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Press Release


Columbia Banking System Announces First Quarter 2020 Results and Quarterly Cash Dividend

Company Release - 4/30/2020 9:00 AM ET

TACOMA, Wash., April 30, 2020 /PRNewswire/ -- 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 first quarter 2020 earnings, "COVID-19 had a profound impact on the final weeks of the first quarter and drove a material increase in our allowance for credit losses. We focused on initiatives intended to improve our operating leverage and their positive impact is reflected in our financial results." Mr. Stein continued, "We experienced strong loan and deposit growth during the quarter with several lines of business experiencing record first quarter performance. In addition, we focused on efficiency initiatives that significantly lowered our expense ratios."

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

Balance Sheet

Total assets at March 31, 2020 were $14.04 billion, a decrease of $41.0 million from the linked quarter. Loans were $8.93 billion, up $189.9 million from December 31, 2019 as a result of loan originations of $330.7 million and increased line utilization partially offset by payments. Securities available for sale were $3.55 billion at March 31, 2020, a decrease of $193.0 million from $3.75 billion at December 31, 2019. Total deposits at March 31, 2020 were $10.81 billion, an increase of $128.0 million from December 31, 2019 principally due to an increase of $104.6 million in public funds, excluding certificates of deposit. Deposit mix remained fairly consistent from December 31, 2019 with 49% noninterest-bearing and 51% interest-bearing. The average cost of total deposits for the quarter was 14 basis points, a decrease of 7 basis points from the fourth 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, "The first quarter proved to be a positive quarter for loan growth driven by production and seasonal line utilization. Our bankers were on track for record first quarter loan production through the first two months, even though the first quarter is historically the weakest quarter of the year. Our teams did an excellent job of pivoting and adapting to our clients' needs as our new reality set in during the last month of the quarter. The decrease in interest rates helped to drive down the cost of deposits to levels close to historic lows."

Income Statement

Net Interest Income

Net interest income for the first quarter of 2020 was $122.4 million, a decrease of $2.4 million and an increase of $1.4 million from the linked quarter and the prior year period, respectively. The decrease from the linked quarter was primarily due to lower interest income on loans as a result of the lower rate environment and higher interest expense on FHLB advances due to higher average advance balances. The decrease to net interest income from the linked quarter was partially offset by an increase in interest income on securities primarily due to $1.9 million of interest income and discount accretion related to the early payoff of three securities and a decrease in interest expense on money market deposits principally due to lower rates. Net interest income compared to the prior year period increased as a result of interest income and discount accretion from the early payoff on securities mentioned previously and higher average balances of securities partially offset by higher interest expense due to higher average balances of FHLB advances. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Provision for Credit Losses

Effective January 1, 2020, Columbia adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") and all related amendments. The allowance for credit losses under ASU 2016-13 utilizes a Current Expected Credit Losses ("CECL") methodology which estimates the expected loan losses over the contractual life of the loans in the loan portfolio of Columbia Bank (the "Bank"). Prior to January 1, 2020, the Allowance for Loan and Lease Losses ("ALLL") methodology was used which estimated the amount of loan losses that had been incurred at the balance sheet date. The day 1 adoption of ASU 2016-13 and related amendments resulted in an increase of $1.6 million to the Bank's allowance for credit losses, an increase of $1.6 million to the Bank's allowance for unfunded commitments and letters of credit and a net-of-tax cumulative-effect adjustment of $2.5 million to decrease the beginning balance of retained earnings.

The Bank's provision for credit losses for the first quarter of 2020, under the new CECL methodology, was $41.5 million compared to $1.6 million and $1.4 million for the linked quarter and comparable quarter in 2019, respectively, which were calculated under the old ALLL methodology. The significant increase in the provision for the first quarter of 2020 was principally the result of the recent novel coronavirus ("COVID-19") pandemic outbreak that has created significant volatility in the local, national and world economies. With the national guidance regarding social distancing and state and county mandates to shelter or stay at home, many large and small businesses have had to close and there has been a dramatic increase in new unemployment claims. As a result, we have increased our reserves for lifetime credit losses as a result of the economic impact of COVID-19. For more information, please see Note 1 to the Consolidated Financial Statements in "Item 8. Financial Statements and Supplementary Data" of our annual report on Form 10-K for the 2019 fiscal year and the "COVID-19 Update" section of this earnings release.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "The increase in the provision was driven by our economic forecast reflecting the changes in the outlook for the economy driven by measures to mitigate health concerns surrounding COVID-19. Also contributing to the rise in the provision for the quarter was the negative migration in the portfolio which came about, not from customer past dues for example, but from our deep dive into the industries we believe that will be most impacted."

Noninterest Income

Noninterest income was $21.2 million for the first quarter of 2020, a decrease of $600 thousand from the linked quarter and a decrease of $489 thousand from the first quarter of 2019. The linked quarter decrease was principally due to decreases in deposit and other fees partially offset by an increase in loan fees. The decrease from the prior year period was primarily due to lower deposit fees and lower net securities gains partially offset by higher loan revenue.

Noninterest Expense

Total noninterest expense for the first quarter of 2020 was $84.3 million, a decrease of $2.7 million from the fourth quarter of 2019 due to lower legal and professional fees. The decrease in legal and professional fees was principally due to lower fees on reciprocal money market accounts in 2020 as well as lower expenses related to corporate initiatives during the first quarter of 2020.

Compared to the first quarter of 2019, noninterest expense decreased $429 thousand. Although total noninterest expense was relatively unchanged, legal and professional fees and Business and Occupation ("B&O") taxes decreased $2.5 million and $1.3 million, respectively, these decreases were partially offset by an increase of $2.8 million in compensation and employee benefits expense. The decrease in professional fees was due to lower fees on reciprocal money market account fees as well as lower expenses related to corporate initiatives. B&O tax expense benefited from a refund for a prior year.

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the first quarter of 2020 was 4.00%, a decrease of 11 basis points and 32 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 and higher premium amortization on taxable securities. Compared to the prior year period, the decreased net interest margin (tax equivalent) was driven by lower rates on loans and higher average balances of FHLB advances.

Columbia's operating net interest margin (tax equivalent)(1) was 4.02% for the first quarter of 2020, which decreased 7 and 31 basis points compared to the linked quarter and the prior year period, respectively. The decreases in the operating net interest margin for the first quarter of 2020 compared to the linked quarter and the prior year quarter were due to the items noted in the preceding paragraph.

Asset Quality

At March 31, 2020, nonperforming assets to total assets were 0.34% compared to 0.24% at December 31, 2019. Total nonperforming assets increased $14.5 million from the linked quarter due to an increase in agriculture and commercial business nonaccrual loans.

(1)

Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.

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


March 31, 2020


December 31, 2019


(in thousands)

Nonaccrual loans:




Commercial loans:




Commercial real estate

$

5,518



$

3,799


Commercial business

24,395



20,937


Agriculture

15,083



5,023


Consumer loans:




One-to-four family residential real estate

2,643



3,292


Other consumer

8



9


Total nonaccrual loans

47,647



33,060


OREO and other personal property owned

510



552


Total nonperforming assets

$

48,157



$

33,612


The following table provides an analysis of the Company's allowance for credit losses:


Three Months Ended


March 31, 2020


December 31,
2019


March 31, 2019


(in thousands)

Prior year ending balance

$

83,968



$

82,660



$

83,369


CECL day 1 adjustment

1,632






Beginning balance

85,600



82,660



83,369


Charge-offs:






Commercial loans:






Commercial real estate

(101)



(452)



(678)


Commercial business

(1,684)



(2,845)



(1,506)


Agriculture

(4,726)



(51)



(78)


Construction



(10)



(195)


Consumer loans:






One-to-four family residential real estate

(10)



(192)



(481)


Other consumer

(268)



(18)



(50)


Total charge-offs

(6,789)



(3,568)



(2,988)


Recoveries:






Commercial loans:






Commercial real estate

14



576



514


Commercial business

860



1,698



527


Agriculture

41



110



58


Construction

442



312



83


Consumer loans:






One-to-four family residential real estate

282



549



334


Other consumer

124



17



15


Total recoveries

1,763



3,262



1,531


Net charge-offs

(5,026)



(306)



(1,457)


Provision for credit losses

41,500



1,614



1,362


Ending balance

$

122,074



$

83,968



$

83,274








The allowance for credit losses to period end loans was 1.37% at March 31, 2020 compared to an ALLL to period end loans of 0.96% at December 31, 2019.

Organizational Update

COVID-19 Update

Columbia began closely monitoring the COVID-19 outbreak early and enacted its pandemic plan in January to provide support for team members and clients. Advanced preparation and early action enabled the Bank to continue all operations as COVID-19 spread in the Northwest. Columbia continues to monitor the pandemic and adjust its response in concert with local government and healthcare officials. Clients have received support through payment deferral programs as well as a variety of options from the SBA including the Paycheck Protection Program, the Economic Injury Disaster Loan and other deferral and automatic debt relief programs. Columbia has assisted its non-profit community partners by lifting restrictions on sponsorships and contributions to allow these organizations to rededicate the funds to COVID-19 response and recovery efforts.

Aaron Deer Named Executive Vice President, Chief Financial Officer

Columbia recently announced the appointment of Aaron Deer to Executive Vice President and Chief Financial Officer following an extensive national search. Mr. Deer was most recently a Managing Director and Senior Research Analyst at Piper Sandler. As an equity analyst, he covered West Coast financial institutions for nearly 20 years with a focus on commercial banks and thrifts, financing of venture capital and private equity-backed enterprises as well as innovation among financial intermediaries. Mr. Deer has a detailed understanding of Columbia's business and broad industry expertise that will prove valuable as the Company continues to sharpen its strategy and explore opportunities for growth and improved operating leverage.

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.28 per common share on May 28, 2020 to shareholders of record as of the close of business on May 14, 2020.

Conference Call Information

Columbia's management will discuss the first quarter 2020 financial results on a conference call scheduled for Thursday, April 30, 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/index.jsp?seid=140

The conference call can also be accessed on Thursday, April 30, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 6697578.

A replay of the call can be accessed beginning Friday, May 1, 2020 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=140

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 as well as the potential effects of the COVID-19 pandemic on Columbia's business, operations, financial performance and prospects. 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 U.S. Securities and Exchange Commission's (the "SEC") 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) the effect of COVID-19 and other infectious illness outbreaks that may arise in the future, which has created significant uncertainties in U.S. and global markets, is expected to continue to adversely affect the businesses in which Columbia is engaged; (3) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (4) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (5) costs or difficulties related to the integration of acquisitions may be greater than expected; (6) competitive pressure among financial institutions may increase significantly; (7) failure to maintain effective internal control over financial reporting or disclosure controls and procedures may adversely affect our business; (8) reliance on and cost of technology may increase; and (9) changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, including with regard to COVID-19, have adversely affected and may continue to 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




Investor Relations


InvestorRelations@columbiabank.com


253-305-1921















CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.




Unaudited





March 31,


December 31,






2020


2019






(in thousands)

ASSETS



Cash and due from banks





$

190,399



$

223,541


Interest-earning deposits with banks





25,357



24,132


Total cash and cash equivalents





215,756



247,673


Debt securities available for sale at fair value





3,553,128



3,746,142


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




38,280



48,120


Loans held for sale





9,701



17,718


Loans, net of unearned income





8,933,321



8,743,465


Less: Allowance for credit losses




122,074



83,968


Loans, net





8,811,247



8,659,497


Interest receivable





44,577



46,839


Premises and equipment, net





164,626



165,408


Other real estate owned





510



552


Goodwill





765,842



765,842


Other intangible assets, net





33,148



35,458


Other assets





401,688



346,275


Total assets





$

14,038,503



$

14,079,524


LIABILITIES AND SHAREHOLDERS' EQUITY





Deposits:








Noninterest-bearing





$

5,323,908



$

5,328,146


Interest-bearing





5,488,848



5,356,562


Total deposits





10,812,756



10,684,708


FHLB advances and Federal Reserve Bank ("FRB") borrowings





712,455



953,469


Securities sold under agreements to repurchase




29,252



64,437


Subordinated debentures





35,231



35,277


Revolving line of credit





5,000




Other liabilities





230,207



181,671


Total liabilities





11,824,901



11,919,562


Commitments and contingent liabilities








Shareholders' equity:









March 31,


December 31,






2020


2019






(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

73,759



73,577



1,651,399



1,650,753


Outstanding

71,575



72,124






Retained earnings





495,830



519,676


Accumulated other comprehensive income




137,207



40,367


Treasury stock at cost

2,184



1,453



(70,834)



(50,834)


Total shareholders' equity





2,213,602



2,159,962


Total liabilities and shareholders' equity




$

14,038,503



$

14,079,524




















CONSOLIDATED STATEMENTS OF INCOME


Columbia Banking System, Inc.

Three Months Ended

Unaudited

March 31,


December 31,


March 31,


2020


2019


2019

Interest Income

(in thousands except per share amounts)

Loans

$

107,366



$

110,384



$

108,416


Taxable securities

21,088



20,074



17,415


Tax-exempt securities

2,302



2,498



2,969


Deposits in banks

141



153



88


Total interest income

130,897



133,109



128,888


Interest Expense






Deposits

3,642



5,809



4,498


FHLB advances and FRB borrowings

4,229



1,899



2,685


Subordinated debentures

468



467



468


Other borrowings

136



117



215


Total interest expense

8,475



8,292



7,866


Net Interest Income

122,422



124,817



121,022


Provision for credit losses

41,500



1,614



1,362


Net interest income after provision for credit losses

80,922



123,203



119,660


Noninterest Income






Deposit account and treasury management fees

7,788



8,665



8,980


Card revenue

3,518



3,767



3,662


Financial services and trust revenue

3,065



3,191



2,957


Loan revenue

4,590



3,625



2,389


Bank owned life insurance

1,596



1,650



1,519


Investment securities gains, net

249





1,847


Other

401



909



342


Total noninterest income

21,207



21,807



21,696


Noninterest Expense






Compensation and employee benefits

54,842



54,308



52,085


Occupancy

9,197



9,010



8,809


Data processing

4,840



4,792



4,669


Legal and professional fees

2,102



4,835



4,573


Amortization of intangibles

2,310



2,450



2,748


Business and Occupation ("B&O") taxes

624



1,234



1,876


Advertising and promotion

1,305



1,329



974


Regulatory premiums

34



18



984


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

12



(10)



113


Other

9,005



9,012



7,869


Total noninterest expense

84,271



86,978



84,700


Income before income taxes

17,858



58,032



56,656


Provision for income taxes

3,230



11,903



10,785


Net Income

$

14,628



$

46,129



$

45,871


Earnings per common share






Basic

$

0.20



$

0.64



$

0.63


Diluted

$

0.20



$

0.64



$

0.63


Dividends declared per common share - regular

$

0.28



$

0.28



$

0.28


Dividends declared per common share - special

$

0.22



$



$

0.14


   Dividends declared per common share - total

$

0.50



$

0.28



$

0.42


Weighted average number of common shares outstanding

71,206



71,238



72,521


Weighted average number of diluted common shares outstanding

71,264



71,310



72,524




















FINANCIAL STATISTICS





Columbia Banking System, Inc.

Three Months Ended

Unaudited

March 31,


December 31,


March 31,


2020


2019


2019

Earnings

(dollars in thousands except per share amounts)

Net interest income

$

122,422



$

124,817



$

121,022


Provision for credit losses

$

41,500



$

1,614



$

1,362


Noninterest income

$

21,207



$

21,807



$

21,696


Noninterest expense

$

84,271



$

86,978



$

84,700


Net income

$

14,628



$

46,129



$

45,871


Per Common Share






Earnings (basic)

$

0.20



$

0.64



$

0.63


Earnings (diluted)

$

0.20



$

0.64



$

0.63


Book value

$

30.93



$

29.95



$

28.39


Tangible book value per common share (1)

$

19.76



$

18.84



$

17.39


Averages






Total assets

$

13,995,632



$

13,750,840



$

13,048,041


Interest-earning assets

$

12,487,550



$

12,231,779



$

11,561,627


Loans

$

8,815,755



$

8,742,246



$

8,406,664


Securities and FHLB stock

$

3,618,567



$

3,453,554



$

3,140,201


Deposits

$

10,622,379



$

10,959,434



$

10,271,016


Interest-bearing deposits

$

5,383,203



$

5,610,850



$

5,226,396


Interest-bearing liabilities

$

6,375,931



$

6,058,319



$

5,802,965


Noninterest-bearing deposits

$

5,239,176



$

5,348,584



$

5,044,620


Shareholders' equity

$

2,193,051



$

2,170,879



$

2,044,832


Financial Ratios






Return on average assets

0.42

%


1.34

%


1.41

%

Return on average common equity

2.67

%


8.50

%


8.97

%

Return on average tangible common equity (1)

4.72

%


14.05

%


15.57

%

Average equity to average assets

15.67

%


15.79

%


15.67

%

Shareholders' equity to total assets

15.77

%


15.34

%


15.99

%

Tangible common shareholders' equity to tangible assets (1)

10.68

%


10.23

%


10.44

%

Net interest margin (tax equivalent)

4.00

%


4.11

%


4.32

%

Efficiency ratio (tax equivalent) (2)

57.73

%


58.34

%


58.33

%

Operating efficiency ratio (tax equivalent) (1)

57.24

%


58.07

%


57.54

%

Noninterest expense ratio

2.41

%


2.53

%


2.60

%








March 31,


December 31,



Period end

2020


2019



Total assets

$

14,038,503



$

14,079,524




Loans, net of unearned income

$

8,933,321



$

8,743,465




Allowance for credit losses

$

122,074



$

83,968




Securities and FHLB stock

$

3,591,408



$

3,794,262




Deposits

$

10,812,756



$

10,684,708




Shareholders' equity

$

2,213,602



$

2,159,962




Nonperforming assets






Nonaccrual loans

$

47,647



$

33,060




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

510



552




Total nonperforming assets

$

48,157



$

33,612




Nonperforming loans to period-end loans

0.53

%


0.38

%



Nonperforming assets to period-end assets

0.34

%


0.24

%



Allowance for credit losses to period-end loans

1.37

%


0.96

%



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

$

5,026



$

306






(1)

This is a non-GAAP measure. See section titled "Non-GAAP Financial Measures" on the last three pages of this earnings release for a reconciliation to the most comparable GAAP measure.



(2)

Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.







QUARTERLY FINANCIAL STATISTICS






Columbia Banking System, Inc.

Three Months Ended

Unaudited

March 31,


December 31,


September 30,


June 30,


March 31,


2020


2019


2019


2019


2019

Earnings

(dollars in thousands except per share amounts)

Net interest income

$

122,422



$

124,817



$

122,450



$

125,116



$

121,022


Provision for credit losses

$

41,500



$

1,614



$

299



$

218



$

1,362


Noninterest income

$

21,207



$

21,807



$

28,030



$

25,648



$

21,696


Noninterest expense

$

84,271



$

86,978



$

87,076



$

86,728



$

84,700


Net income

$

14,628



$

46,129



$

50,727



$

51,724



$

45,871


Per Common Share










Earnings (basic)

$

0.20



$

0.64



$

0.70



$

0.71



$

0.63


Earnings (diluted)

$

0.20



$

0.64



$

0.70



$

0.71



$

0.63


Book value

$

30.93



$

29.95



$

29.90



$

29.26



$

28.39


Averages










Total assets

$

13,995,632



$

13,750,840



$

13,459,774



$

13,096,413



$

13,048,041


Interest-earning assets

$

12,487,550



$

12,231,779



$

11,941,578



$

11,606,727



$

11,561,627


Loans

$

8,815,755



$

8,742,246



$

8,694,592



$

8,601,819



$

8,406,664


Securities and FHLB stock

$

3,618,567



$

3,453,554



$

3,102,213



$

2,969,749



$

3,140,201


Deposits

$

10,622,379



$

10,959,434



$

10,668,767



$

10,186,371



$

10,271,016


Interest-bearing deposits

$

5,383,203



$

5,610,850



$

5,517,171



$

5,174,875



$

5,226,396


Interest-bearing liabilities

$

6,375,931



$

6,058,319



$

5,989,042



$

5,841,425



$

5,802,965


Noninterest-bearing deposits

$

5,239,176



$

5,348,584



$

5,151,596



$

5,011,496



$

5,044,620


Shareholders' equity

$

2,193,051



$

2,170,879



$

2,152,916



$

2,096,157



$

2,044,832


Financial Ratios










Return on average assets

0.42

%


1.34

%


1.51

%


1.58

%


1.41

%

Return on average common equity

2.67

%


8.50

%


9.42

%


9.87

%


8.97

%

Average equity to average assets

15.67

%


15.79

%


16.00

%


16.01

%


15.67

%

Shareholders' equity to total assets

15.77

%


15.34

%


15.71

%


16.30

%


15.99

%

Net interest margin (tax equivalent)

4.00

%


4.11

%


4.14

%


4.40

%


4.32

%

Period-end










Total assets

$

14,038,503



$

14,079,524



$

13,757,760



$

13,090,808



$

13,064,436


Loans, net of unearned income

$

8,933,321



$

8,743,465



$

8,756,355



$

8,646,990



$

8,520,798


Allowance for credit losses

$

122,074



$

83,968



$

82,660



$

80,517



$

83,274


Securities and FHLB stock

$

3,591,408



$

3,794,262



$

3,397,252



$

2,894,218



$

3,052,870


Deposits

$

10,812,756



$

10,684,708



$

10,855,716



$

10,211,599



$

10,369,009


Shareholders' equity

$

2,213,602



$

2,159,962



$

2,161,577



$

2,133,638



$

2,088,620


Goodwill

$

765,842



$

765,842



$

765,842



$

765,842



$

765,842


Other intangible assets, net

$

33,148



$

35,458



$

37,908



$

40,540



$

43,189


Nonperforming assets










Nonaccrual loans

$

47,647



$

33,060



$

37,021



$

39,038



$

52,615


OREO and OPPO

510



552



625



1,118



6,075


Total nonperforming assets

$

48,157



$

33,612



$

37,646



$

40,156



$

58,690


Nonperforming loans to period-end loans

0.53

%


0.38

%


0.42

%


0.45

%


0.62

%

Nonperforming assets to period-end assets

0.34

%


0.24

%


0.27

%


0.31

%


0.45

%

Allowance for credit losses to period-end loans

1.37

%


0.96

%


0.94

%


0.93

%


0.98

%

Net loan charge-offs (recoveries)

$

5,026



$

306



$

(1,844)



$

2,975



$

1,457
































LOAN PORTFOLIO COMPOSITION





Columbia Banking System, Inc.




Unaudited

March 31,


December 31,


September 30,


June 30,


March 31,


2020


2019


2019


2019


2019

Loan Portfolio Composition - Dollars

(dollars in thousands)

Commercial loans:










Commercial real estate

$

3,969,974



$

3,945,853



$

3,746,365



$

3,689,282



$

3,676,921


Commercial business

3,169,668



2,989,613



3,057,669



3,059,066



2,996,412


Agriculture

754,491



765,371



777,619



744,481



663,394


Construction

308,186



361,533



479,171



446,101



458,946


Consumer loans:










One-to-four family residential real estate

690,506



637,325



654,077



667,037



683,227


Other consumer

40,496



43,770



41,454



41,023



41,898


Total loans

8,933,321



8,743,465



8,756,355



8,646,990



8,520,798


Less:  Allowance for credit losses

(122,074)



(83,968)



(82,660)



(80,517)



(83,274)


Total loans, net

$

8,811,247



$

8,659,497



$

8,673,695



$

8,566,473



$

8,437,524


Loans held for sale

$

9,701



$

17,718



$

15,036



$

12,189



$

4,017

































March 31,


December 31,


September 30,


June 30,


March 31,

Loan Portfolio Composition - Percentages

2020


2019


2019


2019


2019

Commercial loans:










Commercial real estate

44.5

%


45.1

%


42.7

%


42.6

%


43.1

%

Commercial business

35.5

%


34.2

%


34.9

%


35.4

%


35.2

%

Agriculture

8.4

%


8.8

%


8.9

%


8.6

%


7.8

%

Construction

3.4

%


4.1

%


5.5

%


5.2

%


5.4

%

Consumer loans:










One-to-four family residential real estate

7.7

%


7.3

%


7.5

%


7.7

%


8.0

%

Other consumer

0.5

%


0.5

%


0.5

%


0.5

%


0.5

%

Total loans

100.0

%


100.0

%


100.0

%


100.0

%


100.0

%































DEPOSIT COMPOSITION






Columbia Banking System, Inc.





Unaudited











March 31,


December 31,


September 30,


June 30,


March 31,


2020


2019


2019


2019


2019

Deposit Composition - Dollars

(dollars in thousands)

Demand and other noninterest-bearing

$

5,323,908



$

5,328,146



$

5,320,435



$

5,082,219



$

5,106,568


Money market

2,313,717



2,322,644



2,295,229



2,240,522



2,311,937


Interest-bearing demand

1,131,874



1,150,437



1,059,502



1,058,545



1,078,849


Savings

905,931



882,050



892,438



887,172



896,458


Interest-bearing public funds, other than

     certificates of deposit

405,810



301,203



629,797



270,398



269,156


Certificates of deposit, less than $250,000

214,449



218,764



223,249



228,920



236,014


Certificates of deposit, $250,000 or more

109,659



151,995



107,506



105,782



101,965


Certificates of deposit insured by CDARS®

17,171



17,065



17,252



16,559



22,890


Brokered certificates of deposit

12,259



12,259



18,852



40,502



51,375


Reciprocal money market accounts

377,980



300,158



291,542



281,247



294,096


Subtotal

10,812,758



10,684,721



10,855,802



10,211,866



10,369,308


   Valuation adjustment resulting from

          acquisition accounting

(2)



(13)



(86)



(267)



(299)


Total deposits

$

10,812,756



$

10,684,708



$

10,855,716



$

10,211,599



$

10,369,009

































March 31,


December 31,


September 30,


June 30,


March 31,

Deposit Composition - Percentages

2020


2019


2019


2019


2019

Demand and other noninterest-bearing

49.2

%


49.9

%


49.0

%


49.8

%


49.2

%

Money market

21.4

%


21.7

%


21.1

%


21.9

%


22.3

%

Interest-bearing demand

10.5

%


10.8

%


9.8

%


10.4

%


10.4

%

Savings

8.4

%


8.3

%


8.2

%


8.7

%


8.6

%

Interest-bearing public funds, other than certificates of deposit

3.8

%


2.8

%


5.8

%


2.7

%


2.6

%

Certificates of deposit, less than $250,000

2.0

%


2.0

%


2.1

%


2.2

%


2.3

%

Certificates of deposit, $250,000 or more

1.0

%


1.4

%


1.0

%


1.0

%


1.0

%

Certificates of deposit insured by CDARS®

0.2

%


0.2

%


0.2

%


0.2

%


0.2

%

Brokered certificates of deposit

0.1

%


0.1

%


0.2

%


0.4

%


0.5

%

Reciprocal money market accounts

3.4

%


2.8

%


2.6

%


2.7

%


2.9

%

Total

100.0

%


100.0

%


100.0

%


100.0

%


100.0

%


































AVERAGE BALANCES AND RATES









Columbia Banking System, Inc.









Unaudited















Three Months Ended


Three Months Ended



March 31, 2020


March 31, 2019



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,815,755



$

108,665



4.96

%


$

8,406,664



$

109,715



5.29

%

Taxable securities


3,209,110



21,088



2.64

%


2,637,436



17,415



2.68

%

Tax exempt securities (2)


409,457



2,914



2.86

%


502,765



3,758



3.03

%

Interest-earning deposits with banks


53,228



141



1.07

%


14,762



88



2.42

%

Total interest-earning assets


12,487,550



132,808



4.28

%


11,561,627



130,976



4.59

%

Other earning assets


232,361







232,077






Noninterest-earning assets


1,275,721







1,254,337






Total assets


$

13,995,632







$

13,048,041






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts (3)


$

2,633,931



$

1,728



0.26

%


$

2,585,983



$

2,585



0.41

%

Interest-bearing demand (3)


1,125,691



484



0.17

%


1,074,595



364



0.14

%

Savings accounts (3)


897,276



43



0.02

%


896,514



43



0.02

%

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


355,401



903



1.02

%


262,765



930



1.44

%

Certificates of deposit


370,904



484



0.52

%


406,539



576



0.57

%

Total interest-bearing deposits


5,383,203



3,642



0.27

%


5,226,396



4,498



0.35

%

FHLB advances and FRB borrowings


909,110



4,229



1.87

%


499,428



2,685



2.18

%

Subordinated debentures


35,253



468



5.34

%


35,438



468



5.36

%

Other borrowings and interest-bearing liabilities


48,365



136



1.13

%


41,703



215



2.09

%

Total interest-bearing liabilities


6,375,931



8,475



0.53

%


5,802,965



7,866



0.55

%

Noninterest-bearing deposits


5,239,176







5,044,620






Other noninterest-bearing liabilities


187,474







155,624






Shareholders' equity


2,193,051







2,044,832






Total liabilities & shareholders' equity


$

13,995,632







$

13,048,041






Net interest income (tax equivalent)


$

124,333







$

123,110




Net interest margin (tax equivalent)


4.00

%






4.32

%



(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 $2.4 million and $2.2 million for the three months ended March 31, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.5 million and $2.0 million for the three months ended March 31, 2020 and 2019, respectively.



(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.3 million for both the three months ended March 31, 2020 and 2019. The tax equivalent yield adjustment to interest earned on tax exempt securities was $612 thousand and $789 thousand for the three months ended March 31, 2020 and 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















Three Months Ended


Three Months Ended



March 31, 2020


December 31, 2019



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

8,815,755



$

108,665



4.96

%


$

8,742,246



$

111,754



5.07

%

Taxable securities


3,209,110



21,088



2.64

%


3,011,521



20,074



2.64

%

Tax exempt securities (2)


409,457



2,914



2.86

%


442,033



3,163



2.84

%

Interest-earning deposits with banks


53,228



141



1.07

%


35,979



153



1.69

%

Total interest-earning assets


12,487,550



132,808



4.28

%


12,231,779



135,144



4.38

%

Other earning assets


232,361







231,456






Noninterest-earning assets


1,275,721







1,287,605






Total assets


$

13,995,632







$

13,750,840






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$

2,633,931



$

1,728



0.26

%


$

2,649,404



$

2,277



0.34

%

Interest-bearing demand


1,125,691



484



0.17

%


1,065,531



446



0.17

%

Savings accounts


897,276



43



0.02

%


888,895



47



0.02

%

Interest-bearing public funds, other than certificates of deposit


355,401



903



1.02

%


616,938



2,413



1.55

%

Certificates of deposit


370,904



484



0.52

%


390,082



626



0.64

%

Total interest-bearing deposits


5,383,203



3,642



0.27

%


5,610,850



5,809



0.41

%

FHLB advances and FRB borrowings


909,110



4,229



1.87

%


379,975



1,899



1.98

%

Subordinated debentures


35,253



468



5.34

%


35,299



467



5.25

%

Other borrowings and interest-bearing liabilities


48,365



136



1.13

%


32,195



117



1.44

%

Total interest-bearing liabilities


6,375,931



8,475



0.53

%


6,058,319



8,292



0.54

%

Noninterest-bearing deposits


5,239,176







5,348,584






Other noninterest-bearing liabilities


187,474







173,058






Shareholders' equity


2,193,051







2,170,879






Total liabilities & shareholders' equity


$

13,995,632







$

13,750,840






Net interest income (tax equivalent)


$

124,333







$

126,852




Net interest margin (tax equivalent)


4.00

%






4.11

%



(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 $2.4 million and $2.1 million for the three months ended March 31, 2020 and December 31, 2019, respectively. The incremental accretion on acquired loans was $1.5 million and $2.3 million for the three months ended March 31, 2020 and December 31, 2019, respectively.



(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.3 million and $1.4 million for the three months ended March 31, 2020 and December 31, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $612 thousand and $665 thousand for the three months ended March 31, 2020 and December 31, 2019, respectively.



Non-GAAP Financial Measures

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

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



Three Months Ended



March 31,


December 31,


March 31,



2020


2019


2019

Operating net interest margin non-GAAP reconciliation:


(dollars in thousands)

Net interest income (tax equivalent) (1)


$

124,333



$

126,852



$

123,110


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







Incremental accretion income on acquired loans (2)


(1,491)



(2,316)



(2,035)


Premium amortization on acquired securities


1,127



1,204



1,779


Interest reversals on nonaccrual loans


788



209



626


Operating net interest income (tax equivalent) (1)


$

124,757



$

125,949



$

123,480


Average interest earning assets


$

12,487,550



$

12,231,779



$

11,561,627


Net interest margin (tax equivalent) (1)


4.00

%


4.11

%


4.32

%

Operating net interest margin (tax equivalent) (1)


4.02

%


4.09

%


4.33

%









Three Months Ended



March 31,


December 31,


March 31,



2020


2019


2019

Operating efficiency ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$

84,271



$

86,978



$

84,700


Adjustments to arrive at operating noninterest expense:







Net benefit (cost) of operation of OREO and OPPO


(4)



10



(114)


Loss on asset disposals


(4)






Business and Occupation ("B&O") taxes


(624)



(1,234)



(1,876)


Operating noninterest expense (numerator B)


$

83,639



$

85,754



$

82,710









Net interest income (tax equivalent) (1)


$

124,333



$

126,852



$

123,110


Noninterest income


21,207



21,807



21,696


Bank owned life insurance tax equivalent adjustment


424



439



404


Total revenue (tax equivalent) (denominator A)


$

145,964



$

149,098



$

145,210









Operating net interest income (tax equivalent) (1)


$

124,757



$

125,949



$

123,480


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







Investment securities loss (gain), net


(249)





(1,847)


Gain on asset disposals


(21)



(530)




Operating noninterest income (tax equivalent)


21,361



21,716



20,253


Total operating revenue (tax equivalent) (denominator B)


$

146,118



$

147,665



$

143,733


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


57.73

%


58.34

%


58.33

%

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


57.24

%


58.07

%


57.54

%



(1)

Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $1.9 million, $2.0 million, and $2.1 million for the three months ended March 31, 2020, December 31, 2019, and March 31, 2019, respectively.



(2)

Beginning January 2020, incremental accretion income on purchased credit impaired loans is no longer presented separate from incremental accretion income on other acquired loans. Prior period amounts have been reclassified to conform with current period presentation.



Non-GAAP Financial Measures - Continued

The Company considers its pre-tax, pre-provision income to be a useful measurement in evaluating the earnings of the Company as it provides a method to assess income. Despite the usefulness of this measure to the Company, there is not a standardized definition for it. 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 table reconciles the Company's calculation of the pre-tax, pre-provision income:



Three Months Ended



March 31,


December 31,


March 31,



2020


2019


2019

Pre-tax, pre-provision income:


(in thousands)

Income before income taxes


$

17,858



$

58,032



$

56,656


Provision for credit losses


41,500



1,614



1,362


Pre-tax, pre-provision income


$

59,358



$

59,646



$

58,018


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:



March 31,


December 31,


March 31,



2020


2019


2019

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)


$

2,213,602



$

2,159,962



$

2,088,620


Adjustments to arrive at tangible common equity:







Goodwill


(765,842)



(765,842)



(765,842)


Other intangible assets, net


(33,148)



(35,458)



(43,189)


Tangible common equity (numerator B)


$

1,414,612



$

1,358,662



$

1,279,589


Total assets (denominator A)


$

14,038,503



$

14,079,524



$

13,064,436


Adjustments to arrive at tangible assets:







Goodwill


(765,842)



(765,842)



(765,842)


Other intangible assets, net


(33,148)



(35,458)



(43,189)


Tangible assets (denominator B)


$

13,239,513



$

13,278,224



$

12,255,405


Shareholders' equity to total assets (numerator A/denominator A)


15.77

%


15.34

%


15.99

%

Tangible common shareholders' equity to tangible assets (numerator B/denominator B)


10.68

%


10.23

%


10.44

%

Common shares outstanding (denominator C)


71,575



72,124



73,565


Book value per common share (numerator A/denominator C)


$

30.93



$

29.95



$

28.39


Tangible book value per common share (numerator B/denominator C)


$

19.76



$

18.84



$

17.39


Non-GAAP Financial Measures - Continued

The Company also considers its return on average tangible common equity ratio to be a useful measurement as it evaluates the Company's ongoing ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the business can be evaluated, whether acquired or developed internally. Despite the usefulness of this ratio to the Company, there is not a standardized definition for it. 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 return on average tangible common shareholders' equity ratio:



Three Months Ended



March 31,


December 31,


March 31,



2020


2019


2019

Return on average tangible common equity non-GAAP reconciliation:


(dollars in thousands)

Net income (numerator A)


$

14,628



$

46,129



$

45,871


Adjustments to arrive at tangible income applicable to common shareholders:







Amortization of intangibles


2,310



2,450



2,748


Tax effect on intangible amortization


(485)



(515)



(577)


Tangible income applicable to common shareholders (numerator B)


$

16,453



$

48,064



$

48,042


Average shareholders' equity (denominator A)


$

2,193,051



$

2,170,879



$

2,044,832


Adjustments to arrive at average tangible common equity:







Average intangibles


(800,079)



(802,446)



(810,376)


Average tangible common equity (denominator B)


$

1,392,972



$

1,368,433



$

1,234,456


Return on average common equity (numerator A/denominator A) (1)


2.67

%


8.50

%


8.97

%

Return on average tangible common equity (numerator B/denominator B) (2)


4.72

%


14.05

%


15.57

%



(1)

For the purpose of this ratio, interim net income has been annualized.



(2)

For the purpose of this ratio, interim tangible income applicable to common shareholders has been annualized.

 

 

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SOURCE Columbia Banking System, Inc.

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