COLUMBIA BANKING SYSTEM, INC. TACOMA, Wash., Jan. 29, 2015 /PRNewswire/ -- Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB) ("Columbia") said today upon the release of Columbia's fourth quarter 2014 earnings, "We continued to build on the momentum created by our recent acquisitions and the outstanding efforts of our bankers whose activities resulted in record-setting full year earnings and loan production for the quarter and year." Ms. Dressel continued, "Our entire team also worked hard preparing for and closing the Intermountain Community Bancorp acquisition which we announced during the third quarter."
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Significant Influences on the Quarter Ended December 31, 2014
Our reported net income for the current quarter was impacted by $5.4 million, or $0.10 per diluted share, in acquisition and accounting related items. Specifically, on a pre-tax basis, these items consisted of $4.6 million in acquisition-related expenses, $948 thousand of impact from FDIC loan accounting, and $2.8 million in provision for loan and lease losses related to the establishment of an allowance for loans acquired in the Intermountain transaction.
As the Intermountain transaction also impacted comparability of our balance sheet to prior periods, the table below is provided to summarize the amounts recognized as of the transaction date for each major class of assets acquired and liabilities assumed:
November 1, 2014
----------------
(in thousands)
Purchase price as of November 1,
2014 $131,935
Recognized amounts of identifiable
assets acquired and (liabilities
assumed), at fair value:
Cash and cash equivalents $47,283
Investment securities 299,458
Federal Home Loan Bank stock 2,124
Acquired loans 502,595
Interest receivable 4,656
Premises and equipment 20,696
Other real estate owned 2,752
Core deposit intangible 10,900
Other assets 35,353
Deposits (736,795)
Other borrowings (22,904)
Securities sold under agreements to
repurchase (59,043)
Other liabilities (13,725)
-------
Total fair value of identifiable net
assets 93,350
------
Goodwill $38,585
=======
Balance Sheet
Loans were $5.45 billion at December 31, 2014, up $622.4 million, or 13% from $4.82 billion at September 30, 2014. The increase in loans was driven by the acquisition of Intermountain as well as strong organic loan growth of approximately $120 million during the current quarter. Securities were $2.13 billion at December 31, 2014, an increase of $488.6 million, or 30% from $1.64 billion at September 30, 2014, again, primarily due to the acquisition of Intermountain. Compared to the prior year end period, loans increased $928.1 million, or 21%, during 2014. The growth during the year was comprised of $502.6 million acquired with Intermountain and $425.5 million of organic growth.
Total deposits at December 31, 2014 were $6.92 billion, an increase of $680.3 million, or 11% from $6.24 billion at September 30, 2014 due to the acquisition of Intermountain. Core deposits comprised 96% of total deposits and were $6.62 billion at December 31, 2014. The average rate on interest bearing deposits for the quarter was 0.08% compared to 0.07% for the third quarter of 2014. The slight uptick is attributed to the deposits obtained in the Intermountain acquisition.
Asset Quality
At December 31, 2014, nonperforming assets to total assets were 0.62% or $53.6 million, compared to 0.67%, or $49.9 million, at September 30, 2014. The $3.7 million increase was due to $5.2 million in nonperforming assets established through the Intermountain transaction, partially offset by a $1.5 million decrease in pre-acquisition nonperforming assets.
The following table sets forth, at the dates indicated, information regarding nonaccrual loans and total nonperforming assets:
December 31, 2014 September 30, 2014 December 31, 2013
(1) (1)
--- ---
(in thousands)
Nonaccrual loans:
Commercial business $16,799 $11,490 $12,609
Real estate:
One-to-four family
residential 2,822 3,513 2,667
Commercial and multifamily
residential 7,847 8,468 11,043
----- ----- ------
Total real estate 10,669 11,981 13,710
Real estate construction:
One-to-four family
residential 465 1,031 3,705
--- ----- -----
Total real estate
construction 945 1,031 3,705
Consumer 2,939 3,496 3,991
----- ----- -----
Total nonaccrual loans 31,352 27,998 34,015
Other real estate owned and
other personal property
owned (1) 22,225 21,941 36,037
Total nonperforming assets $53,577 $49,939 $70,052
======= ======= =======
(1) Reclassified to conform to the
current period's presentation. The
reclassification was limited to
including historically reported
covered OREO and OPPO in the line
item for "Other real estate owned
and personal property owned".
The following table provides an analysis of the Company's allowance for loan and lease losses ("ALLL") at the dates and for the periods indicated:
Three Months Ended December Twelve Months Ended December
31, 31,
---------------------------- -----------------------------
2014 2013 (1)
2014 2013 (1)
---- -------
(in thousands)
Beginning balance $67,871 $78,581 $72,454 $82,300
Charge-offs:
Commercial business (991) (1,912) (4,289) (4,942)
One-to-four family
residential real estate (23) (37) (230) (228)
Commercial and
multifamily residential
real estate - (489) (2,993) (2,543)
One-to-four family
residential real estate
construction - - - (133)
Consumer (518) (980) (2,774) (2,242)
Purchased credit impaired
(1) (3,086) (3,822) (14,436) (13,852)
------ ------ ------- -------
Total charge-offs (4,618) (7,240) (24,722) (23,940)
Recoveries:
Commercial business 449 1,124 3,007 2,443
One-to-four family
residential real estate 56 90 159 270
Commercial and
multifamily residential
real estate 224 524 940 1,033
One-to-four family
residential real estate
construction 1,426 16 1,930 2,665
Consumer 422 200 1,353 553
Purchased credit impaired
(1) 2,031 2,841 7,721 7,231
----- ----- ----- -----
Total recoveries 4,608 4,795 15,110 14,195
----- ----- ------ ------
Net charge-offs (10) (2,445) (9,612) (9,745)
Provision (recapture) for
loan and lease losses
(1) 1,708 (3,682) 6,727 (101)
----- ------ ----- ----
Ending balance $69,569 $72,454 $69,569 $72,454
======= ======= ======= =======
(1) Reclassified to conform to the
current period's presentation. The
reclassification was limited to
including charge-off, recovery, and
provision activity related to the
purchased credit impaired loan
portfolio.
The allowance for loan losses to period end loans was 1.28% at December 31, 2014 compared to 1.41% at September 30, 2014. Excluding acquired loans, the allowance at December 31, 2014 represented 1.21% of non-acquired loans, compared to 1.27% of non-acquired loans at September 30, 2014. The allowance to loans, excluding acquired loans, is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" on the last pages of this earnings release for the reconciliation of the allowance for loan losses to period end loans, excluding acquired loans. The decline reflects strong organic loan growth as well as continued improvement in the Company's asset quality metrics.
For the fourth quarter of 2014, Columbia recorded a provision for loan and lease losses of $1.7 million. For the comparable quarter last year, the Company had a provision recapture of $3.7 million. The provision for loan and lease losses recorded during the current quarter was primarily driven by establishing an allowance for loans acquired in the Intermountain transaction.
Net Interest Margin ("NIM")
Columbia's net interest margin (tax equivalent) of 4.50% for the fourth quarter of 2014 was down 35 basis points from the third quarter of 2014 margin of 4.85%. The decrease was due to the combination of the acquisition of Intermountain, the premium amortization adjustment on mortgage-backed securities recorded in the third quarter of 2014 and continued repricing within the loan portfolio. Compared to the fourth quarter of 2013, Columbia's net interest margin decreased 53 basis points from 5.03%, due, in part, to lower incremental accretion on acquired loans, which was $13.3 million for the prior year quarter, and only $8.8 million for the current quarter as well as the previously mentioned loan repricing.
Columbia's operating net interest margin (tax equivalent)((1) )decreased to 4.17% for the fourth quarter of 2014, compared to 4.22% for the third quarter of 2014. The decrease was primarily due to a combination of a continuing low rate environment and the acquisition of Intermountain.
The following table shows the impact to interest income resulting from accretion of income on acquired loan portfolios as well as the net interest margin and operating net interest margin for the periods presented:
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
---- ---- ---- ----
(dollars in thousands)
Incremental
accretion income
due to:
FDIC purchased
credit impaired
loans $3,796 $6,540 $20,224 $29,815
Other FDIC
acquired loans 10 237 484 2,211
Other acquired
loans 4,957 6,540 21,093 26,200
----- ----- ------ ------
Incremental
accretion income $8,763 $13,317 $41,801 $58,226
====== ======= ======= =======
Net interest
margin (tax
equivalent) 4.50% 5.03% 4.76% 5.16%
Operating net
interest margin
(tax equivalent)
(1) 4.17% 4.31% 4.21% 4.32%
(1) Operating net interest
margin (tax equivalent) is a
non-GAAP financial measure.
See the section titled "Non-
GAAP Financial Measures" on the
last pages of this earnings
release for the reconciliation
of operating net interest
margin (tax equivalent) to net
interest margin.
Impact of FDIC Acquired Loan Accounting
The following table illustrates the impact to earnings associated with Columbia's FDIC acquired loan portfolios:
FDIC Acquired Loan Activity
Three Months Ended Twelve Months Ended
------------------ -------------------
December 31, December 31, December 31, December 31,
2014 2013 2014 2013
---- ---- ---- ----
(in thousands)
Incremental
accretion
income on
FDIC
purchased
credit
impaired
loans $3,796 $6,540 $20,224 $29,815
Incremental
accretion
income on
other FDIC
acquired
loans 10 237 484 2,211
Recapture
(provision)
for losses on
FDIC
purchased
credit
impaired
loans 542 1,582 (2,877) 3,261
Change in FDIC
loss-sharing
asset (5,304) (9,571) (19,989) (45,017)
FDIC clawback
liability
benefit
(expense) 8 (36) (294) (278)
Pre-tax
earnings
impact $(948) $(1,248) $(2,452) $(10,008)
===== ======= ======= ========
The incremental accretion income on FDIC purchased credit impaired loans represents the amount of income recorded 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 December 31, 2014, the accretable yield on purchased credit impaired loans was $73.8 million. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis.
The $5.3 million change in the FDIC loss-sharing asset in the current quarter negatively affected noninterest income and consisted primarily of $5.1 million in amortization expense. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format on the following page in the section titled "Noninterest Income". With the expiration of our two most significant FDIC loss-sharing agreements on March 31, 2015, the amortization of our loss-sharing asset will continue to decline.
Fourth Quarter 2014 Results
Net Interest Income
Net interest income for the fourth quarter of 2014 was $78.8 million, an increase of $2.5 million compared to the third quarter of 2014. This increase was primarily due to the acquired loans and securities from the Intermountain transaction. Compared to the fourth quarter of 2013, net interest income increased by $1.6 million from $77.2 million. The increase from the prior year period is due to the acquired loans and securities from the acquisition of Intermountain and organic loan growth, tempered by the decline in incremental accretion income. For additional information regarding net interest income, see "Average Balances and Rates" tables.
Noninterest Income
Total noninterest income was $15.2 million for the fourth quarter of 2014, a decrease of $745 thousand compared to $15.9 million for the third quarter of 2014. This decrease was due to the gain of $565 thousand recorded during the third quarter related to the deposit premium realized on the sale of three branches to Sound Community Bancorp coupled with an additional $488 thousand in expense associated with the change in FDIC loss-sharing asset during the fourth quarter.
Compared to the fourth quarter of 2013, noninterest income increased by $4.6 million. The increase from the prior year period was primarily due to the expense recorded for the change in FDIC loss-sharing asset, which was $4.3 million less in the current quarter compared to the fourth quarter of 2013.
The change in the FDIC loss-sharing asset is a significant component of noninterest income. The following table reflects the income statement components of the change in the FDIC loss-sharing asset for the periods indicated:
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2014 2013 2014 2013
---- ---- ---- ----
(in thousands)
Adjustments reflected in income
Amortization, net (5,071) (7,259) (21,279) (36,729)
Loan impairment (recapture) (434) (1,265) 2,301 (2,609)
Sale of other real estate (75) (1,101) (2,179) (6,177)
Write-downs of other real estate 206 (10) 1,065 364
Other 70 64 103 132
--- ---
Change in FDIC loss-sharing asset $(5,304) $(9,571) $(19,989) $(45,019)
======= ======= ======== ========
Noninterest Expense
Total noninterest expense for the fourth quarter of 2014 was $64.2 million, an increase of $535 thousand, or 1% from $63.6 million for the same quarter in 2013. The small increase from the prior year period was due to additional ongoing noninterest expense resulting from the Intermountain acquisition and increased cost of OREO. These increases were partially offset by lower acquisition-related expenses of $4.6 million for the current quarter compared to $7.9 million for the prior year period. Of the $4.6 million in acquisition-related expenses recorded during the current quarter, $4.5 million related to the recently completed Intermountain acquisition and the remaining $119 thousand related to the West Coast acquisition. Compared to the third quarter of 2014, noninterest expense increased $4.2 million, due to the $1.3 million increase in acquisition-related expenses, an increase in cost of OREO as well as additional ongoing expense resulting from the Intermountain acquisition.
Organizational Update
Ms. Dressel commented, "We feel very fortunate to have added such a qualified team of bankers to the Columbia Bank family as the result of our acquisition of Intermountain. Throughout our footprint, our bankers remain committed to retaining and developing full service relationships with customers. We continue to have opportunity for growth in all of our markets. In particular, the Boise market is one of the areas on which we will concentrate in 2015."
Forbes Ranking 2015
"We are gratified to rank in the top 20 on the annual Forbes list of best banks in the country, based on safety and soundness measures," Ms. Dressel said. "Columbia ranked #17, a significant jump from our previous position of #31 a year ago. In addition, we ranked as the best in Washington State, and second in the Pacific Northwest for the fourth year in a row."
Conference Call Information
Columbia's management will discuss the fourth quarter 2014 results on a conference call scheduled for Thursday, January 29, 2015 at 1:00 p.m. PST (4:00 pm EST). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #62154937.
A conference call replay will be available from approximately 4:00 p.m. PST on January 29, 2015 through midnight PST on February 5, 2015. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #62154937.
Annual Meeting of Shareholders
Columbia Banking System's Annual Meeting of Shareholders will be held at 1:00 PDT on April 22, 2015, 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, with 78 branches in Washington, 60 in Oregon, and 16 in Idaho. For the eighth consecutive year, the bank was named in 2014 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked in the top 20 on the 2015 Forbes list of best banks in the country, as well as ranking the best in Washington and second in the Pacific Northwest for the fourth year in a row.
More information about Columbia can be found on its website at www.columbiabank.com.
Note Regarding Forward-Looking Statements
This news release includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These forward looking statements describe Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words "will," "believe," "expect," "intend," "should," and "anticipate" and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, including the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q, factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates may reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) costs or difficulties related to the integration of acquisitions may be greater than expected; (5) competitive pressure among financial institutions may increase significantly; and (6) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.
FINANCIAL STATISTICS
Columbia Banking System, Inc. Three Months Ended Twelve Months Ended
Unaudited December 31, December 31,
------------ ------------
2014 2013 (1)
2014 2013 (1)
---- -------
Earnings (dollars in thousands except per share amounts)
--------
Net interest income $78,764 $77,209 $304,048 $291,095
Provision (recapture) for loan and
lease losses (1) $1,708 $(3,682) $6,727 $(101)
Noninterest income $15,185 $10,612 $59,750 $26,700
Noninterest expense $64,154 $63,619 $239,286 $230,886
Acquisition-related expense
(included in noninterest expense) $4,556 $7,910 $9,432 $25,488
Net income $18,920 $19,973 $81,574 $60,016
Per Common Share
----------------
Earnings (basic) $0.34 $0.39 $1.53 $1.24
Earnings (diluted) $0.34 $0.38 $1.52 $1.21
Book value $21.34 $20.50 $21.34 $20.50
Averages
--------
Total assets $8,152,463 $7,192,084 $7,468,091 $6,558,517
Interest-earning assets $7,199,443 $6,269,894 $6,561,047 $5,754,543
Loans $5,168,761 $4,504,587 $4,782,369 $4,140,826
Securities, including Federal Home
Loan Bank stock $1,918,690 $1,662,720 $1,708,575 $1,474,744
Deposits $6,759,259 $6,003,657 $6,187,342 $5,420,577
Interest-bearing deposits $4,174,459 $3,839,060 $3,901,524 $3,596,343
Interest-bearing liabilities $4,282,273 $3,886,126 $3,986,017 $3,683,145
Noninterest-bearing deposits $2,584,800 $2,164,597 $2,285,818 $1,824,234
Shareholders' equity $1,185,346 $1,056,694 $1,109,581 $979,099
Financial Ratios
----------------
Return on average assets 0.93% 1.11% 1.09% 0.92%
Return on average common equity 6.39% 7.57% 7.36% 6.14%
Average equity to average assets 14.54% 14.69% 14.86% 14.93%
Net interest margin (tax equivalent) 4.50% 5.03% 4.76% 5.16%
Efficiency ratio (tax equivalent)
(2) 66.30% 70.69% 63.97% 70.87%
Operating efficiency ratio (tax
equivalent) (3) 60.82% 64.43% 63.33% 64.85%
December 31,
------------
Period end 2014 2013 (1)
---------- ---- -------
Total assets $8,584,325 $7,161,582
Loans, net of unearned income (1) $5,445,378 $4,517,296
Allowance for loan and lease losses
(1) $69,569 $72,454
Securities, including Federal Home
Loan Bank stock $2,131,622 $1,696,640
Deposits $6,924,722 $5,959,475
Core deposits $6,619,944 $5,696,357
Shareholders' equity $1,228,175 $1,053,249
Nonperforming assets
--------------------
Nonaccrual loans $31,352 $34,015
Other real estate owned and other
personal property owned (1) 22,225 36,037
Total nonperforming assets (1) $53,577 $70,052
------- -------
Nonperforming loans to period-end
loans (4) 0.58% 0.75%
Nonperforming assets to period-end
assets (4) 0.62% 1.02%
Allowance for loan and lease losses
to period-end loans (4) 1.28% 1.60%
Net loan charge-offs (1) $9,612 (5) $9,745 (6)
(1) Adjusted to conform to current period presentation. The adjustment was limited to including historically disclosed "covered" amounts into the respective rows as these amounts are no longer disclosed separately in the consolidated balance sheets
or consolidated statements of income.
(2) Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.
(3) The operating efficiency ratio (tax equivalent) is a non-GAAP financial measure. See section titled "Non-GAAP Financial Measures" on the last pages of this earnings release for the reconciliation of the operating efficiency ratio (tax
equivalent) to the efficiency ratio (tax equivalent). During the second quarter of 2014, the methodology was changed to now exclude Washington state Business and Occupation ("B&O") taxes. Amounts presented in prior periods have been adjusted to
conform with the current methodology.
(4) Nonperforming asset ratios have been adjusted as a result of the adjustments noted in (1) above to no longer calculate ratios exclusive of "covered" amounts.
(5) For the twelve months ended December 31, 2014.
(6) For the twelve months ended December 31, 2013.
FINANCIAL STATISTICS
Columbia Banking
System, Inc.
Unaudited December 31,
December 31,
2014
2013
----
Loan Portfolio
Composition (dollars in thousands)
--------------
Commercial business $2,119,565 38.9% $1,561,782 34.6%
Real estate:
One-to-four family
residential 175,571 3.2% 108,317 2.4%
Commercial and
multifamily
residential 2,363,541 43.5% 2,080,075 46.0%
--------- ---- --------- ----
Total real estate 2,539,112 46.7% 2,188,392 48.4%
Real estate
construction:
One-to-four family
residential 116,866 2.1% 54,155 1.2%
Commercial and
multifamily
residential 134,443 2.5% 126,390 2.8%
------- --- ------- ---
Total real estate
construction 251,309 4.6% 180,545 4.0%
Consumer 364,182 6.7% 357,014 7.9%
Purchased credit
impaired 230,584 4.2% 297,845 6.6%
------- --- ------- ---
Subtotal loans 5,504,752 101.1% 4,585,578 101.5%
Less: Net unearned
income (59,374) (1.1)% (68,282) (1.5)%
------- ----- ------- -----
Loans, net of
unearned income 5,445,378 100.0% 4,517,296 100.0%
===== =====
Less: Allowance for
loan and lease
losses (69,569) (52,280)
Total loans, net 5,375,809 4,465,016
========= =========
Loans held for sale $1,116 $735
====== ====
December 31, December 31,
2014 2013
---- ----
Deposit Composition (dollars in thousands)
-------------------
Core deposits:
Demand and other non-
interest bearing $2,651,373 38.3% $2,171,703 36.4%
Interest bearing
demand 1,304,258 18.8% 1,170,006 19.6%
Money market 1,760,331 25.4% 1,569,261 26.3%
Savings 615,721 8.9% 496,444 8.3%
Certificates of
deposit less than
$100,000 288,261 4.2% 288,943 4.9%
------- --- ------- ---
Total core deposits 6,619,944 95.6% 5,696,357 95.5%
Certificates of
deposit greater than
$100,000 202,014 2.9% 201,498 3.5%
Certificates of
deposit insured by
CDARS(R) 18,429 0.3% 19,488 0.3%
Brokered money market
accounts 83,402 1.2% 41,765 0.7%
------ ------
Subtotal 6,923,789 100.0% 5,959,108 100.0%
===== =====
Premium resulting
from acquisition
date fair value
adjustment 933 367
--- ---
Total deposits $6,924,722 $5,959,475
========== ==========
QUARTERLY FINANCIAL STATISTICS
Columbia Banking System, Inc. Three Months Ended
------------------
Unaudited December 31, September 30, June 30, March 31, December 31,
2014 2014 (1) 2014 (1) 2014 (1) 2013 (1)
---- ------- ------- ------- -------
(dollars in thousands except per share)
Earnings
--------
Net interest income $78,764 $76,220 $75,124 $73,940 $77,209
Provision (recapture) for loan and
lease losses (1) $1,708 $980 $2,117 $1,922 $(3,682)
Noninterest income $15,185 $15,930 $14,627 $14,008 $10,612
Noninterest expense $64,154 $59,982 $57,764 $57,386 $63,619
Acquisition-related expense
(included in noninterest expense) $4,556 $3,238 $672 $966 $7,910
Net income $18,920 $21,583 $21,227 $19,844 $19,973
Per Common Share
----------------
Earnings (basic) $0.34 $0.41 $0.40 $0.38 $0.39
Earnings (diluted) $0.34 $0.41 $0.40 $0.37 $0.38
Book value $21.34 $20.78 $20.71 $20.39 $20.50
Averages
--------
Total assets $8,152,463 $7,337,306 $7,229,187 $7,143,759 $7,192,084
Interest-earning assets $7,199,443 $6,451,660 $6,339,102 $6,244,692 $6,269,894
Loans $5,168,761 $4,770,443 $4,646,356 $4,537,107 $4,504,587
Securities, including Federal Home
Loan Bank stock $1,918,690 $1,585,996 $1,645,993 $1,682,370 $1,662,720
Deposits $6,759,259 $6,110,809 $5,968,881 $5,901,838 $6,003,657
Interest-bearing deposits $4,174,459 $3,847,730 $3,807,710 $3,772,370 $3,839,060
Interest-bearing liabilities $4,282,273 $3,889,233 $3,901,016 $3,868,060 $3,886,126
Noninterest-bearing deposits $2,584,800 $2,263,079 $2,161,171 $2,129,468 $2,164,597
Shareholders' equity $1,185,346 $1,099,512 $1,084,927 $1,067,353 $1,056,694
Financial Ratios
----------------
Return on average assets 0.93% 1.18% 1.17% 1.11% 1.11%
Return on average common equity 6.39% 7.86% 7.83% 7.45% 7.57%
Average equity to average assets 14.54% 14.99% 15.01% 14.94% 14.69%
Net interest margin (tax equivalent) 4.50% 4.85% 4.86% 4.85% 5.03%
Period end
----------
Total assets $8,584,325 $7,466,081 $7,297,458 $7,237,053 $7,161,582
Loans, net of unearned income (1) $5,445,378 $4,823,022 $4,714,575 $4,577,363 $4,517,296
Allowance for loan and lease losses
(1) $69,569 $67,871 $69,295 $70,571 $72,454
Securities, including Federal Home
Loan Bank stock $2,131,622 $1,643,003 $1,621,929 $1,671,594 $1,696,640
Deposits $6,924,722 $6,244,401 $5,985,069 $6,044,416 $5,959,475
Core deposits $6,619,944 $5,990,118 $5,735,047 $5,768,434 $5,696,357
Shareholders' equity $1,228,175 $1,096,211 $1,092,151 $1,074,491 $1,053,249
Nonperforming, assets
---------------------
Nonaccrual loans $31,352 $27,998 $30,613 $36,397 $34,015
Other real estate owned and other
personal property owned (1) 22,225 21,941 28,254 30,662 36,037
------ ------ ------ ------ ------
Total nonperforming assets (1) $53,577 $49,939 $58,867 $67,059 $70,052
------- ------- ------- ------- -------
Nonperforming loans to period-end
loans (2) 0.58% 0.58% 0.65% 0.80% 0.75%
Nonperforming assets to period-end
assets (2) 0.62% 0.67% 0.81% 0.93% 0.98%
Allowance for loan and lease losses
to period-end loans (2) 1.28% 1.41% 1.47% 1.54% 1.60%
Net loan charge-offs (1) $10 $2,404 $3,393 $3,805 $2,445
(1) Adjusted to conform to current period presentation. The adjustment was limited to including historically disclosed "covered" amounts into the respective rows as these amounts are no longer disclosed separately in the consolidated balance sheets or consolidated statements of income.
(2) Nonperforming asset ratios have been adjusted as a result of the adjustments noted in (1) above to no longer calculate ratios exclusive of "covered" amounts.
CONSOLIDATED STATEMENTS OF INCOME
Columbia Banking
System, Inc. Three Months Ended
Twelve Months Ended
Unaudited December 31,
December 31,
------------
2014 2013 (1) 2014 2013 (1)
---- ------- ---- -------
(in thousands except per share)
Interest Income
Loans $69,831 $69,294 $268,279 $266,284
Taxable securities 7,075 6,400 28,754 20,459
Tax-exempt securities 2,917 2,548 10,830 9,837
Deposits in banks 74 65 179 355
--- --- --- ---
Total interest income 79,897 78,307 308,042 296,935
Interest Expense
Deposits 811 890 3,005 3,962
Federal Home Loan Bank
advances 87 89 396 (404)
Prepayment charge on
Federal Home Loan Bank
advances - - - 1,548
Other borrowings 235 119 593 734
--- --- --- ---
Total interest expense 1,133 1,098 3,994 5,840
----- ----- ----- -----
Net Interest Income 78,764 77,209 304,048 291,095
Provision (recapture)
for loan and lease
losses (1) 1,708 (3,682) 6,727 (101)
----- ------ ----- ----
Net interest income
after provision
(recapture) for loan
and lease losses 77,056 80,891 297,321 291,196
Noninterest Income
Service charges and
other fees 14,575 13,840 55,555 48,351
Merchant services fees 1,961 2,878 7,975 8,812
Investment securities
gains, net - - 552 462
Bank owned life
insurance 926 960 3,823 3,570
Change in FDIC loss-
sharing asset (5,304) (9,571) (19,989) (45,017)
Other 3,027 2,505 11,834 10,522
----- ----- ------ ------
Total noninterest
income 15,185 10,612 59,750 26,700
Noninterest Expense
Compensation and
employee benefits 35,903 34,835 130,864 125,432
Occupancy 8,024 11,494 32,300 33,054
Merchant processing 948 891 4,006 3,551
Advertising and
promotion 1,218 895 3,964 4,090
Data processing and
communications 3,900 3,573 15,369 14,076
Legal and professional
fees 4,012 2,363 11,389 12,338
Taxes, licenses and
fees 1,165 996 4,552 5,033
Regulatory premiums 1,105 1,300 4,549 4,706
Net cost (benefit) of
operation of other
real estate 162 (1,295) (1,045) (7,401)
Amortization of
intangibles 1,777 1,657 6,293 6,045
Other (1) 5,940 6,910 27,045 29,962
----- ----- ------ ------
Total noninterest
expense 64,154 63,619 239,286 230,886
------ ------ ------- -------
Income before income
taxes 28,087 27,884 117,785 87,010
Provision for income
taxes 9,167 7,911 36,211 26,994
----- ----- ------ ------
Net Income $18,920 $19,973 $81,574 $60,016
======= ======= ======= =======
Earnings per common
share
Basic $0.34 $0.39 $1.53 $1.24
Diluted $0.34 $0.38 $1.52 $1.21
Dividends paid per
common share $0.30 $0.11 $0.94 $0.41
Weighted average number
of common shares
outstanding 55,137 50,847 52,618 47,993
Weighted average number
of diluted common
shares outstanding 55,272 52,358 53,183 49,051
(1) Reclassified to conform to the
current period's presentation. The
reclassification was limited to
removing the separate line item for
FDIC clawback liability expense
within noninterest expense and
including the prior period activity
in the line item for other
noninterest expense as well as
removing the separate line item for
provision for losses on covered
loans and including the prior period
activity in the line item for
provision for loan and lease losses.
CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
Unaudited December 31, December 31,
2014 2013 (1)
---- -------
(in thousands)
ASSETS
Cash and due from banks $171,221 $165,030
Interest-earning deposits with banks 16,949 14,531
------ ------
Total cash and cash equivalents 188,170 179,561
Securities available for sale at fair value (amortized cost of $2,087,069 and $1,680,491, respectively) 2,098,257 1,664,111
Federal Home Loan Bank stock at cost 33,365 32,529
Loans held for sale 1,116 735
Loans, net of unearned income of ($59,374) and ($68,282), respectively (1) 5,445,378 4,517,296
Less: allowance for loan and lease losses (1) 69,569 72,454
------ ------
Loans, net 5,375,809 4,444,842
FDIC loss-sharing asset 15,174 39,846
Interest receivable 27,802 22,206
Premises and equipment, net 172,090 154,732
Other real estate owned 22,190 35,927
Goodwill 382,537 343,952
Other intangible assets, net 30,459 25,852
Other assets 237,356 217,289
Total assets $8,584,325 $7,161,582
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $2,651,373 $2,171,703
Interest-bearing 4,273,349 3,787,772
--------- ---------
Total deposits 6,924,722 5,959,475
Federal Home Loan Bank advances 216,568 36,606
Securities sold under agreements to repurchase 105,080 25,000
Other borrowings 8,248 -
Other liabilities 101,532 87,252
------- ------
Total liabilities 7,356,150 6,108,333
Commitments and contingent liabilities
December 31, December 31,
2014 2013
---- ----
Preferred stock (no par value)
Authorized shares 2,000 2,000
Issued and outstanding 9 9 2,217 2,217
Common stock (no par value)
Authorized shares 63,033 63,033
Issued and outstanding 57,437 51,265 985,839 860,562
Retained earnings 234,498 202,514
Accumulated other comprehensive loss 5,621 (12,044)
----- -------
Total shareholders' equity 1,228,175 1,053,249
Total liabilities and shareholders' equity $8,584,325 $7,161,582
========== ==========
(1) Reclassified to conform to the
current period's presentation. The
reclassification was limited to
removing the separate line items for
covered loans and including the
prior period balances in the line
items for loans, net of unearned
income and allowance for loan and
lease losses.
AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
Three Months Ended December 31, Three Months Ended December 31,
2014 2013
---- ----
Average Interest Average Average Interest Average
Balances Earned / Paid Rate Balances Earned / Paid Rate
-------- ------------- ---- -------- ------------- ----
(dollars in thousands)
ASSETS
Loans, net (1)(2)(3) $5,168,761 $70,463 5.45% $4,504,587 $69,542 6.18%
Taxable securities 1,491,930 7,075 1.90% 1,319,447 6,400 1.94%
Tax exempt securities (3) 426,759 4,577 4.29% 343,273 3,952 4.61%
Interest-earning deposits
with banks 111,993 74 0.26% 102,587 65 0.25%
------- --- ------- ---
Total interest-earning assets 7,199,443 $82,189 4.57% 6,269,894 $79,959 5.10%
Other earning assets 140,135 125,788
Noninterest-earning assets 812,885 796,402
------- -------
Total assets $8,152,463 $7,192,084
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit $497,704 $284 0.23% $520,764 $426 0.33%
Savings accounts 591,137 18 0.01% 491,756 23 0.02%
Interest-bearing demand 1,260,231 138 0.04% 1,158,016 129 0.04%
Money market accounts 1,825,387 371 0.08% 1,668,524 312 0.07%
--------- --- --------- ---
Total interest-bearing
deposits 4,174,459 811 0.08% 3,839,060 890 0.09%
Federal Home Loan Bank
advances 24,823 87 1.40% 22,066 89 1.62%
Other borrowings 82,991 235 1.13% 25,000 119 1.90%
------ --- ------ ---
Total interest-bearing
liabilities 4,282,273 $1,133 0.11% 3,886,126 $1,098 0.11%
Noninterest-bearing deposits 2,584,800 2,164,597
Other noninterest-bearing
liabilities 100,044 84,667
Shareholders' equity 1,185,346 1,056,694
--------- ---------
Total liabilities &
shareholders' equity $8,152,463 $7,192,084
========== ==========
Net interest income (tax equivalent) $81,056 $78,861
======= =======
Net interest margin (tax equivalent) 4.50% 5.03%
==== ====
(1) Nonaccrual loans have been
included in the tables as loans
carrying a zero yield. Amortized
net deferred loan fees and net
unearned discounts on certain
acquired loans were included in
the interest income calculations.
The amortization of net deferred
loan fees was $1.2 million and
$1.0 million for the three months
ended December 31, 2014 and 2013,
respectively. The accretion of
net unearned discounts on certain
acquired loans was $5.0 million
and $6.8 million for the three
months ended December 31, 2014
and 2013, respectively.
(2) Incremental accretion on purchased
credit impaired loans is included
in loan interest earned. The
incremental accretion income on
purchased credit impaired loans
was $3.8 million and $6.5 million
for the three months ended
December 31, 2014 and 2013,
respectively.
(3) Yields on a fully tax equivalent
basis. The tax equivalent yield
adjustment to interest earned on
noncovered loans was $632
thousand and $248 thousand for
the three months ended December
31, 2014 and 2013, respectively.
The tax equivalent yield
adjustment to interest earned on
tax exempt securities was $1.7
million and $1.4 million for the
three months ended December 31,
2014 and 2013, respectively.
AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
Twelve Months Ended December 31, Twelve Months Ended December 31,
2014 2013
---- ----
Average Interest Average Average Interest Average
Balances Earned / Paid Rate Balances Earned / Paid Rate
-------- ------------- ---- -------- ------------- ----
(dollars in thousands)
ASSETS
Loans, net (1)(2)(4) $4,782,369 $270,210 5.65% $4,140,826 $266,903 6.45%
Taxable securities (3) 1,332,144 28,754 2.16% 1,155,066 20,459 1.77%
Tax exempt securities (4) 376,431 16,997 4.52% 319,678 15,262 4.77%
Interest-earning deposits
with banks 70,103 179 0.26% 138,973 355 0.26%
------ --- ------- ---
Total interest-earning assets 6,561,047 $316,140 4.82% 5,754,543 $302,979 5.27%
Other earning assets 132,419 111,228
Noninterest-earning assets 774,625 692,746
------- -------
Total assets $7,468,091 $6,558,517
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit $485,487 $1,259 0.26% $535,656 $1,998 0.37%
Savings accounts 543,303 60 0.01% 445,666 94 0.02%
Interest-bearing demand 1,204,584 478 0.04% 1,048,482 587 0.06%
Money market accounts 1,668,150 1,208 0.07% 1,566,539 1,283 0.08%
--------- ----- --------- -----
Total interest-bearing
deposits 3,901,524 3,005 0.08% 3,596,343 3,962 0.11%
Federal Home Loan Bank
advances (5) 44,876 396 0.88% 51,030 1,144 2.24%
Other borrowings 39,617 593 1.50% 35,772 734 2.05%
------ --- ------ ---
Total interest-bearing
liabilities 3,986,017 $3,994 0.10% 3,683,145 $5,840 0.16%
Noninterest-bearing deposits 2,285,818 1,824,234
Other noninterest-bearing
liabilities 86,675 72,039
Shareholders' equity 1,109,581 979,099
--------- -------
Total liabilities &
shareholders' equity $7,468,091 $6,558,517
========== ==========
Net interest income (tax equivalent) $312,146 $297,139
======== ========
Net interest margin (tax equivalent) 4.76% 5.16%
==== ====
(1) Nonaccrual loans have been
included in the table as loans
carrying a zero yield. Amortized
net deferred loan fees and net
unearned discounts on certain
acquired loans were included in
the interest income calculations.
The amortization of net deferred
loan fees was $4.5 million and
$3.3 million for the twelve
months ended December 31, 2014
and 2013, respectively. The
accretion of net unearned
discounts on certain acquired
loans was $21.6 million and $28.4
million for the twelve months
ended December 31, 2014 and 2013,
respectively.
(2) Incremental accretion on purchased
credit impaired loans is also
included in loan interest earned.
The incremental accretion income
on purchased credit impaired
loans was $20.2 million and $29.8
million for the twelve months
ended December 31, 2014 and 2013,
respectively.
(3) During the twelve months ended
December 31, 2014, the Company
recorded a $2.6 million reversal
of premium amortization, which
increased interest income on
taxable securities.
(4) Yields on a fully tax equivalent
basis. The tax equivalent yield
adjustment to interest earned on
noncovered loans was $1.9 million
and $619 thousand for the twelve
months ended December 31, 2014
and 2013, respectively. The tax
equivalent yield adjustment to
interest earned on tax exempt
securities was $6.2 million and
$5.4 million for the twelve
months ended December 31, 2014
and 2013, respectively.
(5) Federal Home Loan Bank advances
includes a prepayment charge of
$1.5 million during the twelve
months ended December 31, 2013.
As a result of the prepayment,
the Company recorded $874
thousand in premium amortization,
which partially offset the impact
of the prepayment charge.
Non-GAAP Financial Measures
The Company considers its operating net interest margin and operating efficiency ratios to be important measurements as they more closely reflect the ongoing operating performance of the Company. Despite the importance of the operating net interest margin and operating efficiency ratio to the Company, there are no standardized definitions for them and, as a result, the Company's calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measure to investors. As a result, the Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.
The following tables reconcile the Company's calculation of the operating net interest margin and operating efficiency ratio:
Three Months Ended December 31,
Twelve Months Ended December 31,
2014 2013 2014 2013
---- ---- ---- ----
Operating net interest
margin non-GAAP
reconciliation: (dollars in thousands)
Net interest income
(tax equivalent) (1) $81,056 $78,861 $312,146 $297,139
------- ------- -------- --------
Adjustments to arrive
at operating net
interest income (tax
equivalent):
Incremental accretion
income on FDIC
purchased credit
impaired loans (3,796) (6,540) (20,224) (29,815)
Incremental accretion
income on other FDIC
acquired loans (10) (237) (484) (2,211)
Incremental accretion
income on other
acquired loans (4,957) (6,540) (21,093) (26,200)
Premium amortization on
acquired securities 2,490 1,828 7,123 7,309
Correction of
immaterial error -
securities premium
amortization - - (2,622) -
Interest reversals on
nonaccrual loans 189 161 1,291 882
Prepayment charges on
FHLB advances - - - 1,548
Operating net interest
income (tax
equivalent) (1) $74,972 $67,533 $276,137 $248,652
======= ======= ======== ========
Average interest
earning assets $7,199,443 $6,269,894 $6,561,047 $5,754,543
Net interest margin
(tax equivalent) (1) 4.50% 5.03% 4.76% 5.16%
Operating net interest
margin (tax
equivalent) (1) 4.17% 4.31% 4.21% 4.32%
Three Months Ended December 31,
Twelve Months Ended December 31,
2014 2013 2014 2013
---- ---- ---- ----
Operating efficiency
ratio non-GAAP
reconciliation: (dollars in thousands)
Noninterest expense
(numerator A) $64,154 $63,619 $239,286 $230,886
Adjustments to arrive
at operating
noninterest expense:
Acquisition-related
expenses (4,556) (7,910) (9,432) (25,488)
Net benefit of
operation of OREO and
OPPO (160) 1,308 1,182 7,539
FDIC clawback liability
benefit (expense) 8 (36) (294) (278)
Loss on asset disposals (6) (107) (563) (141)
State of Washington
Business and
Occupation ("B&O")
taxes (1,067) (908) (4,183) (4,727)
Operating noninterest
expense (numerator B) $58,373 $55,966 $225,996 $207,791
Net interest income
(tax equivalent) (1) $81,056 $78,861 $312,146 $297,139
Noninterest income 15,185 10,612 59,750 26,700
Bank owned life
insurance tax
equivalent adjustment 528 530 2,177 1,969
--- --- ----- -----
Total revenue (tax
equivalent)
(denominator A) $96,769 $90,003 $374,073 $325,808
Operating net interest
income (tax
equivalent) (1) $74,972 $67,533 $276,137 $248,652
Adjustments to arrive
at operating
noninterest income
(tax equivalent):
Investment securities
gains, net - - (552) (462)
Gain on asset disposals (8) (354) (86) (421)
Other nonrecurring gain - (1,025) - (1,025)
Gain related to branch
sale deposit premium - - (565) -
Change in FDIC loss-
sharing asset 5,304 9,571 19,989 45,017
Operating noninterest
income (tax
equivalent) 21,009 19,334 80,713 71,778
------ ------ ------ ------
Total operating revenue
(tax equivalent)
(denominator B) $95,981 $86,867 $356,850 $320,430
Efficiency ratio (tax
equivalent) (numerator
A/denominator A) 66.30% 70.69% 63.97% 70.87%
Operating efficiency
ratio (tax equivalent)
(numerator B/
denominator B) 60.82% 64.43% 63.33% 64.85%
(1) Tax-exempt interest income has been
adjusted to a tax equivalent basis. The amount
of such adjustment was an addition to net
interest income of $2.3 million and $1.7
million for the three months ended December 31,
2014 and 2013, respectively, and $8.1 million
and $6.0 million for the twelve months ended
December 31, 2014 and 2013, respectively.
Non-GAAP Financial Measures - Continued
The Company considers its ratio of allowance for loan and lease losses to period-end loans, excluding acquired loans to be an important measurement because it more closely reflects the ongoing allowance coverage and provides a ratio that is more comparable to other bank holding companies that have not had similar acquisitions. Despite the importance of this ratio to the Company, there are no standardized definitions for it and, as a result, the Company's calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of this measure to investors. As a result, the Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.
The following table reconciles the Company's calculation of the allowance for loan and lease losses to period-end loans, excluding acquired loans:
December 31, September 30, December 31,
2014 2014 2013
---- ---- ----
(dollars in thousands)
Allowance for loan
and lease losses
(numerator a) $69,569 $67,871 $72,454
Less: Allowance for
loan and lease
losses attributable
to acquired loans (23,212) (21,876) (24,362)
------- ------- -------
Equals: Allowance
for loan and lease
losses, excluding
acquired loans
(numerator b) $46,357 45,995 48,092
Loans, net of
unearned income
(denominator a) $5,445,378 $4,823,022 $4,517,296
Less: acquired
loans, net (1,615,496) (1,187,487) (1,479,387)
---------- ---------- ----------
Equals: Loans,
excluding acquired
loans, net of
unearned income
(denominator b) $3,829,882 $3,635,535 $3,037,909
Allowance for loan
and lease losses to
period-end loans
(numerator a/
denominator a) 1.28% 1.41% 1.60%
Allowance for loan
and lease losses to
period-end loans,
excluding acquired
loans (numerator b/
denominator b) 1.21% 1.27% 1.58%
Explanatory Note
Our two most significant FDIC loss-sharing agreements expire on March 31, 2015. As a result, a significant portion of receivables previously disclosed as "covered loans" will no longer be covered by FDIC loss-sharing. To prepare for this event, we have changed our consolidated balance sheet presentation, and reclassified our prior period balance sheets, to no longer differentiate between covered and non-covered loans. Further, when presenting certain loan portfolio details, we refer to loans acquired with deteriorated credit quality as "purchased credit impaired" loans. Purchased credit impaired loan balances approximate balances previously presented as "covered loans".
Contacts: Melanie J. Dressel,
President and
Chief Executive Officer
(253) 305-1911
Clint E. Stein,
Executive Vice President
and Chief Financial
Officer
(253) 593-8304
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SOURCE Columbia Banking System, Inc.
