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Press Release


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

Notable Items for Second Quarter 2020

-- Quarterly net income of $36.6 million and diluted earnings per share of $0.52

-- Net loans increased $838.6 million, or 9% during the second quarter of 2020 from regular second quarter production of $295 million supplemented by Paycheck Protection Program loan originations

-- Deposits increased $2.32 billion, or 21% during the second quarter of 2020

-- Net interest margin of 3.64%, a decrease of 36 basis points from the linked quarter

-- Nonperforming assets to period-end assets ratio remained stable at 0.34%

-- Regular cash dividend declared of $0.28 per share

Company Release - 7/23/2020 9:00 AM ET

TACOMA, Wash., July 23, 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 second quarter 2020 earnings, "I'm proud of the accomplishments by our team of bankers during one of the most challenging quarters in our 27 year history. They came together to execute on our pandemic response plan while supporting each other through the professional and personal challenges of COVID-19." Mr. Stein continued, "In addition, our bankers continued to support our clients and our communities through uninterrupted access to our banking services as well as our ongoing philanthropic activities."

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

Balance Sheet

Total assets at June 30, 2020 were $15.92 billion, an increase of $1.88 billion from the linked quarter. Loans were $9.77 billion, up $838.6 million from March 31, 2020 as a result of loan originations of $1.26 billion partially offset by payments. Included in the loan originations for the quarter were $962.0 million of loans originated under the Paycheck Protection Program ("PPP"). Interest-earning deposits with banks were $880.2 million, an increase of $854.9 million from the linked quarter due to the surge in deposits. Debt securities available for sale were $3.69 billion at June 30, 2020, an increase of $140.7 million from $3.55 billion at March 31, 2020. Total deposits at June 30, 2020 were $13.13 billion, an increase of $2.32 billion from March 31, 2020 largely due to an increase of $1.40 billion in demand and other noninterest-bearing deposits. The deposit mix remained fairly consistent from March 31, 2020 with 51% noninterest-bearing and 49% interest-bearing. The average cost of total deposits for the quarter was 7 basis points, a decrease of 7 basis points from the first quarter of 2020. For additional information regarding this calculation, see the "Net Interest Margin" section.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "Our dedicated team of bankers worked tirelessly during the quarter assisting our clients with their PPP loan applications and loan deferral requests while providing an exceptional level of customer service during these challenging times. Their efforts resulted in robust growth in our balance sheet increasing both loans and deposits while also reducing our cost of deposits by 50%."

Income Statement

Net Interest Income

Net interest income for the second quarter of 2020 was $121.9 million, a decrease of $571 thousand and $3.3 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 the lower rate environment more than offset the increase in interest income from the rise in average loan balances. Interest income from securities decreased as a result of $1.9 million of interest income and discount accretion, in the first quarter of 2020, related to the early payoff of three securities as well as lower rates in the current quarter. Partially offsetting these decreases in interest income was a favorable variance in deposit interest expense due to the lower rate environment and lower interest expense on FHLB borrowings as a result of lower average borrowing balances. Net interest income compared to the prior-year period decreased as a result of interest income on loans being down due to the lower rate environment partially offset by an increase in interest income on securities due to higher average balances. The decrease in interest income was partially offset by favorable decreases in interest expense on interest-bearing deposits and FHLB advances resulting from lower rates. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Provision for Credit Losses

The Bank's provision for credit losses for the second quarter of 2020 was $33.5 million compared to $41.5 million for the linked quarter and $218 thousand for the comparable quarter in 2019. The provision for credit losses for the second quarter of 2020 remained elevated relative to the prior year principally as a result of COVID-19 and the downturn in the national and global economies. As a result, we added $33.5 million to our allowance for credit losses. For more information, please see the "COVID-19 Update" section of this earnings release.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "We continue to see modest downward pressure in credit quality migration in our loan portfolio, relative to the first quarter. Weaknesses in the retail and hospitality sectors were the primary cause, which is not surprising given the current pandemic environment. Loans migrating to nonaccrual status and net charge-offs during the quarter continue to be from issues with clients that arose prior to COVID-19. Currently, loan payment deferral requests have declined. To illustrate, in June, we extended loan payment deferrals on approximately $58 million in loans as compared to over $1.2 billion in loans in April. While our credit metrics remained stable in the second quarter, we recognize that many challenges associated with the current downturn may not materialize until later this year or next year due to uncertainty with respect to how the pandemic evolves, additional government stimulus, and the effectiveness of loan deferrals, among other factors."

Noninterest Income

Noninterest income was $37.3 million for the second quarter of 2020, an increase of $16.1 million from the linked quarter and $11.6 million from the second quarter of 2019, respectively. The increases compared to the linked quarter and the same quarter in 2019 were principally due to the sale of 17,360 shares of Visa Class B restricted stock by the Bank for a gain of $3.0 million, which resulted in an observable market price. As a result, the Company wrote up its remaining 77,683 Visa Class B restricted shares to fair value resulting in a gain of $13.4 million, for a total gain of $16.4 million. Based on the existing transfer restriction and uncertainty of Visa's litigation, the shares were previously carried at a zero-cost basis. We also recognized an $875 thousand gain on the sale of a loan that had previously been charge-off. Partially offsetting these gains were decreases in overdraft fees of $1.1 million and $1.2 million compared to the linked quarter and second quarter of 2019, respectively. The decrease in overdraft fees was due to an overall decrease in the number of transactions during this pandemic time period as well as clients generally carrying higher cash balances in their deposit accounts. In addition, the increase from the prior-year period was partially offset by a $1.1 million current period decrease in treasury management fees and a $3.0 million bank-owned life insurance benefit that was recognized during the second quarter of 2019.

Noninterest Expense

Total noninterest expense for the second quarter of 2020 was $80.8 million, a decrease of $3.4 million compared to the first quarter of 2020 principally due to lower compensation and benefits expense. Labor costs related to the origination of PPP loans during the quarter are treated as a contra expense and reduce compensation and benefits expense. These labor costs are capitalized and amortized as a reduction to interest income over the life of the loan. This decrease in noninterest expense was partially offset by an increase in regulatory premiums and provision for unfunded loan commitments. We utilized the remaining $283 thousand of our Small Bank Assessment Credit this quarter related to our FDIC deposit insurance premiums compared to an applied credit of $967 thousand during the first quarter of 2020. The provision for unfunded loan commitments increased by $1.8 million compared to the linked quarter.

Compared to the second quarter of 2019, noninterest expense decreased $5.9 million principally due to the deferral of loan origination costs related to the PPP loans discussed above. Legal and professional fees also declined compared to one year. Partially offsetting these decreases was the $2.6 million increase in the provision for unfunded loan commitments due to higher estimated loss rates and higher amounts of unfunded loan commitments.

The provision for unfunded loan commitments for the periods indicated are as follows:


Three Months Ended


Six Months Ended


June 30, 2020


March 31, 2020


June 30, 2019


June 30, 2020


June 30, 2019


(in thousands)

Provision (recapture) for unfunded loan commitments

$

2,800



$

1,000



$

200



$

3,800



$

(350)






















Net Interest Margin

Columbia's net interest margin (tax equivalent) for the second quarter of 2020 was 3.64%, a decrease of 36 basis points and 76 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 and prior-year period was driven by higher average interest-earning deposits with banks at an average rate of 11 basis points as well as lower rates on the loan and securities portfolios, which were exacerbated by PPP.

Columbia's operating net interest margin (tax equivalent)1 was 3.64% for the second quarter of 2020, which decreased 38 and 74 basis points compared to the linked quarter and the prior-year period, respectively. The decreases in the operating net interest margin for the second quarter of 2020 compared to the linked quarter and the prior-year period were due to the items noted in the preceding paragraph.

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 highlights the yield on our paycheck protection program loans:



Three Months Ended



June 30, 2020

Paycheck Protection Program loans


(dollars in thousands)

Interest income


$

4,590


Average balance


$

643,966


Yield


2.87

%

Aaron Deer, Columbia's Executive Vice President and Chief Financial Officer, stated, "The margin compression we experienced during the quarter was largely due to excess liquidity created by record deposit inflows. Of course, historically low interest rates also contributed to the pressure and, unfortunately, the rate environment may remain a challenge for some time. We will take a measured approach in deploying our excess liquidity given uncertainty as to PPP funds utilization and depositor behavior generally in the current environment."

Asset Quality

At June 30, 2020, nonperforming assets to total assets remained unchanged at 0.34% compared to March 31, 2020. Total nonperforming assets increased $6.3 million from the linked quarter due to a modest increase in commercial real estate and agriculture nonaccrual loans.

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



June 30, 2020


March 31, 2020


December 31, 2019



(in thousands)

Nonaccrual loans:







Commercial loans:







Commercial real estate


$

11,155



$

5,518



$

3,799


Commercial business


20,525



24,395



20,937


Agriculture


19,162



15,083



5,023


Construction


217






Consumer loans:







One-to-four family residential real estate


2,662



2,643



3,292


Other consumer


11



8



9


Total nonaccrual loans


53,732



47,647



33,060


OREO and other personal property owned


747



510



552


Total nonperforming assets


$

54,479



$

48,157



$

33,612


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



Three Months Ended


Six Months Ended



June 30, 2020


March 31, 2020


June 30, 2019


June 30, 2020


June 30, 2019



(in thousands)

Beginning balance


$

122,074



$

83,968



$

83,274



$

83,968



$

83,369


Impact of adopting ASC 326




1,632





1,632




Charge-offs:











Commercial loans:











Commercial real estate




(101)



(564)



(101)



(1,242)


Commercial business


(5,442)



(1,684)



(4,316)



(7,126)



(5,822)


Agriculture




(4,726)



(61)



(4,726)



(139)


Construction






(20)





(215)


Consumer loans:











One-to-four family residential real estate




(10)



(321)



(10)



(802)


Other consumer


(198)



(268)



(5)



(466)



(55)


Total charge-offs


(5,640)



(6,789)



(5,287)



(12,429)



(8,275)


Recoveries:











Commercial loans:











Commercial real estate


13



14



556



27



1,070


Commercial business


811



860



492



1,671



1,019


Agriculture


1



41



64



42



122


Construction


235



442



691



677



774


Consumer loans:











One-to-four family residential real estate


422



282



450



704



784


Other consumer


130



124



59



254



74


Total recoveries


1,612



1,763



2,312



3,375



3,843


Net charge-offs


(4,028)



(5,026)



(2,975)



(9,054)



(4,432)


Provision for credit losses


33,500



41,500



218



75,000



1,580


Ending balance


$

151,546



$

122,074



$

80,517



$

151,546



$

80,517













The allowance for credit losses to period-end loans was 1.55% at June 30, 2020 compared to 1.37% at March 31, 2020. Excluding PPP loans, the allowance for credit losses to period-end loans2 was 1.72%.

2 

Allowance for credit losses to period-end loans, excluding PPP is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of allowance for credit losses to period-end loans to allowance for credit losses to period-end loans, excluding PPP loans.  

Organizational Update

COVID-19 Update

Columbia launched two community focused initiatives in response to the pandemic, putting more than $1 million to work in support of our local communities. The Pass It On Project is designed to provide small businesses more than $500,000 to perform services for community members whose lives have been adversely impacted by the pandemic or the economic downturn it caused. The program will support more than 350 small businesses and many more individuals in the Northwest as we continue to manage through the pandemic and economic recovery. The COVID-19 Community Relief fund put more than $500,000 in the hands of 25 non-profit organizations working to provide relief for those affected by the pandemic in the Northwest.

"Each of our community programs developed in response to the pandemic honor our deep commitment to support businesses and respond to the evolving needs in our local communities," said David Moore Devine, Columbia's Executive Vice President and Chief Marketing & Experience Officer. "Small businesses are the lifeblood of our communities and by helping them thrive through the Pass It On Project, we create a ripple effect of support throughout the Northwest."

Recognition

Columbia was honored to earn recognition as the #1 bank in the Northwest region by JD Powers in the 2020 Retail Banking Satisfaction Study. The award reflects our ongoing commitment to meeting the needs of our clients with exceptional service.

Boise NeighborHub

The Bank recently announced the expansion of its new retail branch service concept to the Boise, Idaho market with the construction of a new NeighborHub, located in downtown Boise. The NeighborHub concept combines sales and support focused technology with the elevated skill set of a team of bankers with universal knowledge and expertise in handling all business and consumer needs. The location will open in the fall of 2020 and will also serve the broader community as a hub for educational seminars, local events and community functions in the evenings.

"We are excited to bring our signature NeighborHub style of banking to downtown Boise this year," said Mr. Stein. "The new location will expand our presence in the Treasure Valley and further build upon the success of the first NeighborHub location in the Seattle market."

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.28 per common share on August 19, 2020 to shareholders of record as of the close of business on August 5, 2020.

Conference Call Information

Columbia's management will discuss the second quarter 2020 financial results on a conference call scheduled for Thursday, July 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/index.jsp?seid=166

The conference call can also be accessed on Thursday, July 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 3787244.

A replay of the call can be accessed beginning Friday, July 24, 2020 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166

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. The bank has been named one of Puget Sound Business Journal's"Washington's Best Workplaces," more than 10 times and was recently honored as the #1 bank in the Northwest region by JD Power in the 2020 Retail Banking Satisfaction Study. Columbia was named the #1 bank in the Northwest on the Forbes 2020 list of "America's Best Banks" marking nearly 10 consecutive years on the publication's list of top financial institutions.

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,


Aaron Deer,


President and


Executive Vice President and


Chief Executive Officer


Chief Financial Officer






Investor Relations




InvestorRelations@columbiabank.com




253-305-1921















CONSOLIDATED BALANCE SHEETS






Columbia Banking System, Inc.







Unaudited




June 30,


March 31,


December 31,








2020


2020


2019








(in thousands)

ASSETS





Cash and due from banks







$

217,461



$

190,399



$

223,541


Interest-earning deposits with banks







880,232



25,357



24,132


Total cash and cash equivalents







1,097,693



215,756



247,673


Debt securities available for sale at fair value (amortized cost of $3,491,307, $3,406,492 and $3,703,096, respectively)


3,693,787



3,553,128



3,746,142


Equity securities







13,425






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






16,280



38,280



48,120


Loans held for sale







28,803



9,701



17,718


Loans, net of unearned income







9,771,898



8,933,321



8,743,465


Less: Allowance for credit losses






151,546



122,074



83,968


Loans, net







9,620,352



8,811,247



8,659,497


Interest receivable







59,149



44,577



46,839


Premises and equipment, net







164,362



164,626



165,408


Other real estate owned







747



510



552


Goodwill







765,842



765,842



765,842


Other intangible assets, net







30,938



33,148



35,458


Other assets







429,566



401,688



346,275


Total assets







$

15,920,944



$

14,038,503



$

14,079,524


LIABILITIES AND SHAREHOLDERS' EQUITY









Deposits:












Noninterest-bearing







$

6,719,437



$

5,323,908



$

5,328,146


Interest-bearing







6,412,040



5,488,848



5,356,562


Total deposits







13,131,477



10,812,756



10,684,708


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


157,441



712,455



953,469


Securities sold under agreements to repurchase






51,479



29,252



64,437


Subordinated debentures







35,185



35,231



35,277


Revolving line of credit









5,000




Other liabilities







268,607



230,207



181,671


Total liabilities







13,644,189



11,824,901



11,919,562


Commitments and contingent liabilities












Shareholders' equity:













June 30,


March 31,


December 31,








2020


2020


2019








(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

73,770



73,759



73,577



1,654,129



1,651,399



1,650,753


Outstanding

71,586



71,575



72,124








Retained earnings







512,383



495,830



519,676


Accumulated other comprehensive income






181,077



137,207



40,367


Treasury stock at cost

2,184



2,184



1,453



(70,834)



(70,834)



(50,834)


Total shareholders' equity







2,276,755



2,213,602



2,159,962


Total liabilities and shareholders' equity






$

15,920,944



$

14,038,503



$

14,079,524



































CONSOLIDATED STATEMENTS OF INCOME





Columbia Banking System, Inc.


Three Months Ended


Six Months Ended

Unaudited


June 30,


March 31,


June 30,


June 30,


June 30,



2020


2020


2019


2020


2019

Interest Income


(in thousands except per share amounts)

Loans


$

105,496



$

107,366



$

116,585



$

212,862



$

225,001


Taxable securities


18,343



21,088



15,918



39,431



33,333


Tax-exempt securities


2,257



2,302



2,712



4,559



5,681


Deposits in banks


136



141



207



277



295


Total interest income


126,232



130,897



135,422



257,129



264,310


Interest Expense











Deposits


2,094



3,642



4,976



5,736



9,474


FHLB advances and FRB borrowings


1,796



4,229



4,708



6,025



7,393


Subordinated debentures


468



468



468



936



936


Other borrowings


23



136



154



159



369


Total interest expense


4,381



8,475



10,306



12,856



18,172


Net Interest Income


121,851



122,422



125,116



244,273



246,138


Provision for credit losses


33,500



41,500



218



75,000



1,580


Net interest income after provision for credit losses


88,351



80,922



124,898



169,273



244,558


Noninterest Income











Deposit account and treasury management fees


6,092



7,788



9,035



13,880



18,015


Card revenue


3,079



3,518



3,763



6,597



7,425


Financial services and trust revenue


3,163



3,065



3,425



6,228



6,382


Loan revenue


5,607



4,590



3,596



10,197



5,985


Bank owned life insurance


1,618



1,596



1,597



3,214



3,116


Investment securities gains, net


16,425



249



285



16,674



2,132


Other


1,275



401



3,947



1,676



4,289


Total noninterest income


37,259



21,207



25,648



58,466



47,344


Noninterest Expense











Compensation and employee benefits


46,043



54,842



52,015



100,885



104,100


Occupancy


8,812



9,197



8,712



18,009



17,521


Data processing


5,454



4,840



4,601



10,294



9,270


Legal and professional fees


3,483



2,102



6,554



5,585



11,127


Amortization of intangibles


2,210



2,310



2,649



4,520



5,397


Business and Occupation ("B&O") taxes


1,244



624



1,411



1,868



3,287


Advertising and promotion


837



1,305



870



2,142



1,844


Regulatory premiums


1,034



34



956



1,068



1,940


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


(200)



12



(705)



(188)



(592)


Other


11,916



9,005



9,665



20,921



17,534


Total noninterest expense


80,833



84,271



86,728



165,104



171,428


Income before income taxes


44,777



17,858



63,818



62,635



120,474


Provision for income taxes


8,195



3,230



12,094



11,425



22,879


Net Income


$

36,582



$

14,628



$

51,724



$

51,210



$

97,595


Earnings per common share











Basic


$

0.52



$

0.20



$

0.71



$

0.72



$

1.33


Diluted


$

0.52



$

0.20



$

0.71



$

0.72



$

1.33


Dividends declared per common share - regular


$

0.28



$

0.28



$

0.28



$

0.56



$

0.56


Dividends declared per common share - special




0.22



0.14



0.22



0.28


   Dividends declared per common share - total


$

0.28



$

0.50



$

0.42



$

0.78



$

0.84


Weighted average number of common shares outstanding


70,679



71,206



72,451



70,942



72,486


Weighted average number of diluted common shares outstanding


70,711



71,264



72,451



70,981



72,487



































FINANCIAL STATISTICS








Columbia Banking System, Inc.


Three Months Ended


Six Months Ended

Unaudited


June 30,


March 31,


June 30,


June 30,


June 30,



2020


2020


2019


2020


2019

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

121,851



$

122,422



$

125,116



$

244,273



$

246,138


Provision for credit losses


$

33,500



$

41,500



$

218



$

75,000



$

1,580


Noninterest income


$

37,259



$

21,207



$

25,648



$

58,466



$

47,344


Noninterest expense


$

80,833



$

84,271



$

86,728



$

165,104



$

171,428


Net income


$

36,582



$

14,628



$

51,724



$

51,210



$

97,595


Per Common Share











Earnings (basic)


$

0.52



$

0.20



$

0.71



$

0.72



$

1.33


Earnings (diluted)


$

0.52



$

0.20



$

0.71



$

0.72



$

1.33


Book value


$

31.80



$

30.93



$

29.26



$

31.80



$

29.26


Tangible book value per common share (1)


$

20.67



$

19.76



$

18.20



$

20.67



$

18.20


Averages











Total assets


$

15,148,488



$

13,995,632



$

13,096,413



$

14,572,060



$

13,072,360


Interest-earning assets


$

13,657,719



$

12,487,550



$

11,606,727



$

13,072,635



$

11,584,301


Loans


$

9,546,099



$

8,815,755



$

8,601,819



$

9,180,927



$

8,504,781


Securities, including equity securities and FHLB stock


$

3,591,693



$

3,618,567



$

2,969,749



$

3,605,131



$

3,054,504


Deposits


$

12,220,415



$

10,622,379



$

10,186,371



$

11,421,397



$

10,228,459


Interest-bearing deposits


$

6,037,107



$

5,383,203



$

5,174,875



$

5,710,155



$

5,200,493


Interest-bearing liabilities


$

6,514,012



$

6,375,931



$

5,841,425



$

6,444,971



$

5,822,301


Noninterest-bearing deposits


$

6,183,308



$

5,239,176



$

5,011,496



$

5,711,242



$

5,027,966


Shareholders' equity


$

2,254,349



$

2,193,051



$

2,096,157



$

2,223,700



$

2,070,636


Financial Ratios











Return on average assets


0.97

%


0.42

%


1.58

%


0.70

%


1.49

%

Return on average common equity


6.49

%


2.67

%


9.87

%


4.61

%


9.43

%

Return on average tangible common equity (1)


10.53

%


4.72

%


16.71

%


7.69

%


16.15

%

Average equity to average assets


14.88

%


15.67

%


16.01

%


15.26

%


15.84

%

Shareholders' equity to total assets


14.30

%


15.77

%


16.30

%


14.30

%


16.30

%

Tangible common shareholders' equity to tangible assets (1)


9.79

%


10.68

%


10.80

%


9.79

%


10.80

%

Net interest margin (tax equivalent)


3.64

%


4.00

%


4.40

%


3.82

%


4.36

%

Efficiency ratio (tax equivalent) (2)


50.09

%


57.73

%


56.57

%


53.72

%


57.43

%

Operating efficiency ratio (tax equivalent) (1)


54.91

%


57.24

%


56.34

%


56.08

%


56.93

%

Noninterest expense ratio


2.13

%


2.41

%


2.65

%


2.27

%


2.62

%














June 30,


March 31,


December 31,





Period-end


2020


2020


2019





Total assets


$

15,920,944



$

14,038,503



$

14,079,524






Loans, net of unearned income


$

9,771,898



$

8,933,321



$

8,743,465






Allowance for credit losses


$

151,546



$

122,074



$

83,968






Securities, including equity securities and FHLB stock


$

3,723,492



$

3,591,408



$

3,794,262






Deposits


$

13,131,477



$

10,812,756



$

10,684,708






Shareholders' equity


$

2,276,755



$

2,213,602



$

2,159,962






Nonperforming assets











Nonaccrual loans


$

53,732



$

47,647



$

33,060






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


747



510



552






Total nonperforming assets


$

54,479



$

48,157



$

33,612






Nonperforming loans to period-end loans


0.55

%


0.53

%


0.38

%





Nonperforming assets to period-end assets


0.34

%


0.34

%


0.24

%





Allowance for credit losses to period-end loans


1.55

%


1.37

%


0.96

%





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


$

4,028



$

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


June 30,


March 31,


December 31,


September 30,


June 30,



2020


2020


2019


2019


2019

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

121,851



$

122,422



$

124,817



$

122,450



$

125,116


Provision for credit losses


$

33,500



$

41,500



$

1,614



$

299



$

218


Noninterest income


$

37,259



$

21,207



$

21,807



$

28,030



$

25,648


Noninterest expense


$

80,833



$

84,271



$

86,978



$

87,076



$

86,728


Net income


$

36,582



$

14,628



$

46,129



$

50,727



$

51,724


Per Common Share











Earnings (basic)


$

0.52



$

0.20



$

0.64



$

0.70



$

0.71


Earnings (diluted)


$

0.52



$

0.20



$

0.64



$

0.70



$

0.71


Book value


$

31.80



$

30.93



$

29.95



$

29.90



$

29.26


Averages











Total assets


$

15,148,488



$

13,995,632



$

13,750,840



$

13,459,774



$

13,096,413


Interest-earning assets


$

13,657,719



$

12,487,550



$

12,231,779



$

11,941,578



$

11,606,727


Loans


$

9,546,099



$

8,815,755



$

8,742,246



$

8,694,592



$

8,601,819


Securities, including equity securities and FHLB stock


$

3,591,693



$

3,618,567



$

3,453,554



$

3,102,213



$

2,969,749


Deposits


$

12,220,415



$

10,622,379



$

10,959,434



$

10,668,767



$

10,186,371


Interest-bearing deposits


$

6,037,107



$

5,383,203



$

5,610,850



$

5,517,171



$

5,174,875


Interest-bearing liabilities


$

6,514,012



$

6,375,931



$

6,058,319



$

5,989,042



$

5,841,425


Noninterest-bearing deposits


$

6,183,308



$

5,239,176



$

5,348,584



$

5,151,596



$

5,011,496


Shareholders' equity


$

2,254,349



$

2,193,051



$

2,170,879



$

2,152,916



$

2,096,157


Financial Ratios











Return on average assets


0.97

%


0.42

%


1.34

%


1.51

%


1.58

%

Return on average common equity


6.49

%


2.67

%


8.50

%


9.42

%


9.87

%

Average equity to average assets


14.88

%


15.67

%


15.79

%


16.00

%


16.01

%

Shareholders' equity to total assets


14.30

%


15.77

%


15.34

%


15.71

%


16.30

%

Net interest margin (tax equivalent)


3.64

%


4.00

%


4.11

%


4.14

%


4.40

%

Period-end











Total assets


$

15,920,944



$

14,038,503



$

14,079,524



$

13,757,760



$

13,090,808


Loans, net of unearned income


$

9,771,898



$

8,933,321



$

8,743,465



$

8,756,355



$

8,646,990


Allowance for credit losses


$

151,546



$

122,074



$

83,968



$

82,660



$

80,517


Securities, including equity securities and FHLB stock


$

3,723,492



$

3,591,408



$

3,794,262



$

3,397,252



$

2,894,218


Deposits


$

13,131,477



$

10,812,756



$

10,684,708



$

10,855,716



$

10,211,599


Shareholders' equity


$

2,276,755



$

2,213,602



$

2,159,962



$

2,161,577



$

2,133,638


Goodwill


$

765,842



$

765,842



$

765,842



$

765,842



$

765,842


Other intangible assets, net


$

30,938



$

33,148



$

35,458



$

37,908



$

40,540


Nonperforming assets











Nonaccrual loans


$

53,732



$

47,647



$

33,060



$

37,021



$

39,038


OREO and OPPO


747



510



552



625



1,118


Total nonperforming assets


$

54,479



$

48,157



$

33,612



$

37,646



$

40,156


Nonperforming loans to period-end loans


0.55

%


0.53

%


0.38

%


0.42

%


0.45

%

Nonperforming assets to period-end assets


0.34

%


0.34

%


0.24

%


0.27

%


0.31

%

Allowance for credit losses to period-end loans


1.55

%


1.37

%


0.96

%


0.94

%


0.93

%

Net loan charge-offs (recoveries)


$

4,028



$

5,026



$

306



$

(1,844)



$

2,975



































LOAN PORTFOLIO COMPOSITION







Columbia Banking System, Inc.











Unaudited


June 30,


March 31,


December 31,


September 30,


June 30,



2020


2020


2019


2019


2019

Loan Portfolio Composition - Dollars


(dollars in thousands)

Commercial loans:











Commercial real estate


$

4,032,643



$

3,969,974



$

3,945,853



$

3,746,365



$

3,689,282


Commercial business


3,859,513



3,169,668



2,989,613



3,057,669



3,059,066


Agriculture


845,950



754,491



765,371



777,619



744,481


Construction


304,015



308,186



361,533



479,171



446,101


Consumer loans:











One-to-four family residential real estate


692,837



690,506



637,325



654,077



667,037


Other consumer


36,940



40,496



43,770



41,454



41,023


Total loans


9,771,898



8,933,321



8,743,465



8,756,355



8,646,990


Less:  Allowance for credit losses


(151,546)



(122,074)



(83,968)



(82,660)



(80,517)


Total loans, net


$

9,620,352



$

8,811,247



$

8,659,497



$

8,673,695



$

8,566,473


Loans held for sale


$

28,803



$

9,701



$

17,718



$

15,036



$

12,189


























June 30,


March 31,


December 31,


September 30,


June 30,

Loan Portfolio Composition - Percentages


2020


2020


2019


2019


2019

Commercial loans:











Commercial real estate


41.2

%


44.5

%


45.1

%


42.7

%


42.6

%

Commercial business


39.5

%


35.5

%


34.2

%


34.9

%


35.4

%

Agriculture


8.7

%


8.4

%


8.8

%


8.9

%


8.6

%

Construction


3.1

%


3.4

%


4.1

%


5.5

%


5.2

%

Consumer loans:











One-to-four family residential real estate


7.1

%


7.7

%


7.3

%


7.5

%


7.7

%

Other consumer


0.4

%


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













June 30,


March 31,


December 31,


September 30,


June 30,



2020


2020


2019


2019


2019

Deposit Composition - Dollars


(dollars in thousands)

Demand and other noninterest-bearing


$

6,719,437



$

5,323,908



$

5,328,146



$

5,320,435



$

5,082,219


Money market


2,586,376



2,313,717



2,322,644



2,295,229



2,240,522


Interest-bearing demand


1,274,058



1,131,874



1,150,437



1,059,502



1,058,545


Savings


1,035,723



905,931



882,050



892,438



887,172


Interest-bearing public funds, other than certificates of deposit


623,496



405,810



301,203



629,797



270,398


Certificates of deposit, less than $250,000


210,357



214,449



218,764



223,249



228,920


Certificates of deposit, $250,000 or more


104,330



109,659



151,995



107,506



105,782


Certificates of deposit insured by CDARS®


17,078



17,171



17,065



17,252



16,559


Brokered certificates of deposit


8,427



12,259



12,259



18,852



40,502


Reciprocal money market accounts


552,195



377,980



300,158



291,542



281,247


Subtotal


13,131,477



10,812,758



10,684,721



10,855,802



10,211,866


     Valuation adjustment resulting from acquisition accounting




(2)



(13)



(86)



(267)


Total deposits


$

13,131,477



$

10,812,756



$

10,684,708



$

10,855,716



$

10,211,599


























June 30,


March 31,


December 31,


September 30,


June 30,

Deposit Composition - Percentages


2020


2020


2019


2019


2019

Demand and other noninterest-bearing


51.2

%


49.2

%


49.9

%


49.0

%


49.8

%

Money market


19.7

%


21.4

%


21.7

%


21.1

%


21.9

%

Interest-bearing demand


9.7

%


10.5

%


10.8

%


9.8

%


10.4

%

Savings


7.9

%


8.4

%


8.3

%


8.2

%


8.7

%

Interest-bearing public funds, other than certificates of deposit


4.7

%


3.8

%


2.8

%


5.8

%


2.7

%

Certificates of deposit, less than $250,000


1.6

%


2.0

%


2.0

%


2.1

%


2.2

%

Certificates of deposit, $250,000 or more


0.8

%


1.0

%


1.4

%


1.0

%


1.0

%

Certificates of deposit insured by CDARS®


0.1

%


0.2

%


0.2

%


0.2

%


0.2

%

Brokered certificates of deposit


0.1

%


0.1

%


0.1

%


0.2

%


0.4

%

Reciprocal money market accounts


4.2

%


3.4

%


2.8

%


2.6

%


2.7

%

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



June 30, 2020


June 30, 2019



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

9,546,099



$

106,737



4.50

%


$

8,601,819



$

117,984



5.50

%

Taxable securities


3,189,805



18,343



2.31

%


2,506,672



15,918



2.55

%

Tax exempt securities (2)


401,888



2,857



2.86

%


463,077



3,433



2.97

%

Interest-earning deposits with banks


519,927



136



0.11

%


35,159



207



2.36

%

Total interest-earning assets


13,657,719



128,073



3.77

%


11,606,727



137,542



4.75

%

Other earning assets


234,019







233,273






Noninterest-earning assets


1,256,750







1,256,413






Total assets


$

15,148,488







$

13,096,413






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts (3)


$

2,939,657



$

974



0.13

%


$

2,539,757



$

2,896



0.46

%

Interest-bearing demand (3)


1,213,182



339



0.11

%


1,066,876



428



0.16

%

Savings accounts (3)


976,785



38



0.02

%


891,341



43



0.02

%

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


559,256



393



0.28

%


273,387



1,023



1.50

%

Certificates of deposit


348,227



350



0.40

%


403,514



586



0.58

%

Total interest-bearing deposits


6,037,107



2,094



0.14

%


5,174,875



4,976



0.39

%

FHLB advances and FRB borrowings


407,035



1,796



1.77

%


602,041



4,708



3.14

%

Subordinated debentures


35,207



468



5.35

%


35,392



468



5.30

%

Other borrowings and interest-bearing liabilities


34,663



23



0.27

%


29,117



154



2.12

%

Total interest-bearing liabilities


6,514,012



4,381



0.27

%


5,841,425



10,306



0.71

%

Noninterest-bearing deposits


6,183,308







5,011,496






Other noninterest-bearing liabilities


196,819







147,335






Shareholders' equity


2,254,349







2,096,157






Total liabilities & shareholders' equity


$

15,148,488







$

13,096,413






Net interest income (tax equivalent)


$

123,692







$

127,236




Net interest margin (tax equivalent)


3.64

%






4.40

%



(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 $5.1 million and $2.1 million for the three months ended June 30, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.7 million and $2.7 million for the three months ended June 30, 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 $1.2 million and $1.4 million for the three months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $721 thousand for the three months ended June 30, 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



June 30, 2020


March 31, 2020



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

9,546,099



$

106,737



4.50

%


$

8,815,755



$

108,665



4.96

%

Taxable securities


3,189,805



18,343



2.31

%


3,209,110



21,088



2.64

%

Tax exempt securities (2)


401,888



2,857



2.86

%


409,457



2,914



2.86

%

Interest-earning deposits with banks


519,927



136



0.11

%


53,228



141



1.07

%

Total interest-earning assets


13,657,719



128,073



3.77

%


12,487,550



132,808



4.28

%

Other earning assets


234,019







232,361






Noninterest-earning assets


1,256,750







1,275,721






Total assets


$

15,148,488







$

13,995,632






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$

2,939,657



$

974



0.13

%


$

2,633,931



$

1,728



0.26

%

Interest-bearing demand


1,213,182



339



0.11

%


1,125,691



484



0.17

%

Savings accounts


976,785



38



0.02

%


897,276



43



0.02

%

Interest-bearing public funds, other than certificates of deposit


559,256



393



0.28

%


355,401



903



1.02

%

Certificates of deposit


348,227



350



0.40

%


370,904



484



0.52

%

Total interest-bearing deposits


6,037,107



2,094



0.14

%


5,383,203



3,642



0.27

%

FHLB advances and FRB borrowings


407,035



1,796



1.77

%


909,110



4,229



1.87

%

Subordinated debentures


35,207



468



5.35

%


35,253



468



5.34

%

Other borrowings and interest-bearing liabilities


34,663



23



0.27

%


48,365



136



1.13

%

Total interest-bearing liabilities


6,514,012



4,381



0.27

%


6,375,931



8,475



0.53

%

Noninterest-bearing deposits


6,183,308







5,239,176






Other noninterest-bearing liabilities


196,819







187,474






Shareholders' equity


2,254,349







2,193,051






Total liabilities & shareholders' equity


$

15,148,488







$

13,995,632






Net interest income (tax equivalent)


$

123,692







$

124,333




Net interest margin (tax equivalent)


3.64

%






4.00

%



(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 $5.1 million and $2.4 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The incremental accretion on acquired loans was $1.7 million and $1.5 million for the three months ended June 30, 2020 and March 31, 2020, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.2 million and $1.3 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $612 thousand for the three months ended June 30, 2020 and March 31, 2020, respectively.


































AVERAGE BALANCES AND RATES









Columbia Banking System, Inc.









Unaudited















Six Months Ended


Six Months Ended



June 30, 2020


June 30, 2019



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

9,180,927



$

215,402



4.72

%


$

8,504,781



$

227,699



5.40

%

Taxable securities


3,199,458



39,431



2.48

%


2,571,692



33,333



2.61

%

Tax exempt securities (2)


405,673



5,771



2.86

%


482,812



7,191



3.00

%

Interest-earning deposits with banks


286,577



277



0.19

%


25,016



295



2.38

%

Total interest-earning assets


13,072,635



$

260,881



4.01

%


11,584,301



$

268,518



4.67

%

Other earning assets


233,190







232,678






Noninterest-earning assets


1,266,235







1,255,381






Total assets


$

14,572,060







$

13,072,360






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts (3)


$

2,786,794



$

2,702



0.19

%


$

2,562,742



$

5,481



0.43

%

Interest-bearing demand (3)


1,169,436



823



0.14

%


1,070,715



792



0.15

%

Savings accounts (3)


937,030



81



0.02

%


893,913



86



0.02

%

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


457,328



1,296



0.57

%


268,105



1,953



1.47

%

Certificates of deposit


359,567



834



0.47

%


405,018



1,162



0.58

%

Total interest-bearing deposits


5,710,155



5,736



0.20

%


5,200,493



9,474



0.37

%

FHLB advances and FRB borrowings


658,072



6,025



1.84

%


551,018



7,393



2.71

%

Subordinated debentures


35,230



936



5.34

%


35,415



936



5.33

%

Other borrowings and interest-bearing liabilities


41,514



159



0.77

%


35,375



369



2.10

%

Total interest-bearing liabilities


6,444,971



$

12,856



0.40

%


5,822,301



$

18,172



0.63

%

Noninterest-bearing deposits


5,711,242







5,027,966






Other noninterest-bearing liabilities


192,147







151,457






Shareholders' equity


2,223,700







2,070,636






Total liabilities & shareholders' equity


$

14,572,060







$

13,072,360






Net interest income (tax equivalent)


$

248,025







$

250,346




Net interest margin (tax equivalent)


3.82

%






4.36

%



(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 $7.5 million and $4.3 million for the six months ended June 30, 2020 and 2019, respectively. The incremental accretion on acquired loans was $3.2 million and $4.7 million for the six months ended June 30, 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 $2.5 million and $2.7 million for the six months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.2 million and $1.5 million for the six months ended June 30, 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.

Non-GAAP Financial Measures

The Company considers its operating net interest margin (tax equivalent) 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 (tax equivalent) 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 (tax equivalent) and operating efficiency ratio:



Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,



2020


2020


2019


2020


2019

Operating net interest margin non-GAAP reconciliation:


(dollars in thousands)

Net interest income (tax equivalent) (1)


$

123,692



$

124,333



$

127,236



$

248,025



$

250,346


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











Incremental accretion income on acquired loans (2)


(1,675)



(1,491)



(2,663)



(3,166)



(4,698)


Premium amortization on acquired securities


975



1,127



1,651



2,102



3,430


Interest reversals on nonaccrual loans


673



788



662



1,461



1,288


Operating net interest income (tax equivalent) (1)


$

123,665



$

124,757



$

126,886



$

248,422



$

250,366


Average interest earning assets


$

13,657,719



$

12,487,550



$

11,606,727



$

13,072,635



$

11,584,301


Net interest margin (tax equivalent) (1)


3.64

%


4.00

%


4.40

%


3.82

%


4.36

%

Operating net interest margin (tax equivalent) (1)


3.64

%


4.02

%


4.38

%


3.82

%


4.36

%













Three Months Ended


Six Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,



2020


2020


2019


2020


2019

Operating efficiency ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$

80,833



$

84,271



$

86,728



$

165,104



$

171,428


Adjustments to arrive at operating noninterest expense:











Net benefit (cost) of operation of OREO and OPPO


200



(4)



705



196



591


Loss on asset disposals


(220)



(4)





(224)




Business and Occupation ("B&O") taxes


(1,244)



(624)



(1,411)



(1,868)



(3,287)


Operating noninterest expense (numerator B)


$

79,569



$

83,639



$

86,022



$

163,208



$

168,732













Net interest income (tax equivalent) (1)


$

123,692



$

124,333



$

127,236



$

248,025



$

250,346


Noninterest income


37,259



21,207



25,648



58,466



47,344


Bank owned life insurance tax equivalent adjustment


430



424



424



854



828


Total revenue (tax equivalent) (denominator A)


$

161,381



$

145,964



$

153,308



$

307,345



$

298,518













Operating net interest income (tax equivalent) (1)


$

123,665



$

124,757



$

126,886



$

248,422



$

250,366


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











Investment securities loss (gain), net


(16,425)



(249)



(285)



(16,674)



(2,132)


Gain on asset disposals


(26)



(21)





(47)




Operating noninterest income (tax equivalent)


21,238



21,361



25,787



42,599



46,040


Total operating revenue (tax equivalent) (denominator B)


$

144,903



$

146,118



$

152,673



$

291,021



$

296,406


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


50.09

%


57.73

%


56.57

%


53.72

%


57.43

%

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


54.91

%


57.24

%


56.34

%


56.08

%


56.93

%



(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 $1.8 million, $1.9 million, and $2.1 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively, and $3.8 million and $4.2 million for the six months ended June 30, 2020 and 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


Six Months Ended



June 30,


March 31,


June 30,


June 30,


June 30,



2020


2020


2019


2020


2019

Pre-tax, pre-provision income:


(in thousands)

Income before income taxes


$

44,777



$

17,858



$

63,818



$

62,635



$

120,474


Provision for credit losses


33,500



41,500



218



75,000



1,580


Pre-tax, pre-provision income


$

78,277



$

59,358



$

64,036



$

137,635



$

122,054


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:



June 30,


March 31,


June 30,



2020


2020


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)


$

2,276,755



$

2,213,602



$

2,133,638


Adjustments to arrive at tangible common equity:







Goodwill


(765,842)



(765,842)



(765,842)


Other intangible assets, net


(30,938)



(33,148)



(40,540)


Tangible common equity (numerator B)


$

1,479,975



$

1,414,612



$

1,327,256


Total assets (denominator A)


$

15,920,944



$

14,038,503



$

13,090,808


Adjustments to arrive at tangible assets:







Goodwill


(765,842)



(765,842)



(765,842)


Other intangible assets, net


(30,938)



(33,148)



(40,540)


Tangible assets (denominator B)


$

15,124,164



$

13,239,513



$

12,284,426


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


14.30

%


15.77

%


16.30

%

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


9.79

%


10.68

%


10.80

%

Common shares outstanding (denominator C)


71,586



71,575



72,924


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