Exhibit 99.1
FOR IMMEDIATE RELEASE
April 28, 2004
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
INCREASED FIRST QUARTER 2004 EARNINGS
HIGHLIGHTS
• First quarter earnings of $5.2 million, up 16% from $4.4 million for 1st quarter 2003.
• Highest first quarter earnings in Columbia’s history.
• 1st quarter earnings per diluted share of $0.38, up 15% from 1st quarter 2003.
• ROE and ROA improve to 13.37% and 1.17%, respectively, in 1st quarter 2004.
• Total loans increased $53.2 million, up 5% from 4th quarter 2003
TACOMA, Washington—Columbia Banking System, Inc. (Nasdaq: COLB) today announced earnings for the first quarter 2004 of $5.2 million, up 16% from $4.4 million for the first quarter of 2003. For the same periods, earnings per share increased to $0.38 per diluted share, an increase of 15% from $0.33 per diluted share one year ago. Return on average assets and return on average equity for the first quarter 2004 were 1.17% and 13.37%, respectively, compared to 1.07% and 13.30%, respectively, for the first quarter of the prior year. First quarter 2004 earnings were impacted favorably by a lower provision for loan losses of $300,000, compared to $1.6 million for the first quarter of 2003, a decrease of 81%.
Melanie Dressel, President and Chief Executive Officer stated, “Our trend of improving earnings is a result of lower contributions to our loan loss allowance, as well as our commitment to exceptional
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customer service, which translates into expanded relationships and increased business. We have been able to manage our net interest margin through our growth in core deposits, consistently lowering our cost of funds.”
Ms. Dressel further noted, “I am also pleased to announce a subsequent event regarding the large credit that we reported had been moved to nonaccrual status during the fourth quarter of 2003. In early April, this $6.2 million loan was brought back into accrual status, reducing nonperforming loans by 49%.”
Ms. Dressel continued, “Columbia’s total loans for the first quarter reflected a $53.2 million increase, or 5%, from the fourth quarter of 2003, an encouraging development after nearly three years of soft loan demand. Our focus has been on increasing our share of the market by building full relationships with our customers, providing competitive products, a wide variety of delivery channels and striving to deliver the best possible service. In two independent surveys measuring customer satisfaction last year, Columbia Bank’s combined average score was 4.8 out of 5.0; the average for financial institutions is 4.2. We’re pleased that our customers view their experience with us as highly positive.”
“As part of our ongoing efforts to provide exceptional service and to increase market share, we have formed a new Equipment Finance division, scheduled to begin operations on May 1,” noted Ms. Dressel. “This department will offer commercial financing of equipment to businesses in the Northwest through a broker network and equipment vendor base and, in the near future, Columbia Bank branches. We were fortunate to hire a team very experienced in this line of business. We are excited about the potential to attract new businesses to the bank as well as meeting a need for our existing customers.”
At March 31, 2004, Columbia’s total assets were $1.80 billion, an increase of 3% from $1.74 billion at December 31, 2003. Total loans were $1.13 billion at March 31, 2004, up 5% from $1.08 billion at year-end 2003. Total deposits increased $58.8 million to $1.60 billion during the first quarter of 2004, an increase of 4% from December 31, 2003. Most of the growth occurred in core deposits.
First Quarter 2004 Operating Results
Net Interest Income
Net interest income increased $853,000, or 5%, in the first quarter 2004 compared to the first quarter 2003 due to a lower cost of funds and increased core deposits. The Company’s net interest margin decreased to 4.25% in the first quarter 2004, compared with 4.37% in the first quarter 2003.
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The net interest margin was impacted by a 25 basis point decrease (a basis point equals 1/100 of 1%) in the prime rate at the end of the second quarter 2003.Ms. Dressel stated, “Our net interest margin, however, increased to 4.25% from the third and fourth quarter 2003 levels of 4.16%, a positive development in this challenging interest rate environment.”
Average interest-earning assets increased to $1.64 billion, or 8%, during the first quarter of 2004, compared with $1.52 billion at the end of the first quarter 2003. The yield on average interest-earning assets decreased 61 basis points to 5.30% at March 31, 2004, from 5.91% at March 31, 2003. Average interest-bearing liabilities increased 4% to $1.29 billion from $1.24 billion last year. The cost of average interest-bearing liabilities decreased 56 basis points to 1.32% in the first quarter of 2004, compared to 1.88% in the first quarter of 2003.
Noninterest income
Total noninterest income decreased $439,000, or 8%, from a year ago. The decrease in noninterest income during the first quarter of 2004 as compared to first quarter 2003 was due to fewer residential mortgage loan originations resulting from the expected effect of rising long-term interest rates. This lower revenue was partially offset by merchant services income as well as service charges and other fees resulting from the growth in core deposits.
Noninterest expense
Noninterest expense for the first quarter of 2004 was $14.3 million, an increase of 4.8% from $13.7 million for the same period in 2003. This increase was primarily due to increased employee taxes, health insurance, other employment benefit expenses, and volume-related merchant services processing expenses. Compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002 required additional expenditures beginning during the first quarter of 2004, and these expenses are expected to continue for the remainder of the year.
The Company’s efficiency ratio was 63.36% for the first quarter 2004 compared with 61.84% for the same period in 2003. This increase was due to lower revenues from mortgage banking and increases in employment benefit expenses. Ms. Dressel noted, “We continue to challenge ourselves to operate more efficiently and achieve in the longer term an efficiency ratio below 60%, while still keeping in mind our core value of customer service.”
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Nonperforming Assets and Loan Loss Provision
The Company made a loan loss provision of $300,000 for first quarter 2004, compared with $1.6 million for first quarter 2003. For the quarters ended March 31, 2004 and 2003, net loan charge-offs amounted to $603,000 and $1.5 million, respectively. As reported for the fourth quarter 2003, a large credit was moved to nonaccrual status as a result of adverse changes in the borrower’s financial condition. Subsequent to the first quarter ended March 31, 2004, this loan was brought back into accrual status in early April 2004, reducing nonperforming loans by $6.2 million, or 49%.
The allowance for loan losses as a percentage of loans (excluding loans held for sale at each date) decreased to 1.76% at March 31, 2004 as compared to 1.88% at year-end 2003, due to a $53.2 million increase in loan balances. At quarter-end, the allowance for loan losses to nonperforming loans increased to 157% compared to 153% at December 31, 2003. Ms. Dressel said, “We are maintaining a conservative approach to credit quality and will continue to prudently add to our loan loss allowance to ensure we maintain adequate reserves as our loan totals grow.”
Columbia Banking System, Inc. is a Tacoma-based bank holding company whose wholly owned bank subsidiary is Columbia Bank, a Washington state-chartered full-service commercial bank with 34 banking offices in Pierce, King, Cowlitz, Kitsap and Thurston counties. Columbia’s stock trades on the Nasdaq Stock MarketSMunder the symbol COLB. Columbia Banking System’s Annual Meeting of Shareholders will be held at 1:00 PDT on April 28, 2004 at the Best Western Hotel & Conference Center, 5700 Pacific Highway East, Fife, Washington.
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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 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,” “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 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, national and international economic conditions are less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely
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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 reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which Columbia is engaged.
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FINANCIAL STATISTICS
Columbia Banking System, Inc.
Unaudited
(in thousands, except per share amounts)
Three Months Ended March 31, | ||||||||
| 2004 | 2003 | |||||||
Earnings | ||||||||
Net interest income | $ | 16,872 | $ | 16,019 | ||||
Provision for loan loss | 300 | 1,600 | ||||||
Noninterest income | 5,114 | 5,553 | ||||||
Noninterest expense | 14,349 | 13,694 | ||||||
Net income | 5,151 | 4,431 | ||||||
Per Share | ||||||||
Net income (basic) | $ | 0.38 | $ | 0.33 | ||||
Net income (diluted) | 0.38 | 0.33 | ||||||
Averages | ||||||||
Total assets | $ | 1,776,056 | $ | 1,673,047 | ||||
Interest-earning assets | 1,642,635 | 1,520,782 | ||||||
Loans | 1,126,363 | 1,175,935 | ||||||
Securities | 510,756 | 335,432 | ||||||
Deposits | 1,559,141 | 1,448,203 | ||||||
Core deposits | 1,108,794 | 956,909 | ||||||
Shareholders’ Equity | 154,981 | 135,160 | ||||||
Financial Ratios | ||||||||
Return on average assets | 1.17 | % | 1.07 | % | ||||
Return on average equity | 13.37 | 13.30 | ||||||
Net interest margin | 4.25 | 4.37 | ||||||
Efficiency ratio (tax equivalent)(1) | 63.36 | 61.84 | ||||||
Average equity to average assets | 8.73 | 8.08 | ||||||
| March 31, | December 31 | |||||||||||
| 2004 | 2003 | 2003 | ||||||||||
Period end | ||||||||||||
Total assets | $ | 1,801,353 | $ | 1,758,587 | $ | 1,744,347 | ||||||
Loans | 1,131,531 | 1,146,527 | 1,078,302 | |||||||||
Allowance for loan losses | 19,958 | 19,272 | 20,261 | |||||||||
Securities | 508,046 | 426,088 | 523,864 | |||||||||
Deposits | 1,603,378 | 1,489,039 | 1,544,626 | |||||||||
Core deposits | 1,147,246 | 1,006,121 | 1,098,237 | |||||||||
Shareholders’ equity | 163,016 | 137,594 | 150,372 | |||||||||
Book value per share | 12.02 | 10.32 | 11.19 | |||||||||
Nonperforming assets | ||||||||||||
Nonaccrual loans | $ | 12,715 | $ | 10,532 | $ | 13,255 | ||||||
Restructured loans | 130 | |||||||||||
Personal property owned | 635 | 836 | 691 | |||||||||
Real estate owned | 1,056 | 2,500 | 1,452 | |||||||||
Total nonperforming assets | $ | 14,406 | $ | 13,998 | $ | 15,398 | ||||||
Nonperforming loans to period-end loans | 1.12 | % | 0.93 | % | 1.23 | % | ||||||
Nonperforming assets to period-end assets | 0.80 | % | 0.80 | % | 0.88 | % | ||||||
Allowance for loan losses to period-end loans | 1.76 | % | 1.68 | % | 1.88 | % | ||||||
Allowance for loan losses to nonperforming loans | 156.96 | % | 180.75 | % | 152.86 | % | ||||||
Allowance for loan losses to nonperforming assets | 138.54 | % | 137.68 | % | 131.58 | % | ||||||
Net loan charge-offs | $ | 603 | (2) | $ | 1,499 | (3) | $ | 1,760 | (4) | |||
| (1) | Noninterest expense divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding nonrecurring income and expense, such as gains/losses on investment securities and net cost (gain) of OREO. |
| (2) | For the three months ended March 31, 2004. |
| (3) | For the three months ended March 31, 2003. |
| (4) | For the twelve months ended December 31, 2003. |
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QUARTERLY FINANCIAL STATISTICS
Columbia Banking System, Inc.
Unaudited
(in thousands, except per share amounts)
| Three Months Ended | ||||||||||||||||||||
Mar 31 2004 | Dec 31 2003 | Sept 30 2003 | Jun 30 2003 | Mar 31 2003 | ||||||||||||||||
Earnings | ||||||||||||||||||||
Net interest income | $ | 16,872 | $ | 16,245 | $ | 15,489 | $ | 16,114 | $ | 16,019 | ||||||||||
Provision for loan loss | 300 | 250 | 1,000 | 1,600 | ||||||||||||||||
Noninterest income | 5,114 | 5,464 | 6,032 | 5,735 | 5,553 | |||||||||||||||
Noninterest expense | 14,349 | 13,931 | 14,291 | 14,044 | 13,694 | |||||||||||||||
Net income | 5,151 | 5,431 | 4,895 | 4,765 | 4,431 | |||||||||||||||
Per Share | ||||||||||||||||||||
Net income [basic] | 0.38 | 0.41 | 0.37 | 0.36 | 0.33 | |||||||||||||||
Net income [diluted] | 0.38 | 0.40 | 0.36 | 0.35 | 0.33 | |||||||||||||||
Averages | ||||||||||||||||||||
Total assets | $ | 1,776,056 | $ | 1,724,573 | $ | 1,676,192 | $ | 1,709,468 | $ | 1,673,047 | ||||||||||
Interest-earning assets | 1,642,635 | 1,588,762 | 1,514,584 | 1,554,936 | 1,520,782 | |||||||||||||||
Loans | 1,126,363 | 1,081,513 | 1,115,637 | 1,143,862 | 1,175,935 | |||||||||||||||
Securities | 510,756 | 497,380 | 367,246 | 404,914 | 335,432 | |||||||||||||||
Deposits | 1,559,141 | 1,532,063 | 1,496,116 | 1,455,247 | 1,448,203 | |||||||||||||||
Core deposits | 1,108,794 | 1,082,843 | 1,044,124 | 982,948 | 956,909 | |||||||||||||||
Shareholders’ Equity | 154,981 | 145,593 | 143,208 | 140,417 | 135,160 | |||||||||||||||
Financial Ratios | ||||||||||||||||||||
Return on average assets | 1.17 | % | 1.25 | % | 1.16 | % | 1.12 | % | 1.07 | % | ||||||||||
Return on average equity | 13.37 | 14.80 | 13.56 | 13.61 | 13.30 | |||||||||||||||
Net interest margin | 4.25 | 4.16 | 4.16 | 4.26 | 4.37 | |||||||||||||||
Efficiency ratio (tax equivalent) | 63.36 | 62.84 | 64.36 | 62.43 | 61.84 | |||||||||||||||
Average equity to average assets | 8.73 | 8.44 | 8.54 | 8.21 | 8.08 | |||||||||||||||
Period end | ||||||||||||||||||||
Total assets | $ | 1,801,353 | $ | 1,744,347 | $ | 1,698,956 | $ | 1,724,798 | $ | 1,758,587 | ||||||||||
Loans | 1,131,531 | 1,078,302 | 1,071,201 | 1,098,675 | 1,146,527 | |||||||||||||||
Allowance for loan losses | 19,958 | 20,261 | 20,331 | 19,994 | 19,272 | |||||||||||||||
Securities | 508,046 | 523,864 | 433,460 | 385,971 | 426,088 | |||||||||||||||
Deposits | 1,603,378 | 1,544,626 | 1,518,844 | 1,542,387 | 1,489,039 | |||||||||||||||
Core deposits | 1,147,246 | 1,098,237 | 1,070,216 | 1,079,879 | 1,006,121 | |||||||||||||||
Shareholders’ equity | 163,016 | 150,372 | 144,528 | 144,871 | 137,594 | |||||||||||||||
Book value per share | 12.02 | 11.19 | 10.79 | 10.82 | 10.32 | |||||||||||||||
Nonperforming assets | ||||||||||||||||||||
Nonaccrual loans | $ | 12,715 | $ | 13,255 | $ | 6,806 | $ | 6,165 | $ | 10,532 | ||||||||||
Restructured loans | 50 | 130 | ||||||||||||||||||
Personal property owned | 635 | 691 | 700 | 769 | 836 | |||||||||||||||
Real estate owned | 1,056 | 1,452 | 1,503 | 2,547 | 2,500 | |||||||||||||||
Total nonperforming assets | $ | 14,406 | $ | 15,398 | $ | 9,009 | $ | 9,531 | $ | 13,998 | ||||||||||
Nonperforming loans to period-end loans | 1.12 | % | 1.23 | % | 0.64 | % | 0.57 | % | 0.93 | % | ||||||||||
Nonperforming assets to period-end assets | 0.80 | % | 0.88 | % | 0.53 | % | 0.55 | % | 0.80 | % | ||||||||||
Allowance for loan losses to period-end loans | 1.76 | % | 1.88 | % | 1.90 | % | 1.82 | % | 1.68 | % | ||||||||||
Allowance for loan losses to nonperforming loans | 156.96 | % | 152.86 | % | 298.72 | % | 321.71 | % | 180.75 | % | ||||||||||
Allowance for loan losses to nonperforming assets | 138.54 | % | 131.58 | % | 225.67 | % | 209.78 | % | 137.68 | % | ||||||||||
Net loan (recoveries) charge-offs | $ | 603 | $ | 70 | $ | (87 | ) | $ | 278 | $ | 1,499 | |||||||||
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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Columbia Banking System, Inc.
Three Months Ended March 31, | ||||||||
(Unaudited) (in thousands except per share) | 2004 | 2003 | ||||||
Interest Income | ||||||||
Loans | $ | 16,049 | $ | 18,612 | ||||
Securities available for sale | 5,039 | 3,097 | ||||||
Securities held to maturity | 28 | 44 | ||||||
Deposits with banks | 13 | 27 | ||||||
Total interest income | 21,129 | 21,780 | ||||||
Interest Expense | ||||||||
Deposits | 3,915 | 5,206 | ||||||
Federal Home Loan Bank advances | 80 | 277 | ||||||
Long-term obligations | 262 | 278 | ||||||
Total interest expense | 4,257 | 5,761 | ||||||
Net Interest Income | 16,872 | 16,019 | ||||||
Provision for loan losses | 300 | 1,600 | ||||||
Net interest income after provision for loan losses | 16,572 | 14,419 | ||||||
Noninterest Income | ||||||||
Service charges and other fees | 2,527 | 2,395 | ||||||
Mortgage banking | 503 | 1,081 | ||||||
Merchant services fees | 1,562 | 1,291 | ||||||
Loss on sale of investment securities, net | (6 | ) | ||||||
Bank owned life insurance (BOLI) | 250 | 398 | ||||||
Other | 278 | 388 | ||||||
Total noninterest income | 5,114 | 5,553 | ||||||
Noninterest Expense | ||||||||
Compensation and employee benefits | 7,786 | 7,172 | ||||||
Occupancy | 2,086 | 2,187 | ||||||
Merchant processing | 652 | 496 | ||||||
Advertising and promotion | 271 | 507 | ||||||
Data processing | 515 | 449 | ||||||
Legal & professional services | 628 | 514 | ||||||
Taxes, licenses & fees | 384 | 450 | ||||||
Net cost (gain) of other real estate owned | 12 | (5 | ) | |||||
Other | 2,015 | 1,924 | ||||||
Total noninterest expense | 14,349 | 13,694 | ||||||
Income before income taxes | 7,337 | 6,278 | ||||||
Provision for income taxes | 2,186 | 1,847 | ||||||
Net Income | $ | 5,151 | $ | 4,431 | ||||
Net income per common share: | ||||||||
Basic | $ | 0.38 | $ | 0.33 | ||||
Diluted | 0.38 | 0.33 | ||||||
Dividends paid per common share | $ | 0.05 | ||||||
Average number of common shares outstanding | 13,473 | 13,304 | ||||||
Average number of diluted common shares outstanding | 13,706 | 13,415 | ||||||
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CONSOLIDATED CONDENSED BALANCE SHEETS Columbia Banking System, Inc. (Unaudited) (in thousands) | March 31, 2004 | December 31, 2003 | |||||||||
Assets | |||||||||||
Cash and due from banks | $ | 46,889 | $ | 49,685 | |||||||
Interest-earning deposits with banks | 21,189 | 949 | |||||||||
Total cash and cash equivalents | 68,078 | 50,634 | |||||||||
Securities available for sale at fair value (amortized cost of $484,681 and $509,989 respectively) | 493,516 | 509,200 | |||||||||
Securities held to maturity (fair value of $4,510 and $4,708 respectively) | 4,353 | 4,548 | |||||||||
Federal Home Loan Bank stock | 10,177 | 10,116 | |||||||||
Loans held for sale | 15,738 | 10,640 | |||||||||
Loans, net of unearned income of ($2,461) and ($2,437) respectively | 1,131,531 | 1,078,302 | |||||||||
Less: allowance for loan losses | 19,958 | 20,261 | |||||||||
Loans, net | 1,111,573 | 1,058,041 | |||||||||
Interest receivable | 7,378 | 6,640 | |||||||||
Premises and equipment, net | 50,007 | 50,692 | |||||||||
Real estate owned | 1,056 | 1,452 | |||||||||
Other | 39,477 | 42,384 | |||||||||
Total Assets | $ | 1,801,353 | $ | 1,744,347 | |||||||
Liabilities and Shareholders’ Equity | |||||||||||
Deposits: | |||||||||||
Noninterest-bearing | $ | 326,818 | $ | 317,721 | |||||||
Interest-bearing | 1,276,560 | 1,226,905 | |||||||||
Total deposits | 1,603,378 | 1,544,626 | |||||||||
Federal Home Loan Bank advances | 16,500 | ||||||||||
Other borrowings | 1,000 | ||||||||||
Long-term subordinated debt | 22,196 | 22,180 | |||||||||
Other liabilities | 11,763 | 10,669 | |||||||||
Total liabilities | 1,638,337 | 1,593,975 | |||||||||
Shareholders’ equity: | |||||||||||
Preferred stock (no par value) | |||||||||||
Authorized, 2 million shares; none outstanding | |||||||||||
| Common stock (no par value) | March 31, 2004 | December 31, 2003 | |||||||||
Authorized shares | 60,032 | 60,032 | |||||||||
Issued and outstanding | 13,557 | 13,433 | 114,584 | 112,675 | |||||||
Retained earnings | 42,689 | 38,210 | |||||||||
Accumulated other comprehensive income — | |||||||||||
Unrealized gains (losses) on securities available for sale, net of tax | 5,743 | (513 | ) | ||||||||
Total shareholders’ equity | 163,016 | 150,372 | |||||||||
Total Liabilities and Shareholders’ Equity | $ | 1,801,353 | $ | 1,744,347 | |||||||
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