Company Calls Action 'Proactive,' Says Business Fundamentals Remain Strong
TACOMA, Wash., July 9 /PRNewswire-FirstCall/ -- Columbia Banking
System, Inc. (Nasdaq: COLB) ("Columbia") today announced it expects to make
a provision for loan losses of $15.4 million for the second quarter of
2008, due to an increase in non-accrual loans resulting from the slowing
Pacific Northwest economic environment. The action will increase Columbia's
total allowance for loan losses to about 1.83% of net loans at June 30,
2008. Charge-offs for the quarter are expected to be $1.6 million,
increasing $800,000 from charge-offs of $761,000 for the first quarter
2008.
"The decision to increase our provision is a prudent step on the part
of Columbia's management in light of the continuing weakness in the
for-sale housing industry and the economy," said Melanie Dressel, president
and chief executive officer. "As we have previously stated, Columbia is not
immune to the instability in the residential real estate markets and
mortgage-related industries, which already has affected other financial
institutions in the markets we serve. We are actively managing our
nonperforming assets."
Ms. Dressel added that Columbia's loan portfolio is highly diverse,
with less than 20 percent of the total portfolio in real estate
construction-related loans, of which approximately 13 percent is in the
for-sale housing segment. The company did not originate subprime mortgage
loans. Nevertheless, she said, customers have been adversely affected by
the weak economy and subprime mortgage fallout.
Ms. Dressel continued, "It is important to reiterate that while credit
quality for nearly all northwest regional financial institutions is under
pressure, Columbia's business fundamentals remain sound, positioning us
well to manage through this challenging economic cycle."
Columbia expects to report that nonaccrual loans totaled $65 million to
$75 million at June 30, 2008, compared with $14.4 million at March 31,
2008. Loans past due 30 days or more were approximately $21.5 million at
June 30, 2008, compared with $16.6 million at March 31, 2008.
The increase in non-accruals is centered in our for-sale housing
portfolio and commercial real estate construction portfolio. During the
quarter, the for-sale housing portfolio, which currently totals
approximately $282 million, had an increase in non-accrual loans of
approximately $42 million, bringing the total to about $47 million. This
increase primarily was due to seven builder banking customers whose
activities are centered in the Pierce County area in Washington State and
Clackamas County in Portland, Oregon. We have set aside $7.0 million in
specific reserves for these new non-accrual loans, based on lower
anticipated value of some projects.
"Market conditions in both of these counties have declined
significantly in the past few months, and we have seen double-digit
declines in year-over-year housing sales as well as double-digit declines
in sale prices for land and lots," Ms. Dressel said. "Given these market
conditions, combined with the weak financial performance posted by some of
these builders during the first quarter, we believe some of the builders to
whom we have extended credit and who are focused in these markets will be
experiencing significant challenges in the near future. Accordingly, we
have placed $29 million of performing loans on non-accrual; these loans are
included in the $42 million increase in non-accrual loans as mentioned
above."
In our commercial real estate construction portfolio, which is
approximately $157 million as of June 30, 2008, we experienced an increase
of $12.8 million in non-accrual loans. The increase in this segment is
primarily centered in our condominium construction portfolio which accounts
for approximately $32 million of the total loans outstanding in this
portfolio. This represents a little over $9.0 million of the non-accruals
as of June 30, 2008. Columbia set aside $1.5 million in specific reserves
for these newly-identified non-accrual loans.
Ms. Dressel commented, "We are continuing to work with our customers to
resolve these issues as quickly as possible; however, given the nature of
these types of projects, it is unlikely they will be resolved in the
immediate future. It is reasonable, therefore, to expect our provision for
loan losses in the next few quarters to remain at elevated levels compared
with prior periods."
Ms. Dressel continued, "Based on the fundamentals of our business over
our 15-year history, including our emphasis on gathering core deposits and
our diversified loan portfolio, we remain positive about the future. We
will stay the course with good, fundamental banking."
Conference Calls
Columbia's management will discuss the information in this news release
on a conference call on Thursday, July 10, 2008 at 7:00 a.m. PDT. To listen
to this discussion call 1-888-318-7969; Conference ID code 54503313. A
conference call replay will be available from approximately 10:00 a.m. PDT
on July 10th through midnight PDT on Thursday, July 17, 2008. The
conference call replay can be accessed by dialing 1-800-642-1687 and
entering Conference ID code 54503313.
Columbia will discuss second quarter 2008 results on a conference call
scheduled for Thursday, July 24, 2008 at 1:00 p.m. PDT. To listen to this
discussion by calling 1-888-318-7969; Conference ID code 53553319. A
conference call replay will be available from approximately 4:00 p.m. PDT
on July 24 through midnight PDT on Thursday, July 31, 2008. The conference
call replay can be accessed by dialing 1-800-642-1687 and entering
Conference ID code 53553319.
About Columbia
Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is
the holding company of Columbia Bank, a Washington state-chartered
full-service commercial bank. With the 2007 acquisitions of Mountain Bank
Holding Company and Town Center Bancorp and the 2008 internal merger of its
subsidiary, Bank of Astoria, into Columbia Bank, Columbia Banking System
has 53 banking offices in Pierce, King, Cowlitz, Kitsap, Thurston and
Whatcom counties in Washington State, and Clackamas, Clatsop, Tillamook and
Multnomah counties in Oregon. Included in Columbia Bank are former branches
of Mt. Rainier National Bank, doing business as Mt. Rainier Bank, with 5
branches in King and Pierce counties. Columbia Bank does business under the
Bank of Astoria name at the Bank of Astoria's former branches located in
Astoria, Warrenton, Seaside and Cannon Beach in Clatsop County and in
Manzanita in Tillamook County. More information about Columbia can be found
on its website at http://www.columbiabank.com.
Note Regarding Forward Looking Statements
This news release includes forward looking statements, which management
believes are 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 and national
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) a continued decline in the housing/real estate
market; (3) changes in interest rates significantly reduce interest margins
and negatively affect funding sources; (4) deterioration of credit quality
that could, among other things, increase defaults and delinquency risks in
the Banks' loan portfolios (5) projected business increases following
strategic expansion activities are lower than expected; (6) competitive
pressure among financial institutions increases significantly; (7)
legislation or regulatory requirements or changes adversely affect the
businesses in which we are engaged; and (8) our ability to realize the
efficiencies we expect to receive from our investments in personnel,
acquisitions and infrastructure.
Contacts: Melanie J. Dressel, President and
Chief Executive Officer
(253) 305-1911
Gary R. Schminkey, Executive Vice President
and Chief Financial Officer
(253) 305-1966
SOURCE Columbia Banking System, Inc.
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Related links:
http://www.columbiabank.com
CONTACT:
Melanie J. Dressel, President and Chief
Executive Officer, +1-253-305-1911, or Gary R. Schminkey,
Executive Vice President and Chief Financial Officer,
+1-253-305-1966, both of Columbia Banking System, Inc.
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