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Columbia Banking System Announces Second Quarter 2018 Results and Quarterly Cash Dividend

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Columbia Banking System Announces Second Quarter 2018 Results and Quarterly Cash Dividend

PR Newswire

TACOMA, Wash., July 26, 2018 /PRNewswire/ --

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

Highlights

  • Record quarterly net income of $41.7 million; diluted earnings per share of $0.57, which included $0.03 per share negative impact from acquisition-related expenses
  • Net interest margin of 4.29%, up 7 basis points from linked quarter
  • Record second quarter loan production of $372.7 million
  • Nonperforming assets to period end assets ratio decreased to 0.61%

Hadley Robbins, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ:COLB) ("Columbia"), said today upon the release of Columbia's second quarter 2018 earnings, "Our bankers had a very successful quarter in generating a record level of production, while at the same time working down nonperforming assets. Year over year, we have seen earnings before income taxes grow more than 35%."

Balance Sheet

Total assets at June 30, 2018 were $12.63 billion, an increase of $98.0 million from March 31, 2018. Loans were $8.45 billion, up $114.5 million from March 31, 2018 as loan originations of $372.7 million and increased seasonal line utilization were partially offset by payments. Debt securities available for sale were $2.65 billion at June 30, 2018, an increase of $22.2 million, or 1% from $2.62 billion at March 31, 2018. Total deposits at June 30, 2018 were $10.38 billion, a decrease of $11.5 million from March 31, 2018. Core deposits comprised 95% of total deposits and were $9.89 billion at June 30, 2018, a decrease of $8.5 million from March 31, 2018. The average cost of total deposits for the quarter was 0.10%, unchanged from the first quarter of 2018.

Income Statement

Net Interest Income

Net interest income for the second quarter of 2018 was $116.7 million, an increase of $1.2 million from the linked quarter and an increase of $30.5 million from the prior year period. The increase from the linked quarter was due to higher rates on earning assets and the increase from the prior year period was primarily due to income from earning assets acquired in the Pacific Continental acquisition, which closed on November 1, 2017, as well as higher rates on earning assets. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" table.

Noninterest Income

Noninterest income was $23.7 million for the second quarter of 2018, an increase of $549 thousand from the first quarter of 2018. The linked quarter increase was principally due to higher card revenue and financial services and trust revenue, partially offset by lower other noninterest income. Compared to the second quarter of 2017, noninterest income decreased by $443 thousand. The decrease was due to the lack of merchant processing revenue in the current quarter as a result of the sale of our merchant card services portfolio in the third quarter of 2017, partially offset by an increase in treasury management fees. As a result of the merchant card services portfolio sale, we now share with the buyer in merchant services revenue and include such amounts in "Card revenue." For the current quarter, this net revenue share was $855 thousand. Also contributing to the decrease in noninterest income compared to the prior year period was our change to net presentation of interchange revenue pursuant to the adoption of new revenue recognition accounting guidance on January 1, 2018. Specifically, $1.2 million of payment card network expenses that would have historically been presented in other noninterest expense are now presented in card revenue.

Noninterest Expense

Total noninterest expense for the second quarter of 2018 was $84.6 million, a decrease of $1.3 million from the first quarter of 2018. After removing the effect of acquisition-related expenses of $2.8 million, noninterest expense for the current quarter was essentially flat from the linked quarter on the same basis as higher OREO and legal and professional fees were offset by lower compensation and employee benefits and other noninterest expense. Compared to the second quarter of 2017, noninterest expense increased $15.8 million. This increase was driven by additional, ongoing expenses resulting from our November 1, 2017 acquisition of Pacific Continental and $1.8 million higher acquisition-related expenses in the current quarter.

Provision for Income Taxes

Our effective tax rate for the current quarter was 19.3%, compared to 14.6% and 29.1% for the linked and prior year periods, respectively. The increase from the linked period is due to the tax benefit of discrete items such as share-based compensation recorded in the first quarter. The decrease from the prior year period was principally attributable to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which lowered the corporate tax rate to 21% from 35%. The prior year period's effective tax rate reflected the then-enacted 35% corporate tax rate reduced by favorable tax attributes of certain earning assets and discrete tax benefits from share-based compensation.

Our effective tax rate remains below the statutory tax rate due to tax-exempt income from municipal securities, bank owned life insurance and certain loan receivables.

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the second quarter of 2018 was 4.29%, an increase of 7 basis points from the linked quarter and 17 basis points from the prior year period. The increases were due to higher rates on interest-earning assets. Columbia's operating net interest margin (tax equivalent)(1) was 4.27% for the second quarter of 2018, an increase of 9 basis points from the linked quarter and an increase of 18 basis points from the prior year period. These increases were due to higher rates on interest-earning assets, which more than offset the more modest increase in rates on interest-bearing liabilities from the comparative periods.

Greg Sigrist, Columbia's Executive Vice President and Chief Financial Officer, commented, "Columbia's net interest margin continues to benefit from the strength of our core deposits."

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,



2018


2018


2017


2017


2017


2018


2017



(dollars in thousands)

Incremental accretion income due to:















FDIC purchased credit impaired loans


$

326



$

329



$

265



$

972



$

753



$

655



$

2,870


Other acquired loans


2,690



3,370



2,482



1,903



2,356



6,060



4,304


Incremental accretion income


$

3,016



$

3,699



$

2,747



$

2,875



$

3,109



$

6,715



$

7,174

















Net interest margin (tax equivalent)


4.29

%


4.22

%


4.20

%


4.20

%


4.12

%


4.26

%


4.16

%

Operating net interest margin (tax equivalent) (1)


4.27

%


4.18

%


4.25

%


4.15

%


4.09

%


4.22

%


4.09

%

__________

(1) 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, 2018, nonperforming assets to total assets were 0.61% compared to 0.72% at March 31, 2018. Total nonperforming assets decreased $13.4 million from the linked quarter due to a $9.0 million decrease in nonaccrual loans and a decrease in other real estate owned.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "For the quarter, we enjoyed a modest decline in non-performing assets and saw continued positive migration in portfolio metrics overall. However, we took a rather large charge-off in the agricultural portfolio during the quarter, which principally drove the provision. Absent this event, it was a strong quarter for the bank from a credit perspective."

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



June 30, 2018


March 31, 2018


December 31, 2017



(in thousands)

Nonaccrual loans:







Commercial business


$

52,036



$

57,619



$

45,460


Real estate:







One-to-four family residential


976



1,054



785


Commercial and multifamily residential


11,118



14,539



13,941


Total real estate


12,094



15,593



14,726


Real estate construction:







One-to-four family residential


389



1,210



1,854


Total real estate construction


389



1,210



1,854


Consumer


4,985



4,042



4,149


Total nonaccrual loans


69,504



78,464



66,189


Other real estate owned and other personal property owned


7,080



11,507



13,298


Total nonperforming assets


$

76,584



$

89,971



$

79,487


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



Three Months Ended


Six Months Ended



June 30,
2018


March 31,
2018


June 30,
2017


June 30,
2018


June 30,
2017



(in thousands)

Beginning balance


$

79,827



$

75,646



$

71,021



$

75,646



$

70,043


Charge-offs:











Commercial business


(5,775)



(2,477)



(3,600)



(8,252)



(4,727)


One-to-four family residential real estate






(153)





(460)


Commercial and multifamily residential real estate




(223)





(223)




One-to-four family residential real estate construction










(14)


Consumer


(232)



(264)



(465)



(496)



(893)


Purchased credit impaired


(1,235)



(1,343)



(1,800)



(2,578)



(3,739)


Total charge-offs


(7,242)



(4,307)



(6,018)



(11,549)



(9,833)


Recoveries:











Commercial business


1,543



802



2,944



2,345



3,309


One-to-four family residential real estate


196



172



223



368



340


Commercial and multifamily residential real estate


640



159



127



799



205


One-to-four family residential real estate construction


14



19



58



33



87


Consumer


270



260



248



530



533


Purchased credit impaired


927



1,224



1,204



2,151



2,348


Total recoveries


3,590



2,636



4,804



6,226



6,822


Net charge-offs


(3,652)



(1,671)



(1,214)



(5,323)



(3,011)


Provision for loan and lease losses


3,975



5,852



3,177



9,827



5,952


Ending balance


$

80,150



$

79,827



$

72,984



$

80,150



$

72,984


The allowance for loan losses to period end loans was 0.95% at June 30, 2018 compared to 0.96% at March 31, 2018. For the second quarter of 2018, Columbia recorded a net provision for loan and lease losses of $4.0 million compared to a net provision of $5.9 million for the linked quarter and a net provision of $3.2 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter consisted of $4.6 million of provision expense for loan losses, excluding PCI loans and a provision recapture of $575 thousand for PCI loans.

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.26 per common share on August 22, 2018 to shareholders of record as of the close of business on August 8, 2018.

Conference Call Information

Columbia's management will discuss the second quarter 2018 financial results on a conference call scheduled for Thursday, July 26, 2018 at 1:00 p.m. Pacific Time (4:00 p.m. ET). Interested parties may join the live-streamed event by using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~072618

The conference call can also be accessed on Thursday, July 26, 2018 at 1:00 p.m. Pacific Time (4:00 p.m. ET) by calling 888-286-8956; Conference ID: 7677614.

A replay of the call can be accessed beginning Friday, July 27, 2018 using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~072618

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 12th consecutive year, the bank was named in 2018 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked 11th on the 2018 Forbes list of best banks.

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, including 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; and (6) 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,








2018


2018


2017








(in thousands)

ASSETS



Cash and due from banks







$

224,370



$

206,532



$

244,615


Interest-earning deposits with banks







39,169



87,124



97,918


Total cash and cash equivalents







263,539



293,656



342,533


Debt securities available for sale at fair value






2,646,208



2,624,045



2,737,751


Equity securities at fair value







4,963



5,000



5,080


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






13,960



11,640



10,440


Loans held for sale







6,773



4,312



5,766


Loans, net of unearned income







8,454,107



8,339,631



8,358,657


Less: allowance for loan and lease losses






80,150



79,827



75,646


Loans, net







8,373,957



8,259,804



8,283,011


Interest receivable







43,105



41,795



40,881


Premises and equipment, net







168,315



168,366



169,490


Other real estate owned







7,080



11,507



13,298


Goodwill







765,842



765,842



765,842


Other intangible assets, net







51,897



54,985



58,173


Other assets







282,947



289,684



284,621


Total assets







$

12,628,586



$

12,530,636



$

12,716,886


LIABILITIES AND SHAREHOLDERS' EQUITY







Deposits:












Noninterest-bearing







$

4,953,993



$

4,927,226



$

5,081,901


Interest-bearing







5,430,011



5,468,297



5,450,184


Total deposits







10,384,004



10,395,523



10,532,085


FHLB advances







99,549



41,564



11,579


Securities sold under agreements to repurchase






46,229



24,247



79,059


Subordinated debentures







35,555



35,601



35,647


Junior subordinated debentures











8,248


Other liabilities







98,368



85,778



100,346


Total liabilities







10,663,705



10,582,713



10,766,964


Commitments and contingent liabilities













June 30,


March 31,


December 31,








2018


2018


2017








(in thousands)







Common stock (no par value)












Authorized shares

115,000



115,000



115,000








Issued and outstanding

73,245



73,240



73,020



1,636,903



1,634,916



1,634,705


Retained earnings







383,899



361,140



337,442


Accumulated other comprehensive loss







(55,921)



(48,133)



(22,225)


Total shareholders' equity







1,964,881



1,947,923



1,949,922


Total liabilities and shareholders' equity






$

12,628,586



$

12,530,636



$

12,716,886


 

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,



2018


2018


2017


2018


2017

Interest Income


(in thousands except per share)

Loans


$

105,412



$

103,027



$

75,579



$

208,439



$

149,699


Taxable securities


11,923



12,708



9,468



24,631



20,454


Tax-exempt securities


3,063



3,064



2,716



6,127



5,407


Deposits in banks


151



345



23



496



42


Total interest income


120,549



119,144



87,786



239,693



175,602


Interest Expense











Deposits


2,572



2,509



908



5,081



1,695


FHLB advances


815



570



591



1,385



816


Subordinated debentures


468



468





936




Other borrowings


20



116



126



136



255


Total interest expense


3,875



3,663



1,625



7,538



2,766


Net Interest Income


116,674



115,481



86,161



232,155



172,836


Provision for loan and lease losses


3,975



5,852



3,177



9,827



5,952


Net interest income after provision for loan and lease losses


112,699



109,629



82,984



222,328



166,884


Noninterest Income











Deposit account and treasury management fees


8,683



8,740



7,396



17,423



14,683


Card revenue


6,616



5,813



6,202



12,429



11,925


Financial services and trust revenue


3,219



2,730



3,036



5,949



5,875


Loan revenue


3,054



3,186



2,989



6,240



6,582


Merchant processing revenue






2,264





4,283


Bank owned life insurance


1,712



1,426



1,433



3,138



2,713


Investment securities gains (losses), net


(33)



22





(11)




Change in FDIC loss-sharing asset






(173)





(447)


Other


441



1,226



988



1,667



3,380


Total noninterest income


23,692



23,143



24,135



46,835



48,994


Noninterest Expense











Compensation and employee benefits


48,949



50,570



38,393



99,519



79,218


Occupancy


9,276



10,121



7,577



19,397



14,768


Merchant processing expense






1,147





2,196


Advertising and promotion


1,622



1,429



1,137



3,051



1,954


Data processing


5,221



5,270



4,741



10,491



8,949


Legal and professional fees


4,171



3,237



2,947



7,408



6,316


Taxes, licenses and fees


1,560



1,425



748



2,985



1,989


Regulatory premiums


937



937



741



1,874



1,517


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


758



1



(1)



759



151


Amortization of intangibles


3,088



3,188



1,249



6,276



2,598


Other


9,061



9,809



10,188



18,870



18,197


Total noninterest expense


84,643



85,987



68,867



170,630



137,853


Income before income taxes


51,748



46,785



38,252



98,533



78,025


Provision for income taxes


9,999



6,815



11,120



16,814



21,694


Net Income


$

41,749



$

39,970



$

27,132



$

81,719



$

56,331


Earnings per common share











Basic


$

0.57



$

0.55



$

0.47



$

1.12



$

0.97


Diluted


$

0.57



$

0.55



$

0.47



$

1.12



$

0.97


Dividends declared per common share


$

0.26



$

0.22



$

0.22



$

0.48



$

0.44


Weighted average number of common shares outstanding


72,385



72,300



57,520



72,343



57,437


Weighted average number of diluted common shares outstanding


72,390



72,305



57,525



72,347



57,442


 

FINANCIAL STATISTICS





Columbia Banking System, Inc.


Three Months Ended


Six Months Ended

Unaudited


June 30,


March 31,


June 30,


June 30,


June 30,



2018


2018


2017


2018


2017

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

116,674



$

115,481



$

86,161



$

232,155



$

172,836


Provision for loan and lease losses


$

3,975



$

5,852



$

3,177



$

9,827



$

5,952


Noninterest income


$

23,692



$

23,143



$

24,135



$

46,835



$

48,994


Noninterest expense


$

84,643



$

85,987



$

68,867



$

170,630



$

137,853


Acquisition-related expense (included in noninterest expense)


$

2,822



$

4,265



$

1,023



$

7,087



$

2,387


Net income


$

41,749



$

39,970



$

27,132



$

81,719



$

56,331


Per Common Share











Earnings (basic)


$

0.57



$

0.55



$

0.47



$

1.12



$

0.97


Earnings (diluted)


$

0.57



$

0.55



$

0.47



$

1.12



$

0.97


Book value


$

26.83



$

26.60



$

22.23



$

26.83



$

22.23


Tangible book value per common share (2)


$

15.66



$

15.39



$

15.42



$

15.66



$

15.42


Averages











Total assets


$

12,529,540



$

12,603,144



$

9,597,274



$

12,566,138



$

9,535,827


Interest-earning assets


$

11,052,807



$

11,122,753



$

8,651,735



$

11,087,587



$

8,586,376


Loans


$

8,389,230



$

8,348,740



$

6,325,462



$

8,369,097



$

6,262,190


Securities, including equity securities and FHLB stock


$

2,628,292



$

2,682,250



$

2,316,077



$

2,655,122



$

2,313,299


Deposits


$

10,264,822



$

10,334,480



$

7,965,868



$

10,299,459



$

7,960,292


Interest-bearing deposits


$

5,390,869



$

5,405,730



$

4,123,135



$

5,398,259



$

4,120,882


Interest-bearing liabilities


$

5,611,055



$

5,627,853



$

4,367,216



$

5,619,408



$

4,315,724


Noninterest-bearing deposits


$

4,873,953



$

4,928,750



$

3,842,733



$

4,901,200



$

3,839,410


Shareholders' equity


$

1,954,552



$

1,949,275



$

1,295,564



$

1,951,928



$

1,278,702


Financial Ratios











Return on average assets


1.33

%


1.27

%


1.13

%


1.30

%


1.18

%

Return on average common equity


8.54

%


8.20

%


8.38

%


8.37

%


8.81

%

Return on average tangible common equity (2)


15.57

%


15.08

%


12.46

%


15.33

%


13.19

%

Average equity to average assets


15.60

%


15.47

%


13.50

%


15.53

%


13.41

%

Shareholders equity to total assets


15.56

%


15.55

%


13.39

%


15.56

%


13.39

%

Tangible common shareholders' equity to tangible assets (2)


9.71

%


9.63

%


9.69

%


9.71

%


9.69

%

Net interest margin (tax equivalent)


4.29

%


4.22

%


4.12

%


4.26

%


4.16

%

Efficiency ratio (tax equivalent) (1)


59.29

%


61.04

%


60.42

%


60.16

%


60.19

%

Operating efficiency ratio (tax equivalent) (2)


56.02

%


57.59

%


57.23

%


56.80

%


58.15

%

Noninterest expense ratio


2.70

%


2.73

%


2.87

%


2.72

%


2.89

%

Core noninterest expense ratio (2)


2.61

%


2.59

%


2.73

%


2.60

%


2.79

%



June 30,


March 31,


December 31,





Period end


2018


2018


2017





Total assets


$

12,628,586



$

12,530,636



$

12,716,886






Loans, net of unearned income


$

8,454,107



$

8,339,631



$

8,358,657






Allowance for loan and lease losses


$

80,150



$

79,827



$

75,646






Securities, including equity securities and FHLB stock


$

2,665,131



$

2,640,685



$

2,753,271






Deposits


$

10,384,004



$

10,395,523



$

10,532,085






Core deposits


$

9,888,696



$

9,897,185



$

10,039,557






Shareholders' equity


$

1,964,881



$

1,947,923



$

1,949,922






Nonperforming assets











Nonaccrual loans


$

69,504



$

78,464



$

66,189






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


7,080



11,507



13,298






  Total nonperforming assets


$

76,584



$

89,971



$

79,487






Nonperforming loans to period-end loans


0.82

%


0.94

%


0.79

%





Nonperforming assets to period-end assets


0.61

%


0.72

%


0.63

%





Allowance for loan and lease losses to period-end loans


0.95

%


0.96

%


0.91

%





Net loan charge-offs (recoveries) (3)


$

3,652



$

1,671



$

(703)







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

(2) 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.

(3) For the three months ended.

 

QUARTERLY FINANCIAL STATISTICS




Columbia Banking System, Inc.


Three Months Ended

Unaudited


June 30,


March 31,


December 31,


September 30,


June 30,



2018


2018


2017


2017


2017

Earnings


(dollars in thousands except per share)

Net interest income


$

116,674



$

115,481



$

106,224



$

88,929



$

86,161


Provision (recapture) for loan and lease losses


$

3,975



$

5,852



$

3,327



$

(648)



$

3,177


Noninterest income


$

23,692



$

23,143



$

23,581



$

37,067



$

24,135


Noninterest expense


$

84,643



$

85,987



$

85,627



$

67,537



$

68,867


Acquisition-related expense (included in noninterest expense)


$

2,822



$

4,265



$

13,638



$

1,171



$

1,023


Net income


$

41,749



$

39,970



$

15,728



$

40,769



$

27,132


Per Common Share











Earnings (basic)


$

0.57



$

0.55



$

0.23



$

0.70



$

0.47


Earnings (diluted)


$

0.57



$

0.55



$

0.23



$

0.70



$

0.47


Book value


$

26.83



$

26.60



$

26.70



$

22.76



$

22.23


Tangible book value per common share (1)


$

15.66



$

15.39



$

15.42



$

15.96



$

15.42


Averages











Total assets


$

12,529,540



$

12,603,144



$

11,751,049



$

9,695,005



$

9,597,274


Interest-earning assets


$

11,052,807



$

11,122,753



$

10,453,097



$

8,750,561



$

8,651,735


Loans


$

8,389,230



$

8,348,740



$

7,749,420



$

6,441,537



$

6,325,462


Securities, including equity securities and FHLB stock


$

2,628,292



$

2,682,250



$

2,539,321



$

2,236,235



$

2,316,077


Deposits


$

10,264,822



$

10,334,480



$

9,804,456



$

8,187,337



$

7,965,868


Interest-bearing deposits


$

5,390,869



$

5,405,730



$

5,033,980



$

4,200,580



$

4,123,135


Interest-bearing liabilities


$

5,611,055



$

5,627,853



$

5,127,100



$

4,285,936



$

4,367,216


Noninterest-bearing deposits


$

4,873,953



$

4,928,750



$

4,770,476



$

3,986,757



$

3,842,733


Shareholders' equity


$

1,954,552



$

1,949,275



$

1,754,745



$

1,323,794



$

1,295,564


Financial Ratios











Return on average assets


1.33

%


1.27

%


0.54

%


1.68

%


1.13

%

Return on average common equity


8.54

%


8.20

%


3.59

%


12.32

%


8.38

%

Return on average tangible common equity (1)


15.57

%


15.08

%


6.37

%


17.93

%


12.46

%

Average equity to average assets


15.60

%


15.47

%


14.93

%


13.65

%


13.50

%

Shareholders' equity to total assets


15.56

%


15.55

%


15.33

%


13.54

%


13.39

%

Tangible common shareholders' equity to tangible assets (1)


9.71

%


9.63

%


9.47

%


9.89

%


9.69

%

Net interest margin (tax equivalent)


4.29

%


4.22

%


4.20

%


4.20

%


4.12

%

Period end











Total assets


$

12,628,586



$

12,530,636



$

12,716,886



$

9,814,578



$

9,685,110


Loans, net of unearned income


$

8,454,107



$

8,339,631



$

8,358,657



$

6,512,006



$

6,423,074


Allowance for loan and lease losses


$

80,150



$

79,827



$

75,646



$

71,616



$

72,984


Securities, including equity securities and FHLB stock


$

2,665,131



$

2,640,685



$

2,753,271



$

2,218,113



$

2,280,996


Deposits


$

10,384,004



$

10,395,523



$

10,532,085



$

8,341,717



$

8,072,464


Core deposits


$

9,888,696



$

9,897,185



$

10,039,557



$

7,999,499



$

7,721,766


Shareholders' equity


$

1,964,881



$

1,947,923



$

1,949,922



$

1,328,428



$

1,297,314


Goodwill


$

765,842



$

765,842



$

765,842



$

382,762



$

382,762


Other intangible assets, net


$

51,897



$

54,985



$

58,173



$

13,845



$

15,033


Nonperforming assets











Nonaccrual loans


$

69,504



$

78,464



$

66,189



$

40,317



$

36,824


OREO and OPPO


7,080



11,507



13,298



3,682



4,058


  Total nonperforming assets


$

76,584



$

89,971



$

79,487



$

43,999



$

40,882


Nonperforming loans to period-end loans


0.82

%


0.94

%


0.79

%


0.62

%


0.57

%

Nonperforming assets to period-end assets


0.61

%


0.72

%


0.63

%


0.45

%


0.42

%

Allowance for loan and lease losses to period-end loans


0.95

%


0.96

%


0.91

%


1.10

%


1.14

%

Net loan charge-offs (recoveries)


$

3,652



$

1,671



$

(703)



$

720



$

1,214



(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.

 

LOAN PORTFOLIO COMPOSITION

Columbia Banking System, Inc.





Unaudited


June 30,


March 31,


December 31,


September 30,


June 30,



2018


2018


2017


2017


2017

Loan Portfolio Composition - Dollars


(dollars in thousands)

Commercial business


$

3,538,492



$

3,402,162



$

3,377,324



$

2,735,206



$

2,704,468


Real estate:











One-to-four family residential


180,522



182,302



188,396



176,487



173,150


Commercial and multifamily residential


3,758,207



3,776,709



3,825,739



2,825,794



2,787,560


  Total real estate


3,938,729



3,959,011



4,014,135



3,002,281



2,960,710


Real estate construction:











One-to-four family residential


206,181



208,441



200,518



145,419



139,956


Commercial and multifamily residential


387,951



385,339



371,931



213,939



195,565


  Total real estate construction


594,132



593,780



572,449



359,358



335,521


Consumer


326,402



323,631



334,190



323,913



323,187


Purchased credit impaired


101,782



109,299



112,670



120,477



129,853


Subtotal loans


8,499,537



8,387,883



8,410,768



6,541,235



6,453,739


Less:  Net unearned income


(45,430)



(48,252)



(52,111)



(29,229)



(30,665)


Loans, net of unearned income


8,454,107



8,339,631



8,358,657



6,512,006



6,423,074


Less:  Allowance for loan and lease losses


(80,150)



(79,827)



(75,646)



(71,616)



(72,984)


Total loans, net


8,373,957



8,259,804



8,283,011



6,440,390



6,350,090


Loans held for sale


$

6,773



$

4,312



$

5,766



$

7,802



$

6,918


 

Loan Portfolio Composition - Percentages


June 30,

 2018


March 31,

 2018


December 31,

 2017


September 30,

 2017


June 30,

 2017

Commercial business


41.9

%


40.8

%


40.4

%


42.0

%


42.1

%

Real estate:











One-to-four family residential


2.1

%


2.2

%


2.3

%


2.7

%


2.7

%

Commercial and multifamily residential


44.4

%


45.3

%


45.8

%


43.3

%


43.5

%

  Total real estate


46.5

%


47.5

%


48.1

%


46.0

%


46.2

%

Real estate construction:











One-to-four family residential


2.4

%


2.5

%


2.4

%


2.2

%


2.2

%

Commercial and multifamily residential


4.6

%


4.6

%


4.4

%


3.3

%


3.0

%

  Total real estate construction


7.0

%


7.1

%


6.8

%


5.5

%


5.2

%

Consumer


3.9

%


3.9

%


4.0

%


5.0

%


5.0

%

Purchased credit impaired


1.2

%


1.3

%


1.3

%


1.9

%


2.0

%

Subtotal loans


100.5

%


100.6

%


100.6

%


100.4

%


100.5

%

Less:  Net unearned income


(0.5)

%


(0.6)

%


(0.6)

%


(0.4)

%


(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,



2018


2018


2017


2017


2017

Deposit Composition - Dollars


(dollars in thousands)

Core deposits:











Demand and other non-interest bearing


$

4,953,993



$

4,927,226



$

5,081,901



$

4,119,950



$

3,905,652


Interest bearing demand


1,278,686



1,328,756



1,265,212



1,009,378



988,532


Money market


2,513,648



2,477,487



2,543,712



1,821,262



1,787,101


Savings


875,707



886,171



861,941



772,858



756,825


Certificates of deposit, less than $250,000


266,662



277,545



286,791



276,051



283,656


  Total core deposits


9,888,696



9,897,185



10,039,557



7,999,499



7,721,766













Certificates of deposit, $250,000 or more


91,578



96,333



100,399



84,105



81,861


Certificates of deposit insured by CDARS® (1)


23,492



23,191



25,374



20,690



19,276


Brokered certificates of deposit


68,870



76,931



78,481






Reciprocal money market accounts (1)


311,935



302,544



289,031



237,421



249,554


Subtotal


10,384,571



10,396,184



10,532,842



8,341,715



8,072,457


  Premium (discount) resulting from acquisition date fair value adjustment


(567)



(661)



(757)



2



7


Total deposits


$

10,384,004



$

10,395,523



$

10,532,085



$

8,341,717



$

8,072,464


 

Deposit Composition - Percentages


June 30,

2018


March 31,

2018


December 31,

2017


September 30,

2017


June 30,

2017

Core deposits:











Demand and other non-interest bearing


47.7

%


47.4

%


48.2

%


49.4

%


48.4

%

Interest bearing demand


12.3

%


12.8

%


12.0

%


12.1

%


12.2

%

Money market


24.2

%


23.8

%


24.2

%


21.8

%


22.1

%

Savings


8.4

%


8.5

%


8.2

%


9.3

%


9.4

%

Certificates of deposit, less than $250,000


2.6

%


2.7

%


2.7

%


3.3

%


3.5

%

  Total core deposits


95.2

%


95.2

%


95.3

%


95.9

%


95.6

%












Certificates of deposit, $250,000 or more


0.9

%


0.9

%


1.0

%


1.0

%


1.0

%

Certificates of deposit insured by CDARS® (1)


0.2

%


0.2

%


0.2

%


0.2

%


0.2

%

Brokered certificates of deposit


0.7

%


0.7

%


0.7

%


%


%

Reciprocal money market accounts (1)


3.0

%


3.0

%


2.8

%


2.9

%


3.2

%

Total


100.0

%


100.0

%


100.0

%


100.0

%


100.0

%

__________

(1) For periods prior to June 30, 2018, CDARS® and reciprocal money market accounts were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With the passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, these items are no longer considered brokered deposits.

 

AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited















Three Months Ended


Three Months Ended



June 30, 2018


June 30, 2017



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,389,230



$

106,526



5.08

%


$

6,325,462



$

77,030



4.87

%

Taxable securities


2,111,086



11,923



2.26

%


1,861,895



9,468



2.03

%

Tax exempt securities (2)


517,206



3,877



3.00

%


454,182



4,179



3.68

%

Interest-earning deposits with banks


35,285



151



1.71

%


10,196



23



0.90

%

Total interest-earning assets


11,052,807



$

122,477



4.43

%


8,651,735



$

90,700



4.19

%

Other earning assets


221,141







173,044






Noninterest-earning assets


1,255,592







772,495






Total assets


$

12,529,540







$

9,597,274






LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit


$

464,217



$

549



0.47

%


$

386,361



$

95



0.10

%

Savings accounts


875,529



30



0.01

%


755,253



19



0.01

%

Interest-bearing demand


1,295,409



608



0.19

%


983,936



192



0.08

%

Money market accounts


2,755,714



1,385



0.20

%


1,997,585



602



0.12

%

Total interest-bearing deposits


5,390,869



2,572



0.19

%


4,123,135



908



0.09

%

FHLB advances


156,512



815



2.08

%


195,369



591



1.21

%

Subordinated debentures


35,577



468



5.26

%






%

Other borrowings


28,097



20



0.28

%


48,712



126



1.03

%

Total interest-bearing liabilities


5,611,055



$

3,875



0.28

%


4,367,216



$

1,625



0.15

%

Noninterest-bearing deposits


4,873,953







3,842,733






Other noninterest-bearing liabilities


89,980







91,761






Shareholders' equity


1,954,552







1,295,564






Total liabilities & shareholders' equity


$

12,529,540







$

9,597,274






Net interest income (tax equivalent)


$

118,602







$

89,075




Net interest margin (tax equivalent)


4.29

%






4.12

%



(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 $1.8 million for the three month periods ended June 30, 2018 and June 30, 2017, respectively. The incremental accretion on acquired loans was $3.0 million and $3.1 million for the three months ended June 30, 2018 and 2017, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis at a rate of 21% for 2018 and 35% for 2017. The tax equivalent yield adjustment to interest earned on loans was $1.1 million and $1.5 million for the three months ended June 30, 2018 and 2017, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $814 thousand and $1.5 million for the three month periods ended June 30, 2018 and 2017, respectively.

 

AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited















Three Months Ended


Three Months Ended



June 30, 2018


March 31, 2018



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,389,230



$

106,526



5.08

%


$

8,348,740



$

104,091



4.99

%

Taxable securities


2,111,086



11,923



2.26

%


2,158,039



12,708



2.36

%

Tax exempt securities (2)


517,206



3,877



3.00

%


524,211



3,878



2.96

%

Interest-earning deposits with banks


35,285



151



1.71

%


91,763



345



1.50

%

Total interest-earning assets


11,052,807



$

122,477



4.43

%


11,122,753



$

121,022



4.35

%

Other earning assets


221,141







218,126






Noninterest-earning assets


1,255,592







1,262,265






Total assets


$

12,529,540







$

12,603,144






LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit


$

464,217



$

549



0.47

%


$

479,729



$

526



0.44

%

Savings accounts


875,529



30



0.01

%


878,170



41



0.02

%

Interest-bearing demand


1,295,409



608



0.19

%


1,252,823



535



0.17

%

Money market accounts


2,755,714



1,385



0.20

%


2,795,008



1,407



0.20

%

Total interest-bearing deposits


5,390,869



2,572



0.19

%


5,405,730



2,509



0.19

%

FHLB advances


156,512



815



2.08

%


125,660



570



1.81

%

Subordinated debentures


35,577



468



5.26

%


35,623



468



5.26

%

Other borrowings


28,097



20



0.28

%


60,840



116



0.76

%

Total interest-bearing liabilities


5,611,055



$

3,875



0.28

%


5,627,853



$

3,663



0.26

%

Noninterest-bearing deposits


4,873,953







4,928,750






Other noninterest-bearing liabilities


89,980







97,266






Shareholders' equity


1,954,552







1,949,275






Total liabilities & shareholders' equity


$

12,529,540







$

12,603,144






Net interest income (tax equivalent)


$

118,602







$

117,359




Net interest margin (tax equivalent)


4.29

%






4.22

%



(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 month periods ended June 30, 2018 and March 31, 2018, respectively. The incremental accretion on acquired loans was $3.0 million and $3.7 million for the three months ended June 30, 2018 and March 31, 2018, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis at a rate of 21% for 2018. The tax equivalent yield adjustment to interest earned on loans was $1.1 million for both the three months ended June 30, 2018 and March 31, 2018. The tax equivalent yield adjustment to interest earned on tax exempt securities was $814 thousand for both the three month periods ended June 30, 2018 and March 31, 2018.

 

AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited















Six Months Ended June 30,


Six Months Ended June 30,



2018


2017



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,369,097



$

210,617



5.03

%


$

6,262,190



$

152,544



4.87

%

Taxable securities


2,134,433



24,631



2.31

%


1,861,762



20,454



2.20

%

Tax exempt securities (2)


520,689



7,755



2.98

%


451,537



8,319



3.68

%

Interest-earning deposits with banks


63,368



496



1.57

%


10,887



42



0.77

%

Total interest-earning assets


11,087,587



$

243,499



4.39

%


8,586,376



$

181,359



4.22

%

Other earning assets


219,642







175,554






Noninterest-earning assets


1,258,909







773,897






Total assets


$

12,566,138







$

9,535,827






LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit


$

471,930



$

1,075



0.46

%


$

392,798



$

190



0.10

%

Savings accounts


876,842



71



0.02

%


746,988



38



0.01

%

Interest-bearing demand


1,274,234



1,143



0.18

%


978,279



351



0.07

%

Money market accounts


2,775,253



2,792



0.20

%


2,002,817



1,116



0.11

%

Total interest-bearing deposits


5,398,259



5,081



0.19

%


4,120,882



1,695



0.08

%

FHLB advances


141,171



1,385



1.96

%


138,787



816



1.18

%

Subordinated debentures


35,600



936



5.26

%






%

Other borrowings


44,378



136



0.61

%


56,055



255



0.91

%

Total interest-bearing liabilities


5,619,408



$

7,538



0.27

%


4,315,724



$

2,766



0.13

%

Noninterest-bearing deposits


4,901,200







3,839,410






Other noninterest-bearing liabilities


93,602







101,991