EXHIBIT 99.1
FOR IMMEDIATE RELEASE
July 24, 2008
Contacts: Melanie J. Dressel, President and
Chief Executive Officer
(253) 305-1911
Gary R. Schminkey, Executive Vice President
and Chief Financial Officer
(253) 305-1966
COLUMBIA BANKING SYSTEM ANNOUNCES
SECOND QUARTER 2008 EARNINGS; MAINTAINS $0.17 CASH DIVIDEND
Company Remains Well Capitalized, With Solid
Net Interest Margin and Strong Business Fundamentals
TACOMA, Washington, July 24, 2008 -- Columbia Banking System, Inc. (NASDAQ: COLB) (“Columbia”) today announced earnings for the second quarter 2008 of $1.9 million, compared with $8.5 million for the second quarter of 2007. Diluted earnings per share were $0.11, compared with $0.53 per share a year earlier. The decrease in net income for the quarter reflected the previously announced provision for loan losses of $15.4 million for the second quarter 2008, which was due to an increase in real estate construction related non-accrual loans resulting from the slowing Pacific Northwest economic environment.
Revenue (net interest income plus noninterest income) was $39.6 million for the second quarter of 2008, up 22% from $32.4 million a year earlier. The net interest margin increased to 4.39% from 4.36% in the second quarter of 2007, and from 4.38% in the first quarter of 2008. The efficiency ratio improved to 59.31% for the second quarter of 2008 from 60.04% a year earlier.
“The fundamentals of our business remain sound, despite the fact that credit quality for nearly all northwest regional financial institutions is under pressure,” Melanie Dressel, President and Chief Executive Officer said. “We believe our focus on fundamental banking will position us well to manage through this challenging economic cycle.”
Ms. Dressel continued, “Our loan portfolio is highly diverse, with less than 20% of the total portfolio in real estate construction related loans; approximately 12% is in the for-sale housing segment. Our core deposits, which represent 80% of our total deposits, result from the strong relationships we have built with our customers, and have helped us maintain a stable net interest margin.” Core deposits are defined as demand, savings, and money market accounts, and certificates of deposit under $100,000.
Columbia’s capital position remains strong and is well above the “well-capitalized” regulatory definition of 10% set by the Federal Deposit Insurance Corporation (FDIC). The total risk-based capital ratio was 11.43% at June 30 2008, compared with 12.83% one year earlier and 11.07% at the end of the first quarter of 2008.
Columbia’s liquidity ratio, a measure of funds available to meet the loan and deposit needs of customers and for the general operations of the Company, was approximately 28% at June 30, 2008, compared with 26% and 29% at March 31, 2008 and December 31, 2007, respectively. The liquidity ratio at June 30, 2008, translates into approximately $890 million of available funding.
Columbia also announced that it will pay its quarterly cash dividend of $0.17 per share on August 20, 2008, to shareholders of record as of the close of business on August 6, 2008. “Reflecting our well-capitalized position at June 30, 2008, our quarterly cash dividend is being maintained at the same level as in the previous five quarters,” Ms. Dressel said.
Return on average assets and return on average equity for the second quarter 2008 were 0.24% and 2.19% respectively, compared to 1.29% and 13.04%, respectively, for the same period in 2007.
Net income for the six months ended June 30, 2008, was $12.9 million, compared with $15.8 million for the first six months of 2007. On a diluted per share basis, net income was $0.72, compared with $0.97 a year earlier. Return on average assets and return on average equity for the first six months of 2008 were 0.82% and 7.37%, respectively, compared with 1.22% and 12.29%, respectively, for the same period in 2007. Return on average tangible equity for the first six months of 2008 was 10.87% compared to 14.23% for the same period last year. The efficiency ratio for the first six months of 2008 improved to 60.77%, from 61.68% for the first six months of 2007.
At June 30, 2008, Columbia’s total assets were $3.17 billion, compared with $3.18 billion at December 31, 2007. Total loans were $2.28 billion at June 30, 2008, unchanged from $2.28 billion at year-end 2007. Total deposits were $2.40 billion at June 30, 2008, compared with $2.50 billion at December 31, 2007.
Results for the second quarter and first six months of 2008 reflect the financial consolidation of Mountain Bank Holding Company and Town Center Bancorp, which were both acquired on July 23, 2007; accordingly, the second quarter and first six months of 2007 financial information does not include the results of the two organizations. Additionally, earnings per diluted share for the first quarter and first six months of 2008 were affected by an increase in the total number of shares outstanding as a result of shares issued in conjunction with the 2007 acquisitions.
During the second quarter, Columbia redeemed pre-tax $1.1 million of the MasterCard International shares it obtained in connection with MasterCard’s 2006 initial public offering. Columbia also recognized $612,364 of pre-tax income during the second quarter from the receipt of life insurance proceeds received in connection with the death of a former officer covered by bank owned life insurance (“BOLI”).
In the first quarter, Columbia recorded a pre-tax gain on the sale of investment securities in the amount of $881,872. The gain resulted from repositioning the portfolio and extending its weighted average life. In March 2008, Visa Inc completed its initial public offering; as a result, Columbia received 118,637 shares of Visa Inc. Class B stock which were subject to a partial mandatory redemption. On March 28, 2008 Visa redeemed 45,866 shares of Columbia’s stock for net pre-tax cash proceeds of $1.96 million. In conjunction with the completion of Visa’s IPO, Columbia also recognized a pre-tax reversal of previously accrued Visa litigation expense in the amount of $889,200.
For comparative purposes, the table below illustrates core earnings, a non-GAAP measure removing the effect of income and expense items not derived from customary business activities.
Core Earnings
| (Dollars in thousands, except per share data) | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
| Net Income | $ | 1,936 | | $ | 8,544 | | $ | 12,913 | | $ | 15,827 |
| | | | | | | | | | | | |
| Deduct: (amounts shown net of tax) | | | | | | | | | | | |
| | | | | | | | | | | | |
| Gain on sale of investment securities | | - | | | - | | | (568 | ) | | - |
| Redemption of Visa and MasterCard shares | | (687 | ) | | - | | | (1,952 | ) | | - |
Reversal of previously accrued litigation expense | | - | | | - | | | (573 | ) | | - |
Insurance proceeds received on death of former officer | | (395 | ) | | - | | | (395 | ) | | - |
| | | | | | | | | | | | |
| Core Earnings | $ | 854 | | $ | 8,544 | | $ | 9,425 | | $ | 15,827 |
| | | | | | | | | | | | |
| Earnings per Diluted Share: | | | | | | | | | | | |
| | | | | | | | | | | | |
| GAAP earnings | $ | 0.11 | | $ | 0.53 | | $ | 0.72 | | $ | 0.97 |
| Core earnings | $ | 0.05 | | $ | 0.53 | | $ | 0.52 | | $ | 0.97 |
The amounts contained in the above table have been tax affected to illustrate their impact on net income.
Second Quarter 2008 Operating Results
Net Interest Income
Net interest income for the second quarter of 2008 was $30.3 million, an increase of $4.6 million, or 18%, from $25.7 million for the second quarter 2007. The increase is primarily due to an 18% increase in earning assets from the prior year. The increase in earning assets was due to a combination of the 2007 acquisitions and new loan production. Columbia’s net interest margin was 4.39%, an increase from 4.36% for the second quarter of 2007. On a linked quarterly basis, the net interest margin was 4.38% for the first quarter of 2008, and 4.29% for the fourth quarter of 2007.
Average interest-earning assets increased 18% to $2.90 billion in the second quarter of 2008, up from $2.46 billion in the second quarter of 2007. The yield on average interest-earning assets decreased 90 basis points to 6.33% in the second quarter of 2008, from 7.23% in the second quarter in 2007. Average interest-bearing liabilities increased to $2.32 billion from $1.94 billion last year. The cost of average interest-bearing liabilities decreased 118 basis points to 2.44% in the second quarter of 2008, compared with 3.62% in the second quarter of 2007.
For the six months ended June 30, 2008, net interest income increased 20% to $60.6 million from $50.4 million a year earlier. This increase for the first half of 2008 primarily was driven by loan growth, coupled with a decrease in interest expense on interest-bearing deposits.
During the first six months of 2008, Columbia’s net interest margin increased to 4.39% from 4.37% a year earlier. Average interest-earning assets grew to $2.90 billion in the first six months of 2008 from $2.43 billion in the 2007 period. The yield on average interest-earning assets decreased 57 basis points to 6.62% in the first six months of 2008 from 7.19% in 2007. In comparison, average interest-bearing liabilities grew to $2.33 billion from $1.92 billion for the first six months of 2007. The cost of average interest-bearing liabilities decreased 80 basis points to 2.78% in the first six months of 2008, compared with 3.58% for the 2007 period.
Noninterest income
Total noninterest income for the second quarter 2008 was $9.3 million, an increase of $2.6 million, or 38%, from $6.7 million a year earlier. The increase in noninterest income is primarily due to the redemption of MasterCard shares totaling $1.1 million, increased service charges and other fees, and other income. Service charges and other fees increased $445,000, or 14%, in the second quarter of 2008 compared with the 2007 period. This increase is the result of changes in the company’s deposit account fee structure in conjunction with an increase in the number of deposit accounts, primarily due to the third quarter 2007 acquisitions. Other income increased primarily due to the receipt of life insurance proceeds received in connection with the death of a former officer covered by BOLI.
For the six months ended June 30, 2008, noninterest income increased $6.5 million, or 51%, from the 2007 period. The increase in noninterest income is primarily due to proceeds from the redemption of Visa and MasterCard shares of $3.0 million and a gain on the sale of investment securities of $882,000.
Services charges and other fees increased $1.1 million, or 17% in the first six months of 2008 from the 2007 period.
Noninterest expense
Noninterest expense for the second quarter of 2008 was $23.4 million, an increase of $3.1 million, or 15%, from $20.3 million a year earlier. The increase was primarily due to increased salary expense as a result of the third quarter 2007 acquisitions and the expansion of the retail branch and professional lending team.
Total noninterest expense for the first six months of 2008 increased $6.3 million, or 15%, from the 2007 period. This increase was due primarily to increased compensation and employee benefits as described earlier and other expense increases also described earlier. Finally, occupancy expenses increased $676,000 from the first half of 2007, primarily due to the 2007 acquisitions and two new branch locations opened during fourth quarter 2007.
Nonperforming Assets and Loan Loss Provision
Note: For a more complete discussion of the Company’s Nonperforming Assets and Loan Loss Provision, please refer to Columbia’s press release dated July 9, 2008, available on www.columbiabank.com.
The Company made a provision for loan and lease losses of $15.4 million for the quarter ended June 30, 2008, compared with $2.1 million for the first quarter of 2008, and $1.4 million in the fourth quarter of 2007. The provision increased the total allowance for loan losses to 1.83% of net loans at June 30, 2008. The additional provision is due to the weakness in the for-sale housing industry resulting from the slowing economic environment and non-accrual loans increasing to $71.7 million, compared with $14.0 million at December 31, 2007. Net loan charge-offs for the quarter were $1.54 million, compared with $761,000 for the first quarter of 2008, and $380,000 for the year ended December 31, 2007.
“As we have previously stated, Columbia is not immune to the instability in the residential real estate markets and mortgage-related industries,” Ms. Dressel said. “We have seen significant declines in market conditions in the past few months, with double-digit declines in both year-over-year housing sales and in sale prices for land and lots in some of our markets. We are diligent in maintaining our risk management practices and monitoring the economic climate, and have taken appropriate actions.”
Columbia has placed more than $29 million of performing for-sale housing loans on non-accrual status, and has allocated $7.0 million in specific reserves.
Organizational Update
“Ms. Dressel said, “Due to their proximity, two Mt. Rainier Bank branch locations in Federal Way and Auburn, Washington were consolidated into two Columbia Bank branches during the second quarter. The consolidations brought our strong retail system to 53 branches in 10 counties in Washington and Oregon.” Ms. Dressel also noted, “We are very proud that Columbia Bank was selected by Washington CEO magazine as one of “Washington’s Best 100 Companies to Work For” for 2008.”
Conference Call
Columbia will discuss second quarter 2008 results on a conference call scheduled for Thursday, July 24, 2008 at 1:00 p.m. PDT. To listen to this discussion by calling 1-888-318-7969; Conference ID code 53553319 A conference call replay will be available from approximately 4:00 p.m. PDT on July 24 through midnight PDT on Thursday, July 31, 2008. The conference call replay can be accessed by dialing 1-800-642-1687 and entering Conference ID code 53553319.
About Columbia
Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank which was selected by Washington CEO magazine as one of 2008’s “Washington’s Best 100 Companies to Work For” . With the 2007 acquisitions of Mountain Bank Holding Company and Town Center Bancorp and the 2008 internal merger of its subsidiary, Bank of Astoria, into Columbia Bank, Columbia Banking System has 53 banking offices in Pierce, King, Cowlitz, Kitsap, Thurston and Whatcom counties in Washington State, and Clackamas, Clatsop, Tillamook and Multnomah counties in Oregon. Included in Columbia Bank are former branches of Mt. Rainier National Bank, doing business as Mt. Rainier Bank, with 5 branches in King and Pierce counties. Columbia Bank does business under the Bank of Astoria name at the Bank of Astoria’s former branches located in Astoria, Warrenton, Seaside and Cannon Beach in Clatsop County and in Manzanita in Tillamook County. More information about Columbia can be found on its website at www.columbiabank.com.
###
Note Regarding Forward Looking Statements
This news release includes forward looking statements, which management believes are a benefit to shareholders. These forward looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of our style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in our filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local and national economic conditions are less favorable than expected or have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets; (2) a continued decline in the housing/real estate market; (3) changes in interest rates significantly reduce interest margins and negatively affect funding sources; (4) deterioration of credit quality that could, among other things, increase defaults and delinquency risks in the Banks’ loan portfolios (5) projected business increases following strategic expansion activities are lower than expected; (6) competitive pressure among financial institutions increases significantly; (7) legislation or regulatory requirements or changes adversely affect the businesses in which we are engaged; and (8) our ability to realize the efficiencies we expect to receive from our investments in personnel, acquisitions and infrastructure
| FINANCIAL STATISTICS | | | | | | | | | | | | |
| Columbia Banking System, Inc. | | Three Months Ended | | | Six Months Ended | |
| Unaudited | | June 30, | | | June 30, | |
| (in thousands except per share) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Earnings | | | | | | | | | | | | |
| Net interest income | | $ | 30,274 | | | $ | 25,695 | | | $ | 60,601 | | | $ | 50,398 | |
| Provision for loan and lease losses | | $ | 15,350 | | | $ | 329 | | | $ | 17,426 | | | $ | 967 | |
| Noninterest income | | $ | 9,305 | | | $ | 6,741 | | | $ | 19,462 | | | $ | 12,918 | |
| Noninterest expense | | $ | 23,367 | | | $ | 20,266 | | | $ | 46,921 | | | $ | 40,668 | |
| Net income | | $ | 1,936 | | | $ | 8,544 | | | $ | 12,913 | | | $ | 15,827 | |
| | | | | | | | | | | | | | | | | |
Per Share | | | | | | | | | | | | | | | | |
| Net income (basic) | | $ | 0.11 | | | $ | 0.53 | | | $ | 0.72 | | | $ | 0.98 | |
| Net income (diluted) | | $ | 0.11 | | | $ | 0.53 | | | $ | 0.72 | | | $ | 0.97 | |
| | | | | | | | | | | | | | | | | |
| Averages | | | | | | | | | | | | | | | | |
| Total assets | | $ | 3,182,877 | | | $ | 2,654,863 | | | $ | 3,184,445 | | | $ | 2,620,634 | |
| Interest-earning assets | | $ | 2,902,449 | | | $ | 2,460,603 | | | $ | 2,904,310 | | | $ | 2,426,676 | |
| Loans | | $ | 2,297,661 | | | $ | 1,846,163 | | | $ | 2,301,125 | | | $ | 1,806,150 | |
| Securities | | $ | 584,780 | | | $ | 582,378 | | | $ | 583,418 | | | $ | 590,122 | |
| Deposits | | $ | 2,413,225 | | | $ | 2,090,273 | | | $ | 2,434,208 | | | $ | 2,045,951 | |
| Core deposits | | $ | 1,923,973 | | | $ | 1,733,698 | | | $ | 1,928,659 | | | $ | 1,838,486 | |
| Shareholders' equity | | $ | 354,895 | | | $ | 262,905 | | | $ | 352,583 | | | $ | 259,617 | |
| | | | | | | | | | | | | | | | | |
Financial Ratios | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.24 | % | | | 1.29 | % | | | 0.82 | % | | | 1.22 | % |
| Return on average equity | | | 2.19 | % | | | 13.04 | % | | | 7.37 | % | | | 12.29 | % |
Return on average tangible equity(1) | | | 3.56 | % | | | 15.04 | % | | | 10.87 | % | | | 14.23 | % |
| Average equity to average assets | | | 11.15 | % | | | 9.90 | % | | | 11.07 | % | | | 9.91 | % |
| Net interest margin | | | 4.39 | % | | | 4.36 | % | | | 4.39 | % | | | 4.37 | % |
Efficiency ratio (tax equivalent)(2) | | | 59.31 | % | | | 60.04 | % | | | 60.77 | % | | | 61.68 | % |
| | | | | | | | | | | | | | | | | |
| | | June 30, | | | December 31, | | | | |
Period end | | 2008 | | | 2007 | | | 2007 | | | | | |
| Total assets | | $ | 3,169,607 | | | $ | 2,660,946 | | | $ | 3,178,713 | | | | | |
| Loans | | $ | 2,275,719 | | | $ | 1,859,592 | | | $ | 2,282,728 | | | | | |
| Allowance for loan and lease losses | | $ | 41,724 | | | $ | 21,339 | | | $ | 26,599 | | | | | |
| Securities | | $ | 549,755 | | | $ | 570,742 | | | $ | 572,973 | | | | | |
| Deposits | | $ | 2,398,924 | | | $ | 2,117,325 | | | $ | 2,498,061 | | | | | |
| Core deposits | | $ | 1,933,256 | | | $ | 1,725,875 | | | $ | 1,997,155 | | | | | |
| Shareholders' equity | | $ | 344,270 | | | $ | 259,773 | | | $ | 341,731 | | | | | |
| | | | | | | | | | | | | | | | | |
| Book value per share | | $ | 19.01 | | | $ | 16.07 | | | $ | 19.03 | | | | | |
| Tangible book value per share | | $ | 13.35 | | | $ | 14.06 | | | $ | 13.29 | | | | | |
| | | | | | | | | | | | | | | | | |
Nonperforming assets | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 71,730 | | | $ | 4,972 | | | $ | 14,005 | | | | | |
| Restructured loans | | | 540 | | | | 985 | | | | 456 | | | | | |
| Other personal property owned | | | - | | | | 32 | | | | - | | | | | |
| Other real estate owned | | | - | | | | - | | | | 181 | | | | | |
| Total nonperforming assets | | $ | 72,270 | | | $ | 5,989 | | | $ | 14,642 | | | | | |
| Nonperforming loans to period-end loans | | | 3.18 | % | | | 0.32 | % | | | 0.63 | % | | | | |
| Nonperforming assets to period-end assets | | | 2.28 | % | | | 0.23 | % | | | 0.46 | % | | | | |
| Allowance for loan and lease losses to period-end loans | | | 1.83 | % | | | 1.15 | % | | | 1.17 | % | | | | |
| Allowance for loan and lease losses to nonperforming loans | | | 57.73 | % | | | 358.22 | % | | | 183.94 | % | | | | |
| Allowance for loan and lease losses to nonperforming assets | | | 57.73 | % | | | 356.30 | % | | | 181.66 | % | | | | |
| Net loan charges-offs (recoveries) | | $ | 2,301 | (3) | | $ | (190 | )(4) | | $ | 380 | (5) | | | | |
| (1) Annualized net income, excluding core deposit intangible asset amortization, divided by average daily shareholders' equity, excluding |
| average goodwill and average core deposit intangible asset. |
| (2) Noninterest expense divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding gain/loss |
| on sale of investment securities, net cost (gain) of OREO, proceeds from redemption of Visa and Mastercard shares, reversal of |
| previously accrued Visa litigation expense, net income from BOLI policy swap transactions, and death benefit insurance proceeds. |
| (3) For the six months ended June 30, 2008. |
| (4) For the six months ended June 30, 2007. |
| (5) For the twelve months ended December 31, 2007. |
| FINANCIAL STATISTICS | | | | | | | | | | | | | | | | | |
| Columbia Banking System, Inc. | | |
| Unaudited | June 30, | | | December 31, | |
| (in thousands) | 2008 | | | % of Total | | | 2007 | | | % of Total | | | 2007 | | | % of Total | |
Loan Portfolio Composition | | | | | | | | | | | | | | | | | |
| Commercial business | $ | 760,282 | | | | 33.4 | % | | $ | 681,534 | | | | 36.7 | % | | $ | 762,365 | | | | 33.4 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Real Estate: | | | | | | | | | | | | | | | | | | | | | | | |
| One-to-four family residential | | 55,504 | | | | 2.4 | % | | | 46,299 | | | | 2.5 | % | | | 60,991 | | | | 2.7 | % |
| Five or more family residential and commercial | | 829,048 | | | | 36.4 | % | | | 677,477 | | | | 36.4 | % | | | 852,139 | | | | 37.3 | % |
| Total Real Estate | | 884,552 | | | | 38.8 | % | | | 723,776 | | | | 38.9 | % | | | 913,130 | | | | 40.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Real Estate Construction: | | | | | | | | | | | | | | | | | | | | | | | |
| One-to-four family residential | | 281,848 | | | | 12.4 | % | | | 180,925 | | | | 9.7 | % | | | 269,115 | | | | 11.8 | % |
| Five or more family residential and commercial | | 156,990 | | | | 6.9 | % | | | 127,769 | | | | 6.9 | % | | | 165,490 | | | | 7.2 | % |
| Total Real Estate Construction | | 438,838 | | | | 19.3 | % | | | 308,694 | | | | 16.6 | % | | | 434,605 | | | | 19.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Consumer | | 195,914 | | | | 8.7 | % | | | 148,869 | | | | 8.0 | % | | | 176,559 | | | | 7.8 | % |
| Subtotal loans | | 2,279,586 | | | | 100.2 | % | | | 1,862,873 | | | | 100.2 | % | | | 2,286,659 | | | | 100.2 | % |
| Less: Deferred loan fees | | (3,867 | ) | | | -0.2 | % | | | (3,281 | ) | | | -0.2 | % | | | (3,931 | ) | | | -0.2 | % |
| Total loans | $ | 2,275,719 | | | | 100.0 | % | | $ | 1,859,592 | | | | 100.0 | % | | $ | 2,282,728 | | | | 100.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Loans held for sale | $ | 3,323 | | | | | | | $ | 2,251 | | | | | | | $ | 4,482 | | | | | |
| | | June 30, | | | December 31, | |
| (in thousands) | | 2008 | | | 2007 | | | 2007 | |
Deposit Composition | | | | | | | | | |
| Demand and other noninterest bearing | | $ | 480,612 | | | $ | 419,695 | | | $ | 468,237 | |
| Interest bearing demand | | | 445,798 | | | | 440,051 | | | | 478,596 | |
| Money market | | | 580,535 | | | | 509,463 | | | | 609,502 | |
| Savings | | | 118,145 | | | | 102,997 | | | | 115,324 | |
| Certificates of deposit < $100,000 | | | 308,166 | | | | 253,669 | | | | 325,496 | |
| Certificates of deposit > $100,000 | | | 399,950 | | | | 330,964 | | | | 428,885 | |
| Wholesale certificates of deposit | | | 65,718 | | | | 60,486 | | | | 72,021 | |
| Total deposits | | $ | 2,398,924 | | | $ | 2,117,325 | | | $ | 2,498,061 | |
| QUARTERLY FINANCIAL STATISTICS | | | | | | | | | | | | | | | |
| Columbia Banking System, Inc. | | Three Months Ended | |
| Unaudited | | Jun 30 | | | Mar 31 | | | Dec 31 | | | Sept 30 | | | Jun 30 | |
| (in thousands except per share) | | 2008 | | | 2008 | | | 2007 | | | 2007 | | | 2007 | |
| Earnings | | | | | | | | | | | | | | | |
| Net interest income | | $ | 30,274 | | | $ | 30,327 | | | $ | 29,562 | | | $ | 28,860 | | | $ | 25,695 | |
| Provision for loan and lease losses | | $ | 15,350 | | | $ | 2,076 | | | $ | 1,407 | | | $ | 1,231 | | | $ | 329 | |
| Noninterest income | | $ | 9,305 | | | $ | 10,157 | | | $ | 7,199 | | | $ | 7,631 | | | $ | 6,741 | |
| Noninterest expense | | $ | 23,367 | | | $ | 23,554 | | | $ | 25,736 | | | $ | 22,425 | | | $ | 20,266 | |
| Net income | | $ | 1,936 | | | $ | 10,977 | | | $ | 7,298 | | | $ | 9,256 | | | $ | 8,544 | |
| | | | | | | | | | | | | | | | | | | | | |
Per Share | | | | | | | | | | | | | | | | | | | | |
| Net income (basic) | | $ | 0.11 | | | $ | 0.61 | | | $ | 0.41 | | | $ | 0.53 | | | $ | 0.53 | |
| Net income (diluted) | | $ | 0.11 | | | $ | 0.61 | | | $ | 0.41 | | | $ | 0.53 | | | $ | 0.53 | |
| | | | | | | | | | | | | | | | | | | | | |
| Averages | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 3,182,877 | | | $ | 3,186,013 | | | $ | 3,131,122 | | | $ | 2,969,197 | | | $ | 2,654,863 | |
| Interest-earning assets | | $ | 2,902,449 | | | $ | 2,906,172 | | | $ | 2,836,045 | | | $ | 2,702,487 | | | $ | 2,460,603 | |
| Loans | | $ | 2,297,661 | | | $ | 2,304,588 | | | $ | 2,241,893 | | | $ | 2,102,281 | | | $ | 1,846,163 | |
| Securities | | $ | 584,780 | | | $ | 582,056 | | | $ | 572,412 | | | $ | 572,124 | | | $ | 582,378 | |
| Deposits | | $ | 2,413,225 | | | $ | 2,455,190 | | | $ | 2,487,356 | | | $ | 2,382,881 | | | $ | 2,090,273 | |
| Core deposits | | $ | 1,923,973 | | | $ | 1,933,346 | | | $ | 1,960,896 | | | $ | 1,919,908 | | | $ | 1,733,698 | |
| Shareholders' equity | | $ | 354,895 | | | $ | 350,271 | | | $ | 335,510 | | | $ | 301,499 | | | $ | 262,905 | |
| | | | | | | | | | | | | | | | | | | | | |
| Financial Ratios | | | | | | | | | | | | | | | | | | | | |
| Return on average assets | | | 0.24 | % | | | 1.39 | % | | | 0.92 | % | | | 1.24 | % | | | 1.29 | % |
| Return on average equity | | | 2.19 | % | | | 12.60 | % | | | 8.63 | % | | | 12.18 | % | | | 13.04 | % |
| Return on average tangible equity | | | 3.56 | % | | | 18.33 | % | | | 13.08 | % | | | 15.81 | % | | | 15.04 | % |
| Average equity to average assets | | | 11.15 | % | | | 10.99 | % | | | 10.72 | % | | | 10.15 | % | | | 9.90 | % |
| Net interest margin | | | 4.39 | % | | | 4.38 | % | | | 4.29 | % | | | 4.40 | % | | | 4.36 | % |
| Efficiency ratio (tax equivalent) | | | 59.31 | % | | | 62.36 | % | | | 62.83 | % | | | 59.23 | % | | | 60.04 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Period end | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 3,169,607 | | | $ | 3,246,586 | | | $ | 3,178,713 | | | $ | 3,122,744 | | | $ | 2,660,946 | |
| Loans | | $ | 2,275,719 | | | $ | 2,300,465 | | | $ | 2,282,728 | | | $ | 2,212,751 | | | $ | 1,859,592 | |
| Allowance for loan and lease losses | | $ | 41,724 | | | $ | 27,914 | | | $ | 26,599 | | | $ | 25,380 | | | $ | 21,339 | |
| Securities | | $ | 549,755 | | | $ | 598,470 | | | $ | 572,973 | | | $ | 577,712 | | | $ | 570,742 | |
| Deposits | | $ | 2,398,924 | | | $ | 2,526,514 | | | $ | 2,498,061 | | | $ | 2,477,794 | | | $ | 2,117,325 | |
| Core deposits | | $ | 1,933,256 | | | $ | 1,997,975 | | | $ | 1,997,155 | | | $ | 1,964,029 | | | $ | 1,725,875 | |
| Shareholders' equity | | $ | 344,270 | | | $ | 351,667 | | | $ | 341,731 | | | $ | 329,969 | | | $ | 259,773 | |
| | | | | | | | | | | | | | | | | | | | | |
| Book value per share | | $ | 19.01 | | | $ | 19.45 | | | $ | 19.03 | | | $ | 18.45 | | | $ | 16.07 | |
| Tangible book value per share | | $ | 13.35 | | | $ | 13.77 | | | $ | 13.29 | | | $ | 12.79 | | | $ | 14.06 | |
| | | | | | | | | | | | | | | | | | | | | |
Nonperforming assets | | | | | | | | | | | | | | | | | | | | |
| Nonaccrual loans | | $ | 71,730 | | | $ | 14,368 | | | $ | 14,005 | | | $ | 9,983 | | | $ | 4,972 | |
| Restructured loans | | | 540 | | | | 468 | | | | 456 | | | | 257 | | | | 985 | |
| Other personal property owned | | | - | | | | 187 | | | | - | | | | - | | | | 32 | |
| Other real estate owned | | | - | | | | - | | | | 181 | | | | 181 | | | | - | |
| Total nonperforming assets | | $ | 72,270 | | | $ | 15,023 | | | $ | 14,642 | | | $ | 10,421 | | | $ | 5,989 | |
| Nonperforming loans to period-end loans | | | 3.18 | % | | | 0.64 | % | | | 0.63 | % | | | 0.46 | % | | | 0.32 | % |
| Nonperforming assets to period-end assets | | | 2.28 | % | | | 0.46 | % | | | 0.46 | % | | | 0.33 | % | | | 0.23 | % |
| Allowance for loan and lease losses to period-end loans | | | 1.83 | % | | | 1.21 | % | | | 1.17 | % | | | 1.15 | % | | | 1.15 | % |
| Allowance for loan and lease losses to nonperforming loans | | | 57.73 | % | | | 188.15 | % | | | 183.94 | % | | | 247.85 | % | | | 358.22 | % |
| Allowance for loan and lease losses to nonperforming assets | | | 57.73 | % | | | 185.81 | % | | | 181.66 | % | | | 243.55 | % | | | 356.30 | % |
| Net loan charges-offs (recoveries) | | $ | 1,540 | | | $ | 761 | | | $ | 188 | | | $ | 382 | | | $ | (191 | ) |
| CONSOLIDATED CONDENSED STATEMENTS OF INCOME | | | | | | | | | | |
| Columbia Banking System, Inc. | | | | | | | | | | | | |
| (Unaudited) | | Three Months Ended | | | Six Months Ended | |
| | | June 30, | | | June 30, | |
| (in thousands except per share) | | 2008 | | | 2007 | | | 2008 | | | 2007 | |
| Interest Income | | | | | | | | | | | | |
| Loans | | $ | 37,334 | | | $ | 36,224 | | | $ | 78,637 | | | $ | 70,254 | |
| Taxable securities | | | 4,895 | | | | 4,657 | | | | 9,875 | | | | 9,442 | |
| Tax-exempt securities | | | 1,999 | | | | 1,960 | | | | 4,000 | | | | 3,920 | |
| Federal funds sold and deposits in banks | | | 95 | | | | 414 | | | | 244 | | | | 785 | |
| Total interest income | | | 44,323 | | | | 43,255 | | | | 92,756 | | | | 84,401 | |
| | | | | | | | | | | | | | | | | |
| Interest Expense | | | | | | | | | | | | | | | | |
| Deposits | | | 11,461 | | | | 13,617 | | | | 26,296 | | | | 25,776 | |
| Federal Home Loan Bank advances | | | 1,995 | | | | 2,484 | | | | 4,577 | | | | 5,663 | |
| Long-term obligations | | | 429 | | | | 513 | | | | 916 | | | | 1,020 | |
| Other borrowings | | | 164 | | | | 946 | | | | 366 | | | | 1,544 | |
| Total interest expense | | | 14,049 | | | | 17,560 | | | | 32,155 | | | | 34,003 | |
| | | | | | | | | | | | | | | | | |
| Net Interest Income | | | 30,274 | | | | 25,695 | | | | 60,601 | | | | 50,398 | |
| Provision for loan and lease losses | | | 15,350 | | | | 329 | | | | 17,426 | | | | 967 | |
| Net interest income after provision for loan and lease losses | | | 14,924 | | | | 25,366 | | | | 43,175 | | | | 49,431 | |
| | | | | | | | | | | | | | | | | |
| Noninterest Income | | | | | | | | | | | | | | | | |
| Service charges and other fees | | | 3,738 | | | | 3,293 | | | | 7,306 | | | | 6,252 | |
| Merchant services fees | | | 2,162 | | | | 2,124 | | | | 4,078 | | | | 4,093 | |
| Redemption of Visa and Mastercard shares | | | 1,066 | | | | - | | | | 3,028 | | | | - | |
| Gain on sale of investment securities, net | | | - | | | | - | | | | 882 | | | | - | |
| Bank owned life insurance ("BOLI") | | | 549 | | | | 451 | | | | 1,054 | | | | 877 | |
| Other | | | 1,790 | | | | 873 | | | | 3,114 | | | | 1,696 | |
| Total noninterest income | | | 9,305 | | | | 6,741 | | | | 19,462 | | | | 12,918 | |
| | | | | | | | | | | | | | | | | |
| Noninterest Expense | | | | | | | | | | | | | | | | |
| Compensation and employee benefits | | | 12,348 | | | | 10,848 | | | | 25,744 | | | | 22,206 | |
| Occupancy | | | 3,199 | | | | 2,945 | | | | 6,458 | | | | 5,782 | |
| Merchant processing | | | 904 | | | | 884 | | | | 1,770 | | | | 1,707 | |
| Advertising and promotion | | | 637 | | | | 657 | | | | 1,218 | | | | 1,204 | |
| Data processing | | | 783 | | | | 553 | | | | 1,598 | | | | 1,120 | |
| Legal and professional fees | | | 765 | | | | 687 | | | | 714 | | | | 1,510 | |
| Taxes, licenses and fees | | | 796 | | | | 703 | | | | 1,547 | | | | 1,316 | |
| Net gain on sale of other real estate owned | | | - | | | | - | | | | (23 | ) | | | - | |
| Other | | | 3,935 | | | | 2,989 | | | | 7,895 | | | | 5,823 | |
| Total noninterest expense | | | 23,367 | | | | 20,266 | | | | 46,921 | | | | 40,668 | |
| | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 862 | | | | 11,841 | | | | 15,716 | | | | 21,681 | |
| Provision (benefit) for income taxes | | | (1,074 | ) | | | 3,297 | | | | 2,803 | | | | 5,854 | |
| | | | | | | | | | | | | | | | | |
| Net Income | | $ | 1,936 | | | $ | 8,544 | | | $ | 12,913 | | | $ | 15,827 | |
| | | | | | | | | | | | | | | | | |
| Net income per common share | | | | | | | | | | | | | | | | |
| Basic | | $ | 0.11 | | | $ | 0.53 | | | $ | 0.72 | | | $ | 0.98 | |
| Diluted | | $ | 0.11 | | | $ | 0.53 | | | $ | 0.72 | | | $ | 0.97 | |
| Dividends paid per common share | | $ | 0.17 | | | $ | 0.17 | | | $ | 0.34 | | | $ | 0.32 | |
| Weighted average number of common shares outstanding | | | 17,898 | | | | 16,126 | | | | 17,874 | | | | 16,115 | |
| Weighted average number of diluted common shares outstanding | | | 18,021 | | | | 16,258 | | | | 17,998 | | | | 16,261 | |
| CONSOLIDATED CONDENSED BALANCE SHEETS | | | | | | | | | |
| Columbia Banking System, Inc. | | | | | | | | | |
| (Unaudited) | | | | | June 30, | | | December 31, | |
| (in thousands) | | | | | 2008 | | | 2007 | |
| ASSETS | | | |
| Cash and due from banks | | | | | $ | 97,076 | | | $ | 82,735 | |
| Interest-earning deposits with banks | | | | | | 8,552 | | | | 11,240 | |
| Federal funds sold | | | | | | 10,000 | | | | - | |
| Total cash and cash equivalents | | | | | | 115,628 | | | | 93,975 | |
| Securities available for sale at fair value (amortized cost of $554,547 and $558,685, respectively) | | | | | | 549,755 | | | | 561,366 | |
| Federal Home Loan Bank stock at cost | | | | | | 17,260 | | | | 11,607 | |
| Loans held for sale | | | | | | 3,323 | | | | 4,482 | |
| Loans, net of deferred loan fees of ($3,867) and ($3,931), respectively | | | | | | 2,275,719 | | | | 2,282,728 | |
| Less: allowance for loan and lease losses | | | | | | 41,724 | | | | 26,599 | |
| Loans, net | | | | | | 2,233,995 | | | | 2,256,129 | |
| Interest receivable | | | | | | 12,289 | | | | 14,622 | |
| Premises and equipment, net | | | | | | 60,558 | | | | 56,122 | |
| Other real estate owned | | | | | | - | | | | 181 | |
| Goodwill | | | | | | 96,116 | | | | 96,011 | |
| Core deposit intangible, net | | | | | | 6,458 | | | | 7,050 | |
| Other assets | | | | | | 74,225 | | | | 77,168 | |
| Total Assets | | | | | $ | 3,169,607 | | | $ | 3,178,713 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| Deposits: | | | | | | | | | | | |
| Noninterest-bearing | | | | | $ | 480,612 | | | $ | 468,237 | |
| Interest-bearing | | | | | | 1,918,312 | | | | 2,029,824 | |
| Total deposits | | | | | | 2,398,924 | | | | 2,498,061 | |
| Short-term borrowings: | | | | | | | | | | | |
| Federal Home Loan Bank advances | | | | | | 329,000 | | | | 257,670 | |
| Securities sold under agreements to repurchase | | | | | | 25,000 | | | | - | |
| Other borrowings | | | | | | 5,107 | | | | 5,061 | |
| Total short-term borrowings | | | | | | 359,107 | | | | 262,731 | |
| Long-term subordinated debt | | | | | | 25,561 | | | | 25,519 | |
| Other liabilities | | | | | | 41,745 | | | | 50,671 | |
| Total liabilities | | | | | | 2,825,337 | | | | 2,836,982 | |
| Commitments and contingent liabilities | | | | | | - | | | | - | |
| Shareholders' equity | | | | | | | | | | | |
| Preferred stock (no par value) | | | | | | - | | | | - | |
| Authorized, 2 million shares; none outstanding | | | | | | | | | | | |
| | June 30, | | December 31, | | | | | | | | |
| | 2008 | | 2007 | | | | | | | | |
| Common Stock (no par value) | | | | | | | | | | | |
| Authorized shares | 63,034 | | 63,034 | | | | | | | | |
| Issued and outstanding | 18,111 | | 17,953 | | | 228,826 | | | | 226,550 | |
| Retained earnings | | | | | | 114,810 | | | | 110,169 | |
| Accumulated other comprehensive income | | | | | | 634 | | | | 5,012 | |
| Total shareholders' equity | | | | | | 344,270 | | | | 341,731 | |
| Total Liabilities and Shareholders' Equity | | | | | $ | 3,169,607 | | | $ | 3,178,713 | |
