Toggle SGML Header (+)


Section 1: 8-K (FORM 8-K)

Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
July 25, 2019
COLUMBIA BANKING SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Washington
 
0-20288
 
91-1422237
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
1301 A Street
Tacoma, Washington 98402-2156
(Address of principal executive offices and zip code)
(253) 305-1900
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading symbol
 
Name of each exchange on which registered
Common Stock, No Par Value
 
COLB
 
NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.




Items to be Included in this Report

Item 2.02 Results of Operations and Financial Condition
Item 8.01 Other Events
The following information is furnished pursuant to Item 2.02, "Results of Operations and Financial Condition" and Item 8.01 "Other Events."
On July 25, 2019, Columbia Banking System, Inc. issued a press release reporting its financial results for the quarter ended June 30, 2019 and a quarterly cash dividend of $0.28 per share. The dividend will be paid on August 21, 2019 to shareholders of record at the close of business on August 7, 2019. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference in its entirety.
Item 9.01 Financial Statements and Exhibits
(d) The following exhibit is being furnished herewith:
99.1 Press release dated July 25, 2019 reporting the financial results of Columbia Banking System, Inc. for the quarter ended June 30, 2019 and a quarterly cash dividend.





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
COLUMBIA BANKING SYSTEM, INC.
 
 
 
 
 
 
Date:
July 25, 2019
 
 
 
/s/ HADLEY S. ROBBINS
 
 
 
 
 
Hadley S. Robbins
 
 
 
 
 
President and
Chief Executive Officer




EXHIBIT INDEX
99.1 Press release dated July 25, 2019 reporting the financial results of Columbia Banking System, Inc. for the quarter ended June 30, 2019 and a quarterly cash dividend.
 

(Back To Top)

Section 2: EX-99.1 (PRESS RELEASE - EARNINGS AND DIVIDEND)

Exhibit


Exhibit 99.1

398908663_cbsystemsolidbuga11.jpg

FOR IMMEDIATE RELEASE

July 25, 2019

                        


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



Highlights

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


TACOMA, Washington, July 25, 2019 -- 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 2019 earnings, “We are quite pleased with the strong but disciplined loan growth in the quarter. That disciplined approach to our lending also comes through in the excellent credit quality of the portfolio at the midway point of 2019. We are confident that our focus on driving sustainable revenue growth combined with a disciplined approach to expense management will continue to drive long term shareholder value.”








Balance Sheet
Total assets at June 30, 2019 were $13.09 billion, an increase of $26.4 million from the linked quarter. Loans were $8.65 billion, up $126.2 million, or 5.9% annualized, from March 31, 2019 as a result of loan originations of $400.7 million and increased seasonal line utilization partially offset by payments. Securities available for sale were $2.86 billion at June 30, 2019, a decrease of $162.9 million from $3.03 billion at March 31, 2019 as earning assets rotated into loans. Total deposits at June 30, 2019 were $10.21 billion, a decrease of $157.4 million from March 31, 2019. Core deposits comprised 96% of total deposits and were $9.77 billion at June 30, 2019, a decrease of $131.2 million from March 31, 2019. Deposit mix remained fairly consistent from March 31, 2019 with 50% noninterest-bearing and 50% interest-bearing. The average cost of total deposits for the quarter was 20 basis points, an increase of 2 basis points from the first quarter of 2019, on an actual/actual basis. For additional information regarding this calculation, see the “Net Interest Margin” section.
Clint Stein, Columbia’s Executive Vice President and Chief Operating Officer, stated, “Our bankers continue to excel in a very competitive business environment by delivering record first half loan production.” Mr. Stein continued, “Their performance is both a testament to their capabilities and impressive given their continued adherence to our credit disciplines.”
Income Statement
Net Interest Income
Net interest income for the second quarter of 2019 was $125.1 million, an increase of $4.1 million and $8.4 million from the linked quarter and the prior year period, respectively. The increase in net interest income for the linked quarter was primarily due to $4.9 million of interest recoveries on nonaccrual loans received in the second quarter of 2019 related to two lending relationships. Partially offsetting these loan interest recoveries, interest expense on Federal Home Loan Bank (“FHLB”) advances increased due to both higher average borrowings and higher average rates compared to the linked quarter. The increase in net interest income over the prior year period was primarily due to the previously mentioned loan interest recoveries. In addition, interest income on loans and taxable securities increased due to both higher average balances and higher rates. For additional information regarding net interest income, see the “Net Interest Margin” section and the “Average Balances and Rates” tables.
Noninterest Income
Noninterest income was $25.6 million for the second quarter of 2019, an increase of $4.0 million from the first quarter of 2019. The linked quarter increase was principally due to $3.0 million in bank-

2



owned life insurance (“BOLI”) benefits and a $667 thousand gain on disposal of loans realized during the second quarter. Compared to the second quarter of 2018, noninterest income increased $2.0 million. The increase from the prior year period was due to the previously noted BOLI benefits and the gain on disposal of loans during the quarter, partially offset by lower card revenue during the current quarter because, as of July 1, 2018, we became subject to the interchange fee cap imposed under the Dodd-Frank Act.
Noninterest Expense
Total noninterest expense for the second quarter of 2019 was $86.7 million, an increase of $2.0 million from the first quarter of 2019. The increase in noninterest expense was a result of higher legal and professional fees and other expenses which were partially offset by a decrease in Other Real Estate Owned (“OREO”) expense. The increase in professional expense was primarily due to expenses related to the on-going digital corporate initiative, while other expenses increased $1.8 million as a result of increases in off-balance sheet reserves and sponsorships during the quarter. These increases in noninterest expense were partially offset by a $705 thousand net benefit of OREO in the second quarter, due to a gain on the sale of OREO, compared to a cost of OREO of $113 thousand for the linked quarter.
Compared to the second quarter of 2018, noninterest expense increased by $2.1 million. After removing acquisition-related expenses of $2.8 million from the second quarter of 2018, year over year noninterest expense increased $4.9 million, or 6%. This increase was primarily driven by higher compensation and employee benefits and legal and professional expenses partially offset by a decrease in OREO expenses. Salary expense increased as a result of the rise in the number of employees compared to June 30, 2018. Legal and professional fees were $2.6 million higher in the second quarter of 2019 primarily due to expenses related to the digital corporate initiative. These increases in expenses were partially offset by a net benefit on OREO in the second quarter of 2019, as previously noted, compared to a net cost of $758 thousand during the second quarter of 2018.
Net Interest Margin
Beginning January 2019, our net interest margin was calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

3



Columbia’s net interest margin (tax equivalent) for the second quarter of 2019 was 4.40%, an increase of 8 basis points and 10 basis points from the linked quarter and prior year period, respectively. The increase in the net interest margin (tax equivalent) compared to the linked quarter was driven by the previously noted $4.9 million of loan interest recoveries, or 17 basis points, partially offset by lower rates on taxable securities and higher average rates on FHLB advances. Compared to the prior year period, the increased net interest margin (tax equivalent) was driven by the previously noted interest recoveries and higher rates on the loan portfolio, partially offset by higher rates on our deposits and borrowings.
Columbia’s operating net interest margin (tax equivalent)(2) was 4.38% for the second quarter of 2019, which increased 5 and 10 basis points compared to the linked quarter and the prior year period, respectively. The increases in the operating net interest margin for the current quarter compared to the linked quarter and the prior year quarter were due to the items previously noted in the preceding paragraph.
The following table shows the impact to interest income resulting from income accretion on acquired loan portfolios as well as the net interest margin and operating net interest margin:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
June 30,
 
June 30,
 
 
2019
 
2019
 
2018
 
2018
 
2018
 
2019
 
2018
 
 
(dollars in thousands)
Incremental accretion income due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FDIC purchased credit impaired loans
 
$
579

 
$
288

 
$
395

 
$
585

 
$
326

 
$
867

 
$
655

Other acquired loans
 
2,084

 
1,747

 
2,218

 
2,643

 
2,690

 
3,831

 
6,060

Incremental accretion income
 
$
2,663

 
$
2,035

 
$
2,613

 
$
3,228

 
$
3,016

 
$
4,698

 
$
6,715

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (tax equivalent) (1)
 
4.40
%
 
4.32
%
 
4.36
%
 
4.37
%
 
4.30
%
 
4.36
%
 
4.29
%
Operating net interest margin (tax equivalent) (1)(2)
 
4.38
%
 
4.33
%
 
4.34
%
 
4.34
%
 
4.28
%
 
4.36
%
 
4.26
%
__________
(1) Beginning January 2019, net interest margin (tax equivalent) and operating net interest margin (tax equivalent) were calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(2) Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled “Non-GAAP Financial Measures” in this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.

Asset Quality
At June 30, 2019, nonperforming assets to total assets were 0.31% compared to 0.45% at March 31, 2019. Total nonperforming assets decreased $18.5 million from the linked quarter due to a decrease in both nonaccrual loans and OREO.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “I’m really proud of our bankers and their consistent disciplined approach to managing credit risk,

4



especially our Special Credits team. The reduction in nonperforming assets combined with interest recoveries of $4.9 million made it an exemplary quarter.”
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
 
 
June 30, 2019
 
March 31, 2019
 
December 31, 2018
 
 
(in thousands)
Nonaccrual loans:
 
 
 
 
 
 
Commercial business
 
$
23,997

 
$
35,577

 
$
35,513

Real estate:
 
 
 
 
 
 
One-to-four family residential
 
860

 
923

 
1,158

Commercial and multifamily residential
 
11,843

 
13,301

 
14,904

Total real estate
 
12,703

 
14,224

 
16,062

Real estate construction:
 
 
 
 
 
 
One-to-four family residential
 

 

 
318

Consumer
 
2,338

 
2,814

 
2,949

Total nonaccrual loans
 
39,038

 
52,615

 
54,842

OREO and other personal property owned
 
1,118

 
6,075

 
6,049

Total nonperforming assets
 
$
40,156

 
$
58,690

 
$
60,891


5



The following table provides an analysis of the Company’s allowance for loan and lease losses:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
 
 
(in thousands)
Beginning balance, loans excluding PCI loans
 
$
80,029

 
$
79,758

 
$
74,162

 
$
79,758

 
$
68,739

Beginning balance, PCI loans
 
3,245

 
3,611

 
5,665

 
3,611

 
6,907

Beginning balance
 
83,274

 
83,369

 
79,827

 
83,369

 
75,646

Charge-offs:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
(4,118
)
 
(1,249
)
 
(5,775
)
 
(5,367
)
 
(8,252
)
One-to-four family residential real estate
 

 
(2
)
 

 
(2
)
 

Commercial and multifamily residential real estate
 

 

 

 

 
(223
)
One-to-four family residential real estate construction
 

 
(170
)
 

 
(170
)
 

Consumer
 
(354
)
 
(478
)
 
(232
)
 
(832
)
 
(496
)
Purchased credit impaired
 
(815
)
 
(1,089
)
 
(1,235
)
 
(1,904
)
 
(2,578
)
Total charge-offs
 
(5,287
)
 
(2,988
)
 
(7,242
)
 
(8,275
)
 
(11,549
)
Recoveries:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
547

 
480

 
1,543

 
1,027

 
2,345

One-to-four family residential real estate
 
20

 
17

 
196

 
37

 
368

Commercial and multifamily residential real estate
 
33

 
31

 
640

 
64

 
799

One-to-four family residential real estate construction
 
661

 
60

 
14

 
721

 
33

Commercial and multifamily residential real estate construction
 
1

 

 

 
1

 

Consumer
 
178

 
238

 
270

 
416

 
530

Purchased credit impaired
 
872

 
705

 
927

 
1,577

 
2,151

Total recoveries
 
2,312

 
1,531

 
3,590

 
3,843

 
6,226

Net charge-offs
 
(2,975
)
 
(1,457
)
 
(3,652
)
 
(4,432
)
 
(5,323
)
Provision for loan and lease losses, excluding PCI loans
 
251

 
1,344

 
4,550

 
1,595

 
11,525

Provision (recapture) for loan and lease losses, PCI loans
 
(33
)
 
18

 
(575
)
 
(15
)
 
(1,698
)
Provision for loan and lease losses
 
218

 
1,362

 
3,975

 
1,580

 
9,827

Ending balance, loans excluding PCI loans
 
77,248

 
80,029

 
75,368

 
77,248

 
75,368

Ending balance, PCI loans
 
3,269

 
3,245

 
4,782

 
3,269

 
4,782

Ending balance
 
$
80,517

 
$
83,274

 
$
80,150

 
$
80,517

 
$
80,150

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

6



Organizational Update
During the first six months of 2019, the Bank received the following accolades:
For the 13th consecutive year, named as one of Washington’s Best Workplaces by Puget Sound Business Journal;
Winner of the 2018 Corporate Citizenship Award for midsize companies in Washington state from the Puget Sound Business Journal;
Selected as Best Bank and Best Large Business in The Best of South Sound reader’s choice poll for 2019 by South Sound Magazine;
Received the Corporate Award of the Year for work with Small Business Association Loans to minority owned businesses from the Oregon Association of Minority Entrepreneurs;
Selected as one of the Best Banks in the Best of The Mid-Valley, in the annual reader’s poll by the Salem Statesman Journal;
Columbia Bank’s Board of Directors was awarded the Governance Award for their service to the Bank and the community by Seattle Business Magazine;
Recognized as one of the Best Places to Work in Idaho by Populus Marketing Research;
Awarded the 2018 National Association of Secretaries of State Medallion for outstanding work to improve lives in Washington communities from The State of Washington Secretary of State’s Office, and
Selected as one of America’s Best Banks of 2019 among the nation’s 100 largest publicly traded banks and thrifts by Forbes.
Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.28 per common share on August 21, 2019 to shareholders of record as of the close of business on August 7, 2019.
Conference Call Information
Columbia’s management will discuss the second quarter 2019 financial results on a conference call scheduled for Thursday, July 25, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT). Interested parties may join the live-streamed event by using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~072519
The conference call can also be accessed on Thursday, July 25, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT) by calling 888-286-8956; Conference ID: 5179848.
A replay of the call can be accessed beginning Friday, July 26, 2019 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~072519



7



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.

8



Note Regarding Forward-Looking Statements
This news release includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements include, but are not limited to, descriptions of Columbia’s management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia’s style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “intend,” “should,” and “anticipate” or the negative of these words or words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risks and uncertainties, many of which are outside our control, that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia’s filings with the Securities and Exchange Commission, available at the SEC’s website at www.sec.gov and the Company’s website at www.columbiabank.com, include the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q, (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) costs or difficulties related to the integration of acquisitions may be greater than expected; (5) competitive pressure among financial institutions may increase significantly; (6) failure to maintain effective internal controls over financial reporting or disclosure controls and procedures may adversely affect our business; (7) reliance on and cost of technology may increase; and (8) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

Contacts:
Hadley S. Robbins,
 
President and
 
Chief Executive Officer
 
 
 
Gregory A. Sigrist,
 
Executive Vice President and
 
Chief Financial Officer
 
 
 
Investor Relations
 
 
253-305-1921

9




CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
June 30,
 
March 31,
 
December 31,
 
 
 
 
 
 
 
2019
 
2019
 
2018
 
 
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
 
 
 
 
 
$
224,327

 
$
178,591

 
$
260,180

Interest-earning deposits with banks
 
 
 
 
 
 
34,332

 
33,482

 
17,407

Total cash and cash equivalents
 
 
 
 
 
 
258,659

 
212,073

 
277,587

Debt securities available for sale at fair value
 
 
 
 
 
2,864,418

 
3,027,270

 
3,167,448

Federal Home Loan Bank (“FHLB”) stock at cost
 
 
 
 
 
29,800

 
25,600

 
25,960

Loans held for sale
 
 
 
 
 
 
12,189

 
4,017

 
3,849

Loans, net of unearned income
 
 
 
 
 
 
8,646,990

 
8,520,798

 
8,391,511

Less: allowance for loan and lease losses
 
 
 
 
 
80,517

 
83,274

 
83,369

Loans, net
 
 
 
 
 
 
8,566,473

 
8,437,524

 
8,308,142

Interest receivable
 
 
 
 
 
 
46,878

 
46,835

 
45,323

Premises and equipment, net
 
 
 
 
 
 
167,295

 
168,139

 
168,788

Other real estate owned
 
 
 
 
 
 
1,118

 
6,075

 
6,019

Goodwill
 
 
 
 
 
 
765,842

 
765,842

 
765,842

Other intangible assets, net
 
 
 
 
 
 
40,540

 
43,189

 
45,937

Other assets
 
 
 
 
 
 
337,596

 
327,872

 
280,250

Total assets
 
 
 
 
 
 
$
13,090,808

 
$
13,064,436

 
$
13,095,145

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing
 
 
 
 
 
 
$
5,082,219

 
$
5,106,568

 
$
5,227,216

Interest-bearing
 
 
 
 
 
 
5,129,380

 
5,262,441

 
5,230,910

Total deposits
 
 
 
 
 
 
10,211,599

 
10,369,009

 
10,458,126

FHLB advances
 
 
 
 
 
 
495,496

 
390,510

 
399,523

Securities sold under agreements to repurchase
 
 
 
 
 
50,226

 
23,018

 
61,094

Subordinated debentures
 
 
 
 
 
 
35,370

 
35,416

 
35,462

Other liabilities
 
 
 
 
 
 
164,479

 
157,863

 
107,291

Total liabilities
 
 
 
 
 
 
10,957,170

 
10,975,816

 
11,061,496

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
 
 
June 30,
 
March 31,
 
December 31,
 
 
 
 
 
 
 
2019
 
2019
 
2018
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Preferred stock (no par value)
 
 
 
 
 
 
 
 
 
 
 
Authorized shares
2,000

 
2,000

 
2,000

 
 
 
 
 
 
Common stock (no par value)
 
 
 
 
 
 
 
 
 
 
 
Authorized shares
115,000

 
115,000

 
115,000

 
 
 
 
 
 
Issued
73,548

 
73,565

 
73,249

 
 
 
 
 
 
Outstanding
72,924

 
73,565

 
73,249

 
1,644,922

 
1,642,977

 
1,642,246

Retained earnings
 
 
 
 
 
 
463,429

 
442,597

 
426,708

Accumulated other comprehensive income (loss)
 
 
 
 
 
 
47,150

 
3,046

 
(35,305
)
Treasury stock at cost
624

 

 

 
(21,863
)
 

 

Total shareholders’ equity
 
 
 
 
 
 
2,133,638

 
2,088,620

 
2,033,649

Total liabilities and shareholders’ equity
 
 
 
 
 
$
13,090,808

 
$
13,064,436

 
$
13,095,145



10



CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Six Months Ended
Unaudited
 
June 30,
 
March 31,
 
June 30,
 
June 30,
 
June 30,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Interest Income
 
(in thousands except per share amounts)
Loans
 
$
116,585

 
$
108,416

 
$
105,412

 
$
225,001

 
$
208,439

Taxable securities
 
15,918

 
17,415

 
11,923

 
33,333

 
24,631

Tax-exempt securities
 
2,712

 
2,969

 
3,063

 
5,681

 
6,127

Deposits in banks
 
207

 
88

 
151

 
295

 
496

Total interest income
 
135,422

 
128,888

 
120,549

 
264,310

 
239,693

Interest Expense
 
 
 
 
 
 
 
 
 
 
Deposits
 
4,976

 
4,498

 
2,572

 
9,474

 
5,081

FHLB advances
 
4,708

 
2,685

 
815

 
7,393

 
1,385

Subordinated debentures
 
468

 
468

 
468

 
936

 
936

Other borrowings
 
154

 
215

 
20

 
369

 
136

Total interest expense
 
10,306

 
7,866

 
3,875

 
18,172

 
7,538

Net Interest Income
 
125,116

 
121,022

 
116,674

 
246,138

 
232,155

Provision for loan and lease losses
 
218

 
1,362

 
3,975

 
1,580

 
9,827

Net interest income after provision for loan and lease losses
 
124,898

 
119,660

 
112,699

 
244,558

 
222,328

Noninterest Income
 
 
 
 
 
 
 
 
 
 
Deposit account and treasury management fees
 
9,035

 
8,980

 
8,683

 
18,015

 
17,423

Card revenue
 
3,763

 
3,662

 
6,616

 
7,425

 
12,429

Financial services and trust revenue
 
3,425

 
2,957

 
3,219

 
6,382

 
5,949

Loan revenue
 
3,596

 
2,389

 
3,054

 
5,985

 
6,240

Bank owned life insurance
 
1,597

 
1,519

 
1,712

 
3,116

 
3,138

Investment securities gains (losses), net
 
285

 
1,847

 
(33
)
 
2,132

 
(11
)
Other
 
3,947

 
342

 
441

 
4,289

 
1,667

Total noninterest income
 
25,648

 
21,696

 
23,692

 
47,344

 
46,835

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
52,015

 
52,085

 
48,949

 
104,100

 
99,519

Occupancy
 
8,712

 
8,809

 
9,276

 
17,521

 
19,397

Data processing
 
4,601

 
4,669

 
5,221

 
9,270

 
10,491

Legal and professional fees
 
6,554

 
4,573

 
4,171

 
11,127

 
7,408

Amortization of intangibles
 
2,649

 
2,748

 
3,088

 
5,397

 
6,276

Business and Occupation ("B&O") taxes (1)
 
1,411

 
1,876

 
1,459

 
3,287

 
2,776

Advertising and promotion
 
870

 
974

 
1,622

 
1,844

 
3,051

Regulatory premiums
 
956

 
984

 
937

 
1,940

 
1,874

Net cost (benefit) of operation of other real estate owned
 
(705
)
 
113

 
758

 
(592
)
 
759

Other (1)
 
9,665

 
7,869

 
9,162

 
17,534

 
19,079

Total noninterest expense
 
86,728

 
84,700

 
84,643

 
171,428

 
170,630

Income before income taxes
 
63,818

 
56,656

 
51,748

 
120,474

 
98,533

Provision for income taxes
 
12,094

 
10,785

 
9,999

 
22,879

 
16,814

Net Income
 
$
51,724

 
$
45,871

 
$
41,749

 
$
97,595

 
$
81,719

Earnings per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.71

 
$
0.63

 
$
0.57

 
$
1.33

 
$
1.12

Diluted
 
$
0.71

 
$
0.63

 
$
0.57

 
$
1.33

 
$
1.12

Dividends declared per common share - regular
 
$
0.28

 
$
0.28

 
$
0.26

 
$
0.56

 
$
0.48

Dividends declared per common share - special
 
0.14

 
0.14

 

 
0.28

 

   Dividends declared per common share - total
 
$
0.42

 
$
0.42

 
$
0.26

 
$
0.84

 
$
0.48

Weighted average number of common shares outstanding
 
72,451

 
72,521

 
72,385

 
72,486

 
72,343

Weighted average number of diluted common shares outstanding
 
72,451

 
72,524

 
72,390

 
72,487

 
72,347

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

11



FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Six Months Ended
Unaudited
 
June 30,
 
March 31,
 
June 30,
 
June 30,
 
June 30,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
125,116

 
$
121,022

 
$
116,674

 
$
246,138

 
$
232,155

Provision for loan and lease losses
 
$
218

 
$
1,362

 
$
3,975

 
$
1,580

 
$
9,827

Noninterest income
 
$
25,648

 
$
21,696

 
$
23,692

 
$
47,344

 
$
46,835

Noninterest expense
 
$
86,728

 
$
84,700

 
$
84,643

 
$
171,428

 
$
170,630

Acquisition-related expense (included in noninterest expense)
 
$

 
$

 
$
2,822

 
$

 
$
7,087

Net income
 
$
51,724

 
$
45,871

 
$
41,749

 
$
97,595

 
$
81,719

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.71

 
$
0.63

 
$
0.57

 
$
1.33

 
$
1.12

Earnings (diluted)
 
$
0.71

 
$
0.63

 
$
0.57

 
$
1.33

 
$
1.12

Book value
 
$
29.26

 
$
28.39

 
$
26.83

 
$
29.26

 
$
26.83

Tangible book value per common share (1)
 
$
18.20

 
$
17.39

 
$
15.66

 
$
18.20

 
$
15.66

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,096,413

 
$
13,048,041

 
$
12,529,540

 
$
13,072,360

 
$
12,566,138

Interest-earning assets
 
$
11,606,727

 
$
11,561,627

 
$
11,052,807

 
$
11,584,301

 
$
11,087,587

Loans
 
$
8,601,819

 
$
8,406,664

 
$
8,389,230

 
$
8,504,781

 
$
8,369,097

Securities, including equity securities and FHLB stock
 
$
2,969,749

 
$
3,140,201

 
$
2,628,292

 
$
3,054,504

 
$
2,655,122

Deposits
 
$
10,186,371

 
$
10,271,016

 
$
10,264,822

 
$
10,228,459

 
$
10,299,459

Interest-bearing deposits
 
$
5,174,875

 
$
5,226,396

 
$
5,390,869

 
$
5,200,493

 
$
5,398,259

Interest-bearing liabilities
 
$
5,841,425

 
$
5,802,965

 
$
5,611,055

 
$
5,822,301

 
$
5,619,408

Noninterest-bearing deposits
 
$
5,011,496

 
$
5,044,620

 
$
4,873,953

 
$
5,027,966

 
$
4,901,200

Shareholders’ equity
 
$
2,096,157

 
$
2,044,832

 
$
1,954,552

 
$
2,070,636

 
$
1,951,928

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.58
%
 
1.41
%
 
1.33
%
 
1.49
%
 
1.30
%
Return on average common equity
 
9.87
%
 
8.97
%
 
8.54
%
 
9.43
%
 
8.37
%
Return on average tangible common equity (1)
 
16.71
%
 
15.57
%
 
15.57
%
 
16.15
%
 
15.33
%
Average equity to average assets
 
16.01
%
 
15.67
%
 
15.60
%
 
15.84
%
 
15.53
%
Shareholders equity to total assets
 
16.30
%
 
15.99
%
 
15.56
%
 
16.30
%
 
15.56
%
Tangible common shareholders’ equity to tangible assets (1)
 
10.80
%
 
10.44
%
 
9.71
%
 
10.80
%
 
9.71
%
Net interest margin (tax equivalent) (2)
 
4.40
%
 
4.32
%
 
4.30
%
 
4.36
%
 
4.29
%
Efficiency ratio (tax equivalent) (3)
 
56.57
%
 
58.33
%
 
59.29
%
 
57.43
%
 
60.16
%
Operating efficiency ratio (tax equivalent) (1)
 
56.34
%
 
57.54
%
 
56.02
%
 
56.93
%
 
56.80
%
Noninterest expense ratio
 
2.65
%
 
2.60
%
 
2.70
%
 
2.62
%
 
2.72
%
Core noninterest expense ratio (1)
 
2.65
%
 
2.60
%
 
2.61
%
 
2.62
%
 
2.60
%
 
 
June 30,
 
March 31,
 
December 31,
 
 
 
 
Period end
 
2019
 
2019
 
2018
 
 
 
 
Total assets
 
$
13,090,808

 
$
13,064,436

 
$
13,095,145

 
 
 
 
Loans, net of unearned income
 
$
8,646,990

 
$
8,520,798

 
$
8,391,511

 
 
 
 
Allowance for loan and lease losses
 
$
80,517

 
$
83,274

 
$
83,369

 
 
 
 
Securities, including equity securities and FHLB stock
 
$
2,894,218

 
$
3,052,870

 
$
3,193,408

 
 
 
 
Deposits
 
$
10,211,599

 
$
10,369,009

 
$
10,458,126

 
 
 
 
Core deposits
 
$
9,767,776

 
$
9,898,982

 
$
9,973,840

 
 
 
 
Shareholders’ equity
 
$
2,133,638

 
$
2,088,620

 
$
2,033,649

 
 
 
 
Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
39,038

 
$
52,615

 
$
54,842

 
 
 
 
Other real estate owned (“OREO”) and other personal property owned (“OPPO”)
 
1,118

 
6,075

 
6,049

 
 
 
 
Total nonperforming assets
 
$
40,156

 
$
58,690

 
$
60,891

 
 
 
 
Nonperforming loans to period-end loans
 
0.45
%
 
0.62
%
 
0.65
%
 
 
 
 
Nonperforming assets to period-end assets
 
0.31
%
 
0.45
%
 
0.46
%
 
 
 
 
Allowance for loan and lease losses to period-end loans
 
0.93
%
 
0.98
%
 
0.99
%
 
 
 
 
Net loan charge-offs (for the three months ended)
 
$
2,975

 
$
1,457

 
$
2,207

 
 
 
 
__________
(1) This is a non-GAAP measure. See section titled "Non-GAAP Financial Measures" on the last three pages of this earnings release for a reconciliation to the most comparable GAAP measure.
(2) Beginning January 2019, net interest margin was calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(3) Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.

12



QUARTERLY FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
 
2019
 
2019
 
2018
 
2018
 
2018
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
125,116

 
$
121,022

 
$
123,888

 
$
122,796

 
$
116,674

Provision for loan and lease losses
 
$
218

 
$
1,362

 
$
1,789

 
$
3,153

 
$
3,975

Noninterest income
 
$
25,648

 
$
21,696

 
$
20,402

 
$
21,019

 
$
23,692

Noninterest expense
 
$
86,728

 
$
84,700

 
$
87,019

 
$
82,841

 
$
84,643

Acquisition-related expense (included in noninterest expense)
 
$

 
$

 
$
493

 
$
1,081

 
$
2,822

Net income
 
$
51,724

 
$
45,871

 
$
44,748

 
$
46,415

 
$
41,749

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.71

 
$
0.63

 
$
0.61

 
$
0.63

 
$
0.57

Earnings (diluted)
 
$
0.71

 
$
0.63

 
$
0.61

 
$
0.63

 
$
0.57

Book value
 
$
29.26

 
$
28.39

 
$
27.76

 
$
27.05

 
$
26.83

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,096,413

 
$
13,048,041

 
$
12,957,754

 
$
12,805,131

 
$
12,529,540

Interest-earning assets
 
$
11,606,727

 
$
11,561,627

 
$
11,458,470

 
$
11,326,629

 
$
11,052,807

Loans
 
$
8,601,819

 
$
8,406,664

 
$
8,441,354

 
$
8,456,632

 
$
8,389,230

Securities, including equity securities and FHLB stock
 
$
2,969,749

 
$
3,140,201

 
$
2,998,638

 
$
2,849,495

 
$
2,628,292

Deposits
 
$
10,186,371

 
$
10,271,016

 
$
10,560,280

 
$
10,478,800

 
$
10,264,822

Interest-bearing deposits
 
$
5,174,875

 
$
5,226,396

 
$
5,298,590

 
$
5,376,300

 
$
5,390,869

Interest-bearing liabilities
 
$
5,841,425

 
$
5,802,965

 
$
5,599,646

 
$
5,620,997

 
$
5,611,055

Noninterest-bearing deposits
 
$
5,011,496

 
$
5,044,620

 
$
5,261,690

 
$
5,102,500

 
$
4,873,953

Shareholders’ equity
 
$
2,096,157

 
$
2,044,832

 
$
1,988,981

 
$
1,983,317

 
$
1,954,552

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.58
%
 
1.41
%
 
1.38
%
 
1.45
%
 
1.33
%
Return on average common equity
 
9.87
%
 
8.97
%
 
9.00
%
 
9.36
%
 
8.54
%
Average equity to average assets
 
16.01
%
 
15.67
%
 
15.35
%
 
15.49
%
 
15.60
%
Shareholders’ equity to total assets
 
16.30
%
 
15.99
%
 
15.53
%
 
15.29
%
 
15.56
%
Net interest margin (tax equivalent) (1)
 
4.40
%
 
4.32
%
 
4.36
%
 
4.37
%
 
4.30
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,090,808

 
$
13,064,436

 
$
13,095,145

 
$
12,956,596

 
$
12,628,586

Loans, net of unearned income
 
$
8,646,990

 
$
8,520,798

 
$
8,391,511

 
$
8,514,317

 
$
8,454,107

Allowance for loan and lease losses
 
$
80,517

 
$
83,274

 
$
83,369

 
$
83,787

 
$
80,150

Securities, including equity securities and FHLB stock
 
$
2,894,218

 
$
3,052,870

 
$
3,193,408

 
$
2,942,655

 
$
2,665,131

Deposits
 
$
10,211,599

 
$
10,369,009

 
$
10,458,126

 
$
10,603,957

 
$
10,384,004

Core deposits
 
$
9,767,776

 
$
9,898,982

 
$
9,973,840

 
$
10,084,687

 
$
9,888,696

Shareholders’ equity
 
$
2,133,638

 
$
2,088,620

 
$
2,033,649

 
$
1,981,395

 
$
1,964,881

Goodwill
 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

Other intangible assets, net
 
$
40,540

 
$
43,189

 
$
45,937

 
$
48,827

 
$
51,897

Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
39,038

 
$
52,615

 
$
54,842

 
$
60,332

 
$
69,504

OREO and OPPO
 
1,118

 
6,075

 
6,049

 
7,415

 
7,080

Total nonperforming assets
 
$
40,156

 
$
58,690

 
$
60,891

 
$
67,747

 
$
76,584

Nonperforming loans to period-end loans
 
0.45
%
 
0.62
%
 
0.65
%
 
0.71
%
 
0.82
%
Nonperforming assets to period-end assets
 
0.31
%
 
0.45
%
 
0.46
%
 
0.52
%
 
0.61
%
Allowance for loan and lease losses to period-end loans
 
0.93
%
 
0.98
%
 
0.99
%
 
0.98
%
 
0.95
%
Net loan charge-offs (recoveries)
 
$
2,975

 
$
1,457

 
$
2,207

 
$
(484
)
 
$
3,652

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


13



LOAN PORTFOLIO COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
 
2019
 
2019
 
2018
 
2018
 
2018
Loan Portfolio Composition - Dollars
 
(dollars in thousands)
Commercial business
 
$
3,644,051

 
$
3,509,472

 
$
3,438,422

 
$
3,554,147

 
$
3,538,492

Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
279,091

 
282,673

 
238,367

 
232,924

 
180,522

Commercial and multifamily residential
 
3,913,546

 
3,917,833

 
3,846,027

 
3,786,615

 
3,758,207

Total real estate
 
4,192,637

 
4,200,506

 
4,084,394

 
4,019,539

 
3,938,729

Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
201,783

 
207,900

 
217,790

 
211,629

 
206,181

Commercial and multifamily residential
 
255,452

 
240,458

 
284,394

 
349,328

 
387,951

Total real estate construction
 
457,235

 
448,358

 
502,184

 
560,957

 
594,132

Consumer
 
305,752

 
312,886

 
318,945

 
327,863

 
326,402

Purchased credit impaired
 
84,730

 
88,257

 
89,760