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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):
April 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, 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 April 25, 2019, Columbia Banking System, Inc. issued a press release reporting its financial results for the quarter ended March 31, 2019, 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 May 22, 2019 to shareholders of record at the close of business on May 8, 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 April 25, 2019 reporting the financial results of Columbia Banking System, Inc. for the quarter ended March 31, 2019, 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:
April 25, 2019
 
 
 
/s/ HADLEY S. ROBBINS
 
 
 
 
 
Hadley S. Robbins
 
 
 
 
 
President and
Chief Executive Officer




EXHIBIT INDEX
99.1 Press release dated April 25, 2019 reporting the financial results of Columbia Banking System, Inc. for the quarter ended March 31, 2019, 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

397660873_cbsystemsolidbuga10.jpg

FOR IMMEDIATE RELEASE

April 25, 2019

                        


Columbia Banking System Announces First Quarter 2019 Results,
Quarterly and Special Cash Dividends



Highlights

Record first quarter net income of $45.9 million and diluted earnings per share of $0.63
Net loans increased $129.3 million, or 6.2% on an annualized basis from record first quarter loan production of $365.8 million
Net interest margin of 4.32%, a decrease of 4 basis points from the fourth quarter of 2018; operating net interest margin(1) remained stable at 4.33%
Nonperforming assets to period end assets ratio improved to 0.45%
Regular cash dividend and the special cash dividend declared were $0.28 and $0.14, respectively, with the ability to repurchase up to 2.9 million shares, or approximately 4% of outstanding shares


TACOMA, Washington, April 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 first quarter 2019 earnings, “I would like to take this opportunity to express my appreciation for the high level of collaboration and commitment of our employees in creating value for our customers and shareholders. Their collective efforts represent the most significant catalyst in generating the record level of net income and earnings per share posted in the first quarter.”




__________
(1) Operating net interest margin (tax equivalent) is a non-GAAP 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.




Balance Sheet
Total assets at March 31, 2019 were $13.06 billion. Loans were $8.52 billion, up $129.3 million, or 6.2% annualized, from December 31, 2018 as a result of loan originations of $365.8 million. Securities available for sale were $3.03 billion at March 31, 2019, a decrease of $140.2 million from $3.17 billion at December 31, 2018 as earning assets rotated into loans. Total deposits at March 31, 2019 were $10.37 billion, a decrease of $89.1 million from December 31, 2018. Core deposits comprised 95% of total deposits and were $9.90 billion at March 31, 2019, a decrease of $74.9 million from December 31, 2018. Deposit mix remained fairly consistent from December 31, 2018 with 49% noninterest-bearing and 51% interest-bearing. The average cost of total deposits for the quarter was 18 basis points, an increase of 4 basis points from the fourth quarter of 2018, 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, “We achieved record loan production for the first quarter which, coupled with moderating headwinds from pay down activity, led to very solid loan growth during the quarter. Our bankers continue to take market share and earn new relationships on both sides of the balance sheet.” Mr. Stein continued, “Our typical seasonal decline in deposits masked the significant new business development wins our teams achieved.”
Income Statement
Net Interest Income
Net interest income for the first quarter of 2019 was $121.0 million, a decrease of $2.9 million from the linked quarter and an increase of $5.5 million from the prior year period. The decrease from the linked quarter was primarily due to higher average Federal Home Loan Bank (“FHLB”) advance balances combined with a nominal increase in the rates on our interest-bearing demand and money market accounts. The increase from the prior year period was a combination of higher rates on earning assets and higher volumes of loans and taxable securities. For additional information regarding net interest income, see the “Net Interest Margin” section and the “Average Balances and Rates” tables.
Noninterest Income
Noninterest income was $21.7 million for the first quarter of 2019, an increase of $1.3 million from the fourth quarter of 2018. The linked quarter increase was principally due to the $1.8 million gain from the sale of securities during the quarter. Compared to the first quarter of 2018, noninterest income decreased $1.4 million. The decrease from the prior year period was due to lower card revenue during the current quarter because, as of July 1, 2018, we became subject to the interchange fee cap imposed under

2



the Dodd-Frank Act. In addition, loan revenue decreased compared to the first quarter of 2018 due to lower gains recorded on the sale of SBA loans coupled with lower interest rate swap fee income. Other noninterest income also declined as a result of a gain on the sale of a credit card portfolio that was recorded during the first quarter of 2018. Partially offsetting these decreases was the previously noted $1.8 million of investment securities gains in the current quarter.
Noninterest Expense
Total noninterest expense for the first quarter of 2019 was $84.7 million, a decrease of $2.3 million from the fourth quarter of 2018. After removing the effect of acquisition-related expenses for the linked quarter, noninterest expense decreased $1.8 million due to lower legal and professional fees and other expenses which were partially offset by an increase in compensation and benefits expense. The decrease in legal expense was due to lower expenses related to problem loans, while professional fees declined as a result of lower expenses related to corporate initiatives during the first quarter. Other expenses decreased as a result of a $550 thousand recapture of the loan loss reserve on off-balance sheet liabilities during the quarter compared to an expense of $375 thousand during the linked quarter.
Compared to the first quarter of 2018, noninterest expense decreased by $1.3 million. After removing the acquisition-related expenses of $4.3 million from the first quarter of 2018, year over year noninterest expense increased $3.0 million, or 4%. This increase was primarily driven by higher compensation and employee benefits and legal and professional expenses partially offset by a decrease in other expenses. Other expenses decreased as a result of a $550 thousand recapture of the loan loss reserves on off-balance sheet liabilities during the quarter compared to an expense of $1.2 million during the first quarter of 2018.
Net Interest Margin
Beginning first quarter 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, on a quarterly basis, for our net interest margin regardless of the number of days in the quarter. 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 first quarter of 2019 was 4.32%, a decrease of 4 basis points from the linked quarter and an increase of 4 basis points from the prior year period. The decrease in the net interest margin for the current quarter as compared to the linked quarter was due to higher average FHLB advance balances combined with lower loan discount accretion income during the quarter. The increase from the prior year period was a combination of higher rates paid on loans and taxable securities and higher volumes of these interest-earning assets partially offset by higher average FHLB advances.
Columbia’s operating net interest margin (tax equivalent)(2) was 4.33% for the first quarter of 2019, which was effectively flat compared to the linked quarter and increased 9 basis points from the prior year period. The increase in the operating net interest margin for the current quarter compared to the prior year quarter was due to higher rates on interest-earning assets, which more than offset the increase in rates on interest-bearing liabilities.
Greg Sigrist, Columbia’s Executive Vice President and Chief Financial Officer, commented, “Our client franchise has continued to be a remarkable source of strength, as reflected in our total deposit cost.”
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,
 
 
2019
 
2018
 
2018
 
2018
 
2018
 
 
(dollars in thousands)
Incremental accretion income due to:
 
 
 
 
 
 
 
 
 
 
FDIC purchased credit impaired loans
 
$
288

 
$
395

 
$
585

 
$
326

 
$
329

Other acquired loans
 
1,747

 
2,218

 
2,643

 
2,690

 
3,370

Incremental accretion income
 
$
2,035

 
$
2,613

 
$
3,228

 
$
3,016

 
$
3,699

 
 
 
 
 
 
 
 
 
 
 
Net interest margin (tax equivalent) (1)
 
4.32
%
 
4.36
%
 
4.37
%
 
4.30
%
 
4.28
%
Operating net interest margin (tax equivalent) (1)(2)
 
4.33
%
 
4.34
%
 
4.34
%
 
4.28
%
 
4.24
%
__________
(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, on a quarterly basis, for our net interest margin regardless of the number of days in the quarter. 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 March 31, 2019, nonperforming assets to total assets were 0.45% compared to 0.46% at December 31, 2018. Total nonperforming assets decreased $2.2 million from the linked quarter due to a decrease in nonaccrual loans.

4



Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “It was a stable quarter for the bank from a credit perspective as nonperforming assets to total assets ticked down to 0.45% which is below our general target of 0.50%. We continued to have modest net charge-offs and provisions for loan losses.”
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
 
 
March 31, 2019
 
December 31, 2018
 
 
(in thousands)
Nonaccrual loans:
 
 
 
 
Commercial business
 
$
35,577

 
$
35,513

Real estate:
 
 
 
 
One-to-four family residential
 
923

 
1,158

Commercial and multifamily residential
 
13,301

 
14,904

Total real estate
 
14,224

 
16,062

Real estate construction:
 
 
 
 
One-to-four family residential
 

 
318

Total real estate construction
 

 
318

Consumer
 
2,814

 
2,949

Total nonaccrual loans
 
52,615

 
54,842

Other real estate owned and other personal property owned
 
6,075

 
6,049

Total nonperforming assets
 
$
58,690

 
$
60,891


5



The following table provides an analysis of the Company’s allowance for loan and lease losses:
 
 
Three Months Ended
 
 
March 31, 2019
 
December 31, 2018
 
March 31, 2018
 
 
(in thousands)
Beginning balance, loans excluding PCI loans
 
$
79,758

 
$
79,770

 
$
68,739

Beginning balance, PCI loans
 
3,611

 
4,017

 
6,907

Beginning balance
 
83,369

 
83,787

 
75,646

Charge-offs:
 
 
 
 
 
 
Commercial business
 
(1,249
)
 
(2,861
)
 
(2,477
)
One-to-four family residential real estate
 
(2
)
 

 

Commercial and multifamily residential real estate
 

 
(557
)
 
(223
)
One-to-four family residential real estate construction
 
(170
)
 

 

Consumer
 
(478
)
 
(421
)
 
(264
)
Purchased credit impaired
 
(1,089
)
 
(1,076
)
 
(1,343
)
Total charge-offs
 
(2,988
)
 
(4,915
)
 
(4,307
)
Recoveries:
 
 
 
 
 
 
Commercial business
 
480

 
535

 
802

One-to-four family residential real estate
 
17

 
19

 
172

Commercial and multifamily residential real estate
 
31

 
19

 
159

One-to-four family residential real estate construction
 
60

 
1,000

 
19

Consumer
 
238

 
384

 
260

Purchased credit impaired
 
705

 
751

 
1,224

Total recoveries
 
1,531

 
2,708

 
2,636

Net charge-offs
 
(1,457
)
 
(2,207
)
 
(1,671
)
Provision for loan and lease losses, excluding PCI loans
 
1,344

 
1,870

 
6,975

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

 
(81
)
 
(1,123
)
Provision for loan and lease losses
 
1,362

 
1,789

 
5,852

Ending balance, loans excluding PCI loans
 
80,029

 
79,758

 
74,162

Ending balance, PCI loans
 
3,245

 
3,611

 
5,665

Ending balance
 
$
83,274

 
$
83,369

 
$
79,827

The allowance for loan and lease losses to period end loans was 0.98% at March 31, 2019 compared to 0.99% at December 31, 2018. For the first quarter of 2019, Columbia recorded a net provision for loan and lease losses of $1.4 million compared to a net provision of $1.8 million for the linked quarter and a net provision of $5.9 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter consisted of $1.3 million of provision expense for loans, excluding PCI loans and a provision of $18 thousand for PCI loans.

6



Organizational Update
As described in our Annual Report on Form 10-K for the year ended December 31, 2018, our Board of Directors recently approved a stock repurchase program for up to 2.9 million shares, or approximately 4% of outstanding stock.
“Columbia is committed to driving long term shareholder value, and we believe that having a share repurchase program as part of our capital strategy increases the options we have available to achieve this goal,” said Hadley Robbins, President and Chief Executive Officer.
During the quarter, Columbia Bank’s Board of Directors was recognized by Seattle Business Magazine with its “Governance Award” for their service to the bank and the community. In addition, we were pleased to be recognized as one of the “Best Places to Work in Idaho” by Populus Marketing Research.
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 May 22, 2019 to shareholders of record as of the close of business on May 8, 2019.
Conference Call Information
Columbia’s management will discuss the first quarter 2019 financial results on a conference call scheduled for Thursday, April 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~042519
The conference call can also be accessed on Thursday, April 25, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT) by calling 888-286-8956; Conference ID: 6052807.
A replay of the call can be accessed beginning Friday, April 26, 2019 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~042519


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 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) 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
 
 
 
 
March 31,
 
December 31,
 
 
 
 
 
2019
 
2018
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
 
 
 
$
178,591

 
$
260,180

Interest-earning deposits with banks
 
 
 
 
33,482

 
17,407

Total cash and cash equivalents
 
 
 
 
212,073

 
277,587

Debt securities available for sale at fair value
 
 
 
3,027,270

 
3,167,448

Federal Home Loan Bank (“FHLB”) stock at cost
 
 
 
25,600

 
25,960

Loans held for sale
 
 
 
 
4,017

 
3,849

Loans, net of unearned income
 
 
 
 
8,520,798

 
8,391,511

Less: allowance for loan and lease losses
 
 
 
83,274

 
83,369

Loans, net
 
 
 
 
8,437,524

 
8,308,142

Interest receivable
 
 
 
 
46,835

 
45,323

Premises and equipment, net
 
 
 
 
168,139

 
168,788

Other real estate owned
 
 
 
 
6,075

 
6,019

Goodwill
 
 
 
 
765,842

 
765,842

Other intangible assets, net
 
 
 
 
43,189

 
45,937

Other assets
 
 
 
 
327,872

 
280,250

Total assets
 
 
 
 
$
13,064,436

 
$
13,095,145

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
Deposits:
 
 
 
 
 
 
 
Noninterest-bearing
 
 
 
 
$
5,106,568

 
$
5,227,216

Interest-bearing
 
 
 
 
5,262,441

 
5,230,910

Total deposits
 
 
 
 
10,369,009

 
10,458,126

FHLB advances
 
 
 
 
390,510

 
399,523

Securities sold under agreements to repurchase
 
 
 
23,018

 
61,094

Subordinated debentures
 
 
 
 
35,416

 
35,462

Other liabilities
 
 
 
 
157,863

 
107,291

Total liabilities
 
 
 
 
10,975,816

 
11,061,496

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

 
2,000

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

 
115,000

 
 
 
 
Issued and outstanding
73,565

 
73,249

 
1,642,977

 
1,642,246

Retained earnings
 
 
 
 
442,597

 
426,708

Accumulated other comprehensive income (loss)
 
 
 
 
3,046

 
(35,305
)
Total shareholders’ equity
 
 
 
 
2,088,620

 
2,033,649

Total liabilities and shareholders’ equity
 
 
 
$
13,064,436

 
$
13,095,145



10



CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
March 31,
 
December 31,
 
March 31,
 
 
2019
 
2018
 
2018
Interest Income
 
(in thousands except per share amounts)
Loans
 
$
108,416

 
$
110,010

 
$
103,027

Taxable securities
 
17,415

 
16,684

 
12,708

Tax-exempt securities
 
2,969

 
3,005

 
3,064

Deposits in banks
 
88

 
102

 
345

Total interest income
 
128,888

 
129,801

 
119,144

Interest Expense
 
 
 
 
 
 
Deposits
 
4,498

 
3,831

 
2,509

FHLB advances
 
2,685

 
1,399

 
570

Subordinated debentures
 
468

 
467

 
468

Other borrowings
 
215

 
216

 
116

Total interest expense
 
7,866

 
5,913

 
3,663

Net Interest Income
 
121,022

 
123,888

 
115,481

Provision for loan and lease losses
 
1,362

 
1,789

 
5,852

Net interest income after provision for loan and lease losses
 
119,660

 
122,099

 
109,629

Noninterest Income
 
 
 
 
 
 
Deposit account and treasury management fees
 
8,980

 
9,383

 
8,740

Card revenue
 
3,662

 
3,576

 
5,813

Financial services and trust revenue
 
2,957

 
3,211

 
2,730

Loan revenue
 
2,389

 
2,344

 
3,186

Bank owned life insurance
 
1,519

 
1,467

 
1,426

Investment securities gains (losses), net
 
1,847

 
(16
)
 
22

Other
 
342

 
437

 
1,226

Total noninterest income
 
21,696

 
20,402

 
23,143

Noninterest Expense
 
 
 
 
 
 
Compensation and employee benefits
 
52,085

 
51,261

 
50,570

Occupancy
 
8,809

 
8,858

 
10,121

Data processing
 
4,669

 
5,278

 
5,270

Legal and professional fees
 
4,573

 
5,941

 
3,237

Amortization of intangibles
 
2,748

 
2,890

 
3,188

Business and Occupation ("B&O") taxes (1)
 
1,876

 
1,410

 
1,317

Advertising and promotion
 
974

 
1,061

 
1,429

Regulatory premiums
 
984

 
932

 
937

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

 
(26
)
 
1

Other (1)
 
7,869

 
9,414

 
9,917

Total noninterest expense
 
84,700

 
87,019

 
85,987

Income before income taxes
 
56,656

 
55,482

 
46,785

Provision for income taxes
 
10,785

 
10,734

 
6,815

Net Income
 
$
45,871

 
$
44,748

 
$
39,970

Earnings per common share
 
 
 
 
 
 
Basic
 
$
0.63

 
$
0.61

 
$
0.55

Diluted
 
$
0.63

 
$
0.61

 
$
0.55

Dividends declared per common share - regular
 
$
0.28

 
$
0.26

 
$
0.22

Dividends declared per common share - special
 
0.14

 
0.14

 

   Dividends declared per common share - total
 
$
0.42

 
$
0.40

 
$
0.22

Weighted average number of common shares outstanding
 
72,521

 
72,434

 
72,300

Weighted average number of diluted common shares outstanding
 
72,524

 
72,438

 
72,305

__________
(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
Unaudited
 
March 31,
 
December 31,
 
March 31,
 
 
2019
 
2018
 
2018
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
121,022

 
$
123,888

 
$
115,481

Provision for loan and lease losses
 
$
1,362

 
$
1,789

 
$
5,852

Noninterest income
 
$
21,696

 
$
20,402

 
$
23,143

Noninterest expense
 
$
84,700

 
$
87,019

 
$
85,987

Acquisition-related expense (included in noninterest expense)
 
$

 
$
493

 
$
4,265

Net income
 
$
45,871

 
$
44,748

 
$
39,970

Per Common Share
 
 
 
 
 
 
Earnings (basic)
 
$
0.63

 
$
0.61

 
$
0.55

Earnings (diluted)
 
$
0.63

 
$
0.61

 
$
0.55

Book value
 
$
28.39

 
$
27.76

 
$
26.60

Tangible book value per common share (1)
 
$
17.39

 
$
16.68

 
$
15.39

Averages
 
 
 
 
 
 
Total assets
 
$
13,048,041

 
$
12,957,754

 
$
12,603,144

Interest-earning assets
 
$
11,561,627

 
$
11,458,470

 
$
11,122,753

Loans
 
$
8,406,664

 
$
8,441,354

 
$
8,348,740

Securities, including equity securities and FHLB stock
 
$
3,140,201

 
$
2,998,638

 
$
2,682,250

Deposits
 
$
10,271,016

 
$
10,560,280

 
$
10,334,480

Interest-bearing deposits
 
$
5,226,396

 
$
5,298,590

 
$
5,405,730

Interest-bearing liabilities
 
$
5,802,965

 
$
5,599,646

 
$
5,627,853

Noninterest-bearing deposits
 
$
5,044,620

 
$
5,261,690

 
$
4,928,750

Shareholders’ equity
 
$
2,044,832

 
$
1,988,981

 
$
1,949,275

Financial Ratios
 
 
 
 
 
 
Return on average assets
 
1.41
%
 
1.38
%
 
1.27
%
Return on average common equity
 
8.97
%
 
9.00
%
 
8.20
%
Return on average tangible common equity (1)
 
15.57
%
 
16.00
%
 
15.08
%
Average equity to average assets
 
15.67
%
 
15.35
%
 
15.47
%
Shareholders equity to total assets
 
15.99
%
 
15.53
%
 
15.55
%
Tangible common shareholders’ equity to tangible assets (1)
 
10.44
%
 
9.95
%
 
9.63
%
Net interest margin (tax equivalent) (2)
 
4.32
%
 
4.36
%
 
4.28
%
Efficiency ratio (tax equivalent) (3)
 
58.33
%
 
59.31
%
 
61.04
%
Operating efficiency ratio (tax equivalent) (1)
 
57.54
%
 
58.10
%
 
57.59
%
Noninterest expense ratio
 
2.60
%
 
2.69
%
 
2.73
%
Core noninterest expense ratio (1)
 
2.60
%
 
2.67
%
 
2.59
%
 
 
March 31,
 
December 31,
 
 
Period end
 
2019
 
2018
 
 
Total assets
 
$
13,064,436

 
$
13,095,145

 
 
Loans, net of unearned income
 
$
8,520,798

 
$
8,391,511

 
 
Allowance for loan and lease losses
 
$
83,274

 
$
83,369

 
 
Securities, including equity securities and FHLB stock
 
$
3,052,870

 
$
3,193,408

 
 
Deposits
 
$
10,369,009

 
$
10,458,126

 
 
Core deposits
 
$
9,898,982

 
$
9,973,840

 
 
Shareholders’ equity
 
$
2,088,620

 
$
2,033,649

 
 
Nonperforming assets
 
 
 
 
 
 
Nonaccrual loans
 
$
52,615

 
$
54,842

 
 
Other real estate owned (“OREO”) and other personal property owned (“OPPO”)
 
6,075

 
6,049

 
 
Total nonperforming assets
 
$
58,690

 
$
60,891

 
 
Nonperforming loans to period-end loans
 
0.62
%
 
0.65
%
 
 
Nonperforming assets to period-end assets
 
0.45
%
 
0.46
%
 
 
Allowance for loan and lease losses to period-end loans
 
0.98
%
 
0.99
%
 
 
Net loan charge-offs (for the three months ended)
 
$
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, on a quarterly basis, for our net interest margin regardless of the number of days in the quarter. 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
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2019
 
2018
 
2018
 
2018
 
2018
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
121,022

 
$
123,888

 
$
122,796

 
$
116,674

 
$
115,481

Provision for loan and lease losses
 
$
1,362

 
$
1,789

 
$
3,153

 
$
3,975

 
$
5,852

Noninterest income
 
$
21,696

 
$
20,402

 
$
21,019

 
$
23,692

 
$
23,143

Noninterest expense
 
$
84,700

 
$
87,019

 
$
82,841

 
$
84,643

 
$
85,987

Acquisition-related expense (included in noninterest expense)
 
$

 
$
493

 
$
1,081

 
$
2,822

 
$
4,265

Net income
 
$
45,871

 
$
44,748

 
$
46,415

 
$
41,749

 
$
39,970

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.63

 
$
0.61

 
$
0.63

 
$
0.57

 
$
0.55

Earnings (diluted)
 
$
0.63

 
$
0.61

 
$
0.63

 
$
0.57

 
$
0.55

Book value
 
$
28.39

 
$
27.76

 
$
27.05

 
$
26.83

 
$
26.60

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,048,041

 
$
12,957,754

 
$
12,805,131

 
$
12,529,540

 
$
12,603,144

Interest-earning assets
 
$
11,561,627

 
$
11,458,470

 
$
11,326,629

 
$
11,052,807

 
$
11,122,753

Loans
 
$
8,406,664

 
$
8,441,354

 
$
8,456,632

 
$
8,389,230

 
$
8,348,740

Securities, including equity securities and FHLB stock
 
$
3,140,201

 
$
2,998,638

 
$
2,849,495

 
$
2,628,292

 
$
2,682,250

Deposits
 
$
10,271,016

 
$
10,560,280

 
$
10,478,800

 
$
10,264,822

 
$
10,334,480

Interest-bearing deposits
 
$
5,226,396

 
$
5,298,590

 
$
5,376,300

 
$
5,390,869

 
$
5,405,730

Interest-bearing liabilities
 
$
5,802,965

 
$
5,599,646

 
$
5,620,997

 
$
5,611,055

 
$
5,627,853

Noninterest-bearing deposits
 
$
5,044,620

 
$
5,261,690

 
$
5,102,500

 
$
4,873,953

 
$
4,928,750

Shareholders’ equity
 
$
2,044,832

 
$
1,988,981

 
$
1,983,317

 
$
1,954,552

 
$
1,949,275

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.41
%
 
1.38
%
 
1.45
%
 
1.33
%
 
1.27
%
Return on average common equity
 
8.97
%
 
9.00
%
 
9.36
%
 
8.54
%
 
8.20
%
Average equity to average assets
 
15.67
%
 
15.35
%
 
15.49
%
 
15.60
%
 
15.47
%
Shareholders’ equity to total assets
 
15.99
%
 
15.53
%
 
15.29
%
 
15.56
%
 
15.55
%
Net interest margin (tax equivalent) (1)
 
4.32
%
 
4.36
%
 
4.37
%
 
4.30
%
 
4.28
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,064,436

 
$
13,095,145

 
$
12,956,596

 
$
12,628,586

 
$
12,530,636

Loans, net of unearned income
 
$
8,520,798

 
$
8,391,511

 
$
8,514,317

 
$
8,454,107

 
$
8,339,631

Allowance for loan and lease losses
 
$
83,274

 
$
83,369

 
$
83,787

 
$
80,150

 
$
79,827

Securities, including equity securities and FHLB stock
 
$
3,052,870

 
$
3,193,408

 
$
2,942,655

 
$
2,665,131

 
$
2,640,685

Deposits
 
$
10,369,009

 
$
10,458,126

 
$
10,603,957

 
$
10,384,004

 
$
10,395,523

Core deposits
 
$
9,898,982

 
$
9,973,840

 
$
10,084,687

 
$
9,888,696

 
$
9,897,185

Shareholders’ equity
 
$
2,088,620

 
$
2,033,649

 
$
1,981,395

 
$
1,964,881

 
$
1,947,923

Goodwill
 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

Other intangible assets, net
 
$
43,189

 
$
45,937

 
$
48,827

 
$
51,897

 
$
54,985

Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
52,615

 
$
54,842

 
$
60,332

 
$
69,504

 
$
78,464

OREO and OPPO
 
6,075

 
6,049

 
7,415

 
7,080

 
11,507

Total nonperforming assets
 
$
58,690

 
$
60,891

 
$
67,747

 
$
76,584

 
$
89,971

Nonperforming loans to period-end loans
 
0.62
%
 
0.65
%
 
0.71
%
 
0.82
%
 
0.94
%
Nonperforming assets to period-end assets
 
0.45
%
 
0.46
%
 
0.52
%
 
0.61
%
 
0.72
%
Allowance for loan and lease losses to period-end loans
 
0.98
%
 
0.99
%
 
0.98
%
 
0.95
%
 
0.96
%
Net loan charge-offs (recoveries)
 
$
1,457

 
$
2,207

 
$
(484
)
 
$
3,652

 
$
1,671

__________
(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, on a quarterly basis, for our net interest margin regardless of the number of days in the quarter. 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
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2019
 
2018
 
2018
 
2018
 
2018
Loan Portfolio Composition - Dollars
 
(dollars in thousands)
Commercial business
 
$
3,509,472

 
$
3,438,422

 
$
3,554,147

 
$
3,538,492

 
$
3,402,162

Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
282,673

 
238,367

 
232,924

 
180,522

 
182,302

Commercial and multifamily residential
 
3,917,833

 
3,846,027

 
3,786,615

 
3,758,207

 
3,776,709

Total real estate
 
4,200,506

 
4,084,394

 
4,019,539

 
3,938,729

 
3,959,011

Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
207,900

 
217,790

 
211,629

 
206,181

 
208,441

Commercial and multifamily residential
 
240,458

 
284,394

 
349,328

 
387,951

 
385,339

Total real estate construction
 
448,358

 
502,184

 
560,957

 
594,132

 
593,780

Consumer
 
312,886

 
318,945

 
327,863

 
326,402

 
323,631

Purchased credit impaired
 
88,257

 
89,760

 
95,936

 
101,782

 
109,299

Subtotal loans
 
8,559,479

 
8,433,705

 
8,558,442

 
8,499,537

 
8,387,883

Less: Net unearned income
 
(38,681
)
 
(42,194
)
 
(44,125
)
 
(45,430
)
 
(48,252
)
Loans, net of unearned income
 
8,520,798

 
8,391,511

 
8,514,317

 
8,454,107

 
8,339,631

Less: Allowance for loan and lease losses
 
(83,274
)
 
(83,369
)
 
(83,787
)
 
(80,150
)
 
(79,827
)
Total loans, net
 
8,437,524

 
8,308,142

 
8,430,530

 
8,373,957

 
8,259,804

Loans held for sale
 
$
4,017

 
$
3,849

 
$
5,275

 
$
6,773

 
$
4,312


 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
Loan Portfolio Composition - Percentages
 
2019
 
2018
 
2018
 
2018
 
2018
Commercial business
 
41.2
 %
 
41.0
 %
 
41.7
 %
 
41.9
 %
 
40.8
 %
Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
3.3
 %
 
2.8
 %
 
2.7
 %
 
2.1
 %
 
2.2
 %
Commercial and multifamily residential
 
46.1
 %
 
45.8
 %
 
44.5
 %
 
44.4
 %
 
45.3
 %
Total real estate
 
49.4
 %
 
48.6
 %
 
47.2
 %
 
46.5
 %
 
47.5
 %
Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
2.4
 %
 
2.6
 %
 
2.5
 %
 
2.4
 %
 
2.5
 %
Commercial and multifamily residential
 
2.8
 %
 
3.4
 %
 
4.1
 %
 
4.6
 %
 
4.6
 %
Total real estate construction
 
5.2
 %
 
6.0
 %
 
6.6
 %
 
7.0
 %
 
7.1
 %
Consumer
 
3.7
 %
 
3.8
 %
 
3.9
 %
 
3.9
 %
 
3.9
 %
Purchased credit impaired
 
1.0
 %
 
1.1
 %
 
1.1
 %
 
1.2
 %
 
1.3
 %
Subtotal loans
 
100.5
 %
 
100.5
 %
 
100.5
 %
 
100.5
 %
 
100.6
 %
Less: Net unearned income
 
(0.5
)%
 
(0.5
)%
 
(0.5
)%
 
(0.5
)%
 
(0.6
)%
Loans, net of unearned income
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %


14



DEPOSIT COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
 
 
2019
 
2018
 
2018
 
2018
 
2018
Deposit Composition - Dollars
 
(dollars in thousands)
Core deposits:
 
 
 
 
 
 
 
 
 
 
Demand and other noninterest-bearing
 
$
5,106,568

 
$
5,227,216

 
$
5,250,222

 
$
4,953,993

 
$
4,927,226

Interest-bearing demand
 
1,270,047

 
1,244,254

 
1,260,543

 
1,278,686

 
1,328,756

Money market
 
2,389,024

 
2,367,964

 
2,413,185

 
2,513,648

 
2,477,487

Savings
 
897,329

 
890,557

 
908,945

 
875,707

 
886,171

Certificates of deposit, less than $250,000
 
236,014

 
243,849

 
251,792

 
266,662

 
277,545

Total core deposits
 
9,898,982

 
9,973,840

 
10,084,687

 
9,888,696

 
9,897,185

 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit, $250,000 or more
 
101,965

 
89,473

 
90,387

 
91,578

 
96,333

Certificates of deposit insured by CDARS®
 
22,890

 
23,580

 
23,841

 
23,492

 
23,191

Brokered certificates of deposit
 
51,375

 
57,930

 
65,476

 
68,870

 
76,931

Reciprocal money market accounts
 
294,096

 
313,692

 
340,044

 
311,935

 
302,544

Subtotal
 
10,369,308

 
10,458,515

 
10,604,435

 
10,384,571

 
10,396,184

Valuation adjustment resulting from acquisition accounting
 
(299
)
 
(389
)
 
(478
)
 
(567
)
 
(661
)
Total deposits
 
$
10,369,009

 
$
10,458,126

 
$
10,603,957

 
$
10,384,004

 
$
10,395,523

 
 
March 31,
 
December 31,
 
September 30,
 
June 30,
 
March 31,
Deposit Composition - Percentages
 
2019
 
2018
 
2018
 
2018
 
2018
Core deposits:
 
 
 
 
 
 
 
 
 
 
Demand and other noninterest-bearing
 
49.2
%
 
50.0
%
 
49.5
%
 
47.7
%
 
47.4
%
Interest-bearing demand
 
12.2
%
 
11.9
%
 
11.9
%
 
12.3
%
 
12.8
%
Money market
 
23.0
%
 
22.6
%
 
22.8
%
 
24.2
%
 
23.8
%
Savings
 
8.7
%
 
8.5
%
 
8.6
%
 
8.4
%
 
8.5
%
Certificates of deposit, less than $250,000
 
2.3
%
 
2.3
%
 
2.4
%
 
2.6
%
 
2.7
%
Total core deposits
 
95.4
%
 
95.3
%
 
95.2
%
 
95.2
%
 
95.2
%
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit, $250,000 or more
 
1.0
%
 
0.9
%
 
0.9
%
 
0.9
%
 
0.9
%
Certificates of deposit insured by CDARS®
 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
Brokered certificates of deposit
 
0.5
%
 
0.6
%
 
0.6
%
 
0.7
%
 
0.7
%
Reciprocal money market accounts
 
2.9
%
 
3.0
%
 
3.1
%
 
3.0
%
 
3.0
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%



15



AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
March 31, 2019
 
March 31, 2018
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net (1)(2)
 
$
8,406,664

 
$
109,715

 
5.29
%
 
$
8,348,740

 
$
104,091

 
5.06
%
Taxable securities
 
2,637,436

 
17,415

 
2.68
%
 
2,158,039

 
12,708

 
2.39
%
Tax exempt securities (2)
 
502,765

 
3,758

 
3.03
%
 
524,211

 
3,878

 
3.00
%
Interest-earning deposits with banks
 
14,762

 
88

 
2.42
%
 
91,763

 
345

 
1.52
%
Total interest-earning assets
 
11,561,627

 
130,976

 
4.59
%
 
11,122,753

 
121,022

 
4.41
%
Other earning assets
 
232,077

 
 
 
 
 
218,126

 
 
 
 
Noninterest-earning assets
 
1,254,337

 
 
 
 
 
1,262,265

 
 
 
 
Total assets
 
$
13,048,041

 
 
 
 
 
$
12,603,144

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit
 
$
406,539

 
$
576

 
0.57