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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):
January 24, 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, WA
 
 
 
98402
(Address of principal executive offices)
 
 
 
(Zip Code)
Registrant’s telephone number, including area code: (253) 305-1900
(Former name or former address, if changed since last report.)

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))

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 January 24, 2019, Columbia Banking System, Inc. issued a press release reporting its financial results for the quarter and year ended December 31, 2018, a quarterly cash dividend of $0.28 per share and a special cash dividend of $0.14 per share. The dividends will be paid on February 20, 2019 to shareholders of record at the close of business on February 6, 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 January 24, 2019 reporting the financial results of Columbia Banking System, Inc. for the quarter and year ended December 31, 2018, a quarterly cash dividend and a special 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:
January 24, 2019
 
 
 
/s/ HADLEY S. ROBBINS
 
 
 
 
 
Hadley S. Robbins
 
 
 
 
 
President and
Chief Executive Officer




EXHIBIT INDEX
99.1 Press release dated January 24, 2019 reporting the financial results of Columbia Banking System, Inc. for the quarter and year ended December 31, 2018, a quarterly cash dividend and a special cash dividend.
 

(Back To Top)

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

Exhibit


Exhibit 99.1

396474779_cbsystemsolidbuga07.jpg

FOR IMMEDIATE RELEASE

January 24, 2019

                        


Columbia Banking System Announces Fourth Quarter and Full Year 2018 Results,
Quarterly and Special Cash Dividends


Highlights

Record full year 2018 net income of $172.9 million; diluted earnings per share of $2.36
Fourth quarter net income of $44.7 million; diluted earnings per share of $0.61, which included $0.01 per share negative impact from acquisition-related expenses
Record full year production of $1.43 billion and fourth quarter loan production of $388.4 million
Deposit costs increased modestly but remained low at 15 basis points
Nonperforming assets to period end assets ratio decreased to 0.46%
Regular cash dividend increased to $0.28 while special cash dividend maintained at $0.14



TACOMA, Washington, January 24, 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 fourth quarter 2018 earnings, “We had a record year in terms of net income and loan production. Our bankers did an exceptional job in a very competitive environment. We maintained a strong core deposit mix and low funding costs and actively managed our credit exposures, resulting in low levels of nonperforming assets.”

1



Balance Sheet
Total assets at December 31, 2018 were $13.10 billion, an increase of $138.5 million from September 30, 2018. Loans were $8.39 billion, down $122.8 million from September 30, 2018 as loan originations of $388.4 million were offset by pay-downs and prepayments. Debt securities available for sale were $3.17 billion at December 31, 2018, an increase of $246.3 million, or 8% from $2.92 billion at September 30, 2018. Total deposits at December 31, 2018 were $10.46 billion, a decrease of $145.8 million from September 30, 2018 due to seasonal decline. Core deposits comprised 95% of total deposits and were $9.97 billion at December 31, 2018, a decrease of $110.8 million from September 30, 2018. Deposit mix remained consistent from September 30, 2018 with 50% noninterest bearing and 50% interest bearing. The average cost of total deposits for the quarter was 0.15%, an increase of 3 basis points from the third quarter of 2018.
Clint Stein, Columbia’s Executive Vice President and Chief Operating Officer, stated, “We experienced our usual balance sheet seasonality during the fourth quarter.  The deposit portfolio is holding up well with no meaningful rate related attrition. The decrease in the loan portfolio was mostly related to reduced line utilization.” Mr. Stein continued, “While elevated prepayments were still a factor during the quarter, they continued to moderate from levels experienced during the first half of 2018.”
Income Statement
Net Interest Income
Net interest income for the fourth quarter of 2018 was $123.9 million, an increase of $1.1 million from the linked quarter and an increase of $17.7 million from the prior year period. The increase from the linked quarter was due to a combination of higher rates on earning assets and higher volumes of taxable securities. 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 $20.4 million for the fourth quarter of 2018, a decrease of $617 thousand from the third quarter of 2018. The linked quarter decrease was principally due to lower loan revenue. Compared to the fourth quarter of 2017, noninterest income decreased by $3.2 million. The decrease from the prior year period was due to lower card revenue during the current quarter as we became subject to the interchange fee cap imposed under the Dodd-Frank Wall Street Reform and Consumer Protection Act’s

2



Durbin Amendment as of July 1, 2018. 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 fourth quarter of 2018 was $87.0 million, an increase of $4.2 million from the third quarter of 2018. After removing the effect of acquisition-related expenses for the current quarter and the linked quarter, noninterest expense increased $4.8 million due to higher compensation and employee benefits and legal and professional fees. The increase in compensation and employee benefits expense was driven in part by higher health insurance expense and higher payroll costs associated with an additional day within the current quarter. The increase in legal and professional expense was due to implementation and consulting costs related to our digital strategy and other projects. Compared to the fourth quarter of 2017, noninterest expense increased by $1.4 million. After removing the acquisition-related expenses of $13.6 million from the fourth quarter of 2017, noninterest expense increased $14.5 million. This increase was primarily driven by higher compensation and employee benefits and legal expense resulting from the Pacific Continental acquisition.
Provision for Income Taxes
Our effective tax rate for the current quarter was 19.3%, compared to 19.7% and 61.5% for the linked and prior year periods, respectively. The decrease from the prior year period was principally attributable to the re-measurement charge of $12.2 million to reduce our deferred tax assets as a result of 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.

3



Net Interest Margin
Columbia’s net interest margin (tax equivalent) for the fourth quarter of 2018 was 4.40%, a decrease of 1 basis point from the linked quarter and an increase of 20 basis points from the prior year period. Columbia’s operating net interest margin (tax equivalent)(1) was 4.38% for both the fourth quarter of 2018 and the linked quarter and increased 13 basis points from the prior year period. Although the net interest margin for the current quarter as compared to the linked quarter was flat, the increase from the prior year period was due to income from earning assets acquired in the Pacific Continental acquisition as well as higher rates on interest-earning assets, which more than offset the modest increase in rates on interest-bearing liabilities.
Greg Sigrist, Columbia’s Executive Vice President and Chief Financial Officer, commented, “Our net interest margin continued to hold up well given the strength of our deposit franchise. We also added to our leverage strategy in the quarter. Although this muted the benefit of loans repricing in the quarter, the leverage strategy is an important tool to help position the Bank for a falling rate environment.”
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
 
Twelve Months Ended
 
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
December 31,
 
December 31,
 
 
2018
 
2018
 
2018
 
2018
 
2017
 
2018
 
2017
 
 
(dollars in thousands)
Incremental accretion income due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FDIC purchased credit impaired loans
 
$
395

 
$
585

 
$
326

 
$
329

 
$
265

 
$
1,635

 
$
4,107

Other acquired loans
 
2,218

 
2,643

 
2,690

 
3,370

 
2,482

 
10,921

 
8,689

Incremental accretion income
 
$
2,613

 
$
3,228

 
$
3,016

 
$
3,699

 
$
2,747

 
$
12,556

 
$
12,796

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (tax equivalent)
 
4.40
%
 
4.41
%
 
4.29
%
 
4.22
%
 
4.20
%
 
4.33
%
 
4.18
%
Operating net interest margin (tax equivalent) (1)
 
4.38
%
 
4.38
%
 
4.27
%
 
4.18
%
 
4.25
%
 
4.30
%
 
4.15
%
__________
(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.

4



Asset Quality
At December 31, 2018, nonperforming assets to total assets were 0.46% compared to 0.52% at September 30, 2018. Total nonperforming assets decreased $6.9 million from the linked quarter due to a $5.5 million decrease in nonaccrual loans and a $1.4 million decrease in other real estate owned.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “We are pleased with the progress that we have made in reducing the level of our nonperforming assets. Our nonperforming assets to total assets ratio was 0.46% which is below our general target of 0.50%.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
 
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
 
(in thousands)
Nonaccrual loans:
 
 
 
 
 
 
Commercial business
 
$
35,513

 
$
45,753

 
$
45,460

Real estate:
 
 
 
 
 
 
One-to-four family residential
 
1,158

 
501

 
785

Commercial and multifamily residential
 
14,904

 
11,012

 
13,941

Total real estate
 
16,062

 
11,513

 
14,726

Real estate construction:
 
 
 
 
 
 
One-to-four family residential
 
318

 
318

 
1,854

Total real estate construction
 
318

 
318

 
1,854

Consumer
 
2,949

 
2,748

 
4,149

Total nonaccrual loans
 
54,842

 
60,332

 
66,189

Other real estate owned and other personal property owned
 
6,049

 
7,415

 
13,298

Total nonperforming assets
 
$
60,891

 
$
67,747

 
$
79,487


5



The following table provides an analysis of the Company’s allowance for loan and lease losses:
 
 
Three Months Ended
 
Twelve Months Ended
 
 
December 31, 2018
 
September 30, 2018
 
December 31, 2017
 
December 31, 2018
 
December 31, 2017
 
 
(in thousands)
Beginning balance, loans excluding PCI loans
 
$
79,770

 
$
75,368

 
$
64,272

 
$
68,739

 
$
59,528

Beginning balance, PCI loans
 
4,017

 
4,782

 
7,344

 
6,907

 
10,515

Beginning balance
 
83,787

 
80,150

 
71,616

 
75,646

 
70,043

Charge-offs:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
(2,861
)
 
(606
)
 
(1,524
)
 
(11,719
)
 
(7,613
)
One-to-four family residential real estate
 

 

 

 

 
(460
)
Commercial and multifamily residential real estate
 
(557
)
 

 
(287
)
 
(780
)
 
(287
)
One-to-four family residential real estate construction
 

 

 

 

 
(14
)
Consumer
 
(421
)
 
(277
)
 
(318
)
 
(1,194
)
 
(1,474
)
Purchased credit impaired
 
(1,076
)
 
(1,208
)
 
(1,440
)
 
(4,862
)
 
(6,812
)
Total charge-offs
 
(4,915
)
 
(2,091
)
 
(3,569
)
 
(18,555
)
 
(16,660
)
Recoveries:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
535

 
547

 
839

 
3,427

 
4,836

One-to-four family residential real estate
 
19

 
21

 
188

 
408

 
568

Commercial and multifamily residential real estate
 
19

 
213

 
412

 
1,031

 
675

One-to-four family residential real estate construction
 
1,000

 
583

 
71

 
1,616

 
178

Commercial and multifamily residential real estate construction
 

 

 
1

 

 
1

Consumer
 
384

 
266

 
311

 
1,180

 
1,187

Purchased credit impaired
 
751

 
945

 
2,450

 
3,847

 
6,187

Total recoveries
 
2,708

 
2,575

 
4,272

 
11,509

 
13,632

Net recoveries (charge-offs)
 
(2,207
)
 
484

 
703

 
(7,046
)
 
(3,028
)
Provision for loan and lease losses, excluding PCI loans
 
1,870

 
3,655

 
4,774

 
17,050

 
11,614

Recapture for loan and lease losses, PCI loans
 
(81
)
 
(502
)
 
(1,447
)
 
(2,281
)
 
(2,983
)
Provision for loan and lease losses
 
1,789

 
3,153

 
3,327

 
14,769

 
8,631

Ending balance, loans excluding PCI loans
 
79,758

 
79,770

 
68,739

 
79,758

 
68,739

Ending balance, PCI loans
 
3,611

 
4,017

 
6,907

 
3,611

 
6,907

Ending balance
 
$
83,369

 
$
83,787

 
$
75,646

 
$
83,369

 
$
75,646

The allowance for loan losses to period end loans was 0.99% at December 31, 2018 compared to 0.98% at September 30, 2018. For the fourth quarter of 2018, Columbia recorded a net provision for loan and lease losses of $1.8 million compared to a net provision of $3.2 million for the linked quarter and a net provision of $3.3 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter consisted of $1.9 million of provision expense for loans, excluding PCI loans and a recapture of $81 thousand for PCI loans.

6



Organizational Update
For the 8th consecutive year, Columbia was listed on the Forbes annual list of America’s Best Banks, which measures asset quality, capital adequacy, net interest margin and profitability among the nation’s largest publicly traded banks and thrifts. We were also recognized as an employer of choice in Oregon, joining the Oregonian’s list of Top Workplaces 2018 and were named one of Washington’s Best Workplaces for the 12th consecutive year by the Puget Sound Business Journal.
In addition to the recognition we received for dedication to providing a great place to work, we received recognition for our work in the community. We were pleased to receive the 2018 National Association of Secretaries of State Medallion by the Washington Secretary of State for outstanding work to improve lives in Washington communities. We were also delighted to receive the 2018 Corporate Citizenship Award for midsize companies in Washington State by the Puget Sound Business Journal and to be selected as one of Oregon’s Most Admired companies by the Portland Business Journal. For the first time, Columbia was named the Top SBA Lender in Oregon by the Small Business Administration.
Mr. Robbins commented, “We were honored to be recognized for our commitment to our employees, our clients and our communities in the Northwest throughout the year. We were particularly pleased to receive recognition for our partnership and community support from the Springfield, Oregon and Beaverton Oregon Chambers of Commerce, two markets in the footprint of former Pacific Continental Bank.”
Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.28 per common share and a special cash dividend of $0.14 per common share on February 20, 2019 to shareholders of record as of the close of business on February 6, 2019.

7



Conference Call Information
Columbia’s management will discuss the fourth quarter and full-year 2018 financial results on a conference call scheduled for Thursday, January 24, 2019 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~012419
The conference call can also be accessed on Thursday, January 24, 2019 at 1:00 p.m. Pacific Time (4:00 p.m. ET) by calling 888-286-8956; Conference ID: 3096265.
A replay of the call can be accessed beginning Friday, January 25, 2019 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~012419
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.” For the 8th consecutive year, Columbia was included in the 2019 Forbes America’s Best Bank 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) reliance on and cost of technology may increase; and (7) 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
 
 
 
 
 
 
December 31,
 
September 30,
 
December 31,
 
 
 
 
 
 
 
2018
 
2018
 
2017
 
 
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
 
 
 
 
 
$
260,180

 
$
220,706

 
$
244,615

Interest-earning deposits with banks
 
 
 
 
 
 
17,407

 
21,456

 
97,918

Total cash and cash equivalents
 
 
 
 
 
 
277,587

 
242,162

 
342,533

Debt securities available for sale at fair value
 
 
 
 
 
3,167,448

 
2,921,114

 
2,737,751

Equity securities at fair value
 
 
 
 
 
 

 
4,901

 
5,080

Federal Home Loan Bank (“FHLB”) stock at cost
 
 
 
 
 
25,960

 
16,640

 
10,440

Loans held for sale
 
 
 
 
 
 
3,849

 
5,275

 
5,766

Loans, net of unearned income
 
 
 
 
 
 
8,391,511

 
8,514,317

 
8,358,657

Less: allowance for loan and lease losses
 
 
 
 
 
83,369

 
83,787

 
75,646

Loans, net
 
 
 
 
 
 
8,308,142

 
8,430,530

 
8,283,011

Interest receivable
 
 
 
 
 
 
45,323

 
48,476

 
40,881

Premises and equipment, net
 
 
 
 
 
 
168,788

 
169,681

 
169,490

Other real estate owned
 
 
 
 
 
 
6,019

 
7,331

 
13,298

Goodwill
 
 
 
 
 
 
765,842

 
765,842

 
765,842

Other intangible assets, net
 
 
 
 
 
 
45,937

 
48,827

 
58,173

Other assets
 
 
 
 
 
 
280,250

 
295,817

 
284,621

Total assets
 
 
 
 
 
 
$
13,095,145

 
$
12,956,596

 
$
12,716,886

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing
 
 
 
 
 
 
$
5,227,216

 
$
5,250,222

 
$
5,081,901

Interest-bearing
 
 
 
 
 
 
5,230,910

 
5,353,735

 
5,450,184

Total deposits
 
 
 
 
 
 
10,458,126

 
10,603,957

 
10,532,085

FHLB advances
 
 
 
 
 
 
399,523

 
166,536

 
11,579

Securities sold under agreements to repurchase
 
 
 
 
 
61,094

 
62,197

 
79,059

Subordinated debentures
 
 
 
 
 
 
35,462

 
35,508

 
35,647

Junior subordinated debentures
 
 
 
 
 
 

 

 
8,248

Other liabilities
 
 
 
 
 
 
107,291

 
107,003

 
100,346

Total liabilities
 
 
 
 
 
 
11,061,496

 
10,975,201

 
10,766,964

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
 
 
December 31,
 
September 30,
 
December 31,
 
 
 
 
 
 
 
2018
 
2018
 
2017
 
 
 
 
 
 
 
(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 and outstanding
73,249

 
73,260

 
73,020

 
1,642,246

 
1,640,140

 
1,634,705

Retained earnings
 
 
 
 
 
 
426,708

 
411,264

 
337,442

Accumulated other comprehensive loss
 
 
 
 
 
 
(35,305
)
 
(70,009
)
 
(22,225
)
Total shareholders’ equity
 
 
 
 
 
 
2,033,649

 
1,981,395

 
1,949,922

Total liabilities and shareholders’ equity
 
 
 
 
 
$
13,095,145

 
$
12,956,596

 
$
12,716,886



10



CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Twelve Months Ended
Unaudited
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
December 31,
 
 
2018
 
2018
 
2017
 
2018
 
2017
Interest Income
 
(in thousands except per share)
Loans
 
$
110,010

 
$
109,748

 
$
95,889

 
$
428,197

 
$
324,229

Taxable securities
 
16,684

 
14,654

 
9,487

 
55,969

 
38,659

Tax-exempt securities
 
3,005

 
3,069

 
2,920

 
12,201

 
11,045

Deposits in banks
 
102

 
104

 
545

 
702

 
813

Total interest income
 
129,801

 
127,575

 
108,841

 
497,069

 
374,746

Interest Expense
 
 
 
 
 
 
 
 
 
 
Deposits
 
3,831

 
3,193

 
2,022

 
12,105

 
4,800

FHLB advances
 
1,399

 
966

 
99

 
3,750

 
1,078

Subordinated debentures
 
467

 
468

 
304

 
1,871

 
304

Other borrowings
 
216

 
152

 
192

 
504

 
575

Total interest expense
 
5,913

 
4,779

 
2,617

 
18,230

 
6,757

Net Interest Income
 
123,888

 
122,796

 
106,224

 
478,839

 
367,989

Provision for loan and lease losses
 
1,789

 
3,153

 
3,327

 
14,769

 
8,631

Net interest income after provision for loan and lease losses
 
122,099

 
119,643

 
102,897

 
464,070

 
359,358

Noninterest Income
 
 
 
 
 
 
 
 
 
 
Deposit account and treasury management fees
 
9,383

 
9,266

 
8,013

 
36,072

 
30,381

Card revenue
 
3,576

 
3,714

 
6,967

 
19,719

 
25,627

Financial services and trust revenue
 
3,211

 
2,975

 
2,958

 
12,135

 
11,478

Loan revenue
 
2,344

 
3,282

 
2,663

 
11,866

 
12,399

Merchant processing revenue
 

 

 

 

 
4,283

Bank owned life insurance
 
1,467

 
1,402

 
1,377

 
6,007

 
5,380

Investment securities losses, net
 
(16
)
 
(62
)
 
(11
)
 
(89
)
 
(11
)
Change in FDIC loss-sharing asset
 

 

 

 

 
(447
)
Gain on sale of merchant card services portfolio
 

 

 

 

 
14,000

Other
 
437

 
442

 
1,614

 
2,546

 
6,552

Total noninterest income
 
20,402

 
21,019

 
23,581

 
88,256

 
109,642

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
51,261

 
49,419

 
50,473

 
200,199

 
169,674

Occupancy
 
8,858

 
8,321

 
9,554

 
36,576

 
32,407

Merchant processing expense
 

 

 

 

 
2,196

Advertising and promotion
 
1,061

 
1,472

 
1,543

 
5,584

 
4,466

Data processing
 
5,278

 
4,466

 
5,134

 
20,235

 
18,205

Legal and professional fees
 
5,941

 
4,695

 
5,955

 
18,044

 
15,151

Taxes, licenses and fees
 
1,514

 
1,562

 
1,279

 
6,061

 
4,773

Regulatory premiums
 
932

 
904

 
884

 
3,710

 
3,183

Net cost (benefit) of operation of other real estate owned
 
(26
)
 
485

 
46

 
1,218

 
468

Amortization of intangibles
 
2,890

 
3,070

 
2,547

 
12,236

 
6,333

Other
 
9,310

 
8,447

 
8,212

 
36,627

 
34,161

Total noninterest expense
 
87,019

 
82,841

 
85,627

 
340,490

 
291,017

Income before income taxes
 
55,482

 
57,821

 
40,851

 
211,836

 
177,983

Provision for income taxes
 
10,734

 
11,406

 
25,123

 
38,954

 
65,155

Net Income
 
$
44,748

 
$
46,415

 
$
15,728

 
$
172,882

 
$
112,828

Earnings per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.61

 
$
0.63

 
$
0.23

 
$
2.36

 
$
1.86

Diluted
 
$
0.61

 
$
0.63

 
$
0.23

 
$
2.36

 
$
1.86

Dividends declared per common share - regular
 
$
0.26

 
$
0.26

 
$
0.22

 
$
1.00

 
$
0.88

Dividends declared per common share - special
 
$
0.14

 
$

 
$

 
$
0.14

 
$

   Dividends declared per common share - total
 
$
0.40

 
$
0.26

 
$
0.22

 
$
1.14

 
$
0.88

Weighted average number of common shares outstanding
 
72,434

 
72,427

 
67,120

 
72,385

 
59,882

Weighted average number of diluted common shares outstanding
 
72,438

 
72,432

 
67,125

 
72,390

 
59,888


11



FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Twelve Months Ended
Unaudited
 
December 31,
 
September 30,
 
December 31,
 
December 31,
 
December 31,
 
 
2018
 
2018
 
2017
 
2018
 
2017
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
123,888

 
$
122,796

 
$
106,224

 
$
478,839

 
$
367,989

Provision for loan and lease losses
 
$
1,789

 
$
3,153

 
$
3,327

 
$
14,769

 
$
8,631

Noninterest income
 
$
20,402

 
$
21,019

 
$
23,581

 
$
88,256

 
$
109,642

Noninterest expense
 
$
87,019

 
$
82,841

 
$
85,627

 
$
340,490

 
$
291,017

Acquisition-related expense (included in noninterest expense)
 
$
493

 
$
1,081

 
$
13,638

 
$
8,661

 
$
17,196

Net income
 
$
44,748

 
$
46,415

 
$
15,728

 
$
172,882

 
$
112,828

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.61

 
$
0.63

 
$
0.23

 
$
2.36

 
$
1.86

Earnings (diluted)
 
$
0.61

 
$
0.63

 
$
0.23

 
$
2.36

 
$
1.86

Book value
 
$
27.76

 
$
27.05

 
$
26.70

 
$
27.76

 
$
26.70

Tangible book value per common share (1)
 
$
16.68

 
$
15.93

 
$
15.42

 
$
16.68

 
$
15.42

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
12,957,754

 
$
12,805,131

 
$
11,751,049

 
$
12,725,086

 
$
10,134,306

Interest-earning assets
 
$
11,458,470

 
$
11,326,629

 
$
10,453,097

 
$
11,241,321

 
$
9,098,276

Loans
 
$
8,441,354

 
$
8,456,632

 
$
7,749,420

 
$
8,409,373

 
$
6,682,259

Securities, including equity securities and FHLB stock
 
$
2,998,638

 
$
2,849,495

 
$
2,539,321

 
$
2,790,700

 
$
2,350,844

Deposits
 
$
10,560,280

 
$
10,478,800

 
$
9,804,456

 
$
10,410,404

 
$
8,482,350

Interest-bearing deposits
 
$
5,298,590

 
$
5,376,300

 
$
5,033,980

 
$
5,367,602

 
$
4,371,121

Interest-bearing liabilities
 
$
5,599,646

 
$
5,620,997

 
$
5,127,100

 
$
5,614,827

 
$
4,512,727

Noninterest-bearing deposits
 
$
5,261,690

 
$
5,102,500

 
$
4,770,476

 
$
5,042,802

 
$
4,111,229

Shareholders’ equity
 
$
1,988,981

 
$
1,983,317

 
$
1,754,745

 
$
1,969,179

 
$
1,410,056

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.38
%
 
1.45
%
 
0.54
%
 
1.36
%
 
1.11
%
Return on average common equity
 
9.00
%
 
9.36
%
 
3.59
%
 
8.78
%
 
8.00
%
Return on average tangible common equity (1)
 
16.00
%
 
16.74
%
 
6.37
%
 
15.85
%
 
12.38
%
Average equity to average assets
 
15.35
%
 
15.49
%
 
14.93
%
 
15.47
%
 
13.91
%
Shareholders equity to total assets
 
15.53
%
 
15.29
%
 
15.33
%
 
15.53
%
 
15.33
%
Tangible common shareholders’ equity to tangible assets (1)
 
9.95
%
 
9.61
%
 
9.47
%
 
9.95
%
 
9.47
%
Net interest margin (tax equivalent)
 
4.40
%
 
4.41
%
 
4.20
%
 
4.33
%
 
4.18
%
Efficiency ratio (tax equivalent) (2)
 
59.31
%
 
56.67
%
 
63.93
%
 
59.06
%
 
59.07
%
Operating efficiency ratio (tax equivalent) (1)
 
58.10
%
 
54.83
%
 
52.24
%
 
56.63
%
 
56.06
%
Noninterest expense ratio
 
2.69
%
 
2.59
%
 
2.91
%
 
2.68
%
 
2.87
%
Core noninterest expense ratio (1)
 
2.67
%
 
2.55
%
 
2.45
%
 
2.61
%
 
2.67
%
 
 
December 31,
 
September 30,
 
December 31,
 
 
 
 
Period end
 
2018
 
2018
 
2017
 
 
 
 
Total assets
 
$
13,095,145

 
$
12,956,596

 
$
12,716,886

 
 
 
 
Loans, net of unearned income
 
$
8,391,511

 
$
8,514,317

 
$
8,358,657

 
 
 
 
Allowance for loan and lease losses
 
$
83,369

 
$
83,787

 
$
75,646

 
 
 
 
Securities, including equity securities and FHLB stock
 
$
3,193,408

 
$
2,942,655

 
$
2,753,271

 
 
 
 
Deposits
 
$
10,458,126

 
$
10,603,957

 
$
10,532,085

 
 
 
 
Core deposits
 
$
9,973,840

 
$
10,084,687

 
$
10,039,557

 
 
 
 
Shareholders’ equity
 
$
2,033,649

 
$
1,981,395

 
$
1,949,922

 
 
 
 
Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
54,842

 
$
60,332

 
$
66,189

 
 
 
 
Other real estate owned (“OREO”) and other personal property owned (“OPPO”)
 
6,049

 
7,415

 
13,298

 
 
 
 
Total nonperforming assets
 
$
60,891

 
$
67,747

 
$
79,487

 
 
 
 
Nonperforming loans to period-end loans
 
0.65
%
 
0.71
%
 
0.79
%
 
 
 
 
Nonperforming assets to period-end assets
 
0.46
%
 
0.52
%
 
0.63
%
 
 
 
 
Allowance for loan and lease losses to period-end loans
 
0.99
%
 
0.98
%
 
0.91
%
 
 
 
 
Net loan charge-offs (recoveries) (3)
 
$
2,207

 
$
(484
)
 
$
(703
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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) Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.
(3) For the three months ended.

12



QUARTERLY FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
 
2018
 
2018
 
2018
 
2018
 
2017
Earnings
 
(dollars in thousands except per share)
Net interest income
 
$
123,888

 
$
122,796

 
$
116,674

 
$
115,481

 
$
106,224

Provision for loan and lease losses
 
$
1,789

 
$
3,153

 
$
3,975

 
$
5,852

 
$
3,327

Noninterest income
 
$
20,402

 
$
21,019

 
$
23,692

 
$
23,143

 
$
23,581

Noninterest expense
 
$
87,019

 
$
82,841

 
$
84,643

 
$
85,987

 
$
85,627

Acquisition-related expense (included in noninterest expense)
 
$
493

 
$
1,081

 
$
2,822

 
$
4,265

 
$
13,638

Net income
 
$
44,748

 
$
46,415

 
$
41,749

 
$
39,970

 
$
15,728

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.61

 
$
0.63

 
$
0.57

 
$
0.55

 
$
0.23

Earnings (diluted)
 
$
0.61

 
$
0.63

 
$
0.57

 
$
0.55

 
$
0.23

Book value
 
$
27.76

 
$
27.05

 
$
26.83

 
$
26.60

 
$
26.70

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
12,957,754

 
$
12,805,131

 
$
12,529,540

 
$
12,603,144

 
$
11,751,049

Interest-earning assets
 
$
11,458,470

 
$
11,326,629

 
$
11,052,807

 
$
11,122,753

 
$
10,453,097

Loans
 
$
8,441,354

 
$
8,456,632

 
$
8,389,230

 
$
8,348,740

 
$
7,749,420

Securities, including equity securities and FHLB stock
 
$
2,998,638

 
$
2,849,495

 
$
2,628,292

 
$
2,682,250

 
$
2,539,321

Deposits
 
$
10,560,280

 
$
10,478,800

 
$
10,264,822

 
$
10,334,480

 
$
9,804,456

Interest-bearing deposits
 
$
5,298,590

 
$
5,376,300

 
$
5,390,869

 
$
5,405,730

 
$
5,033,980

Interest-bearing liabilities
 
$
5,599,646

 
$
5,620,997

 
$
5,611,055

 
$
5,627,853

 
$
5,127,100

Noninterest-bearing deposits
 
$
5,261,690

 
$
5,102,500

 
$
4,873,953

 
$
4,928,750

 
$
4,770,476

Shareholders’ equity
 
$
1,988,981

 
$
1,983,317

 
$
1,954,552

 
$
1,949,275

 
$
1,754,745

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.38
%
 
1.45
%
 
1.33
%
 
1.27
%
 
0.54
%
Return on average common equity
 
9.00
%
 
9.36
%
 
8.54
%
 
8.20
%
 
3.59
%
Average equity to average assets
 
15.35
%
 
15.49
%
 
15.60
%
 
15.47
%
 
14.93
%
Shareholders’ equity to total assets
 
15.53
%
 
15.29
%
 
15.56
%
 
15.55
%
 
15.33
%
Net interest margin (tax equivalent)
 
4.40
%
 
4.41
%
 
4.29
%
 
4.22
%
 
4.20
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,095,145

 
$
12,956,596

 
$
12,628,586

 
$
12,530,636

 
$
12,716,886

Loans, net of unearned income
 
$
8,391,511

 
$
8,514,317

 
$
8,454,107

 
$
8,339,631

 
$
8,358,657

Allowance for loan and lease losses
 
$
83,369

 
$
83,787

 
$
80,150

 
$
79,827

 
$
75,646

Securities, including equity securities and FHLB stock
 
$
3,193,408

 
$
2,942,655

 
$
2,665,131

 
$
2,640,685

 
$
2,753,271

Deposits
 
$
10,458,126

 
$
10,603,957

 
$
10,384,004

 
$
10,395,523

 
$
10,532,085

Core deposits
 
$
9,973,840

 
$
10,084,687

 
$
9,888,696

 
$
9,897,185

 
$
10,039,557

Shareholders’ equity
 
$
2,033,649

 
$
1,981,395

 
$
1,964,881

 
$
1,947,923

 
$
1,949,922

Goodwill
 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

Other intangible assets, net
 
$
45,937

 
$
48,827

 
$
51,897

 
$
54,985

 
$
58,173

Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
54,842

 
$
60,332

 
$
69,504

 
$
78,464

 
$
66,189

OREO and OPPO
 
6,049

 
7,415

 
7,080

 
11,507

 
13,298

Total nonperforming assets
 
$
60,891

 
$
67,747

 
$
76,584

 
$
89,971

 
$
79,487

Nonperforming loans to period-end loans
 
0.65
%
 
0.71
%
 
0.82
%
 
0.94
%
 
0.79
%
Nonperforming assets to period-end assets
 
0.46
%
 
0.52
%
 
0.61
%
 
0.72
%
 
0.63
%
Allowance for loan and lease losses to period-end loans
 
0.99
%
 
0.98
%
 
0.95
%
 
0.96
%
 
0.91
%
Net loan charge-offs (recoveries)
 
$
2,207

 
$
(484
)
 
$
3,652

 
$
1,671

 
$
(703
)

13



LOAN PORTFOLIO COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
 
2018
 
2018
 
2018
 
2018
 
2017
Loan Portfolio Composition - Dollars
 
(dollars in thousands)
Commercial business
 
$
3,438,422

 
$
3,554,147

 
$
3,538,492

 
$
3,402,162

 
$
3,377,324

Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
238,367

 
232,924

 
180,522

 
182,302

 
188,396

Commercial and multifamily residential
 
3,846,027

 
3,786,615

 
3,758,207

 
3,776,709

 
3,825,739

Total real estate
 
4,084,394

 
4,019,539

 
3,938,729

 
3,959,011

 
4,014,135

Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
217,790

 
211,629

 
206,181

 
208,441

 
200,518

Commercial and multifamily residential
 
284,394

 
349,328

 
387,951