Exhibit 99.1
FOR IMMEDIATE RELEASE
October 29, 2015
Contacts: Melanie J. Dressel,
President and
Chief Executive Officer
(253) 305-1911
Clint E. Stein,
Executive Vice President
and Chief Financial Officer
(253) 593-8304
Columbia Banking System Announces Third Quarter 2015 Earnings
Highlights
| |
| • | Record net income of $25.8 million with diluted earnings per share of $0.45 |
| |
| • | Record new loan production for the quarter of $348 million |
| |
| • | Solid deposit growth of $270 million, or 4% for the quarter |
| |
| • | Nonperforming assets to period end assets reduced to 0.44%, a decrease of 10 basis points from June 30, 2015 and a decrease of 18 basis points from year end 2014 |
| |
| • | Efficiency ratio for the quarter improves to less than 60% |
TACOMA, Washington, October 29, 2015 -- Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB) (“Columbia”), said today upon the release of Columbia’s third quarter 2015 earnings, “The balance sheet growth combined with our ongoing efforts to increase noninterest income and curb expenses resulted in record net income for the quarter. The Pacific Northwest economy continues to be favorable for businesses as evidenced by our record loan production and outstanding deposit growth during the third quarter. Our bankers have worked diligently to grow loans and increase core deposits, resulting in a relatively stable operating net interest margin despite the prolonged low interest rate environment.”
Balance Sheet
Loans were $5.75 billion at September 30, 2015, up $134.6 million from June 30, 2015 due to record loan originations during the current quarter. Securities were $2.04 billion at September 30, 2015, an increase of $111.4 million, or 6% from $1.93 billion at June 30, 2015 due primarily to purchases of securities resulting from deposits growing in excess of loans. Total deposits at September 30, 2015 were $7.31 billion, an increase of $270.4 million from $7.04 billion at June 30, 2015. Core deposits were $6.99 billion at September 30, 2015, an increase of $248.2 million from June 30, 2015. The average rate on interest-bearing deposits and total deposits for the quarter was 0.08% and 0.04%, respectively, unchanged compared to the second quarter of 2015.
Income Statement
Net Interest Income
Net interest income for the third quarter of 2015 was $81.7 million, an increase of $684 thousand compared to the second quarter of 2015. This increase was primarily due to higher average loan balances in the current quarter. Compared to the third quarter of 2014, net interest income increased by $5.5 million from $76.2 million. The increase from the prior year period is due to the combination of acquired loans and securities from the November 1, 2014 acquisition of Intermountain Community Bancorp (“Intermountain”) and organic loan growth, partially offset by a decline in incremental accretion income. For additional information regarding net interest income, see the “Average Balances and Rates” table.
Noninterest Income
Total noninterest income was $22.5 million for the third quarter of 2015, an increase of $1.0 million compared to $21.5 million for the second quarter of 2015. The linked quarter increase was primarily due to an increase in other noninterest income of $1.3 million which resulted from gains on sales of loans in the current quarter of $1.1 million compared to $43 thousand in the second quarter of 2015.
Compared to the third quarter of 2014, noninterest income increased by $6.6 million due to both a $1.6 million increase in service charges and other fees and the change in FDIC loss-sharing asset. The growth in service charges and other fees resulted primarily from the increased customer base from the acquisition of Intermountain. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format below.
The change in the FDIC loss-sharing asset has been a significant component of noninterest income, but over time the significance has diminished. The following table reflects the income statement components of the change in the FDIC loss-sharing asset:
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, | | September 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| | | (in thousands) |
| Adjustments reflected in income | | | | | | | | |
| Amortization, net | | (1,416 | ) | | (3,992 | ) | | (5,086 | ) | | (16,208 | ) |
| Loan impairment | | (119 | ) | | (416 | ) | | 1,413 |
| | 2,735 |
|
| Sale of other real estate | | (126 | ) | | (383 | ) | | (753 | ) | | (2,104 | ) |
| Write-downs of other real estate | | 25 |
| | 67 |
| | 1,148 |
| | 860 |
|
| Other | | 1 |
| | (92 | ) | | 299 |
| | 32 |
|
| Change in FDIC loss-sharing asset | | $ | (1,635 | ) | | $ | (4,816 | ) | | $ | (2,979 | ) | | $ | (14,685 | ) |
Noninterest Expense
Total noninterest expense for the third quarter of 2015 was $64.1 million, a decrease of $4.4 million compared to $68.5 million for the second quarter of 2015. This decrease was driven by lower acquisition-related expenses in the current quarter of $428 thousand compared to $5.6 million in the prior quarter. After removing the effect of the acquisition-related expenses, noninterest expense for the current quarter was $811 thousand higher than the second quarter of 2015 on the same basis. This increase was due to OREO costs, which were $240 thousand in the current quarter compared to a benefit of $563 thousand for the second quarter of 2015. In addition, during the third quarter of 2015 Columbia experienced unusually high fraud losses largely attributed to debit card activity. Fraud losses for the third quarter were $834 thousand, up $546 thousand from the second quarter of 2015.
Clint Stein, Columbia’s Executive Vice President and Chief Financial Officer stated, “As we approach the one year anniversary of closing the Intermountain acquisition, we have achieved our post-integration target expense run rate of less than $64 million per quarter. The realization of our expense goal ahead of our anticipated timeframe coupled with the growth in revenue during the quarter resulted in the efficiency ratio improving to below 60%.”
Compared to the third quarter of 2014, noninterest expense increased $4.1 million, or 7% from $60.0 million, due to both increased expenses resulting from the Intermountain acquisition as well as additional OREO costs, partially offset by a decrease of $2.8 million in acquisition-related expenses.
Net Interest Margin (“NIM”)
Columbia’s net interest margin (tax equivalent) of 4.37% for the third quarter of 2015 decreased 4 basis points from 4.41% for the second quarter of 2015. Compared to the third quarter of 2014, Columbia’s net interest margin decreased 48 basis points from 4.85%, primarily due to lower incremental accretion on acquired loans, which was $9.4 million for the prior year quarter, compared to $6.4 million for the current quarter. Columbia’s operating net interest margin (tax equivalent)(1) was 4.18% for the third quarter of 2015, an increase of 1 basis point from 4.17% for the second quarter of 2015 and down 4 basis points compared to 4.22% for the third quarter of 2014 as a result of the continuing low interest rate environment.
The following table shows the impact to interest income resulting from accretion of income on acquired loan portfolios as well as the net interest margin and operating net interest margin:
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, 2015 | | September 30, 2014 | | September 30, 2015 | | September 30, 2014 |
| | | (dollars in thousands) |
| Incremental accretion income due to: | | | | | | | | |
| FDIC purchased credit impaired loans | | $ | 2,082 |
| | $ | 4,205 |
| | $ | 6,896 |
| | $ | 16,428 |
|
| Other FDIC acquired loans | | 34 |
| | 175 |
| | 166 |
| | 474 |
|
| Other acquired loans | | 4,293 |
| | 5,040 |
| | 14,116 |
| | 16,136 |
|
| Incremental accretion income | | $ | 6,409 |
| | $ | 9,420 |
| | $ | 21,178 |
| | $ | 33,038 |
|
| | | | | | | | | |
| Net interest margin (tax equivalent) | | 4.37 | % | | 4.85 | % | | 4.39 | % | | 4.86 | % |
| Operating net interest margin (tax equivalent) (1) | | 4.18 | % | | 4.22 | % | | 4.18 | % | | 4.23 | % |
__________
(1) Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled “Non-GAAP Financial Measures” on the last pages of this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.
Asset Quality
At September 30, 2015, nonperforming assets to total assets were 0.44% compared to 0.54% at June 30, 2015. Total nonperforming assets decreased $7.9 million due to a $6.7 million reduction in nonaccrual loans and a $1.2 million decline in other real estate owned due to sales activity during the current quarter. Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, stated “One of our goals coming out of the great recession was to reduce our level of nonperforming assets below 50 basis points. We are pleased that we have achieved this goal this past quarter as our NPA ratio declined to 44 basis points.”
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
|
| | | | | | | | | | | | |
| | | September 30, 2015 | | June 30, 2015 | | December 31, 2014 |
| | | (in thousands) |
| Nonaccrual loans: | | | | | | |
| Commercial business | | $ | 10,150 |
| | $ | 13,539 |
| | $ | 16,799 |
|
| Real estate: | | | | | | |
| One-to-four family residential | | 2,012 |
| | 4,193 |
| | 2,822 |
|
| Commercial and multifamily residential | | 4,317 |
| | 3,809 |
| | 7,847 |
|
| Total real estate | | 6,329 |
| | 8,002 |
| | 10,669 |
|
| Real estate construction: | | | | | | |
| One-to-four family residential | | 1,472 |
| | 1,937 |
| | 465 |
|
| Commercial and multifamily residential | | 470 |
| | 469 |
| | 480 |
|
| Total real estate construction | | 1,942 |
| | 2,406 |
| | 945 |
|
| Consumer | | 659 |
| | 1,799 |
| | 2,939 |
|
| Total nonaccrual loans | | 19,080 |
| | 25,746 |
| | 31,352 |
|
| Other real estate owned and other personal property owned | | 19,475 |
| | 20,665 |
| | 22,225 |
|
| Total nonperforming assets | | $ | 38,555 |
| | $ | 46,411 |
| | $ | 53,577 |
|
The following table provides an analysis of the Company's allowance for loan and lease losses ("ALLL"):
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2015 | | 2014 (1) | | 2015 | | 2014 (1) |
| | | (in thousands) |
| Beginning balance | | $ | 69,257 |
| | $ | 69,295 |
| | $ | 69,569 |
| | $ | 72,454 |
|
| Charge-offs: | | | | | | | | |
| Commercial business | | (2,570 | ) | | (1,348 | ) | | (6,082 | ) | | (3,298 | ) |
| One-to-four family residential real estate | | — |
| | — |
| | (297 | ) | | (207 | ) |
| Commercial and multifamily residential real estate | | (198 | ) | | (7 | ) | | (241 | ) | | (2,993 | ) |
| Consumer | | (311 | ) | | (620 | ) | | (1,521 | ) | | (2,256 | ) |
| Purchased credit impaired (1) | | (3,198 | ) | | (3,236 | ) | | (10,174 | ) | | (11,350 | ) |
| Total charge-offs | | (6,277 | ) | | (5,211 | ) | | (18,315 | ) | | (20,104 | ) |
| Recoveries: | | | | | | | | |
| Commercial business | | 623 |
| | 356 |
| | 1,450 |
| | 2,558 |
|
| One-to-four family residential real estate | | 261 |
| | 63 |
| | 288 |
| | 103 |
|
| Commercial and multifamily residential real estate | | 417 |
| | 140 |
| | 3,698 |
| | 716 |
|
| One-to-four family residential real estate construction | | 105 |
| | 20 |
| | 141 |
| | 504 |
|
| Commercial and multifamily residential real estate construction | | 2 |
| | — |
| | 7 |
| | — |
|
| Consumer | | 297 |
| | 340 |
| | 707 |
| | 931 |
|
| Purchased credit impaired (1) | | 1,533 |
| | 1,888 |
| | 5,262 |
| | 5,690 |
|
| Total recoveries | | 3,238 |
| | 2,807 |
| | 11,553 |
| | 10,502 |
|
| Net charge-offs | | (3,039 | ) | | (2,404 | ) | | (6,762 | ) | | (9,602 | ) |
| Provision for loan and lease losses (1) | | 2,831 |
| | 980 |
| | 6,242 |
| | 5,019 |
|
| Ending balance | | $ | 69,049 |
| | $ | 67,871 |
| | $ | 69,049 |
| | $ | 67,871 |
|
__________
(1) Reclassified to conform to the current period’s presentation. The reclassification was limited to including charge-off, recovery, and provision activity related to the purchased credit impaired loan portfolio.
The allowance for loan losses to period end loans was 1.20% at September 30, 2015 compared to 1.23% at June 30, 2015. For the third quarter of 2015, Columbia recorded a net provision for loan and lease losses of $2.8 million compared to a net provision of $980 thousand for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter was due to organic loan growth, charge-off activity and higher loss rates in the substandard category, partially offset by provision recapture recorded for the purchased credit impaired portfolio.
Impact of FDIC Acquired Loan Accounting
While the significance of the FDIC Acquired Loan Accounting has diminished over time, the following table illustrates the impact to earnings associated with Columbia’s FDIC acquired loan portfolios:
|
| | | | | | | | | | | | | | | | |
| FDIC Acquired Loan Accounting |
| | | | | | | | | |
| | | Three Months Ended | | Nine Months Ended |
| | | September 30, 2015 | | September 30, 2014 | | September 30, 2015 | | September 30, 2014 |
| | | (in thousands) |
| Incremental accretion income on FDIC purchased credit impaired loans | | $ | 2,082 |
| | $ | 4,205 |
| | $ | 6,896 |
| | $ | 16,428 |
|
| Incremental accretion income on other FDIC acquired loans | | 34 |
| | 175 |
| | 166 |
| | 474 |
|
| Recapture (provision) for losses on FDIC purchased credit impaired loans | | 519 |
| | 520 |
| | (2,566 | ) | | (3,419 | ) |
| Change in FDIC loss-sharing asset | | (1,635 | ) | | (4,816 | ) | | (2,979 | ) | | (14,685 | ) |
| FDIC clawback liability recovery (expense) | | (174 | ) | | (201 | ) | | (167 | ) | | (302 | ) |
| Pre-tax earnings impact | | $ | 826 |
| | $ | (117 | ) | | $ | 1,350 |
| | $ | (1,504 | ) |
The incremental accretion income on FDIC purchased credit impaired loans represents the amount of income recorded above the contractual rate stated in the individual loan notes. At September 30, 2015, the accretable yield on purchased credit impaired loans was $62.8 million. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis.
The $1.6 million change in the FDIC loss-sharing asset in the current quarter reduced noninterest income and consisted primarily of $1.4 million in amortization expense. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format in the section titled “Noninterest Income” in the following pages.
Organizational Update
Hadley Robbins, Columbia’s Executive Vice President and Chief Operating Officer commented, “As part of our continuing efforts to grow noninterest income while increasing customer satisfaction, we created a Banking Solutions division during the third quarter. Comprised of deposit, payments and digital solutions management functions, including the Cash Management and Merchant Card Services departments and our Customer Care Centers, the division is designed to help us maintain a relevant and contemporary set of products for businesses and individuals.”
Mr. Robbins continued, “We continually review our branch system to ensure that we are running effectively and efficiently, while providing the best possible customer service. We recently celebrated a new building for our Mattawa branch in eastern Washington, delivering an enhanced level of service and convenience to our customers in a very busy location. We also announced the closure of two western Washington branches planned for the fourth quarter this year.”
Conference Call Information
Columbia’s management will discuss the third quarter 2015 results on a conference call scheduled for Thursday, October 29, 2015 at 1:00 p.m. Pacific Daylight Time (4:00 p.m. EDT). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #51083007.
A conference call replay will be available from approximately 4:00 p.m. PDT on October 29, 2015 through 9:00 p.m. PST on November 5, 2015. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #51083007.
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 over 150 branches throughout Washington, Oregon and Idaho. For the ninth consecutive year, the bank was named in 2015 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked in the top 20 on the 2015 Forbes list of best banks in the country, as well as ranking the best in Washington and second in the Pacific Northwest for the fourth year in a row.
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, which management believes are a benefit to shareholders. These forward looking statements describe Columbia’s management’s expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia’s style of banking and the strength of the local economy. The words “will,” “believe,” “expect,” “intend,” “should,” and “anticipate” and 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 risk and uncertainty that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia’s filings with the Securities and Exchange Commission, available at the SEC’s website at www.sec.gov and the Company’s website at www.columbiabank.com, including 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, factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates may reduce interest margins more than expected and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) costs or difficulties related to the integration of acquisitions may be greater than expected; (5) competitive pressure among financial institutions may increase significantly; and (6) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 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.
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| | | | | | | | | | | | | | | | |
| FINANCIAL STATISTICS | | | | | | | | |
| Columbia Banking System, Inc. | | Three Months Ended | | Nine Months Ended |
| Unaudited | | September 30, | | September 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| Earnings | | (dollars in thousands except per share amounts) |
| Net interest income | | $ | 81,694 |
| | $ | 76,220 |
| | $ | 243,068 |
| | $ | 225,284 |
|
| Provision for loan and lease losses | | $ | 2,831 |
| | $ | 980 |
| | $ | 6,242 |
| | $ | 5,019 |
|
| Noninterest income | | $ | 22,499 |
| | $ | 15,930 |
| | $ | 66,728 |
| | $ | 44,565 |
|
| Noninterest expense | | $ | 64,067 |
| | $ | 59,982 |
| | $ | 199,272 |
| | $ | 175,132 |
|
| Acquisition-related expense (included in noninterest expense) | | $ | 428 |
| | $ | 3,238 |
| | $ | 9,045 |
| | $ | 4,876 |
|
| Net income | | $ | 25,780 |
| | $ | 21,583 |
| | $ | 72,087 |
| | $ | 62,654 |
|
| Per Common Share | | | | | | | | |
| Earnings (basic) | | $ | 0.45 |
| | $ | 0.41 |
| | $ | 1.25 |
| | $ | 1.20 |
|
| Earnings (diluted) | | $ | 0.45 |
| | $ | 0.41 |
| | $ | 1.25 |
| | $ | 1.18 |
|
| Book value | | $ | 21.69 |
| | $ | 20.78 |
| | $ | 21.69 |
| | $ | 20.78 |
|
| Averages | | | | | | | | |
| Total assets | | $ | 8,672,692 |
| | $ | 7,337,306 |
| | $ | 8,570,825 |
| | $ | 7,237,459 |
|
| Interest-earning assets | | $ | 7,711,531 |
| | $ | 6,451,660 |
| | $ | 7,600,954 |
| | $ | 6,345,909 |
|
| Loans | | $ | 5,712,614 |
| | $ | 4,770,443 |
| | $ | 5,557,771 |
| | $ | 4,652,157 |
|
| Securities, including Federal Home Loan Bank stock | | $ | 1,945,174 |
| | $ | 1,585,996 |
| | $ | 1,996,527 |
| | $ | 1,637,766 |
|
| Deposits | | $ | 7,233,863 |
| | $ | 6,110,809 |
| | $ | 7,047,818 |
| | $ | 5,994,608 |
|
| Interest-bearing deposits | | $ | 3,910,695 |
| | $ | 3,847,730 |
| | $ | 3,939,525 |
| | $ | 3,809,546 |
|
| Interest-bearing liabilities | | $ | 4,007,198 |
| | $ | 3,889,233 |
| | $ | 4,119,815 |
| | $ | 3,886,180 |
|
| Noninterest-bearing deposits | | $ | 3,323,168 |
| | $ | 2,263,079 |
| | $ | 3,108,293 |
| | $ | 2,185,062 |
|
| Shareholders' equity | | $ | 1,239,830 |
| | $ | 1,099,512 |
| | $ | 1,242,853 |
| | $ | 1,084,049 |
|
| Financial Ratios | | | | | | | | |
| Return on average assets | | 1.19 | % | | 1.18 | % | | 1.12 | % | | 1.15 | % |
| Return on average common equity | | 8.32 | % | | 7.86 | % | | 7.74 | % | | 7.71 | % |
| Average equity to average assets | | 14.30 | % | | 14.99 | % | | 14.50 | % | | 14.98 | % |
| Net interest margin (tax equivalent) | | 4.37 | % | | 4.85 | % | | 4.39 | % | | 4.86 | % |
| Efficiency ratio (tax equivalent) (1) | | 59.69 | % | | 63.33 | % | | 62.51 | % | | 63.16 | % |
| Operating efficiency ratio (tax equivalent) (2) | | 58.85 | % | | 63.81 | % | | 60.86 | % | | 64.26 | % |
| | | | | | | | | |
| | | September 30, | | December 31, | | |
| Period end | | 2015 | | 2014 | | 2014 | | |
| Total assets | | $ | 8,755,984 |
| | $ | 7,466,081 |
| | $ | 8,578,846 |
| | |
| Loans, net of unearned income | | $ | 5,746,511 |
| | $ | 4,823,022 |
| | $ | 5,445,378 |
| | |
| Allowance for loan and lease losses | | $ | 69,049 |
| | $ | 67,871 |
| | $ | 69,569 |
| | |
| Securities, including Federal Home Loan Bank stock | | $ | 2,037,666 |
| | $ | 1,643,003 |
| | $ | 2,131,622 |
| | |
| Deposits | | $ | 7,314,805 |
| | $ | 6,244,401 |
| | $ | 6,924,722 |
| | |
| Core deposits | | $ | 6,986,206 |
| | $ | 5,990,118 |
| | $ | 6,619,944 |
| | |
| Shareholders' equity | | $ | 1,254,136 |
| | $ | 1,096,211 |
| | $ | 1,228,175 |
| | |
| Nonperforming assets | | | | | | | | |
| Nonaccrual loans | | $ | 19,080 |
| | $ | 27,998 |
| | $ | 31,352 |
| | |
| Other real estate owned ("OREO") and other personal property owned ("OPPO") | | 19,475 |
| | 21,941 |
| | 22,225 |
| | |
| Total nonperforming assets | | $ | 38,555 |
| | $ | 49,939 |
| | $ | 53,577 |
| | |
| Nonperforming loans to period-end loans | | 0.33 | % | | 0.58 | % | | 0.58 | % | | |
| Nonperforming assets to period-end assets | | 0.44 | % | | 0.67 | % | | 0.62 | % | | |
| Allowance for loan and lease losses to period-end loans | | 1.20 | % | | 1.41 | % | | 1.28 | % | | |
| Net loan charge-offs | | $ | 6,762 |
| (3) | $ | 9,602 |
| (4) | $ | 9,612 |
| (5) | |
| | | | | | | | | |
| (1) Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis. |
| (2) The operating efficiency ratio (tax equivalent) is a non-GAAP financial measure. See section titled "Non-GAAP Financial Measures" on the last pages of this earnings release for the reconciliation of the operating efficiency ratio (tax equivalent) to the efficiency ratio (tax equivalent). |
| (3) For the nine months ended September 30, 2015. | | | | | | | | |
| (4) For the nine months ended September 30, 2014. | | | | | | | | |
| (5) For the twelve months ended December 31, 2014. | | | | | | | | |
|
| | | | | | | | | | | | | | |
| FINANCIAL STATISTICS | | | | | | | | |
| Columbia Banking System, Inc. | | | | | | | | |
| Unaudited | | September 30, | | December 31, |
| | | 2015 | | 2014 |
| Loan Portfolio Composition | | (dollars in thousands) |
| Commercial business | | $ | 2,354,731 |
| | 41.0 | % | | $ | 2,119,565 |
| | 38.9 | % |
| Real estate: | | | | | | | | |
| One-to-four family residential | | 177,108 |
| | 3.1 | % | | 175,571 |
| | 3.2 | % |
| Commercial and multifamily residential | | 2,449,847 |
| | 42.6 | % | | 2,363,541 |
| | 43.5 | % |
| Total real estate | | 2,626,955 |
| | 45.7 | % | | 2,539,112 |
| | 46.7 | % |
| Real estate construction: | | | | | | | | |
| One-to-four family residential | | 136,783 |
| | 2.4 | % | | 116,866 |
| | 2.1 | % |
| Commercial and multifamily residential | | 134,097 |
| | 2.3 | % | | 134,443 |
| | 2.5 | % |
| Total real estate construction | | 270,880 |
| | 4.7 | % | | 251,309 |
| | 4.6 | % |
| Consumer | | 348,315 |
| | 6.1 | % | | 364,182 |
| | 6.7 | % |
| Purchased credit impaired | | 191,066 |
| | 3.3 | % | | 230,584 |
| | 4.2 | % |
| Subtotal loans | | 5,791,947 |
| | 100.8 | % | | 5,504,752 |
| | 101.1 | % |
| Less: Net unearned income | | (45,436 | ) | | (0.8 | )% | | (59,374 | ) | | (1.1 | )% |
| Loans, net of unearned income | | 5,746,511 |
| | 100.0 | % | | 5,445,378 |
| | 100.0 | % |
| Less: Allowance for loan and lease losses | | (69,049 | ) | | | | (69,569 | ) | | |
| Total loans, net | | 5,677,462 |
| | | | 5,375,809 |
| | |
| Loans held for sale | | $ | 6,637 |
| | | | $ | 1,116 |
| | |
| | | | | | | | | |
| | | September 30, | | December 31, |
| | | 2015 | | 2014 |
| Deposit Composition | | (dollars in thousands) |
| Core deposits: | | | | | | | | |
| Demand and other non-interest bearing | | $ | 3,386,968 |
| | 46.3 | % | | $ | 2,651,373 |
| | 38.3 | % |
| Interest bearing demand | | 911,686 |
| | 12.5 | % | | 1,304,258 |
| | 18.8 | % |
| Money market | | 1,776,087 |
| | 24.3 | % | | 1,760,331 |
| | 25.4 | % |
| Savings | | 651,695 |
| | 8.9 | % | | 615,721 |
| | 8.9 | % |
| Certificates of deposit less than $100,000 | | 259,770 |
| | 3.6 | % | | 288,261 |
| | 4.2 | % |
| Total core deposits | | 6,986,206 |
| | 95.6 | % | | 6,619,944 |
| | 95.6 | % |
| | | | | | | | | |
| Certificates of deposit greater than $100,000 | | 184,047 |
| | 2.4 | % | | 202,014 |
| | 2.9 | % |
| Certificates of deposit insured by CDARS® | | 26,975 |
| | 0.4 | % | | 18,429 |
| | 0.3 | % |
| Brokered money market accounts | | 117,196 |
| | 1.6 | % | | 83,402 |
| | 1.2 | % |
| Subtotal | | 7,314,424 |
| | 100.0 | % | | 6,923,789 |
| | 100.0 | % |
| Premium resulting from acquisition date fair value adjustment | | 381 |
| | | | 933 |
| | |
| Total deposits | | $ | 7,314,805 |
| | | | $ | 6,924,722 |
| | |
|
| | | | | | | | | | | | | | | | | | | | |
| QUARTERLY FINANCIAL STATISTICS | | | | | | | | | | |
| Columbia Banking System, Inc. | | Three Months Ended |
| Unaudited | | September 30, | | June 30, | | March 31, | | December 31, | | September 30, |
| | | 2015 | | 2015 | | 2015 | | 2014 | | 2014 |
| | | (dollars in thousands except per share) |
| Earnings | | |
| Net interest income | | $ | 81,694 |
| | $ | 81,010 |
| | $ | 80,364 |
| | $ | 78,764 |
| | $ | 76,220 |
|
| Provision for loan and lease losses | | $ | 2,831 |
| | $ | 2,202 |
| | $ | 1,209 |
| | $ | 1,708 |
| | $ | 980 |
|
| Noninterest income | | $ | 22,499 |
| | $ | 21,462 |
| | $ | 22,767 |
| | $ | 15,185 |
| | $ | 15,930 |
|
| Noninterest expense | | $ | 64,067 |
| | $ | 68,471 |
| | $ | 66,734 |
| | $ | 64,154 |
| | $ | 59,982 |
|
Acquisition-related expense (included in noninterest expense) | | $ | 428 |
| | $ | 5,643 |
| | $ | 2,974 |
| | $ | 4,556 |
| | $ | 3,238 |
|
| Net income | | $ | 25,780 |
| | $ | 21,946 |
| | $ | 24,361 |
| | $ | 18,920 |
| | $ | 21,583 |
|
| Per Common Share | | | | | | | | | | |
| Earnings (basic) | | $ | 0.45 |
| | $ | 0.38 |
| | $ | 0.42 |
| | $ | 0.34 |
| | $ | 0.41 |
|
| Earnings (diluted) | | $ | 0.45 |
| | $ | 0.38 |
| | $ | 0.42 |
| | $ | 0.34 |
| | $ | 0.41 |
|
| Book value | | $ | 21.69 |
| | $ | 21.38 |
| | $ | 21.53 |
| | $ | 21.34 |
| | $ | 20.78 |
|
| Averages | | | | | | | | | | |
| Total assets | | $ | 8,672,692 |
| | $ | 8,532,173 |
| | $ | 8,505,776 |
| | $ | 8,152,463 |
| | $ | 7,337,306 |
|
| Interest-earning assets | | $ | 7,711,531 |
| | $ | 7,560,288 |
| | $ | 7,529,040 |
| | $ | 7,199,443 |
| | $ | 6,451,660 |
|
| Loans | | $ | 5,712,614 |
| | $ | 5,542,489 |
| | $ | 5,414,942 |
| | $ | 5,168,761 |
| | $ | 4,770,443 |
|
| Securities, including Federal Home Loan Bank stock | | $ | 1,945,174 |
| | $ | 1,976,959 |
| | $ | 2,068,806 |
| | $ | 1,918,690 |
| | $ | 1,585,996 |
|
| Deposits | | $ | 7,233,863 |
| | $ | 6,978,472 |
| | $ | 6,927,756 |
| | $ | 6,759,259 |
| | $ | 6,110,809 |
|
| Interest-bearing deposits | | $ | 3,910,695 |
| | $ | 3,753,101 |
| | $ | 4,157,491 |
| | $ | 4,174,459 |
| | $ | 3,847,730 |
|
| Interest-bearing liabilities | | $ | 4,007,198 |
| | $ | 3,961,013 |
| | $ | 4,395,502 |
| | $ | 4,282,273 |
| | $ | 3,889,233 |
|
| Noninterest-bearing deposits | | $ | 3,323,168 |
| | $ | 3,225,371 |
| | $ | 2,770,265 |
| | $ | 2,584,800 |
| | $ | 2,263,079 |
|
| Shareholders' equity | | $ | 1,239,830 |
| | $ | 1,247,887 |
| | $ | 1,240,853 |
| | $ | 1,185,346 |
| | $ | 1,099,512 |
|
| Financial Ratios | | | | | | | | | | |
| Return on average assets | | 1.19 | % | | 1.03 | % | | 1.15 | % | | 0.93 | % | | 1.18 | % |
| Return on average common equity | | 8.32 | % | | 7.04 | % | | 7.86 | % | | 6.39 | % | | 7.86 | % |
| Average equity to average assets | | 14.30 | % | | 14.63 | % | | 14.59 | % | | 14.54 | % | | 14.99 | % |
| Net interest margin (tax equivalent) | | 4.37 | % | | 4.41 | % | | 4.39 | % | | 4.50 | % | | 4.85 | % |
| Period end | | | | | | | | | | |
| Total assets | | $ | 8,755,984 |
| | $ | 8,518,019 |
| | $ | 8,552,902 |
| | $ | 8,578,846 |
| | $ | 7,466,081 |
|
| Loans, net of unearned income | | $ | 5,746,511 |
| | $ | 5,611,897 |
| | $ | 5,450,895 |
| | $ | 5,445,378 |
| | $ | 4,823,022 |
|
| Allowance for loan and lease losses | | $ | 69,049 |
| | $ | 69,257 |
| | $ | 70,234 |
| | $ | 69,569 |
| | $ | 67,871 |
|
| Securities, including Federal Home Loan Bank stock | | $ | 2,037,666 |
| | $ | 1,926,248 |
| | $ | 2,040,163 |
| | $ | 2,131,622 |
| | $ | 1,643,003 |
|
| Deposits | | $ | 7,314,805 |
| | $ | 7,044,373 |
| | $ | 7,074,965 |
| | $ | 6,924,722 |
| | $ | 6,244,401 |
|
| Core deposits | | $ | 6,986,206 |
| | $ | 6,737,969 |
| | $ | 6,771,755 |
| | $ | 6,619,944 |
| | $ | 5,990,118 |
|
| Shareholders' equity | | $ | 1,254,136 |
| | $ | 1,236,214 |
| | $ | 1,244,443 |
| | $ | 1,228,175 |
| | $ | 1,096,211 |
|
| Nonperforming, assets | | | | | | | | | | |
| Nonaccrual loans | | $ | 19,080 |
| | $ | 25,746 |
| | $ | 31,828 |
| | $ | 31,352 |
| | $ | 27,998 |
|
| OREO and OPPO | | 19,475 |
| | 20,665 |
| | 23,347 |
| | 22,225 |
| | 21,941 |
|
| Total nonperforming assets | | $ | 38,555 |
| | $ | 46,411 |
| | $ | 55,175 |
| | $ | 53,577 |
| | $ | 49,939 |
|
| Nonperforming loans to period-end loans | | 0.33 | % | | 0.46 | % | | 0.58 | % | | 0.58 | % | | 0.58 | % |
| Nonperforming assets to period-end assets | | 0.44 | % | | 0.54 | % | | 0.65 | % | | 0.62 | % | | 0.67 | % |
| Allowance for loan and lease losses to period-end loans | | 1.20 | % | | 1.23 | % | | 1.29 | % | | 1.28 | % | | 1.41 | % |
| Net loan charge-offs | | $ | 3,039 |
| | $ | 3,179 |
| | $ | 544 |
| | $ | 10 |
| | $ | 2,404 |
|
|
| | | | | | | | | | | | | | | | |
| CONSOLIDATED STATEMENTS OF INCOME | | | | | | |
| Columbia Banking System, Inc. | | Three Months Ended | | Nine Months Ended |
| Unaudited | | September 30, | | September 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| | | (in thousands except per share) |
| Interest Income | | | | | | | | |
| Loans | | $ | 72,242 |
| | $ | 65,903 |
| | $ | 214,808 |
| | $ | 198,448 |
|
| Taxable securities | | 7,472 |
| | 8,545 |
| | 22,258 |
| | 21,679 |
|
| Tax-exempt securities | | 2,920 |
| | 2,624 |
| | 8,972 |
| | 7,913 |
|
| Deposits in banks | | 31 |
| | 61 |
| | 84 |
| | 105 |
|
| Total interest income | | 82,665 |
| | 77,133 |
| | 246,122 |
| | 228,145 |
|
| Interest Expense | | | | | | | | |
| Deposits | | 756 |
| | 713 |
| | 2,244 |
| | 2,194 |
|
| Federal Home Loan Bank advances | | 78 |
| | 80 |
| | 391 |
| | 309 |
|
| Other borrowings | | 137 |
| | 120 |
| | 419 |
| | 358 |
|
| Total interest expense | | 971 |
| | 913 |
| | 3,054 |
| | 2,861 |
|
| Net Interest Income | | 81,694 |
| | 76,220 |
| | 243,068 |
| | 225,284 |
|
| Provision for loan and lease losses | | 2,831 |
| | 980 |
| | 6,242 |
| | 5,019 |
|
| Net interest income after provision for loan and lease losses | | 78,863 |
| | 75,240 |
| | 236,826 |
| | 220,265 |
|
| Noninterest Income | | | | | | | | |
| Service charges and other fees | | 15,893 |
| | 14,254 |
| | 46,636 |
| | 40,980 |
|
| Merchant services fees | | 2,422 |
| | 2,104 |
| | 6,802 |
| | 6,014 |
|
| Investment securities gains, net | | 236 |
| | 33 |
| | 1,300 |
| | 552 |
|
| Bank owned life insurance | | 1,086 |
| | 956 |
| | 3,370 |
| | 2,897 |
|
| Change in FDIC loss-sharing asset | | (1,635 | ) | | (4,816 | ) | | (2,979 | ) | | (14,685 | ) |
| Other | | 4,497 |
| | 3,399 |
| | 11,599 |
| | 8,807 |
|
| Total noninterest income | | 22,499 |
| | 15,930 |
| | 66,728 |
| | 44,565 |
|
| Noninterest Expense | | | | | | | | |
| Compensation and employee benefits | | 35,175 |
| | 32,559 |
| | 112,721 |
| | 94,961 |
|
| Occupancy | | 8,101 |
| | 7,445 |
| | 24,781 |
| | 24,276 |
|
| Merchant processing | | 1,090 |
| | 1,080 |
| | 3,146 |
| | 3,058 |
|
| Advertising and promotion | | 1,354 |
| | 1,027 |
| | 3,480 |
| | 2,746 |
|
| Data processing and communications | | 3,796 |
| | 4,269 |
| | 13,022 |
| | 11,469 |
|
| Legal and professional fees | | 2,173 |
| | 2,905 |
| | 7,527 |
| | 7,377 |
|
| Taxes, licenses and fees | | 1,344 |
| | 1,156 |
| | 4,003 |
| | 3,387 |
|
| Regulatory premiums | | 1,084 |
| | 1,195 |
| | 3,626 |
| | 3,444 |
|
| Net cost (benefit) of operation of other real estate owned | | 240 |
| | (1,256 | ) | | (1,569 | ) | | (1,207 | ) |
| Amortization of intangibles | | 1,695 |
| | 1,456 |
| | 5,230 |
| | 4,516 |
|
| Other | | 8,015 |
| | 8,146 |
| | 23,305 |
| | 21,105 |
|
| Total noninterest expense | | 64,067 |
| | 59,982 |
| | 199,272 |
| | 175,132 |
|
| Income before income taxes | | 37,295 |
| | 31,188 |
| | 104,282 |
| | 89,698 |
|
| Provision for income taxes | | 11,515 |
| | 9,605 |
| | 32,195 |
| | 27,044 |
|
| Net Income | | $ | 25,780 |
| | $ | 21,583 |
| | $ | 72,087 |
| | $ | 62,654 |
|
| Earnings per common share | | | | | | | | |
| Basic | | $ | 0.45 |
| | $ | 0.41 |
| | $ | 1.25 |
| | $ | 1.20 |
|
| Diluted | | $ | 0.45 |
| | $ | 0.41 |
| | $ | 1.25 |
| | $ | 1.18 |
|
| Dividends paid per common share | | $ | 0.34 |
| | $ | 0.28 |
| | $ | 0.98 |
| | $ | 0.64 |
|
| Weighted average number of common shares outstanding | | 57,051 |
| | 52,112 |
| | 57,007 |
| | 51,772 |
|
| Weighted average number of diluted common shares outstanding | | 57,064 |
| | 52,516 |
| | 57,021 |
| | 52,479 |
|
|
| | | | | | | | | | | | | |
| CONSOLIDATED BALANCE SHEETS | | | | | | | |
| Columbia Banking System, Inc. | | | | | | | |
| Unaudited | | | | | September 30, | | December 31, |
| | | | | | 2015 | | 2014 |
| | | | | | (in thousands) |
| ASSETS | | |
| Cash and due from banks | | $ | 149,610 |
| | $ | 171,221 |
|
| Interest-earning deposits with banks | | 22,578 |
| | 16,949 |
|
| Total cash and cash equivalents | | 172,188 |
| | 188,170 |
|
| Securities available for sale at fair value (amortized cost of $2,004,728 and $2,087,069, respectively) | | 2,027,424 |
| | 2,098,257 |
|
| Federal Home Loan Bank stock at cost | | 10,242 |
| | 33,365 |
|
| Loans held for sale | | 6,637 |
| | 1,116 |
|
| Loans, net of unearned income of ($45,436) and ($59,374), respectively | | 5,746,511 |
| | 5,445,378 |
|
| Less: allowance for loan and lease losses | | 69,049 |
| | 69,569 |
|
| Loans, net | | 5,677,462 |
| | 5,375,809 |
|
| FDIC loss-sharing asset | | 8,146 |
| | 15,174 |
|
| Interest receivable | | 30,486 |
| | 27,802 |
|
| Premises and equipment, net | | 168,495 |
| | 172,090 |
|
| Other real estate owned | | 19,456 |
| | 22,190 |
|
| Goodwill | | 382,762 |
| | 382,537 |
|
| Other intangible assets, net | | 25,229 |
| | 30,459 |
|
| Other assets | | 227,457 |
| | 231,877 |
|
| Total assets | | $ | 8,755,984 |
| | $ | 8,578,846 |
|
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | |
| Deposits: | | | | |
| Noninterest-bearing | | $ | 3,386,968 |
| | $ | 2,651,373 |
|
| Interest-bearing | | 3,927,837 |
| | 4,273,349 |
|
| Total deposits | | 7,314,805 |
| | 6,924,722 |
|
| Federal Home Loan Bank advances | | 6,540 |
| | 216,568 |
|
| Securities sold under agreements to repurchase | | 73,182 |
| | 105,080 |
|
| Other borrowings | | | | | — |
| | 8,248 |
|
| Other liabilities | | 107,321 |
| | 96,053 |
|
| Total liabilities | | 7,501,848 |
| | 7,350,671 |
|
| Commitments and contingent liabilities | | | | | | | |
| | September 30, | | December 31, | | | | |
| | 2015 | | 2014 | | | | |
| Preferred stock (no par value) | (in thousands) | | | | |
| Authorized shares | 2,000 |
| | 2,000 |
| | | | |
| Issued and outstanding | 9 |
| | 9 |
| | 2,217 |
| | 2,217 |
|
| Common stock (no par value) | | | | | | | |
| Authorized shares | 115,000 |
| | 63,033 |
| | | | |
| Issued and outstanding | 57,729 |
| | 57,437 |
| | 989,088 |
| | 985,839 |
|
| Retained earnings | | 250,005 |
| | 234,498 |
|
| Accumulated other comprehensive income | | 12,826 |
| | 5,621 |
|
| Total shareholders' equity | | 1,254,136 |
| | 1,228,175 |
|
| Total liabilities and shareholders' equity | | $ | 8,755,984 |
| | $ | 8,578,846 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCES AND RATES | | | | | | | | | | |
| Columbia Banking System, Inc. | | | | | | | | | | |
| Unaudited | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Three Months Ended September 30, |
| | | 2015 | | 2014 (1) |
| | | Average
Balances | | Interest
Earned / Paid | | Average
Rate | | Average
Balances | | Interest
Earned / Paid | | Average
Rate |
| | | (dollars in thousands) |
| ASSETS | | | | | | | | | | | | |
| Loans, net (1)(2)(4) | | $ | 5,712,614 |
| | $ | 73,231 |
| | 5.13 | % | | $ | 4,770,443 |
| | $ | 66,421 |
| | 5.57 | % |
| Taxable securities (3) | | 1,498,211 |
| | 7,472 |
| | 1.99 | % | | 1,224,608 |
| | 8,545 |
| | 2.79 | % |
| Tax exempt securities (4) | | 446,963 |
| | 4,491 |
| | 4.02 | % | | 361,388 |
| | 4,118 |
| | 4.56 | % |
| Interest-earning deposits with banks | | 53,743 |
| | 31 |
| | 0.23 | % | | 95,221 |
| | 61 |
| | 0.26 | % |
| Total interest-earning assets | | 7,711,531 |
| | $ | 85,225 |
| | 4.42 | % | | 6,451,660 |
| | $ | 79,145 |
| | 4.91 | % |
| Other earning assets | | 149,895 |
| | | | | | 131,887 |
| | | | |
| Noninterest-earning assets | | 811,266 |
| | | | | | 753,759 |
| | | | |
| Total assets | | $ | 8,672,692 |
| | | | | | $ | 7,337,306 |
| | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
| Certificates of deposit | | $ | 480,132 |
| | $ | 213 |
| | 0.18 | % | | $ | 460,985 |
| | $ | 288 |
| | 0.25 | % |
| Savings accounts | | 643,672 |
| | 17 |
| | 0.01 | % | | 539,982 |
| | 15 |
| | 0.01 | % |
| Interest-bearing demand | | 916,388 |
| | 158 |
| | 0.07 | % | | 1,201,154 |
| | 117 |
| | 0.04 | % |
| Money market accounts | | 1,870,503 |
| | 368 |
| | 0.08 | % | | 1,645,609 |
| | 293 |
| | 0.07 | % |
| Total interest-bearing deposits | | 3,910,695 |
| | 756 |
| | 0.08 | % | | 3,847,730 |
| | 713 |
| | 0.07 | % |
| Federal Home Loan Bank advances | | 13,968 |
| | 78 |
| | 2.23 | % | | 16,503 |
| | 80 |
| | 1.94 | % |
| Other borrowings | | 82,535 |
| | 137 |
| | 0.66 | % | | 25,000 |
| | 120 |
| | 1.92 | % |
| Total interest-bearing liabilities | | 4,007,198 |
| | $ | 971 |
| | 0.10 | % | | 3,889,233 |
| | $ | 913 |
| | 0.09 | % |
| Noninterest-bearing deposits | | 3,323,168 |
| | | | | | 2,263,079 |
| | | | |
| Other noninterest-bearing liabilities | | 102,496 |
| | | | | | 85,482 |
| | | | |
| Shareholders’ equity | | 1,239,830 |
| | | | | | 1,099,512 |
| | | | |
| Total liabilities & shareholders’ equity | | $ | 8,672,692 |
| | | | | | $ | 7,337,306 |
| | | | |
| Net interest income (tax equivalent) | | $ | 84,254 |
| | | | | | $ | 78,232 |
| | |
| Net interest margin (tax equivalent) | | 4.37 | % | | | | | | 4.85 | % |
| |
| (1) | Adjusted to conform to the current period presentation. The adjustment was limited to including amounts historically disclosed as “Covered loans” in “Loans, net.” |
| |
| (2) | Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on certain acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $1.2 million for both three month periods ended September 30, 2015 and 2014. The incremental accretion on acquired loans was $6.4 million and $9.4 million for the three months ended September 30, 2015 and 2014, respectively. |
| |
| (3) | During the three months ended September 30, 2014, the Company recorded a $2.6 million reversal of premium amortization, which increased interest income on taxable securities. |
| |
| (4) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $989 thousand and $518 thousand for the three months ended September 30, 2015 and 2014, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.6 million and $1.5 million for the three months ended September 30, 2015 and 2014, respectively. |
|
| | | | | | | | | | | | | | | | | | | | | | |
| AVERAGE BALANCES AND RATES | | | | | | | | | | |
| Columbia Banking System, Inc. | | | | | | | | | | |
| Unaudited | | | | | | | | | | | | |
| | | Nine Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2015 | | 2014 (1) |
| | | Average
Balances | | Interest
Earned / Paid | | Average
Rate | | Average
Balances | | Interest
Earned / Paid | | Average
Rate |
| | | (dollars in thousands) |
| ASSETS | | | | | | | | | | | | |
| Loans, net (1)(2)(4) | | $ | 5,557,771 |
| | $ | 217,128 |
| | 5.21 | % | | $ | 4,652,157 |
| | $ | 199,747 |
| | 5.72 | % |
| Taxable securities (3) | | 1,541,018 |
| | 22,258 |
| | 1.93 | % | | 1,278,295 |
| | 21,679 |
| | 2.26 | % |
| Tax exempt securities (4) | | 455,509 |
| | 13,802 |
| | 4.04 | % | | 359,471 |
| | 12,419 |
| | 4.61 | % |
| Interest-earning deposits with banks | | 46,656 |
| | 84 |
| | 0.24 | % | | 55,986 |
| | 105 |
| | 0.25 | % |
| Total interest-earning assets | | 7,600,954 |
| | $ | 253,272 |
| | 4.44 | % | | 6,345,909 |
| | $ | 233,950 |
| | 4.92 | % |
| Other earning assets | | 148,189 |
| | | | | | 129,819 |
| | | | |
| Noninterest-earning assets | | 821,682 |
| | | | | | 761,731 |
| | | | |
| Total assets | | $ | 8,570,825 |
| | | | | | $ | 7,237,459 |
| | | | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
| Certificates of deposit | | $ | 490,720 |
| | $ | 689 |
| | 0.19 | % | | $ | 481,370 |
| | $ | 975 |
| | 0.27 | % |
| Savings accounts | | 631,979 |
| | 53 |
| | 0.01 | % | | 527,183 |
| | 42 |
| | 0.01 | % |
| Interest-bearing demand | | 1,003,544 |
| | 451 |
| | 0.06 | % | | 1,185,831 |
| | 340 |
| | 0.04 | % |
| Money market accounts | | 1,813,282 |
| | 1,051 |
| | 0.08 | % | | 1,615,162 |
| | 837 |
| | 0.07 | % |
| Total interest-bearing deposits | | 3,939,525 |
| | 2,244 |
| | 0.08 | % | | 3,809,546 |
| | 2,194 |
| | 0.08 | % |
| Federal Home Loan Bank advances | | 88,121 |
| | 391 |
| | 0.59 | % | | 51,634 |
| | 309 |
| | 0.80 | % |
| Other borrowings | | 92,169 |
| | 419 |
| | 0.61 | % | | 25,000 |
| | 358 |
| | 1.91 | % |
| Total interest-bearing liabilities | | 4,119,815 |
| | $ | 3,054 |
| | 0.10 | % | | 3,886,180 |
| | $ | 2,861 |
| | 0.10 | % |
| Noninterest-bearing deposits | | 3,108,293 |
| | | | | | 2,185,062 |
| | | | |
| Other noninterest-bearing liabilities | | 99,864 |
| | | | | | 82,168 |
| | | | |
| Shareholders’ equity | | 1,242,853 |
| | | | | | 1,084,049 |
| | | | |
| Total liabilities & shareholders’ equity | | $ | 8,570,825 |
| | | | | | $ | 7,237,459 |
| | | | |
| Net interest income (tax equivalent) | | $ | 250,218 |
| | | | | | $ | 231,089 |
| | |
| Net interest margin (tax equivalent) | | 4.39 | % | | | | | | 4.86 | % |
| |
| (1) | Adjusted to conform to the current period presentation. The adjustment was limited to including amounts historically disclosed as “Covered loans” in “Loans, net.” |
| |
| (2) | Nonaccrual loans have been included in the table as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on certain acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $3.8 million and $3.3 million for the nine months ended September 30, 2015 and 2014, respectively. The incremental accretion on certain loans was $21.2 million and $33.0 million for the nine months ended September 30, 2015 and 2014, respectively. |
| |
| (3) | During the nine months ended September 30, 2014, the Company recorded a $2.6 million reversal of premium amortization, which increased interest income on taxable securities. |
| |
| (4) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.3 million and $1.3 million for the nine months ended September 30, 2015 and 2014, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.8 million and $4.5 million for the nine months ended September 30, 2015 and 2014, respectively. |
Non-GAAP Financial Measures
The Company considers its operating net interest margin and operating efficiency ratios to be important measurements as they more closely reflect the ongoing operating performance of the Company. Despite the importance of the operating net interest margin and operating efficiency ratio to the Company, there are no standardized definitions for them and, as a result, the Company’s calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of these measures to investors. As a result, 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 September 30, | | Nine Months Ended September 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| Operating net interest margin non-GAAP reconciliation: | | (dollars in thousands) |
| Net interest income (tax equivalent) (1) | | $ | 84,254 |
| | $ | 78,232 |
| | $ | 250,218 |
| | $ | 231,089 |
|
| Adjustments to arrive at operating net interest income (tax equivalent): | | | | | | | | |
| Incremental accretion income on FDIC purchased credit impaired loans | | (2,082 | ) | | (4,205 | ) | | (6,896 | ) | | (16,428 | ) |
| Incremental accretion income on other FDIC acquired loans | | (34 | ) | | (175 | ) | | (166 | ) | | (474 | ) |
| Incremental accretion income on other acquired loans | | (4,293 | ) | | (5,040 | ) | | (14,116 | ) | | (16,136 | ) |
| Premium amortization on acquired securities | | 2,396 |
| | 1,454 |
| | 7,964 |
| | 4,633 |
|
| Correction of immaterial error - securities premium amortization | | — |
| | (2,622 | ) | | — |
| | (2,622 | ) |
| Interest reversals on nonaccrual loans | | 325 |
| | 423 |
| | 1,131 |
| | 1,103 |
|
| Operating net interest income (tax equivalent) (1) | | $ | 80,566 |
| | $ | 68,067 |
| | $ | 238,135 |
| | $ | 201,165 |
|
| Average interest earning assets | | $ | 7,711,531 |
| | $ | 6,451,660 |
| | $ | 7,600,954 |
| | $ | 6,345,909 |
|
| Net interest margin (tax equivalent) (1) | | 4.37 | % | | 4.85 | % | | 4.39 | % | | 4.86 | % |
| Operating net interest margin (tax equivalent) (1) | | 4.18 | % | | 4.22 | % | | 4.18 | % | | 4.23 | % |
|
| | | | | | | | | | | | | | | | |
| | | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | | 2015 | | 2014 | | 2015 | | 2014 |
| Operating efficiency ratio non-GAAP reconciliation: | | (dollars in thousands) |
| Noninterest expense (numerator A) | | $ | 64,067 |
| | $ | 59,982 |
| | $ | 199,272 |
| | $ | 175,132 |
|
| Adjustments to arrive at operating noninterest expense: | | | | | | | | |
| Acquisition-related expenses | | (428 | ) | | (3,238 | ) | | (9,045 | ) | | (4,876 | ) |
| Net benefit of operation of OREO and OPPO | | (228 | ) | | 1,247 |
| | 1,574 |
| | 1,342 |
|
| FDIC clawback liability expense | | (174 | ) | | (201 | ) | | (167 | ) | | (302 | ) |
| Loss on asset disposals | | (274 | ) | | (106 | ) | | (381 | ) | | (557 | ) |
| State of Washington Business and Occupation ("B&O") taxes | | (1,212 | ) | | (1,069 | ) | | (3,668 | ) | | (3,116 | ) |
| Operating noninterest expense (numerator B) | | $ | 61,751 |
| | $ | 56,615 |
| | $ | 187,585 |
| | $ | 167,623 |
|
| | | | | | | | | |
| Net interest income (tax equivalent) (1) | | $ | 84,254 |
| | $ | 78,232 |
| | $ | 250,218 |
| | $ | 231,089 |
|
| Noninterest income | | 22,499 |
| | 15,930 |
| | 66,728 |
| | 44,565 |
|
| Bank owned life insurance tax equivalent adjustment | | 585 |
| | 544 |
| | 1,815 |
| | 1,649 |
|
| Total revenue (tax equivalent) (denominator A) | | $ | 107,338 |
| | $ | 94,706 |
| | $ | 318,761 |
| | $ | 277,303 |
|
| | | | | | | | | |
| Operating net interest income (tax equivalent) (1) | | $ | 80,566 |
| | $ | 68,067 |
| | $ | 238,135 |
| | $ | 201,165 |
|
| Adjustments to arrive at operating noninterest income (tax equivalent): | | | | | | | | |
| Investment securities gains, net | | (236 | ) | | (33 | ) | | (1,300 | ) | | (552 | ) |
| Gain on asset disposals | | (120 | ) | | (28 | ) | | (125 | ) | | (78 | ) |
| Change in FDIC loss-sharing asset | | 1,635 |
| | 4,816 |
| | 2,979 |
| | 14,685 |
|
| Operating noninterest income (tax equivalent) | | 24,363 |
| | 20,664 |
| | 70,097 |
| | 59,704 |
|
| Total operating revenue (tax equivalent) (denominator B) | | $ | 104,929 |
| | $ | 88,731 |
| | $ | 308,232 |
| | $ | 260,869 |
|
| Efficiency ratio (tax equivalent) (numerator A/denominator A) | | 59.69 | % | | 63.33 | % | | 62.51 | % | | 63.16 | % |
| Operating efficiency ratio (tax equivalent) (numerator B/denominator B) | | 58.85 | % | | 63.81 | % | | 60.86 | % | | 64.26 | % |
__________
(1) Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $2.6 million and $2.0 million for the three months ended September 30, 2015 and 2014, respectively, and an addition to net interest income of $7.2 million and $5.8 million for the nine months ended September 30, 2015 and 2014, respectively.
