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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of
The
Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported):
01/10/2008
COLUMBIA
BANKING SYSTEM, INC.
(Exact
name of registrant as specified in its charter)
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Washington
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0-20288
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91-1422237
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(State
or other jurisdiction
of
incorporation)
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(Commission
File Number)
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(IRS
Employer
Identification
No.)
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1301
A Street
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Tacoma,
WA
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98402
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code: (253) 305-1900
(Former
name or former address, if changed since last report.)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Items
to be Included in this Report
Item
7.01 Regulation FD Disclosure
Columbia
Banking System, Inc. (the “Company”) hereby provides earnings guidance for the
fourth quarter and full year 2007. The Company has not made it a
practice to offer earnings guidance and it is not our intention to change that
practice. However, due to the uncertainty in the current economic climate,
the
current volatility in the financial markets in general and specifically for
financial institutions, we believe that it is necessary to provide some clarity
on our preliminary results of operations for 2007. The Company
anticipates fourth quarter 2007 net earnings to be within the range of $0.40
to
$0.42 per diluted common share and full-year earnings per diluted share to
be in
the range of $1.90 to $1.92 (fourth quarter and full-year 2007 estimates include
the $0.06 Visa USA accrual as described below). Diluted earnings per
share for the fourth quarter and full year 2006 were $0.52 and $1.99,
respectively.
During
the fourth quarter of 2007, the Company recorded an expense accrual for
litigation liabilities stemming from its membership in the Visa USA network
of
$1.8 million pre-tax, or $0.06 per share (see Item 8.01 for additional
details). In addition, because of strong loan growth of approximately
$72 million during the fourth quarter, the Company expects to record a provision
for credit losses of $1.4 million on a pre-tax basis, as compared to $950,000
in
the fourth quarter of 2006. Credit quality continues to approach more
historical levels. We expect nonperforming loans to be within a range of 0.63%
and 0.65% of total loans as compared to 0.46% at September 30, 2007 and 0.20%
at
December 31, 2006. Net charge-offs for the full year 2007 are approximately
$380,000 as compared to $2.7 million for the full year 2006. The Company’s
reserve for loan losses was 1.16% of total loans as compared to 1.18% of total
loans at December 31, 2006.
The
Company also experienced a modest compression of its net interest margin during
the fourth quarter. Given the Company’s asset sensitivity, the effect
of 100 basis points of reduction in the prime rate since mid September 2007
and
the continued intense competition for deposits, the Company’s net interest
margin is expected to be within the range of 4.27% and 4.30%, a decline of
10 to
13 basis points as compared to 4.40% for the third quarter of
2007. The net interest margin was 4.43% and 4.49% for the fourth
quarter and full year 2006, respectively.
Given
the
impact of the one-time charge from the VISA USA liability, we thought it
appropriate to disclose our estimate of fourth quarter and full year 2007
earnings and our loan loss reserve. The Company expects to release
fourth quarter and full-year 2007 results on January 24, 2008 and will conduct
a
conference call on January 24, 2008 at 1PM PST.
Item
8.01 Other Events
On
October 3, 2007, Visa, Inc. (“Visa”) completed a restructuring and issued shares
of Visa common stock to its financial institution members in contemplation
of
its initial public offering (“IPO”) expected to take place in the first quarter
of 2008. As a result of this restructuring, the Company, a Visa
member bank, will receive its proportionate number of Class USA shares of Visa
common stock. In connection with the IPO, it is expected that a
portion of these shares will be redeemed for cash, with the remaining shares
to
be converted to Class A shares at the later of three years after the IPO or
upon
settlement of certain litigation. It is expected that Visa will set
aside a portion of the proceeds from the IPO into an escrow account for the
benefit of member financial institutions to fund certain litigation judgments
or
settlements that may occur.
On
November 7, 2007, Visa announced that it had reached a settlement to resolve
certain restraint of trade litigation brought by American Express. On
December 21, 2007, Visa filed its annual report on Form 10-K in which it
disclosed that, in accordance with Financial Accounting Standard No. 5 (“FAS
5”), it recorded a litigation reserve for a pending lawsuit by Discover
Financial Services (“Discover”) against Visa. Pursuant to agreements
with Visa and its member banks, all member banks are obligated to share in
settlement liabilities. The Company will recognize, in its fourth
quarter financial statements, a pre-tax charge of approximately $1.8 million,
or
$0.06 per diluted common share, related to the American Express settlement
and
the remaining litigation. Of this $1.8 million, $612,000 is the
Company’s proportionate share of the American Express settlement and $1.16
million is the Company’s estimate of the fair value of potential losses related
to the remaining litigation in accordance with FASB Interpretation No.
45.
At
this
time the Company will not reflect any value for its membership interest in
Visa
as a result of the Visa restructuring. However, upon completion of
the anticipated IPO, the fair value of the Company’s proportionate Visa interest
will be realized, based upon the value of shares utilized to establish the
escrow account (limited to the amount of the obligation recorded) and shares
redeemed for cash. The Company anticipates that its expected proceeds
from Visa’s IPO will more than offset any liabilities related to any Visa
litigation.
The
information in this Current Report on Form 8-K shall not be deemed "filed"
for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended,
or
otherwise subject to the liability of that section, nor shall it be deemed
incorporated by reference in any filing or other document pursuant to the
Securities Act of 1933, as amended, except as shall be expressly set forth
by
specific reference in such filing or document.
Note
Regarding Forward-Looking Statements
(Applies
to Items 7.01 and 8.01)
This
Report includes forward-looking statements of Columbia Banking System, Inc
(the
“Company”), which management believes are a benefit to
shareholders. These forward-looking statements describe the Company’s
management’s expectations regarding future events and developments such as
future operating results, growth in loans and deposits, continued success
of the
Company’s style of banking and the strength of the local economy, the amount of
loss allocated to the Company in connection with the Visa restructuring and
litigation, and the successful completion of the Visa IPO. 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 the Company’s 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 the Company than expected and adversely affect the Company’s ability
to continue its internal growth at historical rates and maintain the quality
of
its 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 the Company is engaged; and
(7) with respect to the Visa matters described in Item 8.01, the
market for IPOs in general or for financial institutions in particular are
less
favorable than expected.
Item
9.01 Financial Statements and Exhibits
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(a)
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Financial
statements – not applicable
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(b)
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Pro
forma financial information – not
applicable
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(c)
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Shell
company transactions – not
applicable
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(d)
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Exhibits
– not applicable
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SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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COLUMBIA
BANKING SYSTEM, INC.
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Date:
January 10, 2008
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/s/
Melanie J. Dressel
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Melanie
J. Dressel
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President
and Chief Executive Officer
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