COLB 06.30.13 Pub.10-Q
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________________________ 
FORM 10-Q
________________________________________________________ 
(Mark One)
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2013.
¨
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 issuer as specified in its charter)
 ________________________________________________________ 
Washington
 
91-1422237
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification Number)
 
 
 
1301 “A” Street
Tacoma, Washington
 
98402-2156
(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 registrant: (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  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
ý
 
Accelerated filer
 
¨
 
 
 
 
 
 
 
Non-accelerated filer
 
¨
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
The number of shares of common stock outstanding at July 31, 2013 was 51,259,911.
 

Table of Contents

TABLE OF CONTENTS
 
 
 
Page
 
PART I — FINANCIAL INFORMATION
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
 
PART II — OTHER INFORMATION
 
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
 
Item 5.
 
 
 
Item 6.
 
 
 
 
 
i

Table of Contents

PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
(Unaudited)
 
 
 
 
 
 
June 30,
2013
 
December 31,
2012
ASSETS
 
(in thousands)
Cash and due from banks
 
$
154,407

 
$
124,573

Interest-earning deposits with banks
 
38,302

 
389,353

Total cash and cash equivalents
 
192,709

 
513,926

Securities available for sale at fair value (amortized cost of $1,519,951 and $969,359, respectively)
 
1,507,900

 
1,001,665

Federal Home Loan Bank stock at cost
 
33,139

 
21,819

Loans held for sale
 
2,150

 
2,563

Loans, excluding covered loans, net of unearned income of ($86,062) and ($7,767), respectively
 
4,181,018

 
2,525,710

Less: allowance for loan and lease losses
 
51,698

 
52,244

Loans, excluding covered loans, net
 
4,129,320

 
2,473,466

Covered loans, net of allowance for loan losses of ($26,135) and ($30,056), respectively
 
338,661

 
391,337

Total loans, net
 
4,467,981

 
2,864,803

FDIC loss-sharing asset
 
67,374

 
96,354

Interest receivable
 
23,118

 
14,268

Premises and equipment, net
 
158,776

 
118,708

Other real estate owned ($12,854 and $16,311 covered by FDIC loss-share, respectively)
 
37,193

 
26,987

Goodwill
 
346,373

 
115,554

Other intangible assets, net
 
29,170

 
15,721

Other assets
 
204,582

 
113,967

Total assets
 
$
7,070,465

 
$
4,906,335

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Deposits:
 
 
 
 
 
 
 
Noninterest-bearing
 
$
1,961,244

 
$
1,321,171

Interest-bearing
 
3,786,617

 
2,720,914

Total deposits
 
5,747,861

 
4,042,085

Federal Home Loan Bank advances
 
179,680

 
6,644

Securities sold under agreements to repurchase
 
25,000

 
25,000

Other liabilities
 
87,250

 
68,598

Total liabilities
 
6,039,791

 
4,142,327

Commitments and contingent liabilities
 

 

Shareholders’ equity:
 
 
 
 
 
 
 
 
June 30,
2013
 
December 31,
2012
 
 
 
 
Preferred stock (no par value)
 
 
 
 
 
 
 
Authorized shares
2,000

 
—

 
 
 
 
Issued and outstanding
9

 
—

 
2,217

 
—

Common stock (no par value)
 
 
 
 
 
 
 
Authorized shares
63,033

 
63,033

 
 
 
 
Issued and outstanding
51,237

 
39,686

 
857,615

 
581,471

Retained earnings
 
180,052

 
162,388

Accumulated other comprehensive income (loss)
 
(9,210
)
 
20,149

Total shareholders’ equity
 
1,030,674

 
764,008

Total liabilities and shareholders’ equity
 
$
7,070,465

 
$
4,906,335

See accompanying Notes to unaudited Consolidated Financial Statements.

1
Table of Contents

CONSOLIDATED STATEMENTS OF INCOME
Columbia Banking System, Inc.
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2013
 
2012
 
2013
 
2012
 
 
(in thousands except per share amounts)
Interest Income
 
 
 
 
 
 
 
 
Loans
 
$
74,837

 
$
54,498

 
$
122,865

 
$
116,275

Taxable securities
 
4,890

 
4,951

 
9,124

 
10,196

Tax-exempt securities
 
2,508

 
2,495

 
4,806

 
5,020

Federal funds sold and deposits in banks
 
33

 
170

 
234

 
335

Total interest income
 
82,268

 
62,114

 
137,029

 
131,826

Interest Expense
 
 
 
 
 
 
 
 
Deposits
 
1,054

 
1,561

 
2,143

 
3,340

Federal Home Loan Bank advances
 
(699
)
 
734

 
(628
)
 
1,484

Prepayment charge on Federal Home Loan Bank advances
 
1,548

 
—

 
1,548

 
—

Other borrowings
 
376

 
118

 
495

 
238

Total interest expense
 
2,279

 
2,413

 
3,558

 
5,062

Net Interest Income
 
79,989

 
59,701

 
133,471

 
126,764

Provision for loan and lease losses
 
2,000

 
3,750

 
1,000

 
8,250

Provision (recapture) for losses on covered loans
 
(1,712
)
 
11,688

 
(732
)
 
27,373

Net interest income after provision (recapture) for loan and lease losses
 
79,701

 
44,263

 
133,203

 
91,141

Noninterest Income
 
 
 
 
 
 
 
 
Service charges and other fees
 
13,560

 
7,436

 
21,154

 
14,613

Merchant services fees
 
2,013

 
2,095

 
3,864

 
4,113

Investment securities gains, net
 
92

 
—

 
462

 
62

Bank owned life insurance
 
1,008

 
719

 
1,706

 
1,430

Change in FDIC loss-sharing asset
 
(13,137
)
 
(168
)
 
(23,620
)
 
(1,836
)
Other
 
3,272

 
1,746

 
4,900

 
3,020

Total noninterest income
 
6,808

 
11,828

 
8,466

 
21,402

Noninterest Expense
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
35,657

 
20,966

 
57,310

 
42,961

Occupancy
 
7,543

 
5,091

 
12,296

 
10,424

Merchant processing
 
852

 
930

 
1,709

 
1,803

Advertising and promotion
 
1,160

 
1,119

 
2,030

 
2,001

Data processing and communications
 
3,638

 
2,551

 
6,218

 
4,764

Legal and professional fees
 
5,504

 
1,829

 
7,554

 
3,438

Taxes, licenses and fees
 
1,204

 
1,115

 
2,591

 
2,470

Regulatory premiums
 
1,177

 
925

 
2,034

 
1,785

Net cost (benefit) of operation of other real estate owned
 
(2,828
)
 
(377
)
 
(5,329
)
 
533

Amortization of intangibles
 
1,693

 
1,119

 
2,722

 
2,269

FDIC clawback liability expense (recovery)
 
199

 
(208
)
 
430

 
(234
)
Other
 
8,705

 
4,765

 
12,988

 
11,963

Total noninterest expense
 
64,504

 
39,825

 
102,553

 
84,177

Income before income taxes
 
22,005

 
16,266

 
39,116

 
28,366

Income tax provision
 
7,414

 
4,367

 
12,349

 
7,565

Net Income
 
$
14,591

 
$
11,899

 
$
26,767

 
$
20,801

Earnings per common share
 
 
 
 
 
 
 
 
Basic
 
$
0.28

 
$
0.30

 
$
0.59

 
$
0.52

Diluted
 
$
0.28

 
$
0.30

 
$
0.58

 
$
0.52

Dividends paid per common share
 
$
0.10

 
$
0.22

 
$
0.20

 
$
0.59

Weighted average number of common shares outstanding
 
50,788

 
39,260

 
45,099

 
39,228

Weighted average number of diluted common shares outstanding
 
52,125

 
39,308

 
45,758

 
39,306



See accompanying Notes to unaudited Consolidated Financial Statements.

2
Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Columbia Banking System, Inc.
(Unaudited)
 
 
 
Three Months Ended
 
 
June 30,
 
 
2013
 
2012
 
 
(in thousands)
Net income as reported
 
$
14,591

 
$
11,899

Unrealized gain (loss) from securities:
 
 
 
 
Net unrealized holding gain (loss) from available for sale securities arising during the period, net of tax of $14,116 and ($840)
 
(25,930
)
 
2,370

Reclassification adjustment of net gain from sale of available for sale securities included in income, net of tax of $33 and $0
 
(59
)
 
—

Net unrealized gain (loss) from securities, net of reclassification adjustment
 
(25,989
)
 
2,370

Pension plan liability adjustment:
 
 
 
 
Amortization of unrecognized net actuarial loss included in net periodic pension cost, net of tax of ($32) and ($17)
 
60

 
3

Pension plan liability adjustment, net
 
60

 
3

Total comprehensive income (loss)
 
$
(11,338
)
 
$
14,272

 
 
Six Months Ended
 
 
June 30,
 
 
2013
 
2012
 
 
(in thousands)
Net income as reported
 
$
26,767

 
$
20,801

Unrealized gain (loss) from securities:
 
 
 
 
Net unrealized holding gain (loss) from available for sale securities arising during the period, net of tax of ($15,473) and $87
 
(28,423
)
 
725

Reclassification adjustment of net gain from sale of available for sale securities included in income, net of tax of $163 and $23
 
(299
)
 
(39
)
Net unrealized gain (loss) from securities, net of reclassification adjustment
 
(28,722
)
 
686

Pension plan liability adjustment:
 
 
 
 
Net unrealized loss from unfunded defined benefit plan liability arising during the period, net of tax of $412 and $0
 
(756
)
 
—

Amortization of unrecognized net actuarial loss included in net periodic pension cost, net of tax of ($65) and ($24)
 
119

 
16

Pension plan liability adjustment, net
 
(637
)
 
16

Total comprehensive income (loss)
 
$
(2,592
)
 
$
21,503

See accompanying Notes to unaudited Consolidated Financial Statements.


3
Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Columbia Banking System, Inc.
(Unaudited)
 
  
 
Preferred Stock
 
Common Stock
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
Shareholders’
Equity
 
 
Number of
Shares
 
Amount
 
Number of
Shares
 
Amount
 
 
 
(in thousands)
Balance at January 1, 2012
 
—

 
$
—

 
39,506

 
$
579,136

 
$
155,069

 
$
25,133

 
$
759,338

Net income
 
—

 
—

 
—

 
—

 
20,801

 
—

 
20,801

Other comprehensive income
 
—

 
—

 
—

 
—

 
—

 
702

 
702

Issuance of common stock - stock option and other plans
 
—

 
—

 
19

 
314

 
—

 
—

 
314

Issuance of common stock - restricted stock awards, net of canceled awards
 
—

 
—

 
130

 
908

 
—

 
—

 
908

Cash dividends paid on common stock
 
—

 
—

 
—

 
—

 
(23,351
)
 
—

 
(23,351
)
Balance at June 30, 2012
 
—

 
$
—

 
39,655

 
$
580,358

 
$
152,519

 
$
25,835

 
$
758,712

Balance at January 1, 2013
 
—

 
$
—

 
39,686

 
$
581,471

 
$
162,388

 
$
20,149

 
$
764,008

Net income
 
—

 
—

 
—

 
—

 
26,767

 
—

 
26,767

Other comprehensive loss
 
—

 
—

 
—

 
—

 
—

 
(29,359
)
 
(29,359
)
Issuance of preferred stock, common stock and warrants
 
9

 
2,217

 
11,380

 
273,964

 
—

 
—

 
276,181

Activity in deferred compensation plan
 
—

 
—

 
—

 
517

 
—

 
—

 
517

Issuance of common stock - stock option and other plans
 
—

 
—

 
43

 
774

 
—

 
—

 
774

Issuance of common stock - restricted stock awards, net of canceled awards
 
—

 
—

 
144

 
1,280

 
—

 
—

 
1,280

Purchase and retirement of common stock
 
—

 
—

 
(16
)
 
(391
)
 
—

 
—

 
(391
)
Preferred dividends
 
—

 
—

 
—

 
—

 
(10
)
 
—

 
(10
)
Cash dividends paid on common stock
 
—

 
—

 
—

 
—

 
(9,093
)
 
—

 
(9,093
)
Balance at June 30, 2013
 
9

 
$
2,217

 
51,237

 
$
857,615

 
$
180,052

 
$
(9,210
)
 
$
1,030,674


See accompanying Notes to unaudited Consolidated Financial Statements.

4
Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS
Columbia Banking System, Inc.
(Unaudited)
 
 
Six Months Ended June 30,
 
 
2013
 
2012
 
 
(in thousands)
Cash Flows From Operating Activities
 
 
 
 
Net Income
 
$
26,767

 
$
20,801

Adjustments to reconcile net income to net cash provided by operating activities
 
 
 
 
Provision for loan and lease losses on noncovered and covered loans
 
268

 
35,623

Stock-based compensation expense
 
1,280

 
908

Depreciation, amortization and accretion
 
22,527

 
30,478

Investment securities gain, net
 
(462
)
 
(62
)
Net realized gain on sale of other assets
 
(73
)
 
(41
)
Net realized gain on sale of other real estate owned
 
(6,291
)
 
(6,277
)
Write-down on other real estate owned
 
664

 
5,812

Net change in:
 
 
 
 
Loans held for sale
 
413

 
60

Interest receivable
 
(8,850
)
 
(273
)
Interest payable
 
(12
)
 
(275
)
Other assets
 
6,285

 
(7,424
)
Other liabilities
 
(12,662
)
 
(4,945
)
Net cash provided by operating activities
 
29,854

 
74,385

Cash Flows From Investing Activities
 
 
 
 
Loans originated and acquired, net of principal collected
 
(194,322
)
 
(63,362
)
Purchases of:
 
 
 
 
Securities available for sale
 
(162,018
)
 
(87,346
)
Premises and equipment
 
(8,071
)
 
(11,630
)
Proceeds from:
 
 
 
 
FDIC reimbursement on loss-sharing asset
 
6,387

 
34,313

Sales of securities available for sale
 
166,881

 
3,845

Principal repayments and maturities of securities available for sale
 
167,736

 
108,517

Sales of other assets
 
806

 
9

Sales of covered other real estate owned
 
13,814

 
18,381

Sales of other real estate and other personal property owned
 
6,076

 
11,899

Capital improvements on other real estate properties
 
—

 
(11
)
Acquisition of intangible assets
 
(913
)
 
—

Net cash paid in acquisition
 
(154,170
)
 
—

Other investing activities
 
(1,026
)
 
—

Net cash (used in) provided by investing activities
 
(158,820
)
 
14,615

Cash Flows From Financing Activities
 
 
 
 
Net increase (decrease) in deposits
 
(177,631
)
 
15,288

Proceeds from:
 
 
 
 
Federal Home Loan Bank advances
 
756,100

 
—

Federal Reserve Bank borrowings
 
50

 
—

Exercise of stock options
 
774

 
314

Payments for:
 
 
 
 
Repayment of Federal Home Loan Bank advances
 
(711,000
)
 
(5,727
)
Repayment of Federal Reserve Bank borrowings
 
(50
)
 
—

Common stock dividends
 
(9,093
)
 
(23,351
)
Preferred stock dividends
 
(10
)
 
—

Repayment of long-term subordinated debt
 
(51,000
)
 
—

Purchase and retirement of common stock
 
(391
)
 
—

Net cash used in financing activities
 
(192,251
)
 
(13,476
)
Increase (Decrease) in cash and cash equivalents
 
(321,217
)
 
75,524

Cash and cash equivalents at beginning of period
 
513,926

 
294,289

Cash and cash equivalents at end of period
 
$
192,709

 
$
369,813

Supplemental Information:
 
 
 
 
Cash paid during the year for:
 
 
 
 
Cash paid for interest
 
$
2,155

 
$
5,337

Cash paid for income tax
 
$
9,589

 
$
—

Non-cash investing and financing activities
 
 
 
 
Assets acquired in business combinations
 
$
2,523,842

 
$
—

Liabilities assumed in business combinations
 
$
2,093,491

 
$
—

Loans transferred to other real estate owned
 
$
9,307

 
$
11,789

Share-based consideration issued for acquisitions
 
$
276,181

 
$
—

See accompanying Notes to unaudited Consolidated Financial Statements.

5
Table of Contents

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Columbia Banking System, Inc.
1.
Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. The consolidated financial statements include the accounts of the Company, and its wholly owned banking subsidiary Columbia Bank (the “Bank”), and West Coast Trust. All intercompany transactions and accounts have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. The results of operations for the six months ended June 30, 2013 are not necessarily indicative of results to be anticipated for the year ending December 31, 2013. The accompanying interim unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes contained in the Company’s 2012 Annual Report on Form 10-K.
Significant Accounting Policies
The significant accounting policies used in preparation of our consolidated financial statements are disclosed in our 2012 Annual Report on Form 10-K. There have not been any changes in our significant accounting policies compared to those contained in our 2012 Form 10-K disclosure for the year ended December 31, 2012, except for the adoption of ASU 2012-06 as noted below.
2.
Accounting Pronouncements Recently Issued
In July 2013, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. The Update clarifies when it is appropriate for an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU 2013-11 is effective for interim and annual periods beginning after December 15, 2013. Early adoption is permitted. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date, however, retrospective application is also permitted. Adoption of the new guidance is not expected to have a significant impact on the Company's consolidated financial statements.
In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The Update requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component and to present either on the face of the statement where net income is presented, or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income, but only if the amount reclassified is required to be reclassified to net income in its entirety in the same reporting period. The amendments are effective for annual and interim reporting periods beginning on or after December 15, 2012. The Company adopted the ASU 2013-02 reporting requirements during the interim reporting period beginning on January 1, 2013 with no impact to the Company's financial condition or results of operations. See Note 12 to the Consolidated Financial Statements of this report for new disclosures related to accumulated other comprehensive income.
In October 2012, the FASB issued ASU 2012-06, Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government-Assisted Acquisition of a Financial Institution. ASU 2012-06 clarifies that when a reporting entity recognizes an indemnification asset as a result of a government-assisted acquisition of a financial institution and there is a subsequent change in the amount of cash flows expected to be collected on the indemnified asset, the reporting entity should subsequently measure the indemnification asset on the same basis as the underlying loans by taking into account the contractual limitations of the Loss-Sharing Agreement ("LSA"). For amortization of changes in value, the reporting entity should use the term of the indemnification agreement if it is shorter than the term of the acquired loans. ASU 2012-06 is effective for interim and annual periods beginning after December 15, 2012. The Company adopted the ASU as of January 1, 2013. As a result of the adoption of the ASU, an additional $5.7 million of indemnification asset amortization was recorded during the six months ending June 30, 2013, resulting in a reduction of $3.7 million in net income and $0.08 in earnings per share.

6
Table of Contents

3.
Business Combinations
West Coast Bancorp
On April 1, 2013, the Company completed its acquisition of West Coast Bancorp ("West Coast"). The Company acquired 100% of the voting equity interests of West Coast. The primary reason for the acquisition was to expand the Company's geographic footprint consistent with its ongoing growth strategy.
 The assets acquired and liabilities assumed have been accounted for under the acquisition method of accounting (formerly the purchase method).  The assets and liabilities, both tangible and intangible, were recorded at their estimated fair values as of the April 1, 2013 acquisition date.  Initial accounting for deferred taxes, the mortgage repurchase liability and payment system intangible were incomplete as of June 30, 2013. The amounts currently recognized in the financial statements have been determined provisionally as the completion of a fair value analysis for these items is still in progress.
The application of the acquisition method of accounting resulted in the recognition of goodwill of $230.8 million and a core deposit intangible of $15.3 million, or 0.89% of core deposits. The goodwill represents the excess purchase price over the estimated fair value of the net assets acquired. The goodwill is not deductible for income tax purposes.
The table below summarizes the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed:
 
 
April 1, 2013
 
 
(in thousands)
 
 
 
Purchase price as of April 1, 2013
 
$
540,791

Recognized amounts of identifiable assets acquired and (liabilities assumed), at fair value:
 
 
Cash and cash equivalents
 
$
110,440

Investment securities
 
730,842

Federal Home Loan Bank stock
 
11,824

Acquired loans
 
1,407,798

Premises and equipment
 
35,884

Other real estate owned
 
14,708

Core deposit intangible
 
15,257

Other assets
 
76,710

Deposits
 
(1,883,407
)
Federal Home Loan Bank advances
 
(128,885
)
Junior subordinated debentures
 
(51,000
)
Other liabilities
 
(30,199
)
Total fair value of identifiable net assets
 
309,972

Goodwill
 
$
230,819

See Note 9, Goodwill and other intangible assets, for further discussion of the accounting for goodwill and other intangible assets.
The operating results of the Company include the operating results produced by the acquired assets and assumed liabilities for the period April 1, 2013 to June 30, 2013. Disclosure of the amount of West Coast's revenue and net income (excluding integration costs) included in Columbia's consolidated income statement is impracticable due to the integration of the operations and accounting for this acquisition.
The following table presents certain unaudited pro forma information for illustrative purposes only, for the six month periods ended June 30, 2013 and 2012 as if West Coast had been acquired on January 1, 2012. The unaudited estimated pro forma information combines the historical results of West Coast with the Company's consolidated historical results and includes certain adjustments reflecting the estimated impact of certain fair value adjustments for the respective periods. The pro forma information is not indicative of what would have occurred had the acquisition occurred on January 1, 2012. In particular, no adjustments have been made to eliminate the impact of other-than-temporary impairment losses and losses recognized on the

7
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sale of securities that may not have been necessary had the investments securities been recorded at fair value as of January 1, 2012. The unaudited pro forma information does not consider any changes to the provision for credit losses resulting from recording loan assets at fair value. Additionally, Columbia expects to achieve further operating cost savings and other business synergies, including revenue growth, as a result of the acquisition which are not reflected in the pro forma amounts that follow. As a result, actual amounts will differ from the unaudited pro forma information presented.
 
 
Unaudited Pro Forma
 
 
Six Months Ended June 30,
 
 
2013
 
2012
 
 
(in thousands)
Total revenues (net interest income plus noninterest income)
 
$
177,970

 
$
217,964

Net income
 
$
43,256

 
$
36,809

Earnings per share - basic
 
$
0.85

 
$
0.71

Earnings per share - diluted
 
$
0.83

 
$
0.71

In connection with the West Coast acquisition, Columbia recognized $10.0 million of acquisition-related expenses for the six month period ended June 30, 2013. The acquisition-related expenses were excluded from the table above.
4.
Securities
The following table summarizes the amortized cost, gross unrealized gains and losses and the resulting fair value of securities available for sale:
 
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair Value
 
 
(in thousands)
June 30, 2013
 
 
 
 
 
 
 
 
U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations
 
$
815,604

 
$
10,798

 
$
(18,127
)
 
$
808,275

State and municipal securities
 
338,554

 
10,885

 
(5,618
)
 
343,821

U.S. government agency and government-sponsored enterprise securities
 
339,447

 
373

 
(9,526
)
 
330,294

U.S. government securities
 
21,067

 
—

 
(708
)
 
20,359

Other securities
 
5,279

 
18

 
(146
)
 
5,151

Total
 
$
1,519,951

 
$
22,074

 
$
(34,125
)
 
$
1,507,900

December 31, 2012
 

 

 

 

U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations
 
$
561,076

 
$
16,719

 
$
(5,426
)
 
$
572,369

State and municipal securities
 
265,070

 
20,893

 
(388
)
 
285,575

U.S. government agency and government-sponsored enterprise securities
 
120,085

 
851

 
(435
)
 
120,501

U.S. government securities
 
19,804

 
39

 
(15
)
 
19,828

Other securities
 
3,324

 
104

 
(36
)
 
3,392

Total
 
$
969,359

 
$
38,606

 
$
(6,300
)
 
$
1,001,665


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Table of Contents

The scheduled contractual maturities of investment securities available for sale at June 30, 2013 are presented as follows:
 
 
June 30, 2013
 
 
Amortized Cost
 
Fair Value
 
 
(in thousands)
Due within one year
 
$
17,562

 
$
17,827

Due after one year through five years
 
268,332

 
267,579

Due after five years through ten years
 
444,103

 
436,192

Due after ten years
 
784,675

 
781,150

Other securities with no stated maturity
 
5,279

 
5,152

Total investment securities available-for-sale
 
$
1,519,951

 
$
1,507,900

The following table summarizes, as of June 30, 2013, the carrying value of securities pledged as collateral to secure public deposits, borrowings and other purposes as permitted or required by law:
 
 
Carrying Amount
 
 
(in thousands)
To Washington and Oregon State to secure public deposits
 
$
329,101

To Federal Reserve Bank to secure borrowings
 
44,113

Other securities pledged
 
46,173

Total securities pledged as collateral
 
$
419,387

The following table shows the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2013 and December 31, 2012:  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or More
 
Total
 
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
(in thousands)
June 30, 2013
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations
 
$
487,032

 
$
(17,773
)
 
$
10,156

 
$
(354
)
 
$
497,188

 
$
(18,127
)
State and municipal securities
 
133,440

 
(5,570
)
 
806

 
(48
)
 
134,246

 
(5,618
)
U.S. government agency and government-sponsored enterprise securities
 
292,729

 
(9,526
)
 
—

 
—

 
292,729

 
(9,526
)
U.S. government securities
 
20,358

 
(708
)
 
—

 
—

 
20,358

 
(708
)
Other securities
 
2,297

 
(13
)
 
2,822

 
(133
)
 
5,119

 
(146
)
Total
 
$
935,856

 
$
(33,590
)
 
$
13,784

 
$
(535
)
 
$
949,640

 
$
(34,125
)
 
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2012
 
 
 
 
 
 
 
 
 
 
 
 
U.S. government agency and government-sponsored enterprise mortgage-backed securities and collateralized mortgage obligations
 
$
167,739

 
$
(5,090
)
 
$
12,204

 
$
(336
)
 
$
179,943

 
$
(5,426
)
State and municipal securities
 
20,413

 
(383
)
 
210

 
(5
)
 
20,623

 
(388
)
U.S. government agency and government-sponsored enterprise securities
 
56,600

 
(435
)
 
—

 
—

 
56,600

 
(435
)
U.S. government securities
 
9,914

 
(15
)
 
—

 
—

 
9,914

 
(15
)
Other securities
 
—

 
—

 
964

 
(36
)
 
964

 
(36
)
Total
 
$
254,666

 
$
(5,923
)
 
$
13,378

 
$
(377
)
 
$
268,044

 
$
(6,300
)

9
Table of Contents

At June 30, 2013, there were 76 U.S. government agency and government-sponsored enterprise mortgage-backed securities & collateralized mortgage obligations securities in an unrealized loss position, of which one was in a continuous loss position for 12 months or more. The decline in fair value is attributable to changes in interest rates relative to where these investments fall within the yield curve and their individual characteristics. Because the Company does not intend to sell these securities nor does the Company consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis, which may be upon maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2013.
At June 30, 2013, there were 152 state and municipal government securities in an unrealized loss position, of which two were in a continuous loss position for 12 months or more. The unrealized losses on state and municipal securities were caused by interest rate changes or widening of market spreads subsequent to the purchase of the individual securities. Management monitors published credit ratings of these securities for adverse changes. As of June 30, 2013, none of the rated obligations of state and local government entities held by the Company had a below investment grade credit rating. Because the credit quality of these securities are investment grade and the Company does not intend to sell these securities nor does the Company consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis, which may be upon maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2013.
At June 30, 2013, there were 30 U.S. government agency and government-sponsored enterprise securities in an unrealized loss position, of which none were in a continuous loss position for 12 months or more. The decline in fair value is attributable to changes in interest rates relative to where these investments fall within the yield curve and their individual characteristics. Because the Company does not currently intend to sell these securities nor does the Company consider it more likely than not that it will be required to sell these securities before the recovery of amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired at June 30, 2013.
At June 30, 2013, there were five U.S. government securities in an unrealized loss position, none of which were in a continuous loss position for 12 months or more. The decline in fair value is attributable to changes in interest rates relative to where these investments fall within the yield curve and their individual characteristics. Because the Company does not currently intend to sell this security nor does the Company consider it more likely than not that it will be required to sell this security before the recovery of amortized cost basis, which may be maturity, the Company does not consider this investment to be other-than-temporarily impaired at June 30, 2013.
At June 30, 2013, there were two other securities in an unrealized loss position, of which one security, a mortgage-backed securities fund, was in a continuous unrealized loss position for 12 months or more. The decline in fair value is attributable to changes in interest rates and the additional risk premium investors are demanding for investment securities with these characteristics. The Company does not consider this investment to be other-than-temporarily impaired at June 30, 2013 as it has the intent and ability to hold the investment for sufficient time to allow for recovery in the market value.
5.
Noncovered Loans
Noncovered loans include loans originated through our branch network and loan departments as well as acquired loans that are not subject to FDIC loss-sharing agreements.

10
Table of Contents

The following is an analysis of the noncovered loan portfolio by major types of loans (net of unearned income):
 
 
June 30,
2013
 
December 31,
2012
Noncovered loans:
 
(in thousands)
Commercial business
 
$
1,587,572

 
$
1,155,158

Real estate:
 
 
 
 
One-to-four family residential
 
97,974

 
43,922

Commercial and multifamily residential
 
2,038,278

 
1,061,201

Total real estate
 
2,136,252

 
1,105,123

Real estate construction:
 
 
 
 
One-to-four family residential
 
53,173

 
50,602

Commercial and multifamily residential
 
110,226

 
65,101

Total real estate construction
 
163,399

 
115,703

Consumer
 
379,858

 
157,493

Less: Net unearned income
 
(86,063
)
 
(7,767
)
Total noncovered loans, net of unearned income
 
4,181,018

 
2,525,710

Less: Allowance for loan and lease losses
 
(51,698
)
 
(52,244
)
Total noncovered loans, net
 
$
4,129,320

 
$
2,473,466

Loans held for sale
 
$
2,150

 
$
2,563

At June 30, 2013 and December 31, 2012, the Company had no material foreign activities. Substantially all of the Company’s loans and unfunded commitments are geographically concentrated in its service areas within the states of Washington and Oregon.
The Company has granted loans to officers and directors of the Company and related interests. These loans are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and do not involve more than the normal risk of collectability. The aggregate dollar amount of these loans was $14.2 million at June 30, 2013 and December 31, 2012. During the first six months of 2013, advances and repayments on related party loans totaled $1.3 million.
At June 30, 2013 and December 31, 2012, $564.1 million and $443.4 million of commercial and residential real estate loans were pledged as collateral on Federal Home Loan Bank borrowings and additional borrowing capacity. The Company has also pledged $47.9 million and $13.8 million of commercial loans to the Federal Reserve Bank for additional borrowing capacity at June 30, 2013 and December 31, 2012, respectively.
The following is an analysis of noncovered, nonaccrual loans as of June 30, 2013 and December 31, 2012:
 
 
June 30, 2013
 
December 31, 2012
 
 
Recorded
Investment
Nonaccrual
Loans
 
Unpaid Principal
Balance
Nonaccrual
Loans
 
Recorded
Investment
Nonaccrual
Loans
 
Unpaid Principal
Balance
Nonaccrual
Loans
Noncovered loans:
 
(in thousands)
Commercial business
 
 
 
 
 
 
 
 
Secured
 
$
14,386

 
$
37,620

 
$
9,037

 
$
17,821

Unsecured
 
263

 
6,279

 
262

 
262

Real estate:
 
 
 
 
 
 
 
 
One-to-four family residential
 
3,805

 
6,740

 
2,349

 
2,672

Commercial & multifamily residential
 
 
 
 
 
 
 
 
Commercial land
 
3,116

 
6,503

 
4,076

 
7,491

Income property
 
8,546

 
11,898

 
8,520

 
10,815

Owner occupied
 
5,383

 
8,380

 
6,608

 
7,741

Real estate construction:
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
Land and acquisition
 
3,830

 
8,382

 
3,084

 
6,704

Residential construction
 
923

 
5,858

 
1,816

 
2,431

Consumer
 
3,358

 
17,456

 
1,643

 
1,940

Total
 
$
43,610

 
$
109,116

 
$
37,395

 
$
57,877


11
Table of Contents

 The following is an aging of the recorded investment of the noncovered loan portfolio as of June 30, 2013 and December 31, 2012:
 
 
 
Current
Loans
 
30 - 59
Days
Past Due
 
60 - 89
Days
Past Due
 
Total
Past Due
 
Nonaccrual
Loans
 
Total Loans
June 30, 2013
 
(in thousands)
Noncovered loans:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial business
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
$
1,472,621

 
$
10,265

 
$
2,094

 
$
12,359

 
$
14,386

 
$
1,499,366

Unsecured
 
75,496

 
3,198

 
44

 
3,242

 
263

 
79,001

Real estate:
 
 
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
89,103

 
2,115

 
31

 
2,146

 
3,805

 
95,054

Commercial & multifamily residential
 
 
 
 
 
 
 
 
 
 
 
 
Commercial land
 
130,559

 
—

 
—

 
—

 
3,116

 
133,675

Income property
 
1,126,753

 
2,372

 
68

 
2,440

 
8,546

 
1,137,739

Owner occupied
 
724,178

 
947

 
133

 
1,080

 
5,383

 
730,641

Real estate construction:
 
 
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
Land and acquisition
 
16,420

 
—

 
—

 
—

 
3,830

 
20,250

Residential construction
 
30,913

 
320

 
—

 
320

 
923

 
32,156

Commercial & multifamily residential
 
 
 
 
 
 
 
 
 
 
 
 
Income property
 
71,194

 
—

 
—

 
—

 
—

 
71,194

Owner occupied
 
37,134

 
598

 
—

 
598

 
—

 
37,732

Consumer
 
339,145

 
1,375

 
332

 
1,707

 
3,358

 
344,210

Total
 
$
4,113,516

 
$
21,190

 
$
2,702

 
$
23,892

 
$
43,610

 
$
4,181,018

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current
Loans
 
30 - 59
Days
Past Due
 
60 - 89
Days
Past Due
 
Total
Past Due
 
Nonaccrual
Loans
 
Total Loans
December 31, 2012
 
(in thousands)
Noncovered loans:
 
 
 
 
 
 
 
 
 
 
 
 
Commercial business
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
$
1,091,770

 
$
4,259

 
$
1,485

 
$
5,744

 
$
9,037

 
$
1,106,551

Unsecured
 
44,817

 
252

 
12

 
264

 
262

 
45,343

Real estate:
 
 
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
41,508

 
193

 
142

 
335

 
2,349

 
44,192

Commercial & multifamily residential
 
 
 
 
 
 
 
 
 
 
 
 
Commercial land
 
42,818

 
311

 
122

 
433

 
4,076

 
47,327

Income property
 
603,339

 
2,726

 
227

 
2,953

 
8,520

 
614,812

Owner occupied
 
387,525

 
1,040

 
—

 
1,040

 
6,608

 
395,173

Real estate construction:
 
 
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
Land and acquisition
 
15,412

 
—

 
—

 
—

 
3,084

 
18,496

Residential construction
 
29,848

 
—

 
—

 
—

 
1,816

 
31,664

Commercial & multifamily residential
 
 
 
 
 
 
 
 
 
 
 
 
Income property
 
28,342

 
—

 
—

 
—

 
—

 
28,342

Owner occupied
 
36,211

 
—

 
—

 
—

 
—

 
36,211

Consumer
 
155,207

 
387

 
362

 
749

 
1,643

 
157,599

Total
 
$
2,476,797

 
$
9,168

 
$
2,350

 
$
11,518

 
$
37,395

 
$
2,525,710


12
Table of Contents

The following is an analysis of impaired loans as of June 30, 2013 and December 31, 2012: 
 
 
Recorded Investment
of Loans
Collectively Measured
for Contingency
Provision
 
Recorded Investment
of Loans
Individually
Measured for
Specific
Impairment
 
Impaired Loans With
Recorded Allowance
 
Impaired Loans Without
Recorded Allowance
 
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
June 30, 2013
 
(in thousands)
Noncovered loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial business
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Secured
 
$
1,491,377

 
$
7,989

 
$
665

 
$
853

 
$
242

 
$
7,324

 
$
11,139

Unsecured
 
78,950

 
51

 
51

 
7,355

 
51

 
—

 
—

Real estate:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
93,522

 
1,532

 
337

 
360

 
105

 
1,195

 
1,336

Commercial & multifamily residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial land
 
131,330

 
2,345

 
2,105

 
5,145

 
262

 
240

 
507

Income property
 
1,126,047

 
11,692

 
1,252

 
1,257

 
76

 
10,440

 
14,310

Owner occupied
 
721,104

 
9,537

 
604

 
602

 
30

 
8,933

 
12,037

Real estate construction:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Land and acquisition
 
16,968

 
3,282

 
116

 
115

 
73

 
3,166

 
4,858

Residential construction
 
32,156

 
—

 
—

 
—

 
—

 
—

 
—

Commercial & multifamily residential
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Income property
 
71,194

 
—

 
—

 
—

 
—

 
—

 
—

Owner occupied
 
37,732

 
—

 
—

 
—

 
—

 
—

 
—

Consumer
 
343,486

 
724

 
—

 
—

 
—

 
724

 
723

Total
 
$
4,143,866

 
$
37,152

 
$
5,130

 
$
15,687