West Coast Bancorp Reports Net Income Of $5.7 Million For Fourth Quarter 2012 And $23.5 Million For Full Year 2012

  • Net income for the fourth quarter 2012 was $5.7 million or $0.26 per diluted share and $6.5 million or $0.30 per diluted share excluding after-tax merger-related expenses*.
  • Fourth quarter 2012 return on average assets was .93% or 1.05% excluding after-tax merger-related expenses*.  
  • Fourth quarter 2012 efficiency ratio, excluding merger-related expenses*, improved to 65.8% from 93.0% in the same quarter in 2011.  
  • Full year 2012 pretax income was $35.8 million or $37.5 million excluding merger-related expenses*, which represented an increase of $24.0 million from $13.6 million in 2011.  
  • On December 11, 2012, the Company declared a cash dividend of $.05 per common share, payable on January 31, 2013, to shareholders of record as of January 10, 2013, with Series B preferred shares participating on an as-converted basis.  
  • On September 26, 2012, the Company announced an Agreement and Plan of Merger with Columbia Banking System, Inc. ("Columbia'), headquartered in Tacoma, Washington, with assets of $4.9 billion at December 31, 2012. The merger, for which the consideration consists of a combination of cash and Columbia common stock, is subject to customary closing conditions, including receipt of requisite shareholder and regulatory approvals.

LAKE OSWEGO, Ore., Jan. 24, 2013 (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 fourth quarter 2012 net income of $5.7 million or $0.26 per diluted share compared to net income of $17.8 million or $0.83 per diluted share in the fourth quarter of 2011. Fourth quarter 2011 net income reflected the impact from a reversal of a deferred tax asset valuation allowance. Net income for the full year 2012 was $23.5 million or $1.08 per diluted share compared to net income of $33.8 million or $1.58 per diluted share for the full year 2011.

"I am very pleased with the operating performance of the Company in 2012, especially with the progress achieved in the areas of credit quality, expense management, and new loan originations," said Robert D. Sznewajs, President and Chief Executive Officer. "Over the past year our people have worked hard to attain this level of operating results which compares very favorably with our industry peers. The new organization after the merger with Columbia Bank will be well positioned to successfully compete in the Pacific Northwest for many years to come."

* This press release contains certain non-generally accepted accounting principles in the United States of America ("GAAP") financial measures. Table 1 below shows the reconciliation of net income, pretax income, and noninterest expense to the related non-GAAP measures calculated after excluding the effects of merger-related expenses for the quarters ended December 31, 2012, and 2011, and the full years ended December 31, 2012 and 2011. 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.

Table 1 below shows the reconciliation of net income, pretax income, and noninterest expense to the related non-GAAP measures calculated after excluding the effects of merger-related expenses for the quarters ended December 31, 2012, and 2011, and the full years ended December 31, 2012, and 2011. Merger-related expenses were $1.2 million and $1.8 million for the fourth quarter and full year 2012, respectively.
 
Table 1            
Reconciliation of Net Income, Pretax Income and Noninterest Expense to Non-GAAP financial measures  
(Dollars in thousands) Q4 Q4 Change Full year Full year Change
  2012 2011 $ 12/31/2012 12/31/2011 $
             
Net income  $ 5,739  $ 17,762  $ (12,023)  $ 23,506  $ 33,777  $ (10,271)
             
Merger-related expenses  1,194  --   1,194  1,772  --   1,772
 Less: tax benefit from merger-related expenses (1)  417  --   417  620  --   620
After-tax merger-related expenses  777  --   777  1,152  --   1,152
             
Net income excluding after-tax merger-related expenses (2,3)  $ 6,516  $ 17,762  $ (11,246)  $ 24,658  $ 33,777  $ (9,119)
             
Pretax income  $ 8,419  $ 116  $ 8,303  $ 35,753  $ 13,565  $ 22,188
Merger-related expenses  1,194  --   1,194  1,772  --   1,772
Pretax income excluding merger-related expenses  $ 9,613  $ 116  $ 9,497  $ 37,525  $ 13,565  $ 23,960
             
Noninterest expense  $ 20,277  $ 22,744  $ (2,467)  $ 84,085  $ 90,875  $ (6,790)
Merger-related expenses  1,194  --   1,194  1,772  --   1,772
Noninterest expense excluding merger-related expenses (3, 4)  $ 19,083  $ 22,744  $ (3,661)  $ 82,313  $ 90,875  $ (8,562)
             
             
(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-related expenses is used to calculate the efficiency ratio excluding merger expenses.  
   

Table 2 below shows summary financial information for the quarters ended December 31, 2012, and 2011, and September 30, 2012.
 
Table 2          
SUMMARY FINANCIAL INFORMATION
           
  Qtr. ended Qtr. ended   Qtr. ended  
  Dec. 31, Dec. 31,   Sept. 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  $ 6,516  $ 17,762  $ (11,246)  $ 6,320  $ 196
Net income per diluted share  $ 0.30  $ 0.83  $ (0.53)  $ 0.29  $ 0.01
Return on average assets, annualized 1.05% 2.88%  (1.83) 1.03%  0.02
Return on average equity, annualized 7.67% 23.68%  (16.01) 7.59%  0.08
Efficiency ratio 65.77% 93.02%  (27.25) 68.75%  (2.98)
           
Net income and performance ratios          
Net income  $ 5,739  $ 17,762  $ (12,023)  $ 5,944  $ (205)
Net income available to common stockholders 3  $ 5,369  $ 16,532  $ (11,163)  $ 5,559  $ (190)
Net income per diluted share  $ 0.26  $ 0.83  $ (0.57)  $ 0.27  $ (0.01)
Book value per common share  $ 16.49  $ 15.20  $ 1.29  $ 16.32  $ 0.17
Return on average assets, annualized 0.93% 2.88%  (1.95) 0.97%  (0.04)
Return on average equity, annualized 6.76% 23.68%  (16.92) 7.14%  (0.38)
Efficiency ratio 69.89% 93.02%  (23.13) 70.66%  (0.77)
           
Share and per share figures          
Common shares outstanding at period end  19,293  19,298  (5)  19,290  3
Weighted average diluted shares4  21,727  21,175  552  21,598  129
Weighted average diluted shares-two class method 5  20,450  19,911  539  20,344  106
           
           
1  These measurements exclude the after-tax impact of $.8 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 (1,310), options (27), and restricted stock (64).  
5 Reflects the calculation of diluted shares under the two-class method which includes average common (19,113), options (27), and warrants (1,310).
 

Balance Sheet Overview

Fourth quarter 2012 total average loan balance of $1.48 billion declined $10 million or 1% from the preceding quarter, with declines primarily in commercial and real estate mortgage categories more than offsetting growth in commercial real estate balances. The main driver of the decline in commercial loan balances can be attributed to line utilization declining to 34% from 39% linked-quarters. Total average loans also declined 1% year over year with a decline in commercial and real estate mortgage categories being offset by growth in commercial real estate and real estate construction categories.

The yield on total average loan portfolio of 4.97% in the fourth quarter of 2012 declined 22 basis points from the corresponding quarter in 2011 and stayed substantially unchanged from the previous quarter. Past periods' trend of higher yielding loans in the portfolio paying off or being refinanced at lower yields combined with new loan originations at current market rates continues to drive the yield on the total portfolio lower as compared to the prior year.

 
Table 3                
AVERAGE LOANS FOR THE QUARTER
(Dollars in thousands) Dec. 31, % of Dec. 31, % of Change Sept. 30, % of
  2012 Total 2011 total Amount % 2012 Total
Commercial loans  $ 262,773 17%  $ 293,583 20%  $ (30,810) -10%  $ 287,706 19%
 Commercial real estate construction  33,534 2%  14,730 1%  18,804 128%  37,838 3%
 Residential real estate construction  8,304 1%  13,613 1%  (5,309) -39%  9,497 1%
Total real estate construction loans  41,838 3%  28,343 2%  13,495 48%  47,335 4%
 Mortgage  55,980 4%  67,579 5%  (11,599) -17%  58,393 4%
 Home equity  238,462 16%  260,849 17%  (22,387) -9%  246,330 16%
Total real estate mortgage  294,442 20%  328,428 22%  (33,986) -10%  304,723 20%
Commercial real estate loans  872,639 59%  834,362 55%  38,277 5%  841,098 56%
Installment and other consumer loans  11,918 1%  13,721 1%  (1,803) -13%  12,592 1%
 Total loans  $ 1,483,610    $ 1,498,437    $ (14,827) -1%  $ 1,493,454  
                 
Yield on loans 4.97%   5.19%    (0.22)   4.98%  
 

The Company's investment portfolio continues to have an unfavorable impact on its net interest margin. During 2012, the Company increased its investments in municipal securities while reducing its U.S. government agency securities portfolio. During this time, municipal securities purchases consisted principally of Oregon and Washington school district securities with State guarantees and fully amortizing mortgage-backed securities. The expected duration of the investment portfolio was approximately 3.0 years at December 31, 2012, compared to approximately 2.5 years twelve months earlier.

The fourth quarter 2012 tax equivalent yield on total cash and investment securities balances was 1.99%, a decline of 25 basis points from the same quarter in 2011, and a decline of 13 basis points on a linked-quarter basis.

 
Table 4          
AVERAGE CASH EQUIVALENTS AND INVESTMENT SECURITIES FOR THE QUARTER
(Dollars in thousands) Dec. 31, Dec. 31, Change Sept. 30,
  2012 2011 Amount % 2012
Cash equivalents:          
 Federal funds sold  $ 2,724  $ 3,184  $ (460) -14%  $ 2,558
 Interest-bearing deposits in other banks  47,523  20,530  26,993 131%  47,242
Total cash equivalents  50,247  23,714  26,533 112%  49,800
           
Investment securities:          
 U.S. Treasury securities  200  204  (4) -2%  200
 U.S. Government agency securities  240,134  254,030  (13,896) -5%  217,051
 Corporate securities  9,020  8,854  166 2%  8,385
 Mortgage-backed securities  445,488  445,422  66 0%  447,756
 Obligations of state and political sub.  81,329  62,712  18,617 30%  75,717
 Equity investments and other securities  11,825  12,726  (901) -7%  11,897
Total investment securities  787,996  783,948  4,048 1%  761,006
           
Total cash equivalents and investment securities  $ 838,243  $ 807,662  $ 30,581 4%  $ 810,806
           
Tax equivalent yield on cash equivalents and investment securities (1) 1.99% 2.24%  (0.25)   2.12%
           
(1) Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.  
 

Average total deposits of $1.92 billion in the fourth quarter 2012 stayed essentially unchanged from the previous quarter, as the continued growth in non-interest bearing demand deposits offset declines in money market and time deposit balances. Time deposits represented 7% of the Company's average total deposits in the most recent quarter, a reduction from 9% during the final quarter of 2011. Year-over-year fourth quarter average total deposit balances declined $19 million or 1%, with average money market and time deposit balances declining $63 million and $47 million, respectively. Substantially offsetting these declines, non-interest bearing demand and savings deposits grew $81 million and $19 million, respectively, over the same period.
 
Table 5                
AVERAGE DEPOSITS, BORROWINGS AND SUBORDINATED DEBENTURES FOR THE QUARTER
(Dollars in thousands) Q4 % of Q4 % of Change Q3 % of
  2012 Total 2011 Total Amount % 2012 Total
Demand deposits  $ 703,402 37%  $ 622,741 33%  $ 80,661 13%  $ 677,646 36%
Interest-bearing demand  366,413 19%  375,922 19%  (9,509) -3%  365,560 19%
 Total checking deposits  1,069,815 56%  998,663 52%  71,152 7%  1,043,206 55%
Savings  136,866 7%  117,619 6%  19,247 16%  132,839 7%
Money market  577,358 30%  640,247 33%  (62,889) -10%  592,363 31%
 Total non-time deposits   1,784,039 93%  1,756,529 91%  27,510 2%  1,768,408 93%
Time deposits  132,447 7%  179,288 9%  (46,841) -26%  140,151 7%
 Total deposits  $ 1,916,486 100%  $ 1,935,817 100%  $ (19,331) -1%  $ 1,908,559 100%
                 
Average rate on total deposits 0.07%   0.14%    (0.07)   0.08%  
                 
Average borrowings and subordinated debentures  $ 178,900    $ 189,635    $ (10,735) -6%  $ 179,063  
                 
Rate on borrowings and subordinated debentures  1.43%   11.07%    (9.64)   1.45%  
 

Fourth quarter 2012 average total checking deposit balance of $1.07 billion grew $71 million or 7% from the corresponding quarter in 2011 and represented 56% 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 7 basis points in the most recent quarter, representing a decline of 7 basis points from the same quarter in 2011.

Capital Position and Shareholder Cash Dividend

As shown in Table 6 below, the December 31, 2012, capital position improved from year end 2011. The Company declared a shareholder dividend of $0.05 per share on December 11, 2012. The dividend will be payable on January 31, 2013, to shareholders of record on January 10, 2013.
 
Table 6          
CAPITAL RATIOS
           
  Dec. 31, Dec. 31,   Sept. 30,  
  2012 2011 Change 2012  Change 
West Coast Bancorp          
Tier 1 risk-based capital ratio 20.66% 19.36%  1.30 20.45%  0.21
Total risk-based capital ratio 21.83% 20.62%  1.21 21.62%  0.21
Leverage ratio 15.60% 14.61%  0.99 15.48%  0.12
           
West Coast Bank          
Tier 1 risk-based capital ratio 19.95% 18.66%  1.29 19.80%  0.15
Total risk-based capital ratio 21.20% 19.92%  1.28 21.06%  0.14
Leverage ratio 15.07% 14.09%  0.98 15.00%  0.07
 

Operating Results

As shown in Table 7 below, pretax income, excluding merger-related expenses, in the fourth quarter of 2012 was $9.6 million compared to pre-tax income of $0.1 million in the final quarter last year. The improvement was driven by higher net interest and noninterest income, with significant reductions in noninterest expense and the provision for credit losses in the most recent quarter. Net interest income in the fourth quarter of 2011 was reduced by a $4.4 million charge in conjunction with prepayments of Federal Home Loan Bank ("FHLB") term borrowings. For sequential quarters, pretax income, excluding merger-related expenses, declined modestly due to a benefit for credit losses in the third quarter of 2011 and lower net interest and noninterest income in the most recent quarter. Noninterest expense declined 8% linked quarters. Fourth quarter 2012 net income of $6.5 million, excluding merger-related expenses, declined from $17.8 million in the final quarter of 2011, when the Company fully reversed its deferred tax asset valuation allowance. See Table 1 for reconciliation of pretax income and net income non-GAAP financial measures.
 
Table 7              
SUMMARY INCOME STATEMENT EXCLUDING MERGER-RELATED EXPENSES
(Dollars in thousands) Q4 Q4 Change Q3 Change
  2012 2011 $ % 2012 $ %
               
 Net interest income  $ 21,435  $ 17,940  $ 3,495 19%  $ 21,687  $ (252) -1%
 Provision (benefit) for credit losses   13  1,499  (1,486) -99%  (593)  606 102%
 Noninterest income   7,274  6,419  855 13%  8,172  (898) -11%
 Noninterest expense excluding merger-related expenses   19,083  22,744  (3,661) -16%  20,729  (1,646) -8%
 Income before income taxes excluding merger-related expenses   9,613  116  9,497 8187%  9,723  (110) -1%
 Provision (benefit) for income taxes excluding the tax impact of merger-related expenses  3,097  (17,646)  20,743 118%  3,403  (306) -9%
 Net income excluding merger-related expenses   $ 6,516  $ 17,762  $ (11,246) -63%  $ 6,320  $ 196 3%
 

As shown in Table 8 below, adjusted for the prepayment charge in the corresponding quarter in 2011, the net interest margin of 3.72% declined 16 basis points year over year fourth quarter. The decline in the net interest margin was a result of declining yield on the investment and loan portfolios only partially offset by lower rates on interest bearing deposits and FHLB borrowings. The same factors reduced the net interest margin 8 basis points on a linked-quarter basis.
 
Table 8          
NET INTEREST SPREAD AND MARGIN
(Annualized, tax-equivalent basis) Q4 Q4   Q3  
  2012 2011 Change 2012 Change
Yield on average interest-earning assets 3.89% 4.16%  (0.27) 3.97%  (0.08)
Rate on average interest-bearing liabilities 0.28% 1.58%  (1.30) 0.29%  (0.01)
Net interest spread 3.61% 2.58%  1.03 3.68%  (0.07)
Net interest margin 3.72% 3.13%  0.59 3.80%  (0.08)
           
Impact of FHLB prepayment premium in Q4 2011  --  -0.75%  0.75  --   -- 
Net interest margin excluding FHLB prepayment premium 3.72% 3.88%  (0.16) 3.80%  (0.08)
           
1 The fourth quarter 2011 rate on average interest-bearing liabilities includes 75 basis points of expense associated with the prepayment of FHLB borrowings.
 

As shown in Table 9 below, fourth quarter 2012 total noninterest income of $7.3 million increased $0.9 million or 13% from the same quarter in 2011. The increase was principally attributed to a $1.2 million decrease in Other Real Estate Owned ("OREO") valuation adjustments. On a linked-quarter basis, noninterest income declined $0.9 million with reductions across all major categories.
 
Table 9              
NONINTEREST INCOME
(Dollars in thousands) Q4 Q4 Change Q3 Change
  2012 2011 $ % 2012 $ %
 Noninterest income               
 Service charges on deposit accounts   $ 2,769  $ 3,005  $ (236) -8%  $ 3,017  $ (248) -8%
 Payment systems-related revenue   3,016  3,081  (65) -2%  3,073  (57) -2%
 Trust and investment services revenues   1,077  1,114  (37) -3%  1,231  (154) -13%
 Gains on sales of loans   346  300  46 15%  492  (146) -30%
 Gains on sales of securities   --   192  (192) -100%  --   --  0%
 Other-than-temporary impairment losses   --   --   --  0%  --   --  0%
 Other   818  708  110 16%  816  2 0%
 Total   8,026  8,400  (374) -4%  8,629  (603) -7%
               
 OREO gains (losses) on sale   35  (57)  92 161%  29  6 21%
 OREO valuation adjustments   (787)  (1,924)  1,137 59%  (486)  (301) -62%
 Total net loss on OREO   (752)  (1,981)  1,229 62%  (457)  (295) -65%
               
 Total noninterest income   $ 7,274  $ 6,419  $ 855 13%  $ 8,172  $ (898) -11%
 

As shown in Table 10 below, the Company's fourth quarter 2012 total noninterest expense was $20.3 million. Excluding merger-related expenses, total noninterest expense fell $3.6 million or 16% from the fourth quarter in 2011, which included $1 million in cost reduction related expenses. As a result of cost-savings initiatives implemented over the past eighteen months, expenses declined in all categories. On a linked-quarter basis, total noninterest expenses, excluding merger-related expenses, declined $1.6 million or 8%, with reductions across all categories except for occupancy expense. See Table 1 for reconciliation to GAAP measure. Fourth quarter 2012 merger-related expenses were comprised primarily of professional fees.
 
Table 10              
NONINTEREST EXPENSE
(Dollars in thousands) Q4 Q4 Change Q3 Change
  2012 2011 $ % 2012 $ %
 Noninterest expense               
 Salaries and employee benefits   $ 10,685  $ 12,614  $ (1,929) -15%  $ 11,499  $ (814) -7%
 Equipment   1,467  1,560  (93) -6%  1,480  (13) -1%
 Occupancy   2,084  2,162  (78) -4%  1,901  183 10%
 Payment systems-related expense   1,059  1,265  (206) -16%  1,148  (89) -8%
 Professional fees   468  1,122  (654) -58%  777  (309) -40%
 Postage, printing and office supplies   627  821  (194) -24%  735  (108) -15%
 Marketing   498  659  (161) -24%  520  (22) -4%
 Communications   394  395  (1) 0%  411  (17) -4%
 Other noninterest expense   1,801  2,146  (345) -16%  2,258  (457) -20%
 Total noninterest expense excluding merger-related expenses   $ 19,083  $ 22,744  $ (3,661) -16%  $ 20,729  $ (1,646) -8%
               
 Merger-related expenses   1,194  --   1,194 0%  578  616 107%
 Total noninterest expense   $ 20,277  $ 22,744  $ (2,467) -11%  $ 21,307  $ (1,030) -5%
 

Income Taxes

In the fourth quarter of 2012, the provision for income taxes was $2.7 million compared to a benefit for income taxes of $17.6 million in the final quarter of 2011 when the Company fully reversed its deferred tax asset valuation. The fourth quarter 2012 provision for income taxes was the result of an effective tax rate of 34.3% on pretax income for the full year.

Credit Quality

The Company's provision for credit losses was modest in the fourth quarter 2012 compared to a provision for credit losses of $1.5 million in the same quarter last year, and a benefit for credit losses of $0.6 million in the third quarter of 2012. Net charge-offs in the final quarter of 2012 were $2.0 million or .53% of average loans on an annualized basis, representing a decline from $2.5 million or .67% in the same quarter of 2011, and an increase from $1.0 million or .27% in the prior quarter. See Table 11 below for further details by loan category.
 
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) Q4 loan balance Q4 loan balance Q3 loan balance
  2012 annualized 2011 annualized 2012 annualized
Allowance for credit losses, beginning of period  $ 32,288    $ 37,016    $ 33,900  
Total provision (benefit) for credit losses  13    1,499    (593)  
Loan net charge-offs:            
 Commercial  802 1.21%  292 0.39%  102 0.14%
 Commercial real estate construction  (2) -0.02%  48 1.29%  148 1.56%
 Residential real estate construction  350 16.77%  140 4.08%  (4) -0.17%
 Total real estate construction  348 3.31%  188 2.63%  144 1.21%
 Mortgage  119 0.85%  177 1.04%  101 0.69%
 Home equity  212 0.35%  723 1.10%  373 0.60%
 Total real estate mortgage  331 0.45%  900 1.09%  474 0.62%
 Commercial real estate  150 0.07%  812 0.39%  126 0.06%
 Installment and consumer  249 8.31%  119 3.44%  48 1.52%
 Overdraft  104 0.00%  221 0.00%  125 0.00%
 Total loan net charge-offs  1,984 0.53%  2,532 0.67%  1,019 0.27%
             
Total allowance for credit losses  $ 30,317    $ 35,983    $ 32,288  
Components of allowance for credit losses:            
 Allowance for loan losses  $ 29,448    $ 35,212    $ 31,457  
 Reserve for unfunded commitments  869    771    831  
Total allowance for credit losses  $ 30,317    $ 35,983    $ 32,288  
             
Net loan charge-offs to average loans (annualized) 0.53%   0.67%   0.27%  
Allowance for loan losses to total loans 1.97%   2.35%   2.11%  
Allowance for credit losses to total loans 2.03%   2.40%   2.17%  
Allowance for loan losses to nonperforming loans 117%   87%   97%  
Allowance for credit losses to nonperforming loans 121%   89%   100%  
 

The allowance for credit losses was $30.3 million or 2.03% of total loans at December 31, 2012, compared to an allowance for credit losses of $36.0 million or 2.40% of total loans a year earlier, and $32.3 million or 2.17% at September 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 lower charge off activity and a positive risk rating migration within the loan portfolio. The year-end 2012 allowance for credit losses relative to nonperforming loans increased to 121% from 89% twelve months earlier. 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 December 31, 2012, were $41.2 million or 1.66% of total assets, which represented a 42% reduction from $71.4 million or 2.94% of total assets a year ago, and a decline of 24% from $54.3 million or 2.19% of total assets at the end of the third quarter 2012.

December 31, 2012, total nonaccrual loans declined 38% to $25.1 million from $40.6 million a year earlier.
 
Table 12          
NONPERFORMING ASSETS
(Dollars in thousands) Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31,
  2012 2012 2012 2012 2011
Loans on nonaccrual status:          
Commercial  $ 4,313  $ 6,643  $ 6,199  $ 6,482  $ 7,750
Real estate construction:          
 Commercial real estate construction  --   1,650  3,750  3,749  3,750
 Residential real estate construction  1,336  1,851  1,936  1,981  2,073
Total real estate construction  1,336  3,501  5,686  5,730  5,823
Real estate mortgage:          
 Mortgage  5,994  6,170  7,044  10,744  9,624
 Home equity  3,782  2,845  2,239  2,528  2,325
Total real estate mortgage  9,776  9,015  9,283  13,272  11,949
Commercial real estate  9,659  13,248  12,384  16,648  15,070
Installment and consumer  --   --   --   1  5
Total nonaccrual loans  25,084  32,407  33,552  42,133  40,597
90 days past due not on nonaccrual  --   --   --   --   -- 
 Total nonperforming loans  25,084  32,407  33,552  42,133  40,597
           
Other real estate owned, net  16,112  21,939  25,726  27,525  30,823
Total nonperforming assets  $ 41,196  $ 54,346  $ 59,278  $ 69,658  $ 71,420
           
Nonperforming loans to total loans 1.68% 2.17% 2.24% 2.86% 2.70%
Nonperforming assets to total assets 1.66% 2.19% 2.46% 2.89% 2.94%
           
Total delinquent loans 30-89 days past due  $ 2,662  $ 2,963  $ 3,422  $ 4,095  $ 4,273
Delinquent loans to total loans 0.18% 0.20% 0.23% 0.28% 0.28%
 

As indicated in Table 13 below, during the most recent quarter the Company disposed of 27 OREO properties with a book value of $5.3 million and recorded OREO valuation adjustments totaling $0.8 million. As a result, the Company reduced its OREO balance by $5.8 million to $16.1 million at December 31, 2012, representing a 27% net reduction in total OREO during the quarter. The remaining OREO balance at quarter end reflected write-downs of 63% from original loan principal. Income-producing properties represented the largest balance in the OREO portfolio at December 31, 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) Q4 2012 Q4 2011 Q3 2012
  Amount  #  Amount  #  Amount  # 
Beginning balance  $ 21,939  218  $ 30,234  308  $ 25,726  244
 Additions to OREO  259  1  9,241  15  487  3
 Dispositions of OREO  (5,299)  (27)  (6,728)  (59)  (3,788)  (29)
 OREO valuation adjustment  (787)  --   (1,924)  --   (486)  -- 
Ending balance  $ 16,112  192  $ 30,823  264  $ 21,939  218
 
 
Table 14            
OTHER REAL ESTATE OWNED BY PROPERTY TYPE
  Dec. 31, 2012 Dec. 31, 2011 Sept. 30, 2012
(Dollars in thousands)   # of       # of
  Amount properties Amount properties Amount properties
Income-producing properties  $ 3,821  8  $ 10,282  15  $ 7,749  11
Land  3,575  12  5,049  16  4,104  13
Homes  2,927  12  6,008  17  3,518  14
Residential site developments  2,391  103  3,506  146  2,736  114
Multifamily  1,570  20  428  4  1,570  20
Lots  1,478  31  2,932  51  1,912  40
Commercial site developments  350  6  366  6  350  6
Condominiums  --   --   2,252  9  --   -- 
 Total  $ 16,112  192  $ 30,823  264  $ 21,939  218
 

Other

As announced on January 8, 2013, the Company will not hold a conference call in conjunction with today's release of fourth quarter and full-year 2012 results due to the Company's previously announced Agreement and Plan of Merger with Columbia Banking System, Inc.

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 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, including under the heading "Forward Looking Statement Disclosure" and in the section "Risk Factors" in each report.
 
Table 15              
INCOME STATEMENT
(Dollars and shares in thousands) Q4 Q4 Change Q3 Full Year
  2012 2011 $ % 2012 2012 2011
 Net interest income               
 Interest and fees on loans   $ 18,525  $ 19,647  $ (1,122) -6%  $ 18,706  $ 75,139  $ 80,237
 Interest on investment securities   3,867  4,266  (399) -9%  3,985  16,061  18,251
 Other interest income   32  19  13 68%  35  124  187
 Total interest income   22,424  23,932  (1,508) -6%  22,726  91,324  98,675
 Interest expense on deposit accounts   346  702  (356) -51%  385  1,739  4,973
 Interest on borrowings and subordinated deb.   643  925  (282) -30%  654  2,557  5,808
 Borrowings prepayment charge   --   4,365  (4,365) -100%  --   --   7,140
 Total interest expense   989  5,992  (5,003) -83%  1,039  4,296  17,921
 Net interest income   21,435  17,940  3,495 19%  21,687  87,028  80,754
               
 Provision (benefit) for credit losses   13  1,499  (1,486) -99%  (593)  (983)  8,133
               
 Noninterest income               
 Service charges on deposit accounts   2,769  3,005  (236) -8%  3,017  11,816  13,353
 Payment systems-related revenue   3,016  3,081  (65) -2%  3,073  12,246  12,381
 Trust and investment services revenues   1,077  1,114  (37) -3%  1,231  4,700  4,503
 Gains on sales of loans   346  300  46 15%  492  2,295  1,335
 Net OREO valuation adjustments and gains (losses) on sales  (752)  (1,981)  1,229 62%  (457)  (2,813)  (3,236)
 Other-than-temporary impairment losses   --   --   --   --   --   (49)  (179)
 Gain on sales of securities   --   192  (192) -100%  --   375  713
 Other   818  708  110 16%  816  3,257  2,949
 Total noninterest income   7,274  6,419  855 13%  8,172  31,827  31,819
 Noninterest expense               
 Salaries and employee benefits   10,685  12,614  (1,929) -15%  11,499  45,743  48,587
 Equipment   1,467  1,560  (93) -6%  1,480  6,193  6,113
 Occupancy   2,084  2,162  (78) -4%  1,901  8,179  8,674
 Payment systems-related expense   1,059  1,265  (206) -16%  1,148  4,401  5,141
 Professional fees   468  1,122  (654) -58%  777  3,416  4,118
 Postage, printing and office supplies   627  821  (194) -24%  735  2,910  3,265
 Marketing   498  659  (161) -24%  520  1,585  3,003
 Communications   394  395  (1) 0%  411  1,604  1,549
 Merger-related expenses   1,194  --   1,194 0%  578  1,772  -- 
 Other noninterest expense   1,801  2,146  (345) -16%  2,258  8,282  10,425
 Total noninterest expense   20,277  22,744  (2,467) -11%  21,307  84,085  90,875
 Income before income taxes   8,419  116  8,303 7158%  9,145  35,753  13,565
 Provision (benefit) for income taxes   2,680  (17,646)  20,326 115%  3,201  12,247  (20,212)
 Net income   $ 5,739  $ 17,762  $ (12,023) -68%  $ 5,944  $ 23,506  $ 33,777
               
 Net income per share:               
 Basic   $ 0.28  $ 0.87  $ (0.59)    $ 0.29  $ 1.15  $ 1.65
 Diluted   $ 0.26  $ 0.83  $ (0.57)    $ 0.27  $ 1.08  $ 1.58
 Weighted average common shares   19,113 19,032  81    19,110  19,086  19,007
 Weighted average diluted shares   20,450 19,911  539    20,344  20,286  19,940
               
 Tax equivalent net interest income   $ 21,739  $ 18,223  $ 3,516    $ 21,982  $ 88,165  $ 81,870
 Return on average assets  0.93% 2.88% -1.95%   0.97% 0.97% 1.37%
 Return on average equity  6.76% 23.68% -16.92%   7.14% 7.18% 11.79%
 
 
Table 16          
BALANCE SHEETS
(Dollars in thousands) Dec. 31, Dec. 31, Change Sept. 30,
  2012 2011 $ % 2012
Assets:          
Cash and due from banks  $ 70,119  $ 59,955  $ 10,164 17%  $ 53,026
Federal funds sold  4,059  4,758  (699) -15%  3,426
Interest-bearing deposits in other banks  63,433  27,514  35,919 131%  44,883
 Total cash and cash equivalents  137,611  92,227  45,384 49%  101,335
Investment securities  772,109  729,844  42,265 6%  792,657
Loans  1,494,929  1,501,301  (6,372) 0%  1,490,767
Allowance for loan losses  (29,448)  (35,212)  5,764 16%  (31,457)
Loans, net  1,465,481  1,466,089  (608) 0%  1,459,310
 Total interest-earning assets  2,334,530  2,267,446  67,084 3%  2,331,733
OREO, net  16,112  30,823  (14,711) -48%  21,939
Other assets  96,867  110,904  (14,037) -13%  100,739
 Total assets  $ 2,488,180  $ 2,429,887  $ 58,293 2%  $ 2,475,980
           
Liabilities and Stockholders' Equity:          
Demand  $ 712,285  $ 621,962  $ 90,323 15%  $ 704,810
Savings and interest-bearing demand  524,031  495,117  28,914 6%  499,934
Money market  569,043  625,373  (56,330) -9%  588,635
Time deposits  130,641  173,117  (42,476) -25%  135,913
 Total deposits  1,936,000  1,915,569  20,431 1%  1,929,292
Borrowings and subordinated debentures  178,900  171,000  7,900 5%  178,900
Reserve for unfunded commitments  869  771  98 13%  831
Other liabilities  33,191  28,068  5,123 18%  30,961
 Total liabilities  2,148,960  2,115,408  33,552 2%  2,139,984
Stockholders' equity  339,220  314,479  24,741 8%  335,996
 Total liabilities and stockholders' equity  $ 2,488,180  $ 2,429,887  $ 58,293 2%  $ 2,475,980
 
 
Table 17                
PERIOD END LOANS
(Dollars in thousands) Dec. 31, % of Dec. 31, % of Change Sept. 30, % of
  2012 Total 2011 total Amount % 2012 Total
Commercial loans  $ 259,333 17%  $ 299,766 20%  $ (40,433) -13%  $ 286,134 19%
 Commercial real estate construction  25,191 2%  17,438 1%  7,753 44%  39,100 3%
 Residential real estate construction  7,792 1%  12,724 1%  (4,932) -39%  8,306 1%
Total real estate construction loans  32,983 3%  30,162 2%  2,821 9%  47,406 4%
 Mortgage  54,960 4%  66,610 5%  (11,650) -17%  56,548 4%
 Home equity  233,516 16%  258,384 17%  (24,868) -10%  244,683 16%
Total real estate mortgage  288,476 20%  324,994 22%  (36,518) -11%  301,231 20%
Commercial real estate loans  901,817 59%  832,767 55%  69,050 8%  843,836 56%
Installment and other consumer loans  12,320 1%  13,612 1%  (1,292) -9%  12,160 1%
 Total loans  $ 1,494,929    $ 1,501,301    $ (6,372) 0%  $ 1,490,767  
 
 
Table 18          
 AVERAGE BALANCE SHEETS 
(Dollars in thousands) Q4 Q4 Q3 Year to date
  2012 2011 2012 2012 2011
Cash and due from banks  $ 53,144  $ 53,829  $ 51,697  $ 51,435  $ 52,258
Federal funds sold  2,724  3,184  2,558  2,610  3,796
Interest-bearing deposits in other banks  47,523  20,530  47,242  43,859  67,332
 Total cash and cash equivalents  103,391  77,543  101,497  97,904  123,386
Investment securities  787,996  783,948  761,006  746,233  734,893
Total loans  1,483,610  1,498,437  1,493,454  1,484,724  1,516,409
Allowance for loan losses  (30,670)  (36,101)  (32,794)  (33,096)  (38,456)
Loans, net  1,452,940  1,462,336  1,460,660  1,451,628  1,477,953
Total interest earning assets  2,321,854  2,309,396  2,304,261  2,277,955  2,324,016
Other assets  114,143  122,493  118,879  122,863  124,562
 Total assets  $ 2,458,470  $ 2,446,320  $ 2,442,042  $ 2,418,628  $ 2,460,794
           
Demand  $ 703,402  $ 622,741  $ 677,646  $ 647,323  $ 592,630
Savings and interest-bearing demand  503,280  493,541  498,399  498,649  474,719
Money market  577,358  640,247  592,363  597,376  654,329
Time deposits  132,446  179,288  140,151  147,713  217,149
Total deposits  1,916,486  1,935,817  1,908,559  1,891,061  1,938,827
Borrowings and subordinated debentures  178,900  189,635  179,063  176,939  212,237
Total interest bearing liabilities  1,391,984  1,502,711  1,409,976  1,420,677  1,558,434
Other liabilities  25,162  23,245  23,063  23,108  23,332
Stockholders' equity  337,922  297,623  331,357  327,520  286,398
 Total liabilities and stockholders' equity  $ 2,458,470  $ 2,446,320  $ 2,442,042  $ 2,418,628  $ 2,460,794
 
CONTACT: Robert D. Sznewajs         President & CEO         (503) 598-3243                  Anders Giltvedt         Executive Vice President & CFO         (503) 598-3250

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