<PAGE>
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 March 31, 1997.
/ / 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)
(206) 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
April 30, 1997 was 5,225,578.
<PAGE>
TABLE OF CONTENTS
PART I -- FINANCIAL INFORMATION
Page
Item 1. Financial statements
Consolidated Statements of Operations - three months
ended March 31, 1997 and 1996 2
Consolidated Balance Sheets - March 31, 1997
and December 31, 1996 3
Consolidated Statements of Shareholders' Equity -
twelve months ended December 31, 1996 and
three months ended March 31, 1997 4
Consolidated Statements of Cash Flows -
three months ended March 31, 1997 and 1996 5
Notes to consolidated financial statements 6
Item 2. Management Discussion and Analysis of Financial 8
Condition and Results of Operations
PART II -- OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K 16
Signatures 16
1
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Columbia Banking System, Inc.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands except per share) 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Interest Income
Loans $10,293 $ 8,198
Securities available for sale 683 410
Deposits with banks 377 178
- -----------------------------------------------------------------------------
Total interest income 11,353 8,786
Interest Expense
Deposits 4,649 3,795
Federal Home Loan Bank advances 430 437
Other borrowings 64
- -----------------------------------------------------------------------------
Total interest expense 5,079 4,296
- -----------------------------------------------------------------------------
Net Interest Income 6,274 4,490
Provision for loan losses 400 330
- -----------------------------------------------------------------------------
Net interest income after
provision for loan losses 5,874 4,160
Noninterest Income
Service charges and other fees 727 551
Mortgage banking 93 160
Credit card fees and other 670 454
- -----------------------------------------------------------------------------
Total noninterest income 1,490 1,165
Noninterest Expense
Compensation and employee benefits 2,638 1,819
Occupancy 879 816
Professional services 112 124
Advertising and promotion 221 180
Printing and supplies 155 89
Regulatory premiums and assessments 39 64
Data processing 269 158
Gains on, and net cost of,
real estate owned (3)
Other 1,575 1,267
- -----------------------------------------------------------------------------
Total noninterest expense 5,885 4,517
- -----------------------------------------------------------------------------
Income before income taxes 1,479 808
Provision for income taxes 426
- -----------------------------------------------------------------------------
Net Income $ 1,053 $ 808
=============================================================================
Per share (on average shares outstanding):
Net Income $ 0.19 $ 0.22
Fully diluted net income 0.19 0.22
Average number of common and common
equivalent shares outstanding 5,604 3,720
Fully diluted average common and common
equivalent shares oustanding 5,609 3,986
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 27,522 $ 32,092
Interest-earning deposits with banks 28,069 38,086
Securities available for sale:
U.S. Treasury & Government Agencies 30,467 30,481
Mortgage-backed 10,334 10,760
FHLB stock 4,324 4,248
- -----------------------------------------------------------------------------
Total securities available for sale 45,125 45,489
Loans held for sale 11,503 11,341
Loans 476,607 446,095
Less: allowance for loan losses 4,806 4,504
- -----------------------------------------------------------------------------
Loans, net 471,801 441,591
Interest Receivable 3,450 3,347
Premises and equipment, net 18,736 15,250
Real estate owned 260 40
Other 2,041 1,680
- -----------------------------------------------------------------------------
Total Assets $608,507 $588,916
=============================================================================
Liabilities and Shareholders' Equity
Deposits:
Noninterest-bearing $ 91,512 $ 83,983
Interest-bearing 430,407 409,239
- -----------------------------------------------------------------------------
Total Deposits 521,919 493,222
Federal Home Loan Bank advances 22,000 32,000
Other liabilities 4,582 4,734
- ----------------------------------------------------------------------------
Total liabilities 548,501 529,956
Shareholders' equity:
Preferred stock (no par value)
Authorized, 2,000,000 shares;
None outstanding
March 31, December 31,
Common stock (no par value) 1997 1996
--------- ----------
<S> <C> <C>
Authorized shares 10,000 10,000
Issued and outstanding 5,207 5,185 56,446 56,340
Retained Earnings 3,747 2,694
Unrealized losses on securities
available for sale, net of tax (187) (74)
- -----------------------------------------------------------------------------
Total shareholders' equity 60,006 58,960
- -----------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $608,507 $588,916
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Columbia Banking System, Inc.
<TABLE>
<CAPTION>
Common stock Unrealized Total
Number of Retained Gains and Shareholders'
(in thousands) Shares Amount Earnings (Losses) Equity
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 3,274 $30,806 $1,274 ($113) $31,967
Net income 3,577 3,577
Issuance of shares
of common stock, net 1,492 20,868 20,868
Issuance of shares
of common stock -
5% stock dividend 164 2,157 (2,157)
Conversion of Convertible
Subordinated Notes 255 2,509 2,509
Change in unrealized
gains and (losses) 39 39
- -----------------------------------------------------------------------------
Balance at
December 31, 1996 5,185 56,340 2,694 (74) 58,960
Net income 1,053 1,053
Issuance of shares
of common stock, net 22 106 106
Change in unrealized gains
and (losses),net of tax (113) (113)
- -----------------------------------------------------------------------------
Balance at
March 31, 1997 5,207 $56,446 $3,747 ($187) $60,006
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Columbia Banking System, Inc.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands) 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 1,053 $ 808
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Provision for loan losses 400 330
Losses on real estate owned 3 41
Depreciation and amortization 600 464
Deferred income taxes 186
Net realized losses (gains) on sale of investments (4) 40
Increase in loans held for sale (162) (1,178)
Increase in interest receivable (103) (48)
Increase in interest payable 175 49
Net changes in other assets and liabilities (797) (1,017)
- -----------------------------------------------------------------------------
Net cash provided (used) by operating activities 1,351 (511)
Investing Activities
Proceeds from maturities of securities
available for sale 21 207
Purchases of securities available for sale (271) (10,626)
Proceeds from maturities of mortgage-backed
securities available for sale 385 333
Loans originated and acquired, net of principal collected (31,014) (17,201)
Purchases of premises and equipment (3,899) (275)
Proceeds from disposal of premises and equipment 5 140
Proceeds from sale of real estate owned 32 3,263
- -----------------------------------------------------------------------------
Net cash used by investing activities (34,741) (24,159)
Financing Activities
Net increase in deposits 28,967 23,854
Proceeds from FHLB advances and other long-term debt 10,000
Repayment of FHLB advances and other long-term debt (10,000)
Proceeds from issuance of common stock 106 53
- -----------------------------------------------------------------------------
Net cash provided by financing activities 18,803 33,907
- -----------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (14,587) 9,237
Cash and cash equivalents at beginning of period 70,178 30,879
- -----------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 55,591 $ 40,116
=============================================================================
Supplemental information:
Cash paid for interest $ 4,904 $ 4,246
Loans foreclosed and transferred to real estate owned 260
Issuance of common stock from conversion of convertible
subordinated notes 14
See accompanying notes to consolidated financial statements.
</TABLE>
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Columbia Banking System, Inc.
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. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments including normal recurring accruals necessary
for a fair presentation of results of operations for the interim periods
included herein have been made. The results of operations for the three
months ended March 31, 1997, are not necessarily indicative of results to
be anticipated for the year ending December 31, 1997. Certain amounts in
the 1996 financial statements have been reclassified to conform with the
1997 presentation. For additional information, refer to the consolidated
financial statements and footnotes thereto included in the Columbia Banking
System's (the Company) annual report on Form 10-K for the year ended
December 31, 1996.
2. Summary of Significant Accounting Changes
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
("SFAS 128"). The statement is effective for years ending after
December 15, 1997, for both interim and annual periods, and replaces the
presentation of primary and fully diluted earnings per share with a
presentation of basic and diluted earnings per share. The adoption of this
Statement is not expected to have a material impact on earnings per share
reported by the Company.
3. Sale of Bank Card Operations
During the first quarter, the Company signed an agreement to sell its VISA
card operation and related loan portfolio to The Columbus Bank and Trust
Company. The sale, which closed on April 7, 1997, will result in a one-time
gain of approximately $1.0 million. The sale of the business is not expected
to have a material effect on results of operations in future periods. The
proceeds of the sale will be invested principally in loans to local
businesses and consumers.
4. Subsequent Event - Stock Dividend
On April 23, 1997, the Company announced a 5% stock dividend payable on
May 22, 1997, to shareholders of record on May 8, 1997. Average shares
outstanding, net income per share and book value per share have been adjusted
to give retroactive effect to all periods presented.
6
<PAGE>
CONSOLIDATED AVERAGE BALANCES--NET CHANGES
Columbia Banking System, Inc.
<TABLE>
<CAPTION>
Three Months Ended Increase
March 31, (Decrease)
(in thousands) 1997 1996 Amount
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Loans $469,076 $364,528 $104,548
Securities 45,323 28,748 16,575
Interest-earning deposits with banks 29,160 13,236 15,924
- --------------------------------------------------------------------------------
Total interest-earning assets 543,559 406,512 137,047
Noninterest-earning assets 41,075 29,073 12,002
- --------------------------------------------------------------------------------
Total assets $584,634 $435,585 $149,049
================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits $412,797 $316,817 $ 95,980
Federal Home Loan Bank advances 30,778 31,295 (517)
Convertible subordinated notes 2,684 (2,684)
- --------------------------------------------------------------------------------
Total interest-bearing liabilities $443,575 350,796 92,779
Noninterest-bearing deposits 77,578 49,837 27,741
Other noninterest-bearing liabilities 3,758 2,951 807
Shareholders' Equity 59,723 32,001 27,722
- --------------------------------------------------------------------------------
Total liabilities and shareholders'equity $584,634 $435,585 $149,049
================================================================================
</TABLE>
7
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Columbia Banking System, Inc.
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 projected in the
forward-looking statements due to a number of factors.
Earnings Summary
Net income for the three months ended March 31, 1997 was $1.1 million, or
$0.19 per share, compared to $808,000, or $0.22 per share, for the same
period in 1996, an increase in net income of 30.3%. The increase in net
income was primarily due to increased revenue resulting from continued loan
and deposit growth. While net income increased, earnings per share decreased
13.6% reflecting the issuance of 1.445 million shares of Common Stock in
the fourth quarter of 1996.
During 1996, the Company benefited from utilization of its net operating loss
carryforwards for federal income tax purposes. Therefore, the Company had
no federal income tax provision for the three months ended March 31, 1996.
Had the earnings been fully taxed, net income for the three months ended
March 31, 1996 would have been approximately $520,000 or $0.15 per share.
On a comparable fully taxed basis, net income increased to $1,053,000 in the
first quarter of 1997, from $520,000 for the first quarter of 1996, an
increase of $533,000 or 103%. Income before income taxes for the first
quarter of 1997 was $1.5 million, an increase of 86% over $808,000 for the
same period one year ago.
The Company's goal is to create, over the next several years, a
well-capitalized, customer focused, Pacific Northwest commercial banking
institution with a significant presence in selected markets and total assets
in excess of $1.0 billion. 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 Seattle and Bellevue) and south into Thurston County (the location of the
state capital, Olympia). In order to fund its commercial and consumer
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 banking customer deposits and other
borrowings. The Company believes this mix of funding sources will enable
it to expand its commercial lending activities rapidly while attracting a
stable core deposit base.
During the first quarter of 1997, the Company opened a second Bellevue branch
and a new branch in Kent. Columbia Bank has opened 14 branch locations
since beginning its major Pierce County expansion in August 1993, and now
has 18 branches, 3 in Cowlitz County, 4 in King County and 11 in Pierce
County. The Company has regulatory approval to open three additional
branches in Pierce County and one in King County. During 1997, the Company
anticipates the establishment of new branches and the relocation of the
Spanaway, Edgewood, and Kent branches from temporary to permanent facilities.
New branches normally do not contribute to net income for many months after
opening.
8
<PAGE>
Net Interest Income
Net interest income for the first quarter of 1997 increased to $6.3 million,
or 39.7%, from $4.5 million in the first quarter of 1996. The increase in
net interest income in the first quarter of 1997 is 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. Average
interest-earning assets increased $137.0 million, while average
interest-bearing liabilities increased $92.8 million compared with the
same period in 1996.
Net interest margin (net interest income divided by average interest-earning
assets) increased to 4.68% in the first quarter of 1997 from 4.43% in the
first quarter of 1996. The increase in net interest margin is primarily
the result of the growth in earning assets at increased spreads. While
interest-earning assets grew, the average yield decreased 0.20% to 8.47%
for the first quarter of 1997 from 8.67% in the same period of 1996.
The average cost of interest-bearing liabilities decreased 0.27% to 4.64%
for the first quarter of 1997 from 4.91% in the same period of 1996.
Noninterest Income and Expense
Total noninterest income increased $325,000, or 27.9%, in the first quarter
of 1997, compared with the same period in 1996. Increases in noninterest
income in the first quarter of 1997 were made up of account service charges,
and bank card revenue.
Total noninterest expense increased $1.4 million, or 30.3% in the first
quarter of 1997, compared with the same period in 1996. The increase is
primarily due to expenses associated with the expansion of Columbia Bank.
Total noninterest expense was 75.8% and 79.9% of total revenues (the sum of
net interest income plus noninterest income less nonrecurring gains) for
the first quarter of 1997 and 1996, respectively. Increases in noninterest
expense are centered in compensation (offset in part by deferrals related
to loan originations), occupancy, advertising, printing and supplies, data
processing and other expense. In general, increases in noninterest expense
are due to the growth of the Company, establishment of branches, and the
associated "volume driven" expenses. Total noninterest expense for the
Company is expected to decline in relation to revenues as the Company
pursues its commitment to more efficient operations and as projected asset
growth materializes.
During the first quarter, the Company signed an agreement to sell its VISA
card operation and related loan portfolio to The Columbus Bank and Trust
Company. The sale, which closed on April 7, 1997, will result in a one-time
gain of approximately $1.0 million. The sale of the business is not expected to
have a material effect on results of operations in future periods.
Noninterest income and expense levels will decline in future periods as a
result of the sale of the card operations. For the first quarter, VISA
card operations recorded $107,000 of noninterest income and $66,000 of
noninterest expense. The proceeds of the sale will be invested principally
in loans to local businesses and consumers.
9
<PAGE>
Income Taxes
Prior to December 31, 1996, for federal income tax purposes, the Company had
net operating loss ("NOL") carryforwards. The carryforwards were used,
subject to certain restrictions and limitations, to offset taxable income
and the tax liability of the Company. At December 31, 1996, all available
NOL carryforwards had been utilized to offset taxable income and the Company
is now fully taxable.
For the first quarter of 1997, the Company recorded an income tax provision
of $426,000.
Lending Activities
The Company originates a wide variety of loans. Consistent with the trend
beginning in 1993, the Company continues to increase commercial business
loans and consumer loans as a percentage of its total loan portfolio. The
Company also emphasizes its private banking services to high income and
high net worth individuals.
Loan Portfolio
The following table sets forth at the dates indicated the Company's loan
portfolio composition by type of loan:
<TABLE>
<CAPTION>
March 31, % of December 31, % of
(in thousands) 1997 Total 1996 Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial $188,069 39.5% $169,318 38.0%
Real estate:
One-to four-family residential 59,065 12.4 67,709 15.1
Five or more family residential and
commercial properties 141,255 29.6 128,803 28.9
- -----------------------------------------------------------------------------
Total real estate 200,320 42.0 196,512 44.0
Real estate construction:
One-to four-family residential 19,105 4.0 21,380 4.8
Five or more family residential and
commercial properties 18,103 3.8 10,680 2.4
- -----------------------------------------------------------------------------
Total real estate construction 37,208 7.8 32,060 7.2
Consumer 51,744 10.9 48,807 10.9
- -----------------------------------------------------------------------------
Sub-total loans 477,340 100.2 446,697 100.1
Less: Deferred loan fees (734) (0.2) (602) (0.1)
- -----------------------------------------------------------------------------
Total loans $476,607 100.0% $446,095 100.0%
=============================================================================
Loans held for sale $ 11,503 $ 11,341
=============================================================================
</TABLE>
Total loans increased $30.5 million, or 6.8%, to $476.6 million from year-end
1996. All categories contributed to the increase except for the one- to
four-family residential category which experiences seasonal declines during
the first quarter.
10
<PAGE>
Commercial and Private Banking Lending
Commercial loans increased to $188.1 million at March 31, 1997, representing
39.5% of total loans, from $169.3 million at December 31, 1996. This
increase reflects management's commitment to provide competitive commercial
lending in the Company's primary market area. The Company expects to
continue to expand its commercial lending products and emphasize in
particular its relationship banking with businesses, business owners and
professional individuals.
Real Estate Lending
One- to Four-Family Residential Real Estate Lending.
Residential one- to four-family loans amounted to $59.1 million at
March 31, 1997, representing 12.4% of total loans, compared to $67.7 million
at December 31, 1996. 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.
Multi-family and Commercial Real Estate Lending.
The Company makes multi-family and commercial real estate loans in its
primary market areas. Multi-family and commercial real estate lending
increased to $141.3 million at March 31, 1997, representing 29.6% of total
loans, from $128.8 million at December 31, 1996. 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.
Construction Lending.
One- to Four-Family Residential Real Estate Construction Lending.
The Company originates one- to four-family residential construction loans
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. The Company endeavors to limit
its construction lending risk through adherence to strict underwriting
procedures. Construction loans on one- to four-family residences decreased
to $19.1 million at March 31, 1997, representing 4.0% of total loans, from
$21.4 million at December 31, 1996.
Multi-family and Commercial Real Estate Construction Lending.
Multi-family and commercial real estate construction loans increased
$7.4 million to $18.1 million at March 31, 1997, representing 3.8% of total
loans, from $10.7 million at December 31, 1996.
Consumer Lending.
At March 31, 1997, the Company had $51.7 million of consumer loans
outstanding, representing 10.9% of total loans, as compared with
$48.8 million at December 31, 1996. Consumer loans made by the Company
include automobile loans, boat and recreational vehicle financing, home
equity and home improvement loans and miscellaneous personal loans.
At March 31, 1997, the Company had no foreign loans or loans related to
highly leveraged transactions.
11
<PAGE>
Nonperforming Assets
The following table sets forth at the dates indicated an analysis of the
composition of the Company's nonperforming assets:
<TABLE>
<CAPTION>
March 31, December 31,
(in thousands) 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
Nonaccrual:
One-to four-family residential $1,095 $1,645
Commercial land 61
Commercial business 400 385
Consumer 165 197
- -----------------------------------------------------------------------------
Total $1,721 $2,227
- -----------------------------------------------------------------------------
Restructured:
One-to four-family residential $ 24 $ 25
- -----------------------------------------------------------------------------
Total $ 24 $ 25
- -----------------------------------------------------------------------------
Total nonperforming loans $1,745 $2,252
=============================================================================
Real estate owned:
One-to four-family residential construction $ 260
Five or more family residential and
commercial properties $ 40
- -----------------------------------------------------------------------------
Total $ 260 $ 40
=============================================================================
Total nonperforming assets $2,005 $2,292
=============================================================================
</TABLE>
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 $1.7 million, or 0.37% of total loans
(excluding loans held for sale), at March 31, 1997 from $2.3 million, or
0.51% of total loans at December 31, 1996 due principally to the reduction
of nonperforming loans secured by real estate.
During the first quarter of 1997, the Company foreclosed on $260,000 of loans
collaterlalized by real estate and transferred them to real estate owned.
Total nonperforming assets decreased to $2.0 million, or 0.33% of period-end
assets at March 31, 1997 from $2.3 million, or 0.39% of period-end assets at
December 31, 1996.
12
<PAGE>
Analysis of Allowance for Loan Losses
The allowance for loan losses is maintained at a level considered by
management to be adequate to provide for anticipated loan losses based on
management's assessment of various factors affecting the loan portfolio.
This includes a review of problem loans, business conditions and loss
experience, and overall evaluation of the quality of the underlying
collateral, holding and disposal costs and costs of capital. The allowance
is increased by provisions charged to operations, and is reduced by loans
charged off, net of recoveries.
While management believes that it uses reasonable information to determine
the allowance for loan losses, unforeseen market conditions could result in
adjustments to the allowance for loan losses, and net income could be
significantly affected, if circumstances differ substantially from the
assumptions used in determining the allowance.
The allowance for loan losses at March 31, 1997 remained at 1.01% of loans
(excluding loans held for sale at each date), the same as at December 31,
1996. Although the allowance for loan losses increased by $302,000 during
the first quarter of 1997, a $36,000 increase in net loan charge-offs
compared with the first quarter of 1996 and a $30.5 million, or 6.8%,
increase in loans since year-end 1996 left the ratio unchanged. Net loan
charge-offs amounted to $99,000 for the first quarter of 1997 compared with
net loan charge-offs of $63,000 for the same period in 1996. The Company's
provision for loan losses was $400,000 for the first quarter of 1997,
compared with $330,000 for the first quarter of 1996.
The following table sets forth at the dates indicated the changes in the
Company's allowance for loan losses:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands) 1997 1996
- ----------------------------------------------------------------------------
<S> <C> <C>
Beginning balance $4,504 $3,748
Charge offs:
Commercial business (26)
Consumer (117) (39)
- ----------------------------------------------------------------------------
Total charge-offs (117) (65)
Recoveries:
Commercial business 18 2
Consumer 1
- ----------------------------------------------------------------------------
Total recoveries 19 2
- ----------------------------------------------------------------------------
Net (charge-offs) recoveries (99) (63)
Provision charged to expense 400 330
- ----------------------------------------------------------------------------
Ending balance $4,806 $4,015
============================================================================
</TABLE>
13
<PAGE>
Liquidity and Sources of Funds
The Company's primary sources of funds are customer deposits, brokered
deposits and advances from Federal Home Loan Bank of Seattle (the "FHLB").
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 certificates of deposit. Total deposits increased 5.8%
to $521.9 million at March 31, 1997, from $493.2 million at December 31, 1996.
To fund the growth of the Company, management's strategy has been to make use
of brokered and other wholesale deposits while working to build core deposits
as rapidly as possible through the Company's development of commercial banking
relationships and its branch network. The Company's use of brokered and
other wholesale deposits has decreased since year-end 1996, though management
anticipates continued, and perhaps increasing, use of such deposits to fund
increasing loan demand. The deposit increase of $28.7 million during the
first quarter of 1997 occurred entirely in "core deposits". Brokered and
other wholesale deposits (excluding public deposits) decreased $17.6 million
to $12.7 million, or 2.4% of total deposits, at March 31, 1997, from $30.3
million, or 6.1% of total deposits, at December 31, 1996.
Borrowings
The Company relies on advances from the FHLB to supplement its funding
sources. FHLB advances decreased $10.0 million during the first quarter of
1997 to $22.0 million. FHLB advances are secured by one- to four-family real
estate mortgages and certain other assets.
14
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Capital
Shareholders' equity at March 31, 1997 was $60.0 million compared with $59.0
million at December 31, 1996. The increase is due to improved net income
during the first quarter of 1997. Shareholders' equity was 9.9% and 10.0%
of total period-end assets at March 31, 1997 and December 31, 1996,
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 March 31, 1997, the Company's leverage ratio was
10.27%, compared with 10.62% at December 31, 1996. 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 12.11% and 13.08%,
respectively, at March 31, 1997, compared with 12.81% and 13.79%,
respectively, at December 31, 1996.
During 1992, the Federal Deposit Insurance Corporation (the "FDIC") published
the qualifications necessary to be classified as a "well-capitalized" bank,
primarily for assignment of FDIC insurance premium rates beginning in 1993.
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 March 31, 1997. 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 accepting 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 by institutions such as Columbia Bank, including dividends.
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 23, 1997, the Company announced a 5% stock dividend payable on
May 22, 1997, to shareholders of record on May 8, 1997. Average shares
outstanding, net income per share and book value per share have been adjusted
to give retroactive effect to all periods presented. The retroactive impact
on earnings per share for the three months ended March 31, 1997 and 1996, is
a reduction of $.01 per share.
15
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
See Exhibit 3 - Restated Bylaws of the Company
See Exhibit 11 - Computation of Fully Diluted Earnings per Common Share
See Exhibit 27 - Financial Data Schedule
(b) On March 14, 1997, the Company filed a Form 8-K/A, Amendment No.1 to
Form 8-K filed March 5, 1997 announcing a change in the Company's
Certifying Accountant.
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 May 9, 1997 By /s/ A. G. Espe
----------------------------- -----------------------------
A. G. Espe
Chairman and
Chief Executive Officer
Date May 9, 1997 By /s/ Gary R. Schminkey
----------------------------- -----------------------------
Gary R. Schminkey
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
16
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Exhibit 3
<PAGE>
RESTATED BYLAWS OF
COLUMBIA BANKING SYSTEM, INC.
February 26, 1997
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 - MEETINGS OF SHAREHOLDERS 1
Section 1.1 - Shareholder Meetings 1
Section 1.2 - Annual Meeting 1
Section 1.3 - Special Meetings 1
Section 1.4 - Notice 1
Section 1.5 - Quorum 2
Section 1.6 - Adjournment 2
Section 1.7 - Chairman of Meeting 2
Section 1.8 - Secretary of Meeting 2
Section 1.9 - Conduct of Meetings 2
Section 1.10 - Consent to Action 2
Section 1.11 - Proxies 2
Section 1.12 - Shareholder Advisor 3
Section 1.13 - Recording of Proceedings 3
Section 1.14 - Record Date 3
Section 1.15 - List of Shareholders 3
ARTICLE 2 - DIRECTORS 4
Section 2.1 - Management of Corporation 4
Section 2.2 - Number of Directors 4
Section 2.3 - Qualifications and Nominations
of Directors 4
Section 2.4 - Annual Meetings 4
Section 2.5 - Place of Meetings 4
Section 2.6 - Regular Meetings 4
Section 2.7 - Special Meetings 4
Section 2.8 - Notices 4
Section 2.9 - Quorum 5
Section 2.10 - Attendance by Conference
Telecommunication 5
Section 2.11 - Consent to Action 5
Section 2.12 - Compensation 5
Section 2.13 - Manifestation of Dissent 6
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ARTICLE 3 - COMMITTEES OF THE BOARD OF DIRECTORS 6
Section 3.1 - Executive Committee 5
Section 3.2 - Audit Committee 6
Section 3.3 - Other Committees 7
Section 3.4 - Rules of Procedure 7
ARTICLE 4 - OFFICERS AND EMPLOYEES 7
Section 4.1 - Officers 7
Section 4.2 - Election 7
Section 4.3 - Removal and Vacancy 8
Section 4.4 - Compensation 8
Section 4.5 - Exercise of Rights as Stockholders 8
Section 4.6 - Duties of Chairman of the Board 8
Section 4.7 - Duties of Vice Chairman 9
Section 4.8 - Duties of President 9
Section 4.9 - Duties of Vice President 9
Section 4.10 - Duties of Secretary 9
Section 4.11 - Duties of Treasurer 9
Section 4.11 - Other Officers 9
Section 4.12 - Clerks and Agents 10
ARTICLE 5 - SHARES AND CERTIFICATES FOR SHARES 10
Section 5.1 - Consideration 10
Section 5.2 - Stock Certificates 10
Section 5.3 - Lost Certificates 10
Section 5.4 - Transfer of Shares 11
Section 5.5 - Holder of Record 11
Section 5.6 - Issuance of Shares 11
Section 5.7 - Subscriptions 11
Section 5.8 - Payment of Subscriptions 11
Section 5.9 - Default in Payment of Subscriptions 12
ARTICLE 6 - SEAL 12
Section 6.1 - Corporate Seal 12
ARTICLE 7 - MISCELLANEOUS PROVISIONS 12
Section 7.1 - Fiscal Year 12
Section 7.2 - Records 12
ii
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ARTICLE 8 - BYLAWS 13
Section 8.1 - Inspection 13
Section 8.2 - Amendments 13
iii
<PAGE>
RESTATED BYLAWS OF
COLUMBIA BANKING SYSTEM, INC.
ARTICLE 1
Meetings of Shareholders
SECTION 1.1 - Shareholder Meetings. Shareholder meetings shall be held at the
principal office of the corporation, or at such other location within or
without the State of Washington as shall be determined by the Board of Directors
and stated in the Notice of Meeting.
SECTION 1.2 - Annual Meeting. The regular annual meeting of the shareholders
for the election of directors and for the transaction of such other business
as may properly be brought before the meeting shall be held on such day and
at such time following the close of the corporation's fiscal year as shall
be determined each year by the Board of Directors. If such annual meeting is
omitted by oversight or otherwise during such period, a subsequent annual
meeting may nonetheless be held, and any business transacted or elections held
at such meeting shall be as valid as if the annual meeting had been held
during the period provided above.
SECTION 1.3 - Special Meetings. Special meetings of the shareholders may be
called at any time by the Chairman, the President, a majority of the Board of
Directors, or any shareholder or shareholders holding in the aggregate not less
than one-tenth of all shares entitled to vote at the special meeting.
Shareholders may hold a meeting at any time and place without notice or call,
upon appropriate waivers signed by all shareholders who are entitled to vote
at a shareholders' meeting.
SECTION 1.4 - Notice. Written notice stating the place, day, and hour of the
meeting, and in case of a special meeting the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more that
sixty (60) days before the date of the meeting, either personally or by mail,
by or at the direction of the President, the Secretary, or the person or
persons calling the meeting to each shareholder of record entitled to vote at
such meeting. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
shareholder at his address as it appears on the stock transfer books of the
corporation. Each shareholder shall be responsible for providing the Secretary
with the shareholder's current mailing address to which notices of meetings
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and all other corporate notices may be sent. A shareholder may waive any
notice required for any meeting by executing a written waiver of notice
either before or after said meeting and such waiver shall be equivalent to the
giving of such notice. The attendance of a shareholder at a shareholders'
meeting, in person or by proxy, shall constitute a waiver of notice of the
meeting.
SECTION 1.5 - Quorum. A majority of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of shareholders.
When a quorum is present at any meeting, the affirmative vote of the majority
of the shares represented at the meeting and entitled to vote on the subject
matter shall be the act of the shareholders, unless otherwise provided by law.
SECTION 1.6 - Adjournment. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders.
SECTION 1.7 - Chairman of Meeting. The Chairman, or in his absence, the
President or the Vice Chairman, shall preside at all meetings of the
shareholders unless the Board of Directors shall otherwise determine. The
Board of Directors may appoint any shareholder to act as chairman of the
meeting.
SECTION 1.8 - Secretary of Meeting. The Secretary shall act as a secretary at
all meeting of the shareholders, and in his absence, the presiding officer may
appoint any person to act as secretary.
SECTION 1.9 - Conduct of Meetings. Shareholder meetings shall be conducted in
an orderly and fair manner, but the presiding officer shall not be bound by
any technical rules of parliamentary procedure.
SECTION 1.10 - Voting. Each outstanding share shall be entitled to one vote
on each matter submitted to a vote at a meeting of shareholder.
SECTION 1.11 - Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder of by his duly authorized
attorney in fact. Such proxy shall be filed with the Secretary of the
corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy.
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SECTION 1.12 - Shareholder Advisor. A shareholder or holder of a valid proxy
may be accompanied at any shareholders' meeting by one personal advisor, but
no such advisor may address the meeting without the consent of the presiding
officer.
SECTION 1.13 - Recording of Proceedings. The proceedings of a shareholders'
meeting may not be mechanically or electronically recorded other than by the
Secretary or acting secretary without the express approval of all individuals
in attendance at the meeting.
SECTION 1.14 - Record Date. For the purpose of determining shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purpose,
the Board of Directors may fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall not be more
than sixty (60) days and, in case of a meeting of shareholders, not less than
ten (10) days prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed by
the Board of Directors, the date on which notice of the meeting is mailed or
the date on which the resolution of the Board declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at
any meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 1.15 - List of Shareholders. The Secretary of the corporation shall
make a complete record of the shareholders entitled to vote at a meeting of
shareholders, or any adjournment thereof, arranged in alphabetical order, with
the address of and the number of shares held by each as shown on the
corporation's stock transfer books on the record date. Such record shall be
kept on file a the registered office of the corporation for a period of ten
(10) days prior to the meeting of shareholders. Such record shall be produced
and kept open at the time and place of the shareholders' meeting and shall be
subject to the inspection of any shareholder during the meeting for any proper
purpose.
3
<PAGE>
ARTICLE 2
Directors
SECTION 2.1 - Management of Corporation. All corporate powers shall be
exercised by, or under authority of, and the business and affairs of the
corporation shall be managed under the direction of the Board of Directors
(hereinafter sometimes referred to as the "Board").
SECTION 2.2 - Number of Directors. The initial number of directors is stated
in the Articles of Incorporation. The number to be elected by the shareholders
shall consist of not less than five (5) nor more than twenty-five (25) persons.
The exact number within such minimum and maximum limits shall be fixed and
determined by resolution of the
Board of Directors.
SECTION 2.3 - Qualifications and Nominations of Directors. Any person who will
not attain the age of 75 before the meeting of shareholders at which elected
(or had not attained that age by the date of the last annual meeting of
shareholders, if appointed) may become a director of this corporation; provided
that this provision shall not become effective until January 1, 1996. Any
nomination to the Board of Directors (other than one proposed by the existing
Board of the corporation) must be made in the manner set forth in the Articles
of Incorporation.
SECTION 2.4 - Annual Meetings. Immediately after the annual meeting of
shareholders, the Directors shall meet to elect officers and transact any other
business.
SECTION 2.5 - Place of Meetings. Meetings of the Board of Directors, regular
or special, may be held within or without this state.
SECTION 2.6 - Regular Meetings. Regular meetings of the Board of Directors
may be held without notice at such time and at such place as the Board may by
vote from time to time designate.
SECTION 2.7 - Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman, the President or the Vice Chairman or by any
two (2) directors.
SECTION 2.8 - Notices. Notices of special meetings of the Board of Directors
stating the date, time, place and in general terms the purpose or purposes
thereof shall be delivered to each director, by mailing written notice at least
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<PAGE>
two (2) days before the meeting or by telephoning, telegraphing or personally
advising each director at least one (1) day before the meeting. A special
meeting shall be held not more than twenty (20) days after the delivery of
said notice. If mailed, such notice shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the director
at the address provided to the Secretary. An entry of the service of notice,
given in the manner above provided, shall be made in the minutes of the
proceedings of the Board of Directors, and such entry, if read and approved at
the subsequent meeting of the Board, shall be conclusive on the question of
service. Attendance of a director at a special meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting
for the express purpose of objecting to the transaction of any business because
the meeting was not lawfully called or convened. A director also may waive any
notice required for any meeting by executing a written waiver of notice either
before or after said meeting, and such waiver shall be equivalent to the giving
of such notice.
SECTION 2.9 Quorum. A majority of the directors shall constitute a quorum for
the transaction of business. Unless otherwise provided in the Articles of
Incorporation or these Bylaws, the act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors. A majority of those present at the time and place of any regular
or special meeting, although less than a quorum, may adjourn from time to time,
without further notice, until a quorum shall attend. When a quorum shall
attend, any business may be transacted which might have been transacted at the
meeting had the same been held on the date stated in the notice of meeting.
SECTION 2.10 - Attendance by Conference Telecommunication. Members of the
Board of Directors may participate in a meeting of such Board by means of a
conference telephone or similar communications equipment, by means of which
all person participating in the meeting can hear each other at the same time,
and participation by such means shall constitute presence in person at a
meeting.
SECTION 2.11 - Consent to Action. Any action which may be taken at a meeting
of the Board of Directors, or at a meeting of any committee of the Board, may
be taken without a meeting if a consent in writing, setting forth the action
so taken shall be signed by all of the directors or all the members of the
committee. Such consent shall have the same force and effect as a unanimous
vote at a duly convened meeting.
SECTION 2.12 - Compensation. The directors shall receive such reasonable
compensation for their services as directors and as members of any committee
appointed by the Board as may be prescribed by the Board of Directors, and may
5
<PAGE>
be reimbursed by the corporation for ordinary and reasonable expenses incurred
in the performance of their duties.
SECTION 2.13 - Manifestation of Dissent. A director of the corporation who is
present at a meeting of the Board at which action on any corporate matter is
taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a
director who voted in favor of such action.
ARTICLE 3
Committees of the Board of Directors
SECTION 3.1 - Executive Committee. By resolution adopted by a majority of the
entire Board of Directors, the Board may designate from among its members an
Executive Committee of not less than three (3) nor more than seven (7) members,
one of whom shall be the Chairman, who shall also act as chairman of the
Executive Committee. Any member of the Board may serve as an alternate member
of the Executive Committee in the absence of a regular member or members. The
Executive Committee shall have and may exercise all of the authority of the
Board of Directors during the intervals between meetings of the Bank, except
that the committee shall not have the authority to: (1) authorize or approve
a distribution or issuance of shares, except according to a general formula or
method prescribed by the Board of Directors, (2) approve or propose to
shareholders actions or proposals requiring shareholder approval, (3) fill
vacancies on the Board of Directors or any committee thereof, (4) amend the
Articles of Incorporation pursuant to RCW 23B.10.020, (5) adopt, amend or
repeal Bylaws, (6) approve a plan of merger not requiring shareholder approval,
or (7) authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights, preferences, and
limitations of a class or series of shares, except within certain limits
specifically prescribed by the Board of Directors.
SECTION 3.2 - Audit Committee. By resolution adopted by a majority of the
entire Board of Directors, the Board may appoint from among its members an
Audit Committee of three (3) or more, none of whom shall be active officers of
the corporation, and may designate one (l) of such members as chairman of the
Committee. The Board may also designate one or more directors as alternates
to serve as a member or members of the Committee in the absence of a regular
6
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member or members. The Committee shall establish and maintain continuing
communications between the Board and the corporation's independent auditors,
internal auditors, and members of financial management with respect to the
audit of the corporation's accounts and financial affairs and the audit of
the corporation's controlled subsidiaries. The Committee shall have such other
powers and perform such other duties as may from time to time be prescribed by
the Board of Directors.
SECTION 3.3 - Other Committees. By resolution adopted by a majority of the
entire Board of Directors, the Board may designate from among its members such
other committees as it may deem necessary, each of which shall consist of not
less than two (2) directors and have such powers and duties as may from time
to time be prescribed by the Board.
SECTION 3.4 - Rules of Procedure. The majority of the members of any committee
may fix its rules of procedure. All actions by any committee shall be reported
in written minutes available at any reasonable time to any Board member. Such
actions shall be subject to revision, alteration and approval by the Board of
Directors; provided, that no rights or acts of third parties who have relied
in good faith on the authority granted herein shall be affected by such
revision or alteration.
ARTICLE 4
Officers and Employees
SECTION 4.1 - Officers. The Board of Directors may elect a Chairman and a
Vice Chairman of the Board and shall elect a President. It shall also elect
one or more Vice Presidents, a Secretary and a Treasurer and such additional
officers as in the opinion of the Board the business of the corporation
requires. The Board may also elect or appoint, or in its discretion delegate
to the Chairman the authority to appoint, from time to time such other or
additional officers as are desirable for the conduct of the business of the
corporation.
SECTION 4.2 - Election. None of the officers, except the Chairman,
Vice Chairman, and President, need be directors. The officers shall be
elected annually by the Board of Directors at the meeting of the Board
following the annual meeting of shareholders, and they shall hold office at
the pleasure of the Board of Directors.
SECTION 4.3 - Removal and Vacancy. Any officer, agent, or employee of the
corporation may be removed by the Board of Directors at any time with or
without cause. Such removal, however, shall be without prejudice to the
contract rights, if any, of the persons so removed. Election or appointment
of an officer or agent or employee shall not of itself create contract rights.
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If any corporate office becomes vacant by reason of death, resignation,
removal or otherwise, the Board of Directors or the executive officer
possessing delegated authority to appoint such an officer, shall have power
to fill such vacancies. In case of the absence or disability of any officer,
the Board of Directors or the Chairman may delegate the powers or duties of
any such officer to another officer for the time being.
SECTION 4.4 - Compensation. The compensation of the Chairman shall be fixed
by the Board of Directors. Unless fixed by the Board of Directors, the
compensation for all other officers, employees or agents of the corporation
shall be established by or at the direction of the Chairman.
SECTION 4.5 - Exercise of Rights as Stockholders. Unless otherwise ordered
by the Board of Directors, the Chairman or his designee acting by written
designation, shall have full power and authority on behalf of the corporation
to attend and to vote at any meeting of shareholders of any corporation in
which this corporation may hold stock, other than in a fiduciary capacity,
and may exercise on behalf of this corporation any and all of the rights and
powers incident to the ownership of such stock at any such meeting, and shall
have power and authority to execute and deliver proxies and consents on
behalf of this corporation in connection with the exercise by this corporation
of the rights and powers incident to the ownership of such stock. The Board
of Directors, from time to time, may confer like powers upon any other person
or persons.
SECTION 4.6 - Duties of Chairman of the Board. Unless the Board shall otherwise
determine, the Chairman shall preside at all meetings of the shareholders and
at meetings of the Board of Directors and the Executive Committee. The
Chairman shall see that all orders and resolutions of the Board of Directors
and the Executive Committee are carried into effect and shall be the person
to whom the Vice Chairman and President, and all other officers designated by
the Chairman, shall report. The Chairman may delegate such duties as he sees
fit to delegate to the Vice Chairman, the President, or other officers of the
corporation. The Chairman may appoint agents or employees other than those
appointed by the Board of Directors, and shall perform such other duties as
may be prescribed from time to time by the Board of Directors or by the Bylaws.
8
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SECTION 4.7 - Duties of Vice Chairman. The Vice Chairman may assist the
Chairman in the performance of the Chairman's duties and shall have such
powers and exercise such other duties as shall be delegated to such officer
by the Chairman or the Board. In the absence of the Chairman, the
Vice Chairman shall perform all of the duties and assume all of the
responsibilities of the Chairman.
SECTION 4.8 - Duties of President. The President shall, subject to the
authority granted to the Chairman and the Vice Chairman, be the chief
operating officer of the corporation and shall have general supervision over
the day-to-day business of the corporation. The President shall have such
other authority and shall exercise such other duties as shall, from time to
time, be delegated to such officer by the Chairman or by the Board.
SECTION 4.9 - Duties of Vice President. The Vice Presidents shall have such
powers and perform such duties as may be assigned to them by the Board of
Directors or the Chairman. A Vice President designated by the Board of
Directors shall perform all of the duties of the President in case of
absence or disability of the President
SECTION 4.10 - Duties of Secretary. The Secretary shall, subject to the
direction of the Chairman keep the minutes of all meetings of the shareholders
and of the Board of Directors, and to the extent ordered by the Board of
Directors or the Chairman the minutes of all meetings of all committees. He
shall cause notice to be given of the meetings of the shareholders, of the
Board of Directors, and of any committee appointed by the Board. He shall
have custody of the corporate seal and general charge of the records,
documents, and papers of the corporation not pertaining to the performance of
the duties vested in other officers, which shall at all reasonable times be
open to the examination of any director. Without limiting the generality of
the foregoing, the Secretary shall have charge (directly or through such
transfer agents or registrars as the Board of Directors may appoint) of the
issuance, transfer, and registration of certificates for shares of the
corporation and of the records pertaining thereto. Said records shall be
kept in such manner as to show at any time the number of shares of the
corporation issued and outstanding, the manner in which and the time when
such shares were paid for, the names and addresses of the holders of record
thereof, the numbers and classes of shares held by each, and the time when
each became such holder of record. He shall perform such other duties as
may be assigned to him by the Board of Directors or the Chairman.
SECTION 4.11 - Duties of Treasurer. Except as otherwise set forth herein,
the Treasurer shall, subject to the direction of the Chairman have general
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custody of all the property, funds and securities of the corporation and have
general supervision of the collection and disbursement of funds of the
corporation. He shall provide for the keeping of proper records of all
transactions of the corporation. He shall perform such other duties as may
be assigned to him by the Board of Directors or the Chairman.
SECTION 4.12 - Other Officers. Such other officers as shall be appointed by
the Board of Directors, or the Chairman, acting pursuant to delegated
authority of the Board, shall exercise such powers and perform such duties as
pertain to their several offices, or as may be conferred upon, or assigned to,
them by the Board of Directors or the Chairman or his designee.
SECTION 4.13 - Clerks and Agents. The Chairman, or any other officer of the
corporation authorized by him, may, subject to the supervision of the Board
of Directors, appoint such custodians, bookkeepers and other clerks, agents,
and employees as he shall deem advisable for the prompt and orderly
transaction of the business of the corporation and shall define their duties,
fix the salaries to be paid to them and dismiss them.
ARTICLE 5
Shares and Certificates for Shares
SECTION 5.1 - Consideration. Certificates for shares of the corporation shall
be issued only when fully paid for.
SECTION 5.2 - Stock Certificates. The certificates shall be in such form as
designated by the Board of Directors, shall be numbered in the order in which
they shall be issued, and shall be signed, either manually or in facsimile,
by the President and by the Secretary, or by such officers as may be
designated by the Board of Directors. If a corporate seal is maintained, it
or a facsimile thereof may be affixed to the certificates. Each certificate
shall state upon its face the name of the corporation and that the
corporation is organized under the laws of the State of Washington, the name
of the person to whom it is issued, and the number and class of shares and
the designation of the series, if any, the certificate represents.
SECTION 5.3 - Lost Certificates. No new certificates shall be issued until
the former certificate for the shares represented thereby shall have been
surrendered and cancelled, except in the case of lost or destroyed
certificates, and in that case only after the receipt of a bond or other
security by the corporation, satisfactory to the Board of Directors,
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indemnifying the corporation and all persons against loss in consequence of
the issuance of such new certificate.
SECTION 5.4 - Transfer of Shares. Shares of the corporation may be
transferred by endorsement by the signature of the owner, his agent,
attorney or legal representative, and the delivery of the certificate; but
no transfer shall be valid except between the parties thereto, until the same
shall have been entered upon the books of the corporation, so as to show the
names of the parties, by and to whom transferred, the numbers and designation
of the shares and the date of transfer.
SECTION 5.5 - Holder of Record. The person registered on the books of the
corporation as the owner of the issued shares shall be recognized by the
corporation as the person exclusively entitled to have and to exercise the
rights and privileges incident to the ownership of such shares.
Notwithstanding the preceding sentence, the Board of Directors may adopt by
resolution a procedure whereby a shareholder may certify in writing to the
corporation that all or a portion of the shares registered in the name of
such shareholder are held for the account of a specified person or persons.
Upon receipt by the corporation of a certification complying with such an
adopted procedure, the person specified in the certification shall be deemed,
for the purpose or purposes set forth in the certification, to be the holders
of record of the number of shares specified in place of the shareholder
making the certification.
SECTION 5.6 - Issuance of Shares. Any shares authorized but not issued by
this corporation shall be issued, sold, or otherwise transferred by this
corporation only upon authorization of the Board of Directors.
SECTION 5.7 - Subscriptions. A subscription for shares of this corporation
shall be in writing and upon such terms as may be approved by the Board of
Directors.
SECTION 5.8 - Payment of Subscriptions. A subscription for shares shall be
paid in accordance with the terms set forth in the subscription or related
subscription agreement, if any. If the subscription or subscription
agreement does not require payment on or before a stated date or at a fixed
period after a stated date, then payment shall be made in such manner and
at such times as may be determined by the Board of Directors and expressed
by it in a written call for payment; provided that the call shall be uniform
as to all shares of the same class or series and that the call shall be
mailed to each subscriber at his last post office address known to the
corporation at least thirty (30) days in advance of the date upon which
11
<PAGE>
payment or the first installment, if installment payments are called for,
is due.
SECTION 5.9 - Default in Payment of Subscriptions. If a payment required
by a subscription, a subscription agreement, or a call of the Board of
Directors is not paid when due, then the corporation may make written
demand for payment upon the defaulting subscriber by personal service or
by mailing a copy of the demand to the subscriber at his last post office
address known to the corporation. If the payment is not made within
twenty (20) days of the serving or mailing of the demand for payment,
the corporation may terminate the subscription, forfeit the subscriber's
rights thereunder, retain as liquidated damages any sums previously paid
on the subscription, and hold and dispose of the shares as though never
subject to the subscription. In lieu of forfeiture, the corporation may
proceed to collect the amount due in the same manner as any debt due the
corporation.
ARTICLE 6
Seal
SECTION 6.1 - Corporate Seal. In the exercise of its discretion the Board
of Directors may adopt and maintain a suitable seal for the corporation.
ARTICLE 7
Miscellaneous Provisions
SECTION 7.1 - Fiscal Year. The fiscal year of the corporation shall be the
calendar year.
SECTION 7.2 - Records. The Articles of Incorporation, the Bylaws, and the
proceedings of all meetings of the shareholders, the Board of Directors and
standing committees of the Board shall be recorded in appropriate minute
books provided for that purpose. The minutes of each meeting shall be
signed by the Secretary or other officer appointed to act as Secretary.
12
<PAGE>
ARTICLE 8
Bylaws
SECTION 8.1 - Inspection. A copy of the Bylaws, with all amendments thereto,
shall at all times be kept in a convenient place at the principal office of
the corporation, and shall be open for inspection of all shareholders during
normal business hours.
SECTION 8.2 - Amendments. The Bylaws may be amended, altered or repealed,
at any regular meeting of the Board of Directors, by a vote of the majority
of the whole Board of Directors, provided that a written statement of the
proposed action shall have been personally delivered or mailed to all
directors at least two (2) days prior to any such meeting.
I HEREBY CERTIFY that the foregoing are the Restated Bylaws of Columbia
Banking System, Inc in effect on this 26th day of February, 1997.
/s/ Jill L. Myers
-----------------------------
Jill L. Myers
Secretary
13
<PAGE>
Exhibit 11
Computation of Fully Diluted Earnings per Common Share
Columbia Banking System, Inc.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
(in thousands, except per share data) 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Earnings
Net income applicable to common stock $1,053 $ 808
Interest on convertible subordinated notes,
net of income tax effects--Note 1 60
- --------------------------------------------------------------------------------
Pro forma net income available to common stock $1,053 $ 868
================================================================================
Shares
Average number of common and common
equivalent shares outstanding 5,604 3,720
Additional shares assuming conversion of
convertible subordinated notes--Note 1 266
Incremental shares attributed to outstanding options 5
- --------------------------------------------------------------------------------
Fully diluted average common and common
equivalent shares outstanding 5,609 3,986
================================================================================
Fully diluted earnings per share - as reported $0.19 $0.22
================================================================================
Fully diluted earnings per share - as calculated $0.19 $0.22
================================================================================
</TABLE>
Note 1. Earnings per share and fully diluted earnings per share are reported
as the same for the three months ended March 31, 1996. The inclusion of
convertible subordinated notes would have produced an antidilutive effect.
Additional average shares, assuming the conversion of convertible subordinated
notes, represent 253,742 for the three months ended March 31, 1996. The
related interest expense on these notes (net of income tax effects) was
$60,265 for the three months ended March 31, 1996.
On April 23, 1997, the Company announced a 5% stock dividend payable on
May 22, 1997, to shareholders of record on May 8, 1997. Average shares
outstanding, net income per share and book value per share have been adjusted
to give retroactive effect to all periods presented.
On June 3, 1996, the Company gave notice that it would redeem all of its
issued and outstanding 7.85% Convertible Subordinated Notes (the "Notes") on
August 1, 1996. The Notes were convertible in whole or in part, in multiples
of $1,000 principal amount, at 100% of the principal amount of the Note
(or portion thereof), at the conversion price per share of common stock of
$10.56. Prior to August 1, 1996, all of the Notes were converted into
223,743 shares of common stock.
For additional information on earnings per share, please see the "Capital"
section of the "Management Discussion and Analysis of Financial Condition
and Results of Operations".
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
FINANCIAL DATA SCHEDULE
Columbia Banking System, Inc.
(in thousands except per share)
</LEGEND>
<CIK> 0000887343
<NAME> COLUMBIA BANKING SYSTEM, INC.
<MULTIPLIER> 1000
<CURRENCY> $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 27522
<INT-BEARING-DEPOSITS> 28069
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 45125
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 476607
<ALLOWANCE> 4806
<TOTAL-ASSETS> 608507
<DEPOSITS> 521919
<SHORT-TERM> 0
<LIABILITIES-OTHER> 4582
<LONG-TERM> 22000
0
0
<COMMON> 56446
<OTHER-SE> 3560
<TOTAL-LIABILITIES-AND-EQUITY> 608507
<INTEREST-LOAN> 10293
<INTEREST-INVEST> 683
<INTEREST-OTHER> 377
<INTEREST-TOTAL> 11353
<INTEREST-DEPOSIT> 4649
<INTEREST-EXPENSE> 5079
<INTEREST-INCOME-NET> 6274
<LOAN-LOSSES> 400
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5885
<INCOME-PRETAX> 1479
<INCOME-PRE-EXTRAORDINARY> 1053
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1053
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
<YIELD-ACTUAL> 4.68
<LOANS-NON> 1721
<LOANS-PAST> 0
<LOANS-TROUBLED> 24
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4504
<CHARGE-OFFS> 117
<RECOVERIES> 19
<ALLOWANCE-CLOSE> 4806
<ALLOWANCE-DOMESTIC> 4806
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (139)
</TABLE>
