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As filed with the Securities and Exchange Commission on December 28, 2012

Registration No. 333-184742

 

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-4

REGISTRATION STATEMENT

Under

THE SECURITIES ACT OF 1933

 

 

COLUMBIA BANKING SYSTEM, INC.

(Exact name of registrant as specified in its charter)

 

 

 

WASHINGTON		6712		91-1422237
(State or other jurisdiction of incorporation or organization)		(Primary standard industrial classification code number)		(I.R.S. employer identification no.)

1301 “A” Street, Tacoma, Washington 98402-4200 (253) 305-1900

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

MELANIE J. DRESSEL

President and Chief Executive Officer

1301 “A” Street

Tacoma, Washington 98402-4200

(253)305-1900

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies of communications to:

 

Stephen M. Klein William E. Bartholdt Graham & Dunn PC Pier 70 2801 Alaskan Way, Suite 300 Seattle, Washington 98121-1128 Telephone: (206) 340-9648		Robert D. Sznewajs President and Chief Executive Officer West Coast Bancorp 5335 Meadows Road – Suite 201 Lake Oswego, Oregon 97035 Telephone: (503) 684-0884		Matthew M. Guest Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telephone: (212) 403-1000

 

 

Approximate date of commencement of proposed sale of securities to the public:

As soon as practicable after this Registration Statement becomes effective and upon completion of the merger described in the enclosed document.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer		x				Accelerated filer		¨
Non-accelerated filer		¨				Smaller reporting company		¨

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

 

 

 

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Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold prior to the time the registration statement becomes effective. This document shall not constitute an offer to sell nor shall there be any sale of these securities in any jurisdiction in which such offer or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

 

PRELIMINARY—SUBJECT TO COMPLETION—DATED DECEMBER     , 2012

 

MERGER PROPOSED—YOUR VOTE IS VERY IMPORTANT

 

 

Columbia Banking System, Inc. which we refer to as “Columbia,” and West Coast Bancorp, which we refer to as “West Coast,” have entered into a definitive merger agreement that provides for the combination of the two companies. Under the merger agreement, a wholly owned subsidiary of Columbia will merge with and into West Coast, with West Coast remaining as the surviving entity and a wholly owned subsidiary of Columbia (which transaction we refer to as the “merger”). Such surviving entity will, as soon as reasonably practicable following the merger and as part of a single integrated transaction, merge with and into Columbia (we refer to the two mergers together as the “mergers”). Before we complete the merger, the shareholders of West Coast must approve the merger agreement pursuant to Oregon law. West Coast shareholders will vote to approve the merger agreement at a special meeting of shareholders to be held on [                    ], 2012. Columbia shareholders must approve the issuance of the shares of Columbia common stock in connection with the merger pursuant to the requirements of the Nasdaq Stock Exchange. Columbia shareholders will vote to approve the issuance of the shares of Columbia common stock in connection with the merger at a special meeting of shareholders to be held on [                    ], 2012.

Under the terms of the merger agreement, the aggregate merger consideration payable by Columbia will consist of 12,809,525 shares of Columbia common stock and $264,468,650 in cash (subject to increase under certain circumstances). West Coast shareholders may elect to receive either cash, stock, or a unit consisting of a mix of cash and stock, in an amount equal to such holder’s pro rata share (subject to certain adjustments) of the total merger consideration. However, because the total amount of cash and stock to be issued by Columbia is fixed, a West Coast shareholder may receive a combination of cash and stock that differs from such holder’s election if too many West Coast shareholders elect one form of consideration over the other. We expect the mergers, taken together, to be a tax-free transaction for West Coast shareholders, to the extent they receive Columbia common stock for their shares of West Coast common stock. Based on the 12,809,525 fixed shares issued by Columbia to West Coast shareholders, after completion of the merger, West Coast shareholders would own approximately 24% of Columbia’s common stock (including shares of Columbia common stock issuable upon conversion of Series B Preferred Stock and the exercise of Class C Warrants, and ignoring any shares of Columbia common stock they may already own).

The value of the consideration to be received by West Coast shareholders in the merger will vary with the trading price of Columbia common stock between now and the completion of the merger. The per share consideration is determined by the quotient obtained by dividing (1) the sum of: (A) the product of: (i) the Purchaser Average Closing Price (as defined in the Merger Agreement) and (ii) the total Columbia shares to be issued; and (B) the total cash Columbia will pay; and (C) $24 million plus proceeds from in-the-money option exercises; by (2) the sum of common share equivalents from common shares, preferred stock, warrants and in-the-money options. The table below shows the approximate hypothetical value of the merger consideration per share if it had been calculated based on the closing price for Columbia common stock on the Nasdaq Global Select Market on each of September 25, 2012, the trading day immediately prior to the announcement of the merger, and [        ], the last practicable trading day prior to the date of this document.

 

Date		Columbia closing price		Per share consideration
September 25, 2012		$18.85		$23.08
[            ]		[            ]		[            ]

The market prices of both Columbia common stock and West Coast common stock will fluctuate before the merger. You should obtain current stock price quotations for Columbia common stock and West Coast common stock. Columbia common stock is traded on the Nasdaq Global Select Market under the symbol “COLB,” and West Coast common stock is traded on the Nasdaq Global Select Market under the symbol “WCBO.”

The West Coast board of directors has unanimously determined that the combination of West Coast and Columbia is in the best interests of West Coast shareholders based upon its analysis, investigation and deliberation, and the West Coast board of directors unanimously recommends that the West Coast shareholders vote “FOR” the approval of the merger agreement and “FOR” the approval of the other proposals described in this joint proxy statement/prospectus.

The Columbia board of directors has also unanimously determined that the combination of Columbia and West Coast is in the best interests of Columbia shareholders based upon its analysis, investigation and deliberation, and the Columbia board of directors unanimously recommends that the Columbia shareholders vote “FOR” the issuance of shares of Columbia common stock in connection with the merger and “FOR” the approval of the other proposals described in this joint proxy statement/prospectus.

You should read this entire joint proxy statement/prospectus, including the appendices and the documents incorporated by reference into the document, carefully because it contains important information about the merger and the related transactions. In particular, you should read carefully the information under the section entitled “Risk Factors” beginning on page 18.

The shares of Columbia common stock to be issued to West Coast shareholders in the merger are not deposits or savings accounts or other obligations of any bank or savings association, and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the merger described in this joint proxy statement/prospectus or the Columbia common stock to be issued in the merger, or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This joint proxy statement/prospectus is dated [                    ], 2012 and is first being mailed to the shareholders of West Coast and the shareholders of Columbia on or about [                    ], 2012.

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COLUMBIA BANKING SYSTEM, INC.

1301 “A” Street

Tacoma, Washington 98402

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

To Be Held [                    ], 2012

 

 

Notice is hereby given that a Special Meeting of Shareholders of Columbia Banking System, Inc., or Columbia, will be held at [            ], on [                    ], 2012, at [    ], local time. The following proposals will be considered and conducted at the Columbia special meeting:

 

1.

To approve the issuance of shares of Columbia common stock in the merger of a to-be-formed wholly owned subsidiary of Columbia with and into West Coast Bancorp, an Oregon corporation, which will result in West Coast Bancorp becoming a wholly owned subsidiary of Columbia.

 

2.

To approve one or more adjournments of the Columbia special meeting, if necessary or appropriate, including adjournments to solicit additional proxies in favor of the issuance of Columbia common stock in the merger.

Columbia will transact no other business at the special meeting, except for business properly brought before the special meeting or any adjournment or postponement of such meeting.

The approval by Columbia’s shareholders of the share issuance proposal is required for the completion of the merger described in this joint proxy statement/prospectus.

All shareholders are invited to attend the meeting. Only those shareholders of record at the close of business on [                    ], 2012 will be entitled to notice of the meeting and to vote at the meeting.

Please refer to the attached joint proxy statement/prospectus with respect to the business to be transacted at the special meeting of Columbia shareholders.

Your vote is very important. To ensure your representation at the Columbia special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend the Columbia special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the Columbia special meeting.

The Columbia board of directors unanimously recommends that you vote “FOR” each of the Columbia proposals.

By Order of the Board of Directors

Melanie J. Dressel

President and Chief Executive Officer

[                    ], 2012

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WEST COAST BANCORP

5335 MEADOWS ROAD, SUITE 201

LAKE OSWEGO, OR 97035

NOTICE OF THE SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON [                    ], [2012]

NOTICE IS HEREBY GIVEN that a special meeting of the shareholders of West Coast Bancorp (“West Coast”) will be held at [            ] at [    ], Pacific time, on [                    ], 2012, for the following purposes:

1. To approve the Agreement and Plan of Merger, dated as of September 25, 2012, by and among Columbia Banking System, Inc., West Coast, and Sub (as defined therein) (the “Merger” proposal);

2. To approve, on a non-binding, advisory basis, the compensation to be paid to West Coast’s named executive officers that is based on or otherwise relates to the merger, discussed under the section entitled “The Merger—Interests of West Coast Directors and Executive Officers in the Merger” beginning on page 83 (the “Merger-Related Named Executive Officer Compensation” proposal); and

3. To approve one or more adjournments of the West Coast special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the Merger proposal (the “West Coast Adjournment” proposal).

West Coast will transact no other business at the special meeting, except for business properly brought before the special meeting or any adjournment or postponement thereof.

The Merger proposal and the Merger-Related Named Executive Officer Compensation proposal are described in more detail in this document, which you should read carefully in its entirety before you vote. A copy of the merger agreement is attached as Appendix A to this document.

The West Coast board of directors has set [                    ], 2012 as the record date for the West Coast special meeting. All holders of record of West Coast common stock or preferred stock at the close of business on the record date will be notified of the meeting. Only holders of record of West Coast common stock at the close of business on [                    ], 2012 will be entitled to vote at the West Coast special meeting and any adjournments or postponements thereof. Any shareholder entitled to attend and vote at the West Coast special meeting is entitled to appoint a proxy to attend and vote on such shareholder’s behalf. Such proxy need not be a holder of West Coast common stock.

Your vote is very important. To ensure your representation at the West Coast special meeting, please complete and return the enclosed proxy card or submit your proxy by telephone or through the Internet. Please vote promptly whether or not you expect to attend the West Coast special meeting. Submitting a proxy now will not prevent you from being able to vote in person at the West Coast special meeting.

The West Coast board of directors has unanimously adopted and approved the merger agreement and the transactions contemplated thereby and recommends that you vote “FOR” the Merger proposal, “FOR” the Merger-Related Named Executive Officer Compensation proposal and “FOR” the West Coast Adjournment proposal.

BY ORDER OF THE BOARD OF DIRECTORS

Robert D. Sznewajs

President and Chief Executive Officer

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WHERE YOU CAN FIND MORE INFORMATION

Both Columbia and West Coast file annual, quarterly and special reports, proxy statements and other business and financial information with the Securities and Exchange Commission (the “SEC”). You may read and copy any materials that either Columbia or West Coast files with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, at prescribed rates. Please call the SEC at (800) SEC-0330 ((800) 732-0330) for further information on the public reference room. In addition, Columbia and West Coast file reports and other business and financial information with the SEC electronically, and the SEC maintains a website located at http://www.sec.gov containing this information. You will also be able to obtain these documents, free of charge, from West Coast by accessing West Coast’s website at www.wcb.com under the heading “Investor Relations” or from Columbia at www.columbiabank.com under the tab “About Us” and then under the heading “Investor Relations.” Copies can also be obtained, free of charge, by directing a written request to Columbia Banking System, Inc., Attention: Corporate Secretary, 1301 A Street, Suite 800, Tacoma, Washington 98401-2156 or to West Coast Bancorp, 5335 Meadows Road, Suite 201, Lake Oswego, Oregon 97035.

Columbia has filed a registration statement on Form S-4 to register with the SEC up to 12,859,525 shares of Columbia common stock and certain other securities as specified therein. This joint proxy statement/prospectus is a part of that registration statement. As permitted by SEC rules, this document does not contain all of the information included in the registration statement or in the exhibits or schedules to the registration statement. You may read and copy the registration statement, including any amendments, schedules and exhibits at the addresses set forth below. Statements contained in this document as to the contents of any contract or other documents referred to in this document are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the registration statement. This document incorporates important business and financial information about Columbia and West Coast that is not included in or delivered with this document, including incorporating by reference documents that Columbia and West Coast have previously filed with the SEC. These documents contain important information about the companies and their financial condition. See “Documents Incorporated by Reference” on page 134. These documents are available without charge to you upon written or oral request to the applicable company’s principal executive offices. The respective addresses and telephone numbers of such principal executive offices are listed below

 

Columbia Banking System, Inc.		West Coast Bancorp
1301 A Street, Suite 800		5335 Meadows Road, Suite 201
Tacoma, Washington 98401		Lake Oswego, Oregon 97035
Attention: Melanie J. Dressel		Attention: Robert D. Sznewajs
(253) 305-1900		(503) 684-0884

To obtain timely delivery of these documents, you must request the information no later than [                    ], 2012 in order to receive them before Columbia’s special meeting of shareholders and no later than [                    ], 2012 in order to receive them before West Coast’s special meeting of shareholders.

Columbia common stock is traded on the Nasdaq Global Select Market under the symbol “COLB,” and West Coast common stock is traded on the Nasdaq Global Select Market under the symbol “WCBO.”

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		Page
QUESTIONS AND ANSWERS			1
SUMMARY			10
RISK FACTORS			18
Risk Factors Relating to the Merger			18
Risk Factors Relating to West Coast and West Coast’s Business			22
Risk Factors Relating to Columbia and Columbia’s Business			23
SELECTED CONSOLIDATED FINANCIAL DATA OF COLUMBIA			24
SELECTED CONSOLIDATED FINANCIAL DATA OF WEST COAST			26
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA			28
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION			29
COMPARATIVE PER SHARE DATA OF COLUMBIA (UNAUDITED)			39
MARKET PRICES, DIVIDENDS AND OTHER DISTRIBUTIONS			40
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			41
THE MERGER			42
Terms of the Merger			42
Conversion of Shares; Exchange of Certificates; Elections as to Form of Consideration			48
Regulatory Approvals Required for the Merger			51
Accounting Treatment			51
Public Trading Markets			51
Resale of Columbia Common Stock			52
Background of the Merger			52
Recommendation of the West Coast Board of Directors and Reasons for the Merger			55
Opinion of West Coast’s Financial Advisor			57
Recommendation of the Columbia Board of Directors and Reasons for the Merger			76
Opinion of Columbia’s Financial Advisor			77
Management and Board of Directors of Columbia After the Merger			83
Interests of West Coast Directors and Executive Officers in the Merger			83
Merger-Related Compensation for West Coast’s Named Executive Officers			87
Series B Preferred Stock, Stock Options, Class C Warrants, and Restricted Shares			88
THE MERGER AGREEMENT			89
Effects of the Merger			89
Effective Time of the Merger			89
Covenants and Agreements			89
Representations and Warranties			97
Conditions to the Merger			100
Termination; Termination Fee			101
Effect of Termination			102
Amendments, Extensions and Waivers			102
Stock Market Listing			103
Fees and Expenses			103
Related Agreements			103
LITIGATION RELATED TO THE MERGER			106
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER			107

 

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DESCRIPTION OF COLUMBIA’S CAPITAL STOCK			109
Common Stock			109
Preferred Stock			110
COMPARISON OF RIGHTS OF HOLDERS OF COLUMBIA AND WEST COAST COMMON STOCK			113
General			113
Comparison of Shareholders’ Rights			113
COLUMBIA SPECIAL MEETING OF SHAREHOLDERS			122
Date, Time and Place			122
Purpose			122
Record Date and Quorum			122
Vote Required			123
Treatment of Abstentions; Failure to Vote			123
How to Vote			123
Shares Held in Street Name			124
Revoking Your Proxy			124
Attending the Columbia Special Meeting			124
Proxy Solicitations			125
Delivery of Proxy Materials To Shareholders Sharing an Address			125
INFORMATION CONCERNING COLUMBIA			125
General			125
WEST COAST SPECIAL SHAREHOLDERS’ MEETING			127
General			127
Purpose of West Coast Special Meeting			127
Recommendation of the West Coast Board of Directors			127
West Coast Record Date and Quorum			127
Required Vote			128
Treatment of Abstentions; Failure to Vote			128
Voting on Proxies; Incomplete Proxies			128
Shares Held in Street Name			129
Revocability of Proxies and Changes to a West Coast Shareholder’s Vote			129
Solicitation of Proxies			130
Delivery of Proxy Materials to Shareholders Sharing an Address			130
Attending the West Coast Special Meeting			130
WEST COAST PROPOSALS			130
Merger Proposal			130
Merger-Related Named Executive Officer Compensation Proposal			131
West Coast Adjournment Proposal			131
Other Matters To Come Before the West Coast Special Meeting			132
INFORMATION CONCERNING WEST COAST			132
CERTAIN LEGAL MATTERS			132
EXPERTS			132
WEST COAST ANNUAL MEETING SHAREHOLDER PROPOSALS			133
COLUMBIA ANNUAL MEETING SHAREHOLDER PROPOSALS			133
DOCUMENTS INCORPORATED BY REFERENCE			134

 

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Appendix A		Agreement and Plan of Merger, dated as of September 25, 2012, by and among Columbia Banking System, Inc., West Coast Bancorp and Sub (as defined therein)
Appendix B		Opinion of Keefe, Bruyette & Woods
Appendix C		Opinion of Sandler O’Neill + Partners, L.P.
Appendix D		Sections 60.551 to 60.594 of the Oregon Revised Statutes, Regarding Dissenters’ Rights
Appendix E		Stock Conversion, Voting and Support Agreement by and between Columbia Banking System, Inc. and Castle Creek Capital Partners IV, LP dated September 25, 2012
Appendix F		Stock Conversion, Voting and Support Agreement by and between Columbia Banking System, Inc. and GF Financial, L.L.C. dated September 25, 2012
Appendix G		Stock Conversion, Voting and Support Agreement by and between Columbia Banking System, Inc. and MFP Partners, L.P. dated September 25, 2012
Appendix H		Form of Voting and Non-Competition Agreement by and among Columbia Banking System, Inc., West Coast Bancorp and certain directors of West Coast Bancorp dated September 25, 2012
Appendix I		Form of Voting Agreement by and among West Coast Bancorp, Columbia Banking System, Inc. and directors of Columbia Banking System, Inc. dated September 25, 2012

 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference into this document, including Columbia’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and West Coast’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, and the matters addressed under the caption “Cautionary Note Regarding Forward-Looking Statements,” West Coast shareholders should consider the matters described below carefully in determining whether to vote to approve the merger agreement and the transactions contemplated by the merger agreement, and Columbia shareholders should consider the matters described below carefully in determining whether to vote to approve the issuance of shares of Columbia common stock in the merger.

Risk Factors Relating to the Merger

Because the market price of Columbia common stock may fluctuate, you cannot be sure of the value of the merger consideration that you will receive.

Upon completion of the merger, each share of West Coast common stock (other than certain shares owned by West Coast, Columbia or their wholly-owned subsidiaries) will be converted into the right to receive merger consideration consisting of shares of Columbia common stock or cash, or a unit consisting of a mix of Columbia common stock and cash, pursuant to the terms of the merger agreement. The value of the merger consideration to be received by West Coast shareholders will be based on the volume weighted average price of Columbia common stock during the twenty trading day period beginning on the twenty fifth day before the effective time of the merger. This average price may vary from the closing price of Columbia common stock on the date we announced the merger, on the date that this document was mailed to Columbia shareholders and West Coast shareholders, and on the date of the meetings of the Columbia and West Coast shareholders. Any change in the market price of Columbia common stock prior to completion of the merger will affect the value of the merger consideration that West Coast shareholders will receive upon completion of the merger. Accordingly, at the time of the West Coast special meeting and prior to the election deadline, West Coast shareholders will not know or be able to calculate the amount of the cash consideration they would receive or the exchange ratio used to determine the number of any shares of Columbia common stock they would receive upon completion of the merger. Stock price changes may result from a variety of factors, including general market and economic conditions, changes in our respective businesses, operations and prospects, and regulatory considerations, among other things. Many of these factors are beyond the control of Columbia and West Coast. West Coast shareholders should obtain current market quotations for shares of Columbia common stock before voting their shares at the West Coast special meeting.

West Coast shareholders may receive a form of consideration different from what they elect.

Although each West Coast shareholder may elect to receive all cash or all Columbia common stock in the merger, or a unit consisting of a mix of cash and stock, the pools of cash and Columbia common stock to be paid in the merger are fixed. As a result, if either the aggregate cash or stock elections exceed the maximum available, and you choose the consideration election that exceeds the maximum available, some or all of your consideration may be in a form that you did not choose.

We may fail to realize all of the anticipated benefits of the merger.

The success of the merger will depend, in part, on our ability to successfully combine the Columbia and West Coast organizations. If we are not able to achieve this objective, the anticipated benefits of the merger may not be realized fully or at all or may take longer than expected to be realized.

Columbia and West Coast have operated and, until the completion of the merger, will continue to operate, independently. It is possible that the integration process or other factors could result in the loss or departure of key employees, the disruption of the ongoing business of West Coast or inconsistencies in standards, controls,

 

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procedures and policies. It is also possible that clients, customers, depositors and counterparties of West Coast could choose to discontinue their relationships with the combined company post-merger because they prefer doing business with an independent company or for any other reason, which would adversely affect the future performance of the combined company. These transition matters could have an adverse effect on each of Columbia and West Coast during the pre-merger period and for an undetermined time after the completion of the merger.

The results of operations of Columbia after the merger may be affected by factors different from those currently affecting the results of operations of Columbia and West Coast.

The businesses of Columbia and West Coast differ in certain respects and, accordingly, the results of operations of the combined company and the market price of the combined company’s common stock may be affected by factors different from those currently affecting the independent results of operations of Columbia and West Coast. For a discussion of the business of Columbia and certain factors to be considered in connection with Columbia’s business, see “Information Concerning Columbia” and the documents incorporated by reference in this document and referred to under “Where You Can Find More Information”. For a discussion of the business of West Coast and certain factors to be considered in connection with West Coast’s business, see “Information Concerning West Coast” and the documents incorporated by reference in this document and referred to under “Where You Can Find More Information”.

The merger agreement limits West Coast’s ability to pursue an alternative transaction and requires West Coast to pay a termination fee of $20,000,000 under certain circumstances relating to alternative acquisition proposals.

The merger agreement prohibits West Coast from soliciting, initiating, encouraging or knowingly facilitating certain alternative acquisition proposals with any third party, subject to exceptions set forth in the merger agreement. See “The Merger Agreement—No Solicitation” included elsewhere in this joint proxy statement/prospectus. The merger agreement also provides for the payment by West Coast to Columbia of a termination fee of $20,000,000 in the event that the merger agreement is terminated in certain circumstances, involving, among others, certain changes in the recommendation of West Coast’s board of directors, a failure of West Coast’s shareholders to approve the merger agreement or the termination of the merger agreement in certain circumstances followed by an acquisition of West Coast by a third party. These provisions may discourage a potential competing acquiror that might have an interest in acquiring West Coast from considering or proposing such an acquisition. It should be noted, however, that the failure of West Coast shareholders to approve the merger agreement will not in and of itself trigger West Coast’s obligation to pay the termination fee, unless other factors, including a third-party acquisition proposal for West Coast made prior to the West Coast special meeting, also exist. See “The Merger Agreement—Termination; Termination Fee” included elsewhere in this joint proxy statement/prospectus.

The fairness opinions that Columbia and West Coast have obtained from KBW and Sandler O’Neill, respectively, have not been, and are not expected to be, updated to reflect any changes in circumstances that may have occurred since the signing of the merger agreement.

The fairness opinions issued to Columbia and West Coast by KBW and Sandler O’Neill, which are Columbia’s and West Coast’s respective financial advisors, regarding the fairness, from a financial point of view, of the consideration to be paid in connection with the merger, speak only as of September 25, 2012. Changes in the operations and prospects of Columbia or West Coast, general market and economic conditions and other factors which may be beyond the control of Columbia and West Coast, and on which the fairness opinions were based, may have altered the value of Columbia or West Coast or the market prices of shares of Columbia or West Coast as of the date of this document, or may alter such values and market prices by the time the merger is completed. KBW and Sandler O’Neill do not have any obligation to update, revise or reaffirm their respective opinions to reflect subsequent developments, and have not done so. Because West Coast and Columbia do not currently anticipate asking their respective financial advisors to update their opinions, the opinions will not

 

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address the fairness of the merger consideration from a financial point of view at the time the merger is completed. West Coast’s board of directors’ recommendation that West Coast shareholders vote “FOR” approval of the merger agreement and Columbia’s Board of Directors’ recommendation that Columbia shareholders vote “FOR” approval of the stock issuance, however, is made as of the date of this document. For a description of the opinions that Columbia and West Coast received from their respective financial advisors, see “Opinion of Columbia Financial Advisor” and “Opinion of West Coast’s Financial Advisor” included elsewhere in this joint proxy statement/prospectus.

The merger is subject to the receipt of consents and approvals from governmental entities that may impose conditions that could have an adverse effect on the combined company following the merger.

Before the merger may be completed, various approvals and consents must be obtained from the Federal Reserve Board, the Oregon Department of Consumer and Business Services and various other securities, antitrust, and other regulatory authorities. These governmental entities may impose conditions on the granting of such approvals and consents. Although Columbia and West Coast do not currently expect that any such material conditions or changes would be imposed, there can be no assurance that they will not be, and such conditions or changes could have the effect of delaying completion of the merger or imposing additional costs or limiting the revenues of the combined company following the merger, any of which might have an adverse effect on the combined company following the merger. In addition, each of Columbia and West Coast has agreed to use its reasonable best efforts to avoid or overcome impediments to completing the merger, including, among other things, making expenditures and incurring costs, raising capital, divesting or otherwise disposing of businesses or assets, and effecting the dissolution, internal merger or consolidation of subsidiaries or enhancing internal controls. Such actions may entail costs and may adversely affect Columbia, West Coast, or the combined company following the merger.

The merger is subject to certain closing conditions that, if not satisfied or waived, will result in the merger not being completed, which may cause the prices of Columbia common stock or West Coast common stock to decline.

The merger is subject to customary conditions to closing, including the receipt of required regulatory approvals and approvals of the Columbia and West Coast shareholders. If any condition to the merger is not satisfied or waived, to the extent permitted by law, the merger will not be completed. In addition, Columbia and West Coast may terminate the merger agreement under certain circumstances even if the merger agreement is approved by West Coast shareholders and the issuance of Columbia common stock in connection with the merger is approved by Columbia shareholders. If Columbia and West Coast do not complete the merger, the trading prices of Columbia common stock or West Coast common stock may decline to the extent that the current prices reflect a market assumption that the merger will be completed. In addition, neither company would realize any of the expected benefits of having completed the merger. If the merger is not completed and West Coast’s board of directors seeks another merger or business combination, West Coast shareholders cannot be certain that West Coast will be able to find a party willing to offer equivalent or more attractive consideration than the consideration Columbia has agreed to provide in the merger. If the merger is not completed, additional risks could materialize, which could materially and adversely affect the business, financial condition and results of Columbia or West Coast. For more information on closing conditions to the merger agreement, see “The Merger Agreement—Conditions to the Merger” included elsewhere in this joint proxy statement/prospectus.

The combined company expects to incur substantial expenses related to the merger.

The combined company expects to incur substantial expenses in connection with completing the merger and combining the business, operations, networks, systems, technologies, policies and procedures of the two companies. Although Columbia and West Coast have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their combination expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses

 

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associated with the merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the completion of the merger. As a result of these expenses, both Columbia and West Coast expect to take charges against their earnings before and after the completion of the merger. The charges taken in connection with the merger are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.

The unaudited pro forma condensed combined financial information included in this document is preliminary and the actual financial condition and results of operations after the merger may differ materially.

The unaudited pro forma condensed combined financial information in this document is presented for illustrative purposes only and is not necessarily indicative of what Columbia’s actual financial condition or results of operations would have been had the merger been completed on the dates indicated. The unaudited pro forma condensed combined financial information reflects adjustments, which are based upon preliminary estimates, to record the West Coast identifiable assets acquired and liabilities assumed at fair value and the resulting goodwill recognized. The purchase price allocation reflected in this document is preliminary, and final allocation of the purchase price will be based upon the actual purchase price and the fair value of the assets and liabilities of West Coast as of the date of the completion of the merger. Accordingly, the final acquisition accounting adjustments may differ materially from the pro forma adjustments reflected in this document. For more information, see “Unaudited Pro Forma Condensed Combined Financial Information” beginning on page 29.

Shares of Columbia common stock to be received by West Coast shareholders as a result of the merger will have rights different from the shares of West Coast common stock.

Upon completion of the merger, the rights of former West Coast shareholders who receive Columbia common stock in the merger and thereby become Columbia shareholders will be governed by the certificate of incorporation and bylaws of Columbia. The rights associated with West Coast common stock are different from the rights associated with Columbia common stock. In addition, the rights of shareholders under Washington law, where Columbia is organized, may differ from the rights of shareholders under Oregon law, where West Coast is organized. See “Comparison of Rights of Holders of Columbia and West Coast Common Stock” beginning on page 112 for a discussion of the different rights associated with Columbia common stock.

Columbia has various provisions in its articles of incorporation that could impede a takeover of Columbia.

Columbia’s restated articles of incorporation contain provisions providing for, among other things, preferred stock, super majority approval of certain business transactions, and consideration of non-monetary factors in evaluating a takeover offer. Although these provisions were not adopted for the express purpose of preventing or impeding the takeover of Columbia without the approval of the Columbia board of directors, such provisions may have that effect. Such provisions may prevent former West Coast shareholders who receive shares of Columbia common stock in the merger from taking part in a transaction in which such shareholders could realize a premium over the current market price of Columbia common stock. See “Comparison of Rights of Holders of Columbia and West Coast Common Stock,” beginning on page 113.

 

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Certain West Coast directors and officers may have interests in the merger different from the interests of West Coast shareholders.

In considering the recommendations of the board of directors of West Coast, West Coast shareholders should be aware that certain directors and executive officers of West Coast have interests in the merger that may differ from, or may be in addition to, the interests of West Coast shareholders generally. The board of directors of West Coast was aware of these interests and considered them, among other matters, when it adopted the merger agreement and in making its recommendations that the West Coast shareholders approve the Merger proposal. These interests include:

 

•

In accordance with the merger agreement, one of the directors of West Coast will be recommended to serve on Columbia’s board of directors and the board of directors of Columbia State Bank following the merger;

 

•

Certain of West Coast’s executive officers are party to change in control agreements that provide severance and other benefits following a change in control of West Coast in connection with a qualifying termination of employment and if such termination of employment occurred immediately following the merger, the executive officers with change in control agreements with West Coast would be entitled to receive severance payments and benefits equal to $3,416,461 for the five executive officers who are party to a change in control agreement and excise tax gross-ups for Mr. Sznewajs of $711,619 and for Mr. Bygland of $323,397.

 

•

Hadley Robbins and Xandra McKeown, both of whom are executive officers of West Coast, entered into employment agreements with Columbia (replacing existing change in control agreements with West Coast) that become effective upon the completion of the merger and pursuant to such employment agreements, if their employment is terminated (in a qualifying termination of employment) immediately following the effective time of the merger, they would be entitled to severance payments and benefits equal to $560,427 and $569,137 respectively, with Mr. Robbins also being entitled to a 280G excise tax gross-up that is equal to $454,828;

 

•

Accelerated vesting of restricted shares of West Coast common stock held by West Coast’s executive officers and non-employee directors with a total aggregate value (based on the average closing price of West Coast common stock over the first five business days following the public announcement of the merger) equal to approximately $955,000;

 

•

Accelerated vesting and, in most instances, payment of the supplemental executive retirement plans entered into with certain West Coast executive officers, with an aggregate acceleration value of $979,867 for all of the West Coast executive officers who participate in the supplemental executive retirement plan; and

 

•

West Coast directors and officers are entitled to continued indemnification and insurance coverage under the merger agreement.

For a more complete description of the interests of West Coast directors and executive officers in the merger, see “The Merger—Interests of West Coast’s Directors and Executive Officers in the Merger.”

Risk Factors Relating to West Coast and West Coast’s Business

West Coast is, and will continue to be, subject to the risks described in West Coast’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Documents Incorporated by Reference” and “Where You Can Find More Information” included elsewhere in this joint proxy statement/prospectus.

 

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Risk Factors Relating to Columbia and Columbia’s Business

Columbia is, and will continue to be, subject to the risks described in Columbia’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as updated by subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Documents Incorporated by Reference” and “Where You Can Find More Information” included elsewhere in this joint proxy statement/prospectus.

 

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SELECTED CONSOLIDATED FINANCIAL DATA OF COLUMBIA

The following selected consolidated financial information for the fiscal years ended December 31, 2007 through December 31, 2011 is derived from audited financial statements of Columbia. The financial information of and for the nine months ended September 30, 2012 and 2011 are derived from unaudited financial statements, has been prepared on the same basis as the historical information derived from audited financial statements and, in the opinion of Columbia’s management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data for those dates. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2012. You should read this information in conjunction with Columbia’s consolidated financial statements and related notes thereto included in Columbia’s Annual Report on Form 10-K for the year ended December 31, 2011, and in Columbia’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012, which are incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information.”

 

		Nine Months Ended September 30, 2012				Nine Months Ended September 30, 2011				Years Ended December 31,
										2011				2010				2009				2008				2007
		(dollars in thousands except per share)
For the Period
Interest income		$	191,295			$	176,352			$	251,271			$	185,879			$	143,035			$	175,060			$	184,217
Interest expense		$	7,266			$	11,740			$	14,535			$	21,092			$	27,683			$	55,547			$	75,397
Net interest income		$	184,029			$	164,612			$	236,736			$	164,787			$	115,352			$	119,513			$	108,820
Provision for loan and lease losses, excluding covered loans		$	11,125			$	2,650			$	7,400			$	41,291			$	63,500			$	41,176			$	3,605
Noninterest income (loss)		$	20,491			$	319			$	(9,283	)		$	52,781			$	29,690			$	14,850			$	27,748
Noninterest expense		$	125,113			$	114,445			$	155,759			$	137,147			$	94,488			$	92,125			$	88,829
Net income (loss)		$	32,681			$	33,283			$	48,037			$	30,784			$	(3,968	)		$	5,968			$	32,381
Net income (loss) applicable to common shareholders		$	32,681			$	33,283			$	48,037			$	25,837			$	(8,371	)		$	5,498			$	32,381
Per Common Share
Earnings (loss) (Basic)		$	0.82			$	0.84			$	1.22			$	0.73			$	(0.38	)		$	0.30			$	1.91
Earnings (loss) (Diluted)		$	0.82			$	0.84			$	1.21			$	0.72			$	(0.38	)		$	0.30			$	1.89
Cash dividends declared per common share		$	0.89			$	0.14			$	0.27			$	0.04			$	0.07			$	0.58			$	0.66
Book Value		$	19.20			$	18.99			$	19.23			$	17.97			$	16.13			$	18.82			$	19.03
Averages
Total assets		$	4,797,543			$	4,426,037			$	4,509,010			$	4,248,590			$	3,084,421			$	3,134,054			$	2,837,162
Interest-earning assets		$	4,199,125			$	3,794,865			$	3,871,424			$	3,583,728			$	2,783,862			$	2,851,555			$	2,599,379
Loans, including covered loans		$	2,891,688			$	2,536,492			$	2,607,266			$	2,485,650			$	2,124,574			$	2,264,486			$	1,990,622
Securities		$	1,012,716			$	919,173			$	928,891			$	720,152			$	584,028			$	565,299			$	581,122
Deposits		$	3,829,640			$	3,457,227			$	3,541,399			$	3,270,923			$	2,378,176			$	2,382,484			$	2,242,134
Core deposits		$	3,555,936			$	3,132,963			$	3,218,425			$	2,828,246			$	1,945,039			$	1,911,897			$	1,887,391
Shareholders’ equity		$	760,217			$	721,638			$	730,726			$	668,469			$	462,127			$	354,387			$	289,297
Financial Ratios
Net interest margin			5.99	%			5.96	%			6.27	%			4.76	%			4.33	%			4.38	%			4.35	%
Return on average assets			0.91	%			1.01	%			1.07	%			0.72	%			(0.13	)%			0.19	%			1.14	%
Return on average common equity			5.74	%			6.17	%			6.57	%			4.15	%			(2.16	)%			1.59	%			11.19	%
Efficiency ratio (tax equivalent) (1)			69.47	%			68.62	%			70.68	%			67.56	%			61.53	%			59.88	%			61.33	%
Average equity to average assets			15.85	%			16.30	%			16.21	%			15.73	%			14.98	%			11.31	%			10.20	%
At Period End
Total assets		$	4,903,049			$	4,755,832			$	4,785,945			$	4,256,363			$	3,200,930			$	3,097,079			$	3,178,713
Covered assets, net		$	445,797			$	595,640			$	560,055			$	531,504				—				—				—
Loans, excluding covered loans		$	2,476,844			$	2,257,899			$	2,348,371			$	1,915,754			$	2,008,884			$	2,232,332			$	2,282,728
Allowance for noncovered loan and lease losses		$	51,527			$	50,422			$	53,041			$	60,993			$	53,478			$	42,747			$	26,599
Securities		$	965,641			$	1,018,069			$	1,050,325			$	781,774			$	631,645			$	540,525			$	572,973
Deposits		$	3,938,855			$	3,795,499			$	3,815,529			$	3,327,269			$	2,482,705			$	2,382,151			$	2,498,061
Core deposits		$	3,685,844			$	3,464,705			$	3,510,435			$	2,998,482			$	2,072,821			$	1,941,047			$	1,996,393
Shareholders’ equity		$	761,977			$	749,966			$	759,338			$	706,878			$	528,139			$	415,385			$	341,731
Nonperforming Assets, Excluding Covered Assets
Nonaccrual loans		$	41,589			$	55,183			$	53,483			$	89,163			$	110,431			$	106,163			$	14,005
Other real estate owned and other personal property owned			11,749				34,069				31,905				30,991				19,037				2,874				181
Total nonperforming assets, excluding covered assets		$	53,338			$	89,252			$	85,388			$	120,154			$	129,468			$	109,037			$	14,186

 

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		Nine Months Ended September 30, 2012				Nine Months Ended September 30, 2011				Years Ended December 31,
										2011				2010				2009				2008				2007
		(dollars in thousands except per share)
Nonperforming loans to year end loans, excluding covered loans			1.68	%			2.44	%			2.28	%			4.65	%			5.50	%			4.76	%			0.61	%
Nonperforming assets to year end assets, excluding covered assets			1.20	%			2.15	%			2.02	%			3.23	%			4.04	%			3.52	%			0.45	%
Allowance for loan and lease losses to year end loans, excluding covered loans			2.08	%			2.23	%			2.26	%			3.18	%			2.66	%			1.91	%			1.17	%
Allowance for loan and lease losses to nonperforming loans, excluding covered loans			123.90	%			91.37	%			99.17	%			68.41	%			48.43	%			40.27	%			189.93	%
Net loan charge-offs		$	12,639			$	13,221			$	15,352			$	33,776			$	52,769			$	25,028			$	380
Risk-Based Capital Ratios
Total capital			20.75	%			21.87	%			21.05	%			24.47	%			19.60	%			14.25	%			10.90	%
Tier 1 capital			19.49	%			20.61	%			19.79	%			23.20	%			18.34	%			12.99	%			9.87	%
Leverage ratio			12.80	%			12.87	%			12.96	%			13.99	%			14.33	%			11.27	%			8.54	%

 

(1)

Noninterest expense, excluding net cost of operation of other real estate, FDIC clawback liability expense and merger related expenses, divided by the sum of net interest income and noninterest income on a tax equivalent basis, excluding gain/loss on sale of investment securities, impairment charge on investment securities, gain on bank acquisition, incremental accretion income on the acquired loan portfolio and the change in FDIC loss-sharing asset. The tax equivalent basis was derived using Columbia’s estimated statutory rate of 35%.

 

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SELECTED CONSOLIDATED FINANCIAL DATA OF WEST COAST

The following selected consolidated financial information for the fiscal years ended December 31, 2007 through December 31, 2011 is derived from audited financial statements of West Coast. The financial information of and for the nine months ended September 30, 2012 and 2011 are derived from unaudited financial statements, has been prepared on the same basis as the historical information derived from audited financial statements and, in the opinion of West Coast’s management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data for those dates. The results of operations for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the entire year ending December 31, 2012. You should read this information in conjunction with West Coast’s consolidated financial statements and related notes thereto included in West Coast’s Annual Report on Form 10-K for the year ended December 31, 2011, and in West Coast’s Quarterly Report on Form 10-Q for the nine months ended September 30, 2012, which are incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information.”

 

(Dollars in thousands, except per share data)		As of and For the Nine Months ended September 30,								As of and For the Year ended December 31,
		2012				2011				2011				2010				2009				2008				2007
Interest income		$	68,900			$	74,743			$	98,675			$	105,576			$	112,150			$	140,846			$	183,190
Interest expense			3,307				11,929				17,921				22,269				33,423				48,696				68,470
Net interest income			65,593				62,814				80,754				83,307				78,727				92,150				114,720
Provision (benefit) for credit losses			(996	)			6,634				8,133				18,652				90,057				40,367				38,956
Net interest income (loss) after provision for credit losses			66,589				56,180				72,621				64,655				(11,330	)			51,783				75,764
Noninterest income			24,553				25,400				31,819				32,697				9,129				24,629				33,498
Noninterest expense			63,808				68,131				90,875				90,337				108,288				90,323				85,299
Income (loss) before income taxes			27,334				13,449				13,565				7,015				(110,489	)			(13,911	)			23,963
Provision (benefit) for income taxes			9,567				(2,566	)			(20,212	)			3,790				(19,276	)			(7,598	)			7,121
Net income (loss)		$	17,767			$	16,015			$	33,777			$	3,225			$	(91,213	)		$	(6,313	)		$	16,842
Net interest income on a tax equivalent basis 2		$	66,427			$	63,647			$	81,870			$	84,478			$	80,222			$	93,901			$	116,361
Per share data:
Basic earnings (loss) per share		$	0.87			$	0.78			$	1.65			$	0.16			$	(29.15	)		$	(2.05	)		$	5.40
Diluted earnings (loss) per share		$	0.82			$	0.75			$	1.58			$	0.16			$	(29.15	)		$	(2.05	)		$	5.20
Cash dividends declared		$	0.05			$	—			$	—			$	—			$	0.10			$	1.45			$	2.55
Period end book value per common share		$	16.32			$	14.28			$	15.20			$	13.04			$	35.10			$	63.15			$	66.75
Weighted average common shares outstanding			19,077				18,999				19,007				17,460				3,102				3,094				3,101
Weighted average diluted shares outstanding			20,225				19,951				19,940				18,059				3,102				3,094				3,209
Total assets		$	2,475,980			$	2,521,247			$	2,429,887			$	2,461,059			$	2,733,547			$	2,516,140			$	2,646,614
Total deposits		$	1,929,292			$	1,990,778			$	1,915,569			$	1,940,522			$	2,146,884			$	2,024,379			$	2,094,832
Total long-term borrowings		$	178,900			$	181,281			$	120,000			$	168,599			$	250,699			$	91,059			$	83,100
Total loans, net		$	1,459,310			$	1,467,310			$	1,466,089			$	1,496,053			$	1,686,352			$	2,035,876			$	2,125,752
Stockholders’ equity		$	335,996			$	296,867			$	314,479			$	272,560			$	249,058			$	198,187			$	208,241
Financial ratios:
Return on average assets			0.99	%			0.87	%			1.37	%			0.13	%			-3.49	%			-0.25	%			0.66	%
Return on average equity			7.32	%			7.58	%			11.79	%			1.21	%			-45.66	%			-3.06	%			7.93	%
Average equity to average assets			13.47	%			11.46	%			11.64	%			10.32	%			7.64	%			8.04	%			8.37	%
Dividend payout ratio			0.00	%			0.00	%			0.00	%			0.00	%			-0.34	%			-70.73	%			47.51	%
Efficiency ratio 1			70.42	%			76.96	%			80.44	%			78.14	%			122.34	%			72.79	%			56.90	%
Net loans to assets			58.94	%			58.20	%			60.34	%			60.79	%			61.69	%			80.91	%			80.33	%
Average yields earned 2			4.12	%			4.34	%			4.29	%			4.40	%			4.71	%			5.92	%			7.72	%
Average rates paid			0.31	%			1.01	%			1.15	%			1.27	%			1.76	%			2.60	%			3.76	%
Net interest spread 2			3.81	%			3.33	%			3.14	%			3.13	%			2.95	%			3.32	%			3.96	%
Net interest margin 2			3.92	%			3.65	%			3.52	%			3.48	%			3.33	%			3.90	%			4.86	%
Nonperforming assets to total assets			2.19	%			3.30	%			2.94	%			4.09	%			5.59	%			7.86	%			1.12	%
Allowance for loan losses to total loans			2.11	%			2.42	%			2.35	%			2.62	%			2.23	%			1.40	%			2.16	%
Allowance for credit losses to total loans			2.17	%			2.46	%			2.40	%			2.67	%			2.29	%			1.45	%			2.53	%
Net loan charge-offs to average loans			0.24	%			0.94	%			0.8 7	%			1.05	%			4.21	%			3.04	%			0.34	%
Allowance for credit losses to nonperforming loans			99.64	%			70.02	%			88.63	%			67.07	%			39.68	%			23.46	%			207.75	%
Allowance for loan losses to nonperforming loans			97.07	%			68.69	%			86.73	%			65.68	%			38.74	%			22.67	%			177.53	%

 

1.	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.

2.	Interest earned on nontaxable securities has been computed on a 35% tax equivalent basis.

 

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3.

Non-performing loan components are comprised of loans on non-accrual status (inclusive of non-accruing TDRs), plus any loans past due 90 days or more still on accrual. Accruing TDRs are not included in the non-performing loan calculation. West Coast’s rationale for this is that West Coast’s policy for moving non-performing TDRs to accrual status requires payment performance (typically six consecutive months), coupled with a reasonable assurance such performance will continue (as validated by current financial information).

 

As of 9/30/12:
Loans 90 days P/D on accrual			$     0
Nonaccrual TDRs		$	17.0mm
Other nonaccrual loans		$	15.4mm
Total nonperforming loans		$	32.4mm

 

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SELECTED UNAUDITED PRO FORMA FINANCIAL DATA

The following table shows selected unaudited pro forma condensed combined financial information about the financial condition and results of operations of Columbia giving effect to the merger with West Coast. The selected unaudited pro forma condensed combined financial information assumes that the merger is accounted for under the acquisition method of accounting with Columbia treated as the acquirer. Under the acquisition method of accounting, the assets and liabilities of West Coast, as of the effective date of the merger, will be recorded by Columbia at their respective fair values and the excess of the merger consideration over the fair value of West Coast’s net assets will be allocated to goodwill.

The table sets forth the information as if the merger had become effective on September 30, 2012, with respect to financial condition data, and on January 1, 2011, with respect to the results of operations data. The selected unaudited pro forma condensed combined financial data has been derived from and should be read in conjunction with the unaudited pro forma condensed combined financial information, including the notes thereto, which is included in this joint proxy statement/prospectus under “Unaudited Pro Forma Condensed Combined Financial Information.”

The selected unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented. The selected unaudited pro forma condensed combined financial information also does not consider any potential impacts of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors. Further, as explained in more detail in the notes accompanying the more detailed unaudited pro forma condensed combined financial information included under “Unaudited Pro Forma Condensed Combined Financial Information,” the pro forma allocation of purchase price reflected in the selected unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Additionally, the adjustments made in the unaudited pro forma condensed financial information, which are described in those notes, are preliminary and may be revised.

 

(Dollars in thousands, except per share amounts)		For the Nine Months Ended September 30, 2012				For the Year Ended December 31, 2011
Pro Forma Condensed Consolidated Income Statement Information:
Net interest income		$	258,939			$	329,839
Provision for loan losses			33,510				13,885
Income before income taxes			81,063				88,643
Net income			56,186				87,752

 

(Dollars in thousands, except per share amounts)		As of September 30, 2012
Pro Forma Condensed Consolidated Balance Sheet Information:
Loans		$	4,270,832
Total assets			7,250,863
Deposits			5,868,221
Borrowings			240,980
Shareholders’ equity			1,003,437

 

		For the Nine Months Ended September 30, 2012				For the Year Ended December 31, 2011
Per Common Share
Earnings (Basic)		$	1.08			$	1.69
Earnings (Diluted)			1.08				1.69
Cash dividends declared per common share			0.89				0.27

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information and explanatory notes show the impact on the historical financial positions and results of operations of Columbia and West Coast and have been prepared to illustrate the effects of the merger involving Columbia and West Coast under the acquisition method of accounting with Columbia treated as the acquirer. Under the acquisition method of accounting, the assets and liabilities of West Coast, as of the effective date of the merger, will be recorded by Columbia at their respective fair values and the excess of the merger consideration over the fair value of West Coast’s net assets will be allocated to goodwill. The unaudited pro forma condensed combined balance sheet as of September 30, 2012 is presented as if the merger with West Coast had occurred on September 30, 2012. The unaudited pro forma condensed combined income statements for the year ended December 31, 2011 and the nine months ended September 30, 2012 are presented as if the merger had occurred on January 1, 2011. The historical consolidated financial information has been adjusted to reflect factually supportable items that are directly attributable to the merger and, with respect to the income statements only, expected to have a continuing impact on consolidated results of operations.

The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented. The adjustments included in these unaudited pro forma condensed combined financial statements are preliminary and may be revised. The unaudited pro forma condensed combined financial information also does not consider any potential impacts of potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors. For the historical income statements of West Coast, amounts related to other real estate owned, which were historically reported in noninterest income by West Coast, have been reclassified to noninterest expense to conform to the presentation in Columbia’s financial statements.

In addition, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial information, the pro forma allocation of purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments may include, but not be limited to, changes in (i) West Coast’s balance sheet through the effective time of the merger; (ii) the aggregate value of merger consideration paid if the price of Columbia’s stock varies from the assumed $18.85 per share; (iii) total merger related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market conditions differ from current assumptions.

The unaudited pro forma condensed combined financial statements are provided for informational purposes only. The unaudited pro forma condensed combined financial statements are not necessarily, and should not be assumed to be, an indication of the results that would have been achieved had the transaction been completed as of the dates indicated or that may be achieved in the future. The preparation of the unaudited pro forma condensed combined financial statements and related adjustments required management to make certain assumptions and estimates. The unaudited pro forma condensed combined financial statements should be read together with:

 

•

the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

•

Columbia’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2011, included in Columbia’s Annual Report on Form 10-K for the year ended December 31, 2011;

 

•

West Coast’s separate audited historical consolidated financial statements and accompanying notes as of and for the year ended December 31, 2011, included in West Coast’s Annual Report on Form 10-K for the year ended December 31, 2011;

 

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•

Columbia’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three and nine months ended September 30, 2012 included in Columbia’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012;

 

•

West Coast’s separate unaudited historical consolidated financial statements and accompanying notes as of and for the three and nine months ended September 30, 2012, included in West Coast’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012; and

 

•

other information pertaining to Columbia and West Coast contained in or incorporated by reference into this joint proxy statement/prospectus. See “Selected Consolidated Financial Data of Columbia” and “Selected Consolidated Financial Data of West Coast” and “Documents Incorporated by Reference” included elsewhere in this joint proxy statement/prospectus.

The unaudited pro forma condensed combined balance sheet as of September 30, 2012 presents the consolidated financial position giving pro forma effect to the following transactions as if they had occurred as of September 30, 2012:

 

•

the completion of Columbia’s acquisition of West Coast, including the issuance of 12,809,525 shares of Columbia’s common stock; and

 

•

the repayment of all junior subordinated debentures, including any repayment fee and accrued interest, totaling approximately $51 million.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF

SEPTEMBER 30, 2012

 

		Columbia Historical				West Coast Historical				Pro Forma Merger Adjustments				Notes		Pro Forma Combined
		(in thousands)
ASSETS
Cash and cash equivalents			562,592				101,335				(315,469	)		A			348,458
Securities available for sale at fair value			943,624				792,657				—						1,736,281
Federal Home Loan Bank stock at cost			22,017				12,040				—						34,057
Loans held for sale			3,600				—				—						3,600
Loans, excluding covered loans, net of unearned income			2,476,844				1,490,767				(74,538	)		B			3,893,073
Less: allowance for loan and lease losses			51,527				31,457				(31,457	)		C			51,527
Loans, excluding covered loans, net			2,425,317				1,459,310				(43,081	)					3,841,546
Covered loans, net of allowance for loan			429,286				—				—						429,286
Total loans, net			2,854,603				1,459,310				(43,081	)					4,270,832
FDIC loss-sharing asset			111,677				—				—						111,677
Premises and equipment, net			115,506				22,672				15,000			D			153,178
Other real estate owned			27,386				21,939				—						49,325
Goodwill			115,554				—				182,409			E			297,963
Core deposit intangible, net			16,803				—				15,561			F			32,364
Other assets			129,687				66,027				17,414			G			213,128
Total assets		$	4,903,049			$	2,475,980			$	(128,166	)				$	7,250,863
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits			3,938,855				1,929,292				74			H			5,868,221
Federal Home Loan Bank advances			113,080				127,900				—						240,980
Junior subordinated debentures			—				51,000				(51,000	)		I			—
Other liabilities			89,137				31,792				17,296			J			138,225
Total liabilities			4,141,072				2,139,984				(33,630	)					6,247,426
Commitments and contingent liabilities
Shareholders’ equity:
Preferred stock			—				21,124				(21,124	)		K			—
Common stock			581,001				231,766				9,694			L			822,461
Retained earnings			152,498				71,692				(71,692	)		M			152,498
Accumulated other comprehensive income			28,478				11,414				(11,414	)		N			28,478
Total shareholders’ equity			761,977				335,996				(94,536	)					1,003,437
Total liabilities and shareholders’ equity		$	4,903,049			$	2,475,980			$	(128,166	)				$	7,250,863

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE

NINE MONTHS ENDED SEPTEMBER 30, 2012

 

		Columbia Historical				West Coast Historical				Pro Forma Merger Adjustments				Notes				Pro Forma Combined
		(in thousands except per share amounts)
Interest Income
Loans		$	168,875			$	56,614			$	9,317				O			$	234,806
Taxable securities			14,414				10,647				—								25,061
Tax-exempt securities			7,442				1,547				—								8,989
Federal funds sold and deposits in banks			564				92				—								656
Total interest income			191,295				68,900				9,317								269,512
Interest Expense
Deposits			4,679				1,393				—								6,072
Federal Home Loan Bank advances			2,229				1,001				—								3,230
Junior subordinated debentures			—				913				—								913
Other borrowings			358				—				—								358
Total interest expense			7,266				3,307				—								10,573
Net Interest Income			184,029				65,593				9,317								258,939
Provision (recapture) for loan and lease losses			11,125				(996	)			—								10,129
Provision for losses on covered loans			23,381				—				—								23,381
Net interest income after provision for loan and lease losses			149,523				66,589				9,317								225,429
Noninterest Income
Service charges and other fees			22,222				12,670				—								34,892
Merchant services fees			6,167				9,230				—								15,397
Gain on sale of investment securities, net			62				375				—								437
Impairment charge on investment securities			—				(49	)			—								(49	)
Change in FDIC loss-sharing asset			(14,787	)			—				—								(14,787	)
Other			6,827				4,388				—								11,215
Total noninterest income			20,491				26,614				—								47,105
Noninterest Expense
Compensation and employee benefits			64,484				35,058				—								99,542
Occupancy			15,310				10,821				288				Q				26,419
Merchant processing			2,724				3,342				—								6,066
Advertising and promotion			3,342				1,087				—								4,429
Data processing and communications			7,263				1,210				—								8,473
Legal and professional fees			6,221				2,948				(1,709	)			R				7,460
Regulatory premiums			2,560				—				—								2,560
Net cost (benefit) of operation of other real estate owned			(536	)			2,061				—								1,525
Amortization of intangibles			3,362				—				1,910				S				5,272
FDIC clawback liability			100				—				—								100
Other			20,283				9,342				—								29,625
Total noninterest expense			125,113				65,869				489								191,471
Income before income taxes			44,901				27,334				8,828								81,063
Income tax provision			12,220				9,567				3,090				T				24,877
Net Income		$	32,681			$	17,767			$	5,738							$	56,186
Per Common Share
Earnings basic		$	0.82			$	0.87											$	1.08
Earnings diluted		$	0.82			$	0.82											$	1.08
Dividends declared per common share		$	0.89			$	0.05											$	0.89
Weighted average number of common shares outstanding			39,248				19,077				(6,267	)			U				52,058
Weighted average number of diluted common shares outstanding			39,251				20,225				(7,415	)			V				52,061

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME FOR THE

YEAR ENDED DECEMBER 31, 2011

 

		Columbia Historical				West Coast Historical				Pro Forma Merger Adjustments				Notes				Pro Forma Combined
		(in thousands except per share amounts)
Interest Income
Loans		$	218,420			$	80,237			$	12,423				O			$	311,080
Taxable securities			21,870				16,177				—								38,047
Tax-exempt securities			10,142				2,074				—								12,216
Federal funds sold and deposits in banks			839				187				—								1,026
Total interest income			251,271				98,675				12,423								362,369
Interest Expense
Deposits			10,478				4,973				74				P				15,525
Federal Home Loan Bank advances			2,980				4,630				—								7,610
Borrowings prepayment charge			—				7,140				—								7,140
Junior subordinated debentures			—				1,178				—								1,178
Other borrowings			1,077				—				—								1,077
Total interest expense			14,535				17,921				74								32,530
Net Interest Income			236,736				80,754				12,349								329,839
Provision (recapture) for loan and lease losses			7,400				8,133				—								15,533
Provision for losses on covered loans			(1,648	)			—				—								(1,648	)
Net interest income after provision for loan and lease losses			230,984				72,621				12,349								315,954
Noninterest Income
Service charges and other fees			26,632				17,856				—								44,488
Gain on bank acquisitions, net of tax			1,830				—				—								1,830
Merchant services fees			7,385				12,381				—								19,766
Gain on sale of investment securities, net			134				713				—								847
Impairment charge on investment securities			(2,950	)			(179	)			—								(3,129	)
Change in FDIC loss-sharing asset			(49,496	)			—				—								(49,496	)
Other			7,182				4,284				—								11,466
Total noninterest income			(9,283	)			35,055				—								25,772
Noninterest Expense
Compensation and employee benefits			81,552				48,587				—								130,139
Occupancy			18,963				14,787				384				Q				34,134
Merchant processing			3,698				5,141				—								8,839
Advertising and promotion			3,686				3,003				—								6,689
Data processing and communications			8,484				1,549				—								10,033
Legal and professional fees			6,486				4,118				—								10,604
Regulatory premiums			4,337				—				—								4,337
Net cost (benefit) of operation of other real estate owned			(1,022	)			3,236				—								2,214
Amortization of intangibles			4,319				—				2,829				S				7,148
FDIC clawback liability			3,656				—				—								3,656
Other			21,600				13,690				—								35,290
Total noninterest expense			155,759				94,111				3,213								253,083
Income before income taxes			65,942				13,565				9,136								88,643
Income tax provision			17,905				(20,212	)			3,198				T				891
Net Income		$	48,037			$	33,777			$	5,938							$	87,752
Per Common Share
Earnings basic		$	1.22			$	1.65											$	1.69
Earnings diluted		$	1.21			$	1.58											$	1.69
Dividends declared per common share		$	0.27			$	—											$	0.27
Weighted average number of common shares outstanding			39,103				19,007				(6,197	)			U				51,913
Weighted average number of diluted common shares outstanding			39,180				19,940				(7,415	)			V				51,990

See accompanying Notes to Unaudited Pro Forma Condensed Combined Financial Information.

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Information

Note 1—Basis of Presentation

The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting giving effect to the merger involving Columbia and West Coast. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the financial position had the merger been consummated at September 30, 2012 or the results of operations had the merger been consummated at January 1, 2011, nor is it necessarily indicative of the results of operation in future periods or the future financial position of the combined entities. For the historical income statements of West Coast, amounts related to other real estate owned, which were historically reported in noninterest income by West Coast, have been reclassified to noninterest expense to conform to the presentation in Columbia’s financial statements. The merger, which is currently expected to be completed in the first quarter of 2013, provides for the issuance of 12,809,525 shares of Columbia common stock and $264.5 million in cash (subject to adjustment in certain circumstances). West Coast shareholders may elect to receive either cash, stock, or a unit consisting of a mix of cash and stock, in an amount equal to such holder’s pro rata share of the total merger consideration. The value of the per share merger consideration would be approximately $23.08 based upon a purchaser average closing price (as defined in the merger agreement) of $18.85.

Under the acquisition method of accounting, the assets and liabilities of West Coast will be recorded at the respective fair values on the merger date. The fair value on the merger date represents management’s best estimates based on available information and facts and circumstances in existence on the merger date. The pro forma allocation of purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary from the actual purchase price allocation that will be recorded at the time the merger is completed. Adjustments may include, but not be limited to, changes in (i) West Coast’s balance sheet through the effective time of the merger; (ii) the aggregate value of merger consideration paid if the price of Columbia’s stock varies from the assumed $18.85 per share; (iii) total merger related expenses if consummation and/or implementation costs vary from currently estimated amounts; and (iv) the underlying values of assets and liabilities if market conditions differ from current assumptions.

The accounting policies of both Columbia and West Coast are in the process of being reviewed in detail. Upon completion of such review, conforming adjustments or financial statement reclassification may be determined.

Note 2—Estimated Merger and Integration Costs

In connection with the merger, the plan to integrate Columbia’s and West Coast’s operations is still being developed. Over the next several months, the specific details of these plans will continue to be refined. Columbia and West Coast are currently in the process of assessing the two companies’ personnel, benefit plans, premises, equipment, computer systems, supply chain methodologies, and service contracts to determine where they may take advantage of redundancies or where it will be beneficial or necessary to convert to one system. Certain decisions arising from these assessments may involve involuntary termination of West Coast’s employees, vacating West Coast’s leased premises, changing information systems, canceling contracts between West Coast and certain service providers and selling or otherwise disposing of certain premises, furniture and equipment owned by West Coast. Additionally, as part of our formulation of the integration plan, certain actions regarding existing Columbia information systems, premises, equipment, benefit plans, supply chain methodologies, supplier contracts, and involuntary termination of personnel may be taken. Columbia expects to incur merger-related expenses including system conversion costs, employee retention and severance agreements, communications to customers, and others. To the extent there are costs associated with these actions, the costs will be recorded based on the nature and timing of these integration actions. Most acquisition and restructuring costs are recognized separately from a business combination and generally will be expensed as incurred. We estimated the merger related costs to be approximately $30 million and expect they will be incurred primarily in 2013.

 

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Note 3—Estimated Annual Cost Savings

Columbia expects to realize $21 million in annual pre-tax cost savings following the merger, which management expects to be phased-in over a two-year period, but there is no assurance that the anticipated cost savings will be realized on the anticipated time schedule or at all. These cost savings are not reflected in the presented pro forma financial information.

Note 4—Pro Forma Adjustments

The following pro forma adjustments have been reflected in the unaudited pro forma condensed combined financial information. All taxable adjustments were calculated using a 35% tax rate to arrive at deferred tax asset or liability adjustments. All adjustments are based on current assumptions and valuations, which are subject to change.

 

Balance Sheet
(dollars in thousands)
A. Adjustments to cash and cash equivalents
To reflect cash used to purchase West Coast				$	(264,469	)
To reflect cash used to redeem West Coast junior subordinated debentures					(51,000	)
				$	(315,469	)
B. Adjustment to loans, excluding covered loans, net of unearned income
To reflect estimated fair value at merger date, calculated as 5% of the West Coast loan balance. The adjustment to loans is primarily related to credit deterioration in the acquired loan portfolio. During Columbia’s due diligence on West Coast, Columbia reviewed loan information across collateral types and geographic distributions. Columbia applied traditional examination methodologies to arrive at the fair value adjustment.				$	(74,538	)
C. Adjustment to allowance for loan and lease losses
To remove West Coast allowance at merger date as the credit risk is contemplated in the fair value adjustment in adjustment B above.				$	(31,457	)
D. Adjustment to premises and equipment
To reflect estimated fair value of West Coast properties at merger date, based on third-party estimates. The estimated useful life of these properties is 39 years.				$	15,000
E. Adjustment to goodwill
To reflect the goodwill associated with the West Coast merger.				$	182,409
F. Adjustment to core deposit intangible, net
To record the estimated fair value of acquired identifiable intangible assets, calculated as 1% of West Coast core deposits. Core deposits were identified as the demand, savings, money market accounts and certificates of deposit under $100,000. Although a core deposit study was not performed for the West Coast merger, the fair value adjustment of 1% was determined to be appropriate based on the valuation methodology utilized for Columbia’s prior acquisitions taken in conjunction with a review of West Coast’s historical deposit trends. A more detailed analysis will be completed upon closing of the merger. The acquired core deposit intangible will be amortized over 10 years using a sum-of-the-years-digits method. The estimated 10 year life was validated through review of the core deposit intangible lives utilized by our industry peers. The lives utilized by industry peers ranged from 5.5 to 15 years with an average of 9.25 years. Columbia felt the resiliency exhibited by West Coast’s deposit base over the past 5 years warranted a higher life than the average estimated useful life.				$	15,561

 

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G. Adjustment to other assets
To reflect deferred tax asset created in the merger						$	17,414
Calculated as follows:
Adjustment to loans		$	74,538
Adjustment to allowance for loan and lease losses			(31,457	)
Adjustment to other liabilities			6,600
Adjustment to deposits			74
Subtotal for fair value adjustments			49,755
Calculated deferred tax asset at Columbia’s estimated statutory rate of 35%		$	17,414
H. Adjustment to deposits
To reflect estimated fair value at merger date based on current market rates for similar products. This adjustment will be accreted into income over the estimated lives of the deposits, which is less than one year.						$	74
I. Adjustment to junior subordinated debentures
To reflect redemption of junior subordinated debentures						$	(51,000	)
J. Adjustments to other liabilities
To reflect liability for estimated change in control payments						$	6,600
To reflect deferred tax liability created in the merger							10,696
						$	17,296
The deferred tax liability is calculated as follows:
Adjustment to premises and equipment		$	15,000
Adjustment to core deposit intangible, net			15,561
Subtotal for fair value adjustments			30,561
Calculated deferred tax liability at Columbia’s estimated statutory rate of 35%		$	10,696
K. Adjustment to preferred stock
To eliminate historical West Coast preferred stock						$	(21,124	)
L. Adjustments to common stock
To eliminate historical West Coast common stock		$	(231,766	)
To reflect the issuance of Columbia common stock to West Coast shareholders			241,460
		$	9,694
M. Adjustment to retained earnings
To eliminate historical West Coast retained earnings		$	(71,692	)
N. Adjustment to accumulated other comprehensive income
To eliminate historical West Coast accumulated other comprehensive income		$	(11,414	)

 

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Income Statements
(dollars in thousands
		Nine Months Ended September 30, 2012				Year Ended December 31, 2011
O. Adjustment to loan interest income
To reflect accretion of loan discount resulting from loan fair value pro forma adjustment based on weighted average remaining life of six years		$	9,317			$	12,423
P. Adjustment to deposit interest expense
To reflect amortization of deposit premium resulting from deposit fair value pro forma adjustment H based on weighted average life of time deposits being under 1 year.		$	—			$	74
Q. Adjustment to occupancy
To reflect additional depreciation expense resulting from premises and equipment pro forma adjustment based on estimated useful life of 39 years		$	288			$	384
R. Adjustment to legal and professional
To remove direct, incremental costs of the merger incurred by Columbia and West Coast.		$	(1,709	)		$	—
S. Adjustment to amortization of intangibles
To reflect amortization of acquired intangible assets based on amortization period of 10 years and using the sum-of-the-years-digits method of amortization		$	1,910			$	2,829
T. Adjustment to income tax provision
To reflect the income tax effect of pro forma adjustments O-S at Columbia’s estimated statutory tax rate of 35%		$	3,090			$	3,198

 

U. Adjusted to weighted average number of common shares outstanding						$	(6,267	)		$	(6,197	)
Adjustment to nine months ended September 30, 2012 calculated as follows:
Removal of West Coast weighted average number of common shares outstanding for the nine months ended September 30, 2012			(19,077	)
Columbia shares issued to West Coast shareholders			12,810
Adjustment to weighted average number of common shares outstanding for the nine months ended September 30, 2012			(6,267	)
Adjustment to year ended December 31, 2011 calculated as follows:
Removal of West Coast weighted average number of common shares outstanding for the year ended December 31, 2011			(19,007	)
Columbia shares issued to West Coast shareholders			12,810
Adjustment to weighted average number of common shares outstanding for the year ended December 31, 2011			(6,197	)

 

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						Nine Months Ended September 30, 2012				Year Ended December 31, 2011
V. Adjustment to weighted average number of diluted common shares outstanding						$	(7,415	)		$	(7,130	)
Adjustment to nine months ended September 30, 2012 calculated as follows:
Removal of West Coast weighted average number of diluted common shares outstanding for the nine months ended September 30, 2012			(20,225	)
Columbia shares issued to West Coast shareholders			12,810
Adjustment to weighted average number of diluted common shares outstanding for the nine months ended September 30, 2012			(7,415	)
Adjustment to year ended December 31, 2011 calculated as follows:
Removal of West Coast weighted average number of diluted common shares outstanding for the year ended December 31, 2011			(19,940	)
Columbia shares issued to West Coast shareholders			12,810
Adjustment to weighted average number of diluted common shares outstanding for the year ended December 31, 2011			(7,130	)

Note 5—Preliminary Purchase Accounting Allocation

The unaudited pro forma condensed combined financial information reflects the issuance of approximately 12,809,525 shares of Columbia common stock totaling approximately $241.5 million as well as cash consideration of approximately $264.5 million. The merger will be accounted for using the acquisition method of accounting; accordingly Columbia’s cost to acquire West Coast will be allocated to the assets (including identifiable intangible assets) and liabilities of West Coast at their respective estimated fair values as of the merger date. Accordingly, the pro forma purchase price was preliminarily allocated to the assets acquired and the liabilities assumed based on their estimated fair values as summarized in the following table.

 

		September 30, 2012
		(in thousands)
Total pro forma purchase price		$	505,929
Fair value of assets acquired:
Cash and cash equivalents		$	50,335
Securities available for sale at fair value			792,657
Federal Home Loan Bank stock at cost			12,040
Loans, net of unearned income			1,416,229
Premises and equipment			37,672
Other real estate owned			21,939
Goodwill			182,409
Core deposit intangible			15,561
Other assets			83,441
Total assets acquired		$	2,612,283
Fair value of liabilities assumed:
Deposits		$	1,929,366
FHLB advances			127,900
Other liabilities			49,088
Total liabilities assumed			2,106,354
Fair value of net assets acquired		$	505,929

 

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COMPARATIVE PER SHARE DATA OF COLUMBIA (UNAUDITED)

Presented below for Columbia and West Coast is historical, unaudited pro forma combined and pro forma equivalent per share financial data as of and for the year ended December 31, 2011 and as of and for the nine months ended September 30, 2012. The information presented below should be read together with the historical consolidated financial statements of Columbia and West Coast, including the related notes, filed by Columbia and West Coast, as applicable, with the SEC and incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information.”

The unaudited pro forma and pro forma per equivalent share information gives effect to the merger as if the merger had been effective on December 31, 2011 or September 30, 2012 in the case of the book value data, and as if the merger had been effective as of January 1, 2011 in the case of the earnings per share and the cash dividends data. The unaudited pro forma data combines the historical results of West Coast into Columbia’s consolidated statement of income. While certain adjustments were made for the estimated impact of fair value adjustments and other acquisition-related activity, they are not indicative of what could have occurred had the acquisition taken place on January 1, 2011.

The unaudited pro forma adjustments are based upon available information and certain assumptions that Columbia management believes are reasonable. The unaudited pro forma data, while helpful in illustrating the financial characteristics of the combined company under one set of assumptions, does not reflect the impact of factors that may result as a consequence of the merger or consider any potential impacts of current market conditions or the merger on revenues, expense efficiencies, asset dispositions, among other factors, nor the impact of possible business model changes. As a result, unaudited pro forma data is presented for illustrative purposes only and does not represent an attempt to predict or suggest future results. Upon completion of the merger, the operating results of West Coast will be reflected in the consolidated financial statements of Columbia on a prospective basis.

 

		Columbia Historical				West Coast Historical				Pro Forma Combined				Per Equivalent West Coast Share (1)
For the year ended December 31, 2011:
Basic earnings per share		$	1.22			$	1.65			$	1.69			$	0.94
Diluted earnings per share		$	1.21			$	1.58			$	1.69			$	0.94
Cash dividends declared (2)		$	0.27			$	—			$	0.27			$	0.15
Book value per share as of December 31, 2011		$	19.23			$	15.20			$	18.72			$	10.44
For the nine months ended September 30, 2012:
Basic earnings per share		$	0.82			$	0.87			$	1.08			$	0.60
Diluted earnings per share		$	0.82			$	0.82			$	1.08			$	0.60
Cash dividends declared (2)		$	0.89			$	0.05			$	0.89			$	0.50
Book value per share as of September 30, 2012		$	19.20			$	16.32			$	19.11			$	10.66

 

(1)	Reflects West Coast shares at the exchange ratio of 0.5576

(2)	Pro forma combined cash dividends declared are based only upon Columbia’s historical amounts

 

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MARKET PRICES, DIVIDENDS AND OTHER DISTRIBUTIONS

Stock Prices

The table below sets forth, for the calendar quarters indicated, the high and low closing sales price per share of Columbia common stock and West Coast common stock, which trade on The Nasdaq Global Select Market under the symbols “COLB” and “WCBO,” respectively. As of [                    ], 2012, there were approximately [    ] beneficial holders of Columbia’s common stock and approximately [    ] beneficial holders of West Coast’s common stock.

 

		Columbia Common Stock								West Coast Common Stock
		High				Low				High				Low
2010
First Quarter		$	22.60			$	16.03			$	15.00			$	10.25
Second Quarter		$	24.96			$	18.17			$	17.20			$	12.75
Third Quarter		$	19.97			$	15.91			$	13.75			$	10.30
Fourth Quarter		$	21.99			$	17.00			$	14.70			$	12.25
2011
First Quarter		$	22.14			$	17.91			$	17.90			$	14.55
Second Quarter		$	19.95			$	16.56			$	18.25			$	15.00
Third Quarter		$	18.14			$	14.01			$	18.03			$	12.96
Fourth Quarter		$	19.76			$	13.46			$	16.74			$	13.75
2012
First Quarter		$	23.31			$	19.99			$	19.56			$	15.74
Second Quarter		$	23.42			$	17.39			$	20.11			$	18.13
Third Quarter		$	19.65			$	17.48			$	22.47			$	19.09
Fourth Quarter (1)		$				$				$				$

 

(1)	Through [                    ], 2012

 

		Columbia Common Stock				West Coast Common Stock
September 25, 2012 (1)		$	18.85			$	20.18
[                    ], 2012 (2)		$	[	]		$	[	]

 

(1)	The last trading day before the public announcement of the signing of the merger agreement.

(2)	The last practicable date before the date of this joint proxy statement/prospectus.

Dividends and Other Distributions

Columbia declared a quarterly dividend with respect to its common stock for the quarter ended June 30, 2012 of $0.09 per share, and a concurrent special dividend of $0.21 per share. On April 25, 2012, Columbia declared a quarterly cash dividend of $0.08 per share and a special one-time cash dividend of $0.14 per share. On January 26, 2012, Columbia declared a quarterly cash dividend of $0.08 per share and a special, one-time cash dividend of $0.29 per share. For the quarter ended December 31, 2011, the quarterly dividend was $0.08 per share, with a concurrent special dividend of $0.05 per share. Quarterly dividends for the first three quarters of 2011 were $0.03 per share, $0.05 per share, and $0.06 per share, respectively. In 2010, Columbia declared quarterly dividends of $0.01 per share.

On September 25, 2012, West Coast announced a quarterly cash dividend of $0.05 per outstanding share of common stock and $0.50 per outstanding share of Series B Preferred Stock (which was based on the amount that would have been paid if such shares of Series B Preferred Stock had been converted to common stock prior to payment of the dividend). West Coast did not pay dividends with respect to its common stock during 2010, 2011 or the first two quarters of 2012.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document, including information included or incorporated by reference in this document may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, (i) statements about the benefits of the merger, including future financial and operating results, cost savings, enhancements to revenue and accretion to reported earnings that may be realized from the merger; (ii) statements about our respective plans, objectives, expectations and intentions and other statements that are not historical facts; and (iii) other statements identified by words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” or words of similar meaning. These forward-looking statements are based on current beliefs and expectations of Columbia’s and West Coast’s managements, and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Columbia’s and West Coast’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.

The following potential factors, among others, could cause actual results to differ materially from the anticipated results or other expectations in the forward-looking statements:

 

•

the merger may not close when expected or at all because required regulatory, shareholder or other approvals and other conditions to closing are not received on a timely basis or at all;

 

•

Columbia’s stock price could change, before closing of the merger, including as a result of the financial performance of West Coast prior to closing, or more generally due to broader stock market movements, and the performance of financial companies and peer group companies;

 

•

benefits from the merger may not be fully realized or may take longer to realize than expected, including as a result of changes in general economic and market conditions, interest and exchange rates, monetary policy, laws and regulations and their enforcement, and the degree of competition in the geographic and business areas in which West Coast operates;

 

•

West Coast’s business may not be integrated into Columbia’s successfully, or such integration may take longer to accomplish than expected;

 

•

the anticipated growth opportunities and cost savings from the merger may not be fully realized or may take longer to realize than expected;

 

•

operating costs, customer losses and business disruption following the merger, including adverse developments in relationships with employees, may be greater than expected; and

 

•

management time and effort may be diverted to the resolution of merger-related issues.

Additional factors that could cause actual results to differ materially from those expressed in the forward-looking statements are discussed in Columbia’s and West Coast’s reports filed with the SEC.

All subsequent written and oral forward-looking statements concerning the proposed transaction or other matters attributable to Columbia or West Coast or any person acting on behalf of Columbia or West Coast are expressly qualified in their entirety by the cautionary statements above. Neither Columbia nor West Coast undertakes any obligation to update any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

 

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THE MERGER

The following is a discussion of the merger and the material terms of the merger agreement between Columbia and West Coast. You are urged to read carefully the merger agreement in its entirety, a copy of which is attached as Appendix A to this document and incorporated by reference herein. This summary may not contain all of the information about the merger agreement that is important to you. We encourage you to read the merger agreement carefully and in its entirety. Factual information about Columbia and West Coast can be found elsewhere in this joint proxy statement/prospectus and in the public filings Columbia and West Coast make with the SEC, as described in the section entitled “Where You Can Find More Information.”

Terms of the Merger

Transaction Structure

Columbia’s and West Coast’s boards of directors have unanimously approved and adopted the merger agreement. The merger agreement provides for the acquisition of West Coast by Columbia through the merger of a direct wholly-owned subsidiary of Columbia to be incorporated prior to the closing of the merger, with and into West Coast, with West Coast continuing as the surviving corporation. As soon as reasonably practicable following the merger, and as part of a single integrated transaction, the surviving corporation will be merged with and into Columbia. We refer to the merger of the wholly-owned Columbia subsidiary with and into West Coast as the “merger,” the merger of the surviving corporation with and into Columbia as the “second step merger,” and the two mergers together as the “mergers.”

 

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Merger Consideration

In the merger, West Coast shareholders will have the right, with respect to each of their shares of West Coast common stock, to elect to receive, subject to proration and adjustment as described below, either cash, stock, or a unit consisting of a mix of cash and stock (with the percentage of cash comprising such unit equal to the percentage of the total consideration represented by cash), in an amount equal to your pro rata share (taking into account Class C Warrants and in-the-money stock options on an as-exercised basis and shares of common stock issuable upon conversion of Series B Preferred Stock (including shares of Series B Preferred Stock issuable upon exercise of Class C Warrants)) of the total consideration, which consists of $264,468,650 in cash (which may be increased in certain circumstances described below) plus the aggregate proceeds received by West Coast from the exercise of stock options between the execution of the merger agreement and the effective time of the merger (less any amounts paid to holders of West Coast stock options exercised during such period), plus the product of 12,809,525 shares of Columbia common stock multiplied by the volume weighted average price of Columbia common stock for the twenty trading day period beginning on the twenty fifth day before the effective time of the merger (the “Purchaser Average Closing Price”). The following table sets forth information concerning the approximate aggregate and per share consideration that would be payable in the merger based on different Purchaser Average Closing Prices. The table does not reflect the fact that cash will be paid instead of fractional shares, and does not account for any adjustments that may be made to the total cash amount in certain circumstances.

 

		Purchaser Average Closing Price				Total Stock Consideration (in millions)				Total Cash Amount (in millions)				Aggregate Consideration (in millions)				Per Share Consideration
		$	17.00			$	217.8			$	264.5			$	482.2			$	22.05
		$	17.25			$	221.0			$	264.5			$	485.4			$	22.19
		$	17.50			$	224.2			$	264.5			$	488.6			$	22.33
		$	17.75			$	227.4			$	264.5			$	491.8			$	22.47
		$	18.00			$	230.6			$	264.5			$	495.0			$	22.61
		$	18.25			$	233.8			$	264.5			$	498.2			$	22.75
		$	18.50			$	237.0			$	264.5			$	501.4			$	22.89
		$	18.75			$	240.2			$	264.5			$	504.6			$	23.03
As of 9/25/12		$	18.85			$	241.5			$	264.5			$	505.9			$	23.08
		$	19.00			$	243.4			$	264.5			$	507.8			$	23.17
		$	19.25			$	246.6			$	264.5			$	511.1			$	23.31
		$	19.50			$	249.8			$	264.5			$	514.3			$	23.44
		$	19.75			$	253.0			$	264.5			$	517.5			$	23.58
		$	20.00			$	256.2			$	264.5			$	520.7			$	23.72
		$	20.25			$	259.4			$	264.5			$	523.9			$	23.86
		$	20.50			$	262.6			$	264.5			$	527.1			$	24.00
		$	20.75			$	265.8			$	264.5			$	530.3			$	24.14
		$	21.00			$	269.0			$	264.5			$	533.5			$	24.28

If the effective time of the merger does not occur on or prior to the later of (i) six months from the execution of the merger agreement (the “Six Months Date”) and (ii) April 1, 2013, and if West Coast’s consolidated total stockholders’ equity (subject to adjustment for certain unaccrued fees and expenses incurred in connection with the merger) exceeds $328,000,000, the aggregate merger consideration will be increased by an amount in cash equal to West Coast’s earnings during the period from the Six Months Date to the effective time of the merger less the amount of quarterly cash dividends paid by West Coast during such period. In addition, if the Purchaser Average Closing Price declined by more than 17.5% from the closing price of Columbia common stock on the day of the execution of the merger agreement, and Columbia’s common stock underperforms the Keefe Bruyette & Wood (KBW) Regional Banking Index by more than 17.5% during such period, West Coast may terminate the merger agreement unless Columbia contributes sufficient additional cash consideration to offset any reduction in the value of the merger consideration attributable to such decline, as discussed in greater detail

 

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below. We sometimes refer to $264,468,650, plus the aggregate proceeds received by West Coast from the exercise of stock options between the execution of the merger agreement and the effective time of the merger (less any amounts paid to holders of West Coast stock options exercised during such period), plus any additional cash consideration paid by Columbia pursuant to the two preceding sentences, as the total cash amount. We sometimes refer to the product of 12,809,525 multiplied by the Purchaser Average Closing Price as the total stock consideration.

If you are a West Coast shareholder, whether you receive cash or Columbia common stock or a unit consisting of a mix of cash and stock as merger consideration, the value of the merger consideration that you will receive will fluctuate with the market price of Columbia common stock and will depend on the volume weighted average price of Columbia common stock for the twenty trading day period beginning on the twenty fifth day before the completion of the merger, and, if you receive Columbia common stock as merger consideration, on the market price of Columbia common stock when you receive the shares of Columbia common stock.

Cash Election

The merger agreement provides that each West Coast shareholder who makes a valid cash election will have the right to receive, in exchange for each share of West Coast common stock, subject to proration and adjustment as described below, an amount in cash equal its pro rata share (taking into account Class C Warrants and in-the-money stock options on an as-exercised basis and shares of common stock issuable upon conversion of Series B Preferred Stock (including shares of Series B Preferred Stock issuable upon exercise of Class C Warrants)) of the aggregate consideration, which consists of the total cash amount plus the total stock consideration (both as described above). This amount, which is referred to as the per share cash consideration, or the per share consideration, is calculated as the quotient obtained by dividing (a) the sum of (i) the aggregate consideration (which is equal to the total cash amount plus the total stock consideration) and (ii) the warrant and option proceeds (as defined below), by (b) the aggregate number of shares of West Coast common stock outstanding (including restricted shares, shares issuable upon conversion of Series B Preferred Stock (including shares of Series B Preferred Stock issuable upon exercise of West Coast’s Class C Warrants) and shares issuable upon exercise of West Coast stock options that have an exercise price below the per share consideration). For purposes of this calculation, the warrant and option proceeds are defined as the sum of (i) $24,000,000 and (ii) the aggregate proceeds that would be received by West Coast from the exercise of all West Coast stock options that have an exercise price below the per share consideration. For example, based on the volume weighted average price of Columbia common stock during the twenty trading day period ending [    ], the last practicable date before the printing of this document, and assuming no adjustments to the aggregate merger consideration are required pursuant to the discussion above concerning the delay in the completion of the merger or a greater than 17.5% decline in Columbia’s stock price, each West Coast common shareholder who receives cash for such shareholder’s shares would have the right to receive approximately $[        ] per share in cash. The aggregate amount of cash that Columbia has agreed to pay in the merger is fixed at the total cash amount and as a result, even if a West Coast shareholder makes a cash election, that holder may nevertheless receive a mix of cash and stock. If a West Coast shareholder makes a valid cash election, such holder’s shares are referred to as cash election shares.

Stock Election

The merger agreement provides that each West Coast shareholder who makes a valid stock election will have the right to receive, in exchange for each share of West Coast common stock, subject to proration and adjustment as described below, a number of shares of Columbia common stock equal to the exchange ratio (as defined below). We refer to this as the per share stock consideration. The exchange ratio is calculated as the quotient (rounded to the nearest ten-thousandth) obtained by dividing (a) the per share consideration by (b) the Purchaser Average Closing Price. No fractional shares of Columbia common stock will be issued in the merger, and a holder of West Coast common stock who would otherwise be entitled to a fractional share of Columbia

 

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common stock will receive cash in lieu thereof. Because the aggregate amount of cash that will be paid in the merger is fixed at the total cash amount, in the event that the total cash amount is undersubscribed, even if a West Coast shareholder makes a stock election, that holder may nevertheless receive a mix of cash and stock. If a West Coast shareholder makes a valid stock election, such holder’s shares are referred to as stock election shares.

Mixed Election

The merger agreement provides that each West Coast shareholder who makes a valid mixed election will have the right to receive the per share stock consideration in respect of the portion of such holder’s shares equal to the stock percentage (as defined below), rounded to the nearest whole share, and the per share cash consideration in respect of the portion of such holder’s shares equal to the cash percentage (as defined below), rounded to the nearest whole share. The cash percentage is equal to the total cash amount payable by Columbia as a percentage of the aggregate consideration (the value of the total cash amount and the total stock consideration payable by Columbia), which will fluctuate with the price of Columbia common stock during the during the twenty trading day period beginning on the twenty fifth day before the effective time of the merger, and the stock percentage is equal to one (1) minus the cash percentage. If a West Coast shareholder makes a valid mixed election, the shares with respect to which such holder has the right to receive the per share cash consideration are referred to as mixed cash shares and the shares with respect to which such holder has the right to receive the per share stock consideration are referred to as mixed stock shares.

Non-Election

West Coast shareholders who make no election to receive cash or shares of Columbia common stock in the merger, whose elections are not received by the exchange agent by the election deadline, or whose forms of election are improperly completed and/or are not signed will be deemed not to have made an election. West Coast shareholders not making an election may be paid in cash, Columbia common stock or a mix of cash and shares of Columbia common stock depending on, and after giving effect to, the adjustment procedures described below, the number of valid cash elections and stock elections that have been made by other West Coast shareholders, and the number of shares held by West Coast shareholders who provided notice of dissent to West Coast and do not vote in favor of the merger and who have not lost their right to dissenters’ rights (in the event that dissenters’ rights apply because shares of West Coast common stock cease to be registered on a national securities exchange, as discussed below) in accordance with the procedures and requirements of Oregon law (sometimes referred to as proposed dissenting shares). Shares of West Coast common stock with respect to which no election is deemed to have been made are referred to as no election shares.

Adjustment on a Prorated Basis

The cash and stock elections are subject to adjustment to ensure that the aggregate amount of cash that would be paid in the merger is equal to the total cash amount. As a result, even if a West Coast shareholder makes a cash election or stock election, such West Coast shareholder may nevertheless receive some stock consideration or some cash consideration, respectively.

Proration Adjustment if Cash Consideration is Oversubscribed

Shares of Columbia common stock may be issued to West Coast shareholders who make cash elections if the total cash amount is oversubscribed, meaning the aggregate cash amount that would be paid in the merger exceeds the total cash amount, in which case:

 

•

all mixed stock shares, stock election shares and no election shares will be converted into the right to receive the per share stock consideration;

 

•

all proposed dissenting shares (meaning all shares of West Coast common stock whose holders provide notice of dissent to West Coast prior to the West Coast special meeting and who do not vote in favor of the merger, in the event that dissenters’ rights apply to the merger (as discussed below)) will be deemed, for the purposes of proration, to be converted into the right to receive the per share cash consideration;

 

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•

the exchange agent will select from among the cash election shares, by a pro rata selection process, a sufficient number of shares such that the aggregate cash amount that will be paid in the merger equals as closely as practicable the total cash amount, and all shares so selected will be converted into the right to receive the per share stock consideration (such shares are referred to as stock designated shares);

 

•

a West Coast shareholder making a cash election will receive:

 

•

the per share stock consideration for such holder’s shares that are stock designated shares; and

 

•

the per share cash consideration for such holder’s remaining shares; and

 

•

all mixed cash shares will be converted into the right to receive the per share cash consideration.

Example of Oversubscription of Total Cash Amount

As an example, assuming that the Purchaser Average Closing Price was equal to $18.85, and the total cash amount is $264,468,650, then the per share consideration would be equal to approximately $23.08 and the aggregate consideration would be equal to approximately $505.9 million, consisting of approximately $264.5 million in cash and 12,809,525 shares of Columbia stock valued at approximately $241.5 million. Under these assumptions, there would be a total of 11,985,058 shares of West Coast common stock exchangeable for cash consideration and 10,942,342 shares of West Coast common stock exchangeable for stock consideration in the merger (assuming all holders of Series B Preferred Stock elect to receive merger consideration, and treating all Class C Warrants and shares of Series B Preferred Stock on a common-equivalent basis).

Assuming that:

 

•

the number of cash election shares and mixed cash shares (and proposed dissenting shares, in the event that dissenters’ rights apply) combined is equal to 14,000,000, which would require the payment of approximately $323.2 million in cash (14,000,000*$23.08) (in other words, there is only approximately $264.5 million in total cash consideration, but based on the elections received approximately $323.2 million in cash would be paid in the merger),

then a West Coast shareholder that has made a valid cash election with respect to 1,000 shares of West Coast common stock would receive the per share stock consideration with respect to 144 shares (as rounded to the nearest whole share) of West Coast common stock and the per share cash consideration with respect to the remaining 856 shares (as rounded to the nearest whole share) of West Coast common stock. Therefore, that West Coast shareholder would receive 176 shares (as rounded to the nearest whole share) of Columbia common stock and approximately $19,760 in cash (as rounded to the nearest dollar). This example does not reflect any cash that may be paid in lieu of fractional shares of Columbia common stock.

Proration Adjustment if Cash Consideration is Undersubscribed

West Coast shareholders who make stock elections may receive cash in respect of some of their shares if the total cash amount is undersubscribed, meaning the aggregate cash amount that would be paid in the merger is less than the total cash amount, in which case:

 

•

all cash election shares and mixed cash shares will be converted into the right to receive the per share cash consideration;

 

•

all proposed dissenting shares will be deemed, for the purposes of proration, to be converted into the right to receive the per share cash consideration;

 

•

the exchange agent will select first from among the no election shares and then (if necessary) from among the stock election shares, by a pro rata selection process, a sufficient number of shares such that the aggregate cash amount that will be paid in the merger equals as closely as practicable the total cash amount (such shares are referred to as cash designated shares);

 

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•

a West Coast shareholder making a stock election will receive:

 

•

the per share cash consideration for such holder’s shares that are cash designated shares; and

 

•

the per share stock consideration for such holder’s remaining shares;

 

•

all mixed stock shares and all no election shares that are not cash designated shares will be converted into the right to receive the per share stock consideration; and

 

•

all no election shares that are cash designated shares will be converted into the right to receive the per share cash consideration.

Examples of Undersubscription of Total Cash Amount

As an example, assuming that the Purchaser Average Closing Price was equal to $18.85, and the total cash amount is $264,468,650, then the per share consideration would be equal to approximately $23.08 and the aggregate consideration would be equal to approximately $505.9 million, consisting of approximately $264.5 million in cash and 12,809,525 shares of Columbia stock valued at approximately $241.5 million. Under these assumptions, there would be a total of 11,985,058 shares of West Coast common stock exchangeable for cash consideration and 10,942,342 shares of West Coast common stock exchangeable for stock consideration in the merger (assuming all holders of Series B Preferred Stock elect to receive merger consideration, and treating all Class C Warrants and shares of Series B Preferred Stock on a common-equivalent basis).

Scenario 1: Undersubscription of total cash amount and only no election shares are prorated into receiving cash consideration:

Assuming that: