Mobile Menu Locations Contact

Press Release


Columbia Banking System Announces Fourth Quarter and Full Year 2019 Results, and Quarterly and Special Cash Dividends

Company Release - 1/23/2020 9:00 AM ET

TACOMA, Wash., Jan. 23, 2020 /PRNewswire/ --

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

Highlights

  • Record full year 2019 net income of $194.5 million and diluted earnings per share of $2.68
  • Fourth Quarter net income of $46.1 million; diluted earnings per share of $0.64
  • Record full year loan production of $1.58 billion and fourth quarter loan production of $427.0 million
  • Nonperforming assets to period end assets ratio improved for the eighth consecutive quarter to 0.24%
  • Exceeded our five-year fund-raising milestone, raising more than $1.0 million for local communities through our annual Warm Hearts fund-raiser
  • Successfully completed leadership transition as planned
  • Regular and special cash dividends declared of $0.28 and $0.22 per share, respectively

Clint Stein, President and Chief Executive Officer of Columbia Banking System, Inc. and Columbia Bank (NASDAQ: COLB) ("Columbia"), said today upon the release of Columbia's fourth quarter 2019 earnings, "I want to thank the entire team for a remarkable year in which we had record net income, despite the three rate cuts that occurred during the year. We also had record loan production in addition to progressing on a number of strategic initiatives. It is a testament to our bench strength and our succession planning process that we were able to have these results while going through a leadership transition during the fourth quarter."

Balance Sheet

Total assets at December 31, 2019 were $14.08 billion, an increase of $321.8 million from the linked quarter. Loans were $8.74 billion, down $12.9 million from September 30, 2019 as a result of loan originations of $427.0 million offset by a decrease in seasonal line utilization and payments. Securities available for sale were $3.75 billion at December 31, 2019, an increase of $378.6 million from $3.37 billion at September 30, 2019. Total deposits at December 31, 2019 were $10.68 billion, a decrease of $171.0 million from September 30, 2019 principally due to a decrease of $328.6 million in public funds, excluding certificates of deposit. Deposit mix remained fairly consistent from September 30, 2019 with 50% noninterest-bearing and 50% interest-bearing. The average cost of total deposits for the quarter was 21 basis points, a decrease of 5 basis points from the third quarter of 2019. For additional information regarding this calculation, see the "Net Interest Margin" section.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "We were able to achieve record loan production for both the fourth quarter and the full year while maintaining our credit disciplines thanks to our talented bankers. Over the past year, we have relied on our strong performers as well as have invested in new teams that have hit the ground running and contributed to a very successful year."

Income Statement

Net Interest Income

Net interest income for the fourth quarter of 2019 was $124.8 million, an increase of $2.4 million and $929 thousand from the linked quarter and the prior year period, respectively. The increase from the linked quarter was primarily due to higher interest income on securities as a result of higher average balances combined with lower premium amortization on securities as well as lower interest expense on deposits and borrowings resulting from a lower rate environment. These benefits to net interest income were partially offset by lower interest income from loans principally due to the lower rate environment. Net interest income compared to the prior year period increased as a result of interest income from the higher average balances of securities partially offset by higher interest expense due to the higher average balances of interest-bearing public funds, excluding certificates of deposit, and FHLB advances. 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 $21.8 million for the fourth quarter of 2019, a decrease of $6.2 million from the linked quarter and an increase of $1.4 million from the fourth quarter of 2018. The linked quarter decrease was principally due to a $5.9 million gain from the sale-leaseback of owned real estate during the third quarter of 2019. The increase from the prior year period was primarily due to higher loan revenue.

Noninterest Expense

Total noninterest expense for the fourth quarter of 2019 was $87.0 million, relatively unchanged from the linked quarter and the prior year period.

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.

Columbia's net interest margin (tax equivalent) for the fourth quarter of 2019 was 4.11%, a decrease of 3 basis points and 25 basis points from the linked quarter and prior year period, respectively. The decrease in the net interest margin (tax equivalent) compared to the linked quarter was driven by lower rates on the loan portfolio partially offset by lower premium amortization on taxable securities. The decrease was also partially offset by lower rates on deposits and FHLB advances. Compared to the prior year period, the decreased net interest margin (tax equivalent) was driven by lower rates on loans and higher rates on deposits partially offset by lower rates on FHLB advances.

Columbia's operating net interest margin (tax equivalent)(2) was 4.09% for the fourth quarter of 2019, which decreased 3 and 25 basis points compared to the linked quarter and the prior year period, respectively. The decreases in the operating net interest margin for the fourth quarter of 2019 compared to the linked quarter and the prior year quarter were due to the items 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


Twelve Months Ended


December 31,


September 30,


June 30,


March 31,


December 31,


December 31,


December 31,


2019


2019


2019


2019


2018


2019


2018


(dollars in thousands)

Incremental accretion income due to:














Purchased credit impaired loans

$

304



$

113



$

579



$

288



$

395



$

1,284



$

1,635


Other acquired loans

2,012



1,959



2,084



1,747



2,218



7,802



10,921


Incremental accretion income

$

2,316



$

2,072



$

2,663



$

2,035



$

2,613



$

9,086



$

12,556
















Net interest margin (tax equivalent) (1)

4.11

%


4.14

%


4.40

%


4.32

%


4.36

%


4.24

%


4.33

%

Operating net interest margin (tax equivalent) (1)(2)

4.09

%


4.12

%


4.38

%


4.33

%


4.34

%


4.23

%


4.30

%

_________

(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 December 31, 2019, nonperforming assets to total assets were 0.24% compared to 0.27% at September 30, 2019. Total nonperforming assets decreased $4.0 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, "We continue to be pleased with our loan portfolio trends. Credit costs continue to be low and reflect the strong performance which we enjoyed in the fourth quarter and for the full year. Net charge-offs were approximately 1 basis point for the quarter and 3 basis points for the full year. These results, combined with stable credit metrics relative to problem loans and impaired assets, drove provisioning to very modest levels in 2019. From a credit perspective, it was a great year thanks to the diligent efforts of our bankers and work by our special asset teams."

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


December 31, 2019


September 30, 2019


December 31, 2018


(in thousands)

Nonaccrual loans:






Commercial business

$

26,974



$

24,408



$

35,513


Real estate:






One-to-four family residential

591



574



1,158


Commercial and multifamily residential

3,477



10,083



14,904


Total real estate

4,068



10,657



16,062


Real estate construction:






One-to-four family residential





318


Consumer

2,018



1,956



2,949


Total nonaccrual loans

33,060



37,021



54,842


OREO and other personal property owned

552



625



6,049


Total nonperforming assets

$

33,612



$

37,646



$

60,891


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


Three Months Ended


Twelve Months Ended


December 31, 2019


September 30, 2019


December 31, 2018


December 31, 2019


December 31, 2018


(in thousands)

Beginning balance, loans excluding PCI loans

$

79,602



$

77,248



$

79,770



$

79,758



$

68,739


Beginning balance, PCI loans

3,058



3,269



4,017



3,611



6,907


Beginning balance

82,660



80,517



83,787



83,369



75,646


Charge-offs:










Commercial business

(2,592)



(2,365)



(2,861)



(10,324)



(11,719)


One-to-four family residential real estate







(2)




Commercial and multifamily residential real estate





(557)





(780)


One-to-four family residential real estate construction







(170)




Consumer

(283)



(285)



(421)



(1,400)



(1,194)


Purchased credit impaired

(693)



(722)



(1,076)



(3,319)



(4,862)


Total charge-offs

(3,568)



(3,372)



(4,915)



(15,215)



(18,555)


Recoveries:










Commercial business

1,720



358



535



3,105



3,427


One-to-four family residential real estate

140



65



19



242



408


Commercial and multifamily residential real estate

362



184



19



610



1,031


One-to-four family residential real estate construction

262



2,471



1,000



3,454



1,616


Commercial and multifamily residential real estate construction







1




Consumer

188



326



384



930



1,180


Purchased credit impaired

590



1,812



751



3,979



3,847


Total recoveries

3,262



5,216



2,708



12,321



11,509


Net (charge-offs) recoveries

(306)



1,844



(2,207)



(2,894)



(7,046)


Provision for loan and lease losses, excluding PCI loans

1,725



1,600



1,870



4,920



17,050


Recapture of loan and lease losses, PCI loans

(111)



(1,301)



(81)



(1,427)



(2,281)


Provision for loan and lease losses

1,614



299



1,789



3,493



14,769


Ending balance, loans excluding PCI loans

81,124



79,602



79,758



81,124



79,758


Ending balance, PCI loans

2,844



3,058



3,611



2,844



3,611


Ending balance

$

83,968



$

82,660



$

83,369



$

83,968



$

83,369


The allowance for loan and lease losses to period end loans was 0.96% at December 31, 2019 compared to 0.94% at September 30, 2019. For the fourth quarter of 2019, Columbia recorded a net provision for loan and lease losses of $1.6 million compared to a net provision of $299 thousand for the linked quarter and a net provision of $1.8 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the fourth quarter of 2019 consisted of $1.7 million of provision expense for loans, excluding PCI loans, and a provision recapture of $111 thousand for PCI loans.

Organizational Update

The close of 2019 also brought about a change to our leadership team as Clint Stein assumed the role of CEO and other leadership changes were announced. Mr. Stein stated, "The leadership transition went seamlessly as a result of our succession planning process that has been in the works for years. I look forward to working with this very talented group of professionals as we execute on our long-term strategic vision."

During the year ended December 31, 2019, the Bank received the following accolades:

  • Received the Community Commitment Award from the American Bankers Association Foundation;
  • Received the IDEA Award for Outstanding Leader of the Year from South Sound Business Magazine;
  • Our Portland Office was named Top SBA Lender by the Small Business Association;
  • Our Seattle Office was named as one of the Top Three SBA Lenders by the Small Business Association;
  • Columbia board members Michelle Lantow, Mae Fujita Numata, Elizabeth Seaton and Janine Terrano were added to the annual list of Most Influential Corporate Directors by WomenInc. Magazine;
  • Hadley Robbins was named to the inaugural Power 100 list of the most influential leaders in the region by the Puget Sound Business Journal;
  • Selected as one of the Top Corporate Philanthropists for 2019 by the Portland Business Journal;
  • Received an Extraordinary Banking Award for 2019 by the Institute of Extraordinary Banking;
  • Named to the list of Top Workplaces in 2018 by Portland'sOregonian;
  • Honored as one of Oregon's Most Admired Companies in 2018 by the Portland Business Journal;
  • For the 13th consecutive year, named as one of Washington's Best Workplaces by the 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's Board of Directors 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 and a special cash dividend of $0.22 per common share on February 19, 2020 to shareholders of record as of the close of business on February 5, 2020.

Conference Call Information

Columbia's management will discuss the fourth quarter 2019 financial results on a conference call scheduled for Thursday, January 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET). Interested parties may join the live-streamed event by using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~01232020

The conference call can also be accessed on Thursday, January 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 6169965.

A replay of the call can be accessed beginning Friday, January 24, 2020 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~01232020

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.

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.govand 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 control 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:

Clint Stein,


President and


Chief Executive Officer




Greg Sigrist,


Executive Vice President and


Chief Financial Officer




Investor Relations


[email protected]


253-305-1921























CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited







December 31,


September 30,


December 31,








2019


2019


2018








(in thousands)

ASSETS



Cash and due from banks







$

223,541



$

278,461



$

260,180


Interest-earning deposits with banks







24,132



20,144



17,407


Total cash and cash equivalents







247,673



298,605



277,587


Debt securities available for sale at fair value






3,746,142



3,367,572



3,167,448


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






48,120



29,680



25,960


Loans held for sale







17,718



15,036



3,849


Loans, net of unearned income







8,743,465



8,756,355



8,391,511


Less: allowance for loan and lease losses






83,968



82,660



83,369


Loans, net







8,659,497



8,673,695



8,308,142


Interest receivable







46,839



48,503



45,323


Premises and equipment, net







165,408



165,431



168,788


Other real estate owned







552



625



6,019


Goodwill







765,842



765,842



765,842


Other intangible assets, net







35,458



37,908



45,937


Other assets







346,275



354,863



280,250


Total assets







$

14,079,524



$

13,757,760



$

13,095,145


LIABILITIES AND SHAREHOLDERS' EQUITY







Deposits:












Noninterest-bearing







$

5,328,146



$

5,320,435



$

5,227,216


Interest-bearing







5,356,562



5,535,281



5,230,910


Total deposits







10,684,708



10,855,716



10,458,126


FHLB advances







953,469



492,482



399,523


Securities sold under agreements to repurchase






64,437



24,489



61,094


Subordinated debentures







35,277



35,323



35,462


Other liabilities







181,671



188,173



107,291


Total liabilities







11,919,562



11,596,183



11,061,496


Commitments and contingent liabilities













December 31,


September 30,


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

73,577



73,588



73,249



1,650,753



1,648,335



1,642,246


Outstanding

72,124



72,288



73,249








Retained earnings







519,676



493,738



426,708


Accumulated other comprehensive income (loss)






40,367



64,884



(35,305)


Treasury stock at cost

1,453



1,300





(50,834)



(45,380)




Total shareholders' equity







2,159,962



2,161,577



2,033,649


Total liabilities and shareholders' equity






$

14,079,524



$

13,757,760



$

13,095,145
































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,


2019


2019


2018


2019


2018

Interest Income

(in thousands except per share amounts)

Loans

$

110,384



$

112,656



$

110,010



$

448,041



$

428,197


Taxable securities

20,074



16,457



16,684



69,864



55,969


Tax-exempt securities

2,498



2,556



3,005



10,735



12,201


Deposits in banks

153



864



102



1,312



702


Total interest income

133,109



132,533



129,801



529,952



497,069


Interest Expense










Deposits

5,809



6,863



3,831



22,146



12,105


FHLB advances

1,899



2,569



1,399



11,861



3,750


Subordinated debentures

467



468



467



1,871



1,871


Other borrowings

117



183



216



669



504


Total interest expense

8,292



10,083



5,913



36,547



18,230


Net Interest Income

124,817



122,450



123,888



493,405



478,839


Provision for loan and lease losses

1,614



299



1,789



3,493



14,769


Net interest income after provision for loan and lease losses

123,203



122,151



122,099



489,912



464,070


Noninterest Income










Deposit account and treasury management fees

8,665



9,015



9,383



35,695



36,072


Card revenue

3,767



4,006



3,576



15,198



19,719


Financial services and trust revenue

3,191



3,226



3,211



12,799



12,135


Loan revenue

3,625



3,855



2,344



13,465



11,866


Bank owned life insurance

1,650



1,528



1,467



6,294



6,007


Investment securities gains (losses), net





(16)



2,132



(89)


Other

909



6,400



437



11,598



2,546


Total noninterest income

21,807



28,030



20,402



97,181



88,256


Noninterest Expense










Compensation and employee benefits

54,308



54,459



51,261



212,867



200,199


Occupancy

9,010



8,645



8,858



35,176



36,576


Data processing

4,792



5,102



5,278



19,164



20,235


Legal and professional fees

4,835



5,683



5,941



21,645



18,044


Amortization of intangibles

2,450



2,632



2,890



10,479



12,236


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

1,234



1,325



1,410



5,846



5,664


Advertising and promotion

1,329



1,752



1,061



4,925



5,584


Regulatory premiums

18



(38)



932



1,920



3,710


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

(10)



(90)



(26)



(692)



1,218


Other (1)

9,012



7,606



9,414



34,152



37,024


Total noninterest expense

86,978



87,076



87,019



345,482



340,490


Income before income taxes

58,032



63,105



55,482



241,611



211,836


Provision for income taxes

11,903



12,378



10,734



47,160



38,954


Net Income

$

46,129



$

50,727



$

44,748



$

194,451



$

172,882


Earnings per common share










Basic

$

0.64



$

0.70



$

0.61



$

2.68



$

2.36


Diluted

$

0.64



$

0.70



$

0.61



$

2.68



$

2.36


Dividends declared per common share - regular

$

0.28



$

0.28



$

0.26



$

1.12



$

1.00


Dividends declared per common share - special





0.14



0.28



0.14


   Dividends declared per common share - total

$

0.28



$

0.28



$

0.40



$

1.40



$

1.14


Weighted average number of common shares outstanding

71,238



71,803



72,434



71,999



72,385


Weighted average number of diluted common shares outstanding

71,310



71,803



72,438



72,032



72,390


________

(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.







FINANCIAL STATISTICS




Columbia Banking System, Inc.

Three Months Ended


Twelve Months Ended

Unaudited

December 31,


September 30,


December 31,


December 31,


December 31,


2019


2019


2018


2019


2018

Earnings

(dollars in thousands except per share amounts)

Net interest income

$

124,817



$

122,450



$

123,888



$

493,405



$

478,839


Provision for loan and lease losses

$

1,614



$

299



$

1,789



$

3,493



$

14,769


Noninterest income

$

21,807



$

28,030



$

20,402



$

97,181



$

88,256


Noninterest expense

$

86,978



$

87,076



$

87,019



$

345,482



$

340,490


Acquisition-related expense (included in noninterest expense)

$



$



$

493



$



$

8,661


Net income

$

46,129



$

50,727



$

44,748



$

194,451



$

172,882


Per Common Share










Earnings (basic)

$

0.64



$

0.70



$

0.61



$

2.68



$

2.36


Earnings (diluted)

$

0.64



$

0.70



$

0.61



$

2.68



$

2.36


Book value

$

29.95



$

29.90



$

27.76



$

29.95



$

27.76


Tangible book value per common share (1)

$

18.84



$

18.78



$

16.68



$

18.84



$

16.68


Averages










Total assets

$

13,750,840



$

13,459,774



$

12,957,754



$

13,341,024



$

12,725,086


Interest-earning assets

$

12,231,779



$

11,941,578



$

11,458,470



$

11,837,633



$

11,241,321


Loans

$

8,742,246



$

8,694,592



$

8,441,354



$

8,612,478



$

8,409,373


Securities, including equity securities and FHLB stock

$

3,453,554



$

3,102,213



$

2,998,638



$

3,167,112



$

2,790,700


Deposits

$

10,959,434



$

10,668,767



$

10,560,280



$

10,523,687



$

10,410,404


Interest-bearing deposits

$

5,610,850



$

5,517,171



$

5,298,590



$

5,383,746



$

5,367,602


Interest-bearing liabilities

$

6,058,319



$

5,989,042



$

5,599,646



$

5,923,818



$

5,614,827


Noninterest-bearing deposits

$

5,348,584



$

5,151,596



$

5,261,690



$

5,139,941



$

5,042,802


Shareholders' equity

$

2,170,879



$

2,152,916



$

1,988,981



$

2,116,642



$

1,969,179


Financial Ratios










Return on average assets

1.34

%


1.51

%


1.38

%


1.46

%


1.36

%

Return on average common equity

8.50

%


9.42

%


9.00

%


9.19

%


8.78

%

Return on average tangible common equity (1)

14.05

%


15.67

%


16.00

%


15.47

%


15.85

%

Average equity to average assets

15.79

%


16.00

%


15.35

%


15.87

%


15.47

%

Shareholders equity to total assets

15.34

%


15.71

%


15.53

%


15.34

%


15.53

%

Tangible common shareholders' equity to tangible assets (1)

10.23

%


10.48

%


9.95

%


10.23

%


9.95

%

Net interest margin (tax equivalent) (2)

4.11

%


4.14

%


4.36

%


4.24

%


4.33

%

Efficiency ratio (tax equivalent) (3)

58.34

%


56.91

%


59.31

%


57.52

%


59.06

%

Operating efficiency ratio (tax equivalent) (1)

58.07

%


58.65

%


58.10

%


57.64

%


56.63

%

Noninterest expense ratio

2.53

%


2.59

%


2.69

%


2.59

%


2.68

%

Core noninterest expense ratio (1)

2.53

%


2.59

%


2.67

%


2.59

%


2.61

%


December 31,


September 30,


December 31,





Period end

2019


2019


2018





Total assets

$

14,079,524



$

13,757,760



$

13,095,145






Loans, net of unearned income

$

8,743,465



$

8,756,355



$

8,391,511






Allowance for loan and lease losses

$

83,968



$

82,660



$

83,369






Securities, including equity securities and FHLB stock

$

3,794,262



$

3,397,252



$

3,193,408






Deposits

$

10,684,708



$

10,855,716



$

10,458,126






Shareholders' equity

$

2,159,962



$

2,161,577



$

2,033,649






Nonperforming assets










Nonaccrual loans

$

33,060



$

37,021



$

54,842






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

552



625



6,049






Total nonperforming assets

$

33,612



$

37,646



$

60,891






Nonperforming loans to period-end loans

0.38

%


0.42

%


0.65

%





Nonperforming assets to period-end assets

0.24

%


0.27

%


0.46

%





Allowance for loan and lease losses to period-end loans

0.96

%


0.94

%


0.99

%





Net loan charge-offs (recoveries) (for the three months ended)

$

306



$

(1,844)



$

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.







QUARTERLY FINANCIAL STATISTICS



Columbia Banking System, Inc.

Three Months Ended

Unaudited

December 31,


September 30,


June 30,


March 31,


December 31,


2019


2019


2019


2019


2018

Earnings

(dollars in thousands except per share amounts)

Net interest income

$

124,817



$

122,450



$

125,116



$

121,022



$

123,888


Provision for loan and lease losses

$

1,614



$

299



$

218



$

1,362



$

1,789


Noninterest income

$

21,807



$

28,030



$

25,648



$

21,696



$

20,402


Noninterest expense

$

86,978



$

87,076



$

86,728



$

84,700



$

87,019


Acquisition-related expense (included in noninterest expense)

$



$



$



$



$

493


Net income

$

46,129



$

50,727



$

51,724



$

45,871



$

44,748


Per Common Share










Earnings (basic)

$

0.64



$

0.70



$

0.71



$

0.63



$

0.61


Earnings (diluted)

$

0.64



$

0.70



$

0.71



$

0.63



$

0.61


Book value

$

29.95



$

29.90



$

29.26



$

28.39



$

27.76


Averages










Total assets

$

13,750,840



$

13,459,774



$

13,096,413



$

13,048,041



$

12,957,754


Interest-earning assets

$

12,231,779



$

11,941,578



$

11,606,727



$

11,561,627



$

11,458,470


Loans

$

8,742,246



$

8,694,592



$

8,601,819



$

8,406,664



$

8,441,354


Securities, including equity securities and FHLB stock

$

3,453,554



$

3,102,213



$

2,969,749



$

3,140,201



$

2,998,638


Deposits

$

10,959,434



$

10,668,767



$

10,186,371



$

10,271,016



$

10,560,280


Interest-bearing deposits

$

5,610,850



$

5,517,171



$

5,174,875



$

5,226,396



$

5,298,590


Interest-bearing liabilities

$

6,058,319



$

5,989,042



$

5,841,425



$

5,802,965



$

5,599,646


Noninterest-bearing deposits

$

5,348,584



$

5,151,596



$

5,011,496



$

5,044,620



$

5,261,690


Shareholders' equity

$

2,170,879



$

2,152,916



$

2,096,157



$

2,044,832



$

1,988,981


Financial Ratios










Return on average assets

1.34

%


1.51

%


1.58

%


1.41

%


1.38

%

Return on average common equity

8.50

%


9.42

%


9.87

%


8.97

%


9.00

%

Average equity to average assets

15.79

%


16.00

%


16.01

%


15.67

%


15.35

%

Shareholders' equity to total assets

15.34

%


15.71

%


16.30

%


15.99

%


15.53

%

Net interest margin (tax equivalent) (1)

4.11

%


4.14

%


4.40

%


4.32

%


4.36

%

Period end










Total assets

$

14,079,524



$

13,757,760



$

13,090,808



$

13,064,436



$

13,095,145


Loans, net of unearned income

$

8,743,465



$

8,756,355



$

8,646,990



$

8,520,798



$

8,391,511


Allowance for loan and lease losses

$

83,968



$

82,660



$

80,517



$

83,274



$

83,369


Securities, including equity securities and FHLB stock

$

3,794,262



$

3,397,252



$

2,894,218



$

3,052,870



$

3,193,408


Deposits

$

10,684,708



$

10,855,716



$

10,211,599



$

10,369,009



$

10,458,126


Shareholders' equity

$

2,159,962



$

2,161,577



$

2,133,638



$

2,088,620



$

2,033,649


Goodwill

$

765,842



$

765,842



$

765,842



$

765,842



$

765,842


Other intangible assets, net

$

35,458



$

37,908



$

40,540



$

43,189



$

45,937


Nonperforming assets










Nonaccrual loans

$

33,060



$

37,021



$

39,038



$

52,615



$

54,842


OREO and OPPO

552



625



1,118



6,075



6,049


Total nonperforming assets

$

33,612



$

37,646



$

40,156



$

58,690



$

60,891


Nonperforming loans to period-end loans

0.38

%


0.42

%


0.45

%


0.62

%


0.65

%

Nonperforming assets to period-end assets

0.24

%


0.27

%


0.31

%


0.45

%


0.46

%

Allowance for loan and lease losses to period-end loans

0.96

%


0.94

%


0.93

%


0.98

%


0.99

%

Net loan charge-offs (recoveries)

$

306



$

(1,844)



$

2,975



$

1,457



$

2,207


________

(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.







LOAN PORTFOLIO COMPOSITION


Columbia Banking System, Inc.










Unaudited

December 31,


September 30,


June 30,


March 31,


December 31,


2019


2019


2019


2019


2018

Loan Portfolio Composition - Dollars

(dollars in thousands)

Commercial business

$

3,602,597



$

3,707,314



$

3,644,051



$

3,509,472



$

3,438,422


Real estate:










One-to-four family residential

265,144



273,079



279,091



282,673



238,367


Commercial and multifamily residential

4,183,961



3,975,647



3,913,546



3,917,833



3,846,027


Total real estate

4,449,105



4,248,726



4,192,637



4,200,506



4,084,394


Real estate construction:










One-to-four family residential

192,762



195,198



201,783



207,900



217,790


Commercial and multifamily residential

163,103



261,786



255,452



240,458



284,394


Total real estate construction

355,865



456,984



457,235



448,358



502,184


Consumer

292,697



297,009



305,752



312,886



318,945


Purchased credit impaired

77,516



81,777



84,730



88,257



89,760


Subtotal loans

8,777,780



8,791,810



8,684,405



8,559,479



8,433,705


Less:  Net unearned income

(34,315)



(35,455)



(37,415)



(38,681)



(42,194)


Loans, net of unearned income

8,743,465



8,756,355



8,646,990



8,520,798



8,391,511


Less:  Allowance for loan and lease losses

(83,968)



(82,660)



(80,517)



(83,274)



(83,369)


Total loans, net

8,659,497



8,673,695



8,566,473



8,437,524



8,308,142


Loans held for sale

$

17,718



$

15,036



$

12,189



$

4,017



$

3,849






















Loan Portfolio Composition - Percentages

December 31,
2019


September 30,
2019


June 30,
2019


March 31,
2019


December 31,
2018

Commercial business

41.2

%


42.3

%


42.1

%


41.2

%


41.0

%

Real estate:










One-to-four family residential

3.0

%


3.1

%


3.2

%


3.3

%


2.8

%

Commercial and multifamily residential

47.9

%


45.5

%


45.3

%


46.1

%


45.8

%

Total real estate

50.9

%


48.6

%


48.5

%


49.4

%


48.6

%

Real estate construction:










One-to-four family residential

2.2

%


2.2

%


2.3

%


2.4

%


2.6

%

Commercial and multifamily residential

1.9

%


3.0

%


3.0

%


2.8

%


3.4

%

Total real estate construction

4.1

%


5.2

%


5.3

%


5.2

%


6.0

%

Consumer

3.3

%


3.4

%


3.5

%


3.7

%


3.8

%

Purchased credit impaired

0.9

%


0.9

%


1.0

%


1.0

%


1.1

%

Subtotal loans

100.4

%


100.4

%


100.4

%


100.5

%


100.5

%

Less:  Net unearned income

(0.4)

%


(0.4)

%


(0.4)

%


(0.5)

%


(0.5)

%

Loans, net of unearned income

100.0

%


100.0

%


100.0

%


100.0

%


100.0

%































DEPOSIT COMPOSITION




Columbia Banking System, Inc.



Unaudited











December 31,


September 30,


June 30,


March 31,


December 31,


2019


2019


2019


2019


2018

Deposit Composition - Dollars

(dollars in thousands)

Demand and other noninterest-bearing

$

5,328,146



$

5,320,435



$

5,082,219



$

5,106,568



$

5,227,216


Money market (1)

2,322,644



2,295,229



2,240,522



2,311,937



2,294,125


Interest-bearing demand (1)

1,150,437



1,059,502



1,058,545



1,078,849



1,084,863


Savings (1)

882,050



892,438



887,172



896,458



889,849


Interest-bearing public funds, other than certificates of deposit (1)

301,203



629,797



270,398



269,156



233,938


Certificates of deposit, less than $250,000

218,764



223,249



228,920



236,014



243,849


Certificates of deposit, $250,000 or more

151,995



107,506



105,782



101,965



89,473


Certificates of deposit insured by CDARS®

17,065



17,252



16,559



22,890



23,580


Brokered certificates of deposit

12,259



18,852



40,502



51,375



57,930


Reciprocal money market accounts

300,158



291,542



281,247



294,096



313,692


Subtotal

10,684,721



10,855,802



10,211,866



10,369,308



10,458,515


Valuation adjustment resulting from acquisition accounting

(13)



(86)



(267)



(299)



(389)


Total deposits

$

10,684,708



$

10,855,716



$

10,211,599



$

10,369,009



$

10,458,126






















Deposit Composition - Percentages

December 31,
2019


September 30,
2019


June 30,
2019


 

March 31,
2019


 

December 31,
2018

Demand and other noninterest-bearing

49.9

%


49.0

%


49.8

%


49.2

%


50.0

%

Money market (1)

21.7

%


21.1

%


21.9

%


22.3

%


21.9

%

Interest-bearing demand (1)

10.8

%


9.8

%


10.4

%


10.4

%


10.4

%

Savings (1)

8.3

%


8.2

%


8.7

%


8.6

%


8.5

%

Interest-bearing public funds, other than certificates of deposit (1)

2.8

%


5.8

%


2.7

%


2.6

%


2.2

%

Certificates of deposit, less than $250,000

2.0

%


2.1

%


2.2

%


2.3

%


2.3

%

Certificates of deposit, $250,000 or more

1.4

%


1.0

%


1.0

%


1.0

%


0.9

%

Certificates of deposit insured by CDARS®

0.2

%


0.2

%


0.2

%


0.2

%


0.2

%

Brokered certificates of deposit

0.1

%


0.2

%


0.4

%


0.5

%


0.6

%

Reciprocal money market accounts

2.8

%


2.6

%


2.7

%


2.9

%


3.0

%

Total

100.0

%


100.0

%


100.0

%


100.0

%


100.0

%

________

(1)

Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.







AVERAGE BALANCES AND RATES


Columbia Banking System, Inc.



Unaudited















Three Months Ended


Three Months Ended



December 31, 2019


December 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)


$

8,742,246



$

111,754



5.07

%


$

8,441,354



$

111,239



5.23

%

Taxable securities


3,011,521



20,074



2.64

%


2,493,683



16,684



2.65

%

Tax exempt securities (2)


442,033



3,163



2.84

%


504,955



3,805



2.99

%

Interest-earning deposits with banks


35,979



153



1.69

%


18,478



102



2.19

%

Total interest-earning assets


12,231,779



135,144



4.38

%


11,458,470



131,830



4.56

%

Other earning assets


231,456







230,601






Noninterest-earning assets


1,287,605







1,268,683






Total assets


$

13,750,840







$

12,957,754






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts (4)


2,649,404



2,277



0.34

%


2,669,217



2,191



0.33

%

Interest-bearing demand (4)


1,065,531



446



0.17

%


1,065,883



383



0.14

%

Savings accounts (4)


888,895



47



0.02

%


897,260



36



0.02

%

Interest-bearing public funds, other than certificates of deposit (4)


616,938



2,413



1.55

%


238,638



634



1.05

%

Certificates of deposit


390,082



626



0.64

%


427,592



587



0.54

%

Total interest-bearing deposits


5,610,850



5,809



0.41

%


5,298,590



3,831



0.29

%

FHLB advances


379,975



1,899



1.98

%


215,606



1,399



2.57

%

Subordinated debentures


35,299



467



5.25

%


35,484



467



5.22

%

Other borrowings and interest-bearing liabilities


32,195



117



1.44

%


49,966



216



1.72

%

Total interest-bearing liabilities


6,058,319



8,292



0.54

%


5,599,646



5,913



0.42

%

Noninterest-bearing deposits


5,348,584







5,261,690






Other noninterest-bearing liabilities


173,058







107,437






Shareholders' equity


2,170,879







1,988,981






Total liabilities & shareholders' equity


$

13,750,840







$

12,957,754






Net interest income (tax equivalent)


$

126,852







$

125,917




Net interest margin (tax equivalent)


4.11

%






4.36

%

________

(1)

Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $2.1 million and $2.5 million for the three months ended December 31, 2019 and 2018, respectively. The incremental accretion income on acquired loans was $2.3 million and $2.6 million for the three months ended December 31, 2019 and 2018, respectively.



(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million and $1.2 million for the three months ended December 31, 2019 and 2018, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $665 thousand and $800 thousand for the three months ended December 31, 2019 and 2018, respectively.



(3)

Beginning January 2019, average rates were 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.



(4)

Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.







AVERAGE BALANCES AND RATES




Columbia Banking System, Inc.





Unaudited











Three Months Ended


Three Months Ended



December 31, 2019


September 30, 2019



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,742,246



$

111,754



5.07

%


$

8,694,592



$

114,099



5.21

%

Taxable securities


3,011,521



20,074



2.64

%


2,654,490



16,457



2.46

%

Tax exempt securities (2)


442,033



3,163



2.84

%


447,723



3,235



2.87

%

Interest-earning deposits with banks


35,979



153



1.69

%


144,773



864



2.37

%

Total interest-earning assets


12,231,779



135,144



4.38

%


11,941,578



134,655



4.47

%

Other earning assets


231,456







230,140






Noninterest-earning assets


1,287,605







1,288,056






Total assets


$

13,750,840







$

13,459,774






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts (3)


$

2,649,404



$

2,277



0.34

%


$

2,589,390



$

2,840



0.44

%

Interest-bearing demand (3)


1,065,531



446



0.17

%


1,049,833



438



0.17

%

Savings accounts (3)


888,895



47



0.02

%


893,395



49



0.02

%

Interest-bearing public funds, other than certificates of deposit (3)


616,938



2,413



1.55

%


602,674



2,879



1.90

%

Certificates of deposit


390,082



626



0.64

%


381,879



657



0.68

%

Total interest-bearing deposits


5,610,850



5,809



0.41

%


5,517,171



6,863



0.49

%

FHLB advances


379,975



1,899



1.98

%


400,956



2,569



2.54

%

Subordinated debentures


35,299



467



5.25

%


35,346



468



5.25

%

Other borrowings and interest-bearing liabilities


32,195



117



1.44

%


35,569



183



2.04

%

Total interest-bearing liabilities


6,058,319



8,292



0.54

%


5,989,042



10,083



0.67

%

Noninterest-bearing deposits


5,348,584







5,151,596






Other noninterest-bearing liabilities


173,058







166,220






Shareholders' equity


2,170,879







2,152,916






Total liabilities & shareholders' equity


$

13,750,840







$

13,459,774






Net interest income (tax equivalent)


$

126,852







$

124,572




Net interest margin (tax equivalent)


4.11

%






4.14

%

_______

(1)

Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $2.1 million and $2.0 million for the three months ended December 31, 2019 and September 30, 2019, respectively. The incremental accretion on acquired loans was $2.3 million and $2.1 million for the three months ended December 31, 2019 and September 30, 2019, respectively.



(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million and $1.4 million for the three months ended December 31, 2019 and September 30, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $665 thousand and $679 thousand for the three months ended December 31, 2019 and September 30, 2019, respectively.



(3)

Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.







AVERAGE BALANCES AND RATES




Columbia Banking System, Inc.





Unaudited











Twelve Months Ended


Twelve Months Ended



December 31, 2019


December 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)


$

8,612,478



$

453,552



5.27

%


$

8,409,373



$

432,781



5.15

%

Taxable securities


2,703,423



69,864



2.58

%


2,275,892



55,969



2.46

%

Tax exempt securities (2)


463,689



13,589



2.93

%


514,808



15,445



3.00

%

Interest-earning deposits with banks


58,043



1,312



2.26

%


41,248



702



1.70

%

Total interest-earning assets


11,837,633



$

538,317



4.55

%


11,241,321



$

504,897



4.49

%

Other earning assets


231,731







224,595






Noninterest-earning assets


1,271,660







1,259,170






Total assets


$

13,341,024







$

12,725,086






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts (4)


$

2,591,303



$

10,598



0.41

%


$

2,695,585



$

6,216



0.23

%

Interest-bearing demand (4)


1,064,145



1,676



0.16

%


1,089,548



1,543



0.14

%

Savings accounts (4)


892,518



183



0.02

%


884,770



138



0.02

%

Interest-bearing public funds, other than certificates of deposit (4)


440,359



7,244



1.65

%


244,943



2,002



0.82

%

Certificates of deposit


395,421



2,445



0.62

%


452,756



2,206



0.49

%

Total interest-bearing deposits


5,383,746



22,146



0.41

%


5,367,602



12,105



0.23

%

FHLB advances


470,082



11,861



2.52

%


166,577



3,750



2.25

%

Subordinated debentures


35,368



1,871



5.29

%


35,553



1,871



5.26

%

Other borrowings and interest-bearing liabilities


34,622



669



1.93

%


45,095



504



1.12

%

Total interest-bearing liabilities


5,923,818



$

36,547



0.62

%


5,614,827



$

18,230



0.32

%

Noninterest-bearing deposits


5,139,941







5,042,802






Other noninterest-bearing liabilities


160,623







98,278






Shareholders' equity


2,116,642







1,969,179






Total liabilities & shareholders' equity


$

13,341,024







$

12,725,086






Net interest income (tax equivalent)


$

501,770







$

486,667




Net interest margin (tax equivalent)


4.24

%






4.33

%

________

(1)

Nonaccrual loans have been included in the table as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $8.4 million and $9.3 million for the twelve months ended December 31, 2019 and 2018, respectively. The incremental accretion on acquired loans was $9.1 million and $12.6 million for the twelve months ended December 31, 2019 and 2018, respectively.



(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $5.5 million and $4.6 million for the twelve months ended December 31, 2019 and 2018, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.9 million and $3.2 million for the twelve months ended December 31, 2019 and 2018, respectively.



(3)

Beginning January 2019, average rate was calculated using the actual number of days to be 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.



(4)

Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.



Non-GAAP Financial Measures

The Company considers its operating net interest margin and operating efficiency ratios to be useful measurements as they more closely reflect the ongoing operating performance of the Company. Despite the usefulness of the operating net interest margin and operating efficiency ratio to the Company, there are no standardized definitions for them and, as a result, the Company's calculations may not be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following tables reconcile the Company's calculation of the operating net interest margin and operating efficiency ratio:


Three Months Ended


Twelve Months Ended


December 31,


September 30,


December 31,


December 31,


December 31,


2019


2019


2018


2019


2018

Operating net interest margin non-GAAP reconciliation:

(dollars in thousands)

Net interest income (tax equivalent) (1)

$

126,852



$

124,572



$

125,917



$

501,770



$

486,667


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










Incremental accretion income on purchased credit impaired loans

(304)



(113)



(395)



(1,284)



(1,635)


Incremental accretion income on other acquired loans

(2,012)



(1,959)



(2,218)



(7,802)



(10,921)


Premium amortization on acquired securities

1,204



1,386



1,671



6,020



7,736


Interest reversals on nonaccrual loans

209



174



417



1,671



1,564


Operating net interest income (tax equivalent) (1)

$

125,949



$

124,060



$

125,392



$

500,375



$

483,411


Average interest earning assets

$

12,231,779



$

11,941,578



$

11,458,470



$

11,837,633



$

11,241,321


Net interest margin (tax equivalent) (1)(2)

4.11

%


4.14

%


4.36

%


4.24

%


4.33

%

Operating net interest margin (tax equivalent) (1)(2)

4.09

%


4.12

%


4.34

%


4.23

%


4.30

%






Three Months Ended


Twelve Months Ended


December 31,


September 30,


December 31,


December 31,


December 31,


2019


2019


2018


2019


2018

Operating efficiency ratio non-GAAP reconciliation:

(dollars in thousands)

Noninterest expense (numerator A)

$

86,978



$

87,076



$

87,019



$

345,482



$

340,490


Adjustments to arrive at operating noninterest expense:










Acquisition-related expenses





(493)





(8,661)


Net benefit (cost) of operation of OREO and OPPO

10



113



(23)



714



(1,262)


Loss on asset disposals



(5)



(166)



(5)



(277)


Business and Occupation ("B&O") taxes

(1,234)



(1,325)



(1,410)



(5,846)



(5,664)


Operating noninterest expense (numerator B)

$

85,754



$

85,859



$

84,927



$

340,345



$

324,626












Net interest income (tax equivalent) (1)

$

126,852



$

124,572



$

125,917



$

501,770



$

486,667


Noninterest income

21,807



28,030



20,402



97,181



88,256


Bank owned life insurance tax equivalent adjustment

439



406



390



1,673



1,597


Total revenue (tax equivalent) (denominator A)

$

149,098



$

153,008



$

146,709



$

600,624



$

576,520












Operating net interest income (tax equivalent) (1)

$

125,949



$

124,060



$

125,392



$

500,375



$

483,411


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










Investment securities loss (gain), net





16



(2,132)



89


Gain on asset disposals

(530)



(6,104)



(30)



(6,634)



(141)


Operating noninterest income (tax equivalent)

21,716



22,332



20,778



90,088



89,801


Total operating revenue (tax equivalent) (denominator B)

$

147,665



$

146,392



$

146,170



$

590,463



$

573,212


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

58.34

%


56.91

%


59.31

%


57.52

%


59.06

%

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

58.07

%


58.65

%


58.10

%


57.64

%


56.63

%

_________

(1)

Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $2.0 million, $2.1 million, and $2.0 million for the three months ended December 31, 2019, September 30, 2019, and December 31, 2018, respectively; and $8.4 million and $7.8 million for the twelve month periods ended December 31, 2019 and 2018, respectively.



(2)

Beginning January 2019, net interest margin (tax equivalent) and operating net interest margin (tax equivalent) were 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.



Non-GAAP Financial Measures - Continued

The Company also considers its core noninterest expense ratio to be a useful measurement as it more closely reflects the ongoing operating performance of the Company. Despite the usefulness of the core noninterest expense ratio to the Company, there is not a standardized definition for it, as a result, the Company's calculations may not be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the core noninterest expense ratio:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2019


2019


2018


2019


2018

Core noninterest expense ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$

86,978



$

87,076



$

87,019



$

345,482



$

340,490


Adjustments to arrive at core noninterest expense:











Acquisition-related expenses






(493)





(8,661)


Core noninterest expense (numerator B)


$

86,978



$

87,076



$

86,526



$

345,482



$

331,829


Average assets (denominator)


$

13,750,840



$

13,459,774



$

12,957,754



$

13,341,024



$

12,725,086


Noninterest expense ratio (numerator A/denominator) (1)


2.53

%


2.59

%


2.69

%


2.59

%


2.68

%

Core noninterest expense ratio (numerator B/denominator) (2)


2.53

%


2.59

%


2.67

%


2.59

%


2.61

%

__________

(1)

For the purpose of this ratio, interim noninterest expense has been annualized.



(2)

For the purpose of this ratio, interim core noninterest expense has been annualized.



The Company considers its tangible common equity ratio and tangible book value per share ratio to be useful measurements in evaluating the capital adequacy of the Company as they provide a method to assess management's success in utilizing our tangible capital. Despite the usefulness of these ratios to the Company, there is not a standardized definition for them, as a result, the Company's calculation may not always be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

 The following tables reconcile the Company's calculation of the tangible common equity ratio:

<


December 31,


September 30,


December 31,



2019


2019


2018

Tangible common equity ratio and tangible book value per common share non-GAAP reconciliation:


(dollars in thousands except per share amounts)

Shareholders' equity (numerator A)


$

2,159,962



$

2,161,577



$

2,033,649


Adjustments to arrive at tangible common equity: