UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1999.
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________.
Commission File Number 0-20288
COLUMBIA BANKING SYSTEM, INC.
(Exact name of small business issuer as specified in its charter)
Washington 91-1422237
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1102 Broadway Plaza
Tacoma, Washington 98402
(Address of principal executive offices) (Zip Code)
(253) 305-1900
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the issuer: (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
The number of shares of the issuer's Common Stock outstanding at
October 29, 1999 was 10,601,471.
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Page
Item 1. Financial statements
Consolidated Statements of Operations - three months and
nine months ended September 30, 1999 and 1998 2
Consolidated Balance Sheets - September 30, 1999
and December 31, 1998 3
Consolidated Statements of Shareholders' Equity -
twelve months ended December 31, 1997 and 1998,
and nine months ended September 30, 1999 4
Consolidated Statements of Cash Flows -
nine months ended September 30, 1999 and 1998 5
Notes to consolidated financial statements 6
Item 2. Management Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3. Qualitative and Quantitative Disclosures about Market Risk 20
PART II -- OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 21
Signatures 21
1
CONSOLIDATED STATEMENTS OF OPERATIONS
Columbia Banking System, Inc.
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands except per share) 1999 1998 1999 1998
- - -----------------------------------------------------------------------------
Interest Income
Loans $20,219 $17,146 $56,246 $49,521
Securities available for sale 1,387 1,164 4,242 3,322
Securities held to maturity 67 87 221 333
Deposits with banks 52 612 540 1,125
- - -----------------------------------------------------------------------------
Total interest income 21,725 19,009 61,249 54,301
Interest Expense
Deposits 8,341 7,828 23,922 21,700
Federal Home Loan Bank advances 518 453 1,357 1,529
- - -----------------------------------------------------------------------------
Total interest expense 8,859 8,281 25,279 23,229
Net Interest Income 12,866 10,728 35,970 31,072
Provision for loan losses 600 450 1,800 1,450
- - -----------------------------------------------------------------------------
Net interest income after
provision for loan losses 12,266 10,278 34,170 29,622
Noninterest Income
Service charges and other fees 1,824 1,456 5,226 4,157
Mortgage banking 267 405 920 1,215
Other fees 2,107 1,273 5,417 3,153
- - -----------------------------------------------------------------------------
Total noninterest income 4,198 3,134 11,563 8,525
Noninterest Expense
Compensation and employee benefits 5,105 4,246 14,773 11,906
Occupancy 1,615 1,321 4,893 3,650
Advertising and promotion 407 388 1,321 1,125
Data processing 494 452 1,478 1,312
Other 3,888 3,049 11,129 8,558
- - -----------------------------------------------------------------------------
Total noninterest expense 11,509 9,456 33,594 26,551
Income before income taxes 4,955 3,956 12,139 11,596
Provision for income taxes 1,666 1,362 4,100 4,041
- - -----------------------------------------------------------------------------
Net Income $ 3,289 $ 2,594 $ 8,039 $ 7,555
=============================================================================
Net income per common share:
Basic $ 0.31 $ 0.25 $ 0.76 $ 0.72
Diluted 0.30 0.24 0.74 0.69
Average number of common shares
outstanding 10,598 10,547 10,593 10,528
Average number of diluted common
shares oustanding 10,843 10,875 10,856 10,872
See accompanying notes to consolidated financial statements.
2
CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
(Unaudited)
September 30, December 31,
(in thousands) 1999 1998
- - -----------------------------------------------------------------------------
Assets
Cash and due from banks $ 53,850 $ 53,602
Interest-earning deposits with banks 37,814 22,816
- - -----------------------------------------------------------------------------
Total cash and cash equivalents 91,664 76,418
Securities available for sale 82,606 93,726
Securities held to maturity 7,397 6,358
FHLB stock 6,243 5,550
Loans held for sale 9,300 10,023
Loans 974,744 828,639
Less: allowance for loan losses 9,809 9,002
- - -----------------------------------------------------------------------------
Loans, net 964,935 819,637
Interest Receivable 6,828 6,420
Premises and equipment, net 38,743 37,077
Real estate owned 1,263 901
Other 7,383 3,809
- - -----------------------------------------------------------------------------
Total Assets $1,216,362 $1,059,919
=============================================================================
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 238,099 $ 180,445
Interest-bearing 834,813 757,900
- - -----------------------------------------------------------------------------
Total Deposits 1,072,912 938,345
Federal Home Loan Bank advances 41,300 25,000
Other liabilities 6,075 7,008
- - ----------------------------------------------------------------------------
Total liabilities 1,120,287 970,353
Shareholders' equity:
Preferred stock (no par value)
Authorized, 2 million shares;
None outstanding
September 30, December 31,
Common stock (no par value) 1999 1998
--------- ----------
Authorized shares 47,250 47,250
Issued and outstanding 10,601 10,062 78,066 68,612
Retained Earnings 20,285 20,616
Unrealized gains (losses) on securities
available for sale, net of tax (2,276) 338
- - -----------------------------------------------------------------------------
Total shareholders' equity 96,075 89,566
- - -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $1,216,362 $1,059,919
=============================================================================
See accompanying notes to consolidated financial statements.
3
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Columbia Banking System, Inc.
(Unaudited)
Accumulated
Common stock Other Total
Number of Retained Comprehensive Shareholders'
(in thousands) Shares Amount Earnings Income (Loss) Equity
- - -----------------------------------------------------------------------------
Balance at
December 31, 1996 9,372 $62,980 $ 5,282 ($ 38) $68,224
Comprehensive income:
Net income for 1997 9,275
Change in unrealized gains and (losses)
on securities available for sale, net of tax 75
Total comprehensive income 9,350
Issuance of stock under stock option
and other plans 117 779 779
Issuance of shares of common stock--
5% stock dividend 391 4,142 (4,142)
- - -----------------------------------------------------------------------------
Balance at
December 31, 1997 9,880 67,901 10,415 37 78,353
Comprehensive income:
Net income for 1998 10,201
Change in unrealized gains and (losses)
on securities available for sale, net of tax 301
Total comprehensive income 10,502
Issuance of stock under stock option
and other plans 182 711 711
- - -----------------------------------------------------------------------------
Balance at
December 31, 1998 10,062 68,612 20,616 338 89,566
Comprehensive income:
Net income for 1999 8,039
Change in unrealized gains and (losses)
on securities available for sale, net of tax (2,614)
Total comprehensive income 5,425
Issuance of stock under stock option
and other plans (1) 35 1,084 1,084
Issuance of shares of common stock--
5% stock dividend 504 8,370 (8,370)
- - -----------------------------------------------------------------------------
Balance at
September 30, 1999 10,601 $78,066 $20,285 ($2,276) $96,075
=============================================================================
See accompanying notes to consolidated financial statements.
(1) Includes the amortization of restricted stock grants of which 33,075 shares
were issued and oustanding during 1996, and an additional 70,875 shares
were issued and oustanding during 1998.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Columbia Banking System, Inc.
(Unaudited)
Nine Months Ended
September 30,
(in thousands) 1999 1998
- - -----------------------------------------------------------------------------
Operating Activities
Net income $ 8,039 $ 7,555
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 1,800 1,450
Losses on real estate owned 4 31
Depreciation and amortization 1,727 1,512
Deferred income tax (benefit) expense (1,385) 5
Net (gains) losses on sale of assets (5) 2
(Increase) decrease in loans held for sale 723 (3,134)
Increase in interest receivable (408) (1,133)
Increase in interest payable 213 523
Net changes in other assets and liabilities (2,010) (255)
- - -----------------------------------------------------------------------------
Net cash provided by operating activities 8,698 6,556
Investing Activities
Proceeds from maturities of securities
available for sale 14,852 28,015
Purchases of securities available for sale (8,843) (67,079)
Proceeds from maturities of mortgage-backed
securities available for sale 460 5,070
Proceeds from maturities of securities
held to maturity 940 3,750
Purchases of securities held to maturity (1,980) (880)
Loans originated and acquired, net of
principal collected (147,314) (82,802)
Purchases of premises and equipment (4,081) (10,223)
Proceeds from disposal of premises and equipment 8 1
Proceeds from sale of real estate owned 562 200
Other, net (7)
- - -----------------------------------------------------------------------------
Net cash used by investing activities (145,403) (123,948)
Financing Activities
Net increase in deposits 134,567 140,521
Net increase in short-term borrowings 16,300
Repayment of FHLB advances and other long-term debt (7,000)
Proceeds from issuance of common stock 1,084 640
- - -----------------------------------------------------------------------------
Net cash provided by financing activities 151,951 134,161
- - -----------------------------------------------------------------------------
Increase in cash and cash equivalents 15,246 16,769
Cash and cash equivalents at beginning of period 76,418 75,712
- - -----------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 91,664 $ 92,481
=============================================================================
Supplemental information:
Cash paid for interest $ 25,066 $ 22,706
Cash paid for income taxes 4,950 3,969
Loans foreclosed and transferred to real estate owned 921 843
See accompanying notes to consolidated financial statements.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Columbia Banking System, Inc.
Columbia Banking System, Inc. (the "Company") is a registered bank holding
company whose wholly owned subsidiary, Columbia State Bank ("Columbia Bank"),
conducts a full-service commercial banking business. Headquartered in Tacoma,
Washington, the Company provides a full range of banking services to small
and medium-sized businesses, professionals and other individuals through
banking offices located in the Tacoma metropolitan area and contiguous parts
of the Puget Sound region of Washington, as well as the Longview and Woodland
communities in southwestern Washington. Substantially all of the Company's
loans, loan commitments and core deposits are geographically concentrated in
its service areas.
1. Basis of Presentation
The interim unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with instructions to Form 10-Q and Article 10 of Regulation
S-X. In the opinion of management, all adjustments consisting of normal
recurring accruals necessary for a fair presentation of the financial
condition and the results of operations for the interim periods included
herein have been made. The results of operations for the nine months ended
September 30, 1999, are not necessarily indicative of results to be
anticipated for the year ending December 31, 1999. Certain amounts in the
1998 financial statements have been reclassified to conform with the 1999
presentation. For additional information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1998.
2. Earnings Per Share
Earnings per share is computed using the weighted average number of common
and diluted common shares outstanding during the period. Basic EPS is
computed by dividing income available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
The only reconciling item affecting the calculation of earnings per share is
the inclusion of stock options affecting the shares outstanding in diluted
earnings per share of 245,000 and 329,000 for the three months ended
September 30, 1999 and 1998, respectively, and 263,000 and 344,000 for the
nine months ended September 30, 1999 and 1998, respectively.
3. Stock Dividend
On April 28, 1999, the Company announced a 5% stock dividend payable on
May 26, 1999, to shareholders of record on May 12, 1999. Average shares
outstanding and net income per share for all periods presented have been
retroactively adjusted to give effect to this transaction.
4. Prospective Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities." The Statement establishes
accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet measured at its fair value.
This Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. The FASB has delayed the implementation date of SFAS No. 133 for
one year to fiscal years beginning after June 15, 2000. The Company
currently has no activity in derivative instruments and hedging activities,
and does not expect adopting of SFAS No. 133 to have a material effect on
the financial statements.
6
5. Subsequent Event
On October 28, 1999, the Company announced that it has reached an agreement
to acquire CAPCO Financial Company, Inc., Bellevue, Washington, as a separate,
wholly owned subsidiary of Columbia Bank. CAPCO shareholders will receive
530,000 shares of common stock of CBSI. The acquisition is expected to be
completed during fourth quarter, 1999.
7
MANAGEMENT's DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Columbia Banking System, Inc.
This discussion should be read in conjunction with the unaudited consolidated
financial statements of Columbia Banking System, Inc. (the "Company") and
notes thereto presented elsewhere in this report. In the following
discussion, unless otherwise noted, references to increases or decreases in
average balances in items of income and expense for a particular period and
balances at a particular date refer to the comparison with corresponding
amounts for the period or date one year earlier.
This discussion contains certain forward-looking statements within the
meaning of the federal securities laws. Actual results and the timing of
certain events could differ materially from those discussed in the
forward-looking statements due to a number of factors. Specific factors
include, among others, the effect of interest rate changes, risk associated
with acquiring other banks, or opening and acquiring new branches,
controlling expenses, and general economic conditions. Readers are cautioned
not to place undue reliance on the forward-looking statements since they
reflect management's analysis only as of the date of the statement.
Overview
Columbia Banking System, Inc., a Washington corporation, is a registered bank
holding company whose wholly owned subsidiary, Columbia State Bank ("Columbia
Bank"), conducts a full-service commercial banking business. Headquartered
in Tacoma, Washington, the Company serves small and medium-sized businesses,
professionals and other individuals through 27 banking offices located in
the Tacoma metropolitan area and contiguous parts of the Puget Sound region
of Washington, as well as the Longview and Woodland communities in
southwestern Washington. At September 30, 1999, the Company had total assets
of $1.2 billion.
Management believes the ongoing consolidation among financial institutions in
Washington has created significant gaps in the ability of large banks
operating in Washington to serve certain customers, particularly the Company's
target customer base of small and medium-sized businesses, professionals and
other individuals. The Company's business strategy is to provide its
customers with the financial sophistication and breadth of products of a
regional bank while retaining the appeal and service level of a community
bank. Management believes that as a result of the Company's strong commitment
to highly personalized relationship-oriented customer service, its varied
products, its strategic branch locations and the long-standing community
presence of its managers, lending officers and branch personnel, it is well
positioned to attract new customers and to increase its market share of loans
and deposits.
The Company's goal over the next several years is to create a well-capitalized,
customer focused, Pacific Northwest banking institution with a significant
presence in selected markets. The Company intends to effect this growth
strategy through a combination of growth at existing branch offices, new
branch openings (usually following the hiring of an experienced branch
manager and/or lending officer with strong community ties and banking
relationships) and acquisitions. In particular, the Company anticipates
continued expansion in Pierce County, north into King County (the location
of Auburn and Bellevue), south into Thurston County (the location of the
state capitol, Olympia) and northwest into Kitsap County (the location of
Bremerton and Port Orchard). Expansion by acquisition into other markets
will be considered as promising situations arise. In order to fund its
lending activities and to allow for increased contact with customers, the
Company is establishing a branch system catering primarily to retail
depositors, supplemented by business customer deposits and other borrowings.
The Company believes this mix of funding sources will enable it to expand
lending activities rapidly while attracting a stable core deposit base. In
order to support its strategy of growth, without compromising its
personalized banking approach or its commitment to asset quality, the
Company has made significant investments in experienced branch,
8
lending and administrative personnel and has incurred significant costs
related to its branch expansion. Although the Company's expense ratios have
improved since 1993, management anticipates that the ratios will remain
relatively high by industry standards for the foreseeable future due to the
Company's aggressive growth strategy and emphasis on convenience and personal
service. Management is placing increased emphasis on control of noninterest
expense.
During the first nine months of 1999 Columbia Bank opened two new branches.
In January, the Company opened a newly constructed branch in Port Orchard,
its first office in Kitsap County. Additionally, a new West Olympia branch
opened in temporary quarters in April and is the Company's first Thurston
County location. Both branches are full service facilities. The Company's
future plans include new locations in Pierce, King, Kitsap and Thurston
counties of western Washington. Management continues to pursue opportunities
for expansion via a combination of internal and external growth by acquisition.
New branches normally do not contribute to net income for many months after
opening.
At September 30, 1999, the Company had 27 branches, 15 in Pierce County, 6
in King County, 4 in Cowlitz County, 1 in Kitsap County, and 1 in Thurston
County. Since beginning its major Pierce County expansion in August 1993,
the Company has grown from four to twenty-seven branches through a
combination of internal and external growth by acquisition.
In addition to the ongoing expansion of its branch network, the Company
continuously reviews new products and services to give its customers more
banking options. In addition, new technology and services are reviewed for
business development and cost saving purposes. During the first quarter of
1999, the Company opened an International Banking division located in
downtown Tacoma. The division serves local businesses and individuals
involved in international trade by providing letters of credit, wire
transfers, and foreign currency. During the first quarter of 1999, the
Company also made an equity investment in Manzanita Capital, Inc., a newly
formed holding company which owns all of the outstanding common stock of
The Trust Company of Washington, a non-depository trust and investment
company, and McAdams Wright Ragen, a full service brokerage and advisory
firm. Management expects that the services provided by these companies
will expand and compliment the services provided by Columbia Bank in a
cost-effective manner and will assist in carrying out the Company's growth
strategy.
The economy of the Company's principal market area, while primarily dependent
upon aerospace, foreign trade and natural resources, including agriculture
and timber, has become more diversified over the past decade as a result of
the success of software companies such as Microsoft and the establishment of
numerous research and biotechnology firms. The Washington economy and that
of the Puget Sound region generally have experienced strong growth and
stability in recent years.
Results of Operations
The results of operations of the Company are dependent to a large degree on
the Company's net interest income. The Company also generates noninterest
income through service charges and fees and income from mortgage banking
operations and merchant services. The Company's operating expenses consist
primarily of compensation and employee benefit expense, occupancy expense,
and merchant services and bank card expenses. Like most financial
institutions, the Company's interest income and cost of funds are affected
significantly by general economic conditions, particularly changes in market
interest rates, and by government policies and actions of regulatory
authorities.
Net income for the third quarter of 1999 was $3.3 million, or $0.30 per
diluted share, compared to $2.6 million, or $0.24 per diluted share, for the
third quarter of 1998, an increase in net income of 26.8%. Net income for
the nine months ended September 30, 1999, was $8.0 million, or $0.74 per
diluted share, an increase of 6.4% compared with $7.6 million, or $0.69 per
diluted share for the same period in 1998. The earnings increase for the
third quarter reflects significant growth in assets, loans and deposits as
compared to the quarter ended September 30, 1998, and to continued increases
9
in noninterest income. Net income for the nine months ended September 30,
1999, although up 6.4% over the same period in 1998, was negatively impacted
by first quarter 1999 results, with per diluted share earnings of $0.19 per
share, which resulted from increased expenses associated with branch and
infrastructure expansion, coupled with loan growth that was later and
slightly less than expected. Management has reemphasized cost controls as
a high priority and will continue taking steps to control expenses, while
continuing to pursue its growth strategy.
On April 28, 1999, the Company announced a 5% stock dividend payable on
May 26, 1999, to shareholders of record on May 12, 1999. Average shares
outstanding and net income per share for all periods presented have been
retroactively adjusted to give effect to this transaction.
Net Interest Income
Net interest income for the third quarter of 1999 increased 19.9% to
$12.9 million, from $10.7 million in the third quarter of 1998. For the
nine months ended September 30, 1999, net interest income increased 15.8%
to $36.0 million from $31.1 million for the same period in 1998. The
increase in net interest income was largely due to the overall growth of the
Company. Net interest income was favorably affected by average
interest-earning assets increasing more rapidly than average interest-bearing
liabilities, with the difference funded by noninterest-bearing deposits and
shareholders' equity. During the first nine months of 1999, average
interest-earning assets increased $177.8 million, while average
interest-bearing liabilities increased only $147.2 million, compared with
the same period in 1998. Net interest income is up 9% from the second
quarter to the third quarter of 1999.
Net interest margin (net interest income divided by average interest-earning
assets) increased to 4.83% in the third quarter of 1999 from 4.80% in the
third quarter of 1998. Average interest-earning assets grew to $1.1 billion
during the third quarter of 1999, compared with $889.3 million for the same
period in 1998. The average yield on interest-earning assets decreased 0.35%
to 8.14% during the third quarter of 1999 from 8.49% in the same period of
1998. In comparison, the average cost of interest-bearing liabilities
decreased 0.47% to 4.09% during the third quarter of 1999 from 4.56% in the
same period of 1998.
For the first nine months of 1999, net interest margin decreased to 4.75%
from 4.97% for the same period in 1998. Average interest-earning assets
grew to $1.0 billion during the first nine months of 1999, compared with
$837.8 million for the same period in 1998. The average yield on
interest-earning assets decreased 0.60% to 8.08% during the first nine
months of 1999 from 8.68% in the same period of 1998. In comparison, the
average cost of interest-bearing liabilities decreased 0.49% to 4.09%
during the first nine months of 1999 from 4.58% in the same period of 1998.
For the first nine months of 1999 compared to the same period in 1998, the
decrease in net interest margin is primarily due to decreasing interest
rates. Competition and declining interest rates have caused loan yields
to decline to a greater degree than corresponding decreases in deposit and
borrowing costs, causing the net interest margin to decrease. Interest
rates in general exhibited a downward trend during 1998 and were generally
stable during the first quarter of 1999, but exhibited a slight upward
trend during the second and third quarters of 1999. While the net interest
margin for the third quarter of 1999 is lower than the same period in 1998,
the net interest margin has increased to 4.83% from the second quarter 1999
net interest margin of 4.70%.
10
CONSOLIDATED AVERAGE BALANCES--NET CHANGES
Columbia Banking System, Inc.
Three Months Ended Increase Nine Months Ended Increase
September 30, (Decrease) September 30, (Decrease)
(in thousands) 1999 1998 Amount 1999 1998 Amount
- - --------------------------------------------------------------------------------
ASSETS
Loans $ 960,450 $763,587 $196,863 $900,349 $732,089 $168,260
Securities 97,088 81,624 15,464 100,269 78,495 21,774
Interest-earning
deposits with banks 3,964 44,049 (40,085) 14,985 27,218 (12,233)
- - --------------------------------------------------------------------------------
Total interest-earning
assets 1,061,502 889,260 172,242 1,015,603 837,802 177,801
Noninterest-earning
assets 94,667 79,798 14,869 90,277 73,372 16,905
- - --------------------------------------------------------------------------------
Total assets $1,156,169 $969,058 $187,111 $1,105,880 $911,174 $194,706
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing
deposits $ 822,150 $687,500 $134,650 $792,089 $641,284 $150,805
Federal Home Loan Bank
advances 37,467 32,828 4,639 33,591 37,187 (3,596)
- - --------------------------------------------------------------------------------
Total interest-bearing
liabilities $859,617 720,328 139,289 825,680 678,471 147,209
Noninterest-bearing
deposits 193,911 156,628 37,283 180,116 143,305 36,811
Other noninterest-bearing
liabilities 7,237 6,298 939 6,707 6,056 651
Shareholders' Equity 95,404 85,804 9,600 93,377 83,342 10,035
- - --------------------------------------------------------------------------------
Total liabilities and
shareholders'equity $1,156,169 $969,058 $187,111 $1,105,880 $911,174 $194,706
================================================================================
Noninterest Income
Noninterest income increased $1.1 million, or 34%, in the third quarter of
1999, and $3.0 million, or 36%, for the first nine months of 1999, compared
with the same periods in 1998, respectively, despite decreases in mortgage
banking income. Increases during the third quarter and the first nine months
of 1999, were primarily centered in account service charges and merchant
services income. In general, increases in account service charges and
merchant services are due to the overall growth of the Company.
Noninterest Expense
Total noninterest expense increased $2.1 million, or 21.7%, for the third
quarter of 1999, and $7.0 million, or 26.5%, for the first nine months of
1999, compared with the same period in 1998. The increases were primarily
due to personnel costs associated with the Company's expansion as well as
occupancy, merchant services and bank card, and other expenses. The Company's
efficiency ratio (noninterest expense, excluding unusual and nonrecurring
items, divided by the sum of net interest income plus noninterest income,
excluding unusual and nonrecurring items) was 67.4% and 70.7% for the third
quarter and first nine months of 1999, respectively, compared to 68.2% and
67.1% for the same periods in 1998. There were no material unusual and
nonrecurring items for the three and nine months ending September 30, 1999
and 1998. The increase during the first nine months of 1999 is primarily
due to slower than expected loan growth in the early first quarter of 1999
and expenses associated with branch and infrastructure expansion. Early in
1999, the Company reemphasized cost controls as shown by a decrease in the
efficiency ratio to 67.4% in the third quarter and a 3% increase in
noninterest expense during the third and second quarters of 1999, compared
with 8% in the first quarter of 1999.
11
Income Taxes
For the third quarter and first nine months of 1999, the Company recorded
income tax provisions of $1.7 million and $4.1 million, respectively.
Credit Risk Management
The extension of credit in the form of loans or other credit substitutes to
individuals and businesses is a major portion of the Company's principal
business activity. Company policies and applicable laws and regulations
require risk analysis as well as ongoing portfolio and credit management.
The Company manages its credit risk through lending limit constraints,
credit review, approval policies and extensive, ongoing internal monitoring.
The Company also manages credit risk through diversification of the loan
portfolio by type of loan, type of industry, aggregation of debt limits to
a single borrower and the type of borrower.
In analyzing its existing portfolio, the Company reviews its consumer and
residential loan portfolios by risk rating each loan and analyzing their
performance as a pool of loans since no single loan is individually
significant or judged by its risk rating size or potential risk of loss.
In contrast, the monitoring process for the commercial business, real estate
construction, and commercial real estate portfolios includes periodic reviews
of individual loans with risk ratings assigned to each loan and performance
judged on a loan by loan basis. The Company reviews these loans to assess
the ability of the borrower to service all of its interest and principal
obligations and as a result the risk rating may be adjusted accordingly. In
the event that full collection of principal and interest is not reasonably
assured, the loan is appropriately downgraded and, if warranted, placed on
non-accrual status even though the loan may be current as to principal and
interest payments.
Loan policies, credit quality criteria, portfolio guidelines and other
controls are established under the guidance of the Company's chief credit
officer and approved, as appropriate, by the Board. Credit Administration,
together with appropriate loan committees, has the responsibility for
administering the credit approval process. As another part of its control
process, the Company uses an independent internal credit review and
examination function to provide assurance that loans and commitments are
made and maintained as prescribed by its credit policies. This includes a
review of documentation when the loan is initially extended and subsequent
on-site examination to ensure continued performance and proper risk
assessment.
Lending Activities
The Company is a full service commercial bank, which originates a wide
variety of loans. Consistent with the trend begun in 1993, the Company
continues to have success originating commercial business and commercial
real estate loans.
12
The following table sets forth the Company's loan portfolio composition by
type of loan for the dates indicated:
Septembe 30, % of December 31 % of
(in thousands) 1999 Total 1998 Total
- - -----------------------------------------------------------------------------
Commercial $404,861 41.5% $332,638 40.1%
Real estate:
One-to four-family residential 59,034 6.1 61,132 7.4
Five or more family residential and
Commercial properties 359,001 36.8 291,868 35.2
- - -----------------------------------------------------------------------------
Total real estate 418,035 42.9 353,000 42.6
Real estate construction:
One-to four-family residential 22,373 2.3 26,444 3.2
Five or more family residential and
Commercial properties 35,027 3.6 23,213 2.8
- - -----------------------------------------------------------------------------
Total real estate construction 57,400 5.9 49,657 6.0
Consumer 96,529 9.9 94,572 11.4
- - -----------------------------------------------------------------------------
Sub-total loans 976,825 100.2 829,867 100.1
Less: Deferred loan fees (2,082) (0.2) (1,228) (0.1)
- - -----------------------------------------------------------------------------
Total loans $974,743 100.0% $828,639 100.0%
=============================================================================
Loans held for sale $ 9,300 $ 10,023
=============================================================================
Total loans increased $146.1 million, or 17.6%, to $974.7 million from
year-end 1998. Commercial and five or more family residential and
commercial real estate were the categories contributing majority of the
increase.
Commercial and Private Banking Lending
Commercial loans increased $72.2 million, or 22%, to $404.9 million from
year-end 1998, representing 41.5% of total loans. Net growth in commercial
loans slowed during the first quarter of 1999 and rebounded during the
second and third quarters of 1999. Growth during the first nine months of
1999 was favorably affected by continued emphasis on maintaining and
expanding an aggressive calling campaign whereby loan officers concentrated
on traditional commercial business loans and related borrowing needs.
Management is committed to provide competitive commercial lending in the
Company's primary market areas. The Company expects to continue to expand
its commercial lending products and to emphasize in particular its
relationship banking with businesses, business owners and professional
individuals.
Real Estate Lending
One- to Four-Family Residential: Residential one- to four-family loans
decreased $2.1 million to $59.0 million at September 30, 1999, representing
6.1% of total loans, compared with $61.1 million at December 31, 1998. The
decrease is attributable to maturities and prepayments of the portfolio.
These loans are used by the Company to collateralize advances from the FHLB.
The Company's underwriting standards require that one- to four-family
portfolio loans generally be owner-occupied and that loan amounts not exceed
80% (90% with private mortgage insurance) of the appraised value or cost,
whichever is lower, of the underlying collateral at origination. Generally,
management's policy is to originate for sale to third parties residential
loans secured by properties located within the Company's primary market areas.
13
Five or More Family Residential and Commercial Properties: The Company makes
multi-family and commercial real estate loans in its primary market areas.
Multi-family and commercial real estate lending increased to $359.0 million
at September 30, 1999, representing 36.8% of total loans, from $291.9 million
at December 31, 1998. The increase in multi-family and commercial real
estate lending in the first nine months reflects a mix of owner occupied
and income property transactions. Generally, multi-family and commercial
real estate loans are made only to borrowers who have existing banking
relationships with the Company. Management believes that volumes in this
category of loans will increase at a slower rate during the balance of 1999.
The Company's underwriting standards generally require that the loan-to-value
ratio for multi-family and commercial loans not exceed 75% of appraised value
or cost, whichever is lower, and that commercial properties maintain debt
coverage ratios (net operating income divided by annual debt servicing) of
1.2 or better. Underwriting standards can be influenced by competition.
The Company endeavors to maintain the highest practical underwriting
standards while balancing the need to remain competitive in its lending
practices.
Construction Loans
The Company originates a variety of real estate construction loans. One- to
four-family residential construction loans are originated for the
construction of custom homes (where the home buyer is the borrower) and
provides financing to builders for the construction of pre-sold homes and
speculative residential construction. Construction loans on one- to
four-family residences decreased to $22.4 million at September 30, 1999,
representing 2.3% of total loans, from $26.4 million at December 31, 1998.
Multi-family and commercial real estate construction loans increased to $35.0
million at September 30, 1999, representing 3.6% of total loans, from
$23.2 million at December 31, 1998. The increase is the result of several
large and small construction projects primarily with borrowers who have
existing banking relationships with the Company.
The Company endeavors to limit its construction lending risk through
adherence to strict underwriting procedures.
Consumer Lending
At September 30, 1999, the Company had $96.5 million of consumer loans
outstanding, representing 9.9% of total loans, as compared with $94.6 million
at December 31, 1998. The balance at December 31, 1998, included
approximately $10.0 million of short-term loans made to a group of
individuals in connection with a singular transaction which matured in early
January 1999. Consumer loans made by the Company include automobile loans,
boat and recreational vehicle financing, home equity and home improvement
loans and miscellaneous personal loans.
14
Nonperforming Assets
Nonperforming assets consist of: (i) nonaccrual loans, which are loans placed
on a nonaccrual basis generally when the loan becomes past due 90 days or
when there are otherwise serious doubts about the collectibility of principal
or interest; (ii) restructured loans, for which concessions, including the
reduction of interest rates below a rate otherwise available to that borrower
or the deferral of interest or principal, have been granted due to the
borrower's weakened financial condition (interest on restructured loans is
accrued at the restructured rates when it is anticipated that no loss of
original principal will occur); (iii) accruing loans which are contractually
past due ninety days or more as to interest or principal payments.
The following tables set forth, at the dates indicated, information with
respect to nonaccrual loans, restructured loans, total nonperforming loans
(nonaccrual loans plus restructured loans), real estate owned, and total
nonperforming assets of the Company:
September 30, December 31,
(in thousands) 1999 1998
- - -----------------------------------------------------------------------------
Nonaccrual:
One-to four-family residential $ 140 $ 722
Commercial real estate 780 1,542
Commercial business 1,039 1,214
Consumer 232 125
- - -----------------------------------------------------------------------------
Total 2,191 3,603
Restructured:
One-to four-family residential 15
One-to four-family residential construction 1,485 1,768
Commercial business 68
- - -----------------------------------------------------------------------------
Total 1,553 1,783
- - -----------------------------------------------------------------------------
Total nonperforming loans $ 3,744 $ 5,386
=============================================================================
Real estate owned $ 1,263 $ 901
- - -----------------------------------------------------------------------------
Total nonperforming assets $ 5,007 $ 6,287
=============================================================================
The consolidated financial statements are prepared according to the accrual
basis of accounting. This includes the recognition of interest income on
the loan portfolio, unless a loan is placed on a nonaccrual basis, which
occurs when there are serious doubts about the collectibility of principal
or interest. The policy of the Company generally is to discontinue the
accrual of interest on all loans past due 90 days or more and place them
on nonaccrual status.
Nonperforming loans decreased to $3.7 million, or 0.38% of total loans
(excluding loans held for sale), at September 30, 1999, from $5.4 million,
or 0.65% of total loans at December 31, 1998 due principally to decreases
in the commercial real estate and business categories.
Restructured loans totaled $1.6 million at September 30, 1999, of which the
balance of the residential construction loan category $1.485 million is
currently on nonaccrual.
Nonaccrual loans and other nonperforming assets are centered in a small
number of lending relationships which management considers to be adequately
reserved. All nonperforming loans are to Washington businesses. Columbia
Bank is not involved with loans to foreign companies and foreign countries.
15
Real estate owned, which is comprised of foreclosed real estate loans,
increased to $1.3 million at September 30, 1999, from $901,000 at December
31, 1998. During 1999, the Company foreclosed on $964,000 of loans
collateralized by real estate and transferred the real estate to REO. Also,
the Company reduced REO by $602,000, with proceeds of $562,000 from sales
and net losses on sales of $4,000, and write-downs of $36,000. At September
30, 1999, REO consisted of two foreclosed properties.
Total nonperforming assets decreased by approximately $1.3 million, at
September 30, 1999 from its balance of $6.3 million at December 31, 1998.
As a percentage of period-end assets at September 30, 1999, nonperforming
assets decreased to 0.41% from 0.59% of period-end assets at December 31,
1998.
Provision and Allowance for Loan Losses
The Company maintains an allowance for loan losses to absorb losses inherent
in the loan portfolio. The size of the allowance is determined through
quarterly assessments of the probable estimated losses in the loan portfolio.
The Company's methodology for making such assessments and determining the
adequacy of the allowance includes the following key elements:
1. Formula based allowances using factors derived from the historical
performance of the portfolio for the past 5 years
2. Specific allowances for identified problem loans and/or portfolio segments
3. Unallocated allowance
In addition, the allowance incorporates the results of measuring impaired
loans as provided in the Statement of Financial Accounting Standards ("SFAS")
No. 114, "Accounting by Creditors for Impairment of a Loan", and SFAS No. 118,
which amended SFAS No. 114. These accounting standards prescribe the
measurement methods, income recognition and disclosures concerning impaired
loans.
On a quarterly basis (semi-annual in the case of economic and business
conditions reviews) the senior credit officers of the Company review with
Executive Management and the Board of Directors the various additional
factors that management considers when determining the adequacy of the
allowance. These factors include the following as of the applicable balance
sheet date:
1. Existing general economic and business conditions affecting the Company's
market place
2. Credit quality trends, including trends in nonperforming loans
3. Collateral values
4. Seasoning of the loan portfolio
5. Bank regulatory examination results
6. Findings of internal credit examiners
7. Duration of current business cycle
The allowance is increased by provisions charged to operations, and is
reduced by loans charged off, net of recoveries. While management believes
it uses the best information available to determine the allowance for loan
losses, unforeseen market conditions could result in adjustments to the
allowance, and net income could be significantly affected, if circumstances
differ substantially from the assumptions used in determining the allowance.
16
The allowance for loan losses at September 30, 1999 increased $807,000 to
$9.8 million from $9.0 million at December 31, 1998. The allowance for loan
losses as a percentage of loans (excluding loans held for sale at each date)
at September 30, 1999 decreased to 1.01% from 1.09% of loans at December 31,
1998. The decrease in the allowance as a percentage of loans was due
primarily to the $146.1 million growth in loans during the first nine months
of 1999.
Net loan charge-offs amounted to $993,000 for the first nine months of 1999
compared with net loan charge-offs of $617,000 for the same period in 1998.
During the first nine months of 1999, the Company set aside a $1.8 million
provision for loan losses as compared with $1.5 million for the same period
in 1998.
The following table sets forth at the dates indicated the changes in the
Company's allowance for loan losses:
Three Months Ended Nine Months Ended
September 30, September 30,
(in thousands) 1999 1998 1999 1998
- - ----------------------------------------------------------------------------
Beginning balance $9,981 $8,877 $9,002 $8,440
Charge offs:
One-to-four family residential
construction (274) (275)
Commercial business (519) (47) (800) (542)
Consumer (62) (66) (94) (309)
- - ----------------------------------------------------------------------------
Total charge-offs (855) (113) (1,169) (851)
Recoveries:
Commercial business 55 32 113 158
Consumer 28 27 63 76
- - ----------------------------------------------------------------------------
Total recoveries 83 59 176 234
- - ----------------------------------------------------------------------------
Net (charge-offs) recoveries (772) (54) (993) (617)
Provision charged to expense 600 450 1,800 1,450
- - ----------------------------------------------------------------------------
Ending balance $9,809 $9,273 $9,809 $9,273
============================================================================
The allowance for loan losses equaled 262% of nonperforming loans and 196%
of nonperforming assets at September 30, 1999, compared with 178% of
nonperforming loans and 154% of nonperforming assets at September 30, 1998.
Liquidity and Sources of Funds
The Company's primary sources of funds are customer deposits, advances from
the Federal Home Loan Bank of Seattle (the "FHLB") and brokered deposits.
These funds, together with loan repayments, loan sales, retained earnings,
equity and other borrowed funds, are used to make loans, to acquire
securities and other assets and to fund continuing operations.
Deposit Activities
The Company's deposit products include a wide variety of transaction accounts,
savings accounts and time deposit accounts. Total deposits increased
$134.6 million, or 14.3%, to $1.1 billion at September 30, 1999 from $938.3
million at December 31, 1998. Deposits were temporarily affected by
approximately $30.0 million deposited at the end of September and transferred
out a few days later.
The Company is establishing a branch system catering primarily to retail
depositors, supplemented by business banking customer deposits and other
borrowings. While that stable core deposit base is being established,
management's strategy for funding growth has been to make use of brokered
and other wholesale deposits. Management anticipates continued use of such
deposits, as needed, to fund increasing loan demand. Brokered and other
17
wholesale deposits (excluding public deposits) increased $20.0 million to
$27.3 million, or 2.5% of total deposits at September 30, 1999. The
brokered deposits have varied maturities from 1 month to 5 years.
Borrowings
The Company relies on short-term and long-term advances from the FHLB to
supplement its funding sources. FHLB advances increased $16.3 million to
$41.3 million at September 30, 1999 compared to a balance of $25.0 million
at December 31, 1998. All of the increase is in short-term FHLB advances
for funding strong third quarter loan growth. FHLB advances are secured by
one- to four-family real estate mortgages and certain other assets.
Capital
Shareholders' equity at September 30, 1999, was $96.1 million compared with
$89.6 million at December 31, 1998. The increase is due primarily to net
income of $8.0 million during the first nine months of 1999. Shareholders'
equity was 7.90% and 8.45% of total period-end assets at September 30, 1999,
and December 31, 1998, respectively.
Banking regulations require bank holding companies and banks to maintain a
minimum "leverage" ratio of core capital to adjusted quarterly average total
assets of at least 3%. At September 30, 1999, the Company's leverage ratio
was 8.50%, compared with 8.72% at December 31, 1998. In addition, banking
regulators have adopted risk-based capital guidelines, under which risk
percentages are assigned to various categories of assets and off-balance
sheet items to calculate a risk-adjusted capital ratio. Tier I capital
generally consists of common shareholders' equity (which does not include
unrealized gains and losses on securities), less goodwill and certain
identifiable intangible assets, while Tier II capital includes the allowance
for loan losses and subordinated debt, both subject to certain limitations.
Regulatory minimum risk-based capital guidelines require Tier I capital of
4% of risk-adjusted assets and total capital (combined Tier I and Tier II)
of 8%. The Company's Tier I and total capital ratios were 9.29% and 10.22%,
respectively, at September 30, 1999, compared with 9.89% and 10.88%,
respectively, at December 31, 1998.
The Federal Deposit Insurance Corporation (the "FDIC") established the
qualifications necessary to be classified as a "well-capitalized" bank,
primarily for assignment of FDIC insurance premium rates. To qualify as
"well-capitalized," banks must have a Tier I risk-adjusted capital ratio of
at least 6%, a total risk-adjusted capital ratio of at least 10%, and a
leverage ratio of at least 5%. Columbia Bank qualified as "well-capitalized"
at September 30, 1999. Federal laws generally bar institutions which are
not well-capitalized from accepting brokered deposits. The FDIC has issued
rules which prohibit under-capitalized institutions from soliciting or a
ccepting such deposits. Adequately capitalized institutions are allowed to
solicit such deposits, but only to accept them if a waiver is obtained from
the FDIC.
Applicable federal and Washington state regulations restrict capital
distributions, including dividends by institutions such as Columbia Bank.
Such restrictions are tied to the institution's capital levels after giving
effect to distributions. The Company's ability to pay cash dividends is
substantially dependent upon receipt of dividends from the Bank. The Company
presently intends to retain earnings to support anticipated growth.
Accordingly, the Company does not intend to pay cash dividends on its common
stock in the foreseeable future.
On April 28, 1999, the Company announced a 5% stock dividend payable on
May 26, 1999, to shareholders of record on May 12, 1999. Average shares
outstanding, net income per share and book value per share for all periods
presented have been retroactively adjusted to give effect to this transaction.
18
Impact of the Year 2000 Issue (Y2K)
This is a Year 2000 Readiness Disclosure Statement
Many existing computer systems, including the systems used by the Company,
use only two digits to identify a year in the date field. These programs
were designed and developed without considering the impact of the upcoming
change in the century. If not corrected, many computer applications could
fail or create erroneous results by or at the Year 2000. Financial
institutions, such as Columbia, are dependent on many types of automated
computer systems for their day to day operations. The failure of any of
theses systems to recognize the year 2000 could have a material effect on
the Company's business, results of operations, and/or financial condition.
The Company's State of Readiness: The Company established a project team,
which has developed a project plan that insured the Company is Y2K compliant
well before December 31, 1999. The project plan incorporated five phases:
awareness, assessment, renovation, validation, and implementation. The
Company currently is prepared for the year 2000.
The awareness phase is ongoing and incorporates monthly updates to the Board
of Directors, management, and staff. In addition, shareholders and customers
are informed through mailings, financial reports and through the Company's
website. The Y2K project team meets monthly. Loan officers were trained
in interviewing and surveying credit customers on the state of readiness of
their businesses and continue those activities.
The Company has completed its assessment of all of its computer systems,
hardware, software, networks, telecommunications, ATM, property, and
equipment that could potentially be either directly or indirectly affected
by Y2K. The Company has identified all vendors that supply services and/or
products that could be considered critical to day-to-day operations to
determine if they are Y2K compatible. The Company has identified all
customers who have a total borrowing relationship of $250,000 or more or
otherwise have the potential to adversely affect the Company's asset quality
or profitability if they do not become Y2K compliant and is updating the
status of those relationships quarterly.
Based on its assessment, the Company has essentially completed renovating all
systems and equipment needing Y2K upgrades. In early October 1998, the
Company's data processing provider advised the Company that it had
successfully converted its systems to Y2K compatibility. Testing has been
completed and the Company's data processing system is fully compliant at
March 31, 1999. All other systems and equipment have also been upgraded.
The validation process involves testing all systems and equipment for Y2K
compatibility. Bank hardware has been tested and the Company has replaced
obsolete equipment as part of its normal business operations.
The implementation phase incorporates the development of contingency plans
for the century date change. The Company has developed a year 2000
contingency plan, a credit risk mitigation plan, a liquidity contingency
plan, and ongoing disclosures and inquiries to customers and vendors.
The Costs to Address the Company's Year 2000 Issues: The Company has expended
approximately $64,000 in staff time and travel expenses in addressing the Y2K
issue. Equipment upgrades cost approximately $562,000. Much of the
Company's equipment, such as PCs, has been upgraded as part of normal
business operations. The Company is relatively new and the majority of its
hardware and software are recent purchases or are being upgraded to meet
growth demands. The Company moved into a new state-of-the-art operations
center in August 1998. The center included the installation of new item
processing hardware and software, a new voice response unit, a new wire
transfer system, and a new optical storage system, all of which are Y2K
compatible. Management believes that expenses relating to meeting the
Company's Y2K challenges will not have a material effect on its operations
or financial performance.
19
The Risks of the Company's Year 2000 Issues: Although the Company has
prepared its operations for the century change, there can be no assurance
that forces beyond its control will not impact its operations. The Company
purchases systems, equipment, and data processing services from vendors and
suppliers. It also depends on many other vendors for various services
needed for day-to-day operations. The Company's customers could also be
impacted adversely by the century change and thereby impact the financial
performance of the Company. In spite of the Company's diligent efforts in
assuring that its outside suppliers, vendors and customers are Y2K ready,
there can be no assurance that when the century changes, certain systems,
technology and equipment of Columbia, its vendors and its customers will not
be impacted and consequently impact the operations of the Company.
The Company's Contingency Plan: The Company has developed a comprehensive
Year 2000 contingency plan. Although the Company has taken precaution to
assure its technology is Y2K ready, it will continue to address possible
emergency scenarios. Extensive testing of the contingency plans for all
critical systems has been completed.
The Company's new state-of-the-art operations center has a generator backup
to run the entire facility. All branch offices have special procedures in
order to operate without the usual telecommunications links so that, in the
event of a telecommunications failure, the Company is able to process its
data through a remote site.
Qualitative and Quantitative Disclosures about Market Risk
A number of measures are used to monitor and manage interest rate risk,
including income simulations and interest sensitivity (gap) analyses. An
income simulation model is the primary tool used to assess the direction and
magnitude of changes in net interest income resulting from changes in
interest rates. Key assumptions in the model include prepayment speeds on
certain assets, cash flows and maturities of other investment securities,
loan and deposit volumes and pricing. These assumptions are inherently
uncertain and, as a result, the model cannot precisely estimate net interest
income or precisely predict the impact of higher or lower interest rates on
net interest income. Actual results will differ from simulated results due
to timing, magnitude and frequency of interest rate changes and changes in
market conditions and management strategies, among other factors. At
September 30, 1999, based on the measures used to monitor and manage interest
rate risk, there has not been a material change in the Company's interest
rate risk since December 31, 1998. For additional information, refer to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" referenced in the Company's annual report on Form 10-K for the
year ended December 31, 1998.
20
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) On November 4, 1999, the Company filed Form 8-K announcing it has
approved a management succession plan effective January 1, 2000,
and the Company also announced it has reached an agreement to
acquire CAPCO Financial Company, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COLUMBIA BANKING SYSTEM, INC.
(Registrant)
Date November 8, 1999 By /s/ W. W. Philip
----------------------------- --------------------------------
W. W. Philip
Chairman and
Chief Executive Officer
Date November 8, 1999 By /s/ Gary R. Schminkey
----------------------------- ---------------------------------
Gary R. Schminkey
Executive Vice President and
Chief Financial Officer
21