $ | 50,422 | ||||||||||
Securities | $ | 965,641 | $ | 1,019,978 | $ | 1,021,428 | $ | 1,050,325 | $ | 1,018,069 | ||||||||||
Deposits | $ | 3,938,855 | $ | 3,830,817 | $ | 3,865,445 | $ | 3,815,529 | $ | 3,795,499 | ||||||||||
Core deposits | $ | 3,685,844 | $ | 3,568,307 | $ | 3,591,663 | $ | 3,510,435 | $ | 3,464,705 | ||||||||||
Shareholders' equity | $ | 761,977 | $ | 758,712 | $ | 752,703 | $ | 759,338 | $ | 749,966 | ||||||||||
Nonperforming, noncovered assets | ||||||||||||||||||||
Nonaccrual loans | $ | 41,589 | $ | 49,465 | $ | 57,552 | $ | 53,483 | $ | 55,183 | ||||||||||
OREO and OPPO | 11,749 | 17,608 | 21,571 | 31,905 | 34,069 | |||||||||||||||
Total nonperforming, noncovered assets | $ | 53,338 | $ | 67,073 | $ | 79,123 | $ | 85,388 | $ | 89,252 | ||||||||||
Nonperforming assets to period-end noncovered loans + OREO and OPPO | 2.14 | % | 2.73 | % | 3.31 | % | 3.59 | % | 3.89 | % | ||||||||||
Nonperforming loans to period-end noncovered loans | 1.68 | % | 2.03 | % | 2.43 | % | 2.28 | % | 2.44 | % | ||||||||||
Nonperforming assets to period-end noncovered assets | 1.20 | % | 1.56 | % | 1.84 | % | 2.02 | % | 2.15 | % | ||||||||||
Allowance for loan and lease losses to period-end noncovered loans | 2.08 | % | 2.14 | % | 2.20 | % | 2.26 | % | 2.23 | % | ||||||||||
Allowance for loan and lease losses to nonperforming noncovered loans | 123.90 | % | 105.52 | % | 90.84 | % | 99.17 | % | 91.37 | % | ||||||||||
Net noncovered loan charge-offs | $ | 3,544 | $ | 3,836 | $ | 5,258 | $ | 2,131 | $ | 4,135 | ||||||||||
13
CONSOLIDATED STATEMENTS OF INCOME | ||||||||||||||||
Columbia Banking System, Inc. | Three Months Ended | Nine Months Ended | ||||||||||||||
Unaudited | September 30, | September 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands except per share) | ||||||||||||||||
Interest Income | ||||||||||||||||
Loans | $ | 52,600 | $ | 59,655 | $ | 168,875 | $ | 151,446 | ||||||||
Taxable securities | 4,218 | 6,037 | 14,414 | 16,701 | ||||||||||||
Tax-exempt securities | 2,422 | 2,500 | 7,442 | 7,483 | ||||||||||||
Federal funds sold and deposits in banks | 229 | 240 | 564 | 722 | ||||||||||||
Total interest income | 59,469 | 68,432 | 191,295 | 176,352 | ||||||||||||
Interest Expense | ||||||||||||||||
Deposits | 1,339 | 2,642 | 4,679 | 8,569 | ||||||||||||
Federal Home Loan Bank advances | 745 | 807 | 2,229 | 2,215 | ||||||||||||
Long-term obligations | — | 75 | — | 579 | ||||||||||||
Other borrowings | 120 | 120 | 358 | 377 | ||||||||||||
Total interest expense | 2,204 | 3,644 | 7,266 | 11,740 | ||||||||||||
Net Interest Income | 57,265 | 64,788 | 184,029 | 164,612 | ||||||||||||
Provision for loan and lease losses | 2,875 | 500 | 11,125 | 2,650 | ||||||||||||
Provision (recapture) for losses on covered loans, net | (3,992 | ) | 433 | 23,381 | 2,312 | |||||||||||
Net interest income after provision (recapture) for loan and lease losses | 58,382 | 63,855 | 149,523 | 159,650 | ||||||||||||
Noninterest Income (Loss) | ||||||||||||||||
Service charges and other fees | 7,609 | 6,991 | 22,222 | 19,746 | ||||||||||||
Gain on bank acquisitions, net of tax | — | 1,830 | — | 1,830 | ||||||||||||
Merchant services fees | 2,054 | 1,952 | 6,167 | 5,393 | ||||||||||||
Gain on sale of investment securities, net | — | — | 62 | — | ||||||||||||
Bank owned life insurance | 747 | 523 | 2,177 | 1,556 | ||||||||||||
Change in FDIC loss-sharing asset | (12,951 | ) | (10,855 | ) | (14,787 | ) | (32,048 | ) | ||||||||
Other | 1,630 | 1,755 | 4,650 | 3,842 | ||||||||||||
Total noninterest income (loss) | (911 | ) | 2,196 | 20,491 | 319 | |||||||||||
Noninterest Expense | ||||||||||||||||
Compensation and employee benefits | 21,523 | 21,392 | 64,484 | 59,772 | ||||||||||||
Occupancy | 4,886 | 4,815 | 15,310 | 13,600 | ||||||||||||
Merchant processing | 921 | 976 | 2,724 | 2,764 | ||||||||||||
Advertising and promotion | 1,341 | 1,137 | 3,342 | 3,050 | ||||||||||||
Data processing and communications | 2,499 | 2,195 | 7,263 | 6,032 | ||||||||||||
Legal and professional fees | 2,783 | 1,957 | 6,221 | 4,868 | ||||||||||||
Taxes, licenses and fees | 1,124 | 1,211 | 3,594 | 2,983 | ||||||||||||
Regulatory premiums | 775 | 574 | 2,560 | 3,553 | ||||||||||||
Net benefit of operation of other real estate | (1,069 | ) | (195 | ) | (536 | ) | (423 | ) | ||||||||
Amortization of intangibles | 1,093 | 1,177 | 3,362 | 3,116 | ||||||||||||
FDIC clawback liability | 334 | 1,146 | 100 | 3,294 | ||||||||||||
Other | 4,726 | 3,550 | 16,689 | 11,836 | ||||||||||||
Total noninterest expense | 40,936 | 39,935 | 125,113 | 114,445 | ||||||||||||
Income before income taxes | 16,535 | 26,116 | 44,901 | 45,524 | ||||||||||||
Provision for income taxes | 4,655 | 7,244 | 12,220 | 12,241 | ||||||||||||
Net Income | $ | 11,880 | $ | 18,872 | $ | 32,681 | $ | 33,283 | ||||||||
Earnings per common share | ||||||||||||||||
Basic | $ | 0.30 | $ | 0.48 | $ | 0.82 | $ | 0.84 | ||||||||
Diluted | $ | 0.30 | $ | 0.48 | $ | 0.82 | $ | 0.84 | ||||||||
Dividends paid per common share | $ | 0.30 | $ | 0.06 | $ | 0.89 | $ | 0.14 | ||||||||
Weighted average number of common shares outstanding | 39,289 | 39,131 | 39,248 | 39,092 | ||||||||||||
Weighted average number of diluted common shares outstanding | 39,291 | 39,192 | 39,251 | 39,167 | ||||||||||||
14
CONSOLIDATED BALANCE SHEETS | |||||||||||||
Columbia Banking System, Inc. | |||||||||||||
Unaudited | September 30, | December 31, | |||||||||||
2012 | 2011 | ||||||||||||
(in thousands) | |||||||||||||
ASSETS | |||||||||||||
Cash and due from banks | $ | 98,979 | $ | 91,364 | |||||||||
Interest-earning deposits with banks and federal funds sold | 463,613 | 202,925 | |||||||||||
Total cash and cash equivalents | 562,592 | 294,289 | |||||||||||
Securities available for sale at fair value (amortized cost of $898,434 and $987,560, respectively) | 943,624 | 1,028,110 | |||||||||||
Federal Home Loan Bank stock at cost | 22,017 | 22,215 | |||||||||||
Loans held for sale | 3,600 | 2,148 | |||||||||||
Loans, excluding covered loans, net of unearned income of ($11,523) and ($16,217), respectively | 2,476,844 | 2,348,371 | |||||||||||
Less: allowance for loan and lease losses | 51,527 | 53,041 | |||||||||||
Loans, excluding covered loans, net | 2,425,317 | 2,295,330 | |||||||||||
Covered loans, net of allowance for loan losses of ($29,157) and ($4,944), respectively | 429,286 | 531,929 | |||||||||||
Total loans, net | 2,854,603 | 2,827,259 | |||||||||||
FDIC loss-sharing asset | 111,677 | 175,071 | |||||||||||
Interest receivable | 16,587 | 15,287 | |||||||||||
Premises and equipment, net | 115,506 | 107,899 | |||||||||||
Other real estate owned ($16,511 and $28,126 covered by Federal Deposit Insurance Corporation loss-share, respectively) | 27,386 | 51,019 | |||||||||||
Goodwill | 115,554 | 115,554 | |||||||||||
Core deposit intangible, net | 16,803 | 20,166 | |||||||||||
Other assets | 113,100 | 126,928 | |||||||||||
Total assets | $ | 4,903,049 | $ | 4,785,945 | |||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||
Deposits: | |||||||||||||
Noninterest-bearing | $ | 1,270,321 | $ | 1,156,610 | |||||||||
Interest-bearing | 2,668,534 | 2,658,919 | |||||||||||
Total deposits | 3,938,855 | 3,815,529 | |||||||||||
Federal Home Loan Bank advances | 113,080 | 119,009 | |||||||||||
Securities sold under agreements to repurchase | 25,000 | 25,000 | |||||||||||
Other liabilities | 64,137 | 67,069 | |||||||||||
Total liabilities | 4,141,072 | 4,026,607 | |||||||||||
Commitments and contingent liabilities | |||||||||||||
September 30, | December 31, | ||||||||||||
2012 | 2011 | ||||||||||||
Common stock (no par value) | |||||||||||||
Authorized shares | 63,033 | 63,033 | |||||||||||
Issued and outstanding | 39,689 | 39,506 | 581,001 | 579,136 | |||||||||
Retained earnings | 152,498 | 155,069 | |||||||||||
Accumulated other comprehensive income | 28,478 | 25,133 | |||||||||||
Total shareholders' equity | 761,977 | 759,338 | |||||||||||
Total liabilities and shareholders' equity | $ | 4,903,049 | $ | 4,785,945 | |||||||||
15