For more information, contact

 

Robert D. Sznewajs

President & CEO

(503) 598-3243

 

Anders Giltvedt

Executive Vice President & CFO

(503) 598-3250

 

West Coast Bancorp Reports Net Income of $5.7 Million for Fourth Quarter 2012 and $23.5 million for Full Year 2012

 

·

Net income for the fourth quarter 2012 was $5.7 million or $0.26 per diluted share and $6.5 million or $0.30 per diluted share excluding after-tax merger-related expenses*.

 

·

Fourth quarter 2012 return on average assets was .93% or 1.05% excluding after-tax merger-related expenses*.

 

·

Fourth quarter 2012 efficiency ratio, excluding merger-related expenses*, improved to 65.8% from 93.0% in the same quarter in 2011.

 

·

Full year 2012 pretax income was $35.8 million or $37.5 million excluding merger-related expenses*, which represented an increase of $24.0 million from $13.6 million in 2011.

 

·

On December 11, 2012, the Company declared a cash dividend of $.05 per common share, payable on January 31, 2013, to shareholders of record as of January 10, 2013, with Series B preferred shares participating on an as-converted basis.

 

·

On September 26, 2012, the Company announced an Agreement and Plan of Merger with Columbia Banking System, Inc. (“Columbia’), headquartered in Tacoma, Washington, with assets of $4.9 billion at December 31, 2012. The merger, for which the consideration consists of a combination of cash and Columbia common stock, is subject to customary closing conditions, including receipt of requisite shareholder and regulatory approvals.

 

Lake Oswego, OR – January 24, 2013 – West Coast Bancorp (NASDAQ: WCBO) (“Bancorp” or “Company”), the parent company of West Coast Bank (“Bank”) and West Coast Trust Company, Inc., today announced fourth quarter 2012 net income of $5.7 million or $0.26 per diluted share compared to net income of $17.8 million or $0.83 per diluted share in the fourth quarter of 2011. Fourth quarter 2011 net income reflected the impact from a reversal of a deferred tax asset valuation allowance. Net income for the full year 2012 was $23.5 million or $1.08 per diluted share compared to net income of $33.8 million or $1.58 per diluted share for the full year 2011.

 

*This press release contains certain non-generally accepted accounting principles in the United States of America (“GAAP”) financial measures. Table 1 below shows the reconciliation of net income, pretax income, and noninterest expense to the related non-GAAP measures calculated after excluding the effects of merger-related expenses for the quarters ended December 31, 2012, and 2011, and the full years ended December 31, 2012 and 2011. Management uses this non-GAAP information internally and has disclosed it to investors based on its belief that the information provides additional, valuable information relating to its operating performance as compared to prior periods.

  

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 2 of 17

  

“I am very pleased with the operating performance of the Company in 2012, especially with the progress achieved in the areas of credit quality, expense management, and new loan originations,” said Robert D. Sznewajs, President and Chief Executive Officer. “Over the past year our people have worked hard to attain this level of operating results which compares very favorably with our industry peers. The new organization after the merger with Columbia Bank will be well positioned to successfully compete in the Pacific Northwest for many years to come.”

 

Table 1 below shows the reconciliation of net income, pretax income, and noninterest expense to the related non-GAAP measures calculated after excluding the effects of merger-related expenses for the quarters ended December 31, 2012, and 2011, and the full years ended December 31, 2012, and 2011. Merger-related expenses were $1.2 million and $1.8 million for the fourth quarter and full year 2012, respectively.

 

Table 1
Reconciliation of Net Income, Pretax Income and Noninterest Expense to Non-GAAP financial measures
(Dollars in thousands)		Q4				Q4				Change				Full year				Full year				Change
		2012				2011				$				12/31/2012				12/31/2011				$
Net income		$	5,739			$	17,762			$	(12,023	)		$	23,506			$	33,777			$	(10,271	)
Merger-related expenses			1,194				-				1,194				1,772				-				1,772
Less: tax benefit from merger-related expenses (1)			417				-				417				620				-				620
After-tax merger-related expenses			777				-				777				1,152				-				1,152
Net income excluding after-tax merger-related expenses (2,3)		$	6,516			$	17,762			$	(11,246	)		$	24,658			$	33,777			$	(9,119	)
Pretax income		$	8,419			$	116			$	8,303			$	35,753			$	13,565			$	22,188
Merger-related expenses			1,194				-				1,194				1,772				-				1,772
Pretax income excluding merger-related expenses		$	9,613			$	116			$	9,497			$	37,525			$	13,565			$	23,960
Noninterest expense		$	20,277			$	22,744			$	(2,467	)		$	84,085			$	90,875			$	(6,790	)
Merger-related expenses			1,194				-				1,194				1,772				-				1,772
Noninterest expense excluding merger-related expenses (3, 4)		$	19,083			$	22,744			$	(3,661	)		$	82,313			$	90,875			$	(8,562	)

  

(1)

Tax rate assumed to be 35%.

(2)

Net income excluding merger-related expenses is GAAP net income adjusted for the after-tax impact of merger-related expenses.

(3)

Management uses this non-GAAP information internally and has disclosed it to investors based on its belief that the information provides additional, valuable information relating to the Company's operating performance as compared to prior periods.

(4)

Noninterest expense excluding merger-related expenses is used to calculate the efficiency ratio excluding merger expenses.

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 3 of 17

 

Table 2 below shows summary financial information for the quarters ended December 31, 2012, and 2011, and September 30, 2012.

 

Table 2
SUMMARY FINANCIAL INFORMATION
		Qtr. ended				Qtr. ended								Qtr. ended
		Dec. 31,				Dec. 31,								Sept. 30,
(Dollars and shares in thousands)		2012				2011				Change				2012				Change
Net income and performance ratios excluding after-tax merger-related expenses 1
Net income		$	6,516			$	17,762			$	(11,246	)		$	6,320			$	196
Net income per diluted share		$	0.30			$	0.83			$	(0.53	)		$	0.29			$	0.01
Return on average assets, annualized			1.05	%			2.88	%			(1.83	)			1.03	%			0.02
Return on average equity, annualized			7.67	%			23.68	%			(16.01	)			7.59	%			0.08
Efficiency ratio2			65.77	%			93.02	%			(27.25	)			68.75	%			(2.98	)
Net income and performance ratios
Net income		$	5,739			$	17,762			$	(12,023	)		$	5,944			$	(205	)
Net income available to common stockholders 3		$	5,369			$	16,532			$	(11,163	)		$	5,559			$	(190	)
Net income per diluted share		$	0.26			$	0.83			$	(0.57	)		$	0.27			$	(0.01	)
Book value per common share		$	16.49			$	15.20			$	1.29			$	16.32			$	0.17
Return on average assets, annualized			0.93	%			2.88	%			(1.95	)			0.97	%			(0.04	)
Return on average equity, annualized			6.76	%			23.68	%			(16.92	)			7.14	%			(0.38	)
Efficiency ratio2			69.89	%			93.02	%			(23.13	)			70.66	%			(0.77	)
Share and per share figures
Common shares outstanding at period end			19,293				19,298				(5	)			19,290				3
Weighted average diluted shares4			21,727				21,175				552				21,598				129
Weighted average diluted shares-two class method 5			20,450				19,911				539				20,344				106

 

1

These measurements exclude the after-tax impact of $.8 million of merger-related expenses; see Table 1 for a reconciliation of net income and noninterest expense to nongaap financial measures.

2

The efficiency ratio has been computed as noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains/losses on sales of securities.

3

Adjusted for the impact of allocating net income to participating instruments, which include restricted stock and Series B preferred stock.

4

Reflects the average dilutive impacts of Series B preferred stock (1,213), warrants (1,310), options (27), and restricted stock (64).

5

Reflects the calculation of diluted shares under the two-class method which includes average common (19,113), options (27), and warrants (1,310).

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 4 of 17

  

Balance Sheet Overview

Fourth quarter 2012 total average loan balance of $1.48 billion declined $10 million or 1% from the preceding quarter, with declines primarily in commercial and real estate mortgage categories more than offsetting growth in commercial real estate balances. The main driver of the decline in commercial loan balances can be attributed to line utilization declining to 34% from 39% linked-quarters. Total average loans also declined 1% year over year with a decline in commercial and real estate mortgage categories being offset by growth in commercial real estate and real estate construction categories.

 

The yield on total average loan portfolio of 4.97% in the fourth quarter of 2012 declined 22 basis points from the corresponding quarter in 2011 and stayed substantially unchanged from the previous quarter. Past periods’ trend of higher yielding loans in the portfolio paying off or being refinanced at lower yields combined with new loan originations at current market rates continues to drive the yield on the total portfolio lower as compared to the prior year.

 

Table 3
AVERAGE LOANS FOR THE QUARTER
(Dollars in thousands)		Dec. 31,				% of				Dec. 31,				% of				Change								Sept. 30,				% of
		2012				Total				2011				total				Amount				%				2012				Total
Commercial loans		$	262,773				17	%		$	293,583				20	%		$	(30,810	)			-10	%		$	287,706				19	%
Commercial real estate construction			33,534				2	%			14,730				1	%			18,804				128	%			37,838				3	%
Residential real estate construction			8,304				1	%			13,613				1	%			(5,309	)			-39	%			9,497				1	%
Total real estate construction loans			41,838				3	%			28,343				2	%			13,495				48	%			47,335				4	%
Mortgage			55,980				4	%			67,579				5	%			(11,599	)			-17	%			58,393				4	%
Home equity			238,462				16	%			260,849				17	%			(22,387	)			-9	%			246,330				16	%
Total real estate mortgage			294,442				20	%			328,428				22	%			(33,986	)			-10	%			304,723				20	%
Commercial real estate loans			872,639				59	%			834,362				55	%			38,277				5	%			841,098				56	%
Installment and other consumer loans			11,918				1	%			13,721				1	%			(1,803	)			-13	%			12,592				1	%
Total loans		$	1,483,610							$	1,498,437							$	(14,827	)			-1	%		$	1,493,454
Yield on loans			4.97	%							5.19	%							(0.22	)							4.98	%

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013 

Page 5 of 17

 

The Company’s investment portfolio continues to have an unfavorable impact on its net interest margin. During 2012, the Company increased its investments in municipal securities while reducing its U.S. government agency securities portfolio. During this time, municipal securities purchases consisted principally of Oregon and Washington school district securities with State guarantees and fully amortizing mortgage-backed securities. The expected duration of the investment portfolio was approximately 3.0 years at December 31, 2012, compared to approximately 2.5 years twelve months earlier.

 

The fourth quarter 2012 tax equivalent yield on total cash and investment securities balances was 1.99%, a decline of 25 basis points from the same quarter in 2011, and a decline of 13 basis points on a linked-quarter basis.

 

Table 4
AVERAGE CASH EQUIVALENTS AND INVESTMENT SECURITIES FOR THE QUARTER
(Dollars in thousands)		Dec. 31,				Dec. 31,				Change								Sept. 30,
		2012				2011				Amount				%				2012
Cash equivalents:
Federal funds sold		$	2,724			$	3,184			$	(460	)			-14	%		$	2,558
Interest-bearing deposits in other banks			47,523				20,530				26,993				131	%			47,242
Total cash equivalents			50,247				23,714				26,533				112	%			49,800
Investment securities:
U.S. Treasury securities			200				204				(4	)			-2	%			200
U.S. Government agency securities			240,134				254,030				(13,896	)			-5	%			217,051
Corporate securities			9,020				8,854				166				2	%			8,385
Mortgage-backed securities			445,488				445,422				66				0	%			447,756
Obligations of state and political sub.			81,329				62,712				18,617				30	%			75,717
Equity investments and other securities			11,825				12,726				(901	)			-7	%			11,897
Total investment securities			787,996				783,948				4,048				1	%			761,006
Total cash equivalents and investment securities		$	838,243			$	807,662			$	30,581				4	%		$	810,806
Tax equivalent yield on cash equivalents and investment securities (1)			1.99	%			2.24	%			(0.25	)							2.12	%

 

⁽¹⁾ Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 6 of 17

  

Average total deposits of $1.92 billion in the fourth quarter 2012 stayed essentially unchanged from the previous quarter, as the continued growth in non-interest bearing demand deposits offset declines in money market and time deposit balances. Time deposits represented 7% of the Company’s average total deposits in the most recent quarter, a reduction from 9% during the final quarter of 2011. Year-over-year fourth quarter average total deposit balances declined $19 million or 1%, with average money market and time deposit balances declining $63 million and $47 million, respectively. Substantially offsetting these declines, non-interest bearing demand and savings deposits grew $81 million and $19 million, respectively, over the same period.

 

Table 5
AVERAGE DEPOSITS, BORROWINGS AND SUBORDINATED DEBENTURES FOR THE QUARTER
(Dollars in thousands)		Q4				% of				Q4				% of				Change								Q3				% of
		2012				Total				2011				Total				Amount				%				2012				Total
Demand deposits		$	703,402				37	%		$	622,741				33	%		$	80,661				13	%		$	677,646				36	%
Interest-bearing demand			366,413				19	%			375,922				19	%			(9,509	)			-3	%			365,560				19	%
Total checking deposits			1,069,815				56	%			998,663				52	%			71,152				7	%			1,043,206				55	%
Savings			136,866				7	%			117,619				6	%			19,247				16	%			132,839				7	%
Money market			577,358				30	%			640,247				33	%			(62,889	)			-10	%			592,363				31	%
Total non-time deposits			1,784,039				93	%			1,756,529				91	%			27,510				2	%			1,768,408				93	%
Time deposits			132,447				7	%			179,288				9	%			(46,841	)			-26	%			140,151				7	%
Total deposits		$	1,916,486				100	%		$	1,935,817				100	%		$	(19,331	)			-1	%		$	1,908,559				100	%
Average rate on total deposits			0.07	%							0.14	%							(0.07	)							0.08	%
Average borrowings and subordinated debentures		$	178,900							$	189,635							$	(10,735	)			-6	%		$	179,063
Rate on borrowings and subordinated debentures			1.43	%							11.07	%							(9.64	)							1.45	%

 

Fourth quarter 2012 average total checking deposit balance of $1.07 billion grew $71 million or 7% from the corresponding quarter in 2011 and represented 56% of the Company’s average total deposits in the quarter. Lower market interest rates and a continuing shift in the mix from time deposits to non-time deposits over the past year reduced the average rate paid on total deposits to 7 basis points in the most recent quarter, representing a decline of 7 basis points from the same quarter in 2011.

 

Capital Position and Shareholder Cash Dividend

As shown in Table 6 below, the December 31, 2012, capital position improved from year end 2011. The Company declared a shareholder dividend of $0.05 per share on December 11, 2012. The dividend will be payable on January 31, 2013, to shareholders of record on January 10, 2013.

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 7 of 17

  

Table 6
CAPITAL RATIOS
		Dec. 31,				Dec. 31,								Sept. 30,
		2012				2011				Change				2012				Change
West Coast Bancorp
Tier 1 risk-based capital ratio			20.66	%			19.36	%			1.30				20.45	%			0.21
Total risk-based capital ratio			21.83	%			20.62	%			1.21				21.62	%			0.21
Leverage ratio			15.60	%			14.61	%			0.99				15.48	%			0.12
West Coast Bank
Tier 1 risk-based capital ratio			19.95	%			18.66	%			1.29				19.80	%			0.15
Total risk-based capital ratio			21.20	%			19.92	%			1.28				21.06	%			0.14
Leverage ratio			15.07	%			14.09	%			0.98				15.00	%			0.07

 

Operating Results

 

As shown in Table 7 below, pretax income, excluding merger-related expenses, in the fourth quarter of 2012 was $9.6 million compared to pre-tax income of $0.1 million in the final quarter last year. The improvement was driven by higher net interest and noninterest income, with significant reductions in noninterest expense and the provision for credit losses in the most recent quarter. Net interest income in the fourth quarter of 2011 was reduced by a $4.4 million charge in conjunction with prepayments of Federal Home Loan Bank (“FHLB”) term borrowings. For sequential quarters, pretax income, excluding merger-related expenses, declined modestly due to a benefit for credit losses in the third quarter of 2011 and lower net interest and noninterest income in the most recent quarter. Noninterest expense declined 8% linked quarters. Fourth quarter 2012 net income of $6.5 million, excluding merger-related expenses, declined from $17.8 million in the final quarter of 2011, when the Company fully reversed its deferred tax asset valuation allowance. See Table 1 for reconciliation of pretax income and net income non-GAAP financial measures.

 

Table 7
SUMMARY INCOME STATEMENT EXCLUDING MERGER-RELATED EXPENSES
(Dollars in thousands)		Q4				Q4				Change								Q3				Change
		2012				2011				$				%				2012				$				%
Net interest income		$	21,435			$	17,940			$	3,495				19	%		$	21,687			$	(252	)			-1	%
Provision (benefit) for credit losses			13				1,499				(1,486	)			-99	%			(593	)			606				102	%
Noninterest income			7,274				6,419				855				13	%			8,172				(898	)			-11	%
Noninterest expense excluding merger-related expenses			19,083				22,744				(3,661	)			-16	%			20,729				(1,646	)			-8	%
Income before income taxes excluding merger-related expenses			9,613				116				9,497				8187	%			9,723				(110	)			-1	%
Provision (benefit) for income taxes exluding the tax impact of merger-related expenses			3,097				(17,646	)			20,743				118	%			3,403				(306	)			-9	%
Net income excluding merger-related expenses		$	6,516			$	17,762			$	(11,246	)			-63	%		$	6,320			$	196				3	%

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 8 of 17

  

As shown in Table 8 below, adjusted for the prepayment charge in the corresponding quarter in 2011, the net interest margin of 3.72% declined 16 basis points year over year fourth quarter. The decline in the net interest margin was a result of declining yield on the investment and loan portfolios only partially offset by lower rates on interest bearing deposits and FHLB borrowings. The same factors reduced the net interest margin 8 basis points on a linked-quarter basis.

 

Table 8
NET INTEREST SPREAD AND MARGIN
(Annualized, tax-equivalent basis)		Q4				Q4								Q3
		2012				2011				Change				2012				Change
Yield on average interest-earning assets			3.89	%			4.16	%			(0.27	)			3.97	%			(0.08	)
Rate on average interest-bearing liabilities 1			0.28	%			1.58	%			(1.30	)			0.29	%			(0.01	)
Net interest spread			3.61	%			2.58	%			1.03				3.68	%			(0.07	)
Net interest margin			3.72	%			3.13	%			0.59				3.80	%			(0.08	)
Impact of FHLB prepayment premium in Q4 2011			-				-0.75	%			0.75				-				-
Net interest margin excluding FHLB prepayment premium			3.72	%			3.88	%			(0.16	)			3.80	%			(0.08	)

 

1

The fourth quarter 2011 rate on average interest-bearing liabilities includes 75 basis points of expense asociated with the prepayment of FHLB borrowings.

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 9 of 17

  

As shown in Table 9 below, fourth quarter 2012 total noninterest income of $7.3 million increased $0.9 million or 13% from the same quarter in 2011. The increase was principally attributed to a $1.2 million decrease in Other Real Estate Owned (“OREO”) valuation adjustments. On a linked-quarter basis, noninterest income declined $0.9 million with reductions across all major categories.

 

Table 9
NONINTEREST INCOME
(Dollars in thousands)		Q4				Q4				Change								Q3				Change
		2012				2011				$				%				2012				$				%
Noninterest income
Service charges on deposit accounts		$	2,769			$	3,005			$	(236	)			-8	%		$	3,017			$	(248	)			-8	%
Payment systems-related revenue			3,016				3,081				(65	)			-2	%			3,073				(57	)			-2	%
Trust and investment services revenues			1,077				1,114				(37	)			-3	%			1,231				(154	)			-13	%
Gains on sales of loans			346				300				46				15	%			492				(146	)			-30	%
Gains on sales of securities			-				192				(192	)			-100	%			-				-				0	%
Other-than-temporary impairment losses			-				-				-				0	%			-				-				0	%
Other			818				708				110				16	%			816				2				0	%
Total			8,026				8,400				(374	)			-4	%			8,629				(603	)			-7	%
OREO gains (losses) on sale			35				(57	)			92				161	%			29				6				21	%
OREO valuation adjustments			(787	)			(1,924	)			1,137				59	%			(486	)			(301	)			-62	%
Total net loss on OREO			(752	)			(1,981	)			1,229				62	%			(457	)			(295	)			-65	%
Total noninterest income		$	7,274			$	6,419			$	855				13	%		$	8,172			$	(898	)			-11	%

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 10 of 17

  

As shown in Table 10 below, the Company’s fourth quarter 2012 total noninterest expense was $20.3 million. Excluding merger-related expenses, total noninterest expense fell $3.6 million or 16% from the fourth quarter in 2011, which included $1 million in cost reduction related expenses. As a result of cost-savings initiatives implemented over the past eighteen months, expenses declined in all categories. On a linked-quarter basis, total noninterest expenses, excluding merger-related expenses, declined $1.6 million or 8%, with reductions across all categories except for occupancy expense. See Table 1 for reconciliation to GAAP measure. Fourth quarter 2012 merger-related expenses were comprised primarily of professional fees.

 

Table 10
NONINTEREST EXPENSE
(Dollars in thousands)		Q4				Q4				Change								Q3				Change
		2012				2011				$				%				2012				$				%
Noninterest expense
Salaries and employee benefits		$	10,685			$	12,614			$	(1,929	)			-15	%		$	11,499			$	(814	)			-7	%
Equipment			1,467				1,560				(93	)			-6	%			1,480				(13	)			-1	%
Occupancy			2,084				2,162				(78	)			-4	%			1,901				183				10	%
Payment systems-related expense			1,059				1,265				(206	)			-16	%			1,148				(89	)			-8	%
Professional fees			468				1,122				(654	)			-58	%			777				(309	)			-40	%
Postage, printing and office supplies			627				821				(194	)			-24	%			735				(108	)			-15	%
Marketing			498				659				(161	)			-24	%			520				(22	)			-4	%
Communications			394				395				(1	)			0	%			411				(17	)			-4	%
Other noninterest expense			1,801				2,146				(345	)			-16	%			2,258				(457	)			-20	%
Total noninterest expense excluding merger-related expenses		$	19,083			$	22,744			$	(3,661	)			-16	%		$	20,729			$	(1,646	)			-8	%
Merger-related expenses			1,194				-				1,194				0	%			578				616				107	%
Total noninterest expense		$	20,277			$	22,744			$	(2,467	)			-11	%		$	21,307			$	(1,030	)			-5	%

 

Income Taxes

 

In the fourth quarter of 2012, the provision for income taxes was $2.7 million compared to a benefit for income taxes of $17.6 million in the final quarter of 2011 when the Company fully reversed its deferred tax asset valuation. The fourth quarter 2012 provision for income taxes was the result of an effective tax rate of 34.3% on pretax income for the full year.

 

Credit Quality

 

The Company’s provision for credit losses was modest in the fourth quarter 2012 compared to a provision for credit losses of $1.5 million in the same quarter last year, and a benefit for credit losses of $0.6 million in the third quarter of 2012. Net charge-offs in the final quarter of 2012 were $2.0 million or .53% of average loans on an annualized basis, representing a decline from $2.5 million or .67% in the same quarter of 2011, and an increase from $1.0 million or .27% in the prior quarter. See Table 11 below for further details by loan category.

  

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 11 of 17

  

Table 11
ALLOWANCE FOR CREDIT LOSSES AND NET CHARGE-OFFS
						Charge-offs as								Charge-offs as								Charge-offs as
						a % of average								a % of average								a % of average
(Dollars in thousands)		Q4				loan balance				Q4				loan balance				Q3				loan balance
		2012				annualized				2011				annualized				2012				annualized
Allowance for credit losses, beginning of period		$	32,288							$	37,016							$	33,900
Total provision (benefit) for credit losses			13								1,499								(593	)
Loan net charge-offs:
Commercial			802				1.21	%			292				0.39	%			102				0.14	%
Commercial real estate construction			(2	)			-0.02	%			48				1.29	%			148				1.56	%
Residential real estate construction			350				16.77	%			140				4.08	%			(4	)			-0.17	%
Total real estate construction			348				3.31	%			188				2.63	%			144				1.21	%
Mortgage			119				0.85	%			177				1.04	%			101				0.69	%
Home equity			212				0.35	%			723				1.10	%			373				0.60	%
Total real estate mortgage			331				0.45	%			900				1.09	%			474				0.62	%
Commercial real estate			150				0.07	%			812				0.39	%			126				0.06	%
Installment and consumer			249				8.31	%			119				3.44	%			48				1.52	%
Overdraft			104				0.00	%			221				0.00	%			125				0.00	%
Total loan net charge-offs			1,984				0.53	%			2,532				0.67	%			1,019				0.27	%
Total allowance for credit losses		$	30,317							$	35,983							$	32,288
Components of allowance for credit losses:
Allowance for loan losses		$	29,448							$	35,212							$	31,457
Reserve for unfunded commitments			869								771								831
Total allowance for credit losses		$	30,317							$	35,983							$	32,288
Net loan charge-offs to average loans (annualized)			0.53	%							0.67	%							0.27	%
Allowance for loan losses to total loans			1.97	%							2.35	%							2.11	%
Allowance for credit losses to total loans			2.03	%							2.40	%							2.17	%
Allowance for loan losses to nonperforming loans			117	%							87	%							97	%
Allowance for credit losses to nonperforming loans			121	%							89	%							100	%

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 12 of 17

  

The allowance for credit losses was $30.3 million or 2.03% of total loans at December 31, 2012, compared to an allowance for credit losses of $36.0 million or 2.40% of total loans a year earlier, and $32.3 million or 2.17% at September 30, 2012. The decline in the allowance for credit losses and the allowance relative to total loans over both periods reflected the improving trend in the overall risk profile of the loan portfolio as evidenced by lower charge off activity and a positive risk rating migration within the loan portfolio. The year-end 2012 allowance for credit losses relative to nonperforming loans increased to 121% from 89% twelve months earlier. The Company’s estimate of the allowance for credit losses will continue to be closely correlated to the loan portfolio’s credit quality performance trends and the region’s economic conditions.

 

Total nonperforming assets at December 31, 2012, were $41.2 million or 1.66% of total assets, which represented a 42% reduction from $71.4 million or 2.94% of total assets a year ago, and a decline of 24% from $54.3 million or 2.19% of total assets at the end of the third quarter 2012.

 

December 31, 2012, total nonaccrual loans declined 38% to $25.1 million from $40.6 million a year earlier.

 

Table 12
NONPERFORMING ASSETS
(Dollars in thousands)		Dec. 31,				Sept. 30,				June 30,				Mar. 31,				Dec. 31,
		2012				2012				2012				2012				2011
Loans on nonaccrual status:
Commercial		$	4,313			$	6,643			$	6,199			$	6,482			$	7,750
Real estate construction:
Commercial real estate construction			-				1,650				3,750				3,749				3,750
Residential real estate construction			1,336				1,851				1,936				1,981				2,073
Total real estate construction			1,336				3,501				5,686				5,730				5,823
Real estate mortgage:
Mortgage			5,994				6,170				7,044				10,744				9,624
Home equity			3,782				2,845				2,239				2,528				2,325
Total real estate mortgage			9,776				9,015				9,283				13,272				11,949
Commercial real estate			9,659				13,248				12,384				16,648				15,070
Installment and consumer			-				-				-				1				5
Total nonaccrual loans			25,084				32,407				33,552				42,133				40,597
90 days past due not on nonaccrual			-				-				-				-				-
Total nonperforming loans			25,084				32,407				33,552				42,133				40,597
Other real estate owned, net			16,112				21,939				25,726				27,525				30,823
Total nonperforming assets		$	41,196			$	54,346			$	59,278			$	69,658			$	71,420
Nonperforming loans to total loans			1.68	%			2.17	%			2.24	%			2.86	%			2.70	%
Nonperforming assets to total assets			1.66	%			2.19	%			2.46	%			2.89	%			2.94	%
Total delinquent loans 30-89 days past due		$	2,662			$	2,963			$	3,422			$	4,095			$	4,273
Delinquent loans to total loans			0.18	%			0.20	%			0.23	%			0.28	%			0.28	%

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 13 of 17

  

As indicated in Table 13 below, during the most recent quarter the Company disposed of 27 OREO properties with a book value of $5.3 million and recorded OREO valuation adjustments totaling $0.8 million. As a result, the Company reduced its OREO balance by $5.8 million to $16.1 million at December 31, 2012, representing a 27% net reduction in total OREO during the quarter. The remaining OREO balance at quarter end reflected write-downs of 63% from original loan principal. Income-producing properties represented the largest balance in the OREO portfolio at December 31, 2012, followed by land and homes, substantially all of which are located within the Company’s footprint.

 

Table 13
OTHER REAL ESTATE OWNED ACTIVITY
(Dollars in thousands)		Q4 2012								Q4 2011								Q3 2012
		Amount				#				Amount				#				Amount				#
Beginning balance		$	21,939				218			$	30,234				308			$	25,726				244
Additions to OREO			259				1				9,241				15				487				3
Dispositions of OREO			(5,299	)			(27	)			(6,728	)			(59	)			(3,788	)			(29	)
OREO valuation adjustment			(787	)			-				(1,924	)			-				(486	)			-
Ending balance		$	16,112				192			$	30,823				264			$	21,939				218

 

Table 14
OTHER REAL ESTATE OWNED BY PROPERTY TYPE
		Dec. 31, 2012								Dec. 31, 2011								Sept. 30, 2012
(Dollars in thousands)						# of																# of
		Amount				properties				Amount				properties				Amount				properties
Income-producing properties		$	3,821				8			$	10,282				15			$	7,749				11
Land			3,575				12				5,049				16				4,104				13
Homes			2,927				12				6,008				17				3,518				14
Residential site developments			2,391				103				3,506				146				2,736				114
Multifamily			1,570				20				428				4				1,570				20
Lots			1,478				31				2,932				51				1,912				40
Commercial site developments			350				6				366				6				350				6
Condominiums			-				-				2,252				9				-				-
Total		$	16,112				192			$	30,823				264			$	21,939				218

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 14 of 17

  

Other

 

As announced on January 8, 2013, the Company will not hold a conference call in conjunction with today’s release of fourth quarter and full-year 2012 results due to the Company's previously announced Agreement and Plan of Merger with Columbia Banking System, Inc.

 

West Coast Bancorp is a publicly held, Northwest bank holding company headquartered in Oregon with $2.5 billion in assets, and the parent company of West Coast Bank and West Coast Trust Company, Inc. West Coast Bank operates 58 branches in Oregon and Washington. The Company serves clients who seek the resources, sophisticated products and expertise of larger financial institutions, along with the local decision-making, market knowledge, and customer service orientation of a community bank. The Company offers a broad range of banking, investment, fiduciary and trust services.  For more information, please visit the Company web site at www.wcb.com.

 

Forward Looking Statements

 

Statements in this release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and are made pursuant to the safe harbors of the PSLRA. These statements can often be identified by words such as "expects," "believes," “projects,” “anticipates,” or "will," or other words of similar meaning, and specifically include in this release all statements regarding the expected future benefits of our ongoing cost-cutting initiatives. Actual results could be quite different from those expressed or implied by the forward-looking statements, which give our current expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

 

A number of factors could cause results to differ significantly from our expectations, including, among others, the effects of (i) market conditions in our service areas on our efforts to continue to reduce our levels of nonperforming assets and increase loan originations, (ii) cost reduction initiatives, (iii) any failure to satisfy the conditions to our proposed merger with Columbia Banking System, Inc., including receipt of regulatory and shareholder approvals, and (iv) risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2011 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, including under the heading "Forward Looking Statement Disclosure" and in the section "Risk Factors” in each report.

 

 

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 15 of 17

  

Table 15
INCOME STATEMENT
(Dollars and shares in thousands)		Q4				Q4				Change								Q3				Full Year
		2012				2011				$				%				2012				2012				2011
Net interest income
Interest and fees on loans		$	18,525			$	19,647			$	(1,122	)			-6	%		$	18,706			$	75,139			$	80,237
Interest on investment securities			3,867				4,266				(399	)			-9	%			3,985				16,061				18,251
Other interest income			32				19				13				68	%			35				124				187
Total interest income			22,424				23,932				(1,508	)			-6	%			22,726				91,324				98,675
Interest expense on deposit accounts			346				702				(356	)			-51	%			385				1,739				4,973
Interest on borrowings and subordinated deb.			643				925				(282	)			-30	%			654				2,557				5,808
Borrowings prepayment charge			-				4,365				(4,365	)			-100	%			-				-				7,140
Total interest expense			989				5,992				(5,003	)			-83	%			1,039				4,296				17,921
Net interest income			21,435				17,940				3,495				19	%			21,687				87,028				80,754
Provision (benefit) for credit losses			13				1,499				(1,486	)			-99	%			(593	)			(983	)			8,133
Noninterest income
Service charges on deposit accounts			2,769				3,005				(236	)			-8	%			3,017				11,816				13,353
Payment systems-related revenue			3,016				3,081				(65	)			-2	%			3,073				12,246				12,381
Trust and investment services revenues			1,077				1,114				(37	)			-3	%			1,231				4,700				4,503
Gains on sales of loans			346				300				46				15	%			492				2,295				1,335
Net OREO valuation adjustments and gains (losses) on sales			(752	)			(1,981	)			1,229				62	%			(457	)			(2,813	)			(3,236	)
Other-than-temporary impairment losses			-				-				-				-				-				(49	)			(179	)
Gain on sales of securities			-				192				(192	)			-100	%			-				375				713
Other			818				708				110				16	%			816				3,257				2,949
Total noninterest income			7,274				6,419				855				13	%			8,172				31,827				31,819
Noninterest expense
Salaries and employee benefits			10,685				12,614				(1,929	)			-15	%			11,499				45,743				48,587
Equipment			1,467				1,560				(93	)			-6	%			1,480				6,193				6,113
Occupancy			2,084				2,162				(78	)			-4	%			1,901				8,179				8,674
Payment systems-related expense			1,059				1,265				(206	)			-16	%			1,148				4,401				5,141
Professional fees			468				1,122				(654	)			-58	%			777				3,416				4,118
Postage, printing and office supplies			627				821				(194	)			-24	%			735				2,910				3,265
Marketing			498				659				(161	)			-24	%			520				1,585				3,003
Communications			394				395	(1)							0	%			411				1,604				1,549
Merger-related expenses			1,194				-				1,194				0	%			578				1,772				-
Other noninterest expense			1,801				2,146				(345	)			-16	%			2,258				8,282				10,425
Total noninterest expense			20,277				22,744				(2,467	)			-11	%			21,307				84,085				90,875
Income before income taxes			8,419				116				8,303				7158	%			9,145				35,753				13,565
Provision (benefit) for income taxes			2,680				(17,646	)			20,326				115	%			3,201				12,247				(20,212	)
Net income		$	5,739			$	17,762			$	(12,023	)			-68	%		$	5,944			$	23,506			$	33,777
Net income per share:
Basic		$	0.28			$	0.87			$	(0.59	)						$	0.29			$	1.15			$	1.65
Diluted		$	0.26			$	0.83			$	(0.57	)						$	0.27			$	1.08			$	1.58
Weighted average common shares			19,113				19,032				81								19,110				19,086				19,007
Weighted average diluted shares			20,450				19,911				539								20,344				20,286				19,940
Tax equivalent net interest income		$	21,739			$	18,223			$	3,516							$	21,982			$	88,165			$	81,870
Return on average assets			0.93	%			2.88	%			-1.95	%							0.97	%			0.97	%			1.37	%
Return on average equity			6.76	%			23.68	%			-16.92	%							7.14	%			7.18	%			11.79	%

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 16 of 17

  

Table 16
BALANCE SHEETS
(Dollars in thousands)		Dec. 31,				Dec. 31,				Change								Sept. 30,
		2012				2011				$				%				2012
Assets:
Cash and due from banks		$	70,119			$	59,955			$	10,164				17	%		$	53,026
Federal funds sold			4,059				4,758				(699	)			-15	%			3,426
Interest-bearing deposits in other banks			63,433				27,514				35,919				131	%			44,883
Total cash and cash equivalents			137,611				92,227				45,384				49	%			101,335
Investment securities			772,109				729,844				42,265				6	%			792,657
Loans			1,494,929				1,501,301				(6,372	)			0	%			1,490,767
Allowance for loan losses			(29,448	)			(35,212	)			5,764				16	%			(31,457	)
Loans, net			1,465,481				1,466,089				(608	)			0	%			1,459,310
Total interest-earning assets			2,334,530				2,267,446				67,084				3	%			2,331,733
OREO, net			16,112				30,823				(14,711	)			-48	%			21,939
Other assets			96,867				110,904				(14,037	)			-13	%			100,739
Total assets		$	2,488,180			$	2,429,887			$	58,293				2	%		$	2,475,980
Liabilities and Stockholders' Equity:
Demand		$	712,285			$	621,962			$	90,323				15	%		$	704,810
Savings and interest-bearing demand			524,031				495,117				28,914				6	%			499,934
Money market			569,043				625,373				(56,330	)			-9	%			588,635
Time deposits			130,641				173,117				(42,476	)			-25	%			135,913
Total deposits			1,936,000				1,915,569				20,431				1	%			1,929,292
Borrowings and subordinated debentures			178,900				171,000				7,900				5	%			178,900
Reserve for unfunded commitments			869				771				98				13	%			831
Other liabilities			33,191				28,068				5,123				18	%			30,961
Total liabilities			2,148,960				2,115,408				33,552				2	%			2,139,984
Stockholders' equity			339,220				314,479				24,741				8	%			335,996
Total liabilities and stockholders' equity		$	2,488,180			$	2,429,887			$	58,293				2	%		$	2,475,980

 

  

WEST COAST BANCORP REPORTS FOURTH QUARTER 2012 RESULTS

January 24, 2013

Page 17 of 17

 

Table 17
PERIOD END LOANS
(Dollars in thousands)		Dec. 31,				% of				Dec. 31,				% of				Change								Sept. 30,				% of
		2012				Total				2011				total				Amount				%				2012				Total
Commercial loans		$	259,333				17	%		$	299,766				20	%		$	(40,433	)			-13	%		$	286,134				19	%
Commercial real estate construction			25,191				2	%			17,438				1	%			7,753				44	%			39,100				3	%
Residential real estate construction			7,792				1	%			12,724				1	%			(4,932	)			-39	%			8,306				1	%
Total real estate construction loans			32,983				3	%			30,162				2	%			2,821				9	%			47,406				4	%
Mortgage			54,960				4	%			66,610				5	%			(11,650	)			-17	%			56,548				4	%
Home equity			233,516				16	%			258,384				17	%			(24,868	)			-10	%			244,683				16	%
Total real estate mortgage			288,476				20	%			324,994				22	%			(36,518	)			-11	%			301,231				20	%
Commercial real estate loans			901,817				59	%			832,767				55	%			69,050				8	%			843,836				56	%
Installment and other consumer loans			12,320				1	%			13,612				1	%			(1,292	)			-9	%			12,160				1	%
Total loans		$	1,494,929							$	1,501,301							$	(6,372	)			0	%		$	1,490,767

 

Table 18
AVERAGE BALANCE SHEETS
(Dollars in thousands)		Q4				Q4				Q3				Year to date
		2012				2011				2012				2012				2011
Cash and due from banks		$	53,144			$	53,829			$	51,697			$	51,435			$	52,258
Federal funds sold			2,724				3,184				2,558				2,610				3,796
Interest-bearing deposits in other banks			47,523				20,530				47,242				43,859				67,332
Total cash and cash equivalents			103,391				77,543				101,497				97,904				123,386
Investment securities			787,996				783,948				761,006				746,233				734,893
Total loans			1,483,610				1,498,437				1,493,454				1,484,724				1,516,409
Allowance for loan losses			(30,670	)			(36,101	)			(32,794	)			(33,096	)			(38,456	)
Loans, net			1,452,940				1,462,336				1,460,660				1,451,628				1,477,953
Total interest earning assets			2,321,854				2,309,396				2,304,261				2,277,955				2,324,016
Other assets			114,143				122,493				118,879				122,863				124,562
Total assets		$	2,458,470			$	2,446,320			$	2,442,042			$	2,418,628			$	2,460,794
Demand		$	703,402			$	622,741			$	677,646			$	647,323			$	592,630
Savings and interest-bearing demand			503,280				493,541				498,399				498,649				474,719
Money market			577,358				640,247				592,363				597,376				654,329
Time deposits			132,446				179,288				140,151				147,713				217,149
Total deposits			1,916,486				1,935,817				1,908,559				1,891,061				1,938,827
Borrowings and subordinated debentures			178,900				189,635				179,063				176,939				212,237
Total interest bearing liabilities			1,391,984				1,502,711				1,409,976				1,420,677				1,558,434
Other liabilities			25,162				23,245				23,063				23,108				23,332
Stockholders' equity			337,922				297,623				331,357				327,520				286,398
Total liabilities and stockholders' equity		$	2,458,470			$	2,446,320			$	2,442,042			$	2,418,628			$	2,460,794