Columbia Banking System Announces Second Quarter 2019 Results, and Quarterly Cash Dividend

TACOMA, Wash., July 25, 2019 /PRNewswire/ --

Columbia Banking System Logo. (PRNewsFoto/Columbia Banking System, Inc.)

Highlights

  • Record quarterly net income of $51.7 million and diluted earnings per share of $0.71, inclusive of $4.9 million of loan interest recoveries related to nonaccrual loans and $3.0 million in bank-owned life insurance benefits
  • Net interest margin of 4.40%, an increase of 8 basis points from the linked quarter
  • Net loans increased $126.2 million, or 5.92% on an annualized basis from record second quarter loan production of $400.7 million
  • Nonperforming assets to period end assets ratio improved for the sixth consecutive quarter to 0.31%
  • Repurchased 624 thousand shares of common stock during the quarter
  • Regular cash dividend declared of $0.28 per share

Hadley Robbins, President and Chief Executive Officer of Columbia Banking System and Columbia Bank COLB ("Columbia"), said today upon the release of Columbia's second quarter 2019 earnings, "We are quite pleased with the strong but disciplined loan growth in the quarter. That disciplined approach to our lending also comes through in the excellent credit quality of the portfolio at the midway point of 2019. We are confident that our focus on driving sustainable revenue growth combined with a disciplined approach to expense management will continue to drive long term shareholder value."

Balance Sheet

Total assets at June 30, 2019 were $13.09 billion, an increase of $26.4 million from the linked quarter. Loans were $8.65 billion, up $126.2 million, or 5.9% annualized, from March 31, 2019 as a result of loan originations of $400.7 million and increased seasonal line utilization partially offset by payments. Securities available for sale were $2.86 billion at June 30, 2019, a decrease of $162.9 million from $3.03 billion at March 31, 2019 as earning assets rotated into loans. Total deposits at June 30, 2019 were $10.21 billion, a decrease of $157.4 million from March 31, 2019. Core deposits comprised 96% of total deposits and were $9.77 billion at June 30, 2019, a decrease of $131.2 million from March 31, 2019. Deposit mix remained fairly consistent from March 31, 2019 with 50% noninterest-bearing and 50% interest-bearing. The average cost of total deposits for the quarter was 20 basis points, an increase of 2 basis points from the first quarter of 2019, on an actual/actual basis. For additional information regarding this calculation, see the "Net Interest Margin" section.

Clint Stein, Columbia's Executive Vice President and Chief Operating Officer, stated, "Our bankers continue to excel in a very competitive business environment by delivering record first half loan production." Mr. Stein continued, "Their performance is both a testament to their capabilities and impressive given their continued adherence to our credit disciplines."

Income Statement

Net Interest Income

Net interest income for the second quarter of 2019 was $125.1 million, an increase of $4.1 million and $8.4 million from the linked quarter and the prior year period, respectively. The increase in net interest income for the linked quarter was primarily due to $4.9 million of interest recoveries on nonaccrual loans received in the second quarter of 2019 related to two lending relationships. Partially offsetting these loan interest recoveries, interest expense on Federal Home Loan Bank ("FHLB") advances increased due to both higher average borrowings and higher average rates compared to the linked quarter. The increase in net interest income over the prior year period was primarily due to the previously mentioned loan interest recoveries. In addition, interest income on loans and taxable securities increased due to both higher average balances and higher rates. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Noninterest Income

Noninterest income was $25.6 million for the second quarter of 2019, an increase of $4.0 million from the first quarter of 2019. The linked quarter increase was principally due to $3.0 million in bank-owned life insurance ("BOLI") benefits and a $667 thousand gain on disposal of loans realized during the second quarter. Compared to the second quarter of 2018, noninterest income increased $2.0 million. The increase from the prior year period was due to the previously noted BOLI benefits and the gain on disposal of loans during the quarter, partially offset by lower card revenue during the current quarter because, as of July 1, 2018, we became subject to the interchange fee cap imposed under the Dodd-Frank Act.

Noninterest Expense

Total noninterest expense for the second quarter of 2019 was $86.7 million, an increase of $2.0 million from the first quarter of 2019. The increase in noninterest expense was a result of higher legal and professional fees and other expenses which were partially offset by a decrease in Other Real Estate Owned ("OREO") expense. The increase in professional expense was primarily due to expenses related to the on-going digital corporate initiative, while other expenses increased $1.8 million as a result of increases in off-balance sheet reserves and sponsorships during the quarter. These increases in noninterest expense were partially offset by a $705 thousand net benefit of OREO in the second quarter, due to a gain on the sale of OREO, compared to a cost of OREO of $113 thousand for the linked quarter.

Compared to the second quarter of 2018, noninterest expense increased by $2.1 million. After removing acquisition-related expenses of $2.8 million from the second quarter of 2018, year over year noninterest expense increased $4.9 million, or 6%. This increase was primarily driven by higher compensation and employee benefits and legal and professional expenses partially offset by a decrease in OREO expenses. Salary expense increased as a result of the rise in the number of employees compared to June 30, 2018. Legal and professional fees were $2.6 million higher in the second quarter of 2019 primarily due to expenses related to the digital corporate initiative. These increases in expenses were partially offset by a net benefit on OREO in the second quarter of 2019, as previously noted, compared to a net cost of $758 thousand during the second quarter of 2018.

Net Interest Margin

Beginning January 2019, our net interest margin was calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

Columbia's net interest margin (tax equivalent) for the second quarter of 2019 was 4.40%, an increase of 8 basis points and 10 basis points from the linked quarter and prior year period, respectively. The increase in the net interest margin (tax equivalent) compared to the linked quarter was driven by the previously noted $4.9 million of loan interest recoveries, or 17 basis points, partially offset by lower rates on taxable securities and higher average rates on FHLB advances. Compared to the prior year period, the increased net interest margin (tax equivalent) was driven by the previously noted interest recoveries and higher rates on the loan portfolio, partially offset by higher rates on our deposits and borrowings.

Columbia's operating net interest margin (tax equivalent)(2) was 4.38% for the second quarter of 2019, which increased 5 and 10 basis points compared to the linked quarter and the prior year period, respectively. The increases in the operating net interest margin for the current quarter compared to the linked quarter and the prior year quarter were due to the items previously noted in the preceding paragraph.

The following table shows the impact to interest income resulting from income accretion on acquired loan portfolios as well as the net interest margin and operating net interest margin:





Three Months Ended



Six Months Ended





June 30,



March 31,



December 31,



September 30,



June 30,



June 30,



June 30,





2019



2019



2018



2018



2018



2019



2018





(dollars in thousands)

Incremental accretion income due to:





























FDIC purchased credit impaired loans



$

579





$

288





$

395





$

585





$

326





$

867





$

655



Other acquired loans



2,084





1,747





2,218





2,643





2,690





3,831





6,060



Incremental accretion income



$

2,663





$

2,035





$

2,613





$

3,228





$

3,016





$

4,698





$

6,715

































Net interest margin (tax equivalent) (1)



4.40

%



4.32

%



4.36

%



4.37

%



4.30

%



4.36

%



4.29

%

Operating net interest margin (tax equivalent) (1)(2)



4.38

%



4.33

%



4.34

%



4.34

%



4.28

%



4.36

%



4.26

%



__________

(1)

Beginning January 2019, net interest margin (tax equivalent) and operating net interest margin (tax equivalent) were calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

(2)

Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.

Asset Quality

At June 30, 2019, nonperforming assets to total assets were 0.31% compared to 0.45% at March 31, 2019. Total nonperforming assets decreased $18.5 million from the linked quarter due to a decrease in both nonaccrual loans and OREO.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "I'm really proud of our bankers and their consistent disciplined approach to managing credit risk, especially our Special Credits team. The reduction in nonperforming assets combined with interest recoveries of $4.9 million made it an exemplary quarter."

The following table sets forth information regarding nonaccrual loans and total nonperforming assets:





June 30, 2019



March 31, 2019



December 31, 2018





(in thousands)

Nonaccrual loans:













Commercial business



$

23,997





$

35,577





$

35,513



Real estate:













One-to-four family residential



860





923





1,158



Commercial and multifamily residential



11,843





13,301





14,904



Total real estate



12,703





14,224





16,062



Real estate construction:













One-to-four family residential











318



Consumer



2,338





2,814





2,949



Total nonaccrual loans



39,038





52,615





54,842



OREO and other personal property owned



1,118





6,075





6,049



Total nonperforming assets



$

40,156





$

58,690





$

60,891



The following table provides an analysis of the Company's allowance for loan and lease losses:





Three Months Ended



Six Months Ended





June 30,

2019



March 31,

2019



June 30,

2018



June 30,

2019



June 30,

2018





(in thousands)

Beginning balance, loans excluding PCI loans



$

80,029





$

79,758





$

74,162





$

79,758





$

68,739



Beginning balance, PCI loans



3,245





3,611





5,665





3,611





6,907



Beginning balance



83,274





83,369





79,827





83,369





75,646



Charge-offs:





















Commercial business



(4,118)





(1,249)





(5,775)





(5,367)





(8,252)



One-to-four family residential real estate







(2)









(2)







Commercial and multifamily residential real estate



















(223)



One-to-four family residential real estate construction







(170)









(170)







Consumer



(354)





(478)





(232)





(832)





(496)



Purchased credit impaired



(815)





(1,089)





(1,235)





(1,904)





(2,578)



Total charge-offs



(5,287)





(2,988)





(7,242)





(8,275)





(11,549)



Recoveries:





















Commercial business



547





480





1,543





1,027





2,345



One-to-four family residential real estate



20





17





196





37





368



Commercial and multifamily residential real estate



33





31





640





64





799



One-to-four family residential real estate construction



661





60





14





721





33



Commercial and multifamily residential real estate construction



1













1







Consumer



178





238





270





416





530



Purchased credit impaired



872





705





927





1,577





2,151



Total recoveries



2,312





1,531





3,590





3,843





6,226



Net charge-offs



(2,975)





(1,457)





(3,652)





(4,432)





(5,323)



Provision for loan and lease losses, excluding PCI loans



251





1,344





4,550





1,595





11,525



Provision (recapture) for loan and lease losses, PCI loans



(33)





18





(575)





(15)





(1,698)



Provision for loan and lease losses



218





1,362





3,975





1,580





9,827



Ending balance, loans excluding PCI loans



77,248





80,029





75,368





77,248





75,368



Ending balance, PCI loans



3,269





3,245





4,782





3,269





4,782



Ending balance



$

80,517





$

83,274





$

80,150





$

80,517





$

80,150



The allowance for loan and lease losses to period end loans was 0.93% at June 30, 2019 compared to 0.98% at March 31, 2019. For the second quarter of 2019, Columbia recorded a net provision for loan and lease losses of $218 thousand compared to a net provision of $1.4 million for the linked quarter and a net provision of $4.0 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter consisted of $251 thousand of provision expense for loans, excluding PCI loans, and a provision recapture of $33 thousand for PCI loans.

Organizational Update

During the first six months of 2019, the Bank received the following accolades:

  • For the 13th consecutive year, named as one of Washington's Best Workplaces by Puget Sound Business Journal;
  • Winner of the 2018 Corporate Citizenship Award for midsize companies in Washington state from the Puget Sound Business Journal;
  • Selected as Best Bank and Best Large Business in The Best of South Sound reader's choice poll for 2019 by South Sound Magazine;
  • Received the Corporate Award of the Year for work with Small Business Association Loans to minority owned businesses from the Oregon Association of Minority Entrepreneurs;
  • Selected as one of the Best Banks in the Best of The Mid-Valley, in the annual reader's poll by the Salem Statesman Journal;
  • Columbia Bank's Board of Directors was awarded the Governance Award for their service to the Bank and the community by Seattle Business Magazine;
  • Recognized as one of the Best Places to Work in Idaho by Populus Marketing Research;
  • Awarded the 2018 National Association of Secretaries of State Medallion for outstanding work to improve lives in Washington communities from The State of Washington Secretary of State's Office, and
  • Selected as one of America's Best Banks of 2019 among the nation's 100 largest publicly traded banks and thrifts by Forbes.

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.28 per common share on August 21, 2019 to shareholders of record as of the close of business on August 7, 2019.

Conference Call Information

Columbia's management will discuss the second quarter 2019 financial results on a conference call scheduled for Thursday, July 25, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT). Interested parties may join the live-streamed event by using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~072519

The conference call can also be accessed on Thursday, July 25, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT) by calling 888-286-8956; Conference ID: 5179848.

A replay of the call can be accessed beginning Friday, July 26, 2019 using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~072519

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank with locations throughout Washington, Oregon and Idaho. For the 13th consecutive year, the bank was named in 2019 as one of Puget Sound Business Journal's "Washington's Best Workplaces." For the 8th consecutive year, Columbia was included in the 2019 Forbes America's Best Banks list.

More information about Columbia can be found on its website at www.columbiabank.com.

Note Regarding Forward-Looking Statements

This news release includes 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, descriptions of Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words "will," "believe," "expect," "intend," "should," and "anticipate" or the negative of these words or words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risks and uncertainties, many of which are outside our control, that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, include the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q, (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following:  (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) costs or difficulties related to the integration of acquisitions may be greater than expected; (5) competitive pressure among financial institutions may increase significantly; (6) failure to maintain effective internal controls over financial reporting or disclosure controls and procedures may adversely affect our business; (7) reliance on and cost of technology may increase; and (8) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

Contacts:

Hadley S. Robbins,



President and



Chief Executive Officer







Gregory A. Sigrist,



Executive Vice President and



Chief Financial Officer







Investor Relations



InvestorRelations@columbiabank.com



253-305-1921

 

CONSOLIDATED BALANCE SHEETS







Columbia Banking System, Inc.



Unaudited













June 30,



March 31,



December 31,















2019



2019



2018















(in thousands)

ASSETS





Cash and due from banks













$

224,327





$

178,591





$

260,180



Interest-earning deposits with banks













34,332





33,482





17,407



Total cash and cash equivalents













258,659





212,073





277,587



Debt securities available for sale at fair value















2,864,418





3,027,270





3,167,448



Federal Home Loan Bank ("FHLB") stock at cost















29,800





25,600





25,960



Loans held for sale













12,189





4,017





3,849



Loans, net of unearned income













8,646,990





8,520,798





8,391,511



Less: allowance for loan and lease losses















80,517





83,274





83,369



Loans, net













8,566,473





8,437,524





8,308,142



Interest receivable













46,878





46,835





45,323



Premises and equipment, net













167,295





168,139





168,788



Other real estate owned













1,118





6,075





6,019



Goodwill













765,842





765,842





765,842



Other intangible assets, net













40,540





43,189





45,937



Other assets













337,596





327,872





280,250



Total assets













$

13,090,808





$

13,064,436





$

13,095,145



LIABILITIES AND SHAREHOLDERS' EQUITY













Deposits:























Noninterest-bearing













$

5,082,219





$

5,106,568





$

5,227,216



Interest-bearing













5,129,380





5,262,441





5,230,910



Total deposits













10,211,599





10,369,009





10,458,126



FHLB advances













495,496





390,510





399,523



Securities sold under agreements to repurchase















50,226





23,018





61,094



Subordinated debentures













35,370





35,416





35,462



Other liabilities













164,479





157,863





107,291



Total liabilities













10,957,170





10,975,816





11,061,496



Commitments and contingent liabilities

























June 30,



March 31,



December 31,















2019



2019



2018















(in thousands)













Preferred stock (no par value)























Authorized shares

2,000





2,000





2,000















Common stock (no par value)























Authorized shares

115,000





115,000





115,000















Issued

73,548





73,565





73,249















Outstanding

72,924





73,565





73,249





1,644,922





1,642,977





1,642,246



Retained earnings













463,429





442,597





426,708



Accumulated other comprehensive income (loss)













47,150





3,046





(35,305)



Treasury stock at cost

624













(21,863)











Total shareholders' equity













2,133,638





2,088,620





2,033,649



Total liabilities and shareholders' equity















$

13,090,808





$

13,064,436





$

13,095,145



 



CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.



Three Months Ended



Six Months Ended

Unaudited



June 30,



March 31,



June 30,



June 30,



June 30,





2019



2019



2018



2019



2018

Interest Income



(in thousands except per share amounts)

Loans



$

116,585





$

108,416





$

105,412





$

225,001





$

208,439



Taxable securities



15,918





17,415





11,923





33,333





24,631



Tax-exempt securities



2,712





2,969





3,063





5,681





6,127



Deposits in banks



207





88





151





295





496



Total interest income



135,422





128,888





120,549





264,310





239,693



Interest Expense





















Deposits



4,976





4,498





2,572





9,474





5,081



FHLB advances



4,708





2,685





815





7,393





1,385



Subordinated debentures



468





468





468





936





936



Other borrowings



154





215





20





369





136



Total interest expense



10,306





7,866





3,875





18,172





7,538



Net Interest Income



125,116





121,022





116,674





246,138





232,155



Provision for loan and lease losses



218





1,362





3,975





1,580





9,827



Net interest income after provision for loan and lease losses



124,898





119,660





112,699





244,558





222,328



Noninterest Income





















Deposit account and treasury management fees



9,035





8,980





8,683





18,015





17,423



Card revenue



3,763





3,662





6,616





7,425





12,429



Financial services and trust revenue



3,425





2,957





3,219





6,382





5,949



Loan revenue



3,596





2,389





3,054





5,985





6,240



Bank owned life insurance



1,597





1,519





1,712





3,116





3,138



Investment securities gains (losses), net



285





1,847





(33)





2,132





(11)



Other



3,947





342





441





4,289





1,667



Total noninterest income



25,648





21,696





23,692





47,344





46,835



Noninterest Expense





















Compensation and employee benefits



52,015





52,085





48,949





104,100





99,519



Occupancy



8,712





8,809





9,276





17,521





19,397



Data processing



4,601





4,669





5,221





9,270





10,491



Legal and professional fees



6,554





4,573





4,171





11,127





7,408



Amortization of intangibles



2,649





2,748





3,088





5,397





6,276



Business and Occupation ("B&O") taxes (1)



1,411





1,876





1,459





3,287





2,776



Advertising and promotion



870





974





1,622





1,844





3,051



Regulatory premiums



956





984





937





1,940





1,874



Net cost (benefit) of operation of other real estate owned



(705)





113





758





(592)





759



Other (1)



9,665





7,869





9,162





17,534





19,079



Total noninterest expense



86,728





84,700





84,643





171,428





170,630



Income before income taxes



63,818





56,656





51,748





120,474





98,533



Provision for income taxes



12,094





10,785





9,999





22,879





16,814



Net Income



$

51,724





$

45,871





$

41,749





$

97,595





$

81,719



Earnings per common share





















Basic



$

0.71





$

0.63





$

0.57





$

1.33





$

1.12



Diluted



$

0.71





$

0.63





$

0.57





$

1.33





$

1.12



Dividends declared per common share - regular



$

0.28





$

0.28





$

0.26





$

0.56





$

0.48



Dividends declared per common share - special



0.14





0.14









0.28







   Dividends declared per common share - total



$

0.42





$

0.42





$

0.26





$

0.84





$

0.48



Weighted average number of common shares outstanding



72,451





72,521





72,385





72,486





72,343



Weighted average number of diluted common shares outstanding



72,451





72,524





72,390





72,487





72,347





__________

(1)

Beginning the first quarter of 2019, B&O taxes were reported separately from other taxes, licenses and fees, which are now reported under "other noninterest expense." Prior periods have been reclassified to conform to current period presentation.

 

FINANCIAL STATISTICS





Columbia Banking System, Inc.



Three Months Ended



Six Months Ended

Unaudited



June 30,



March 31,



June 30,



June 30,



June 30,





2019



2019



2018



2019



2018

Earnings



(dollars in thousands except per share amounts)

Net interest income



$

125,116





$

121,022





$

116,674





$

246,138





$

232,155



Provision for loan and lease losses



$

218





$

1,362





$

3,975





$

1,580





$

9,827



Noninterest income



$

25,648





$

21,696





$

23,692





$

47,344





$

46,835



Noninterest expense



$

86,728





$

84,700





$

84,643





$

171,428





$

170,630



Acquisition-related expense (included in noninterest expense)



$





$





$

2,822





$





$

7,087



Net income



$

51,724





$

45,871





$

41,749





$

97,595





$

81,719



Per Common Share





















Earnings (basic)



$

0.71





$

0.63





$

0.57





$

1.33





$

1.12



Earnings (diluted)



$

0.71





$

0.63





$

0.57





$

1.33





$

1.12



Book value



$

29.26





$

28.39





$

26.83





$

29.26





$

26.83



Tangible book value per common share (1)



$

18.20





$

17.39





$

15.66





$

18.20





$

15.66



Averages





















Total assets



$

13,096,413





$

13,048,041





$

12,529,540





$

13,072,360





$

12,566,138



Interest-earning assets



$

11,606,727





$

11,561,627





$

11,052,807





$

11,584,301





$

11,087,587



Loans



$

8,601,819





$

8,406,664





$

8,389,230





$

8,504,781





$

8,369,097



Securities, including equity securities and FHLB stock



$

2,969,749





$

3,140,201





$

2,628,292





$

3,054,504





$

2,655,122



Deposits



$

10,186,371





$

10,271,016





$

10,264,822





$

10,228,459





$

10,299,459



Interest-bearing deposits



$

5,174,875





$

5,226,396





$

5,390,869





$

5,200,493





$

5,398,259



Interest-bearing liabilities



$

5,841,425





$

5,802,965





$

5,611,055





$

5,822,301





$

5,619,408



Noninterest-bearing deposits



$

5,011,496





$

5,044,620





$

4,873,953





$

5,027,966





$

4,901,200



Shareholders' equity



$

2,096,157





$

2,044,832





$

1,954,552





$

2,070,636





$

1,951,928



Financial Ratios





















Return on average assets



1.58

%



1.41

%



1.33

%



1.49

%



1.30

%

Return on average common equity



9.87

%



8.97

%



8.54

%



9.43

%



8.37

%

Return on average tangible common equity (1)



16.71

%



15.57

%



15.57

%



16.15

%



15.33

%

Average equity to average assets



16.01

%



15.67

%



15.60

%



15.84

%



15.53

%

Shareholders equity to total assets



16.30

%



15.99

%



15.56

%



16.30

%



15.56

%

Tangible common shareholders' equity to tangible assets (1)



10.80

%



10.44

%



9.71

%



10.80

%



9.71

%

Net interest margin (tax equivalent) (2)



4.40

%



4.32

%



4.30

%



4.36

%



4.29

%

Efficiency ratio (tax equivalent) (3)



56.57

%



58.33

%



59.29

%



57.43

%



60.16

%

Operating efficiency ratio (tax equivalent) (1)



56.34

%



57.54

%



56.02

%



56.93

%



56.80

%

Noninterest expense ratio



2.65

%



2.60

%



2.70

%



2.62

%



2.72

%

Core noninterest expense ratio (1)



2.65

%



2.60

%



2.61

%



2.62

%



2.60

%





































June 30,



March 31,



December 31,









Period end



2019



2019



2018









Total assets



$

13,090,808





$

13,064,436





$

13,095,145











Loans, net of unearned income



$

8,646,990





$

8,520,798





$

8,391,511











Allowance for loan and lease losses



$

80,517





$

83,274





$

83,369











Securities, including equity securities and FHLB stock



$

2,894,218





$

3,052,870





$

3,193,408











Deposits



$

10,211,599





$

10,369,009





$

10,458,126











Core deposits



$

9,767,776





$

9,898,982





$

9,973,840











Shareholders' equity



$

2,133,638





$

2,088,620





$

2,033,649











Nonperforming assets





















Nonaccrual loans



$

39,038





$

52,615





$

54,842











Other real estate owned ("OREO") and other personal property owned ("OPPO")



1,118





6,075





6,049











Total nonperforming assets



$

40,156





$

58,690





$

60,891











Nonperforming loans to period-end loans



0.45

%



0.62

%



0.65

%









Nonperforming assets to period-end assets



0.31

%



0.45

%



0.46

%









Allowance for loan and lease losses to period-end loans



0.93

%



0.98

%



0.99

%









Net loan charge-offs (for the three months ended)



$

2,975





$

1,457





$

2,207















__________

(1)

This is a non-GAAP measure. See section titled "Non-GAAP Financial Measures" on the last three pages of this earnings release for a reconciliation to the most comparable GAAP measure.

(2)

Beginning January 2019, net interest margin was calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

(3)

Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.

 



QUARTERLY FINANCIAL STATISTICS





Columbia Banking System, Inc.



Three Months Ended

Unaudited



June 30,



March 31,



December 31,



September 30,



June 30,





2019



2019



2018



2018



2018

Earnings



(dollars in thousands except per share amounts)

Net interest income



$

125,116





$

121,022





$

123,888





$

122,796





$

116,674



Provision for loan and lease losses



$

218





$

1,362





$

1,789





$

3,153





$

3,975



Noninterest income



$

25,648





$

21,696





$

20,402





$

21,019





$

23,692



Noninterest expense



$

86,728





$

84,700





$

87,019





$

82,841





$

84,643



Acquisition-related expense (included in noninterest expense)



$





$





$

493





$

1,081





$

2,822



Net income



$

51,724





$

45,871





$

44,748





$

46,415





$

41,749



Per Common Share





















Earnings (basic)



$

0.71





$

0.63





$

0.61





$

0.63





$

0.57



Earnings (diluted)



$

0.71





$

0.63





$

0.61





$

0.63





$

0.57



Book value



$

29.26





$

28.39





$

27.76





$

27.05





$

26.83



Averages





















Total assets



$

13,096,413





$

13,048,041





$

12,957,754





$

12,805,131





$

12,529,540



Interest-earning assets



$

11,606,727





$

11,561,627





$

11,458,470





$

11,326,629





$

11,052,807



Loans



$

8,601,819





$

8,406,664





$

8,441,354





$

8,456,632





$

8,389,230



Securities, including equity securities and FHLB stock



$

2,969,749





$

3,140,201





$

2,998,638





$

2,849,495





$

2,628,292



Deposits



$

10,186,371





$

10,271,016





$

10,560,280





$

10,478,800





$

10,264,822



Interest-bearing deposits



$

5,174,875





$

5,226,396





$

5,298,590





$

5,376,300





$

5,390,869



Interest-bearing liabilities



$

5,841,425





$

5,802,965





$

5,599,646





$

5,620,997





$

5,611,055



Noninterest-bearing deposits



$

5,011,496





$

5,044,620





$

5,261,690





$

5,102,500





$

4,873,953



Shareholders' equity



$

2,096,157





$

2,044,832





$

1,988,981





$

1,983,317





$

1,954,552



Financial Ratios





















Return on average assets



1.58

%



1.41

%



1.38

%



1.45

%



1.33

%

Return on average common equity



9.87

%



8.97

%



9.00

%



9.36

%



8.54

%

Average equity to average assets



16.01

%



15.67

%



15.35

%



15.49

%



15.60

%

Shareholders' equity to total assets



16.30

%



15.99

%



15.53

%



15.29

%



15.56

%

Net interest margin (tax equivalent) (1)



4.40

%



4.32

%



4.36

%



4.37

%



4.30

%

Period end





















Total assets



$

13,090,808





$

13,064,436





$

13,095,145





$

12,956,596





$

12,628,586



Loans, net of unearned income



$

8,646,990





$

8,520,798





$

8,391,511





$

8,514,317





$

8,454,107



Allowance for loan and lease losses



$

80,517





$

83,274





$

83,369





$

83,787





$

80,150



Securities, including equity securities and FHLB stock



$

2,894,218





$

3,052,870





$

3,193,408





$

2,942,655





$

2,665,131



Deposits



$

10,211,599





$

10,369,009





$

10,458,126





$

10,603,957





$

10,384,004



Core deposits



$

9,767,776





$

9,898,982





$

9,973,840





$

10,084,687





$

9,888,696



Shareholders' equity



$

2,133,638





$

2,088,620





$

2,033,649





$

1,981,395





$

1,964,881



Goodwill



$

765,842





$

765,842





$

765,842





$

765,842





$

765,842



Other intangible assets, net



$

40,540





$

43,189





$

45,937





$

48,827





$

51,897



Nonperforming assets





















Nonaccrual loans



$

39,038





$

52,615





$

54,842





$

60,332





$

69,504



OREO and OPPO



1,118





6,075





6,049





7,415





7,080



Total nonperforming assets



$

40,156





$

58,690





$

60,891





$

67,747





$

76,584



Nonperforming loans to period-end loans



0.45

%



0.62

%



0.65

%



0.71

%



0.82

%

Nonperforming assets to period-end assets



0.31

%



0.45

%



0.46

%



0.52

%



0.61

%

Allowance for loan and lease losses to period-end loans



0.93

%



0.98

%



0.99

%



0.98

%



0.95

%

Net loan charge-offs (recoveries)



$

2,975





$

1,457





$

2,207





$

(484)





$

3,652





__________

(1)

Beginning January 2019, net interest margin was calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

 



LOAN PORTFOLIO COMPOSITION





Columbia Banking System, Inc.





















Unaudited



June 30,



March 31,



December 31,



September 30,



June 30,





2019



2019



2018



2018



2018

Loan Portfolio Composition - Dollars



(dollars in thousands)

Commercial business



$

3,644,051





$

3,509,472





$

3,438,422





$

3,554,147





$

3,538,492



Real estate:





















One-to-four family residential



279,091





282,673





238,367





232,924





180,522



Commercial and multifamily residential



3,913,546





3,917,833





3,846,027





3,786,615





3,758,207



Total real estate



4,192,637





4,200,506





4,084,394





4,019,539





3,938,729



Real estate construction:





















One-to-four family residential



201,783





207,900





217,790





211,629





206,181



Commercial and multifamily residential



255,452





240,458





284,394





349,328





387,951



Total real estate construction



457,235





448,358





502,184





560,957





594,132



Consumer



305,752





312,886





318,945





327,863





326,402



Purchased credit impaired



84,730





88,257





89,760





95,936





101,782



Subtotal loans



8,684,405





8,559,479





8,433,705





8,558,442





8,499,537



Less:  Net unearned income



(37,415)





(38,681)





(42,194)





(44,125)





(45,430)



Loans, net of unearned income



8,646,990





8,520,798





8,391,511





8,514,317





8,454,107



Less:  Allowance for loan and lease losses



(80,517)





(83,274)





(83,369)





(83,787)





(80,150)



Total loans, net



8,566,473





8,437,524





8,308,142





8,430,530





8,373,957



Loans held for sale



$

12,189





$

4,017





$

3,849





$

5,275





$

6,773



 





June 30,



March 31,



December 31,



September 30,



June 30,

Loan Portfolio Composition - Percentages



2019



2019



2018



2018



2018

Commercial business



42.1

%



41.2

%



41.0

%



41.7

%



41.9

%

Real estate:





















One-to-four family residential



3.2

%



3.3

%



2.8

%



2.7

%



2.1

%

Commercial and multifamily residential



45.3

%



46.1

%



45.8

%



44.5

%



44.4

%

Total real estate



48.5

%



49.4

%



48.6

%



47.2

%



46.5

%

Real estate construction:





















One-to-four family residential



2.3

%



2.4

%



2.6

%



2.5

%



2.4

%

Commercial and multifamily residential



3.0

%



2.8

%



3.4

%



4.1

%



4.6

%

Total real estate construction



5.3

%



5.2

%



6.0

%



6.6

%



7.0

%

Consumer



3.5

%



3.7

%



3.8

%



3.9

%



3.9

%

Purchased credit impaired



1.0

%



1.0

%



1.1

%



1.1

%



1.2

%

Subtotal loans



100.4

%



100.5

%



100.5

%



100.5

%



100.5

%

Less:  Net unearned income



(0.4)

%



(0.5)

%



(0.5)

%



(0.5)

%



(0.5)

%

Loans, net of unearned income



100.0

%



100.0

%



100.0

%



100.0

%



100.0

%

 



DEPOSIT COMPOSITION









Columbia Banking System, Inc.





















Unaudited

























June 30,



March 31,



December 31,



September 30,



June 30,





2019



2019



2018



2018



2018

Deposit Composition - Dollars



(dollars in thousands)

Core deposits:





















Demand and other noninterest-bearing



$

5,082,219





$

5,106,568





$

5,227,216





$

5,250,222





$

4,953,993



Interest-bearing demand



1,251,211





1,270,047





1,244,254





1,260,543





1,278,686



Money market



2,317,294





2,389,024





2,367,964





2,413,185





2,513,648



Savings



888,132





897,329





890,557





908,945





875,707



Certificates of deposit, less than $250,000



228,920





236,014





243,849





251,792





266,662



Total core deposits



9,767,776





9,898,982





9,973,840





10,084,687





9,888,696

























Certificates of deposit, $250,000 or more



105,782





101,965





89,473





90,387





91,578



Certificates of deposit insured by CDARS®



16,559





22,890





23,580





23,841





23,492



Brokered certificates of deposit



40,502





51,375





57,930





65,476





68,870



Reciprocal money market accounts



281,247





294,096





313,692





340,044





311,935



Subtotal



10,211,866





10,369,308





10,458,515





10,604,435





10,384,571



Valuation adjustment resulting from acquisition accounting



(267)





(299)





(389)





(478)





(567)



Total deposits



$

10,211,599





$

10,369,009





$

10,458,126





$

10,603,957





$

10,384,004





 

 

Deposit Composition - Percentages



June 30,

2019



March 31,

2019



December 31,

2018



September 30,

2018



June 30,

2018











Core deposits:





















Demand and other noninterest-bearing



49.8

%



49.2

%



50.0

%



49.5

%



47.7

%

Interest-bearing demand



12.3

%



12.2

%



11.9

%



11.9

%



12.3

%

Money market



22.7

%



23.0

%



22.6

%



22.8

%



24.2

%

Savings



8.7

%



8.7

%



8.5

%



8.6

%



8.4

%

Certificates of deposit, less than $250,000



2.2

%



2.3

%



2.3

%



2.4

%



2.6

%

Total core deposits



95.7

%



95.4

%



95.3

%



95.2

%



95.2

%























Certificates of deposit, $250,000 or more



1.0

%



1.0

%



0.9

%



0.9

%



0.9

%

Certificates of deposit insured by CDARS®



0.2

%



0.2

%



0.2

%



0.2

%



0.2

%

Brokered certificates of deposit



0.4

%



0.5

%



0.6

%



0.6

%



0.7

%

Reciprocal money market accounts



2.7

%



2.9

%



3.0

%



3.1

%



3.0

%

Total



100.0

%



100.0

%



100.0

%



100.0

%



100.0

%

 

 



AVERAGE BALANCES AND RATES













Columbia Banking System, Inc.





















Unaudited





























Three Months Ended



Three Months Ended





June 30, 2019



June 30, 2018





Average

Balances



Interest

Earned / Paid



Average

Rate (3)



Average

Balances



Interest

Earned / Paid



Average

Rate (3)





(dollars in thousands)

ASSETS

























Loans, net (1)(2)



$

8,601,819





$

117,984





5.50

%



$

8,389,230





$

106,526





5.09

%

Taxable securities



2,506,672





15,918





2.55

%



2,111,086





11,923





2.27

%

Tax exempt securities (2)



463,077





3,433





2.97

%



517,206





3,877





3.01

%

Interest-earning deposits with banks



35,159





207





2.36

%



35,285





151





1.72

%

Total interest-earning assets



11,606,727





137,542





4.75

%



11,052,807





122,477





4.44

%

Other earning assets



233,273













221,141











Noninterest-earning assets



1,256,413













1,255,592











Total assets



$

13,096,413













$

12,529,540











LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit



$

403,514





$

586





0.58

%



$

464,217





$

549





0.47

%

Savings accounts



892,246





43





0.02

%



875,529





30





0.01

%

Interest-bearing demand



1,261,833





1,098





0.35

%



1,295,409





608





0.19

%

Money market accounts



2,617,282





3,249





0.50

%



2,755,714





1,385





0.20

%

Total interest-bearing deposits



5,174,875





4,976





0.39

%



5,390,869





2,572





0.19

%

FHLB advances



602,041





4,708





3.14

%



156,512





815





2.09

%

Subordinated debentures



35,392





468





5.30

%



35,577





468





5.28

%

Other borrowings and interest-bearing liabilities



29,117





154





2.12

%



28,097





20





0.29

%

Total interest-bearing liabilities



5,841,425





10,306





0.71

%



5,611,055





3,875





0.28

%

Noninterest-bearing deposits



5,011,496













4,873,953











Other noninterest-bearing liabilities



147,335













89,980











Shareholders' equity



2,096,157













1,954,552











Total liabilities & shareholders' equity



$

13,096,413













$

12,529,540











Net interest income (tax equivalent)



$

127,236













$

118,602







Net interest margin (tax equivalent)



4.40

%











4.30

%



__________

(1)

Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $2.1 million for both the three months ended June 30, 2019 and 2018, respectively. The incremental accretion income on acquired loans was $2.7 million and $3.0 million for the three months ended June 30, 2019 and 2018, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million and $1.1 million for the three months ended June 30, 2019 and 2018, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $721 thousand and $814 thousand for the three months ended June 30, 2019 and 2018, respectively.

(3)

Beginning January 2019, average rates were calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

 



AVERAGE BALANCES AND RATES















Columbia Banking System, Inc.





















Unaudited





























Three Months Ended



Three Months Ended





June 30, 2019



March 31, 2019





Average

Balances



Interest

Earned / Paid



Average

Rate (3)



Average

Balances



Interest

Earned / Paid



Average

Rate (3)





(dollars in thousands)

ASSETS

























Loans, net (1)(2)



$

8,601,819





$

117,984





5.50

%



$

8,406,664





$

109,715





5.29

%

Taxable securities



2,506,672





15,918





2.55

%



2,637,436





17,415





2.68

%

Tax exempt securities (2)



463,077





3,433





2.97

%



502,765





3,758





3.03

%

Interest-earning deposits with banks



35,159





207





2.36

%



14,762





88





2.42

%

Total interest-earning assets



11,606,727





137,542





4.75

%



11,561,627





130,976





4.59

%

Other earning assets



233,273













232,077











Noninterest-earning assets



1,256,413













1,254,337











Total assets



$

13,096,413













$

13,048,041











LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit



$

403,514





$

586





0.58

%



$

406,539





$

576





0.57

%

Savings accounts



892,246





43





0.02

%



897,335





44





0.02

%

Interest-bearing demand



1,261,833





1,098





0.35

%



1,258,054





953





0.31

%

Money market accounts



2,617,282





3,249





0.50

%



2,664,468





2,925





0.45

%

Total interest-bearing deposits



5,174,875





4,976





0.39

%



5,226,396





4,498





0.35

%

FHLB advances



602,041





4,708





3.14

%



499,428





2,685





2.18

%

Subordinated debentures



35,392





468





5.30

%



35,438





468





5.36

%

Other borrowings and interest-bearing liabilities



29,117





154





2.12

%



41,703





215





2.09

%

Total interest-bearing liabilities



5,841,425





10,306





0.71

%



5,802,965





7,866





0.55

%

Noninterest-bearing deposits



5,011,496













5,044,620











Other noninterest-bearing liabilities



147,335













155,624











Shareholders' equity



2,096,157













2,044,832











Total liabilities & shareholders' equity



$

13,096,413













$

13,048,041











Net interest income (tax equivalent)



$

127,236













$

123,110







Net interest margin (tax equivalent)



4.40

%











4.32

%



__________

(1)

Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $2.1 million and $2.2 million for the three months ended June 30, 2019 and March 31, 2019, respectively. The incremental accretion on acquired loans was $2.7 million and $2.0 million for the three months ended June 30, 2019 and March 31, 2019, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million and $1.3 million for the three months ended June 30, 2019 and March 31, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $721 thousand and $789 thousand for the three months ended June 30, 2019 and March 31, 2019, respectively.

(3)

Beginning January 2019, average rates were calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

 



AVERAGE BALANCES AND RATES









Columbia Banking System, Inc.









Unaudited





























Six Months Ended



Six Months Ended





June 30, 2019



June 30, 2018





Average

Balances



Interest

Earned / Paid



Average

Rate (3)



Average

Balances



Interest

Earned / Paid



Average

Rate (3)





(dollars in thousands)

ASSETS

























Loans, net (1)(2)



$

8,504,781





$

227,699





5.40

%



$

8,369,097





$

210,617





5.07

%

Taxable securities



2,571,692





33,333





2.61

%



2,134,433





24,631





2.33

%

Tax exempt securities (2)



482,812





7,191





3.00

%



520,689





7,755





3.00

%

Interest-earning deposits with banks



25,016





295





2.38

%



63,368





496





1.58

%

Total interest-earning assets



11,584,301





$

268,518





4.67

%



11,087,587





$

243,499





4.43

%

Other earning assets



232,678













219,642











Noninterest-earning assets



1,255,381













1,258,909











Total assets



$

13,072,360













$

12,566,138











LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit



$

405,018





$

1,162





0.58

%



$

471,930





$

1,075





0.46

%

Savings accounts



894,777





87





0.02

%



876,842





71





0.02

%

Interest-bearing demand



1,259,954





2,051





0.33

%



1,274,234





1,143





0.18

%

Money market accounts



2,640,744





6,174





0.47

%



2,775,253





2,792





0.20

%

Total interest-bearing deposits



5,200,493





9,474





0.37

%



5,398,259





5,081





0.19

%

FHLB advances



551,018





7,393





2.71

%



141,171





1,385





1.98

%

Subordinated debentures



35,415





936





5.33

%



35,600





936





5.30

%

Other borrowings and interest-bearing liabilities



35,375





369





2.10

%



44,378





136





0.62

%

Total interest-bearing liabilities



5,822,301





$

18,172





0.63

%



5,619,408





$

7,538





0.27

%

Noninterest-bearing deposits



5,027,966













4,901,200











Other noninterest-bearing liabilities



151,457













93,602











Shareholders' equity



2,070,636













1,951,928











Total liabilities & shareholders' equity



$

13,072,360













$

12,566,138











Net interest income (tax equivalent)



$

250,346













$

235,961







Net interest margin (tax equivalent)



4.36

%











4.29

%





__________

(1)

Nonaccrual loans have been included in the table as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $4.3 million for both the six months ended June 30, 2019 and 2018, respectively. The incremental accretion on acquired loans was $4.7 million and $6.7 million for the six months ended June 30, 2019 and 2018, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.7 million and $2.2 million for the six months ended June 30, 2019 and 2018, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million and $1.6 million for the six months ended June 30, 2019 and 2018, respectively.

(3)

Beginning January 2019, average rate was calculated using the actual number of days to be on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.



Non-GAAP Financial Measures

The Company considers its operating net interest margin and operating efficiency ratios to be useful measurements as they more closely reflect the ongoing operating performance of the Company. Despite the usefulness of the operating net interest margin and operating efficiency ratio to the Company, there are no standardized definitions for them and, as a result, the Company's calculations may not be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following tables reconcile the Company's calculation of the operating net interest margin and operating efficiency ratio:





Three Months Ended



Six Months Ended





June 30,



March 31,



June 30,



June 30,



June 30,





2019



2019



2018



2019



2018

Operating net interest margin non-GAAP reconciliation:



(dollars in thousands)

Net interest income (tax equivalent) (1)



$

127,236





$

123,110





$

118,602





$

250,346





$

235,961



Adjustments to arrive at operating net interest income (tax equivalent):





















Incremental accretion income on FDIC purchased credit impaired loans



(579)





(288)





(326)





(867)





(655)



Incremental accretion income on other acquired loans



(2,084)





(1,747)





(2,690)





(3,831)





(6,060)



Premium amortization on acquired securities



1,651





1,779





2,131





3,430





4,206



Interest reversals on nonaccrual loans



662





626





253





1,288





670



Operating net interest income (tax equivalent) (1)



$

126,886





$

123,480





$

117,970





$

250,366





$

234,122



Average interest earning assets



$

11,606,727





$

11,561,627





$

11,052,807





$

11,584,301





$

11,087,587



Net interest margin (tax equivalent) (1)(2)



4.40

%



4.32

%



4.30

%



4.36

%



4.29

%

Operating net interest margin (tax equivalent) (1)(2)



4.38

%



4.33

%



4.28

%



4.36

%



4.26

%





































Three Months Ended



Six Months Ended





June 30,



March 31,



June 30,



June 30,



June 30,





2019



2019



2018



2019



2018

Operating efficiency ratio non-GAAP reconciliation:



(dollars in thousands)

Noninterest expense (numerator A)



$

86,728





$

84,700





$

84,643





$

171,428





$

170,630



Adjustments to arrive at operating noninterest expense:





















Acquisition-related expenses











(2,822)









(7,087)



Net benefit (cost) of operation of OREO and OPPO



705





(114)





(758)





591





(754)



Loss on asset disposals











(1)









(1)



Business and Occupation ("B&O") taxes



(1,411)





(1,876)





(1,459)





(3,287)





(2,776)



Operating noninterest expense (numerator B)



$

86,022





$

82,710





$

79,603





$

168,732





$

160,012

























Net interest income (tax equivalent) (1)



$

127,236





$

123,110





$

118,602





$

250,346





$

235,961



Noninterest income



25,648





21,696





23,692





47,344





46,835



Bank owned life insurance tax equivalent adjustment



424





404





455





828





834



Total revenue (tax equivalent) (denominator A)



$

153,308





$

145,210





$

142,749





$

298,518





$

283,630

























Operating net interest income (tax equivalent) (1)



$

126,886





$

123,480





$

117,970





$

250,366





$

234,122



Adjustments to arrive at operating noninterest income (tax equivalent):





















Investment securities loss (gain), net



(285)





(1,847)





33





(2,132)





11



Gain on asset disposals











(47)









(82)



Operating noninterest income (tax equivalent)



25,787





20,253





24,133





46,040





47,598



Total operating revenue (tax equivalent) (denominator B)



$

152,673





$

143,733





$

142,103





$

296,406





$

281,720



Efficiency ratio (tax equivalent) (numerator A/denominator A)



56.57

%



58.33

%



59.29

%



57.43

%



60.16

%

Operating efficiency ratio (tax equivalent) (numerator B/denominator B)



56.34

%



57.54

%



56.02

%



56.93

%



56.80

%



__________

(1)

Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $2.1 million for the three months ended June 30, 2019 and March 31, 2019, $1.9 million for the three months ended June 30, 2018; and $4.2 million and $3.8 million for the six month periods ended June 30, 2019 and 2018, respectively.

(2)

Beginning January 2019, net interest margin (tax equivalent) and operating net interest margin (tax equivalent) were calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

Non-GAAP Financial Measures - Continued

The Company also considers its core noninterest expense ratio to be a useful measurement as it more closely reflects the ongoing operating performance of the Company. Despite the usefulness of the core noninterest expense ratio to the Company, there is not a standardized definition for it, as a result, the Company's calculations may not be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the core noninterest expense ratio:





Three Months Ended



Six Months Ended





June 30,



March 31,



June 30,



June 30,



June 30,





2019



2019



2018



2019



2018

Core noninterest expense ratio non-GAAP reconciliation:



(dollars in thousands)

Noninterest expense (numerator A)



$

86,728





$

84,700





$

84,643





$

171,428





$

170,630



Adjustments to arrive at core noninterest expense:





















Acquisition-related expenses











(2,822)









(7,087)



Core noninterest expense (numerator B)



$

86,728





$

84,700





$

81,821





$

171,428





$

163,543



Average assets (denominator)



$

13,096,413





$

13,048,041





$

12,529,540





$

13,072,360





$

12,566,138



Noninterest expense ratio (numerator A/denominator) (1)



2.65

%



2.60

%



2.70

%



2.62

%



2.72

%

Core noninterest expense ratio (numerator B/denominator) (2)



2.65

%



2.60

%



2.61

%



2.62

%



2.60

%



__________

(1)

For the purpose of this ratio, interim noninterest expense has been annualized.

(2)

For the purpose of this ratio, interim core noninterest expense has been annualized.

The Company considers its tangible common equity ratio and tangible book value per share ratio to be useful measurements in evaluating the capital adequacy of the Company as they provide a method to assess management's success in utilizing our tangible capital. Despite the usefulness of these ratios to the Company, there is not a standardized definition for them, as a result, the Company's calculation may not always be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following tables reconcile the Company's calculation of the tangible common equity ratio:





June 30,



March 31,



June 30,





2019



2019



2018

Tangible common equity ratio and tangible book value per common share non-GAAP reconciliation:



(dollars in thousands except per share amounts)

Shareholders' equity (numerator A)



$

2,133,638





$

2,088,620





$

1,964,881



Adjustments to arrive at tangible common equity:













Goodwill



(765,842)





(765,842)





(765,842)



Other intangible assets, net



(40,540)





(43,189)





(51,897)



Tangible common equity (numerator B)



$

1,327,256





$

1,279,589





$

1,147,142



Total assets (denominator A)



$

13,090,808





$

13,064,436





$

12,628,586



Adjustments to arrive at tangible assets:













Goodwill



(765,842)





(765,842)





(765,842)



Other intangible assets, net



(40,540)





(43,189)





(51,897)



Tangible assets (denominator B)



$

12,284,426





$

12,255,405





$

11,810,847



Shareholders' equity to total assets (numerator A/denominator A)



16.30

%



15.99

%



15.56

%

Tangible common shareholders' equity to tangible assets (numerator B/denominator B)



10.80

%



10.44

%



9.71

%

Common shares outstanding (denominator C)



72,924





73,565





73,245



Book value per common share (numerator A/denominator C)



$

29.26





$

28.39





$

26.83



Tangible book value per common share (numerator B/denominator C)



$

18.20





$

17.39





$

15.66



Non-GAAP Financial Measures - Continued

The Company also considers its return on average tangible common equity ratio to be a useful measurement as it evaluates the Company's ongoing ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the business can be evaluated, whether acquired or developed internally. Despite the usefulness of this ratio to the Company, there is not a standardized definition for it, and, as a result, the Company's calculation may not always be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following tables reconcile the Company's calculation of the return on average tangible common shareholders' equity ratio:





Three Months Ended



Six Months Ended





June 30,



March 31,



June 30,



June 30,



June 30,





2019



2019



2018



2019



2018

Return on average tangible common equity non-GAAP reconciliation:



(dollars in thousands)

Net income (numerator A)



$

51,724





$

45,871





$

41,749





$

97,595





$

81,719



Adjustments to arrive at tangible income applicable to common shareholders:





















Amortization of intangibles



2,649





2,748





3,088





5,397





6,276



Tax effect on intangible amortization



(556)





(577)





(649)





(1,133)





(1,318)



Tangible income applicable to common shareholders (numerator B)



$

53,817





$

48,042





$

44,188





101,859





$

86,677



Average shareholders' equity (denominator A)



$

2,096,157





$

2,044,832





$

1,954,552





2,070,636





$

1,951,928



Adjustments to arrive at average tangible common equity:





















Average intangibles



(807,678)





(810,376)





(819,211)





(809,020)





(820,785)



Average tangible common equity (denominator B)



$

1,288,479





$

1,234,456





$

1,135,341





$

1,261,616





$

1,131,143



Return on average common equity (numerator A/denominator A) (1)



9.87

%



8.97

%



8.54

%



9.43

%



8.37

%

Return on average tangible common equity (numerator B/denominator B) (2)



16.71

%



15.57

%



15.57

%



16.15

%



15.33

%



__________

(1)

For the purpose of this ratio, interim net income has been annualized.

(2)

For the purpose of this ratio, interim tangible income applicable to common shareholders has been annualized.

 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/columbia-banking-system-announces-second-quarter-2019-results-and-quarterly-cash-dividend-300890809.html

SOURCE Columbia Banking System, Inc.

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