Columbia Banking System Announces Fourth Quarter and Full Year 2019 Results, and Quarterly and Special Cash Dividends

TACOMA, Wash., Jan. 23, 2020 /PRNewswire/ --

Highlights

• Record full year 2019 net income of $194.5 million and diluted earnings per share of $2.68
• Fourth Quarter net income of $46.1 million; diluted earnings per share of $0.64
• Record full year loan production of $1.58 billion and fourth quarter loan production of $427.0 million
• Nonperforming assets to period end assets ratio improved for the eighth consecutive quarter to 0.24%
• Exceeded our five-year fund-raising milestone, raising more than $1.0 million for local communities through our annual Warm Hearts fund-raiser
• Successfully completed leadership transition as planned
• Regular and special cash dividends declared of $0.28 and $0.22 per share, respectively

Clint Stein, President and Chief Executive Officer of Columbia Banking System, Inc. and Columbia Bank COLB ("Columbia"), said today upon the release of Columbia's fourth quarter 2019 earnings, "I want to thank the entire team for a remarkable year in which we had record net income, despite the three rate cuts that occurred during the year. We also had record loan production in addition to progressing on a number of strategic initiatives. It is a testament to our bench strength and our succession planning process that we were able to have these results while going through a leadership transition during the fourth quarter."

Balance Sheet

Total assets at December 31, 2019 were $14.08 billion, an increase of $321.8 million from the linked quarter. Loans were $8.74 billion, down $12.9 million from September 30, 2019 as a result of loan originations of $427.0 million offset by a decrease in seasonal line utilization and payments. Securities available for sale were $3.75 billion at December 31, 2019, an increase of $378.6 million from $3.37 billion at September 30, 2019. Total deposits at December 31, 2019 were $10.68 billion, a decrease of $171.0 million from September 30, 2019 principally due to a decrease of $328.6 million in public funds, excluding certificates of deposit. Deposit mix remained fairly consistent from September 30, 2019 with 50% noninterest-bearing and 50% interest-bearing. The average cost of total deposits for the quarter was 21 basis points, a decrease of 5 basis points from the third quarter of 2019. For additional information regarding this calculation, see the "Net Interest Margin" section.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "We were able to achieve record loan production for both the fourth quarter and the full year while maintaining our credit disciplines thanks to our talented bankers. Over the past year, we have relied on our strong performers as well as have invested in new teams that have hit the ground running and contributed to a very successful year."

Income Statement

Net Interest Income

Net interest income for the fourth quarter of 2019 was $124.8 million, an increase of $2.4 million and $929 thousand from the linked quarter and the prior year period, respectively. The increase from the linked quarter was primarily due to higher interest income on securities as a result of higher average balances combined with lower premium amortization on securities as well as lower interest expense on deposits and borrowings resulting from a lower rate environment. These benefits to net interest income were partially offset by lower interest income from loans principally due to the lower rate environment. Net interest income compared to the prior year period increased as a result of interest income from the higher average balances of securities partially offset by higher interest expense due to the higher average balances of interest-bearing public funds, excluding certificates of deposit, and FHLB advances. 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 $21.8 million for the fourth quarter of 2019, a decrease of $6.2 million from the linked quarter and an increase of $1.4 million from the fourth quarter of 2018. The linked quarter decrease was principally due to a $5.9 million gain from the sale-leaseback of owned real estate during the third quarter of 2019. The increase from the prior year period was primarily due to higher loan revenue.

Noninterest Expense

Total noninterest expense for the fourth quarter of 2019 was $87.0 million, relatively unchanged from the linked quarter and the prior year period.

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 fourth quarter of 2019 was 4.11%, a decrease of 3 basis points and 25 basis points from the linked quarter and prior year period, respectively. The decrease in the net interest margin (tax equivalent) compared to the linked quarter was driven by lower rates on the loan portfolio partially offset by lower premium amortization on taxable securities. The decrease was also partially offset by lower rates on deposits and FHLB advances. Compared to the prior year period, the decreased net interest margin (tax equivalent) was driven by lower rates on loans and higher rates on deposits partially offset by lower rates on FHLB advances.

Columbia's operating net interest margin (tax equivalent)⁽²⁾ was 4.09% for the fourth quarter of 2019, which decreased 3 and 25 basis points compared to the linked quarter and the prior year period, respectively. The decreases in the operating net interest margin for the fourth quarter of 2019 compared to the linked quarter and the prior year quarter were due to the items 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:

Asset Quality

At December 31, 2019, nonperforming assets to total assets were 0.24% compared to 0.27% at September 30, 2019. Total nonperforming assets decreased $4.0 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, "We continue to be pleased with our loan portfolio trends. Credit costs continue to be low and reflect the strong performance which we enjoyed in the fourth quarter and for the full year. Net charge-offs were approximately 1 basis point for the quarter and 3 basis points for the full year. These results, combined with stable credit metrics relative to problem loans and impaired assets, drove provisioning to very modest levels in 2019. From a credit perspective, it was a great year thanks to the diligent efforts of our bankers and work by our special asset teams."

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

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

The allowance for loan and lease losses to period end loans was 0.96% at December 31, 2019 compared to 0.94% at September 30, 2019. For the fourth quarter of 2019, Columbia recorded a net provision for loan and lease losses of $1.6 million compared to a net provision of $299 thousand for the linked quarter and a net provision of $1.8 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the fourth quarter of 2019 consisted of $1.7 million of provision expense for loans, excluding PCI loans, and a provision recapture of $111 thousand for PCI loans.

Organizational Update

The close of 2019 also brought about a change to our leadership team as Clint Stein assumed the role of CEO and other leadership changes were announced. Mr. Stein stated, "The leadership transition went seamlessly as a result of our succession planning process that has been in the works for years. I look forward to working with this very talented group of professionals as we execute on our long-term strategic vision."

During the year ended December 31, 2019, the Bank received the following accolades:

• Received the Community Commitment Award from the American Bankers Association Foundation;
• Received the IDEA Award for Outstanding Leader of the Year from South Sound Business Magazine;
• Our Portland Office was named Top SBA Lender by the Small Business Association;
• Our Seattle Office was named as one of the Top Three SBA Lenders by the Small Business Association;
• Columbia board members Michelle Lantow, Mae Fujita Numata, Elizabeth Seaton and Janine Terrano were added to the annual list of Most Influential Corporate Directors by WomenInc. Magazine;
• Hadley Robbins was named to the inaugural Power 100 list of the most influential leaders in the region by the Puget Sound Business Journal;
• Selected as one of the Top Corporate Philanthropists for 2019 by the Portland Business Journal;
• Received an Extraordinary Banking Award for 2019 by the Institute of Extraordinary Banking;
• Named to the list of Top Workplaces in 2018 by Portland's Oregonian;
• Honored as one of Oregon's Most Admired Companies in 2018 by the Portland Business Journal;
• For the 13th consecutive year, named as one of Washington's Best Workplaces by the 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's Board of Directors 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 and a special cash dividend of $0.22 per common share on February 19, 2020 to shareholders of record as of the close of business on February 5, 2020.

Conference Call Information

Columbia's management will discuss the fourth quarter 2019 financial results on a conference call scheduled for Thursday, January 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET). Interested parties may join the live-streamed event by using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~01232020

The conference call can also be accessed on Thursday, January 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 6169965.

A replay of the call can be accessed beginning Friday, January 24, 2020 using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~01232020

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 control 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.

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:

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:

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:

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:

 

View original content to download multimedia:http://www.prnewswire.com/news-releases/columbia-banking-system-announces-fourth-quarter-and-full-year-2019-results-and-quarterly-and-special-cash-dividends-300991932.html

SOURCE Columbia Banking System, Inc.