<PAGE>
SCHEDULE 14A--INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
[_] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
COLUMBIA BANKING SYSTEM, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
[LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 22, 1998
NOTICE IS HEREBY GIVEN that, pursuant to call of its directors, the Annual
Meeting of Shareholders of Columbia Banking System, Inc. ("Columbia") will be
held at the Sheraton Tacoma Hotel, 1320 Broadway Plaza, Tacoma, Washington, on
April 22, 1998 at 1:00 p.m., for the purpose of considering and voting upon
the following matters:
1. ELECTION OF DIRECTORS. Electing seventeen (17) persons to serve on the
Board of Directors.
2. APPROVAL OF ARTICLE AMENDMENT. A proposal to amend Columbia's Articles
of Incorporation to increase the number of authorized common shares from
11,000,000 to 30,000,000.
3. WHATEVER OTHER BUSINESS as may properly be brought before the Annual
Meeting or any adjournment thereof.
Only those shareholders of record at the close of business on February 27,
1998 will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
By Order of the Board of Directors
/s/ Jill L. Myers
-------------------------------------
Jill L. Myers
Secretary
Tacoma, Washington
March 18, 1998
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU DO
ATTEND THE ANNUAL MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
<PAGE>
COLUMBIA BANKING SYSTEM, INC.
1102 BROADWAY PLAZA
TACOMA, WASHINGTON 98402
----------------
PROXY STATEMENT
----------------
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
This Proxy Statement and the accompanying Proxy are being first sent to
shareholders on or about March 18, 1998, for use in connection with the Annual
Meeting of Shareholders of Columbia Banking System, Inc. ("Columbia") to be
held on Wednesday, April 22, 1998 (the "Annual Meeting"). Only those
shareholders of record of Columbia's no par value common stock at the close of
business on February 27, 1998 will be entitled to notice of and to vote at the
Annual Meeting. The number of shares of common stock outstanding and entitled
to vote at the Annual Meeting is .
The enclosed Proxy is solicited by and on behalf of the Board of Directors
of Columbia and the costs of solicitation will be borne by Columbia. In
addition to the use of the mails, solicitation may be made, without additional
compensation, by directors and officers of Columbia and regular employees of
Columbia and/or its banking subsidiary, Columbia State Bank ("Columbia Bank"),
by telephone, facsimile and/or personal contact. Columbia does not expect to
pay any compensation for the solicitation of proxies, except to brokers,
nominees, and similar recordholders for reasonable expenses in mailing proxy
materials to beneficial owners.
On each matter before the Annual Meeting, including the election of
directors, shareholders have one vote for each share of common stock held.
Shareholders are not entitled to cumulate their votes in the election of
directors. Under Washington law, if a quorum is present at the Annual Meeting,
the seventeen nominees for election as directors who receive the greatest
number of votes cast for the election of directors by the holders of shares
entitled to vote and present in person or by proxy at the Annual Meeting will
be elected directors. Approval of the amendment to the Articles of
Incorporation requires the affirmative vote of a majority of Columbia's
outstanding common shares.
With regard to the election of directors, votes may be cast in favor of some
or all of the nominees or withheld as to some or all of the nominees. Votes
withheld will have the effect of a negative vote. Abstentions may be specified
on all proposals except the election of directors. An abstention from voting
will have the practical effect of voting against a proposal since the shares
which are the subject of the abstention will be considered present and
entitled to vote but will not be voted in favor of the proposal. If shares are
held in "street name" through a broker or other nominee, the broker or nominee
may not be permitted to exercise voting discretion with respect to some of the
matters to be acted upon. Thus, if the broker or nominee is not given specific
voting instructions, shares may not be voted on those matters and will not be
counted in determining the number of shares necessary for approval. Shares
represented by such "broker non-votes" will, however, be counted in
determining whether or not there is a quorum.
If the enclosed Proxy is duly executed and received in time for the Annual
Meeting, it is the intention of the persons named in the Proxy to vote the
shares represented by the Proxy "FOR" the seventeen nominees for director
listed in this Proxy Statement and "FOR" approval of the Article Amendment,
unless otherwise directed. Any proxy given by a shareholder may be revoked
before its exercise by notice to Columbia in writing, by a subsequently dated
proxy, or in open meeting prior to the taking of the shareholder vote. The
shares represented by properly executed proxies that are not revoked will be
voted in accordance with the specifications in such proxies, or, if no
preference is specified, in accordance with the recommendation of management
as specified above.
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SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of February 27, 1998 with
respect to beneficial ownership of Columbia's common stock by (a) each
director and director nominee; (b) each person who served as chief executive
officer of Columbia during 1997 and each of Columbia's four other most highly
compensated executive officers whose aggregate cash and cash equivalent forms
of compensation exceeded $100,000 during 1997 (the "Named Executives"); and
(c) all current directors and executive officers of Columbia as a group.
Except as noted, Columbia believes that the beneficial owners of the shares
listed below, based on information furnished by such owners, have sole voting
and investment power with respect to such shares. The percentages shown are
based on the number of shares of Columbia common stock deemed to be
outstanding under applicable regulations (including options exercisable within
sixty days). As of February 27, 1998 there were no shareholders known by
Columbia to be the beneficial owners of more than 5% of Columbia's outstanding
shares of common stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY OWNED
------------------
NAME NUMBER PERCENTAGE
- ---- ------- ----------
<S> <C> <C>
Donald A. Andersen(1)........................................ 7,063 *
W. Barry Connoley............................................ 2,152 *
Richard S. DeVine............................................ 25,955 *
Melanie J. Dressel(2)........................................ 19,512 *
A.G. Espe(3)................................................. 109,633 1.7%
Jack Fabulich................................................ 5,644 *
Jonathan Fine(4)............................................. 14,428 *
John P. Folsom............................................... 5,702 *
Margel S. Gallagher(5)....................................... 68,473 1.1%
W. Kelso Gillenwater......................................... 200 *
John A. Halleran............................................. 9,600 *
Thomas L. Matson............................................. 60,268 *
William W. Philip(6)......................................... 160,000 2.5%
John H. Powell(7)............................................ 22,030 *
Robert E. Quoidbach.......................................... 3,757 *
Donald Rodman(8)............................................. 5,343 *
Frank H. Russell............................................. 1,902 *
Harald R. Russell(9)......................................... 11,679 *
Sidney R. Snyder............................................. 17,010 *
William T. Weyerhaeuser...................................... 10,000 *
Evans Q. Whitney(10)......................................... 22,357 *
James M. Will ............................................... 4,836 *
Directors and executive officers as a group (23 persons)..... 605,647 9.2%
</TABLE>
- --------
* Represents less than 1.0% of Columbia's outstanding common stock.
(1) Includes 5,513 shares issuable upon exercise of options which became
exercisable on January 23, 1998 at $8.85 per share.
(2) Includes 8,820 shares issuable upon exercise of options which became
exercisable on September 22, 1996 at $10.66 per share; 2,205 shares
issuable upon exercise of options which became exercisable on January 26,
1997 at $10.66 per share; and 2,205 shares issuable upon exercise of
options which became exercisable on December 16, 1997 at $8.85 per share.
Also includes 5,000 shares issued to Ms. Dressel in January 1998 as a
restricted stock award and held in escrow until certain conditions are met.
(3) Amounts reported for Mr. Espe are owned by his estate. Includes 42,000
shares issuable upon exercise of options all of which became exercisable
upon Mr. Espe's death at prices ranging from $14.52--$20.24 per share.
Also includes 6,767 shares issuable upon exercise of options which became
exercisable on
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September 25, 1993 at $5.86 per share as to 4,897 shares and $8.39 per
share as to 1,870 shares, assigned to Mr. Espe's estate as a result of the
February 1998 liquidation of NorCap, L.L.C. See "INTEREST OF MANAGEMENT IN
CERTAIN TRANSACTIONS".
(4) Includes 4,103 shares owned by a family trust for which Mr. Fine is co-
trustee and shares voting and investment power.
(5) Includes 3,823 shares held by C&G Partnership, a Washington General
Partnership, in which Ms. Gallagher's spouse, J. James Gallagher, is a
general partner. Also includes 17,233 shares held by the J. James
Gallagher & Co. Profit Sharing Trust, for which Ms. Gallagher's spouse, J.
James Gallagher, is the trustee.
(6) Includes 60,681 shares held by Kelcin, a limited partnership, in which Mr.
Philip is a general partner. Also includes 20,000 shares issued to Mr.
Philip in August 1996 as a restricted stock award and held in escrow until
certain conditions are met. Also includes 20,000 shares issued to Mr.
Philip in January 1998 as a restricted stock award and held in escrow
until certain conditions are met.
(7) Includes 3,357 shares issuable upon exercise of options which became
exercisable on September 25, 1993 at $5.86 per share as to 2,430 shares
and $8.39 per share as to 927 shares, assigned to Mr. Powell as a result
of the February 1998 liquidation of NorCap, L.L.C. See "INTEREST OF
MANAGEMENT IN CERTAIN TRANSACTIONS".
(8) All shares are owned by a living trust for which Mr. Rodman and his spouse
are co-trustees and share voting and investment power.
(9) Includes 2,756 shares issuable upon exercise of options which became
exercisable on January 26, 1997 at $10.66 per share; and 1,654 shares
issuable upon exercise of options which became exercisable on December 16,
1997 at $8.85 per share. Also includes 5,000 shares issued to Mr. Russell
in January 1998 as a restricted stock award and held in escrow until
certain conditions are met.
(10) Includes 8,820 shares issuable upon exercise of options which became
exercisable on September 22, 1996 at $10.66 per share; 2,205 shares
issuable upon exercise of options which became exercisable on January 26,
1997 at $10.66 per share; and 2,205 shares issuable upon exercise of
options which became exercisable on December 16, 1997 at $8.85 per share.
Also includes 5,000 shares issued to Mr. Whitney in January 1998 as a
restricted stock award and held in escrow until certain conditions are
met. Also includes 1,050 shares held in a brokerage account for Mr.
Whitney's mother, over which Mr. Whitney exercises investment power.
3
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
Columbia's Bylaws provide that the number of directors to be elected by the
shareholders shall be not less than five (5) nor more than twenty-five (25).
The Bylaws also provide that the exact number of directors within the minimum
and maximum limit will be fixed and determined by resolution of the Board of
Directors. The Board of Directors has fixed the number of directors to be
elected at this Annual Meeting at seventeen (17) and has nominated the
individuals listed on the following pages for election as directors for the
ensuing year or until their successors are elected and qualified. In addition
to the fifteen directors currently serving on the Board, the Board has
nominated Messrs. W. Kelso Gillenwater, former publisher of The News Tribune,
Tacoma, Washington, and William T. Weyerhaeuser, a clinical psychologist in
Tacoma, Washington, for election.
If any nominee should refuse or be unable to serve, the Proxy will be voted
for such person as is designated by the Board of Directors to replace any such
nominee. The Board of Directors presently has no knowledge that any of the
nominees will refuse or be unable to serve.
INFORMATION WITH RESPECT TO NOMINEES
Information with respect to the nominees for director is provided below,
including their names and ages, their principal occupations during the past
five years, and the year first elected a director of Columbia or its
predecessor corporation or one of its former or current subsidiaries. The
address for all of the nominees is 1102 Broadway Plaza, Tacoma, Washington,
98402. With the exception of Messrs. W. Kelso Gillenwater and William T.
Weyerhaeuser, all of the nominees are presently directors of Columbia and
Columbia Bank.
W. BARRY CONNOLEY Director since 1993
Mr. Connoley, 56, has been President and Chief Executive Officer of
MultiCare Health System, Tacoma, Washington since 1986.
RICHARD S. DEVINE Director since 1993
Mr. DeVine, 70, has served as President of Chinook Resources, Inc. (timber
acquisition and sales) since 1992. Mr. DeVine currently serves as Chairman of
Raleigh Schwarz & Powell, Inc. (insurance brokers), Tacoma, Washington, having
served as President of that company from 1976 to 1989.
JACK FABULICH Director since 1993
Mr. Fabulich, 69, is Chairman of Parker Paint Manufacturing Co., Inc.,
Tacoma, Washington, having served as President from 1982 to 1993. He is also
currently the President and a Commissioner of the Port of Tacoma.
JONATHAN FINE Director since 1993
Mr. Fine, 43, is the Chief Executive Officer of the American Red Cross,
Seattle-King County Chapter. From January 1993 until April 1996, Mr. Fine was
a private investor and from 1986 until December 1992, he served as Senior Vice
President and Treasurer of Puget Sound Bancorp, Inc., Tacoma, Washington.
JOHN P. FOLSOM Director since 1997
Mr. Folsom, 54, has been President and Chief Executive Officer of Raleigh,
Schwarz & Powell, Inc. (insurance brokers), Tacoma, Washington, since 1989.
MARGEL S. GALLAGHER Director since 1993
Ms. Gallagher, 50, has been the President of Viva Imports, Ltd. (retail
women's clothing), Tacoma and Seattle, Washington, since 1982.
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<PAGE>
W. KELSO GILLENWATER Director Nominee
Mr. Gillenwater, 50, is currently a private investor. From September 1991
until January 1998, Mr. Gillenwater was the President of Tacoma News, Inc. and
the publisher of the The News Tribune, Tacoma-Pierce County's largest
newspaper.
JOHN A. HALLERAN Director since 1992
Mr. Halleran, 69, has been a private investor since 1992. Prior to that time
he was a general contractor with headquarters in Bellevue, Washington.
THOMAS L. MATSON Director since January 1998
Mr. Matson, 60, has been the owner and President of Tom Matson Dodge, Inc.
(automobile dealership), Auburn, Washington, since 1963.
WILLIAM W. PHILIP Director since 1993
Mr. Philip, 71, has served as Chairman, President and Chief Executive
Officer of Columbia and Columbia Bank since November, 1997. Prior to that time
and since 1993, he served as President and Chief Operating Officer of Columbia
and as President and Chief Executive Officer of Columbia Bank. Until his
retirement in December 1992, Mr. Philip was Chairman of the Board and Chief
Executive Officer of Puget Sound Bancorp, Tacoma, Washington ("PSB") since its
inception in 1981 and was Chairman and Chief Executive Officer of Puget Sound
National Bank prior to and after the inception of PSB, having served with that
institution for more than 40 years.
JOHN H. POWELL Director since 1991
Mr. Powell, 73, has been the co-owner of Sound Oil Company (heating oil
distributor), Seattle, Washington, since 1950. Mr. Powell was Chairman of the
Board of Bank of Seattle, Seattle, Washington, from 1976 to 1983.
ROBERT E. QUOIDBACH Director since 1988
Mr. Quoidbach, 72, has been a private investor and tree farmer since 1990.
Prior to that time he was an industrial contractor in Longview, Washington.
DONALD RODMAN Director since 1991
Mr. Rodman, 59, has been the owner and an executive officer of Rodman
Realty, Longview, Washington, since 1961.
FRANK H. RUSSELL Director since 1993
Mr. Russell, 67, has been the President of Professional Services Unified,
Inc., a full-facility service, including food service, janitorial and
electronic access systems in Tacoma, Washington since 1985. Mr. Russell is
also the President of Quality Meal Expediters (food catering), headquartered
in Tacoma, Washington.
SIDNEY R. SNYDER Director since 1988
Mr. Snyder, 71, has been the owner of Sid's Food Market in Seaview,
Washington since 1953 and of the Midtown Market in Long Beach, Washington
since 1982. Mr. Snyder is the Chairman of the Board and a principal
shareholder of Bank of the Pacific in Long Beach, Washington. Mr. Snyder has
been a member of the Washington State Senate since 1990, currently serving as
the Senate Democratic Leader.
5
<PAGE>
WILLIAM T. WEYERHAEUSER Director Nominee
Mr. Weyerhaeuser, 54, is a clinical psychologist who has been in private
practice in Tacoma, Washington since 1975. Since 1984, Mr. Weyerhaeuser has
also been the owner and Chairman of the Board of Comerco, Inc. (holding
company for the Yelm Telephone Company), Tacoma, Washington, and, since 1994,
has served as the Chairman of the Board of Rock Island Company (private
investment company), St. Paul, Minnesota. Since 1990, Mr. Weyerhaeuser has
also been a director of Potlatch Corporation (forest products), a company with
a class of securities registered pursuant to Section 12(b) of the Securities
Exchange Act of 1934, as amended, located in Spokane, Washington.
JAMES M. WILL Director since 1993
Mr. Will, 51, has served as the President of Titus-Will Enterprises
(automobile leasing, rental and property management company), Tacoma,
Washington since 1997. Prior to that time and since 1969, Mr. Will was the
President of Tam Manufacturing Co. (an automotive reengineering company),
Tacoma, Washington.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THESE NOMINEES.
INFORMATION REGARDING THE BOARD AND ITS COMMITTEES
The Board of Directors of Columbia has established certain standing
committees, including an Audit Committee and a Personnel and Compensation
Committee. There presently is no standing nominating committee.
AUDIT COMMITTEE. The main functions performed by the Audit Committee include
reviewing and approving the services of the independent auditors, reviewing
the plan, scope, and audit results of the internal auditors and the
independent auditors, and reviewing the reports of bank regulatory
authorities. The Audit Committee also reviews the annual and other reports to
the Securities and Exchange Commission and the annual report to the
shareholders. Current members of the Committee, none of whom are officers or
employees of Columbia or Columbia Bank, are: Messrs. Fine (Chairman),
Connoley, Folsom, Halleran, Matson, Powell and Russell, and Ms. Gallagher.
There were five (5) meetings of the Audit Committee during 1997.
PERSONNEL AND COMPENSATION COMMITTEE. The Personnel and Compensation
Committee reviews and recommends remuneration arrangements for senior
management. Current members of the Compensation Committee, none of whom are
officers or employees of Columbia or Columbia Bank, are: Messrs. DeVine
(Chairman), Fabulich, Quoidbach, Rodman, Snyder and Will. There were five (5)
meetings of the Personnel and Compensation Committee during 1997.
BOARD MEETINGS. There were nine (9) regular meetings of the Board of
Directors of Columbia during 1997. All directors attended at least 75% of the
total meetings of the Board and all committees of which they were members in
1997, except Messrs. Connoley and Snyder.
DIRECTOR COMPENSATION. During 1997, Columbia's non-officer directors
received an annual retainer of $1,600. In addition to their annual retainer,
such directors received $200 for each Board meeting attended and $150 for each
committee meeting attended.
In April 1997, all non-officer directors of Columbia were granted a non-
qualified stock option, pursuant to Columbia's Stock Option Plan, to purchase
1,050 shares (as adjusted for stock dividends) of Columbia's common stock at
an exercise price of $15.12 per share (as adjusted for stock dividends). The
options vest (i.e. become exercisable) three years from the date of grant,
unless earlier vesting is approved by the Personnel and Compensation
Committee. The options may be exercised for a period of five years after they
vest. If a director dies, becomes disabled, or retires (defined to mean a
termination of directorship with at least five years of service or after
attaining the age of 75), all options (whether or not vested) will become
immediately exercisable and may be exercised by the director or the director's
estate for a period of five years or until the expiration of the
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<PAGE>
stated term of the option. If a director terminates service on the Board for
any reason other than death, disability or retirement, all options, to the
extent then exercisable, may be exercised within 90 days. If any director is
terminated for cause, all options will immediately terminate. Any additional
option grants, which may be approved from time to time in the discretion of
the Personnel and Compensation Committee and the Board, will be subject to a
director's unexcused absence for the year from no more than 25% of the total
meetings of the Board and all committees of which the director is a member.
PERSONNEL AND COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Columbia's 1997 fiscal year, Mr. Philip served as Chairman of the
Board and a member of the Compensation Committee of MultiCare Health System,
of which Mr. Connoley, one of Columbia's directors, is President and Chief
Executive Officer.
SHAREHOLDER NOMINATIONS FOR 1998 ANNUAL MEETING OF SHAREHOLDERS
In accordance with Columbia's Articles of Incorporation, shareholder
nominations for the 1998 Annual Meeting of Shareholders, if any, must be made
in writing not less than 14 nor more than 50 days prior to the Annual Meeting,
and must be delivered or mailed to the Chairman of Columbia; provided,
however, that if less than 21 days' notice of the Annual Meeting is given to
shareholders, the notification must be mailed or delivered to the Chairman not
later than the close of business on the seventh day following the day on which
notice of the Annual Meeting was mailed. Such notification should contain the
following information to the extent known to the notifying shareholder: (a)
the name and address of each proposed nominee; (b) the principal occupation of
each proposed nominee; (c) the total number of shares of stock of Columbia
that will be voted for each proposed nominee; (d) the name and address of the
notifying shareholder; and (e) the number of shares of stock of Columbia owned
by the notifying shareholder. Nominations not made in accordance with the
above requirements may, in his discretion, be disregarded by the Chairman of
the Annual Meeting, and upon the Chairman's instruction, the vote teller may
disregard all votes cast for such a nominee.
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EXECUTIVE COMPENSATION
REPORT OF THE PERSONNEL AND COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Personnel and Compensation Committee of the Board of Directors of
Columbia (the "Committee") has furnished the following report on executive
compensation for fiscal year 1997. The Committee report is intended to
describe in general terms the process the Committee undertakes and the matters
it considers in determining the appropriate compensation for Columbia's
executive officers, including the executive officers who are named in the
Summary Compensation Table which follows (the "Named Executives").
RESPONSIBILITIES AND COMPOSITION OF THE COMMITTEE
The Committee is responsible for (i) establishing compensation programs for
executive officers of Columbia designed to attract, motivate and retain key
executives responsible for the success of Columbia as a whole;
(ii) administering and maintaining such programs in a manner that will benefit
the long-term interests of Columbia and its shareholders; and (iii)
determining the compensation of Columbia's executive officers. The Committee
serves pursuant to a Charter adopted by the Board of Directors.
The Committee is composed of Richard S. DeVine (Chairman), Jack Fabulich,
Robert E. Quoidbach, Donald Rodman, Sidney R. Snyder and James M. Will. None
of the members are officers or employees of Columbia or Columbia Bank. Mr.
DeVine has served on the Compensation Committee of Columbia or Columbia Bank
since 1993. Messrs. Fabulich, Quoidbach, Rodman, Snyder and Will were
appointed to the Compensation Committee in 1997.
COMPENSATION PHILOSOPHY
Columbia, acting through the Committee, believes that compensation of its
Named Executives and other key personnel should reflect and support the goals
and strategies that Columbia has established and enunciated. Columbia's long-
term 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. Management believes that the ongoing
consolidation in its principal market area affords an opportunity for
aggressive growth in loans and deposits. Columbia's growth strategy consists
of the following elements:
. Focus on relationship lending to small and medium-sized businesses,
professionals and other individuals whom Columbia believes are under
served by larger banks in its market area and are attracted by
Columbia's emphasis on relationship banking.
. Fund loan growth through the creation of a branch system catering
primarily to retail depositors, supplemented by business banking
customer deposits and other borrowings.
. Continue growth in the Tacoma metropolitan area and selectively expand
into neighboring King and Thurston Counties.
. Control credit risk through established loan underwriting and monitoring
procedures, loan concentration limits, product and industry
diversification, and the hiring of experienced lending personnel with a
high degree of familiarity with their market area.
The achievement of these goals is intended to create long-term value for
Columbia's shareholders, consistent with protecting the interests of
depositors. The Committee believes that these goals are best supported by
attracting and retaining well-qualified executive officers and other personnel
through competitive compensation arrangements, with emphasis on rewards for
outstanding contributions to Columbia's success and with a special emphasis on
aligning the interests of the executive officers and other personnel with
those of Columbia's shareholders.
COMPENSATION PROGRAMS AND PRACTICES
Columbia's compensation program for executives consists of three key
elements: (i) base salary; (ii) a performance-based annual bonus; and (iii)
periodic grants of options and other stock-based compensation.
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The Committee believes that this three-part approach best serves the
interests of Columbia and its shareholders. It enables Columbia to meet the
requirements of the highly competitive banking environment in which it
operates, while ensuring that executive officers are compensated in a way that
advances both the short- and long-term interests of shareholders. The variable
annual bonus permits individual performance to be recognized and is based, in
significant part, on an evaluation of the contribution made by the officer to
Columbia's overall performance. Options and other stock-based compensation
relate a significant portion of long-term remuneration directly to stock price
appreciation realized by Columbia's shareholders, and further serve to promote
an executive's continued service to the organization.
The Committee has established compensation ranges based on surveys of
national and Northwest commercial banks with approximately $1 billion in total
assets conducted by an independent consulting firm. The Committee believes
that these institutions are representative of Columbia's main competition for
executive talent, with jobs similar to Columbia's in magnitude, complexity and
scope of responsibility.
BASE SALARY. Base salaries for Columbia's executive officers are based upon
recommendations by the Chief Executive Officer, taking into account such
factors as competitive industry salaries, an executive's scope of
responsibilities, and individual performance and contribution to the
organization. Under the Chief Executive Officer's discretion, the Senior Vice
President--Human Resources Director reviews all salary recommendations with
the Committee, which then approves or disapproves such recommendations. The
Chief Executive Officer reviews any salary recommendations for the Senior Vice
President--Human Resources Director with the Committee.
ANNUAL BONUS. Executive officers have an annual incentive (bonus)
opportunity with awards based on the overall performance of Columbia and on
specific individual performance targets. The performance targets may be based
on one or more of the following criteria: growth in assets and deposits, asset
quality, growth in earnings, and return on equity.
Columbia's Chief Executive Officer, working with the Senior Vice President--
Human Resources Director, determines the annual bonus pool following
completion of each fiscal year. The size of the bonus pool is based upon an
assessment of Columbia's performance as compared to both budgeted and prior
fiscal year performance and the extent to which Columbia achieved its overall
financial goals. Once the bonus pool is determined, the Chief Executive
Officer or the Senior Vice President--Human Resources Director, as
appropriate, makes individual bonus recommendations to the Committee, within
the limits of the pool, for eligible employees based upon an evaluation of
their individual performance and contribution to Columbia's overall
performance.
OPTIONS AND OTHER STOCK-BASED COMPENSATION. Since Columbia's significant
reorganization in 1993, the Committee has followed a compensation philosophy
that emphasizes options and other stock-based compensation. Columbia's use of
stock-based compensation focuses on the following guiding principles:
(i) stock-based compensation has been and will continue to be an important
element of employee pay; (ii) stock options given will be based on performance
measures within the employee's control; (iii) owning stock is an important
ingredient in forming the partnership between all employees and the
organization; and (iv) ownership of significant amounts of Columbia's stock by
executives and senior officers of Columbia will facilitate putting
management's goals in line with shareholders.
Columbia's performance since 1993 has, in the Committee's opinion, shown the
value of this approach. In particular, the Committee has taken note that the
total annual returns to Columbia's shareholders for 1997 and 1996 were 74% and
42%, respectively, as compared to total annual returns for the Nasdaq U.S.
Stock Index of 23% and 23% and for the SNL Securities Western Bank Stock Index
(Columbia Peer Group) of 84% and 38%, respectively.
The Committee anticipates that it will continue to emphasize stock-based
compensation in the future and will expand the number of persons who will
receive options to include essentially all employees of Columbia who meet
certain minimum requirements, including performance measures.
9
<PAGE>
STOCK OWNERSHIP GUIDELINES
In 1997, the Committee approved stock ownership guidelines for its executive
and senior officers as a way to help closely align the financial interests of
these officers with those of Columbia's shareholders. These officers are
expected to make continuing progress towards compliance with the guidelines
during the five-year period that began in April 1997 or the date designated as
an executive or senior officer, whichever is later.
The ownership guidelines are as follows: (i) senior executive officers
(including the positions of Chairman, Chief Executive Officer, President, and
Chief Operating Officer, and other designated senior executive officers) have
a required minimum ownership of 20,000 shares; and (ii) other designated
executive officers and senior officers have a minimum ownership requirement of
3,500 shares.
The Board has also approved stock ownership guidelines which call for
directors to achieve a stock ownership position of at least 5,000 shares by
the year 2002 or within five years of joining the Board.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. A.G. Espe was the Chairman and Chief Executive Officer of Columbia until
his death in mid-November 1997. Mr. W.W. Philip, who was then serving as Vice
Chairman, President and Chief Operating Officer of Columbia, was appointed to
serve as Columbia's Chairman, President and Chief Executive Officer in late
November 1997. In evaluating the compensation of Messrs. Espe and Philip for
services rendered in 1997, the Committee considered both quantitative and
qualitative factors.
In looking at quantitative factors, the Committee reviewed Columbia's 1997
financial results and compared them with Columbia's budget and actual
financial results for 1996. Specifically, the Committee considered that (i)
year-end net income from operations increased 58% from 1996; (ii) year-end
earnings per share (basic) from operations increased 14% from 1996; (iii)
total assets, total loans and total deposits grew by 22%, 31% and 24%,
respectively, from year-end 1996 to year-end 1997; (iv) the 1997 return on
average common shareholders' equity and return on average total assets
increased significantly over 1996; and (v) despite rapid loan growth, credit
quality continued to improve in 1997.
In addition to these quantitative accomplishments, the Committee also
considered certain qualitative accomplishments by Messrs. Espe and Philip in
1997. Specifically, the Committee recognized these executives' leadership in
strategically positioning Columbia for future significant developments in the
banking industry and in Columbia's market area, and otherwise developing long-
term strategies for the organization. The Committee recognized Mr. Espe's and
Mr. Philip's efforts in successfully directing and carrying out the mergers
with Cascade Bancorp, Inc. and the Bank of Fife, and the continued expansion
of Columbia Bank's retail branch system. The Committee also recognized Mr.
Philip's efforts in training other executive officers for future leadership of
the organization following his planned retirement as an executive officer at
year end 1999.
Based on the foregoing and consistent with the Committee's overall
compensation philosophy, the Committee made the following determinations with
respect to Mr. Espe's and Mr. Philip's compensation for 1997. Mr. Espe's
annual salary in 1997 was established at $160,000 and he was awarded an
incentive (bonus) payment of $40,000. In 1996, Mr. Espe was granted so-called
"premium options" to purchase 42,000 shares (as adjusted for stock dividends)
of Columbia's common stock, which vested at the rate of 10,500 shares per year
beginning August 1997, at option prices (as adjusted for stock dividends)
increasing from $14.52 per share, in 1997, to $20.24 per share in August 2000.
The grant of these premium options was intended to further align Mr. Espe's
and shareholders' interests to continue building shareholder value in future
years. Upon his death, the option to purchase all 42,000 shares became
immediately exercisable and will remain exercisable for a period of ten years
following the date of vesting. See "Executive Employment Agreements".
Mr. Philip's annual salary in 1997 was established at $175,000 and he was
awarded an incentive (bonus) payment of $75,000. Following Mr. Espe's death in
November 1997, Mr. Philp was appointed Chairman, President and Chief Executive
Officer of Columbia and his salary for 1998 was established at $225,000.
10
<PAGE>
Mr. Philip was also then granted a restricted stock award for 20,000 shares of
common stock for his outstanding contributions to Columbia's success and to
preserve his close contact with Columbia after his retirement.
POLICY WITH RESPECT TO $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code")
generally limits the Federal corporate income tax deduction for compensation
paid for any fiscal year to Named Executives of a public company to $1
million, unless the compensation is "performance-based compensation" or
qualifies under certain other exemptions. The Committee intends to qualify
executive compensation for deductibility under Section 162(m) to the extent
consistent with the best interests of Columbia. Since corporate objectives may
not always be consistent with the requirements for full deductibility, it is
conceivable that Columbia may enter into compensation arrangements in the
future under which payments are not deductible under Section 162(m).
Deductibility will not be the sole factor used by the Committee in
ascertaining appropriate levels or modes of compensation.
CONCLUSION
The Committee believes that for 1997, the compensation terms for Messrs.
Espe and Philip, as well as for the other Named Executives, were clearly
related to the realization of the goals and strategies established by
Columbia. The Committee also notes that the return to shareholders (as
evidenced by the Stock Performance Graph measurement of Columbia's performance
against the Nasdaq and its peer group) is a further indication of what the
Committee considers the highly satisfactory performance of the Named
Executives and other key employees during the period that Columbia is carrying
out its very aggressive growth strategy.
Richard S. DeVine, Chairman
Jack Fabulich
Robert E. Quoidbach
Donald Rodman
Sidney R. Snyder
James M. Will
11
<PAGE>
STOCK PERFORMANCE GRAPH
The chart shown below depicts the total return to shareholders during the
period beginning after December 31, 1992, and ending December 31, 1997. The
definition of total return includes appreciation in market value of the stock
as well as the actual cash and stock dividends paid to shareholders. The
comparable indices utilized are the Nasdaq U.S. Stock Index, which is a broad
nationally recognized index of stock performance by companies traded on the
Nasdaq National Market and the Nasdaq Small Cap Market, and the SNL Securities
Western Bank Stock Index, comprised of publicly-traded banks with assets of
$250 million to $1 billion, all of which are located in the western United
States. The chart assumes that the value of the investment in Columbia's
common stock and each of the two indices was $100 on December 31, 1992, and
that all dividends were reinvested.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
PERIOD ENDING
-----------------------------------------------------
INDEX 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96 12/31/97
- ----- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Columbia Banking System,
Inc..................... 100.00 110.53 96.04 126.32 179.60 313.33
NASDAQ--Total US......... 100.00 114.80 112.21 158.70 195.19 239.53
Columbia Peer Group...... 100.00 103.57 104.52 127.59 175.78 322.68
</TABLE>
12
<PAGE>
COMPENSATION TABLES
SUMMARY COMPENSATION TABLE
The following table sets forth the aggregate compensation for services
rendered to Columbia or its subsidiaries in all capacities paid or accrued for
the fiscal years ended December 31, 1997, December 31, 1996 and December 31,
1995, to each person serving as Columbia's chief executive officer during 1997
and each of the four other most highly compensated executive officers whose
aggregate cash and cash equivalent forms of compensation exceeded $100,000
(the "Named Executives").
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------- ---------------------
RESTRICTED SECURITIES
STOCK UNDERLYING
NAME AND PRINCIPAL AWARDS OPTIONS ALL OTHER
POSITION YEAR SALARY(1) BONUS(1) ($)(2) (#) COMPENSATION(3)
- ------------------ ---- --------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
A.G. Espe, ............. 1997 $168,147 $40,000 -0- -0- $27,287
Chairman and Chief 1996 170,000 45,000 -0- 42,000(5) 89,008
Executive Officer(4) 1995 168,623 50,000 -0- -0- 25,995
W.W. Philip, ........... 1997 $181,675 $75,000 -0- -0- $ 8,000
Chairman, President and 1996 638,116 45,000 $305,000 -0- -0-
Chief Executive 1995 -0- -0- -0- -0- -0-
Officer(4)
Melanie J. Dressel, .... 1997 $ 86,951 $25,000 -0- 1,575 $ 8,543
Executive Vice 1996 71,680 15,000 -0- -0- 6,754
President 1995 68,564 11,250 -0- -0- 5,587
Harald R. Russell, ..... 1997 $ 87,084 $25,000 -0- 2,835 $ 8,420
Executive Vice 1996 78,750 15,000 -0- 2,205 7,685
President 1995 75,000 11,250 -0- -0- 5,079
Donald A. Andersen, .... 1997 $ 83,000 $20,000 -0- 2,835 $ 8,508
Senior Vice President-- 1996 78,750 15,000 -0- 1,103 7,853
Commercial Loans 1995 74,519 11,250 -0- 5,513 2,490
Evans Q. Whitney, ...... 1997 $ 83,000 $23,000 -0- 1,575 $ 8,508
Senior Vice President-- 1996 78,750 15,000 -0- -0- 12,650
Human Resources 1995 75,000 11,250 -0- -0- 10,774
</TABLE>
- --------
(1) Represents total cash compensation earned, including for Mr. Espe amounts
deferred under a Supplemental Executive Retirement Plan. The 1996 salary
and bonus for Mr. Philip represents compensation for work performed since
July 1993, but not fully earned until year-end 1996. Mr. Philip received
no salary or bonus during the years 1993 through 1995. The contingent
compensation and other payments to Messrs. Espe and Philip which were not
fully earned until year-end 1996 were previously disclosed as potentially
payable under long term incentive awards.
(2) At year-end 1997, the value of the aggregate restricted stock holdings was
$540,000.
(3) Amounts in 1997 represent: (i) profit sharing and matching contributions
under Columbia's 401(k) Plan in the amount of $12,224, $8,000, $8,167,
$7,840, $7,840 and $8,177 for Messrs. Espe, Philip, Russell, Andersen and
Whitney and Ms. Dressel, respectively; and (ii) premiums on group life
insurance paid by Columbia for the benefit of Mr. Espe's estate, Messrs.
Russell, Andersen and Whitney, and Ms. Dressel in the amount of $15,063,
$253, $668, $668, and $366, respectively.
(4) Mr. Espe died on November 9, 1997. Mr. Philip, who, at the time of Mr.
Espe's death, was serving as Vice Chairman, President and Chief Operating
Officer, was appointed Chairman, President and Chief Executive Officer on
November 19, 1997.
13
<PAGE>
(5) The options awarded to Mr. Espe in 1996 were retained by his estate
pursuant to the terms of the option. Upon his death, all options granted
to Mr. Espe became immediately exercisable and may be exercised for a
period of ten years from the date of vesting. Specifically, until August
28, 2007, Mr. Espe's estate may exercise its option to purchase 10,500
shares at an option price of $14.52 per share, and until November 9, 2007,
Mr. Espe's estate may exercise its option to purchase 10,500 shares at an
option price of $16.43 per share, 10,500 shares at an option price of
$18.33 per share, and 10,500 shares at an option price of $20.24 per
share.
OPTION GRANTS IN 1997
The following table sets forth certain information on option grants in 1997
to the Named Executives:
<TABLE>
<CAPTION>
GRANT
DATE
INDIVIDUAL GRANTS VALUE
------------------------------------------ --------
PERCENTAGE
NUMBER OF OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT
OPTIONS EMPLOYEES PRICE PER EXPIRATION DATE
NAME GRANTED(1) IN 1997 SHARE DATE VALUE(2)
- ---- ---------- ---------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
A.G. Espe................... -0- N/A N/A N/A N/A
W.W. Philip................. -0- N/A N/A N/A N/A
Melanie J. Dressel.......... 1,575 1.7% $15.12 4/23/2005 $ 9,945
Harald R. Russell........... 2,835 3.1% $15.12 4/23/2005 $17,903
Donald A. Andersen.......... 2,835 3.1% $15.12 4/23/2005 $17,903
Evans Q. Whitney............ 1,575 1.7% $15.12 4/23/2005 $ 9,946
</TABLE>
- --------
(1) Represents non-qualified stock options granted on April 23, 1997. Number
of securities and exercise price per share have been adjusted for the 5%
stock dividend paid by Columbia in 1997. All shares vest on April 23, 2000
and remain exercisable for five years from the date of vesting.
(2) The fair market value of options granted during 1997 is estimated on the
date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions: expected volatility of 36.95%;
risk-free rates of 5.56%; no annual dividend yields; and expected lives of
five years.
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table summarizes option exercises by and the value of
unexercised options granted to the Named Executives:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE DECEMBER 31, 1997 DECEMBER 31, 1997
NAME ON EXERCISE REALIZED (EXERCISABLE/ UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)(1)
- ---- ----------- -------- --------------------------- ------------------------------
<S> <C> <C> <C> <C>
A.G. Espe............... -0- -0- 42,000/-0-(2) $ 404,040/-0-
W.W. Philip............. -0- -0- -0-/-0- -0-/-0-
Melanie J. Dressel...... -0- -0- 13,230/1,575 $220,169/$18,711
Harald R. Russell....... -0- -0- 4,410/5,040 $75,053/$ 66,843
Donald A. Andersen...... -0- -0- 5,513/3,938 $100,061/$50,269
Evans Q. Whitney........ -0- -0- 13,230/1,575 $220,169/$18,711
</TABLE>
- --------
(1) In accordance with applicable rules of the Securities and Exchange
Commission, values are calculated by subtracting the exercise price from
the fair market value of the underlying stock. For purposes of this table,
fair market value is deemed to be $27.00, the last sale price of
Columbia's common stock reported on the Nasdaq National Market on December
31, 1997.
(2) Amounts reported for A.G. Espe are owned by his estate. Upon Mr. Espe's
death in November 1997, all options became immediately exercisable.
14
<PAGE>
OTHER EMPLOYEE BENEFITS
Columbia also maintains a defined contribution plan, in the form of a 401(k)
plan, that allows employees, including executive officers, to contribute up to
15% of their compensation each year. Columbia currently makes matching
contributions to the extent of 50% of employees' contributions up to 3% of
each employee's total compensation and is authorized to make a discretionary
contribution as determined by the Committee each year. Columbia contributed
approximately $196,000 in matching funds to the 401(k) Plan during 1997, and
made a discretionary contribution of approximately $440,000 for the year 1997.
Columbia also maintains an Employee Stock Purchase Plan (the "ESPP") that
was adopted in 1995. The ESPP allows eligible employees to purchase shares of
Columbia common stock at 90% of the then current market price by means of
payroll deductions.
Beginning in 1994, Columbia established a discretionary Incentive Bonus Plan
for the benefit of certain employees. Contributions by Columbia are based upon
year end results of operations for Columbia and attainment of goals by
individuals. In 1997, Columbia contributed $439,960 to the Plan.
Columbia provides a group health insurance plan along with the normal
vacation and sick pay benefits.
EXECUTIVE EMPLOYMENT AGREEMENTS
Columbia entered into an amended employment agreement with Mr. Espe,
effective January 1, 1997. Among other things, that agreement entitled Mr.
Espe to a Supplemental Employee Retirement Plan ("SERP") benefit for which an
accrual was made each year in the amount of ten percent of Mr. Espe's total
cash compensation plus interest at an assumed rate. Mr. Espe passed away in
November 1997. As provided in the employment agreement, upon Mr. Espe's death
(i) the employment agreement terminated; (ii) all SERP contributions made
prior to that date vested in full; and (iii) all vesting requirements
concerning stock options granted to Mr. Espe lapsed. Thus, Mr. Espe's estate
became entitled to payment of the accrued SERP contributions and to exercise
options to purchase a total of 42,000 shares of Columbia's common stock at
prices ranging from $14.52 to $20.24 per share for a period of ten years from
the date of vesting. See "Summary Compensation Table".
The employment agreement between Columbia and Mr. Philip recently has been
amended effective January 1, 1998 to (i) provide for Mr. Philip's service as
Chairman, President and Chief Executive Officer of Columbia and Columbia Bank;
(ii) extend the term of service as an executive officer by Mr. Philip to
December 31, 1999; and (iii) to establish his minimum annual salary at
$225,000. In addition, the amended agreement also provides for the January
1998 grant of a restricted stock award of 20,000 shares of Columbia's common
stock. The terms and conditions of the stock award provide for the immediate
issuance of the shares to Mr. Philip, for no cash consideration, in escrow.
Mr. Philip was also granted a restricted stock award of 20,000 shares in
August 1996. The initial 20,000 shares (1996 grant) are to remain in escrow
until Mr. Philip has served as an active officer or Board member of Columbia
and/or Columbia Bank for a period of five years ending in August 2001, and the
subsequent 20,000 shares (1998 grant) are to remain in escrow until Mr. Philip
has served as an active officer or Board member of Columbia and/or Columbia
Bank for a period of five years ending January 2003 or earlier mandatory
retirement. The term of the escrow may be reduced (i) by action of the Board
or the Committee; (ii) by reason of a change of control of Columbia or
Columbia Bank (as defined in Mr. Philip's employment agreement); or (iii) by
Mr. Philip's death or disability. Mr. Philip will have the right to vote the
shares and to receive any dividends or other distributions on the shares while
they remain in escrow.
The employment agreement with Mr. Philip contains a covenant by him not to
compete with Columbia in its market area for two years after voluntarily
terminating employment without "good cause" (as defined therein). Columbia is
the beneficiary under a key-person life insurance policy on the life of Mr.
Philip in the amount of $2.0 million.
The employment agreement with Mr. Philip also contains provisions that
require payments in the event of a change in control (as defined therein) and
termination of employment without cause (as defined therein). The
15
<PAGE>
payments would be due if such termination followed by up to two years and in
certain cases preceded the change in control. Generally, in such
circumstances, all contingent payments payable to Mr. Philip are deemed
earned. Under the terms of the agreement, Mr. Philip is entitled to receive
his base salary for two years following such termination or until the term of
his employment agreement, whichever is longer. In such circumstances,
Mr. Philip is also entitled to all benefits provided for in his agreement, to
be fully vested as to any nonvested options and to have restrictions lapse
with regard to any restricted stock or other restricted securities. In the
event that Mr. Philip receives an amount under these provisions which result
in imposition of a tax on the executive under the provisions of Internal
Revenue Code Section 4999 (relating to Golden Parachute payments) Columbia is
obligated to reimburse him for that amount exclusive of any tax imposed by
reason of receipt of reimbursement under the employment agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Columbia is a reporting company pursuant to Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act"). Pursuant to Section 16(a) of the
Exchange Act, and the rules promulgated thereunder, directors, officers,
greater than ten percent shareholders, and certain other key personnel are
required to report their ownership and any change in ownership of Columbia
securities with the Securities and Exchange Commission (the "SEC"). Except as
described below, Columbia believes that all Section 16(a) filing requirements
applicable to its directors, officers and greater than ten percent
shareholders were complied with.
In making these disclosures, Columbia has relied solely on written
representations of its directors and executive officers, and copies of the
reports that they have filed with the SEC.
During 1997, Mr. Harald R. Russell filed a late form reporting a single
transaction. In 1997, it was discovered that certain previously filed reports
for Ms. Melanie Dressel and Mr. John H. Halleran, each of which were filed on
time, incorrectly reported certain holdings. Each report was promptly amended
after the oversight was discovered.
INTEREST OF MANAGEMENT IN CERTAIN TRANSACTIONS
As compensation for the costs and risks associated with its efforts in
facilitating the 1990 acquisition of Columbia by a group of investors that
included Mr. Espe, NorCap, L.L.C. was granted an option to purchase 38,133
shares of Columbia common stock at a price of $5.86 per share (as adjusted to
reflect stock dividends). As part of that same transaction, NorCap was granted
an option to purchase shares of common stock of Columbia National Bancshares,
Inc. ("CNBI"). The option to purchase CNBI shares was converted into an option
to purchase 14,551 Columbia shares at a price of $8.39 per share (as adjusted
to reflect stock dividends), as part of the merger of CNBI with and into
Columbia that was completed in August, 1993. The NorCap options are
exercisable at any time until September 26, 2000. At the time of his death,
NorCap was controlled by Mr. Espe, who owned 60% of NorCap's common units,
subject to conversion and limited voting rights of holders of its convertible
Series A units. Mr. Powell, a current director of Columbia, was also a
director and member of NorCap. NorCap was a shareholder of Columbia.
Subsequent to the death of Mr. Espe, the Board of Directors and members of
NorCap voted to liquidate that company and to distribute a majority of its
assets in kind to its members. As a result of the liquidation of NorCap, Mr.
Espe's estate and Mr. Powell each received shares of Columbia common stock and
options to purchase shares of Columbia common stock. See "SECURITY OWNERSHIP
OF MANAGEMENT".
During 1997, certain directors and executive officers of Columbia and
Columbia Bank, and their associates, were customers of Columbia Bank, and it
is anticipated that such individuals will continue to be customers of Columbia
Bank in the future. All transactions between Columbia Bank and its executive
officers and directors, and their associates, were made in the ordinary course
of business on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons, and, in the opinion of management, did not involve more than
the normal risk of collectability or present other unfavorable features.
16
<PAGE>
PROPOSAL 2: APPROVAL OF AMENDMENT TO ARTICLES OF INCORPORATION
DESCRIPTION OF THE PROPOSED AMENDMENT AND VOTE REQUIRED
On January 28, 1998, the Board of Directors unanimously approved a proposal
to amend Article 4, Section 4.1 of Columbia's Articles of Incorporation in
order to increase the number of shares of the no par value common stock which
Columbia is authorized to issue from 11,000,000 to 30,000,000 (the
"Amendment"). The Board of Directors determined that such Amendment is
advisable and directed that the proposed Amendment be presented to
shareholders for their consideration at the Annual Meeting to be held on April
22, 1998. The affirmative vote of the holders of a majority of the outstanding
shares of common stock of Columbia is required to approve the proposed
Amendment.
The full text of the proposed Amendment to the Articles of Incorporation is
set forth in Appendix A to this Proxy Statement. The Amendment will not affect
the number of shares of preferred stock authorized, which is 2,000,000 shares
of preferred stock no par value per share. There are currently no shares of
preferred stock issued.
PURPOSES AND EFFECTS OF INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON
STOCK
The proposed Amendment would increase the number of shares of common stock
which Columbia is authorized to issue from 11,000,000 to 30,000,000. The
additional 19,000,000 shares would be a part of the existing class of common
stock and, if and when issued, would have the same rights and privileges as
the shares of common stock presently issued and outstanding. The holders of
Columbia's common stock are not entitled to preemptive rights or cumulative
voting.
As of December 31, 1997, there were approximately 4,000,000 shares of
Columbia's common stock available for future issuance. The Board of Directors
believes that it is in the best interests of Columbia and its shareholders
that additional common shares be authorized to provide flexibility to Columbia
in responding to any corporate needs or opportunities that may arise,
including the issuance of stock, from time to time, to fund growth, as
compensation, or for use in potential acquisitions. Such additional stock, if
authorized, could be issued only with the prior approval of the Board of
Directors but generally no further action by the shareholders would be
necessary. If authorization of such additional stock were deferred until a
specific identified need existed, the time and expense required to obtain the
necessary shareholder approval could prevent Columbia from responding to the
need in a timely manner.
EFFECTIVE DATE OF PROPOSED AMENDMENT
If the Amendment to Article 4, Section 4.1 of the Articles of Incorporation
is adopted by the required vote of shareholders, such Amendment will become
effective upon the filing of appropriate Articles of Amendment of the Articles
of Incorporation with the Office of the Washington Secretary of State. It is
expected that Articles of Amendment will be filed shortly following approval
of the Amendment by shareholders at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO AMEND ARTICLE
4, SECTION 4.1 OF COLUMBIA'S ARTICLES OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED COMMON SHARES FROM 11,000,000 TO 30,000,000.
17
<PAGE>
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
On February 25, 1998, Deloitte & Touche LLP ("Deloitte & Touche") was
selected by Columbia to be its independent accountants for the fiscal year
ended December 31, 1998. A representative of Deloitte & Touche is expected to
be present at the Annual Meeting to make a statement, if desired, and to be
available to respond to appropriate questions.
Deloitte & Touche also served as Columbia's independent accountant and
rendered their report with respect to Columbia's financial statements for the
year ended December 31, 1997. Prior to Deloitte & Touche's engagement on
February 26, 1997, Price Waterhouse LLP ("Price Waterhouse") had served as the
principal independent accountant for Columbia and rendered their report with
respect to Columbia's financial statements for the year ended December 31,
1996. The recommendation to change accountants was made by management of
Columbia and was approved by the Audit Committee and the Board of Directors.
In the most recent fiscal year preceding the Board's actions, there were no
disagreements with Price Waterhouse LLP on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to Price Waterhouse's satisfaction, would have caused
them to make reference to the subject matter of the disagreement in connection
with their report. Price Waterhouse's report on Columbia's financial
statements for such fiscal year did not contain any adverse opinion or
disclaimer of opinion, nor was such report qualified in any respect.
INFORMATION CONCERNING SHAREHOLDER PROPOSALS
Proposals of shareholders intended to be presented at the Annual Meeting of
Shareholders of Columbia, scheduled to be held on March 31, 1999, must be
received by Columbia for inclusion in the Proxy Statement and form of Proxy
relating to that meeting by October 23, 1998.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before this
Annual Meeting. However, if other matters should properly come before the
Annual Meeting, it is the intention of the persons named in the Proxy to vote
the Proxy in accordance with the recommendations of management on such
matters.
WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON. IF YOU DO
ATTEND THE ANNUAL MEETING, YOU MAY THEN WITHDRAW YOUR PROXY. THE PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO ITS EXERCISE.
18
<PAGE>
APPENDIX A
PROPOSED AMENDMENT TO ARTICLE 4, SECTION 4.1 OF THE
ARTICLES OF INCORPORATION OF COLUMBIA BANKING SYSTEM, INC.
Section 4.1 of ARTICLE 4 would be amended in its entirety to read as
follows:
The aggregate number of shares which the corporation shall have authority
to issue is 30,000,000 common shares with no par value (hereinafter
referred to as "the common stock") and 2,000,000 preferred shares with no
par value (hereinafter referred to as "the preferred stock"). The preferred
stock is senior to the common stock, and the common stock is subject to the
rights and preferences of the preferred stock as provided in the following
section.
<PAGE>
COLUMBIA BANKING SYSTEM, INC.
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
APRIL 22, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF COLUMBIA
BANKING SYSTEM, INC.
PLEASE SIGN AND RETURN IMMEDIATELY
The undersigned shareholder of COLUMBIA BANKING SYSTEM, INC. ("Columbia")
hereby nominates, constitutes and appoints, J. James Gallagher and W.W. Philip
and each of them (with full power to act alone), the true and lawful attorneys
and proxies, each with full power of substitution, for me and in my name,
place and stead, to act and vote all the common stock of Columbia standing in
my name and on its books on February 27, 1998 at the Annual Meeting of
Shareholders to be held at the Sheraton Tacoma Hotel, Tacoma, Washington, on
April 22, 1998, at 1:00 p.m., and at any adjournment thereof, with all the
powers the undersigned would possess if personally present, as follows:
1. ELECTION OF DIRECTORS. A proposal to elect as directors the persons listed
below to serve until the 1999 Annual Meeting of Shareholders or until their
successors are duly elected and qualified.
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY TO VOTE for
all nominees listed below (in the
manner described below)
INSTRUCTIONS: To withhold authority to vote for any individual nominee, strike
a line through the nominee's name listed below.
W. Barry Connoley, Richard S. DeVine, Jack Fabulich, Jonathan Fine, John P.
Folsom, Margel S. Gallagher, W. Kelso Gillenwater, John A. Halleran, Thomas
L. Matson, William W. Philip, John H. Powell, Robert E. Quoidbach, Donald
Rodman, Frank H. Russell, Sidney R. Snyder, William T. Weyerhaeuser, James
M. Will
<PAGE>
2. APPROVAL OF ARTICLE AMENDMENT. A proposal to amend Columbia's Articles of
Incorporation to increase the number of authorized common shares from
11,000,000 to 30,000,000.
[_] FOR [_] AGAINST [_] ABSTAIN
3. In their discretion, upon such other business as may properly come before
the Annual Meeting or any adjournment thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED ABOVE. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS SET FORTH
ABOVE.
Management knows of no other matters that may properly be, or which are
likely to be, brought before the Annual Meeting. However, if any other matters
are properly presented at the Annual Meeting, this Proxy will be voted in
accordance with the recommendations of management.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders for the April 22, 1998 Annual Meeting, and the accompanying
documents forwarded therewith, and ratifies all lawful action taken by the
above-named attorneys and proxies.
Date: _____________________, 1998
Signature: ______________________
Signature: ______________________
NOTE: Signature(s) should agree
with name(s) on Columbia stock
certificate(s). Executors,
administrators, trustees and
other fiduciaries, and persons
signing on behalf of
corporations or partnerships
should so indicate when signing.
ALL JOINT OWNERS MUST SIGN.
