Market Overview

West Coast Bancorp Reports Results for Third Quarter and Year to Date 2012

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  • On September 25, 2012, the Company Declared a Cash Dividend of $.05 Per Common Share, Payable on October 31, 2012, to Shareholders of Record as of October 10, 2012, With Series B Preferred Shares Participating on an As-Converted Basis.
  • Net Income for the Third Quarter 2012 Was $5.9 Million or $6.3 Million Adjusting for After-Tax Merger-Related Expenses*.
  • Third Quarter 2012 Return on Average Assets Was .97% or 1.03% Excluding After-Tax Merger-Related Expenses*, an Improvement From the Same Quarter in 2011.
  • Total Noninterest Expense Was $21.3 Million in Third Quarter 2012; Excluding Merger-Related Expenses*, Noninterest Expense of $20.7 Million Declined 8% From the Corresponding Quarter in 2011.
  • Third Quarter 2012 Efficiency Ratio, Excluding Merger-Related Expenses*, Improved to 68.7% From 81.0% in the Same Quarter in 2011.
  • Net Income for the Nine-Month Period Ending September 30, 2012, Excluding After-Tax Merger-Related Expenses, Increased 13% From the Same Period in 2011.
  • On September 26, 2012, the Company Announced an Agreement and Plan of Merger With Columbia Banking System, Inc., Headquartered in Tacoma, Washington, With Assets of $4.9 Billion at September 30, 2012. The Merger is Subject to Customary Closing Conditions, Including Receipt of Requisite Shareholder and Regulatory Approvals.

LAKE OSWEGO, Ore., Oct. 25, 2012 (GLOBE NEWSWIRE) -- West Coast Bancorp (Nasdaq: WCBO) ("Bancorp" or "Company"), the parent company of West Coast Bank ("Bank") and West Coast Trust Company, Inc., today announced third quarter 2012 net income of $5.9 million or $.27 per diluted share compared to net income of $6.3 million or $.29 per diluted share in the third quarter of 2011. Net income for the first nine months of 2012 was $17.8 million or $.82 per diluted share compared to net income of $16.0 million or $.75 per diluted share in the same period of 2011.

"The operating performance of the Company continued its positive trend in the third quarter of 2012 compared to prior periods," said Robert D. Sznewajs, President and Chief Executive Officer. "This trend is evidenced by the Board of Director's declaration of a shareholder cash dividend and a continuing improvement in our return on assets, influenced by effective cost control measures and reduced loan loss provisioning due to an improving credit environment. Our recently announced merger with Columbia Bank will further expand the Company's presence in Washington and create the premier community bank in the Pacific Northwest."

Table 1 below shows the reconciliation of net income to the non-GAAP measures of net income excluding after-tax merger-related expenses and of noninterest expense to noninterest expense excluding merger-related expenses for the quarters ended September 30, 2012, and 2011, and the years to date ended September 30, 2012, and 2011.

 
Table 1
Reconciliation of Net Income and Noninterest Expense to Non-GAAP financial measures  
(Dollars in thousands) Q3 Q3 Change Year to date Year to date Change
  2012 2011 $ 9/30/2012 9/30/2011 $
             
Net income  $ 5,944  $ 6,276  $ (332)  $ 17,767  $ 16,015  $ 1,752
             
Merger-related expenses  578  --   578  578  --   578
Less: tax benefit from merger related expenses (1)  202  --   202  202  --   202
After-tax merger-related expenses  376  --   376  376  --   376
             
Net income excluding after-tax merger related expenses (2,3)  $ 6,320  $ 6,276  $ 44  $ 18,143  $ 16,015  $ 2,128
             
Noninterest expense  $ 21,307  $ 22,620  $ (1,313)  $ 63,808  $ 68,131  $ (4,323)
             
Merger-related expenses  578  --   578  578  --   578
Noninterest expense excluding merger-related expenses (3, 4)  $ 20,729  $ 22,620  $ (1,891)  $ 63,230  $ 68,131  $ (4,901)
             
             
(1) Tax rate assumed to be 35%.
(2) Net income excluding merger-related expenses is GAAP net income adjusted for the after-tax impact of merger-related expenses.
(3) Management uses this non-GAAP information internally and has disclosed it to investors based on its belief that the information provides additional, valuable information relating to the Company's operating performance as compared to prior periods.
(4) Noninterest expense excluding merger expenses is used to calculate the efficiency ratio excluding merger expenses.
 

As previously announced on September 26, 2012, Bancorp entered into an Agreement and Plan of Merger with Columbia Banking System, Inc. ("Columbia"), providing for the acquisition of Bancorp by Columbia for consideration consisting of a combination of cash and Columbia common stock on the terms set forth in the merger agreement. Consummation of the transaction remains subject to customary closing conditions, including receipt of requisite shareholder and regulatory approvals.

Table 2 below shows summary financial information for the quarters ended September 30, 2012, and 2011, and June 30, 2012.

 
Table 2
SUMMARY FINANCIAL INFORMATION
           
  Qtr. ended Qtr. ended   Qtr. ended  
  Sept. 30, Sept. 30,   June 30,  
(Dollars and shares in thousands) 2012 2011 Change 2012 Change
           
Net income and performance ratios excluding after-tax merger-related expenses 1          
Net income  $ 6,320  $ 6,276  $ 44  $ 6,034  $ 286
Net income per diluted share  $ 0.29  $ 0.29  $ --   $ 0.28  $ 0.01
Return on average assets, annualized 1.03% 1.00%  0.03 1.01%  0.02
Return on average equity, annualized 7.59% 8.55%  (0.96) 7.50%  0.09
Efficiency ratio 68.75% 81.03%  (12.28) 70.85%  (2.10)
           
Net income and performance ratios          
Net income  $ 5,944  $ 6,276  $ (332)  $ 6,034  $ (90)
Net income available to common stockholders 3  $ 5,559  $ 5,836  $ (277)  $ 5,639  $ (80)
Net income per diluted share  $ 0.27  $ 0.29  $ (0.02)  $ 0.28  $ (0.01)
Book value per common share  $ 16.32  $ 14.28  $ 2.04  $ 15.91  $ 0.41
Return on average assets, annualized 0.97% 1.00%  (0.03) 1.01%  (0.04)
Return on average equity, annualized 7.14% 8.55%  (1.41) 7.50%  (0.36)
Efficiency ratio 70.66% 81.03%  (10.37) 70.85%  (0.19)
           
Share and per share figures          
Common shares outstanding at period end  19,290  19,303  (13)  19,295  (5)
Weighted average diluted shares4  21,598  21,124  474  21,547  51
Weighted average diluted shares-two class method 5  20,344  19,880  464  20,256  88
           
           
1  These measurements exclude the after-tax impact of $.4 million of merger-related expenses; see Table 1 for a reconciliation of net income and noninterest expense to nongaap financial measures.
2 The efficiency ratio has been computed as noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income excluding gains/losses on sales of securities.
3 Adjusted for the impact of allocating net income to participating instruments, which include restricted stock and Series B preferred stock.
4 Reflects the average dilutive impacts of Series B preferred stock (1,213), warrants (1,208), options (26), and restricted stock (41).
5 Reflects the calculation of diluted shares under the two-class method which includes average common (19,110), options (26), and warrants (1,208).
 
           

Balance Sheet Overview

Third quarter 2012 total average loan balance of $1.49 billion increased $14 million or 1% from the preceding quarter, with growth primarily in the commercial real estate construction and commercial real estate portfolios. Total average loans for the quarter ended September 30, 2012, declined $22 million or 1% from the third quarter in 2011, with declines in home equity and mortgage loans more than offsetting the year-over-year increase in commercial real estate construction loans. The yield on the loan portfolio of 4.98% in the most recent quarter declined 27 basis points from the corresponding quarter in 2011 and 10 basis points from the previous quarter as higher yielding loans in the portfolio continued to pay off or be refinanced while new loans were originated at lower yields reflecting prevailing market interest rates.

 
Table 3
AVERAGE LOANS FOR THE QUARTER
(Dollars in thousands) Sept. 30, % of Sept. 30, % of Change June 30, % of
  2012 Total 2011 total Amount % 2012 Total
Commercial loans  $ 287,706 19%  $ 297,354 20%  $ (9,648) -3%  $ 284,473 19%
Commercial real estate construction  37,838 3%  15,764 1%  22,074 140%  23,200 2%
Residential real estate construction  9,497 1%  15,146 1%  (5,649) -37%  11,283 1%
Total real estate construction loans  47,335 4%  30,910 2%  16,425 53%  34,483 3%
Mortgage  58,393 4%  70,143 5%  (11,750) -17%  62,610 4%
Home equity  246,330 16%  263,873 17%  (17,543) -7%  252,014 17%
Total real estate mortgage  304,723 20%  334,016 22%  (29,293) -9%  314,624 21%
Commercial real estate loans  841,098 56%  838,887 55%  2,211 0%  832,870 56%
Installment and other consumer loans  12,592 1%  13,924 1%  (1,332) -10%  12,776 1%
Total loans  $ 1,493,454    $ 1,515,091    $ (21,637) -1%  $ 1,479,226  
                 
Yield on loans 4.98%   5.25%    (0.27)   5.08%  
 
                 

Third quarter average investment portfolio of $761 million remained a sizeable portion of total average earning assets and represented 33% of earning assets as of September 30, 2012. Over the past year, the Company has increased its investments in municipal securities and reduced its U.S. government agency portfolio. During this time, purchases consisted principally of Oregon and Washington school district municipal securities with State guarantees and 10-year and 15-year fully amortizing U.S. government agency mortgage-backed securities. The expected duration of the investment portfolio was approximately 2.7 years at September 30, 2012, compared to approximately 2.3 years twelve months ago.

The third quarter 2012 tax equivalent yield on total cash and investment securities balances was 2.12%, a decline of 23 basis points from the same quarter in 2011, and a decline of 17 basis points from the preceding quarter.

 
Table 4
AVERAGE CASH EQUIVALENTS AND INVESTMENT SECURITIES FOR THE QUARTER
(Dollars in thousands) Sept 30, Sept 30, Change June 30,
  2012 2011 Amount % 2012
Cash equivalents:          
Federal funds sold  $ 2,558  $ 3,275  $ (717) -22%  $ 2,555
Interest-bearing deposits in other banks  47,242  49,918  (2,676) -5%  45,260
Total cash equivalents  49,800  53,193  (3,393) -6%  47,815
           
Investment securities:          
U.S. Treasury securities  200  2,870  (2,670) -93%  200
U.S. Government agency securities  217,051  241,173  (24,122) -10%  230,509
Corporate securities  8,385  9,499  (1,114) -12%  8,516
Mortgage-backed securities  447,756  454,881  (7,125) -2%  407,011
Obligations of state and political sub.  75,717  61,092  14,625 24%  67,882
Equity investments and other securities  11,897  12,809  (912) -7%  12,735
Total investment securities  761,006  782,324  (21,318) -3%  726,853
           
Total cash equivalents and investment securities  $ 810,806  $ 835,517  $ (24,711) -3%  $ 774,668
           
Tax equivalent yield on cash equivalents and investment securities (1) 2.12% 2.35%  (0.23)   2.29%
           
(1) Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.
 
           

Average total deposits of $1.91 billion in the third quarter 2012 increased 2% or $36 million from the prior quarter, as average non-interest bearing demand deposits increased $56 million and more than offset an $11 million decline in average time deposit balances. Time deposits represented 7% of the Company's average total deposits in the most recent quarter compared to 10% during the same quarter of 2011. Year-over-year third quarter average total deposit balances declined $44 million or 2%, with average money market and time deposit balances declining $70 million and $57 million, respectively. Partly offsetting these declines, non-interest bearing demand and savings deposits grew $62 million and $18 million, respectively, over the same period.

 
Table 5
AVERAGE DEPOSITS, BORROWINGS AND SUBORDINATED DEBENTURES FOR THE QUARTER
(Dollars in thousands) Q3 % of Q3 % of Change Q2 % of
  2012 Total 2011 Total Amount % 2012 Total
Demand deposits  $ 677,646 36%  $ 615,956 31%  $ 61,690 10%  $ 621,547 33%
Interest-bearing demand  365,560 19%  363,554 19%  2,006 1%  374,579 20%
Total checking deposits  1,043,206 55%  979,510 50%  63,696 7%  996,126 53%
Savings  132,839 7%  114,779 6%  18,060 16%  127,930 7%
Money market  592,363 31%  661,871 34%  (69,508) -11%  596,949 32%
Total non-time deposits   1,768,408 93%  1,756,160 90%  12,248 1%  1,721,005 92%
Time deposits  140,151 7%  196,807 10%  (56,656) -29%  151,085 8%
Total deposits  $ 1,908,559 100%  $ 1,952,967 100%  $ (44,408) -2%  $ 1,872,090 100%
                 
Average rate on total deposits 0.08%   0.20%    (0.12)   0.09%  
                 
Average borrowings and subordinated debentures  $ 179,063    $ 220,354    $ (41,291) -19%  $ 178,241  
                 
Rate on borrowings and subordinated debentures  1.45%   7.91%    (6.46)   1.44%  
 
                 

Third quarter 2012 average total checking balances of $1.04 billion grew $64 million or 7% from third quarter 2011 and represented 55% of the Company's average total deposits in the quarter. Lower market interest rates and a continuing shift in the mix from time deposits to non-time deposits over the past year reduced the average rate paid on total deposits to 8 basis points in the most recent quarter, representing a decline of 12 basis points from the same quarter in 2011.

Capital Position

As shown in Table 6 below, the Company improved its September 30, 2012, capital position compared to twelve months earlier. As a result of the Company's operating performance and capital position, the Company announced a shareholder dividend of $.05 per share on September 25, 2012. The dividend will be payable on October 31, 2012, to shareholders of record on October 10, 2012.

 
Table 6
CAPITAL RATIOS
           
  Sept. 30, Sept. 30,   June 30,  
  2012 2011 Change 2012  Change 
West Coast Bancorp          
Tier 1 risk-based capital ratio 20.45% 18.43%  2.02 20.33%  0.12
Total risk-based capital ratio 21.62% 19.69%  1.93 21.50%  0.12
Leverage ratio 15.48% 13.72%  1.76 15.55%  (0.07)
           
West Coast Bank          
Tier 1 risk-based capital ratio 19.80% 17.74%  2.06 19.62%  0.18
Total risk-based capital ratio 21.06% 19.00%  2.06 20.88%  0.18
Leverage ratio 15.00% 13.20%  1.80 15.02%  (0.02)
 
           

Operating Results

As shown in Table 7 below, pre-tax income, excluding merger-related expenses, in the third quarter of 2012 was $9.7 million, an increase of $5.7 million or 143% from the third quarter last year. The increase was principally due to an increase in net interest income, a lower provision for loan losses, and a reduction in noninterest expense. For sequential quarters, pre-tax income increased $.4 million or 5% mainly as a result of reductions in noninterest expenses. Third quarter 2012 net income of $6.3 million, excluding merger-related expenses, increased modestly from the corresponding quarter last year and $.3 million or 5% from the prior quarter. See Table 1 for reconciliation of net income to non-GAAP financial measure.

 
Table 7
SUMMARY INCOME STATEMENT EXCLUDING MERGER-RELATED EXPENSES
(Dollars in thousands) Q3 Q3 Change Q2 Change
  2012 2011 $ % 2012 $ %
               
Net interest income  $ 21,687  $ 19,341  $ 2,346 12%  $ 21,773  $ (86) 0%
Provision (benefit) for credit losses  (593)  1,132  (1,725) -152%  (492)  (101) 21%
Noninterest income  8,172  8,414  (242) -3%  8,494  (322) -4%
Noninterest expense excluding merger-related expenses  20,729  22,620  (1,891) -8%  21,476  (747) -3%
Income before income taxes excluding merge-related expenses  9,723  4,003  5,720 143%  9,283  440 5%
Provision (benefit) for income taxes excluding the tax impact of merger expenses  3,403  (2,273)  5,676 250%  3,249  154 5%
Net income excluding merger expenses  $ 6,320  $ 6,276  $ 44 1%  $ 6,034  $ 286 5%
 
               

Third quarter 2012 net interest income of $21.7 million increased $2.3 million from the same quarter in 2011. This was primarily a result of the $2.8 million prepayment charge incurred in third quarter 2011 in conjunction with a $88 million prepayment of FHLB term borrowings. As shown in Table 8 below, the third quarter 2012 net interest margin of 3.80% increased 2 basis points from the net interest margin adjusted for the prepayment charge in the same quarter of 2011. For the sequential quarters, the net interest margin contracted 13 basis points principally as a result of declining yield on investment and loan portfolios.

 
Table 8
NET INTEREST SPREAD AND MARGIN
(Annualized, tax-equivalent basis) Q3 Q3   Q2  
  2012 2011 Change 2012 Change
Yield on average interest-earning assets 3.97% 4.22%  (0.25) 4.12%  (0.15)
Rate on average interest-bearing liabilities 0.29% 1.37%  (1.08) 0.30%  (0.01)
Net interest spread 3.68% 2.85%  0.83 3.82%  (0.14)
Net interest margin 3.80% 3.31%  0.49 3.93%  (0.13)
           
Impact of FHLB prepayment premium in Q3 2011  --  -0.47%  0.47  --   -- 
Net interest margin excluding FHLB prepayment premium 3.80% 3.78%  0.02 3.93%  (0.13)
           
1 Third quarter 2011 rate on average interest-bearing liabilities includes 47 basis points of expense associated with the prepayment of $88 million in FHLB borrowings.
 
           

As shown in Table 9 below, third quarter 2012 total noninterest income of $8.2 million decreased $.2 million or 3% from the same quarter in 2011. The decline can be attributed to a $.7 million decrease in gains on sales of OREO, lower service charges on deposit accounts and payment systems-related revenues and no gains on sales of securities in the most recent quarter. These declines were partly offset by an increase in gains on sales of loans, higher trust and investment services revenues, and a reduction in OREO valuation adjustments. Total net loss on OREO was $.5 million in the quarter ended September 30, 2012, as compared to virtually no net OREO loss in the same quarter of 2011. Total noninterest income in the third quarter of 2012 decreased 3% or $.3 million from the second quarter of 2012, as a lower total net loss on OREO did not offset declines in remaining non-interest income categories.

Excluding the total net loss on OREO, the Company's third quarter noninterest income grew $.2 million on a year-over-year basis, while declining $.9 million from the prior quarter. For sequential quarters, the Company recognized $.4 million less in gains on sales of Small Business Administration loans and no gains on sales of securities in the most recent quarter.

 
Table 9
NONINTEREST INCOME
(Dollars in thousands) Q3 Q3 Change Q2 Change
  2012 2011 $ % 2012 $ %
Noninterest income              
Service charges on deposit accounts  $ 3,017  $ 3,129  $ (112) -4%  $ 3,212  $ (195) -6%
Payment systems-related revenue  3,073  3,201  (128) -4%  3,084  (11) 0%
Trust and investment services revenues  1,231  1,033  198 19%  1,457  (226) -16%
Gains on sales of loans  492  222  270 122%  722  (230) -32%
Gains on sales of securities  --   124  (124) -100%  228  (228) -100%
Other-than-temporary impairment losses  --   --   --  0%  --   --  0%
Other   816  716  100 14%  821  (5) -1%
Total  8,629  8,425  204 2%  9,524  (895) -9%
               
OREO gain on sale  29  685  (656) -96%  183  (154) 84%
OREO valuation adjustments   (486)  (696)  210 30%  (1,213)  727 60%
Total net loss on OREO  (457)  (11)  (446) -4055%  (1,030)  573 56%
               
Total noninterest income  $ 8,172  $ 8,414  $ (242) -3%  $ 8,494  $ (322) -4%
 
               

As shown in Table 10 below, the Company's third quarter 2012 total noninterest expense of $20.7 million, excluding merger-related expenses, declined by $1.9 million or 8% from the same quarter in 2011. As a result of cost-savings initiatives implemented over the past year, expenses declined in nearly all categories from the corresponding quarter in 2011. On a linked quarter basis, total noninterest expenses, excluding merger-related expenses, declined $.7 million or 3%. See Table 1 for reconciliation to GAAP measure.

 
Table 10
NONINTEREST EXPENSE
(Dollars in thousands) Q3 Q3 Change Q2 Change
  2012 2011 $ % 2012 $ %
Noninterest expense              
Salaries and employee benefits  $ 11,499  $ 11,977  $ (478) -4%  $ 12,081  $ (582) -5%
Equipment  1,480  1,461  19 1%  1,584  (104) -7%
Occupancy  1,901  2,115  (214) -10%  2,119  (218) -10%
Payment systems-related expense  1,148  1,279  (131) -10%  1,075  73 7%
Professional fees  777  1,038  (261) -25%  1,060  (283) -27%
Postage, printing and office supplies  735  772  (37) -5%  729  6 1%
Marketing  520  862  (342) -40%  255  265 104%
Communications  411  387  24 6%  419  (8) -2%
Other noninterest expense  2,258  2,729  (471) -17%  2,154  104 5%
Total noninterest expense excluding merger-related expenses  $ 20,729  $ 22,620  $ (1,891) -8%  $ 21,476  $ (747) -3%
               
Merger expenses  578  --   578 0%  --   578 0%
Total noninterest expense  $ 21,307  $ 22,620  $ (1,313) -6%  $ 21,476  $ (169) -1%
 
               

Income Taxes

The third quarter 2012 provision for income taxes was $3.2 million compared to a benefit for income taxes of $2.3 million in the same quarter of 2011. The third quarter 2012 provision for income taxes was the result of an effective tax rate of 35% on pre-tax income. The provision for taxes in the third quarter last year reflected the impact of the Company's deferred tax asset valuation allowance at September 30, 2011, which was subsequently fully reversed in the fourth quarter of 2011.

Credit Quality

The Company recorded a benefit for credit losses of $.6 million in the third quarter of 2012, compared to a provision for credit losses of $1.1 million in the third quarter of 2011 and benefit of $.5 million in the previous quarter. Net charge-offs in the third quarter of 2012 were $1.0 million or .27% of average loans on an annualized basis, representing a decline from $3.3 million or .88%, respectively, in the corresponding quarter in 2011 and an increase of $.2 million on a linked-quarter basis. As shown in the table below, net charge-offs declined in nearly all loan categories compared to the third quarter last year.

 
Table 11
ALLOWANCE FOR CREDIT LOSSES AND NET CHARGE-OFFS
    Charge-offs as   Charge-offs as   Charge-offs as
    a % of average   a % of average   a % of average
(Dollars in thousands) Q3 loan balance Q3 loan balance Q2 loan balance
  2012 annualized 2011 annualized 2012 annualized
Allowance for credit losses, beginning of period  $ 33,900    $ 39,231    $ 34,634  
Total provision (benefit) for credit losses  (593)    1,132    (492)  
Loan net charge-offs:            
Commercial  102 0.14%  1,181 1.58%  223 0.32%
Commercial real estate construction  148 1.56%  472 11.88%  --  0.00%
Residential real estate construction  (4) -0.17%  (87) -2.28%  (29) -1.03%
Total real estate construction  144 1.21%  385 4.94%  (29) -0.34%
Mortgage  101 0.69%  246 1.39%  92 0.59%
Home equity  373 0.60%  516 0.78%  336 0.54%
Total real estate mortgage  474 0.62%  762 0.91%  428 0.55%
Commercial real estate  126 0.06%  779 0.37%  (580) -0.28%
Installment and consumer  48 1.52%  6 0.17%  57 1.79%
Overdraft  125 0.00%  234 0.00%  143 0.00%
Total loan net charge-offs  1,019 0.27%  3,347 0.88%  242 0.07%
             
Total allowance for credit losses  $ 32,288    $ 37,016    $ 33,900  
Components of allowance for credit losses:            
Allowance for loan losses  $ 31,457    $ 36,314    $ 33,132  
Reserve for unfunded commitments  831    702    768  
Total allowance for credit losses  $ 32,288    $ 37,016    $ 33,900  
             
Net loan charge-offs to average loans (annualized) 0.27%   0.88%   0.07%  
Allowance for loan losses to total loans 2.11%   2.42%   2.22%  
Allowance for credit losses to total loans 2.17%   2.46%   2.27%  
Allowance for loan losses to nonperforming loans 97%   69%   99%  
Allowance for credit losses to nonperforming loans 100%   70%   101%  
 
             

The allowance for credit losses was $32.3 million or 2.17% of total loans at September 30, 2012, compared to an allowance for credit losses of $37.0 million or 2.46% of total loans a year earlier and $33.9 million or 2.27%, respectively, at June 30, 2012. The decline in the allowance for credit losses and the allowance relative to total loans over both periods reflected the improving trend in the overall risk profile of the loan portfolio as evidenced by modest charge off activity, low delinquency, and a positive risk rating migration. The allowance for credit losses relative to nonperforming loans increased from 70% a year ago to 100% at September 30, 2012. The Company's estimate of the allowance for credit losses will continue to be closely correlated to the loan portfolio's credit quality performance trends and the region's economic conditions.

Total nonperforming assets at September 30, 2012, were $54.3 million or 2.19% of total assets, and represented a 35% reduction from $83.1 million or 3.30% of total assets a year ago, and a decline of 8% from $59.3 million or 2.46% of total assets as of June 30, 2012.

Over the past twelve months, total nonaccrual loans declined $20.5 million or 39% to $32.4 million at September 30, 2012.

 
Table 12          
NONPERFORMING ASSETS
(Dollars in thousands) Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30,
  2012 2012 2012 2011 2011
Loans on nonaccrual status:          
Commercial  $ 6,643  $ 6,199  $ 6,482  $ 7,750  $ 9,987
Real estate construction:          
Commercial real estate construction  1,650  3,750  3,749  3,750  3,886
Residential real estate construction  1,851  1,936  1,981  2,073  3,311
Total real estate construction  3,501  5,686  5,730  5,823  7,197
Real estate mortgage:          
Mortgage  6,170  7,044  10,744  9,624  10,877
Home equity  2,845  2,239  2,528  2,325  3,285
Total real estate mortgage  9,015  9,283  13,272  11,949  14,162
Commercial real estate  13,248  12,384  16,648  15,070  21,513
Installment and consumer  --   --   1  5  6
Total nonaccrual loans  32,407  33,552  42,133  40,597  52,865
90 days past due not on nonaccrual  --   --   --   --   -- 
Total nonperforming loans  32,407  33,552  42,133  40,597  52,865
           
Other real estate owned, net  21,939  25,726  27,525  30,823  30,234
Total nonperforming assets  $ 54,346  $ 59,278  $ 69,658  $ 71,420  $ 83,099
           
Nonperforming loans to total loans 2.17% 2.24% 2.86% 2.70% 3.52%
Nonperforming assets to total assets 2.19% 2.46% 2.89% 2.94% 3.30%
           
Total delinquent loans 30-89 days past due  $ 2,963  $ 3,422  $ 4,095  $ 4,273  $ 5,556
Delinquent loans to total loans 0.20% 0.23% 0.28% 0.28% 0.37%
 
           

As indicated in Table 13 below, during the most recent quarter the Company disposed of 29 OREO properties with a book value of $3.8 million while acquiring three properties with a book value of $.5 million. OREO valuation adjustments totaled $.5 million in the most recent quarter, down from both third quarter last year and the preceding quarter of 2012. The combination of these transactions resulted in a $3.8 million or 15% net reduction in total OREO during the quarter to $21.9 million at September 30, 2012. The OREO balance reflected write-downs of 57% from original loan principal. Income-producing properties represented the largest balance in the OREO portfolio at September 30, 2012, followed by land and homes, substantially all of which are located within the Company's footprint.

 
Table 13
OTHER REAL ESTATE OWNED ACTIVITY
(Dollars in thousands) Q3 2012   Q3 2011   Q2 2012  
  Amount  #  Amount  #  Amount  # 
Beginning balance  $ 25,726  244  $ 35,374  366  $ 27,525  246
Additions to OREO  487  3  1,672  16  3,304  28
Dispositions of OREO  (3,788)  (29)  (6,116)  (74)  (3,890)  (30)
OREO valuation adjustment  (486)  --   (696)  --   (1,213)  -- 
Ending balance  $ 21,939  218  $ 30,234  308  $ 25,726  244
 
 
Table 14
OTHER REAL ESTATE OWNED BY PROPERTY TYPE
(Dollars in thousands) Sept. 30, # of Sept. 30, # of June 30, # of
  2012 properties 2011 properties 2012 properties
Income-producing properties  $ 7,749  11  $ 8,139  14  $ 8,106  13
Land  4,104  13  3,762  10  4,780  15
Homes  3,518  14  6,329  27  5,539  20
Residential site developments  2,736  114  4,877  176  3,104  126
Lots  1,912  40  3,175  54  1,999  42
Multifamily  1,570  20  455  4  1,570  20
Commercial site developments  350  6  366  6  303  6
Condominiums  --   --   3,131  17  325  2
Total  $ 21,939  218  $ 30,234  308  $ 25,726  244
 
             

Other

The Company will hold a Webcast conference call Thursday, October 25, 2012, at 11:00 a.m. Pacific Time, during which the Company will discuss third quarter 2012 results and current activities. To access the conference call via a live Webcast, go to www.wcb.com and click on Investor Relations and the "3rd Quarter 2012 Earnings Conference Call" tab. The conference call may also be accessed by dialing (866) 394-3464, Conference ID#: 37304304 a few minutes prior to 11:00 a.m. Pacific Time. The call will be available for replay by accessing the Company's website at www.wcb.com and following the same instructions.

West Coast Bancorp is a publicly held, Northwest bank holding company headquartered in Oregon with $2.5 billion in assets, and the parent company of West Coast Bank and West Coast Trust Company, Inc. West Coast Bank operates 58 branches in Oregon and Washington. The Company serves clients who seek the resources, sophisticated products and expertise of larger financial institutions, along with the local decision-making, market knowledge, and customer service orientation of a community bank. The Company offers a broad range of banking, investment, fiduciary and trust services.  For more information, please visit the Company web site at www.wcb.com.

The West Coast Bancorp logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=13726

Forward Looking Statements

Statements in this release regarding future events, performance or results are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") and are made pursuant to the safe harbors of the PSLRA. These statements can often be identified by words such as "expects," "believes," "projects," "anticipates," or "will," or other words of similar meaning, and specifically include in this release all statements regarding the expected future benefits of our ongoing cost-cutting initiatives. Actual results could be quite different from those expressed or implied by the forward-looking statements, which give our current expectations about the future and are not guarantees. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update them to reflect changes that occur after that date.

A number of factors could cause results to differ significantly from our expectations, including, among others, the effects of (i) market conditions in our service areas on our efforts to continue to reduce our levels of nonperforming assets and increase loan originations, (ii) cost reduction initiatives, (iii) any failure to satisfy the conditions to our proposed merger with Columbia Banking System, Inc., including receipt of regulatory and shareholder approvals, and (iv) risk factors identified in our Annual Report on Form 10-K for the year ended December 31, 2011, including under the heading "Forward Looking Statement Disclosure" and in the section "Risk Factors," in our most recent Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and in our Current Report on Form 8-K dated September 25, 2012, including under the heading "Cautionary Statements Regarding Forward Looking Information."

* This press release contains certain non-generally accepted accounting principles in the United States of America ("GAAP") financial measures including net income, excluding after-tax merger-related expenses. Management uses this non-GAAP information internally and has disclosed it to investors based on its belief that the information provides additional, valuable information relating to its operating performance as compared to prior periods. Please see Table 1 for a reconciliation of net income to net income excluding after-tax merger-related expenses and noninterest expense to noninterest expense excluding merger-related expenses.

 
Table 15
INCOME STATEMENT
(Dollars and shares in thousands) Q3 Q3 Change Q2 Year to date
  2012 2011 $ % 2012 2012 2011
Net interest income              
Interest and fees on loans  $ 18,706  $ 20,060  $ (1,354) -7%  $ 18,699  $ 56,614  $ 60,590
Interest on investment securities  3,985  4,626  (641) -14%  4,110  12,194  13,985
Other interest income  35  35  --  0%  32  92  168
Total interest income  22,726  24,721  (1,995) -8%  22,841  68,900  74,743
Interest expense on deposit accounts  385  986  (601) -61%  431  1,393  4,271
Interest on borrowings and subordinated deb.  654  1,619  (965) -60%  637  1,914  4,883
Borrowings prepayment charge  --   2,775  (2,775) -100%  --   --   2,775
Total interest expense  1,039  5,380  (4,341) -81%  1,068  3,307  11,929
Net interest income  21,687  19,341  2,346 12%  21,773  65,593  62,814
               
Provision (benefit) for credit losses  (593)  1,132  (1,725) -152%  (492)  (996)  6,634
               
Noninterest income              
Service charges on deposit accounts  3,017  3,129  (112) -4%  3,212  9,047  10,348
Payment systems-related revenue  3,073  3,201  (128) -4%  3,084  9,230  9,300
Trust and investment services revenues  1,231  1,033  198 19%  1,457  3,623  3,389
Gains on sales of loans  492  222  270 122%  722  1,949  1,035
Net OREO valuation adjustments and gains (losses) on sales  (457)  (11)  (446) -4055%  (1,030)  (2,061)  (1,255)
Other-than-temporary impairment losses  --   --   --   --   --   (49)  (179)
Gain on sales of securities  --   124  (124) -100%  228  375  521
Other   816  716  100 14%  821  2,439  2,241
Total noninterest income  8,172  8,414  (242) -3%  8,494  24,553  25,400
Noninterest expense              
Salaries and employee benefits  11,499  11,977  (478) -4%  12,081  35,058  35,973
Equipment  1,480  1,461  19 1%  1,584  4,726  4,553
Occupancy  1,901  2,115  (214) -10%  2,119  6,095  6,512
Payment systems-related expense  1,148  1,279  (131) -10%  1,075  3,342  3,876
Professional fees  777  1,038  (261) -25%  1,060  2,948  2,996
Postage, printing and office supplies  735  772  (37) -5%  729  2,283  2,444
Marketing  520  862  (342) -40%  255  1,087  2,344
Communications  411  387  24 6%  419  1,210  1,154
Merger-related expenses  578  --   578 0%  --   578  -- 
Other noninterest expense  2,258  2,729  (471) -17%  2,154  6,481  8,279
Total noninterest expense  21,307  22,620  (1,313) -6%  21,476  63,808  68,131
Income before income taxes  9,145  4,003  5,142 128%  9,283  27,334  13,449
Provision (benefit) for income taxes  3,201  (2,273)  5,474 241%  3,249  9,567  (2,566)
Net income  $ 5,944  $ 6,276  $ (332) -5%  $ 6,034  $ 17,767  $ 16,015
               
Net income per share:              
Basic  $ 0.29  $ 0.31  $ (0.02)    $ 0.29  $ 0.87  $ 0.78
Diluted  $ 0.27  $ 0.29  $ (0.02)    $ 0.28  $ 0.82  $ 0.75
Weighted average common shares  19,110 19,029  81    19,082  19,077 18,999
Weighted average diluted shares  20,344 19,880  464    20,256  20,225 19,951
               
Tax equivalent net interest income  $ 21,982  $ 19,628  $ 2,354    $ 22,046  $ 66,427  $ 63,647
Return on average assets 0.97% 1.00% -0.03%   1.01% 0.99% 0.87%
Return on average equity 7.14% 8.55% -1.41%   7.50% 7.32% 7.58%
 
               
 
Table 16
BALANCE SHEETS
(Dollars in thousands) Sept. 30, Sept. 30, Change June 30,
  2012 2011 $ % 2012
Assets:          
Cash and due from banks  $ 53,026  $ 57,442  $ (4,416) -8%  $ 55,332
Federal funds sold  3,426  2,102  1,324 63%  2,740
Interest-bearing deposits in other banks  44,883  47,734  (2,851) -6%  52,815
Total cash and cash equivalents  101,335  107,278  (5,943) -6%  110,887
Investment securities  792,657  823,458  (30,801) -4%  708,884
Loans  1,490,767  1,503,624  (12,857) -1%  1,495,797
Allowance for loan losses  (31,457)  (36,314)  4,857 13%  (33,132)
Loans, net  1,459,310  1,467,310  (8,000) -1%  1,462,665
Total interest-earning assets  2,331,733  2,379,614  (47,881) -2%  2,261,029
OREO, net  21,939  30,234  (8,295) -27%  25,726
Other assets  100,739  92,967  7,772 8%  100,277
Total assets  $ 2,475,980  $ 2,521,247  $ (45,267) -2%  $ 2,408,439
           
Liabilities and Stockholders' Equity:          
Demand  $ 704,810  $ 649,326  $ 55,484 9%  $ 648,819
Savings and interest-bearing demand  499,934  502,586  (2,652) -1%  497,135
Money market  588,635  651,904  (63,269) -10%  585,421
Time deposits  135,913  186,962  (51,049) -27%  145,510
Total deposits  1,929,292  1,990,778  (61,486) -3%  1,876,885
Borrowings and subordinated debentures  178,900  209,099  (30,199) -14%  178,900
Reserve for unfunded commitments  831  702  129 18%  768
Other liabilities  30,961  23,801  7,160 30%  23,869
Total liabilities  2,139,984  2,224,380  (84,396) -4%  2,080,422
Stockholders' equity  335,996  296,867  39,129 13%  328,017
Total liabilities and stockholders' equity  $ 2,475,980  $ 2,521,247  $ (45,267) -2%  $ 2,408,439
 
           
 
Table 17
PERIOD END LOANS
(Dollars in thousands) Sept. 30, % of Sept. 30, % of Change June 30, % of
  2012 Total 2011 total Amount % 2012 Total
Commercial loans  $ 286,134 19%  $ 296,335 19%  $ (10,201) -3%  $ 292,643 19%
Commercial real estate construction  39,100 3%  12,859 1%  26,241 204%  33,477 2%
Residential real estate construction  8,306 1%  13,167 1%  (4,861) -37%  10,549 1%
Total real estate construction loans  47,406 4%  26,026 2%  21,380 82%  44,026 3%
Mortgage  56,548 4%  69,333 5%  (12,785) -18%  59,970 4%
Home equity  244,683 16%  261,457 17%  (16,774) -6%  248,921 17%
Total real estate mortgage  301,231 20%  330,790 22%  (29,559) -9%  308,891 21%
Commercial real estate loans  843,836 56%  836,752 56%  7,084 1%  837,415 56%
Installment and other consumer loans  12,160 1%  13,721 1%  (1,561) -11%  12,822 1%
Total loans  $ 1,490,767    $ 1,503,624    $ (12,857) -1%  $ 1,495,797  
 
                 
 
Table 18
 AVERAGE BALANCE SHEETS 
(Dollars in thousands) Q3 Q3 Q2 Year to date
  2012 2011 2012 2012 2011
Cash and due from banks  $ 51,697  $ 54,156  $ 51,903  $ 50,860  $ 51,729
Federal funds sold  2,558  3,275  2,555  2,572  4,001
Interest-bearing deposits in other banks  47,242  49,918  45,260  42,629  83,104
Total cash and cash equivalents  101,497  107,349  99,718  96,061  138,834
Investment securities  761,006  782,324  726,853  732,210  718,362
Total loans  1,493,454  1,515,091  1,479,226  1,485,098  1,522,465
Allowance for loan losses  (32,794)  (38,529)  (33,699)  (33,910)  (39,250)
Loans, net  1,460,660  1,476,562  1,445,527  1,451,188  1,483,215
Total interest earning assets  2,304,261  2,351,828  2,254,192  2,263,216  2,328,943
Other assets  118,879  120,972  123,179  125,792  125,734
Total assets  $ 2,442,042  $ 2,487,207  $ 2,395,277  $ 2,405,251  $ 2,466,145
           
Demand  $ 677,646  $ 615,956  $ 621,547  $ 628,494  $ 582,482
Savings and interest-bearing demand  498,399  478,333  502,509  497,094  468,376
Money market  592,363  661,871  596,949  604,098  659,075
Time deposits  140,151  196,807  151,085  152,838  229,908
Total deposits  1,908,559  1,952,967  1,872,090  1,882,524  1,939,841
Borrowings and subordinated debentures  179,063  220,354  178,241  176,280  219,854
Total interest bearing liabilities  1,409,976  1,557,365  1,428,784  1,430,310  1,577,213
Other liabilities  23,063  22,779  21,550  22,419  23,835
Stockholders' equity  331,357  291,107  323,396  324,028  282,615
Total liabilities and stockholders' equity  $ 2,442,042  $ 2,487,207  $ 2,395,277  $ 2,405,251  $ 2,466,145
 
           
CONTACT: Robert D. Sznewajs President & CEO (503) 598-3243 Anders Giltvedt Executive Vice President & CFO (503) 598-3250

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