Columbia Banking System Announces First Quarter 2018 Results and Increased Quarterly Cash Dividend

|PR Newswire|About: COLB

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

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Highlights

  • First quarter net income of $40.0 million; diluted earnings per share of $0.55, which included $0.04 per share negative impact from acquisition-related expenses
  • Net interest margin of 4.22%, up 2 basis points from linked quarter
  • Loan production for the quarter of $264.3 million
  • Pacific Continental core system conversion completed

Hadley Robbins, President and Chief Executive Officer of Columbia Banking System (COLB) and Columbia Bank ("Columbia"), said today upon the release of Columbia's first quarter 2018 earnings, "Our first quarter 2018 loan production and line utilization reflected the seasonal pattern of being a low point in the year. In addition, earnings were impacted by $4.3 million of acquisition-related expense and an elevated provision for loan losses of $5.9 million." Mr. Robbins continued, "However, during the period, we crossed a significant milestone by completing the Pacific Continental core systems conversion and achieved a majority of the related cost saving initiatives. With the systems conversion behind us, we are well positioned to continue our focus on high quality earnings growth."

Balance Sheet

Total assets at March 31, 2018 were $12.53 billion, a decrease of $186.3 million from December 31, 2017. Loans were $8.34 billion, down $19.0 million from December 31, 2017 as loan originations of $264.3 million were offset by payments. Debt securities available for sale were $2.62 billion at March 31, 2018, a decrease of $113.7 million, or 4% from $2.74 billion at December 31, 2017. Total deposits at March 31, 2018 were $10.40 billion, a decrease of $136.6 million from December 31, 2017. Core deposits comprised 95% of total deposits and were $9.90 billion at March 31, 2018, a decrease of $142.4 million from December 31, 2017. The average cost of total deposits for the quarter was 0.10%, an increase of 2 basis points from the fourth quarter of 2017.

Income Statement

Net Interest Income

Net interest income for the first quarter of 2018 was $115.5 million, an increase of $9.3 million from the linked quarter and an increase of $28.8 million from the prior year period. The increase from both the linked quarter and prior year period was primarily due to income from earning assets acquired in the Pacific Continental transaction, which closed on November 1, 2017. 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 $23.1 million for the first quarter of 2018, a decrease of $438 thousand from the fourth quarter of 2018. The linked quarter decrease was principally due to lower card revenue partially offset by higher deposit account and treasury management fees. The lower card revenue reflects our change to net presentation of interchange revenue pursuant to the adoption of new revenue recognition accounting guidance on January 1, 2018. Specifically, $1.3 million of payment card network expenses that would have historically been presented in other noninterest expense are now presented in card revenue. Compared to the first quarter of 2017, noninterest income decreased by $1.7 million principally due to a prior year BOLI benefit of $1.5 million recognized in other noninterest income.

Noninterest Expense

Total noninterest expense for the first quarter of 2018 was $86.0 million, an increase of $360 thousand from the fourth quarter of 2017. After removing the effect of acquisition-related expenses, noninterest expense for the current quarter increased $9.7 million from the linked quarter on the same basis. This increase was due to higher compensation and benefits as well as higher other noninterest expense. Compared to the first quarter of 2017, noninterest expense increased $17.0 million. This increase was driven by $2.9 million higher acquisition-related expenses in the current quarter as well as additional, ongoing expenses resulting from our November 1, 2017 acquisition of Pacific Continental.

Provision for Income Taxes

Our effective tax rate for the current quarter was 14.6%, compared to 61.5% and 26.6% for the linked and prior year periods, respectively. The decrease from both periods was principally attributable to the enactment of the Tax Cuts and Jobs Act on December 22, 2017. Specifically, the linked period's effective tax rate included a $12.2 million re-measurement charge so that our deferred tax assets at year-end 2017 reflected the new 21% corporate tax rate. 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. In addition, the current period's rate reflects the tax benefit of discrete items such as share-based compensation. For 2018, we expect our effective tax rate to be approximately 19%.

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the first quarter of 2018 was 4.22%, an increase of 2 basis points from the linked quarter and prior year period. The increases were due to higher loan accretion income during the current quarter. Columbia's operating net interest margin (tax equivalent)(1) was 4.18% for the first quarter of 2018, a decline of 7 basis points from the linked quarter and an increase of 9 basis points from the prior year period. The decrease from the linked quarter was primarily due to a lower tax rate utilized for the tax equivalent components of our net interest income, which lowered the margin by 7 basis points. The increase from the prior year period was due to higher loan yields and volumes which more than offset the lower tax rates used in the current quarter.

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



March 31,


December 31,


September 30,


June 30,


March 31,



2018


2017


2017


2017


2017



(dollars in thousands)

Incremental accretion income due to:











FDIC purchased credit impaired loans


$

329



$

265



$

972



$

753



$

2,117


Other acquired loans


3,370



2,482



1,903



2,356



1,948


Incremental accretion income


$

3,699



$

2,747



$

2,875



$

3,109



$

4,065













Net interest margin (tax equivalent)


4.22

%


4.20

%


4.20

%


4.12

%


4.20

%

Operating net interest margin (tax equivalent) (1)


4.18

%


4.25

%


4.15

%


4.09

%


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 March 31, 2018, nonperforming assets to total assets were 0.72% compared to 0.63% at December 31, 2017. Total nonperforming assets increased $10.5 million from the linked quarter due to a $12.3 million increase in nonaccrual loans, partially offset by a decrease in other real estate owned.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "The agricultural portfolio continues to impact our credit metrics and again was one of the drivers behind the increase in our provision and nonperforming loans for the first quarter. However, the weakness within this portfolio is centered in cattle and potatoes which collectively account for about $127 million of loan balances at quarter end. The rest of our agricultural portfolio is performing consistent with our expectations with only 4% adversely classified."

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



March 31, 2018


December 31, 2017



(in thousands)

Nonaccrual loans:





Commercial business


$

57,619



$

45,460


Real estate:





One-to-four family residential


1,054



785


Commercial and multifamily residential


14,539



13,941


Total real estate


15,593



14,726


Real estate construction:





One-to-four family residential


1,210



1,854


Total real estate construction


1,210



1,854


Consumer


4,042



4,149


Total nonaccrual loans


78,464



66,189


Other real estate owned and other personal property owned


11,507



13,298


Total nonperforming assets


$

89,971



$

79,487


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



Three Months Ended



March 31,
2018


December 31,
2017


March 31,
2017



(in thousands)

Beginning balance


$

75,646



$

71,616



$

70,043


Charge-offs:







Commercial business


(2,477)



(1,524)



(1,127)


One-to-four family residential real estate






(307)


Commercial and multifamily residential real estate


(223)



(287)




One-to-four family residential real estate construction






(14)


Consumer


(264)



(318)



(428)


Purchased credit impaired


(1,343)



(1,440)



(1,939)


Total charge-offs


(4,307)



(3,569)



(3,815)


Recoveries:







Commercial business


802



839



365


One-to-four family residential real estate


172



188



117


Commercial and multifamily residential real estate


159



412



78


One-to-four family residential real estate construction


19



71



29


Commercial and multifamily residential real estate construction




1




Consumer


260



311



285


Purchased credit impaired


1,224



2,450



1,144


Total recoveries


2,636



4,272



2,018


Net recoveries (charge-offs)


(1,671)



703



(1,797)


Provision for loan and lease losses


5,852



3,327



2,775


Ending balance


$

79,827



$

75,646



$

71,021


The allowance for loan losses to period end loans was 0.96% at March 31, 2018 compared to 0.91% at December 31, 2017. For the first quarter of 2018, Columbia recorded a net provision for loan and lease losses of $5.9 million compared to a net provision of $3.3 million for the linked quarter and a net provision of $2.8 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter consisted of $7.0 million of provision for loan losses for loans, excluding PCI loans and a provision recapture of $1.1 million for PCI loans.

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.26 per common share on May 23, 2018 to shareholders of record as of the close of business on May 9, 2018. Clint Stein, Columbia's Executive Vice President, Chief Operating Officer and Chief Financial Officer, commented, "With the passage of tax reform at the end of 2017, we made a commitment to allocate the benefits of a reduced tax burden amongst our employees, communities and shareholders so that all of our stakeholders benefit directly. Our 18% increase in the dividend this quarter reflects a market level payout of the additional capital generated by the reduced tax burden."

Conference Call Information

Columbia's management will discuss the first quarter 2018 financial results on a conference call scheduled for Thursday, April 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~042618

The conference call can also be accessed on Thursday, April 26, 2018 at 1:00 p.m. Pacific Time (4:00 p.m. ET) by calling 888-286-8956; Conference ID code #8285707.

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

https://engage.vevent.com/rt/columbiabankingsysteminc~042618

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 eleventh consecutive year, the bank was named in 2017 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked eleventh 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, including the acquisition of Pacific Continental, 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




Clint E. Stein,


Executive Vice President,


Chief Operating Officer and


Chief Financial Officer




Investor Relations


InvestorRelations@columbiabank.com


253-305-1921

 

CONSOLIDATED BALANCE SHEETS





Columbia Banking System, Inc.





Unaudited





March 31,


December 31,






2018


2017 (1)






(in thousands)

ASSETS


Cash and due from banks





$

206,532



$

244,615


Interest-earning deposits with banks





87,124



97,918


Total cash and cash equivalents





293,656



342,533


Debt securities available for sale at fair value (1)





2,624,045



2,737,751


Equity securities at fair value (1)





5,000



5,080


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





11,640



10,440


Loans held for sale





4,312



5,766


Loans, net of unearned income





8,339,631



8,358,657


Less: allowance for loan and lease losses




79,827



75,646


Loans, net





8,259,804



8,283,011


Interest receivable





41,795



40,881


Premises and equipment, net





168,366



169,490


Other real estate owned





11,507



13,298


Goodwill





765,842



765,842


Other intangible assets, net





54,985



58,173


Other assets





289,684



284,621


Total assets





$

12,530,636



$

12,716,886


LIABILITIES AND SHAREHOLDERS' EQUITY




Deposits:








Noninterest-bearing





$

4,927,226



$

5,081,901


Interest-bearing





5,468,297



5,450,184


Total deposits





10,395,523



10,532,085


FHLB advances





41,564



11,579


Securities sold under agreements to repurchase





24,247



79,059


Subordinated debentures





35,601



35,647


Junior subordinated debentures







8,248


Other liabilities





85,778



100,346


Total liabilities





10,582,713



10,766,964


Commitments and contingent liabilities









March 31,


December 31,






2018


2017






(in thousands)





Common stock (no par value)








Authorized shares

115,000



115,000






Issued and outstanding

73,240



73,020



1,634,916



1,634,705


Retained earnings





361,140



337,442


Accumulated other comprehensive loss





(48,133)



(22,225)


Total shareholders' equity





1,947,923



1,949,922


Total liabilities and shareholders' equity





$

12,530,636



$

12,716,886


__________

(1) Reclassified to conform to current period presentation. The reclassification was limited to adding a separate line item for equity securities at fair value, which were previously included in securities available for sale at fair value.

 

CONSOLIDATED STATEMENTS OF INCOME





Columbia Banking System, Inc.


Three Months Ended

Unaudited


March 31,


December 31,


March 31,



2018


2017


2017



(in thousands except per share)

Interest Income







Loans


$

103,027



$

95,889



$

74,120


Taxable securities


12,708



9,487



10,986


Tax-exempt securities


3,064



2,920



2,691


Deposits in banks


345



545



19


Total interest income


119,144



108,841



87,816


Interest Expense







Deposits


2,509



2,022



787


FHLB advances


570



99



225


Subordinated debentures


468



304




Other borrowings


116



192



129


Total interest expense


3,663



2,617



1,141


Net Interest Income


115,481



106,224



86,675


Provision for loan and lease losses


5,852



3,327



2,775


Net interest income after provision for loan and lease losses


109,629



102,897



83,900


Noninterest Income







Deposit account and treasury management fees


8,740



8,013



7,287


Card revenue


5,813



6,967



5,723


Financial services and trust revenue


2,730



2,958



2,839


Loan revenue


3,186



2,663



3,593


Merchant processing revenue






2,019


Bank owned life insurance


1,426



1,377



1,280


Investment securities gains (losses), net


22



(11)




Change in FDIC loss-sharing asset






(274)


Other


1,226



1,614



2,392


Total noninterest income


23,143



23,581



24,859


Noninterest Expense







Compensation and employee benefits


50,570



50,473



40,825


Occupancy


10,121



9,554



7,191


Merchant processing expense






1,049


Advertising and promotion


1,429



1,543



817


Data processing


5,270



5,134



4,208


Legal and professional fees


3,237



5,955



3,369


Taxes, licenses and fees


1,425



1,279



1,241


Regulatory premiums


937



884



776


Net cost of operation of other real estate owned


1



46



152


Amortization of intangibles


3,188



2,547



1,349


Other


9,809



8,212



8,009


Total noninterest expense


85,987



85,627



68,986


Income before income taxes


46,785



40,851



39,773


Provision for income taxes


6,815



25,123



10,574


Net Income


$

39,970



$

15,728



$

29,199


Earnings per common share







Basic


$

0.55



$

0.23



$

0.50


Diluted


$

0.55



$

0.23



$

0.50


Dividends paid per common share


$

0.22



$

0.22



$

0.22


Weighted average number of common shares outstanding


72,300



67,120



57,388


Weighted average number of diluted common shares outstanding


72,305



67,125



57,394


 

FINANCIAL STATISTICS





Columbia Banking System, Inc.


Three Months Ended

Unaudited


March 31,


December 31,


March 31,



2018


2017


2017

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

115,481



$

106,224



$

86,675


Provision for loan and lease losses


$

5,852



$

3,327



$

2,775


Noninterest income


$

23,143



$

23,581



$

24,859


Noninterest expense


$

85,987



$

85,627



$

68,986


Acquisition-related expense (included in noninterest expense)


$

4,265



$

13,638



$

1,364


Net income


$

39,970



$

15,728



$

29,199


Per Common Share







Earnings (basic)


$

0.55



$

0.23



$

0.50


Earnings (diluted)


$

0.55



$

0.23



$

0.50


Book value


$

26.60



$

26.70



$

21.86


Averages







Total assets


$

12,603,144



$

11,751,049



$

9,473,698


Interest-earning assets


$

11,122,753



$

10,453,097



$

8,520,291


Loans


$

8,348,740



$

7,749,420



$

6,198,215


Securities, including equity securities and FHLB stock


$

2,682,250



$

2,539,321



$

2,310,490


Deposits


$

10,334,480



$

9,804,456



$

7,954,653


Interest-bearing deposits


$

5,405,730



$

5,033,980



$

4,118,604


Interest-bearing liabilities


$

5,627,853



$

5,127,100



$

4,263,660


Noninterest-bearing deposits


$

4,928,750



$

4,770,476



$

3,836,049


Shareholders' equity


$

1,949,275



$

1,754,745



$

1,261,652


Financial Ratios







Return on average assets


1.27

%


0.54

%


1.23

%

Return on average common equity


8.20

%


3.59

%


9.26

%

Average equity to average assets


15.47

%


14.93

%


13.32

%

Net interest margin (tax equivalent)


4.22

%


4.20

%


4.20

%

Efficiency ratio (tax equivalent) (1)


61.04

%


63.93

%


59.95

%

Operating efficiency ratio (tax equivalent) (2)


57.59

%


52.24

%


59.07

%

Noninterest expense ratio


2.73

%


2.91

%


2.91

%

Core noninterest expense ratio (2)


2.59

%


2.45

%


2.85

%










March 31,


December 31,



Period end


2018


2017



Total assets


$

12,530,636



$

12,716,886




Loans, net of unearned income


$

8,339,631



$

8,358,657




Allowance for loan and lease losses


$

79,827



$

75,646




Securities, including equity securities and FHLB stock


$

2,640,685



$

2,753,271




Deposits


$

10,395,523



$

10,532,085




Core deposits


$

9,897,185



$

10,039,557




Shareholders' equity


$

1,947,923



$

1,949,922




Nonperforming assets







Nonaccrual loans


$

78,464



$

66,189




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


11,507



13,298




Total nonperforming assets


$

89,971



$

79,487




Nonperforming loans to period-end loans


0.94

%


0.79

%



Nonperforming assets to period-end assets


0.72

%


0.63

%



Allowance for loan and lease losses to period-end loans


0.96

%


0.91

%



Net loan charge-offs (recoveries)


$

1,671


(3)

$

(703)


(4)










(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) The operating efficiency ratio (tax equivalent) and core noninterest expense ratio are non-GAAP financial measures. See section titled "Non-GAAP Financial Measures" on the last two pages of this earnings release for the reconciliations of the operating efficiency ratio (tax equivalent) to the efficiency ratio (tax equivalent) and the reconciliation of the noninterest expense ratio to the core noninterest expense ratio.

(3) For the three months ended March 31, 2018.

(4) For the three months ended December 31, 2017.






 

QUARTERLY FINANCIAL STATISTICS








Columbia Banking System, Inc.


Three Months Ended

Unaudited


March 31,


December 31,


September 30,


June 30,


March 31,



2018


2017


2017


2017


2017



(dollars in thousands except per share)

Earnings



Net interest income


$

115,481



$

106,224



$

88,929



$

86,161



$

86,675


Provision (recapture) for loan and lease losses


$

5,852



$

3,327



$

(648)



$

3,177



$

2,775


Noninterest income


$

23,143



$

23,581



$

37,067



$

24,135



$

24,859


Noninterest expense


$

85,987



$

85,627



$

67,537



$

68,867



$

68,986


Acquisition-related expense (included in noninterest expense)


$

4,265



$

13,638



$

1,171



$

1,023



$

1,364


Net income


$

39,970



$

15,728



$

40,769



$

27,132



$

29,199


Per Common Share











Earnings (basic)


$

0.55



$

0.23



$

0.70



$

0.47



$

0.50


Earnings (diluted)


$

0.55



$

0.23



$

0.70



$

0.47



$

0.50


Book value


$

26.60



$

26.70



$

22.76



$

22.23



$

21.86


Averages











Total assets


$

12,603,144



$

11,751,049



$

9,695,005



$

9,597,274



$

9,473,698


Interest-earning assets


$

11,122,753



$

10,453,097



$

8,750,561



$

8,651,735



$

8,520,291


Loans


$

8,348,740



$

7,749,420



$

6,441,537



$

6,325,462



$

6,198,215


Securities, including equity securities and FHLB stock


$

2,682,250



$

2,539,321



$

2,236,235



$

2,316,077



$

2,310,490


Deposits


$

10,334,480



$

9,804,456



$

8,187,337



$

7,965,868



$

7,954,653


Interest-bearing deposits


$

5,405,730



$

5,033,980



$

4,200,580



$

4,123,135



$

4,118,604


Interest-bearing liabilities


$

5,627,853



$

5,127,100



$

4,285,936



$

4,367,216



$

4,263,660


Noninterest-bearing deposits


$

4,928,750



$

4,770,476



$

3,986,757



$

3,842,733



$

3,836,049


Shareholders' equity


$

1,949,275



$

1,754,745



$

1,323,794



$

1,295,564



$

1,261,652


Financial Ratios











Return on average assets


1.27

%


0.54

%


1.68

%


1.13

%


1.23

%

Return on average common equity


8.20

%


3.59

%


12.32

%


8.38

%


9.26

%

Average equity to average assets


15.47

%


14.93

%


13.65

%


13.50

%


13.32

%

Net interest margin (tax equivalent)


4.22

%


4.20

%


4.20

%


4.12

%


4.20

%

Period end











Total assets


$

12,530,636



$

12,716,886



$

9,814,578



$

9,685,110



$

9,527,272


Loans, net of unearned income


$

8,339,631



$

8,358,657



$

6,512,006



$

6,423,074



$

6,228,136


Allowance for loan and lease losses


$

79,827



$

75,646



$

71,616



$

72,984



$

71,021


Securities, including equity securities and FHLB stock


$

2,640,685



$

2,753,271



$

2,218,113



$

2,280,996



$

2,341,959


Deposits


$

10,395,523



$

10,532,085



$

8,341,717



$

8,072,464



$

8,088,827


Core deposits


$

9,897,185



$

10,039,557



$

7,999,499



$

7,721,766



$

7,794,590


Shareholders' equity


$

1,947,923



$

1,949,922



$

1,328,428



$

1,297,314



$

1,275,343


Nonperforming assets











Nonaccrual loans


$

78,464



$

66,189



$

40,317



$

36,824



$

25,547


OREO and OPPO


11,507



13,298



3,682



4,058



4,519


  Total nonperforming assets


$

89,971



$

79,487



$

43,999



$

40,882



$

30,066


Nonperforming loans to period-end loans


0.94

%


0.79

%


0.62

%


0.57

%


0.41

%

Nonperforming assets to period-end assets


0.72

%


0.63

%


0.45

%


0.42

%


0.32

%

Allowance for loan and lease losses to period-end loans


0.96

%


0.91

%


1.10

%


1.14

%


1.14

%

Net loan charge-offs (recoveries)


$

1,671



$

(703)



$

720



$

1,214



$

1,797


 

LOAN PORTFOLIO COMPOSITION








Columbia Banking System, Inc.








Unaudited


March 31,


December 31,


September 30,


June 30,


March 31,



2018


2017


2017


2017


2017

Loan Portfolio Composition - Dollars


(dollars in thousands)

Commercial business


$

3,402,162



$

3,377,324



$

2,735,206



$

2,704,468



$

2,559,247


Real estate:











One-to-four family residential


182,302



188,396



176,487



173,150



172,581


Commercial and multifamily residential


3,776,709



3,825,739



2,825,794



2,787,560



2,783,433


  Total real estate


3,959,011



4,014,135



3,002,281



2,960,710



2,956,014


Real estate construction:











One-to-four family residential


208,441



200,518



145,419



139,956



115,219


Commercial and multifamily residential


385,339



371,931



213,939



195,565



172,896


  Total real estate construction


593,780



572,449



359,358



335,521



288,115


Consumer


323,631



334,190



323,913



323,187



318,069


Purchased credit impaired


109,299



112,670



120,477



129,853



138,903


Subtotal loans


8,387,883



8,410,768



6,541,235



6,453,739



6,260,348


Less:  Net unearned income


(48,252)



(52,111)



(29,229)



(30,665)



(32,212)


Loans, net of unearned income


8,339,631



8,358,657



6,512,006



6,423,074



6,228,136


Less:  Allowance for loan and lease losses


(79,827)



(75,646)



(71,616)



(72,984)



(71,021)


Total loans, net


8,259,804



8,283,011



6,440,390



6,350,090



6,157,115


Loans held for sale


$

4,312



$

5,766



$

7,802



$

6,918



$

3,245


 












Loan Portfolio Composition - Percentages


March 31, 2018


December 31, 2017


September 30, 2017


June 30, 2017


March 31, 2017

Commercial business


40.8

%


40.4

%


42.0

%


42.1

%


41.1

%

Real estate:











One-to-four family residential


2.2

%


2.3

%


2.7

%


2.7

%


2.8

%

Commercial and multifamily residential


45.3

%


45.8

%


43.3

%


43.5

%


44.7

%

  Total real estate


47.5

%


48.1

%


46.0

%


46.2

%


47.5

%

Real estate construction:











One-to-four family residential


2.5

%


2.4

%


2.2

%


2.2

%


1.8

%

Commercial and multifamily residential


4.6

%


4.4

%


3.3

%


3.0

%


2.8

%

  Total real estate construction


7.1

%


6.8

%


5.5

%


5.2

%


4.6

%

Consumer


3.9

%


4.0

%


5.0

%


5.0

%


5.1

%

Purchased credit impaired


1.3

%


1.3

%


1.9

%


2.0

%


2.2

%

Subtotal loans


100.6

%


100.6

%


100.4

%


100.5

%


100.5

%

Less:  Net unearned income


(0.6)

%


(0.6)

%


(0.4)

%


(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













March 31,


December 31,


September 30,


June 30,


March 31,



2018


2017


2017


2017


2017

Deposit Composition - Dollars


(dollars in thousands)

Core deposits:











Demand and other non-interest bearing


$

4,927,226



$

5,081,901



$

4,119,950



$

3,905,652



$

3,958,106


Interest bearing demand


1,328,756



1,265,212



1,009,378



988,532



985,954


Money market


2,477,487



2,543,712



1,821,262



1,787,101



1,798,034


Savings


886,171



861,941



772,858



756,825



759,002


Certificates of deposit, less than $250,000


277,545



286,791



276,051



283,656



293,494


  Total core deposits


9,897,185



10,039,557



7,999,499



7,721,766



7,794,590













Certificates of deposit, $250,000 or more


96,333



100,399



84,105



81,861



74,460


Certificates of deposit insured by CDARS®


23,191



25,374



20,690



19,276



20,994


Other brokered certificates of deposit


76,931



78,481








Brokered money market accounts


302,544



289,031



237,421



249,554



198,768


Subtotal


10,396,184



10,532,842



8,341,715



8,072,457



8,088,812


  Premium (discount) resulting from acquisition date fair value adjustment


(661)



(757)



2



7



15


Total deposits


$

10,395,523



$

10,532,085



$

8,341,717



$

8,072,464



$

8,088,827


 

Deposit Composition - Percentages


March 31,


December 31,


September 30,


June 30,


March 31,


2018


2017


2017


2017


2017

Core deposits:











Demand and other non-interest bearing


47.4

%


48.2

%


49.4

%


48.4

%


48.9

%

Interest bearing demand


12.8

%


12.0

%


12.1

%


12.2

%


12.2

%

Money market


23.8

%


24.2

%


21.8

%


22.1

%


22.2

%

Savings


8.5

%


8.2

%


9.3

%


9.4

%


9.4

%

Certificates of deposit, less than $250,000


2.7

%


2.7

%


3.3

%


3.5

%


3.6

%

  Total core deposits


95.2

%


95.3

%


95.9

%


95.6

%


96.3

%












Certificates of deposit, $250,000 or more


0.9

%


1.0

%


1.0

%


1.0

%


0.9

%

Certificates of deposit insured by CDARS®


0.2

%


0.2

%


0.2

%


0.2

%


0.3

%

Other brokered certificates of deposit


0.7

%


0.7

%


%


%


%

Brokered money market accounts


3.0

%


2.8

%


2.9

%


3.2

%


2.5

%

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



March 31, 2018


March 31, 2017



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,348,740



$

104,091



4.99

%


$

6,198,215



$

75,514



4.87

%

Taxable securities


2,158,039



12,708



2.36

%


1,861,627



10,986



2.36

%

Tax exempt securities (2)


524,211



3,878



2.96

%


448,863



4,140



3.69

%

Interest-earning deposits with banks


91,763



345



1.50

%


11,586



19



0.66

%

Total interest-earning assets


11,122,753



$

121,022



4.35

%


8,520,291



$

90,659



4.26

%

Other earning assets


218,126







178,091






Noninterest-earning assets


1,262,265







775,316






Total assets


$

12,603,144







$

9,473,698






LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit


$

479,729



$

526



0.44

%


$

399,306



$

95



0.10

%

Savings accounts


878,170



41



0.02

%


738,631



19



0.01

%

Interest-bearing demand


1,252,823



535



0.17

%


972,560



159



0.07

%

Money market accounts


2,795,008



1,407



0.20

%


2,008,107



514



0.10

%

Total interest-bearing deposits


5,405,730



2,509



0.19

%


4,118,604



787



0.08

%

FHLB advances


125,660



570



1.81

%


81,577



225



1.10

%

Subordinated debentures


35,623



468



5.26

%






%

Other borrowings


60,840



116



0.76

%


63,479



129



0.81

%

Total interest-bearing liabilities


5,627,853



$

3,663



0.26

%


4,263,660



$

1,141



0.11

%

Noninterest-bearing deposits


4,928,750







3,836,049






Other noninterest-bearing liabilities


97,266







112,337






Shareholders' equity


1,949,275







1,261,652






Total liabilities & shareholders' equity


$

12,603,144







$

9,473,698






Net interest income (tax equivalent)


$

117,359







$

89,518




Net interest margin (tax equivalent)


4.22

%






4.20

%



(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 $2.2 million and $1.6 million for the three month periods ended March 31, 2018 and March 31, 2017, respectively. The incremental accretion on acquired loans was $3.7 million and $4.1 million for the three months ended March 31, 2018 and 2017, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.1 million and $1.4 million for the three months ended March 31, 2018 and 2017, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $814 thousand and $1.4 million for the three month periods ended March 31, 2018 and 2017, respectively.

 

AVERAGE BALANCES AND RATES









Columbia Banking System, Inc.









Unaudited















Three Months Ended


Three Months Ended



March 31, 2018


December 31, 2017



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,348,740



$

104,091



4.99

%


$

7,749,420



$

97,720



5.04

%

Taxable securities


2,158,039



12,708



2.36

%


2,035,788



9,487



1.86

%

Tax exempt securities (2)


524,211



3,878



2.96

%


503,533



4,492



3.57

%

Interest-earning deposits with banks


91,763



345



1.50

%


164,356



545



1.33

%

Total interest-earning assets


11,122,753



$

121,022



4.35

%


10,453,097



$

112,244



4.30

%

Other earning assets


218,126







202,246






Noninterest-earning assets


1,262,265







1,095,706






Total assets


$

12,603,144







$

11,751,049






LIABILITIES AND SHAREHOLDERS' EQUITY

Certificates of deposit


$

479,729



$

526



0.44

%


$

457,285



$

374



0.33

%

Savings accounts


878,170



41



0.02

%


835,952



39



0.02

%

Interest-bearing demand


1,252,823



535



0.17

%


1,168,496



376



0.13

%

Money market accounts


2,795,008



1,407



0.20

%


2,572,247



1,233



0.19

%

Total interest-bearing deposits


5,405,730



2,509



0.19

%


5,033,980



2,022



0.16

%

FHLB advances


125,660



570



1.81

%


9,817



99



4.03

%

Subordinated debentures


35,623



468



5.26

%


23,427



304



5.19

%

Other borrowings


60,840



116



0.76

%


59,876



192



1.28

%

Total interest-bearing liabilities


5,627,853



$

3,663



0.26

%


5,127,100



$

2,617



0.20

%

Noninterest-bearing deposits


4,928,750







4,770,476






Other noninterest-bearing liabilities


97,266







98,728






Shareholders' equity


1,949,275







1,754,745






Total liabilities & shareholders' equity


$

12,603,144







$

11,751,049






Net interest income (tax equivalent)


$

117,359







$

109,627




Net interest margin (tax equivalent)


4.22

%






4.20

%



(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 $2.2 million and $1.9 million for the three month periods ended March 31, 2018 and December 31, 2017, respectively. The incremental accretion on acquired loans was $3.7 million and $2.7 million for the three months ended March 31, 2018 and December 31, 2017, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.1 million and $1.8 million for the three months ended March 31, 2018 and December 31, 2017, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $814 thousand and $1.6 million for the three month periods ended March 31, 2018 and December 31, 2017, respectively.

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



March 31,


December 31,


March 31,



2018


2017


2017

Operating net interest margin non-GAAP reconciliation:


(dollars in thousands)

Net interest income (tax equivalent) (1)


$

117,359



$

109,627



$

89,518


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







Incremental accretion income on FDIC purchased credit impaired loans


(329)



(265)



(2,117)


Incremental accretion income on other acquired loans


(3,370)



(2,482)



(1,948)


Premium amortization on acquired securities


2,075



1,978



1,462


Correction of immaterial error - securities premium amortization




1,771




Interest reversals on nonaccrual loans


417



443



265


Operating net interest income (tax equivalent) (1)


$

116,152



$

111,072



$

87,180


Average interest earning assets


$

11,122,753



$

10,453,097



$

8,520,291


Net interest margin (tax equivalent) (1)


4.22

%


4.20

%


4.20

%

Operating net interest margin (tax equivalent) (1)


4.18

%


4.25

%


4.09

%

 



Three Months Ended



March 31,


December 31,


March 31,



2018


2017


2017

Operating efficiency ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$

85,987



$

85,627



$

68,986


Adjustments to arrive at operating noninterest expense:







Acquisition-related expenses


(4,265)



(13,638)



(1,364)


Net benefit (cost) of operation of OREO and OPPO


4



(46)



(150)


FDIC clawback liability recovery






54


Loss on asset disposals




(56)



(6)


State of Washington Business and Occupation ("B&O") taxes


(1,317)



(1,167)



(1,123)


Operating noninterest expense (numerator B)


$

80,409



$

70,720



$

66,397









Net interest income (tax equivalent) (1)


$

117,359



$

109,627



$

89,518


Noninterest income


23,143



23,581



24,859


Bank owned life insurance tax equivalent adjustment


379



741



689


Total revenue (tax equivalent) (denominator A)


$

140,881



$

133,949



$

115,066









Operating net interest income (tax equivalent) (1)


$

116,152



$

111,072



$

87,180


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







Investment securities gains (loss), net


(22)



11




Gain on asset disposals


(35)



(34)



(29)


Mortgage loan repurchase liability adjustment






(573)


Change in FDIC loss-sharing asset






274


Operating noninterest income (tax equivalent)


23,465



24,299



25,220


Total operating revenue (tax equivalent) (denominator B)


$

139,617



$

135,371



$

112,400


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


61.04

%


63.93

%


59.95

%

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


57.59

%


52.24

%


59.07

%

__________

(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 $1.9 million, $3.4 million and $2.8 million for the three month periods ended March 31, 2018, December 31, 2017 and March 31, 2017, respectively.

Non-GAAP Financial Measures - Continued

The Company also considers its core net interest 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 net interest 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 net interest expense ratio:



Three Months Ended



March 31,


December 31,


March 31,



2018


2017


2017

Core noninterest expense ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$

85,987



$

85,627



$

68,986


Adjustments to arrive at core noninterest expense:







FDIC clawback liability recovery






54


Acquisition-related expenses


(4,265)



(13,638)



(1,364)


Net benefit (cost) of operation of OREO and OPPO


4



(46)



(150)


Core noninterest expense (numerator B)


$

81,726



$

71,943



$

67,526


Average assets (denominator)


$

12,603,144



$

11,751,049



$

9,473,698


Noninterest expense ratio (numerator A/denominator)


2.73

%


2.91

%


2.91

%

Core noninterest expense ratio (numerator B/denominator)


2.59

%


2.45

%


2.85

%

 

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SOURCE Columbia Banking System, Inc.