UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 10-Q
 

 
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2007.
 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                     to                    .
 
Commission File Number 0-20288
 

 
COLUMBIA BANKING SYSTEM, INC.
(Exact name of issuer as specified in its charter)
 
Washington
91-1422237
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
 
1301 “A” Street
Tacoma, Washington
98402-2156
(Address of principal executive offices)
(Zip Code)
 
(253) 305-1900
(Issuer’s telephone number, including area code)
 
_________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes  x    No  ¨ 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer  ¨                Accelerated filer  x                Non-accelerated filer  ¨ 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  ¨    No  x 
 
The number of shares of common stock outstanding at October 31, 2007 was 17,894,039
 


 


TABLE OF CONTENTS
 
 
 
Page
     
PART I — FINANCIAL INFORMATION
 
 
         
Item 1.
 
Financial Statements (unaudited)
 
 
         
 
 
Consolidated Condensed Statements of Income - three months and nine months ended September 30, 2007 and 2006
 
1
         
 
 
Consolidated Condensed Balance Sheets - September 30, 2007 and December 31, 2006
 
2
         
 
 
Consolidated Condensed Statements of Changes in Shareholders’ Equity - nine months ended September 30, 2007 and 2006
 
3
         
 
 
Consolidated Condensed Statements of Cash Flows - nine months ended September 30, 2007 and 2006
 
5
         
 
 
Notes to Unaudited Consolidated Condensed Financial Statements
 
6
         
Item 2.
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations
 
13
 
       
Item 3.
 
Quantitative and Qualitative Disclosures about Market Risk
 
26
         
Item 4.
 
Controls and Procedures
 
26
     
PART II — OTHER INFORMATION
 
 
         
Item 1.
 
Legal Proceedings
 
27
         
Item 1A.
 
Risk Factors
 
27
         
Item 2.
 
Unregistered Sales of Equity Securities and Use of Proceeds
 
27
         
Item 3.
 
Defaults Upon Senior Securities
 
27
         
Item 4.
 
Submission of Matters to a Vote of Security Holders
 
27
         
Item 5.
 
Other Information
 
27
         
Item 6.
 
Exhibits
 
27
         
 
 
Signatures
 
28

i


PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CONSOLIDATED CONDENSED STATEMENTS OF INCOME
 
Columbia Banking System, Inc.
(Unaudited)
 
 
 
Three Months Ended
September 30, 
 
Nine Months Ended
September 30, 
 
(in thousands except per share)
 
2007 
 
2006 
 
2007 
 
2006 
 
Interest Income
 
 
 
 
 
 
 
 
 
Loans
 
$
42,353
 
$
32,010
 
$
112,607
 
$
90,982
 
Taxable securities
   
4,625
   
5,019
   
14,067
   
15,185
 
Tax-exempt securities
   
2,005
   
1,944
   
5,925
   
5,124
 
Federal funds sold and deposits with banks
   
395
   
193
   
1,180
   
354
 
Total interest income
   
49,378
   
39,166
   
133,779
   
111,645
 
Interest Expense
                 
Deposits
   
16,841
   
10,868
   
42,617
   
28,767
 
Federal Home Loan Bank advances
   
2,454
   
3,370
   
8,117
   
8,344
 
Long-term obligations
   
584
   
519
   
1,604
   
1,470
 
Other borrowings
   
639
   
4
   
2,183
   
51
 
Total interest expense
   
20,518
   
14,761
   
54,521
   
38,632
 
Net Interest Income
   
28,860
   
24,405
   
79,258
   
73,013
 
Provision for loan and lease losses
   
1,231
   
650
   
2,198
   
1,115
 
Net interest income after provision for loan and lease losses
   
27,629
   
23,755
   
77,060
   
71,898
 
Noninterest Income
                 
Service charges and other fees
   
3,561
   
2,891
   
9,813
   
8,632
 
Merchant services fees
   
2,251
   
2,154
   
6,344
   
6,366
 
Gain on sale of securities available for sale, net
   
   
   
   
10
 
Bank owned life insurance (“BOLI”)
   
502
   
427
   
1,379
   
1,260
 
Other
   
1,317
   
636
   
3,013
   
2,080
 
Total noninterest income
   
7,631
   
6,108
   
20,549
   
18,348
 
Noninterest Expense
                 
Compensation and employee benefits
   
12,159
   
9,878
   
34,365
   
28,973
 
Occupancy
   
3,241
   
2,735
   
9,023
   
8,068
 
Merchant processing
   
880
   
881
   
2,587
   
2,552
 
Advertising and promotion
   
575
   
608
   
1,779
   
2,114
 
Data processing
   
743
   
475
   
1,863
   
1,795
 
Legal and professional services
   
695
   
580
   
2,205
   
1,547
 
Taxes, licenses and fees
   
773
   
637
   
2,089
   
1,873
 
Gain on sale of other real estate owned, net
   
   
   
   
(11
)
Other
   
3,359
   
2,304
   
9,182
   
10,663
 
Total noninterest expense
   
22,425
   
18,098
   
63,093
   
57,574
 
Income before income taxes
   
12,835
   
11,765
   
34,516
   
32,672
 
Provision for income taxes
   
3,579
   
3,430
   
9,433
   
8,910
 
Net Income
 
$
9,256
 
$
8,335
 
$
25,083
 
$
23,762
 
Net income per common share:
                 
Basic
 
$
.53
 
$
.52
 
$
1.52
 
$
1.49
 
Diluted
   
.53
   
.52
   
1.51
   
1.47
 
Dividends paid per common share
 
$
.17
 
$
.15
 
$
.49
 
$
.42
 
Average number of common shares outstanding
   
17,339
   
15,981
   
16,472
   
15,931
 
Average number of diluted common shares outstanding
   
17,533
   
16,143
   
16,636
   
16,135
 
 
See accompanying notes to unaudited consolidated condensed financial statements.
 
1

 
CONSOLIDATED CONDENSED BALANCE SHEETS
 
Columbia Banking System, Inc.
(Unaudited)  
 
(in thousands)
 
 
 
 
 
September 30,
2007
 
December 31,
2006
 
ASSETS
 
 
 
 
 
 
 
 
 
Cash and due from banks
         
$
82,760
 
$
76,365
 
Interest-earning deposits with banks
           
6,695
   
13,979
 
Federal funds sold
           
15,000
   
14,000
 
 
                 
Total cash and cash equivalents
           
104,455
   
104,344
 
Securities available for sale at fair value (amortized cost of $567,804 and $598,703, respectively)
           
564,861
   
592,858
 
Securities held to maturity at cost (fair value of $1,290 and $1,871, respectively)
           
1,245
   
1,822
 
Federal Home Loan Bank stock at cost
           
11,606
   
10,453
 
Loans held for sale
           
2,273
   
933
 
Loans, net of deferred loan fees of ($4,277) and ($2,940), respectively
           
2,212,751
   
1,708,962
 
Less: allowance for loan and lease losses
           
25,380
   
20,182
 
 
                 
Loans, net
           
2,187,371
   
1,688,780
 
Interest receivable
           
16,292
   
12,549
 
Premises and equipment, net
           
55,745
   
44,635
 
Other real estate owned
               
181
   
 
Goodwill
           
93,737
   
29,723
 
Other assets
           
84,978
   
67,034
 
Total Assets
         
$
3,122,744
 
$
2,553,131
 
 
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                 
Deposits:
                 
Noninterest-bearing
         
$
474,600
 
$
432,293
 
Interest-bearing
           
2,003,194
   
1,591,058
 
 
                 
Total deposits
           
2,477,794
   
2,023,351
 
Short-term borrowings:
                 
Federal Home Loan Bank advances
           
252,275
   
205,800
 
Securities sold under agreements to repurchase
               
   
20,000
 
Other borrowings
           
208
   
198
 
 
                 
Total short-term borrowings
           
252,483
   
225,998
 
Long-term subordinated debt
           
25,498
   
22,378
 
Other liabilities
           
37,000
   
29,057
 
 
                 
Total liabilities
           
2,792,775
   
2,300,784
 
Commitments and contingent liabilities
           
   
 
Shareholders’ equity:
                 
Preferred stock (no par value) Authorized, 2 million shares; none outstanding
           
   
 
     
September 30,
   
December 31,
             
 
   
2007
 
 
2006
           
Common stock (no par value)
                 
Authorized shares
   
63,034
   
63,034
         
Issued and outstanding
   
17,882
   
16,060
   
224,804
   
166,763
 
Retained earnings
           
105,913
   
89,037
 
Accumulated other comprehensive loss
           
(748
)
 
(3,453
)
Total shareholders’ equity
           
329,969
   
252,347
 
Total Liabilities and Shareholders’ Equity
         
$
3,122,744
 
$
2,553,131
 
 
See accompanying notes to unaudited consolidated condensed financial statements.
 
2

 
 CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 
Columbia Banking System, Inc.
(Unaudited)
 
     
Common stock 
               
Accumulated
Other
   
Total
 
     
Number of
Shares
   
Amount 
   
Retained
Earnings
   
Deferred
Compensation
   
Comprehensive
Loss
   
Shareholders’
Equity
 
     
(in thousands)
 
Balance at December 31, 2005
   
15,831
 
$
163,065
 
$
66,051
 
$
(92
)
$
(2,782
)
$
226,242
 
Comprehensive income:
                         
Net income
   
   
   
23,762
   
   
   
23,762
 
Net unrealized loss from securities, net of reclassification adjustments and tax
   
   
   
   
   
(2,074
)
 
(2,074
)
Net unrealized gain from cash flow hedging instruments
   
   
   
   
   
1,133
   
1,133
 
Total comprehensive income
                       
22,821
 
Transition adjustment related to adoption of SFAS 123(R)
   
   
(92
)
 
   
92
   
   
 
Issuance of stock under equity compensation plan
   
140
   
2,158
   
   
   
   
2,158
 
Issuance of restricted stock under equity compensation plan
   
76
   
407
   
   
   
   
407
 
Tax benefit associated with exercise of stock options
   
   
882
   
   
   
   
882
 
Cash dividends paid on common stock
   
   
   
(6,709
)
 
   
   
(6,709
)
Balance at September 30, 2006
   
16,047
 
$
166,420
 
$
83,104
 
$
 
$
(3,723
)
$
245,801
 
 
See accompanying notes to unaudited consolidated condensed financial statements.
 
3


CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (continued)
 
Columbia Banking System, Inc.
(Unaudited)
 
     
Common stock 
               
Accumulated
Other
   
Total
 
     
Number of
Shares
   
Amount 
   
Retained
Earnings
   
Deferred
Compensation
   
Comprehensive
Loss
   
Shareholders’
Equity
 
     
(in thousands)
 
Balance at December 31, 2006
   
16,060
 
$
166,763
 
$
89,037
 
$
 
$
(3,453
)
$
252,347
 
Comprehensive income:
                         
Net income
   
   
   
25,083
   
   
   
25,083
 
Other comprehensive income, net of tax:
                                     
Net unrealized gain from securities, net of reclassification adjustments
   
   
   
   
   
1,911
   
1,911
 
Net unrealized gain from cash flow hedging instruments
   
   
   
   
   
794
   
794
 
 
                         
Total comprehensive income
                       
27,788
 
Purchase and retirement of common stock
   
(65
)
 
(2,121
)
 
   
   
   
(2,121
)
Acquisitions:
                                     
Shares issued to the shareholders of Mountain Bank Holding Company
   
993
   
30,327
                     
30,327
 
Converted Mountain Bank Holding Company stock options
         
1,325
                     
1,325
 
Shares issued to the shareholders of Town Center Bancorp
   
705
   
23,869
                     
23,869
 
Converted Town Center Bancorp stock options
         
1,598
                     
1,598
 
                                       
Stock award compensation expense
   
50
   
573
   
   
   
   
573
 
Issuance of stock under stock option and other plans
   
139
   
2,098
   
   
   
   
2,098
 
Stock option compensation expense
   
   
137
   
   
   
   
137
 
Tax benefit associated with exercise of stock options
   
   
235
   
   
   
   
235
 
Cash dividends paid on common stock
   
   
   
(8,207
)
 
   
   
(8,207
)
Balance at September 30, 2007
   
17,882
 
$
224,804
 
$
105,913
 
$
 
$
(748
)
$
329,969
 

See accompanying notes to unaudited consolidated condensed financial statements.
 
4


CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 
Columbia Banking System, Inc.
(Unaudited)
 
 
 
Nine Months Ended
September 30,
 
(in thousands)
 
2007 
 
2006 
 
Operating Activities
 
 
 
 
 
Net income
 
$
25,083
 
$
23,762
 
Adjustments to reconcile net income to net cash provided by operating activities:
         
Provision for loan and lease losses
   
2,198
   
1,115
 
Deferred income tax benefit
   
(1,194
)
 
(796
)
Excess tax benefit from stock-based compensation
   
(80
)
 
(102
)
Stock-based compensation expense
   
710
   
576
 
Gain on sale of investment securities
   
   
(10
)
Gain on sale of other real estate owned and other personal property owned
   
   
(11
)
Depreciation, amortization and accretion
   
4,607
   
5,787
 
Net realized gains on sale of assets
   
(8
)
 
(42
)
Net change in:
             
Loans held for sale
   
(875
)
 
690
 
Interest receivable
   
(2,074
)
 
(2,013
)
Interest payable
   
4,606
   
481
 
Other assets
   
3,109
   
(3,784
)
Other liabilities
   
(6,994
)
 
724
 
 
         
Net cash provided by operating activities
   
29,088
   
26,377
 
Investing Activities
         
Purchases of securities available for sale
   
(2,888
)
 
(137,549
)
Proceeds from sales of securities available for sale
   
28,467
   
3,865
 
Proceeds from principal repayments and maturities of securities available for sale
   
39,033
   
101,932
 
Proceeds from maturities of securities held to maturity
   
578
   
328
 
Loans originated and acquired, net of principal collected
   
(218,350
)
 
(91,902
)
Purchases of premises and equipment
   
(4,003
)
 
(3,797
)
Proceeds from disposal of premises and equipment
   
212
   
206
 
Acquisition of Mt. Rainier and Town Center, net of cash acquired
   
(32,429
)
 
 
Proceeds from sales of Federal Reserve Bank stock
   
310
   
 
Proceeds from sales of other real estate and other personal property owned
   
   
29
 
 
         
Net cash used in investing activities
   
(189,070
)
 
(126,888
)
Financing Activities
         
Net increase in deposits
   
149,758
   
14,576
 
Proceeds from Federal Home Loan Bank advances
   
2,353,626
   
2,024,720
 
Repayment of Federal Home Loan Bank advances
   
(2,315,151
)
 
(1,927,220
)
Net decrease in repurchase agreement borrowings
   
(20,000
)
 
 
Net increase (decrease) in other borrowings
   
10
   
(1,873
)
Cash dividends paid on common stock
   
(8,207
)
 
(6,709
)
Proceeds from issuance of common stock, net
   
2,098
   
1,989
 
Repurchase of common stock
   
(2,121
)
 
 
Excess tax benefit from stock-based compensation
   
80
   
102
 
Net cash provided by financing activities
   
160,093
   
105,585
 
Net increase in cash and cash equivalents
   
111
   
5,074
 
Cash and cash equivalents at beginning of period
   
104,344
   
100,406
 
Cash and cash equivalents at end of period
 
$
104,455
 
$
105,480
 
 
         
Supplemental disclosures of cash flow information:
         
Cash paid for interest
 
$
49,915
 
$
38,470
 
Cash paid for income taxes
   
10,490
   
10,505
 
Share-based consideration issued for acquisitions
   
57,119
   
 
 
See accompanying notes to unaudited consolidated condensed financial statements.
 
5

 
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 
Columbia Banking System, Inc.
 
1. Basis of Presentation and Significant Accounting Policies
 
(a) Basis of Presentation
 
The interim unaudited consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for condensed interim financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain financial information and footnotes have been omitted or condensed. The consolidated condensed financial statements include the accounts of the Company, and its wholly owned banking subsidiaries Columbia Bank and Bank of Astoria (“Astoria”). All intercompany transactions and accounts have been eliminated in consolidation. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of results to be anticipated for the year ending December 31, 2007. The accompanying interim unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and related notes contained in the Company’s 2006 Annual Report on Form 10-K.
 
(b) Significant Accounting Policies
 
The significant accounting policies used in preparation of our consolidated financial statements are disclosed in our 2006 Annual Report on Form 10-K. There have not been any other material changes in our significant accounting policies compared to those contained in our 2006 10-K disclosure for the year ended December 31, 2006.
 
2. Recent Developments
 
Adoption of FIN 48: Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that it has taken or expects to take on a tax return. As of September 30, 2007 and January 1, 2007, we had no unrecognized tax benefits. Our policy is to recognize interest and penalties on unrecognized tax benefits in “Provision for income taxes” in the Consolidated Statements of Income. There were no amounts related to interest and penalties recognized for the nine months ended September 30, 2007. The tax years subject to examination by federal and state taxing authorities are the years ending December 31, 2006, 2005 and 2004. 
 
SFAS 157: Effective January 1, 2008, the Company will adopt Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“SFAS 157”). This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies whenever assets or liabilities are required or permitted to be measured at fair value under currently existing standards. No additional fair value measurements are required under this Statement. The Company plans to apply the disclosure provisions of SFAS 157 to all fair value measurements and is assessing the impact of adoption of SFAS 157 on our consolidated financial position and results of operations.
 
EITF 06-4: Effective January 1, 2008, the Company will apply the consensus reached by the Emerging Issues Task Force in Issue No. 06-4, Accounting for Deferred Compensation and Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangements (“EITF 06-4”). EITF 06-4 provides recognition guidance regarding liabilities and related compensation costs for endorsement split-dollar life insurance arrangements that provide a benefit to an employee that extends to postretirement periods. The Company will recognize the effects of applying the consensus through a change in accounting principle with a cumulative-effect adjustment to retained earnings of approximately $2.2 million as of January 1, 2008. We do not expect application of this consensus to have a material effect on our results of operations; however, compensation expense will be higher when compared to prior periods and net income will be lower.
 
3. Acquisitions of Mountain Bank Holding Company and Town Center Bancorp
 
On July 23, 2007, the Company acquired all of the outstanding common stock of Mountain Bank Holding Company (“Mt. Rainier”), the parent company of Mt. Rainier National Bank, Enumclaw, Washington. Mt. Rainier was merged into Columbia and Mt. Rainier National Bank was merged into Columbia State Bank doing business as Mt. Rainier Bank. The results of Mt. Rainier Bank’s operations are included in those of Columbia State Bank starting in the quarter ended September 30, 2007. The acquisition of Mt. Rainier was consistent with our expansion strategy and with its 7 branches in King and Pierce counties, expanded Columbia’s geographic footprint into adjacent markets.
 
6


The aggregate purchase price was $58.4 million and included $26.4 million of cash, 993,000 common shares valued at $30.3 million, options to purchase 97,000 shares of common stock valued at $1.3 million and $369,000 of direct merger costs. The value of the common shares issued was determined based on the $30.53 average closing market price of the Company’s common stock for the two trading days before and after the measurement date of May 2, 2007 when the number of shares to be issued was determined. Outstanding Mt. Rainier options were converted at a weighted average fair value of $13.66 per option.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.
(in thousands)
 
July 23,
2007
 
Cash
 
$
12,451
 
Securities available for sale
   
21,412
 
Federal funds sold
   
3,716
 
Loans, net of allowance for loan losses of $1,978
   
175,533
 
Premises and equipment, net
   
9,065
 
Other assets
   
7,510
 
Core deposit intangible
   
4,244
 
Goodwill
   
31,490
 
Total assets acquired
   
265,421
 
Deposits
   
(202,644
)
Other liabilities
   
(4,311
)
Total liabilities assumed
   
(206,955
)
Net assets acquired
 
$
58,466
 
 
Additional adjustments to the purchase price allocation may occur as certain items are based on estimates at the time of acquisition, including income taxes and direct costs. The core deposit intangible asset shown in the table above represents the value ascribed to the long-term deposit relationships acquired. This intangible asset is being amortized on an accelerated basis over an estimated useful life of ten years. The core deposit intangible asset is not estimated to have a significant residual value. Goodwill represents the excess of the total purchase price paid for Mt. Rainier over the fair value of the assets acquired, net of the fair values of the liabilities assumed. None of the goodwill is deductible for tax purposes. Goodwill is not amortized, but is evaluated for possible impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired. No impairment losses were recognized in connection with core deposit intangible or goodwill assets during the period from acquisition on July 23, 2007 to the end of the current reporting period.
 
On July 23, 2007, the Company also acquired all of the outstanding common stock of Town Center Bancorp (“Town Center”), the parent company of Town Center Bank, Portland, Oregon. Town Center was merged into Columbia and Town Center Bank was merged into Columbia State Bank. The results of Town Center Bank’s operations are included in those of Columbia State Bank starting in the quarter ended September 30, 2007. The acquisition of Town Center, with its 5 Oregon locations in the North Clackamas and Southeast Portland area, expanded Columbia’s geographic footprint into the Portland metropolitan market and was consistent with our expansion strategy.
 
The aggregate purchase price was $45.6 million and included $19.5 million in cash, 705,000 common shares valued at $23.9 million, options to purchase 90,000 shares of common stock valued at $1.6 million and $667,000 of direct merger costs. The value of the common shares issued was determined based on the $33.87 average closing market price of the Company’s common stock for the two trading days before and after the measurement date of March 28, 2007 when the number of shares to be issued was determined. Outstanding Town Center options were converted at a weighted average fair value of $17.71 per option.
 
7

 
The following table summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of acquisition.

(in thousands)
 
July 23,
2007
 
Cash
 
$
2,104
 
Securities available for sale
   
13,184
 
Federal funds sold
   
2,000
 
Loans, net of allowance for loan losses of $1,213
   
107,976
 
Premises and equipment, net
   
1,596
 
Bank-owned life insurance
   
2,312
 
Other assets
   
2,750
 
Core deposit intangible
   
581
 
Goodwill
   
32,524
 
Total assets acquired
   
165,027
 
Deposits
   
(102,041
)
Advances from Federal Home Loan Bank
   
(8,000
)
Other borrowings
   
(4,087
)
Other liabilities
   
(5,261
)
Total liabilities assumed
   
(119,389
)
Net assets acquired
 
$
45,638
 
 
Additional adjustments to the purchase price allocation may occur as certain items are based on estimates at the time of acquisition, including income taxes and direct costs. The core deposit intangible asset shown in the table above represents the value ascribed to the long-term deposit relationships acquired. This intangible asset is being amortized on an accelerated basis over an estimated useful life of ten years. The core deposit intangible asset is not estimated to have a significant residual value. Goodwill represents the excess of the total purchase price paid for Town Center over the fair value of the assets acquired, net of the fair values of the liabilities assumed. None of the goodwill is deductible for tax purposes. Goodwill is not amortized, but is evaluated for possible impairment at least annually and more frequently if events and circumstances indicate that the asset might be impaired. No impairment losses were recognized in connection with core deposit intangible or goodwill assets during the period from acquisition on July 23, 2007 to the end of the current reporting period.
 
The following tables present unaudited pro forma consolidated condensed results of operations for the three and nine months ended September 30, 2007 and 2006 prepared as if the acquisitions of Mt. Rainier and Town Center had occurred on January 1, 2006. Any cost savings realized as a result of the acquisitions are not reflected in the pro forma condensed statements of income as no assurance can be given with respect to the final amount of such cost savings. The pro forma results have been prepared for comparison purposes only and are not necessarily indicative of the results that would have been obtained had the acquisitions actually occurred on January 1, 2006.

(in thousands, except per common share information)
 
For The Three
Months Ended
9/30/2007
 
For The Three
Months Ended
9/30/2006
 
For The Nine
Months Ended
9/30/2007
 
For The Nine
Months Ended
9/30/2006 
 
Net interest income
 
$
29,875
 
$
28,630
 
$
88,723
 
$
85,039
 
Provision for loan and lease losses
 
$
1,231
 
$
784
 
$
2,376
 
$
1,587
 
Noninterest income
 
$
7,726
 
$
6,865
 
$
21,876
 
$
20,205
 
Noninterest expense
 
$
23,488
(A)
$
21,148
(B)
$
70,590
(C)
$
66,587
(D)
Net income
 
$
9,303
 
$
9,510
 
$
27,225
 
$
26,655
 
Earnings per common share - basic
 
$
0.52
 
$
0.54
 
$
1.54
 
$
1.51
 
Earnings per common share - diluted
 
$
0.52
 
$
0.53
 
$
1.52
 
$
1.49
 
 
(A)
Includes reversal of merger related expenses of $2.6 million, offset by additional core deposit amortization of $175,000 assuming acquired January 1, 2006.
   
(B)
Includes additional core deposit amortization of $201,000 assuming acquired January 1, 2006.
   
(C)
Includes reversal of merger related expenses of $3.1 million, offset by additional core deposit amortization of $527,000 assuming acquired January 1, 2006.
   
(D)
Includes additional core deposit amortization of $604,000 assuming acquired January 1, 2006.
 
8

 
4. Earnings Per Share
 
The following table sets forth the computation of basic and diluted earnings per share for the three and nine month periods ended September 30, 2007 and 2006 (in thousands, except for per share data):
 
 
 
For The Three
Months Ended
9/30/2007
 
For The Three
Months Ended
9/30/2006
 
For The Nine
Months Ended
9/30/2007
 
For The Nine
Months Ended
9/30/2006 
 
Net income
 
$
9,256
 
$
8,335
 
$
25,083
 
$
23,762
 
Weighted average common shares outstanding (for basic calculation)
   
17,339
   
15,981
   
16,472
   
15,931
 
Dilutive effect of outstanding common stock options and nonvested stock awards
   
194
   
162
   
164
   
204
 
Weighted average common stock and common equivalent shares outstanding (for diluted calculation)
   
17,533
   
16,143
   
16,636
   
16,135
 
Earnings per common share - basic
 
$
0.53
 
$
0.52
 
$
1.52
 
$
1.49
 
Earnings per common share - diluted
 
$
0.53
 
$
0.52
 
$
1.51
 
$
1.47
 
 
Potential dilutive shares are excluded from the computation of earnings per share if their effect is anti-dilutive. For the three and nine month periods ended September 30, 2007 anti-dilutive shares outstanding related to options to acquire common stock were 5,671 and 0, respectively. There were no anti-dilutive shares outstanding for the same periods in 2006.
 
5. Dividends
 
On January 25, 2007, the Company declared a quarterly cash dividend of $0.15 per share, payable on February 21, 2007 to shareholders of record as of the close of business on February 7, 2007. On April 25, 2007, the Company declared a quarterly cash dividend of $0.17 per share, payable on May 23, 2007, to shareholders of record at the close of business May 9, 2007. On July 26, 2007, the Company declared a quarterly cash dividend of $0.17 per share, payable on August 22, 2007, to shareholders of record at the close of business August 8, 2007. Subsequent to quarter-end, on October 25, 2007, the Company declared a quarterly cash dividend of $0.17 per share, payable on November 21, 2007, to shareholders of records at the close of business November 7, 2007. The payment of cash dividends is subject to Federal regulatory requirements for capital levels and other restrictions. In addition, the cash dividends paid by Columbia Bank and Bank of Astoria to the Company are subject to both Federal and State regulatory requirements.
 
6. Business Segment Information
 
The Company is managed along two major lines of business within the Columbia Bank banking subsidiary: commercial banking and retail banking. The treasury function of the Company, included in the “Other” category, although not considered a line of business, is responsible for the management of investments and interest rate risk. The Bank of Astoria banking subsidiary operates as a stand-alone segment of the Company.
 
The Company generates segment results that include balances directly attributable to business line activities. The financial results of each segment are derived from the Company’s general ledger system. Overhead, including sales and back office support functions and other indirect expenses are not allocated to the major lines of business. Since the Company is not specifically organized around lines of business, most reportable segments comprise more than one operating activity.
 
The principal activities conducted by commercial banking are the origination of commercial business loans, private banking services and real estate lending. Retail banking includes all deposit products, with their related fee income, and all consumer loan products as well as commercial loan products offered in the Company’s branch offices.
 
9

 
The organizational structure of the Company and its business line financial results are not necessarily comparable with information from other financial institutions. Financial highlights by lines of business are as follows:
 
Condensed Statements of Income:

 
 
Three Months Ended September 30, 2007 
 
 
 
 
 
Columbia Bank 
 
 
     
(in thousands)
 
Bank of
Astoria
 
Commercial
Banking 
 
Retail
Banking 
 
Other 
 
Total 
 
Net interest income after provision for loan and lease loss
 
$
2,280
 
$
11,893
 
$
15,184
 
$
(1,728
)
$
27,629
 
Other income
   
391
   
1,067
   
1,962
   
4,211
   
7,631
 
Other expense
   
(1,607
)
 
(3,341
)
 
(5,755
)
 
(11,722
)
 
(22,425
)
Net income before taxes
   
1,064
   
9,619
   
11,391
   
(9,239
)
 
12,835
 
Income taxes
    
 
   
 
   
 
   
 
   
(3,579
)
Net income
   
 
   
 
   
 
   
 
 
$
9,256
 
Total assets
 
$
227,784
 
$
1,399,262
 
$
776,163
 
$
719,535
 
$
3,122,744
 
 
 
 
Three Months Ended September 30, 2006 
 
 
 
 
 
Columbia Bank 
 
 
     
(in thousands)
 
Bank of
Astoria
 
Commercial
Banking 
 
Retail
Banking 
 
Other 
 
Total 
 
Net interest income after provision for loan and lease loss
 
$
2,213
 
$
5,567
 
$
18,093
 
$
(2,118
)
$
23,755
 
Other income
   
351
   
438
   
1,553
   
3,766
   
6,108
 
Other expense
   
(1,505
)
 
(2,865
)
 
(4,471
)
 
(9,257
)
 
(18,098
)
Net income before taxes
   
1,059
   
3,140
   
15,175
   
(7,609
)
 
11,765
 
Income taxes
                            
(3,430
)
Net income
                         
$
8,335
 
Total assets
 
$
222,168
 
$
1,151,340
 
$
449,355
 
$
684,587
 
$
2,507,450
 
 
 
 
Nine Months Ended September 30, 2007 
 
 
 
 
 
Columbia Bank 
 
 
     
(in thousands)
 
Bank of
Astoria
 
Commercial
Banking 
 
Retail
Banking 
 
Other 
 
Total 
 
Net interest income after provision for loan and lease loss
 
$
6,550
 
$
21,055
 
$
52,987
 
$
(3,532
)
$
77,060
 
Other income
   
1,161
   
2,427
   
5,088
   
11,873
   
20,549
 
Other expense
   
(4,629
)
 
(8,719
)
 
(15,429
)
 
(34,316
)
 
(63,093
)
Net income before taxes
   
3,082
   
14,763
   
42,646
   
(25,975
)
 
34,516
 
Income taxes
   
 
   
 
    
 
   
 
   
(9,433
)
Net income
   
 
    
 
   
 
   
 
 
$
25,083
 
Total assets
 
$
227,784
 
$
1,399,262
 
$
776,163
 
$
719,535
 
$
3,122,744
 
 
10

 
 
 
Nine Months Ended September 30, 2006 
 
 
 
 
 
Columbia Bank 
 
 
     
(in thousands)
 
Bank of
Astoria
 
Commercial
Banking 
 
Retail
Banking 
 
Other 
 
Total 
 
Net interest income after provision for loan and lease loss
 
$
6,355
 
$
16,971
 
$
53,084
 
$
(4,512
)
$
71,898
 
Other income
   
1,127
   
1,371
   
4,645
   
11,205
   
18,348
 
Other expense
   
(4,394
)
 
(7,721
)
 
(13,426
)
 
(32,033
)
 
(57,574
)
Net income before taxes
   
3,088
   
10,621
   
44,303
   
(25,340
)
 
32,672
 
Income taxes
   
 
   
 
   
 
   
 
   
(8,910
)
Net income
   
 
   
 
   
 
   
 
 
$
23,762
 
Total assets
 
$
222,168
 
$
1,151,340
 
$
449,355
 
$
684,587
 
$
2,507,450
 
 
7. Comprehensive Income
 
The components of comprehensive income are as follows:
 
 
 
Three Months Ended
September 30, 
 
(in thousands)
 
2007 
 
2006 
 
Net income as reported
 
$
9,256
 
$
8,335
 
Unrealized gain from securities:
         
Net unrealized gain from available for sale securities arising during the period, net of tax of $3,259 and $3,063
   
5,974
   
5,542
 
Unrealized gain from cash flow hedging instruments:
         
Net unrealized gain arising during the period, net of tax of $863 and $0
   
1,583
   
1,133
 
Reclassification adjustment of losses included in income, net of tax of $13 and $0
   
24
   
 
Net unrealized gain from cash flow hedging instruments
   
1,607
   
1,133
 
Total comprehensive income
 
$
16,837
 
$
15,010
 
 
 
 
Nine Months Ended
September 30, 
 
(in thousands)
 
2007 
 
2006 
 
Net income as reported
 
$
25,083
 
$
23,762
 
Unrealized gain (loss) from securities:
         
Net unrealized gain (loss) from available for sale securities arising during the period, net of tax of $992 and $(1,128)
   
1,911
   
(2,068
)
Reclassification of net gain from sale of available for sale securities included in net income, net of tax of $0 and $(4)
   
   
(6
)
Net unrealized gain (loss) from securities, net of reclassification adjustments
   
1,911
   
(2,074
)
Unrealized gain from cash flow hedging instruments:
         
Net unrealized gain arising during the period, net of tax of $413 and $0
   
756
   
1,133
 
Reclassification adjustment of losses included in income, net of tax of $20 and $0
   
38
   
 
Net unrealized gain from cash flow hedging instruments
   
794
   
1,133
 
Total comprehensive income
 
$
27,788
 
$
22,821
 
 
11

 
8. Allowance for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit
 
The Company maintains an allowance for loan and lease losses to absorb losses inherent in the loan portfolio. The size of the allowance is determined through quarterly assessments of the estimated probable losses in the loan portfolio. The Company’s methodology for making such assessments and determining the adequacy of the allowance includes a general valuation allowance consistent with SFAS No. 5, “Accounting for Contingencies” and criticized/classified loss reserves on specific relationships. Specific allowances for identified problem loans are determined in accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a Loan”.
 
On a quarterly basis the Chief Credit Officer of the Company reviews with Executive Management and the Board of Directors the various additional factors that management considers when determining the adequacy of the allowance, including economic and business condition reviews. These factors include general economic and business conditions affecting the Company’s market place, credit quality trends, including trends in nonperforming loans, collateral values, seasoning of the loan portfolio, bank regulatory examination results, findings of internal credit examiners and the duration of current business cycles. The allowance is increased by provisions charged to income, and is reduced by loans charged-off, net of recoveries. While management believes it uses the best information available to determine the allowance for loan losses, unforeseen market conditions could result in adjustments to the allowance, and net income could be affected, if circumstances differ from the assumptions used in determining the allowance.
 
The following table presents activity in the allowance for loan and lease losses for the three and nine months ended September 30, 2007 and 2006:
 
 
 
Three Months Ended
September 30, 
 
Nine Months Ended
September 30, 
 
(in thousands)
 
2007 
 
2006 
 
2007 
 
2006 
 
Beginning balance
 
$
21,339
 
$
20,990
 
$
20,182
 
$
20,829
 
Allowance added through business combinations
   
3,192
   
   
3,192
   
 
Provision charged to expense
   
1,231
   
650
   
2,198
   
1,115
 
Loans charged-off
   
(528
)
 
(843
)
 
(854
)
 
(1,423
)
Recoveries
   
146
   
129
   
662
   
405
 
Ending balance
 
$
25,380
 
$
20,926
 
$
25,380
 
$
20,926
 
 
Changes in the allowance for unfunded loan commitments and letters of credit are summarized as follows:
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30, 
 
(in thousands)
 
2007 
 
2006 
 
2007 
 
2006 
 
Beginning balance
 
$
339
 
$
339
 
$
339
 
$
339
 
Net changes in the allowance for unfunded loan commitments and letters of credit
   
10
   
   
10
   
 
Ending balance
 
$
349
 
$
339
 
$
349
 
$
339
 
 
9. Goodwill and Intangible Assets
 
The Company had $93.7 million in goodwill at September 30, 2007 and $29.7 million at December 31, 2006. At September 30, 2007 and December 31, 2006, the Company had a core deposit intangible (“CDI”) asset of $7.5 million and $2.9 million, respectively. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets”, goodwill is not amortized but is reviewed for potential impairment during the third quarter on an annual basis, or if events or circumstances indicate a potential impairment, at the reporting unit level. An impairment loss is recorded to the extent that the carrying amount of goodwill exceeds its implied fair value. The CDI is evaluated for impairment if events and circumstances indicate a possible impairment based on undiscounted cash flow projections. The CDI is amortized on an accelerated basis over an estimated life of approximately 10 years. Amortization expense related to the CDI was $95,000 and $287,000 for the three and nine months ended September 30, 2007, respectively, and $113,000 and $339,000 for the three and nine months ended September 30, 2006, respectively. Amortization expense related to the CDI is included in other noninterest expense on the consolidated condensed statements of income.
 
12

 
Item 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
Columbia Banking System, Inc.
 
This discussion should be read in conjunction with the unaudited consolidated condensed financial statements of Columbia Banking System, Inc. (referred to in this report as “we”, “our”, and “the Company”) and notes thereto presented elsewhere in this report and with the December 31, 2006 audited consolidated financial statements and its accompanying notes included in our recent Annual Report on Form 10-K. In the following discussion, unless otherwise noted, references to increases or decreases in average balances in items of income and expense for a particular period and balances at a particular date refer to the comparison with corresponding amounts for the period or date one year earlier. 
 
NOTE REGARDING FORWARD LOOKING STATEMENTS
 
This Quarterly Report on Form 10-Q may be deemed to include forward looking statements, which management believes to be a benefit to shareholders. These forward looking statements describe management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of our style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “should,” and “anticipate” and words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in our filings with the SEC, factors that may cause actual results to differ materially from those contemplated by such forward looking statements include, among others, the following possibilities: (1) local, national, and international economic conditions are less favorable than expected or have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth at historical rates and maintain the quality of our earning assets; (2) changes in interest rates reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches are lower than expected; (4) costs or difficulties related to the integration of acquisitions are greater than expected; (5) competitive pressure among financial institutions increases significantly; (6) legislation or regulatory requirements or changes adversely affect the businesses in which we’re engaged; and (7) our ability to realize the efficiencies we expect to receive from our investments in personnel and infrastructure.
 
CRITICAL ACCOUNTING POLICIES
 
Management has identified the accounting policies related to the allowance for loan and lease losses as critical to an understanding of our financial statements. These policies and related estimates are discussed in “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operation” under the heading “Allowance for Loan and Lease Losses and Unfunded Loan Commitments and Letters of Credit” in our 2006 Annual Report on Form 10-K. There have not been any material changes in our critical accounting policies relating to the allowance for loan and lease losses as compared to those disclosed in our 2006 Annual Report on Form 10-K.
 
RESULTS OF OPERATIONS
 
Our results of operations are dependent to a large degree on our net interest income. We also generate noninterest income through service charges and fees, merchant services fees, and bank owned life insurance. Our operating expenses consist primarily of compensation and employee benefits, occupancy, merchant card processing, data processing and legal and professional fees. Like most financial institutions, our interest income and cost of funds are affected significantly by general economic conditions, particularly changes in market interest rates, and by government policies and actions of regulatory authorities.
 
Business Combinations
 
In July, 2007, the Company acquired all of the outstanding common stock of both Mountain Bank Holding Company (“Mt. Rainier”), the parent company of Mt. Rainier National Bank, Enumclaw, Washington and Town Center Bancorp (“Town Center”), the parent company of Town Center Bank, Portland, Oregon. The acquisitions were consistent with our expansion strategy and added 7 branches in King and Pierce counties and 5 Oregon branches in the North Clackamas and Southeast Portland area.
 
The operating results of Mt. Rainier and Town Center were included in the Company’s operating results beginning July 23, 2007; consequently, 2007 quarter-end and year-to-date operating results are not directly comparable to the 2006 results for the same periods. For comparison purposes to prior periods, Mt. Rainier and Town Center combined contributed $360 million in assets, $287 million in loans and $305 million in deposits (as of July 23, 2007).
 
13

 
Net Interest Income
 
For the three months ended September 30, 2007, net interest income increased $4.4 million, or 18%, compared to the third quarter 2006. The increase is due to increased loans outstanding from new originations as well as loans derived from acquisitions. For the three and nine month periods ended September 30, 2007 funding costs have increased as our mix of core deposits has shifted within our existing portfolio toward higher cost core and non-core funding products. In addition, deposits derived from our recent acquisitions were comprised of a greater percentage of non-core deposit products. However, we have maintained a stable net interest margin because we were able to offset the increased funding costs with higher yielding assets. The net interest margin was 4.40% for the third quarter of 2007, compared to 4.41% for the third quarter of 2006. On a linked quarterly basis, the net interest margin was 4.37% and 4.36%, respectively, for the first and second quarters of 2007.
 
During the third quarter of 2007, the target Federal Funds rate decreased 50 basis points to 4.75%; the Company subsequently reduced its CB Prime Rate to 7.75%. The Company utilizes prime-based interest rate floor derivative instruments to assist in adding stability to interest income and to manage our exposure to such reductions in interest rates. Utilizing these derivative instruments, we have hedged against the variability of cash flows for $200.0 million of principal on our prime-based loans. Should the prime rate fall below the instruments’ strike rates of 7.25% - 7.75%, these interest rate floor derivatives, in conjunction with additional, prudent asset/liability management, should assist us in minimizing the compression to our net interest margin in the event further prime rate reductions occur.
 
14


The following tables set forth the average balances of all major categories of interest-earning assets and interest-bearing liabilities, the total dollar amounts of interest income on interest-earning assets and interest expense on interest-bearing liabilities, the average yield earned on interest-earning assets and average rate paid on interest-bearing liabilities by category and in total, net interest income and net interest margin.
 
 
 
Three months ending
September 30, 
 
Three months ending
September 30, 
 
 
 
2007 
 
2006 
 
(in thousands)
 
Average
Balances (1) 
 
Interest
Earned /
Paid 
 
Average
Rate 
 
Average
Balances (1) 
 
Interest
Earned /
Paid 
 
Average
Rate 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net
 
$
2,102,281
 
$
42,353
   
7.99
%
$
1,647,471
 
$
32,010
   
7.71
%
Securities (2)
   
572,124
   
7,727
   
5.36
%
 
627,821
   
8,031
   
5.08
%
Interest-earning deposits with banks and federal funds sold
   
28,082
   
395
   
5.58
%
 
15,059
   
193
   
5.10
%
Total interest-earning assets
   
2,702,487
 
$
50,475
   
7.41
%
 
2,290,351
 
$
40,234
   
6.97
%
Other earning assets
   
44,595
           
37,927
         
Noninterest-earning assets
   
222,115
           
176,093
         
Total assets
 
$
2,969,197
         
$
2,504,371
         
 
                         
LIABILITIES AND SHAREHOLDERS’ EQUITY
                         
Certificates of deposit
 
$
772,358
 
$
8,976
   
4.61
%
$
541,462
 
$
5,475
   
4.01
%
Savings accounts
   
116,640
   
131
   
0.45
%
 
114,769
   
105
   
0.36
%
Interest-bearing demand and money market accounts
   
1,038,571
   
7,734
   
2.95
%
 
878,638
   
5,288
   
2.39
%
Total interest-bearing deposits
   
1,927,569
   
16,841
   
3.47
%
 
1,534,869
   
10,868
   
2.81
%
Federal Home Loan Bank advances
   
178,303
   
2,454
   
5.46
%
 
243,513
   
3,370
   
5.49
%
Securities sold under agreements to repurchase
   
44,457
   
637
   
5.68
%
 
   
   
 
Other borrowings and interest-bearing liabilities
   
370
   
2
   
2.14
%
 
206
   
4
   
7.69
%
Long-term subordinated debt
   
24,771
   
584
   
9.35
%
 
22,351
   
519
   
9.21
%
Total interest-bearing liabilities
   
2,175,470
   
20,518
   
3.74
%
 
1,800,939
   
14,761
   
3.25
%
Noninterest-bearing deposits
   
455,312
           
440,234
         
Other noninterest-bearing liabilities
   
36,916
           
24,926
         
Shareholders’ equity
   
301,499
           
238,272
         
Total liabilities & shareholders’ equity
 
$
2,969,197
         
$
2,504,371
         
Net interest income (2)
     
$
29,957
         
$
25,473
     
Net interest margin
           
4.40
%
         
4.41
%
 
(1)
Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees were included in the interest income calculations. The amortization of net deferred loan fees was $1.2 million and $463,000 for the three months ended September 30, 2007 and 2006, respectively.
 
(2)
Tax-exempt income is calculated on a tax equivalent basis, based on a marginal tax rate of 35%.
 
15

 
 
 
Nine months ending September 30, 
 
Nine months ending September 30, 
 
 
 
2007 
 
2006 
 
(in thousands)
 
Average
Balances (1) 
 
Interest
Earned/
Paid 
 
Average
Rate 
 
Average
Balances (1) 
 
Interest
Earned/
Paid 
 
Average
Rate 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net
 
$
1,905,945
 
$
112,607
   
7.90
%
$
1,609,739
 
$
90,982
   
7.56
%
Securities (2)
   
584,057
   
23,239
   
5.32
%
 
630,895
   
23,138
   
4.90
%
Interest-earning deposits with banks and federal funds sold
   
29,621
   
1,180
   
4.96
%
 
9,558
   
354
   
4.96
%
Total interest-earning assets
   
2,519,623
 
$
137,026
   
7.27
%
 
2,250,192
 
$
114,474
   
6.80
%
Other earning assets
   
40,877
           
37,516