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4-Traders Homepage  >  Equities  >  Nasdaq  >  Columbia Banking System Inc    COLB

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COLUMBIA BANKING SYSTEM : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

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11/08/2017 | 12:06pm CET
This discussion should be read in conjunction with the unaudited Consolidated
Financial Statements of Columbia Banking System, Inc. (referred to in this
report as "we", "our", "Columbia" and "the Company") and notes thereto presented
elsewhere in this report and with the December 31, 2016 audited Consolidated
Financial Statements and its accompanying notes included in our Annual Report on
Form 10-K. In the following discussion, unless otherwise noted, references to
increases or decreases in average balances in items of income and expense for a
particular period and balances at a particular date refer to the comparison with
corresponding amounts for the period or date one year earlier.
              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include, but are not limited to, statements about our
plans, objectives, expectations and intentions that are not historical facts,
and statements identified by words such as "expects," "anticipates," "intends,"
"plans," "believes," "should," "projects," "seeks," "estimates" or the negative
version of those words or other comparable words or phrases of a future or
forward-looking nature. Forward-looking statements are based on current beliefs
and expectations of management and are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond our control. In addition, forward-looking statements are
subject to assumptions with respect to future business strategies and decisions
that are subject to change. In addition to the factors set forth in the section
titled "Management's Discussion and Analysis of Financial Condition and Results
of Operations" in this report and the factors set forth in the section titled
"Risk Factors" in the Company's Form 10-K, the following factors, among others,
could cause actual results to differ materially from the anticipated results
expressed or implied by forward-looking statements:
•      national and global economic conditions could be less favorable than
       expected or could have a more direct and pronounced effect on us than

expected and adversely affect our ability to continue internal growth and

maintain the quality of our earning assets;

• the housing/real estate markets where we operate and make loans could face

challenges;

• the risks presented by the economy, which could adversely affect credit

quality, collateral values, including real estate collateral, investment

values, liquidity and loan originations and loan portfolio delinquency

       rates;


•      the efficiencies and enhanced financial and operating performance we

expect to realize from investments in personnel, acquisitions (including

       the acquisition of Pacific Continental Corporation ("Pacific
       Continental")), and infrastructure may not be realized;

• the ability to successfully integrate Pacific Continental, or to integrate

future acquired entities;

• interest rate changes could significantly reduce net interest income and

negatively affect funding sources;

• projected business increases following strategic expansion could be lower

than expected;

• changes in the scope and cost of Federal Deposit Insurance Corporation

("FDIC") insurance and other coverages;

• the impact of acquired loans, including purchased credit impaired loans,

on our earnings;

• changes in laws and regulations affecting our businesses, including

changes in the enforcement and interpretation of such laws and regulations

by applicable governmental and regulatory agencies;

• competition among financial institutions and nontraditional providers of

financial services could increase significantly;

• continued consolidation in the Northwest financial services industry

resulting in the creation of larger financial institutions that may have

greater resources could change the competitive landscape;

• the goodwill we have recorded in connection with acquisitions could become

impaired, which may have an adverse impact on our earnings and capital;

• our ability to identify and address cyber-security risks, including

security breaches, "denial of service attacks," "hacking" and identity

theft;

• any material failure or interruption of our information and communications

systems or inability to keep pace with technological changes;

• our ability to effectively manage credit risk, interest rate risk, market

       risk, operational risk, legal risk, liquidity risk and regulatory and
       compliance risk;


•      the effect of geopolitical instability, including wars, conflicts and
       terrorist attacks;

• our profitability measures could be adversely affected if we are unable to

effectively manage our capital;

• natural disasters, including earthquakes, tsunamis, flooding, fires and

other unexpected events; and

• the effects of any damage to our reputation resulting from developments

       related to any of the items identified above.



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You should take into account that forward-looking statements speak only as of
the date of this report. Given the described uncertainties and risks, we cannot
guarantee our future performance or results of operations and you should not
place undue reliance on 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, except as required under federal
securities laws.
CRITICAL ACCOUNTING POLICIES
Management has identified the accounting policies related to the allowance for
loan and lease losses (the "allowance"), business combinations and the valuation
and recoverability of goodwill as critical to an understanding of our financial
statements. These policies and related estimates are discussed in "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" under the headings "Allowance for Loan and Lease Losses," "Business
Combinations" and "Valuation and Recoverability of Goodwill" in our 2016 Annual
Report on Form 10-K. There have not been any material changes in our critical
accounting policies as compared to those disclosed in our 2016 Annual Report on
Form 10-K.
RESULTS OF OPERATIONS
Our results of operations are dependent to a large degree on our net interest
income. We also generate noninterest income from our broad range of products and
services including treasury management, wealth management and debit and credit
cards. Our operating expenses consist primarily of compensation and employee
benefits, occupancy, data processing and legal and professional fees. Like most
financial institutions, our interest income and cost of funds are affected
significantly by general economic conditions, particularly changes in market
interest rates, and by government policies and actions of regulatory
authorities.
Earnings Summary
Comparison of current quarter to prior year period
The Company reported net income for the third quarter of $40.8 million or $0.70
per diluted common share, compared to $27.5 million or $0.47 per diluted common
share for the third quarter of 2016. Net interest income for the three months
ended September 30, 2017 was $88.9 million, an increase of $3.4 million from the
prior year period. The increase was a result of higher interest income on loans
primarily due to higher loan volumes. Noninterest income for the current quarter
was $37.1 million, an increase of $13.9 million from the prior year period. The
increase was primarily due to the $14.0 million gain on the sale of the merchant
card services portfolio.
The provision for loan and lease losses for the third quarter of 2017 was a net
recapture of $648 thousand compared to a provision of $1.9 million during the
third quarter of 2016. The provision recapture recorded in the third quarter of
2017 was due to the recording of a $175 thousand provision recapture on loans,
excluding PCI loans, and a $473 thousand provision recapture related to PCI
loans.
Total noninterest expense for the quarter ended September 30, 2017 was $67.5
million, an increase from $67.3 million for the third quarter of 2016. The
increase from the prior year period was primarily due to due to higher
compensation and benefits expense in the current quarter as well as $1.2 million
higher acquisition-related expenses, partially offset by decreases in
advertising and promotion and merchant processing expenses.
Comparison of current year-to-date to prior year period
Net interest income for the nine months ended September 30, 2017 was $261.8
million, an increase of $13.9 million from the prior year period. The increase
was due to higher loan and securities volumes and lower market-driven premium
amortization on securities, partially offset by lower incremental accretion
income on loans. Noninterest income for the current period was $86.1 million, an
increase of $20.3 million from the prior year period. The increase was due to
the previously noted $14.0 million gain on the sale of the merchant card
services portfolio, lower expense related to our FDIC loss-sharing agreements
and higher other noninterest income.
The provision for loan and lease losses for the nine months ended September 30,
2017 was $5.3 million compared to a provision of $10.8 million for the first
nine months of 2016. The $5.3 million provision was due to recording a provision
of $6.8 million for loans, excluding PCI loans, and a provision recapture of
$1.5 million related to PCI loans.
Total noninterest expense for the nine months ended September 30, 2017 was
$205.4 million, a 5% increase from the prior year period. The increase from the
prior year period was driven by increased compensation and employee benefits
expense, a $2.4 million charge recorded in the current year related to our early
termination of FDIC loss share agreements and higher acquisition-related
expenses.

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Net Interest Income
The following table sets forth the average balances of all major categories of
interest-earning assets and interest-bearing liabilities, the total dollar
amounts of interest income on interest-earning assets and interest expense on
interest-bearing liabilities, the average yield earned on interest-earning
assets and average cost of interest-bearing liabilities by category and, in
total, net interest income and net interest margin:
                                      Three Months Ended September 30,                   Three Months Ended September 30,
                                                    2017                                               2016
                                   Average            Interest        Average         Average            Interest        Average
                                  Balances          Earned / Paid       Rate         Balances          Earned / Paid       Rate
                                                                    (dollars in thousands)
ASSETS
Loans, net (1)(2)             $     6,441,537     $        80,136       4.98 %   $     6,179,163     $        76,195       4.93 %
Taxable securities                  1,784,407               8,718       1.95 %         1,870,466               8,988       1.92 %
Tax exempt securities (2)             451,828               4,181       3.70 %           480,627               4,306       3.58 %
Interest-earning deposits
with banks                             72,789                 226       1.24 %            14,620                  15       0.41 %
Total interest-earning
assets                              8,750,561     $        93,261       4.26 %         8,544,876     $        89,504       4.19 %
Other earning assets                  173,611                                            155,663
Noninterest-earning assets            770,833                                            792,912
Total assets                  $     9,695,005                                    $     9,493,451
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit       $       382,299     $            92       0.10 %   $       417,887     $           124       0.12 %
Savings accounts                      766,540                  19       0.01 %           705,923                  18       0.01 %
Interest-bearing demand             1,000,079                 223       0.09 %           961,527                 189       0.08 %
Money market accounts               2,051,662                 749       0.15 %         2,033,450                 492       0.10 %
Total interest-bearing
deposits                            4,200,580               1,083       0.10 %         4,118,787                 823       0.08 %
Federal Home Loan Bank
advances                               33,687                 163       1.94 %            96,931                 229       0.95 %
Other borrowings                       51,669                 128       0.99 %            79,767                 134       0.67 %
Total interest-bearing
liabilities                         4,285,936     $         1,374       0.13 %         4,295,485     $         1,186       0.11 %
Noninterest-bearing
deposits                            3,986,757                                          3,799,745
Other noninterest-bearing
liabilities                            98,518                                            119,633
Shareholders' equity                1,323,794                                          1,278,588
Total liabilities &
shareholders' equity          $     9,695,005                                    $     9,493,451
Net interest income (tax equivalent)              $        91,887                                    $        88,318
Net interest margin (tax equivalent)                                    4.20 %                                             4.13 %


__________

(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 $1.8 million and $1.4 million for

the three month periods ended September 30, 2017 and 2016, respectively. The

incremental accretion income on acquired loans was $2.9 million and $4.6

million for the three months ended September 30, 2017 and 2016, respectively.

(2) Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent

yield adjustment to interest earned on loans was $1.5 million and $1.2

million for the three months ended September 30, 2017 and 2016, respectively.

    The tax equivalent yield adjustment to interest earned on tax exempt
    securities was $1.5 million for both the three month periods ended
    September 30, 2017 and 2016.



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The following table sets forth the average balances of all major categories of
interest-earning assets and interest-bearing liabilities, the total dollar
amounts of interest income on interest-earning assets and interest expense on
interest-bearing liabilities, the average yield earned on interest-earning
assets and average cost of interest-bearing liabilities by category and, in
total, net interest income and net interest margin:
                                         Nine Months Ended September 30,                         Nine Months Ended September 30,
                                                      2017                                                    2016
                                     Average               Interest        Average           Average               Interest        Average
                                     Balances            Earned / Paid       Rate            Balances            Earned / Paid       Rate
                                                                         (dollars in thousands)
ASSETS
Loans, net (1)(2)             $     6,322,629          $       232,680       4.91 %   $     6,002,656          $       220,445       4.90 %
Taxable securities                  1,835,693                   29,172       2.12 %         1,787,288                   25,834       1.93 %
Tax exempt securities (2)             451,636                   12,500       3.69 %           466,589                   12,918       3.69 %
Interest-earning deposits
with banks                             31,748                      268       1.13 %            23,106                       81       0.47 %
Total interest-earning
assets                              8,641,706          $       274,620       4.24 %         8,279,639          $       259,278       4.18 %
Other earning assets                  174,898                                                 154,950
Noninterest-earning assets            772,865                                                 790,877
Total assets                  $     9,589,469                                         $     9,225,466
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit       $       389,260          $           282       0.10 %   $       431,643          $           408       0.13 %
Savings accounts                      753,577                       57       0.01 %           691,379                       53       0.01 %
Interest-bearing demand               985,625                      574       0.08 %           946,437                      541       0.08 %
Money market accounts               2,019,278                    1,865       0.12 %         1,973,646                    1,350       0.09 %
Total interest-bearing
deposits                            4,147,740                    2,778       0.09 %         4,043,105                    2,352       0.08 %
Federal Home Loan Bank
advances                              103,369                      979       1.26 %           103,023                      594       0.77 %
Other borrowings                       54,577                      383       0.94 %            82,403                      407       0.66 %
Total interest-bearing
liabilities                         4,305,686          $         4,140       0.13 %         4,228,531          $         3,353       0.11 %
Noninterest-bearing
deposits                            3,889,065                                               3,619,994
Other noninterest-bearing
liabilities                           100,820                                                 108,680
Shareholders' equity                1,293,898                                               1,268,261
Total liabilities &
shareholders' equity          $     9,589,469                                         $     9,225,466
Net interest income (tax equivalent)                   $       270,480                                         $       255,925
Net interest margin (tax equivalent)                                         4.17 %                                                  4.12 %


__________

(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 $5.2 million and $3.6 million for

the nine months ended September 30, 2017 and 2016, respectively. The

incremental accretion income on acquired loans was $10.0 million and $13.7

million for the nine months ended September 30, 2017 and 2016, respectively.

(2) Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent

yield adjustment to interest earned on loans was $4.3 million and $3.5

million for the nine months ended September 30, 2017 and 2016, respectively.

    The tax equivalent yield adjustment to interest earned on tax exempt
    securities was $4.4 million and $4.5 million for the nine months ended
    September 30, 2017 and 2016, respectively.



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The following table sets forth the total dollar amount of change in interest
income and interest expense. The changes have been segregated for each major
category of interest-earning assets and interest-bearing liabilities into
amounts attributable to changes in volume and changes in rates. Changes
attributable to the combined effect of volume and interest rates have been
allocated proportionately to the changes due to volume and the changes due to
interest rates:
                                            Three Months Ended September 30,
                                                 2017 Compared to 2016
                                               Increase (Decrease) Due to
                                          Volume            Rate          Total
                                                     (in thousands)
Interest Income
Loans, net                             $    3,259       $      682      $ 3,941
Taxable securities                           (419 )            149         (270 )
Tax exempt securities                        (263 )            138         (125 )
Interest earning deposits with banks          142               69          211
Interest income                        $    2,719       $    1,038      $ 3,757
Interest Expense
Deposits:
Certificates of deposit                $      (10 )     $      (22 )    $   (32 )
Savings accounts                                2               (1 )          1
Interest-bearing demand                         8               26           34
Money market accounts                           4              253          257
Total interest on deposits                      4              256          260
Federal Home Loan Bank advances              (210 )            144          (66 )
Other borrowings                               26              (32 )         (6 )
Interest expense                       $     (180 )     $      368      $   188


The following table sets forth the total dollar amount of change in interest
income and interest expense. The changes have been segregated for each major
category of interest-earning assets and interest-bearing liabilities into
amounts attributable to changes in volume and changes in rates. Changes
attributable to the combined effect of volume and interest rates have been
allocated proportionately to the changes due to volume and the changes due to
interest rates:
                                            Nine Months Ended September 30,
                                                 2017 Compared to 2016
                                              Increase (Decrease) Due to
                                           Volume           Rate        Total
                                                    (in thousands)
Interest Income
Loans, net                             $    11,774       $    461     $ 12,235
Taxable securities                             715          2,623        3,338
Tax exempt securities                         (414 )           (4 )       (418 )
Interest earning deposits with banks            39            148          187
Interest income                        $    12,114       $  3,228     $ 15,342
Interest Expense
Deposits:
Certificates of deposit                $       (38 )     $    (88 )   $   (126 )
Savings accounts                                 5             (1 )          4
Interest-bearing demand                         23             10           33
Money market accounts                           32            483          515
Total interest on deposits                      22            404          426
Federal Home Loan Bank advances                  2            383          385
Other borrowings                               104           (128 )        (24 )
Interest expense                       $       128       $    659     $    787



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The following table shows the impact to interest income of incremental accretion
income as well as the net interest margin and operating net interest margin for
the periods presented:
                                       Three Months Ended September 30,           Nine Months Ended September 30,
                                          2017                   2016                2017                 2016
                                                                (dollars in

thousands)

Incremental accretion income due
to:
FDIC purchased credit impaired
loans                              $           972         $         1,816     $        3,842       $        4,773
Other acquired loans                         1,903                   2,749              6,207                8,896
Incremental accretion income       $         2,875         $         4,565     $       10,049       $       13,669

Net interest margin (tax
equivalent)                                   4.20 %                  4.13 %             4.17 %               4.12 %
Operating net interest
margin (tax equivalent) (1)                   4.15 %                  4.03 %             4.11 %               4.02 %


__________
(1) Operating net interest margin (tax equivalent) is a non-GAAP measurement.
See Non-GAAP measures section of Item 2, Management's Discussion and Analysis.
Comparison of current quarter to prior year period
Net interest income for the third quarter of 2017 was $88.9 million, up from
$85.6 million for the same quarter in 2016. The increase was primarily due to
higher loan interest income, driven principally by higher loan volumes,
partially offset by lower incremental accretion income on loans. As shown in the
table above, incremental accretion income continued to decline which was
reflective of the decrease in volume of acquired loans. Average interest-earning
assets were up $205.7 million from the prior year period due to loan growth. The
Company's net interest margin (tax equivalent) increased to 4.20% in the third
quarter of 2017, from 4.13% for the prior year period. This increase was due to
higher loan volumes, partially offset by lower incremental accretion. The
Company's operating net interest margin (tax equivalent) (see footnote 1 in
prior table) increased to 4.15% from 4.03% due to higher loan and security
volumes.
Comparison of current year-to-date to prior year period
Net interest income for the nine months ended September 30, 2017 was $261.8
million, an increase of 6% from $247.9 million for the prior year period. The
increase in net interest income was due to higher loan and securities volumes
and lower market-driven premium amortization on securities, partially offset by
lower incremental accretion income on loans. The Company's net interest margin
(tax equivalent) increased to 4.17% for the first nine months of 2017, from
4.12% for the prior year period. The increase in the Company's net interest
margin (tax equivalent) was driven by higher loan volumes and lower premium
amortization on taxable securities, partially offset by lower accretion income
on acquired loans. As shown in the table above, the Company recorded $10.0
million in total incremental accretion during the nine months ended
September 30, 2017, a decrease of $3.6 million from the prior year period. The
Company's operating net interest margin (tax equivalent) for the nine months
ended September 30, 2017 increased to 4.11% from 4.02% also due to higher loan
volumes and lower premium amortization on taxable securities (see footnote 1 in
prior table).
Provision for Loan and Lease Losses
Comparison of current quarter to prior year period
During the third quarter of 2017, the Company recorded a $648 thousand net
provision recapture compared to a $1.9 million provision expense during the
third quarter of 2016. The $648 thousand net provision recapture for loan and
lease losses recorded during the current quarter was due to provision recaptures
of $473 thousand for PCI loans and $175 thousand for loans, excluding PCI loans.
The $175 thousand net provision recapture for loans, excluding PCI loans, was
due to a decrease in specific reserve driven by additional collateral being
applied, partially offset by growth in the loan portfolio and net charge-off
activity. The provision recapture recorded relating to PCI loans was due to the
increase in the present value of expected future cash flows as remeasured during
the current quarter, compared to the present value of expected future cash flows
measured during the second quarter of 2017. The amount of provision was
calculated in accordance with the Company's methodology for determining the
allowance, discussed in Note 5 to the Consolidated Financial Statements in "Item
1. Financial Statements (unaudited)" of this report.

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Comparison of current year-to-date to prior year period
The provision for loan and lease losses for the nine months ended September 30,
2017 was $5.3 million compared to $10.8 million during the same period in 2016.
The $5.3 million provision expense for loans recorded for the current
year-to-date period included a provision of $6.8 million for loans, excluding
PCI loans and a provision recapture of $1.5 million related to PCI loans. The
provision of $6.8 million related to loans, excluding PCI loans, was due to the
combination of loan growth and net loan charge-offs experienced in the period.
The $1.5 million in provision recapture for PCI loans was primarily due to the
increase in the present value of expected future cash flows as remeasured during
the current period, compared to the present value of expected future cash flows
at the end of 2016, net of activity during the period. The amount of provision
was calculated in accordance with the Company's methodology for determining the
allowance, discussed in Note 5 to the Consolidated Financial Statements in "Item
1. Financial Statements (unaudited)" of this report.
Noninterest Income
The following table presents the significant components of noninterest income
and the related dollar and percentage change from period to period:
                           Three Months Ended September 30,                 

Nine Months Ended September 30,

                      2017         2016       $ Change    % Change       2017         2016       $ Change    % Change
                                                         (dollars in thousands)
Deposit account
and treasury
management fees    $  7,685     $  7,222     $    463          6  %   $ 22,368     $ 21,304     $  1,064          5  %
Card revenue          6,735        6,114          621         10  %     18,660       17,817          843          5  %
Financial
services and
trust revenue         2,645        2,746         (101 )       (4 )%      8,520        8,347          173          2  %
Loan revenue          3,154        2,949          205          7  %      9,736        8,013        1,723         22  %
Merchant
processing
revenue                   -        2,352       (2,352 )     (100 )%      4,283        6,726       (2,443 )      (36 )%
Bank owned life
insurance             1,290        1,073          217         20  %      4,003        3,459          544         16  %
Investment
securities gains          -          572         (572 )     (100 )%          -        1,174       (1,174 )     (100 )%
Change in FDIC
loss-sharing
asset                     -         (104 )        104       (100 )%       (447 )     (2,197 )      1,750        (80 )%
Gain on sale of
merchant card
services
portfolio            14,000            -       14,000          -  %     14,000            -       14,000          -  %
Other                 1,558          242        1,316        544  %      4,938        1,109        3,829        345  %
Total
noninterest
income             $ 37,067     $ 23,166     $ 13,901         60  %   $ 

86,061 $ 65,752 $ 20,309 31 %


Comparison of current quarter to prior year period
Noninterest income was $37.1 million for the third quarter of 2017, compared to
$23.2 million for the same period in 2016. The increase was primarily due to the
$14.0 million gain on the sale of the merchant card services portfolio. As a
result of that sale, we now share with the buyer in merchant services revenue
and include such amounts in "Card revenue." For the current quarter, this net
revenue share was $438 thousand. Also contributing to the increase in
noninterest income was higher other noninterest income, principally from a
current quarter BOLI benefit of $1.0 million, with no such BOLI benefit in the
prior year period.
Comparison of current year-to-date to prior year period
For the nine months ended September 30, 2017, noninterest income was $86.1
million compared to $65.8 million for the same period in 2016. The increase was
due to the previously noted $14.0 million gain on the sale of the merchant card
services portfolio, lower expense related to our FDIC loss-sharing agreements
and higher other noninterest income. The lower expense recorded for the change
in FDIC loss-sharing asset was due to lower amortization expense in the current
year. For additional information on our FDIC loss-sharing agreements, see Note 7
to the Consolidated Financial Statements in "Item 1. Financial Statements
(unaudited)" of this report. The increase in other noninterest income was
principally from higher current period BOLI benefit of $3.0 million, with only
$254 thousand BOLI benefit in the prior year period.

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Noninterest Expense
The following table presents the significant components of noninterest expense
and the related dollar and percentage change from period to period:
                               Three Months Ended September 30,                     Nine Months Ended September 30,
                         2017          2016       $ Change     % Change       2017          2016        $ Change    % Change
                                                              (dollars in thousands)
Compensation and
employee benefits     $  39,983     $ 38,476     $   1,507          4  %   $ 119,201     $ 112,086     $  7,115          6  %
All other
noninterest
expense:
Occupancy                 8,085        8,219          (134 )       (2 )%      22,853        26,044       (3,191 )      (12 )%
Merchant processing
expense                       -        1,161        (1,161 )     (100 )%       2,196         3,312       (1,116 )      (34 )%
Advertising and
promotion                   969        1,993        (1,024 )      (51 )%       2,923         3,878         (955 )      (25 )%
Data processing           4,122        4,275          (153 )       (4 )%      13,071        12,350          721          6  %
Legal and
professional
services                  2,880        2,264           616         27  %       9,196         5,366        3,830         71  %
Taxes, license and
fees                      1,505        1,491            14          1  %       3,494         4,079         (585 )      (14 )%
Regulatory premiums         782          776             6          1  %       2,299         2,985         (686 )      (23 )%
Net cost (benefit)
of operation of
other real estate
owned                       271         (249 )         520       (209 )%         422           (61 )        483       (792 )%
Amortization of
intangibles               1,188        1,460          (272 )      (19 )%       3,786         4,526         (740 )      (16 )%
Other                     7,752        7,398           354          5  %      25,949        21,563        4,386         20  %
Total all other
noninterest expense      27,554       28,788        (1,234 )       (4 )%      86,189        84,042        2,147          3  %
Total noninterest
expense               $  67,537     $ 67,264     $     273          -  %   

$ 205,390 $ 196,128 $ 9,262 5 %

The following table shows the impact of the acquisition-related expenses for the periods indicated to the various components of noninterest expense:

                                                       Three Months Ended              Nine Months Ended
                                                          September 30,                  September 30,
                                                       2017            2016            2017           2016
                                                                        (in

thousands)

Acquisition-related expenses:
Compensation and employee benefits                $           3     $       -     $        3        $    35
Occupancy                                                   593             -            945          2,383
Advertising and promotion                                   184             -            201              -
Data processing                                              66             -            539             18
Legal and professional fees                                 157             -          1,587              -
Taxes, licenses and fees                                      -             -              3              -
Other                                                       168             -            280              -
Total impact of acquisition-related expense to
noninterest expense                               $       1,171     $       -     $    3,558        $ 2,436
Acquisition-related expenses by transaction:
Pacific Continental (1)                           $       1,171     $       -     $    3,558        $     -
Intermountain                                                 -             -              -          2,436
Total impact of acquisition-related expense to
noninterest expense                               $       1,171     $       -     $    3,558        $ 2,436


__________
(1) The Company completed the acquisition of Pacific Continental on November 1,
2017. See Note 15 of the Consolidated Financial Statements in "Item 1. Financial
Statements (unaudited)" of this report for further information regarding this
acquisition.

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Comparison of current quarter to prior year period
Total noninterest expense for the third quarter of 2017 was $67.5 million, an
increase of $273 thousand from the prior year period. The increase was due to
higher compensation and benefits expense in the current quarter as well as $1.2
million higher acquisition-related expenses, partially offset by decreases in
advertising and promotion and merchant processing expenses. With respect to the
latter, beginning July 1, 2017, the Company no longer directly incurs such
costs.
Comparison of current year-to-date to prior year period
For the nine months ended September 30, 2017, noninterest expense was $205.4
million, an increase of $9.3 million, or 5% from $196.1 million a year earlier.
In addition to the $2.4 million charge related to our FDIC loss share agreement
termination, the increase from the prior year period was driven by higher
compensation and employee benefits due to recognizing additional incentive
expense from solid loan production, deposit growth and financial performance,
higher stock compensation expense and salary increases. The increase in stock
compensation expense related to the immediate vesting of certain restricted
share awards. In addition, legal and professional fees were higher due to costs
from our investment in a customer relationship management application, the
search for certain executive level positions and acquisition-related expenses.
Also contributing to the increased noninterest expense was higher miscellaneous
other noninterest expense due to the recording of an additional $775 thousand
for the allowance for unfunded commitments and letters of credit in the current
year compared to a provision recapture of $25 thousand in the prior year period.
The following table presents selected items included in "Other" noninterest
expense and the associated change from period to period:

                                Three Months Ended         Increase                                               Increase
                                   September 30,          (Decrease)       

Nine Months Ended September 30, (Decrease)

                                 2017          2016         Amount            2017                 2016            Amount
                                                                      (in thousands)
Postage                      $      517     $    499     $      18      $        1,577       $        1,630     $       (53 )
Software support and
maintenance                       1,386        1,231           155               3,957                3,500             457
Supplies                            348          353            (5 )             1,268                1,064             204
Loan expenses                       780          587           193               1,363                1,277              86
Dues and subscriptions              304          310            (6 )             1,109                  927             182
Insurance                           459          484           (25 )             1,370                1,441             (71 )
Card expenses                     1,035          683           352               2,383                2,053             330
Travel and entertainment            826          874           (48 )             2,369                2,490            (121 )
Employee expenses                   328          288            40               1,067                  943             124
Sponsorships and
charitable contributions            378          593          (215 )             1,640                1,737             (97 )
Directors fees                      189          181             8                 750                  562             188
Correspondent bank
processing fees                     129          142           (13 )               397                  417             (20 )
Investor relations                   42           25            17                 228                  189              39
Other personal property
owned                                 -           (5 )           5                  (2 )                 (7 )             5
FDIC clawback expense
(recovery)                            -           29           (29 )               (54 )                308            (362 )
Fraud losses                        156          209           (53 )               698                  376             322
Termination of FDIC loss
share agreements charge               -            -             -               2,409                    -           2,409
Miscellaneous                       875          915           (40 )             3,420                2,656             764
Total other noninterest
expense                      $    7,752     $  7,398     $     354      $       25,949       $       21,563     $     4,386



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Income Taxes
We recorded an income tax provision of $18.3 million for the third quarter of
2017, compared to a provision of $12.1 million for the same period in 2016, with
effective tax rates of 31% for both periods. For the nine months ended
September 30, 2017 and 2016, we recorded income tax provisions of $40.0 million
and $32.6 million, respectively, with effective tax rates of 29% for the current
year and 31% for the prior year period. Our effective tax rate remains lower
than the statutory tax rate due to the amount of tax-exempt municipal securities
held in the investment portfolio, tax-exempt earnings on bank owned life
insurance and loans with favorable tax attributes. In addition, our effective
tax rate was reduced in the current year due to the adoption of new share-based
payment accounting (ASU 2016-09). For additional information, please refer to
the Company's annual report on Form 10-K for the year ended December 31, 2016
and Note 2 to the Consolidated Financial Statements in "Item 1. Financial
Statements (unaudited)" of this report.
FINANCIAL CONDITION
Total assets were $9.81 billion at September 30, 2017, an increase of $305.0
million from $9.51 billion at December 31, 2016. Cash and cash equivalents grew
$98.5 million. Loan growth of $298.6 million during the current year was driven
by strong loan originations. Securities available for sale were $2.21 billion at
September 30, 2017, a decrease of $70.7 million from December 31, 2016. Total
liabilities were $8.49 billion as of September 30, 2017, an increase of $227.6
million from $8.26 billion at December 31, 2016. The increase was primarily due
to increased deposits.
Investment Securities Available for Sale
At September 30, 2017, the Company held investment securities totaling $2.21
billion compared to $2.28 billion at December 31, 2016. The decrease in the
investment securities portfolio from year-end is due to $200.5 million in
principal payments and maturities and $14.1 million in premium amortization
offset by $130.9 million in purchases and a $13.0 million decrease in net
unrealized loss of securities in the portfolio. The average duration of our
investment portfolio was approximately 3 years and 8 months at September 30,
2017. This duration takes into account calls, where appropriate, and consensus
prepayment speeds.
The investment securities are used by the Company as a component of its balance
sheet management strategies. From time-to-time, securities may be sold to
reposition the portfolio in response to strategies developed by the Company's
asset liability management committee. In accordance with our investment
strategy, management monitors market conditions with a view to realize gains on
its available for sale securities portfolio when prudent.
The Company performs a quarterly assessment of the debt and equity securities in
its investment portfolio that have an unrealized loss to determine whether the
decline in the fair value of these securities below their amortized cost basis
is other-than-temporary. Impairment is considered other-than-temporary when it
becomes probable that the Company will be unable to recover the entire amortized
cost basis of its investment. The Company's impairment assessment takes into
consideration factors such as the length of time and the extent to which the
market value has been less than cost, defaults or deferrals of scheduled
interest or principal, external credit ratings and recent downgrades, internal
assessment of credit quality, and whether the Company intends to sell the
security and whether it is more likely than not it will be required to sell the
security prior to recovery of its amortized cost basis. If a decline in fair
value is judged to be other-than-temporary, the cost basis of the individual
security is written down to fair value which then becomes the new cost basis.
The new cost basis is not adjusted for subsequent recoveries in fair value.
When there are credit losses associated with an impaired debt security and the
Company does not have the intent to sell the security and it is more likely than
not that it will not have to sell the security before recovery of its cost
basis, the Company will separate the amount of the impairment into the amount
that is credit-related and the amount related to non-credit factors. The
credit-related impairment is recognized in earnings and the non-credit-related
impairment is recognized in accumulated other comprehensive income.
At September 30, 2017, the market value of securities available for sale had a
net unrealized loss of $7.5 million compared to a net unrealized loss of $20.5
million at December 31, 2016. The change in valuation was the result of
fluctuations in market interest rates subsequent to purchase. At September 30,
2017, the Company had $1.31 billion of investment securities with gross
unrealized losses of $21.1 million; however, we did not consider these
investment securities to be other-than-temporarily impaired.

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The following table sets forth our securities portfolio by type for the dates
indicated:
                                                       September 30, 2017       December 31, 2016
                                                                     (in thousands)
Securities Available for Sale
U.S. government agency and government-sponsored
enterprise mortgage-backed securities and
collateralized mortgage obligations                  $          1,377,417     $         1,465,732
State and municipal securities                                    483,488                 475,060
U.S. government and government-sponsored
enterprise securities                                             341,604                 331,902
U.S. government securities                                            250                     800
Other securities                                                    5,114                   5,083
Total                                                $          2,207,873     $         2,278,577


For further information on our investment portfolio, see Note 3 of the
Consolidated Financial Statements in "Item 1. Financial Statements (unaudited)"
of this report.
Credit Risk Management
The extension of credit in the form of loans or other credit substitutes to
individuals and businesses is one of our principal commerce activities. Our
policies, applicable laws, and regulations require risk analysis as well as
ongoing portfolio and credit management. We manage our credit risk through
lending limit constraints, credit review, approval policies, and extensive,
ongoing internal monitoring. We also manage credit risk through diversification
of the loan portfolio by type of loan, type of industry and type of borrower and
by limiting the aggregation of debt to a single borrower.
In analyzing our existing portfolio, we review our consumer and residential loan
portfolios by their performance as a pool of loans, since no single loan is
individually significant or judged by its risk rating, size or potential risk of
loss. In contrast, the monitoring process for the commercial business, real
estate construction, and commercial real estate portfolios includes periodic
reviews of individual loans with risk ratings assigned to each loan and
performance judged on a loan-by-loan basis.
We review these loans to assess the ability of our borrowers to service all
interest and principal obligations and, as a result, the risk rating may be
adjusted accordingly. In the event that full collection of principal and
interest is not reasonably assured, the loan is appropriately downgraded and, if
warranted, placed on nonaccrual status even though the loan may be current as to
principal and interest payments. Additionally, we assess whether an impairment
of a loan warrants specific reserves or a write-down of the loan. For additional
discussion on our methodology in managing credit risk within our loan portfolio,
see the "Allowance for Loan and Lease Losses" section in this Management's
Discussion and Analysis and Note 1 to the Consolidated Financial Statements in
"Item 8. Financial Statements and Supplementary Data" of the Company's 2016
Annual Report on Form 10-K.
Loan policies, credit quality criteria, portfolio guidelines and other controls
are established under the guidance of our Chief Credit Officer and approved, as
appropriate, by the board of directors. Credit Administration, together with the
management loan committee, has the responsibility for administering the credit
approval process. As another part of its control process, we use an internal
credit review and examination function to provide reasonable assurance that
loans and commitments are made and maintained as prescribed by our credit
policies. This includes a review of documentation when the loan is initially
extended and subsequent examination to ensure continued performance and proper
risk assessment.

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Loan Portfolio Analysis
Our wholly owned banking subsidiary Columbia State Bank is a full service
commercial bank, which originates a wide variety of loans, and focuses its
lending efforts on originating commercial business and commercial real estate
loans.
The following table sets forth the Company's loan portfolio by type of loan for
the dates indicated:
                                         September 30, 2017    % of Total     December 31, 2016    % of Total
                                                                (dollars in thousands)
Commercial business                     $        2,735,206         42.0  %   $       2,551,054         41.1  %
Real estate:
One-to-four family residential                     176,487          2.7  %             170,331          2.7  %
Commercial and multifamily
residential                                      2,825,794         43.3  %           2,719,830         43.7  %
Total real estate                                3,002,281         46.0  %           2,890,161         46.4  %
Real estate construction:
One-to-four family residential                     145,419          2.2  %             121,887          2.0  %
Commercial and multifamily
residential                                        213,939          3.3  %             209,118          3.4  %
Total real estate construction                     359,358          5.5  %             331,005          5.4  %
Consumer                                           323,913          5.0  %             329,261          5.3  %
Purchased credit impaired                          120,477          1.9  %             145,660          2.3  %
Subtotal                                         6,541,235        100.4  %           6,247,141        100.5  %
Less: Net unearned income                          (29,229 )       (0.4 )%             (33,718 )       (0.5 )%
Loans, net of unearned income (before
Allowance for Loan and Lease Losses)    $        6,512,006        100.0  %   $       6,213,423        100.0  %
Loans held for sale                     $            7,802                   $           5,846


Total loans increased $298.6 million from year-end 2016. The increase in loans
was the result of strong loan originations during the first nine months of the
year, partially offset by contractual payments and prepayments. The loan
portfolio continues to be diversified, with the intent to mitigate risk by
monitoring concentration in any one sector. The $29.2 million in unearned income
recorded at September 30, 2017 was comprised of $13.9 million in net purchase
discounts and $15.3 million in deferred loan fees. The $33.7 million in unearned
income recorded at December 31, 2016 consisted of $20.2 million in net purchase
discounts and $13.5 million in deferred loan fees.
The following table provides additional detail related to the net discount of
acquired and purchased loans, excluding PCI loans, by acquisition:
                                    September 30, 2017     December 31, 2016
Acquisition:                                     (in thousands)
Intermountain                                   4,827                 6,599
West Coast                                      9,333                13,957
Other                                            (211 )                (315 )
Total net discount at period end   $           13,949     $          20,241


Commercial Loans: We are committed to providing competitive commercial lending
in our primary market areas. Management expects a continued focus within its
commercial lending products and to emphasize, in particular, relationship
banking with businesses and business owners.
Real Estate Loans: One-to-four family residential loans are secured by
properties located within our primary market areas and, typically, have
loan-to-value ratios of 80% or lower at origination. Our underwriting standards
for commercial and multifamily residential loans generally require that the
loan-to-value ratio for these loans not exceed 75% of appraised value, cost, or
discounted cash flow value, as appropriate, and that commercial properties
maintain debt coverage ratios (net operating income divided by annual debt
servicing) of 1.2 or better. However, underwriting standards can be influenced
by competition and other factors. We endeavor to maintain the highest practical
underwriting standards while balancing the need to remain competitive in our
lending practices.

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Real Estate Construction Loans: We originate a variety of real estate
construction loans. Underwriting guidelines for these loans vary by loan type
but include loan-to-value limits, term limits and loan advance limits, as
applicable. Our underwriting guidelines for commercial and multifamily
residential real estate construction loans generally require that the
loan-to-value ratio not exceed 75% and stabilized debt coverage ratios (net
operating income divided by annual debt servicing) of 1.2 or better. As noted
above, underwriting standards can be influenced by competition and other
factors. However, we endeavor to maintain the highest practical underwriting
standards while balancing the need to remain competitive in our lending
practices.
Consumer Loans: Consumer loans include automobile loans, boat and recreational
vehicle financing, home equity and home improvement loans and miscellaneous
personal loans.
Foreign Loans: The Company has no material foreign activities. Substantially all
of the Company's loans and unfunded commitments are geographically concentrated
in its service areas within the states of Washington, Oregon and Idaho.
Purchased Credit Impaired Loans: PCI loans are comprised of loans and loan
commitments acquired in connection with the 2011 FDIC-assisted acquisitions of
First Heritage Bank and Summit Bank, as well as the 2010 FDIC-assisted
acquisitions of Columbia River Bank and American Marine Bank. PCI loans are
generally accounted for under ASC Topic 310-30, Loans and Debt Securities
Acquired with Deteriorated Credit Quality ("ASC 310-30").
For additional information on our loan portfolio, including amounts pledged as
collateral on borrowings, see Note 4 to the Consolidated Financial Statements in
"Item 1. Financial Statements (unaudited)" of this report.
Nonperforming Assets
Nonperforming assets consist of: (i) nonaccrual loans, which generally are loans
placed on a nonaccrual basis when the loan becomes past due 90 days or when
there are otherwise serious doubts about the collectability of principal or
interest within the existing terms of the loan, (ii) OREO and (iii) other
personal property owned, if applicable.
The following table sets forth, at the dates indicated, information with respect
to our nonaccrual loans and total nonperforming assets:
                                                             September 30, 2017     December 31, 2016
                                                                          (in thousands)
Nonperforming assets
Nonaccrual loans:
Commercial business                                         $           25,213     $          11,555
Real estate:
One-to-four family residential                                             816                   568
Commercial and multifamily residential                                   9,143                11,187
Total real estate                                                        9,959                11,755
Real estate construction:
One-to-four family residential                                             239                   563
Consumer                                                                 4,906                 3,883
Total nonaccrual loans                                                  40,317                27,756
Other real estate owned and other personal property owned                3,682                 5,998
Total nonperforming assets                                  $           43,999     $          33,754

Loans, net of unearned income                               $        6,512,006     $       6,213,423
Total assets                                                $        

9,814,578 $ 9,509,607

Nonperforming loans to period end loans                                   0.62 %                0.45 %
Nonperforming assets to period end assets                                 0.45 %                0.35 %


At September 30, 2017, nonperforming assets were $44.0 million, compared to
$33.8 million at December 31, 2016. Nonperforming assets increased $10.2 million
during the nine months ended September 30, 2017. This increase was due to a
$12.6 million increase in nonaccrual loans, partially offset by a decrease in
OREO.

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Other Real Estate Owned: The following table sets forth activity in OREO for the periods indicated:

                                               Three Months Ended September 30,   Nine Months Ended September 30,
                                                     2017              2016             2017             2016
                                                                         (in thousands)
Balance, beginning of period                   $       4,058       $  10,613      $       5,998       $  13,738
Transfers in                                              74             891                 74           1,202
Valuation adjustments                                   (138 )           (14 )             (364 )          (290 )
Proceeds from sale of OREO property                     (182 )        (2,569 )           (1,901 )        (5,845 )
Gain (loss) on sale of OREO, net                        (130 )            73               (125 )           189
Balance, end of period                         $       3,682       $   8,994      $       3,682       $   8,994


Allowance for Loan and Lease Losses
The allowance for loan and lease losses ("ALLL") is an accounting estimate of
incurred credit losses in our loan portfolio at the balance sheet date. The
provision for loan and lease losses is the expense recognized in the
Consolidated Statements of Income to adjust the allowance to the levels deemed
appropriate by management, as measured by the Company's credit loss estimation
methodologies. The allowance for unfunded commitments and letters of credit is
maintained at a level believed by management to be sufficient to absorb
estimated probable losses related to these unfunded credit facilities at the
balance sheet date.
At September 30, 2017, our allowance was $71.6 million, or 1.10% of total loans
(excluding loans held for sale). This compares with an allowance of $70.0
million, or 1.13% of total loans (excluding loans held for sale) at December 31,
2016 and an allowance of $70.3 million or 1.12% of total loans (excluding loans
held for sale) at September 30, 2016.

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The following table provides an analysis of the Company's allowance for loans at the dates and the periods indicated:

                                          Three Months Ended September 30,           Nine Months Ended September 30,
                                             2017                   2016                 2017                 2016
                                                                       (in thousands)
Beginning balance                     $         72,984       $         69,304     $         70,043       $     68,172
Charge-offs:
Commercial business                             (1,362 )               (2,159 )             (6,089 )           (8,873 )
One-to-four family residential                       -                      -                 (460 )              (35 )
Commercial and multifamily
residential                                          -                      -                    -                (26 )
One-to-four family residential
construction                                         -                      -                  (14 )                -
Consumer                                          (263 )                 (383 )             (1,156 )             (983 )
Purchased credit impaired                       (1,633 )               (2,062 )             (5,372 )           (7,826 )
Total charge-offs                               (3,258 )               (4,604 )            (13,091 )          (17,743 )

Recoveries:

Commercial business                                688                    854                3,997              2,269
One-to-four family residential                      40                     81                  380                142
Commercial and multifamily
residential                                         58                     20                  263                219
One-to-four family residential
construction                                        20                     21                  107                280
Commercial and multifamily
residential construction                             -                    107                    -                109
Consumer                                           343                    399                  876                765
Purchased credit impaired                        1,389                  2,216                3,737              5,291
Total recoveries                                 2,538                  3,698                9,360              9,075
Net charge-offs                                   (720 )                 (906 )             (3,731 )           (8,668 )
Provision (recapture) for loan and
lease losses                                      (648 )                1,866                5,304             10,760
Ending balance                        $         71,616       $         70,264     $         71,616       $     70,264
Total loans, net at end of period,
excluding loans held of sale          $      6,512,006       $      6,259,757     $      6,512,006       $  6,259,757
Allowance for loan and lease losses
to period-end loans                               1.10 %                 1.12 %               1.10 %             1.12 %

Allowance for unfunded commitments and letters of credit Beginning balance

                     $          3,555       $          2,780     $          2,705       $      2,930
Net changes in the allowance for
unfunded commitments and letters of
credit                                             (75 )                  125                  775                (25 )
Ending balance                        $          3,480       $          2,905     $          3,480       $      2,905



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FDIC Loss-sharing Asset
During the second quarter of 2017, the Bank entered into an agreement with the
FDIC to terminate all loss-sharing agreements ahead of their contractual
maturities. These loss-sharing agreements were entered into in 2010 and 2011 in
conjunction with our acquisitions of (1) Columbia River Bank in January 2010,
(2) American Marine Bank in January 2010, (3) Summit Bank in May 2011 and (4)
First Heritage Bank in May 2011. Under the early termination, all rights and
obligations of the Company and the FDIC have been resolved and completed. For
additional information on the early termination of the FDIC loss-sharing
agreements, see Note 7 to the Consolidated Financial Statements in "Item 1.
Financial Statements (unaudited)" of this report.
Liquidity and Sources of Funds
Our primary sources of funds are customer deposits. Additionally, we utilize
advances from the FHLB of Des Moines ("FHLB"), the Federal Reserve Bank of San
Francisco ("FRB"), and term and sweep repurchase agreements to supplement our
funding needs. These funds, together with loan repayments, loan sales, retained
earnings, equity and other borrowed funds are used to make loans, to acquire
securities and other assets and to fund continuing operations.
In addition, we have a shelf registration statement on file with the Securities
and Exchange Commission registering an unlimited amount of any combination of
debt or equity securities, depositary shares, purchase contracts, units and
warrants in one or more offerings. Specific information regarding the terms of
and the securities being offered will be provided at the time of any offering.
Proceeds from any future offerings are expected to be used for general corporate
purposes, including, but not limited to, the repayment of debt, repurchasing or
redeeming outstanding securities, working capital, funding future acquisitions
or other purposes identified at the time of any offering.
Deposit Activities
Our deposit products include a wide variety of transaction accounts, savings
accounts and time deposit accounts. Core deposits (demand deposit, savings,
money market accounts and certificates of deposit less than $250,000) increased
$249.9 million from year-end 2016.
We have established a branch system to serve our consumer and business
depositors. In addition, management's strategy for funding asset growth is to
make use of brokered and other wholesale deposits on an as-needed basis. The
Company participates in the Certificate of Deposit Account Registry Service
(CDARS®) program. CDARS® is a network that allows participating banks to offer
extended FDIC deposit insurance coverage on time deposits. The Company also
participates in a similar program to offer extended FDIC deposit insurance
coverage on money market accounts. These extended deposit insurance programs are
generally available only to existing customers and are not used as a means of
generating additional liquidity. At September 30, 2017, CDARS® deposits and
brokered money market deposits were $258.1 million, or 3% of total deposits,
compared to $230.4 million at year-end 2016. The brokered deposits have varied
maturities.

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The following table sets forth the Company's deposit base by type of product for
the dates indicated:
                                                    September 30, 2017         December 31, 2016
                                                                   % of                      % of
                                                    Balance        Total       Balance       Total
                                                               (dollars in thousands)
Core deposits:
Demand and other noninterest-bearing             $  4,119,950      49.4 %   $ 3,944,495      48.9 %
Interest-bearing demand                             1,009,378      12.1 %       985,293      12.2 %
Money market                                        1,821,262      21.8 %     1,791,283      22.2 %
Savings                                               772,858       9.3 %       723,667       9.0 %
Certificates of deposit, less than $250,000           276,051       3.3 %       304,830       3.8 %
Total core deposits                                 7,999,499      95.9 %     7,749,568      96.1 %
Certificates of deposit, $250,000 or more              84,105       1.0 %        79,424       1.0 %
Certificates of deposit insured by CDARS®              20,690       0.2 %        22,039       0.3 %
Brokered money market accounts                        237,421       2.9 %       208,348       2.6 %
Subtotal                                            8,341,715     100.0 %     8,059,379     100.0 %
Premium resulting from acquisition date fair
value adjustment                                            2                        36
Total deposits                                   $  8,341,717               $ 8,059,415


Borrowings
We rely on FHLB advances and FRB borrowings as another source of both short and
long-term funding. FHLB advances and FRB borrowings are secured by investment
securities, and residential, commercial and commercial real estate loans. We had
FHLB advances of $6.5 million at both September 30, 2017 and December 31, 2016.
We also utilize wholesale and retail repurchase agreements to supplement our
funding sources. Our wholesale repurchase agreements are secured by
mortgage-backed securities. At September 30, 2017 and December 31, 2016, we had
deposit customer sweep-related repurchase agreements of $15.9 million and $55.8
million, respectively, which mature on a daily basis as well as a $25.0 million
term repurchase agreement, which matures in 2018. Management anticipates we will
continue to rely on FHLB advances, FRB borrowings and wholesale and retail
repurchase agreements in the future and we will use those funds primarily to
make loans and purchase securities.
Contractual Obligations, Commitments & Off-Balance Sheet Arrangements
We are party to many contractual financial obligations, including repayment of
borrowings, operating and equipment lease payments, off-balance sheet
commitments to extend credit and investments in affordable housing partnerships.
At September 30, 2017, we had commitments to extend credit of $2.28 billion
compared to $2.22 billion at December 31, 2016.
Capital Resources
Shareholders' equity at September 30, 2017 was $1.33 billion, an increase from
$1.25 billion at December 31, 2016. Shareholders' equity was 14% of total
period-end assets at September 30, 2017 and 13% at December 31, 2016.
Regulatory Capital. In July 2013, the federal bank regulators approved the New
Capital Rules (as discussed in our 2016 Annual Report on Form 10-K, "Item 1.
Business-Supervision and Regulation and -Regulatory Capital Requirements"),
which implement the Basel III capital framework and various provisions of the
Dodd-Frank Act. We and the Bank were required to comply with these rules as of
January 1, 2015, subject to the phase-in of certain provisions. We believe that,
as of September 30, 2017, we and the Bank would meet all capital adequacy
requirements under the New Capital Rules on a fully phased-in basis as if all
such requirements were then in effect.
FDIC regulations set forth the qualifications necessary for a bank to be
classified as "well-capitalized," primarily for assignment of FDIC insurance
premium rates. Failure to qualify as "well-capitalized" can negatively impact a
bank's ability to expand and to engage in certain activities. The Company and
the Bank qualified as "well-capitalized" at September 30, 2017 and December 31,
2016.

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The following table presents the capital ratios and the capital conservation buffer, as applicable, for the Company and its banking subsidiary at September 30, 2017 and December 31, 2016:

                                                          Company                                   Columbia Bank
                                          September 30, 2017     December 

31, 2016 September 30, 2017 December 31, 2016 Common equity tier 1 (CET1) risk-based capital ratio

                                     12.2025 %             11.6450 %              12.0166 %             11.5051 %
Tier 1 risk-based capital ratio                   12.2025 %             11.6646 %              12.0166 %             11.5051 %
Total risk-based capital ratio                    13.1788 %             12.6347 %              12.9936 %             12.4756 %
Leverage ratio                                    10.0883 %              9.5526 %               9.9353 %              9.4275 %
Capital conservation buffer                        5.1788 %              4.6347 %               4.9936 %              4.4756 %


Stock Repurchase Program
On September 27, 2017, the Board of Directors approved a stock repurchase
program. The program authorizes the Company to repurchase up to 2.9 million
shares of our outstanding common stock. The Company intends to purchase the
shares from time to time in the open market or in private transactions, under
conditions which allow such repurchases to be accretive to earnings per share
while maintaining capital ratios that exceed the guidelines for a
well-capitalized financial institution.
Non-GAAP Financial Measures
The Company considers operating net interest margin (tax equivalent) to be a
useful measurement as it more closely reflects the ongoing operating performance
of the Company. Additionally, presentation of the operating net interest margin
allows readers to compare certain aspects of the Company's net interest margin
to other organizations that may not have had significant acquisitions. Despite
the usefulness of the operating net interest margin (tax equivalent) to the
Company, there is no standardized definition for it and, as a result, the
Company's calculations may not be comparable with other organizations. The
Company encourages readers to consider its Consolidated Financial Statements in
their entirety and not to rely on any single financial measure.
The following table reconciles the Company's calculation of the operating net
interest margin (tax equivalent) to the net interest margin (tax equivalent) for
the periods indicated:
                                               Three Months Ended September 30,           Nine Months Ended September 30,
                                                  2017                   2016                 2017                 2016
Operating net interest margin non-GAAP
reconciliation:                                                         (dollars in thousands)
Net interest income (tax equivalent) (1)   $         91,887       $         88,318     $        270,480       $    255,925
Adjustments to arrive at operating net
interest income (tax equivalent):
Incremental accretion income on FDIC
purchased credit impaired loans                        (972 )               (1,816 )             (3,842 )           (4,773 )
Incremental accretion income on other
acquired loans                                       (1,903 )               (2,749 )             (6,207 )           (8,896 )
Premium amortization on acquired
securities                                            1,527                  1,991                4,658              6,390
Interest reversals on nonaccrual loans                  311                    266                1,323                826
Operating net interest income (tax
equivalent) (1)                            $         90,850       $         86,010     $        266,412       $    249,472
Average interest earning assets            $      8,750,561       $      8,544,876     $      8,641,706       $  8,279,639
Net interest margin (tax equivalent) (1)               4.20 %                 4.13 %               4.17 %             4.12 %
Operating net interest margin (tax
equivalent) (1)                                        4.15 %                 4.03 %               4.11 %             4.02 %


__________
(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 $3.0
million and $2.7 million for the three months ended September 30, 2017 and 2016,
respectively, and an addition to net interest income of $8.7 million and $8.0
million for the nine months ended September 30, 2017 and 2016.

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Financials ($)
Sales 2017 479 M
EBIT 2017 201 M
Net income 2017 130 M
Debt 2017 -
Yield 2017 2,03%
P/E ratio 2017 19,97
P/E ratio 2018 18,56
Capi. / Sales 2017 5,29x
Capi. / Sales 2018 4,27x
Capitalization 2 533 M
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Mean consensus OUTPERFORM
Number of Analysts 6
Average target price 46,6 $
Spread / Average Target 7,4%
EPS Revisions
Managers
NameTitle
Hadley S. Robbins President, Chief Executive Officer & Director
William Toycen Weyerhaeuser Chairman
Clint E. Stein Chief Operating Officer & Executive Vice President
John P. Folsom Independent Director
Thomas M. Hulbert Independent Director