COLUMBIA BANKING SYSTEM, INC. TACOMA, Wash., July 23, 2015 /PRNewswire/ -- 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 second quarter 2015 earnings, "We accomplished a lot this quarter, generating solid financial performance, especially in light of the after tax impact to earnings of $3.4 million, or $0.06 per diluted share, resulting from acquisition-related expense and FDIC acquired loan accounting. Despite intense competition, our bankers continue to expand existing and source new relationships. Their production of over $280 million in new loans represents our second highest quarterly total ever."
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Ms. Dressel continued, "We completed the core operating system conversion for our latest acquisition during the quarter and are nearing the end of the integration process. The successful conversion was the result of the outstanding efforts of everyone involved to ensure there was minimal disruption to our customers and new team members."
Significant Influences on the Quarter Ended June 30, 2015
Balance Sheet
Loans were $5.61 billion at June 30, 2015, up $161.0 million from March 31, 2015 due to robust originations during the current quarter. Securities were $1.93 billion at June 30, 2015, a decrease of $113.9 million, or 6% from $2.04 billion at March 31, 2015 primarily due to the reinvestment of cash flows into originated loans. Total deposits at June 30, 2015 were $7.04 billion, a decrease of $30.6 million from $7.07 billion at March 31, 2015. Core deposits were $6.74 billion at June 30, 2015, a decrease of $33.8 million from March 31, 2015. The average rate on interest-bearing deposits and total deposits for the quarter was 0.08% and 0.04%, respectively, compared to 0.07% and 0.04% for the first quarter of 2015.
Asset Quality
At June 30, 2015, nonperforming assets to total assets were 0.54% compared to 0.65% at March 31, 2015. Total nonperforming assets decreased $8.8 million due to a $6.1 million reduction in nonaccrual loans and a $2.7 million decline in other real estate owned due to sales activity during the current quarter.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
June 30, 2015 March 31, 2015 December 31,
2014
------------- -------------- -------------
(in thousands)
Nonaccrual loans:
Commercial business $13,539 $17,429 $16,799
Real estate:
One-to-four family
residential 4,193 4,429 2,822
Commercial and multifamily
residential 3,809 4,498 7,847
----- ----- -----
Total real estate 8,002 8,927 10,669
Real estate construction:
One-to-four family
residential 1,937 2,134 465
Commercial and multifamily
residential 469 470 480
--- --- ---
Total real estate
construction 2,406 2,604 945
Consumer 1,799 2,868 2,939
----- ----- -----
Total nonaccrual loans 25,746 31,828 31,352
Other real estate owned and
other personal property
owned 20,665 23,347 22,225
Total nonperforming assets $46,411 $55,175 $53,577
======= ======= =======
The following table provides an analysis of the Company's allowance for loan and lease losses ("ALLL"):
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2015 2014 (1) 2015 2014 (1)
---- ------- ---- -------
(in thousands)
Beginning balance $70,234 $70,571 $69,569 $72,454
Charge-offs:
Commercial business (2,086) (1,717) (3,512) (1,950)
One-to-four family
residential real estate (289) - (297) (207)
Commercial and multifamily
residential real estate (43) (1,963) (43) (2,986)
Consumer (319) (909) (1,210) (1,636)
Purchased credit impaired (1) (2,876) (3,842) (6,976) (8,115)
------ ------ ------ ------
Total charge-offs (5,613) (8,431) (12,038) (14,894)
Recoveries:
Commercial business 209 1,712 827 2,202
One-to-four family
residential real estate 15 12 27 40
Commercial and multifamily
residential real estate 20 537 3,281 576
One-to-four family
residential real estate
construction 8 442 36 484
Commercial and multifamily
residential real estate
construction 2 - 5 -
Consumer 137 338 410 591
Purchased credit impaired (1) 2,043 1,997 3,729 3,803
----- ----- ----- -----
Total recoveries 2,434 5,038 8,315 7,696
----- ----- ----- -----
Net charge-offs (3,179) (3,393) (3,723) (7,198)
Provision for loan and lease
losses (1) 2,202 2,117 3,411 4,039
----- ----- ----- -----
Ending balance $69,257 $69,295 $69,257 $69,295
======= ======= ======= =======
(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 1.23% at June 30, 2015 compared to 1.29% at March 31, 2015. Excluding acquired loans, the allowance at June 30, 2015 represented 1.17% of originated loans, unchanged from March 31, 2015. The allowance to loans, excluding acquired loans, 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 the allowance for loan losses to period end loans, excluding acquired loans.
For the second quarter of 2015, Columbia recorded a net provision for loan and lease losses of $2.2 million compared to a net provision of $2.1 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter was primarily driven by the net charge-offs recorded during the quarter and growth in the loan portfolio, partially offset by improving asset quality metrics.
Net Interest Margin ("NIM")
Columbia's net interest margin (tax equivalent) of 4.41% for the second quarter of 2015 increased 2 basis points from 4.39% for the first quarter of 2015. Compared to the second quarter of 2014, Columbia's net interest margin decreased 45 basis points from 4.86%, primarily due to lower incremental accretion on acquired loans, which was $11.3 million for the prior year quarter, compared to $7.3 million for the current quarter. Columbia's operating net interest margin (tax equivalent)((1) )was 4.17% for the second quarter of 2015, relatively flat compared to 4.18% for the first quarter of 2015 and down 10 basis points compared to 4.27% for the second quarter of 2014 due 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 Six Months Ended
------------------ ----------------
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
------------- ------------- ------------- -------------
(dollars in thousands)
Incremental
accretion income
due to:
FDIC purchased
credit impaired
loans $2,367 $5,734 $4,814 $12,223
Other FDIC acquired
loans 15 95 132 299
Other acquired
loans 4,889 5,481 9,823 11,096
----- ----- ----- ------
Incremental
accretion income $7,271 $11,310 $14,769 $23,618
====== ======= ======= =======
Net interest margin
(tax equivalent) 4.41% 4.86% 4.40% 4.86%
Operating net
interest margin
(tax equivalent)
(1) 4.17% 4.27% 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.
Impact of FDIC Acquired Loan Accounting
The following table illustrates the impact to earnings associated with Columbia's FDIC acquired loan portfolios:
FDIC Acquired Loan Accounting
Three Months Ended Six Months Ended
------------------ ----------------
June 30, 2015 June 30, 2014 June 30, 2015 June 30, 2014
------------- ------------- ------------- -------------
(in thousands)
Incremental
accretion
income on FDIC
purchased
credit impaired
loans $2,367 $5,734 $4,814 $12,223
Incremental
accretion
income on other
FDIC acquired
loans 15 95 132 299
Provision for
losses on FDIC
purchased
credit impaired
loans (476) (1,517) (3,085) (3,939)
Change in FDIC
loss-sharing
asset (1,494) (5,050) (1,344) (9,869)
FDIC clawback
liability
recovery
(expense) 30 103 7 (101)
Pre-tax
earnings impact $442 $(635) $524 $(1,387)
==== ===== ==== =======
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 and stems from the discount established at the time these loan portfolios were acquired. At June 30, 2015, the accretable yield on purchased credit impaired loans was $67.3 million. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis.
The $1.5 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.
Second Quarter 2015 Results
Net Interest Income
Net interest income for the second quarter of 2015 was $81.0 million, an increase of $646 thousand compared to the first quarter of 2015. This increase was primarily due to higher average loan balances in the current quarter. Compared to the second quarter of 2014, net interest income increased by $5.9 million from $75.1 million. The increase from the prior year period is due to the combination of acquired loans and securities from the 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 $21.5 million for the second quarter of 2015, a decrease of $1.3 million compared to $22.8 million for the first quarter of 2015. The linked quarter decline was primarily due to a $1.6 million negative variance related to the change in FDIC loss-sharing asset. For the prior quarter, the change in FDIC loss-sharing asset was a net benefit of $150 thousand, compared to a net expense in the current quarter of $1.5 million. The net benefit in the linked quarter was due to increases in the asset resulting from loan impairment and OREO write-down activity. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format below. Also contributing to the linked quarter decrease in noninterest income was a reduction in investment securities gains, which were $378 thousand lower in the current quarter than in the first quarter of 2015. These decreases were partially offset by a $1.0 million increase in service charges and other fees compared to the first quarter of 2015.
Compared to the second quarter of 2014, noninterest income increased by $6.8 million. The increase from the prior year period was due to both a $2.1 million increase in service charges and other fees and the change in FDIC loss-sharing asset which was a net expense of $1.5 million in the current quarter compared to an expense of $5.1 million in the second quarter of 2014. The growth in service charges and other fees resulted primarily from the increased customer base from the acquisition of Intermountain.
The change in the FDIC loss-sharing asset has been a significant component of noninterest income. The following table reflects the income statement components of the change in the FDIC loss-sharing asset:
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
(in thousands)
Adjustments reflected in
income
Amortization, net (1,376) (5,764) (3,670) (12,216)
Loan impairment 1 1,214 1,532 3,151
Sale of other real estate (208) (965) (627) (1,721)
Write-downs of other real
estate 52 276 1,124 792
Other 37 189 297 125
--- ---
Change in FDIC loss-
sharing asset $(1,494) $(5,050) $(1,344) $(9,869)
======= ======= ======= =======
Noninterest Expense
Total noninterest expense for the second quarter of 2015 was $68.5 million, an increase of $1.7 million compared to $66.7 million for the first quarter of 2015. This increase was driven by higher acquisition-related expenses in the current quarter of $5.6 million compared to $3.0 million for the first quarter of 2015. After taking into account the acquisition-related expenses, ongoing noninterest expense for the current quarter was $932 thousand lower than the first quarter of 2015 on the same basis. Clint Stein, Columbia's Executive Vice President and Chief Financial Officer stated, "With the Intermountain core system conversion behind us, the added costs associated with running multiple platforms has subsided and we have started to more fully realize the resulting efficiency in our expense numbers."
Compared to the second quarter of 2014, noninterest expense increased $10.7 million, or 19% from $57.8 million, due to the $5.0 million increase in acquisition-related expenses as well as additional ongoing expense resulting from the Intermountain acquisition, partially offset by the $563 thousand benefit recorded in the current quarter related to OREO compared to a benefit of only $97 thousand recorded during the second quarter of 2014.
Organizational Update
Melanie Dressel commented, "We were delighted that Columbia Bank was recently voted the "Best Large Business" 2015 by readers of South Sound Magazine during their annual poll. We were also named one of "Washington's Best Workplaces" 2015 by the Puget Sound Business Journal for the ninth consecutive year. These awards are a true testament to our wonderful employees and their dedication to customer service. I was also very pleased and proud when Clint Stein was named a Puget Sound Business Journal CFO of the year. The award celebrates financial executives in Washington whose leadership, guidance and knowledge contribute greatly to the success of their companies. Clint is certainly very deserving of the honor."
Conference Call Information
Columbia's management will discuss the second quarter 2015 results on a conference call scheduled for Thursday, July 23, 2015 at 1:00 p.m. PDT (4:00 pm EDT). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #22782056.
A conference call replay will be available from approximately 4:00 p.m. PDT on July 23, 2015 through midnight PDT on July 30, 2015. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #22782056.
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. Columbia ranked 17th best 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.
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
FINANCIAL STATISTICS
Columbia Banking System, Inc. Three Months Ended Six Months Ended
Unaudited June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
Earnings (dollars in thousands except per share amounts)
--------
Net interest income $81,010 $75,124 $161,374 $149,064
Provision for loan and lease losses $2,202 $2,117 $3,411 $4,039
Noninterest income $21,462 $14,627 $44,229 $28,635
Noninterest expense $68,471 $57,764 $135,205 $115,150
Acquisition-related expense
(included in noninterest expense) $5,643 $672 $8,617 $1,638
Net income $21,946 $21,227 $46,307 $41,071
Per Common Share
----------------
Earnings (basic) $0.38 $0.40 $0.80 $0.79
Earnings (diluted) $0.38 $0.40 $0.80 $0.77
Book value $21.38 $20.71 $21.38 $20.71
Averages
--------
Total assets $8,532,173 $7,229,187 $8,519,047 $7,186,709
Interest-earning assets $7,560,288 $6,339,102 $7,544,750 $6,292,157
Loans $5,542,489 $4,646,356 $5,479,067 $4,592,033
Securities, including Federal Home
Loan Bank stock $1,976,959 $1,645,993 $2,022,629 $1,664,081
Deposits $6,978,472 $5,968,881 $6,953,254 $5,935,544
Interest-bearing deposits $3,753,101 $3,807,710 $3,954,179 $3,790,137
Interest-bearing liabilities $3,961,013 $3,901,016 $4,177,057 $3,884,628
Noninterest-bearing deposits $3,225,371 $2,161,171 $2,999,075 $2,145,407
Shareholders' equity $1,247,887 $1,084,927 $1,244,389 $1,076,189
Financial Ratios
----------------
Return on average assets 1.03% 1.17% 1.09% 1.14%
Return on average common equity 7.04% 7.83% 7.45% 7.64%
Average equity to average assets 14.63% 15.01% 14.61% 14.97%
Net interest margin (tax equivalent) 4.41% 4.86% 4.40% 4.86%
Efficiency ratio (tax equivalent)
(1) 64.96% 62.61% 63.95% 63.06%
Operating efficiency ratio (tax
equivalent) (2) 60.78% 63.80% 61.90% 64.49%
June 30, December 31,
--------
Period end 2015 2014 2014
---------- ---- ---- ----
Total assets $8,518,019 $7,297,458 $8,578,846
Loans, net of unearned income $5,611,897 $4,714,575 $5,445,378
Allowance for loan and lease losses $69,257 $69,295 $69,569
Securities, including Federal Home
Loan Bank stock $1,926,248 $1,621,929 $2,131,622
Deposits $7,044,373 $5,985,069 $6,924,722
Core deposits $6,737,969 $5,735,047 $6,619,944
Shareholders' equity $1,236,214 $1,092,151 $1,228,175
Nonperforming assets
--------------------
Nonaccrual loans $25,746 $30,613 $31,352
Other real estate owned ("OREO") and
other personal property owned
("OPPO") 20,665 28,254 22,225
Total nonperforming assets $46,411 $58,867 $53,577
======= ======= =======
Nonperforming loans to period-end
loans 0.46% 0.65% 0.58%
Nonperforming assets to period-end
assets 0.54% 0.81% 0.62%
Allowance for loan and lease losses
to period-end loans 1.23% 1.47% 1.28%
Net loan charge-offs $3,723 (3) $7,198 (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 six months ended June 30, 2015.
(4) For the six months ended June 30, 2014.
(5) For the twelve months ended December 31, 2014.
FINANCIAL STATISTICS
Columbia Banking
System, Inc.
Unaudited June 30, December 31,
2015 2014
---- ----
Loan Portfolio
Composition (dollars in thousands)
--------------
Commercial business $2,255,468 40.2% $2,119,565 38.9%
Real estate:
One-to-four family
residential 181,849 3.2% 175,571 3.2%
Commercial and
multifamily
residential 2,406,594 42.9% 2,363,541 43.5%
--------- ---- --------- ----
Total real estate 2,588,443 46.1% 2,539,112 46.7%
Real estate
construction:
One-to-four family
residential 127,311 2.3% 116,866 2.1%
Commercial and
multifamily
residential 129,302 2.3% 134,443 2.5%
------- --- ------- ---
Total real estate
construction 256,613 4.6% 251,309 4.6%
Consumer 358,365 6.4% 364,182 6.7%
Purchased credit
impaired 202,367 3.6% 230,584 4.2%
------- --- ------- ---
Subtotal loans 5,661,256 100.9% 5,504,752 101.1%
Less: Net unearned
income (49,359) (0.9)% (59,374) (1.1)%
------- ----- ------- -----
Loans, net of unearned
income 5,611,897 100.0% 5,445,378 100.0%
===== =====
Less: Allowance for
loan and lease losses (69,257) (69,569)
Total loans, net 5,542,640 5,375,809
========= =========
Loans held for sale $4,220 $1,116
====== ======
June 30, December 31,
2015 2014
---- ----
Deposit Composition (dollars in thousands)
-------------------
Core deposits:
Demand and other non-
interest bearing $3,207,538 45.5% $2,651,373 38.3%
Interest bearing
demand 912,637 13.0% 1,304,258 18.8%
Money market 1,718,000 24.4% 1,760,331 25.4%
Savings 630,897 9.0% 615,721 8.9%
Certificates of
deposit less than
$100,000 268,897 3.8% 288,261 4.2%
------- --- ------- ---
Total core deposits 6,737,969 95.7% 6,619,944 95.6%
Certificates of
deposit greater than
$100,000 194,449 2.7% 202,014 2.9%
Certificates of
deposit insured by
CDARS(R) 18,357 0.3% 18,429 0.3%
Brokered money market
accounts 93,061 1.3% 83,402 1.2%
------ ------
Subtotal 7,043,836 100.0% 6,923,789 100.0%
===== =====
Premium resulting from
acquisition date fair
value adjustment 537 933
--- ---
Total deposits $7,044,373 $6,924,722
========== ==========
QUARTERLY FINANCIAL STATISTICS
Columbia Banking System,
Inc. Three Months Ended
------------------
Unaudited June 30, March 31, December 31, September 30, June 30,
2015 2015 2014 2014 2014
---- ---- ---- ---- ----
(dollars in thousands except per share)
Earnings
--------
Net interest income $81,010 $80,364 $78,764 $76,220 $75,124
Provision for loan and
lease losses $2,202 $1,209 $1,708 $980 $2,117
Noninterest income $21,462 $22,767 $15,185 $15,930 $14,627
Noninterest expense $68,471 $66,734 $64,154 $59,982 $57,764
Acquisition-related
expense (included in
noninterest expense) $5,643 $2,974 $4,556 $3,238 $672
Net income $21,946 $24,361 $18,920 $21,583 $21,227
Per Common Share
----------------
Earnings (basic) $0.38 $0.42 $0.34 $0.41 $0.40
Earnings (diluted) $0.38 $0.42 $0.34 $0.41 $0.40
Book value $21.38 $21.53 $21.34 $20.78 $20.71
Averages
--------
Total assets $8,532,173 $8,505,776 $8,152,463 $7,337,306 $7,229,187
Interest-earning assets $7,560,288 $7,529,040 $7,199,443 $6,451,660 $6,339,102
Loans $5,542,489 $5,414,942 $5,168,761 $4,770,443 $4,646,356
Securities, including
Federal Home Loan Bank
stock $1,976,959 $2,068,806 $1,918,690 $1,585,996 $1,645,993
Deposits $6,978,472 $6,927,756 $6,759,259 $6,110,809 $5,968,881
Interest-bearing deposits $3,753,101 $4,157,491 $4,174,459 $3,847,730 $3,807,710
Interest-bearing
liabilities $3,961,013 $4,395,502 $4,282,273 $3,889,233 $3,901,016
Noninterest-bearing
deposits $3,225,371 $2,770,265 $2,584,800 $2,263,079 $2,161,171
Shareholders' equity $1,247,887 $1,240,853 $1,185,346 $1,099,512 $1,084,927
Financial Ratios
----------------
Return on average assets 1.03% 1.15% 0.93% 1.18% 1.17%
Return on average common
equity 7.04% 7.86% 6.39% 7.86% 7.83%
Average equity to average
assets 14.63% 14.59% 14.54% 14.99% 15.01%
Net interest margin (tax
equivalent) 4.41% 4.39% 4.50% 4.85% 4.86%
Period end
----------
Total assets $8,518,019 $8,552,902 $8,578,846 $7,466,081 $7,297,458
Loans, net of unearned
income $5,611,897 $5,450,895 $5,445,378 $4,823,022 $4,714,575
Allowance for loan and
lease losses $69,257 $70,234 $69,569 $67,871 $69,295
Securities, including
Federal Home Loan Bank
stock $1,926,248 $2,040,163 $2,131,622 $1,643,003 $1,621,929
Deposits $7,044,373 $7,074,965 $6,924,722 $6,244,401 $5,985,069
Core deposits $6,737,969 $6,771,755 $6,619,944 $5,990,118 $5,735,047
Shareholders' equity $1,236,214 $1,244,443 $1,228,175 $1,096,211 $1,092,151
Nonperforming, assets
---------------------
Nonaccrual loans $25,746 $31,828 $31,352 $27,998 $30,613
OREO and OPPO 20,665 23,347 22,225 21,941 28,254
------ ------ ------ ------ ------
Total nonperforming assets $46,411 $55,175 $53,577 $49,939 $58,867
------- ------- ------- ------- -------
Nonperforming loans to
period-end loans 0.46% 0.58% 0.58% 0.58% 0.65%
Nonperforming assets to
period-end assets 0.54% 0.65% 0.62% 0.67% 0.81%
Allowance for loan and
lease losses to period-
end loans 1.23% 1.29% 1.28% 1.41% 1.47%
Net loan charge-offs $3,179 $544 $10 $2,404 $3,393
CONSOLIDATED STATEMENTS OF INCOME
Columbia Banking System,
Inc. Three Months Ended Six Months Ended
Unaudited June 30, June 30,
-------- --------
2015 2014 2015 2014
---- ---- ---- ----
(in thousands except per share)
Interest Income
Loans $71,744 $67,004 $142,566 $132,545
Taxable securities 7,260 6,382 14,786 13,134
Tax-exempt securities 3,010 2,671 6,052 5,289
Deposits in banks 26 30 53 44
--- --- --- ---
Total interest income 82,040 76,087 163,457 151,012
Interest Expense
Deposits 740 729 1,488 1,481
Federal Home Loan Bank
advances 154 115 313 229
Other borrowings 136 119 282 238
--- --- --- ---
Total interest expense 1,030 963 2,083 1,948
----- --- ----- -----
Net Interest Income 81,010 75,124 161,374 149,064
Provision for loan and
lease losses 2,202 2,117 3,411 4,039
----- ----- ----- -----
Net interest income after
provision for loan and
lease losses 78,808 73,007 157,963 145,025
Noninterest Income
Service charges and other
fees 15,874 13,790 30,743 26,726
Merchant services fees 2,340 2,040 4,380 3,910
Investment securities
gains, net 343 296 1,064 519
Bank owned life insurance 1,206 976 2,284 1,941
Change in FDIC loss-
sharing asset (1,494) (5,050) (1,344) (9,869)
Other 3,193 2,575 7,102 5,408
----- ----- ----- -----
Total noninterest income 21,462 14,627 44,229 28,635
Noninterest Expense
Compensation and employee
benefits 38,446 31,064 77,546 62,402
Occupancy 8,687 8,587 16,680 16,831
Merchant processing 1,079 998 2,056 1,978
Advertising and promotion 1,195 950 2,126 1,719
Data processing and
communications 4,242 3,680 9,226 7,200
Legal and professional
fees 2,847 2,303 5,354 4,472
Taxes, licenses and fees 1,427 1,051 2,659 2,231
Regulatory premiums 1,321 1,073 2,542 2,249
Net cost (benefit) of
operation of other real
estate (563) (97) (1,809) 49
Amortization of
intangibles 1,718 1,480 3,535 3,060
Other 8,072 6,675 15,290 12,959
----- ----- ------ ------
Total noninterest expense 68,471 57,764 135,205 115,150
------ ------ ------- -------
Income before income taxes 31,799 29,870 66,987 58,510
Provision for income taxes 9,853 8,643 20,680 17,439
----- ----- ------ ------
Net Income $21,946 $21,227 $46,307 $41,071
======= ======= ======= =======
Earnings per common share
Basic $0.38 $0.40 $0.80 $0.79
Diluted $0.38 $0.40 $0.80 $0.77
Dividends paid per common
share $0.34 $0.24 $0.64 $0.36
Weighted average number of
common shares outstanding 57,055 52,088 56,999 51,600
Weighted average number of
diluted common shares
outstanding 57,069 52,494 57,012 52,463
CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
Unaudited June 30, December 31,
2015 2014
---- ----
(in thousands)
ASSETS
Cash and due from banks $172,139 $171,221
Interest-earning deposits with banks 5,564 16,949
----- ------
Total cash and cash equivalents 177,703 188,170
Securities available for sale at fair value (amortized cost of $1,907,403 and $2,087,069, respectively) 1,914,445 2,098,257
Federal Home Loan Bank stock at cost 11,803 33,365
Loans held for sale 4,220 1,116
Loans, net of unearned income of ($49,359) and ($59,374), respectively 5,611,897 5,445,378
Less: allowance for loan and lease losses 69,257 69,569
------ ------
Loans, net 5,542,640 5,375,809
FDIC loss-sharing asset 9,344 15,174
Interest receivable 27,483 27,802
Premises and equipment, net 170,380 172,090
Other real estate owned 20,617 22,190
Goodwill 382,537 382,537
Other intangible assets, net 26,924 30,459
Other assets 229,923 231,877
Total assets $8,518,019 $8,578,846
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $3,207,538 $2,651,373
Interest-bearing 3,836,835 4,273,349
--------- ---------
Total deposits 7,044,373 6,924,722
Federal Home Loan Bank advances 45,549 216,568
Securities sold under agreements to repurchase 92,230 105,080
Other borrowings - 8,248
Other liabilities 99,653 96,053
------ ------
Total liabilities 7,281,805 7,350,671
Commitments and contingent liabilities
June 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 57,709 57,437 987,320 985,839
Retained earnings 243,888 234,498
Accumulated other comprehensive income 2,789 5,621
----- -----
Total shareholders' equity 1,236,214 1,228,175
Total liabilities and shareholders' equity $8,518,019 $8,578,846
========== ==========
AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
Three Months Ended June 30, Three Months Ended June 30,
--------------------------- ---------------------------
2015 2014 (1)
---- -------
Average Interest Average Average Interest Average
Balances Earned / Paid Rate Balances Earned / Paid Rate
-------- ------------- ---- -------- ------------- ----
(dollars in thousands)
ASSETS
Loans, net (1)(2)(3) $5,542,489 $72,410 5.23% $4,646,356 $67,429 5.80%
Taxable securities 1,516,740 7,260 1.91% 1,281,753 6,382 1.99%
Tax exempt securities (3) 460,219 4,632 4.03% 364,240 4,192 4.60%
Interest-earning deposits
with banks 40,840 26 0.25% 46,753 30 0.26%
------ --- ------ ---
Total interest-earning assets 7,560,288 $84,328 4.46% 6,339,102 $78,033 4.92%
Other earning assets 148,573 130,462
Noninterest-earning assets 823,312 759,623
------- -------
Total assets $8,532,173 $7,229,187
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit $489,984 $236 0.19% $480,459 $325 0.27%
Savings accounts 626,930 17 0.01% 527,370 14 0.01%
Interest-bearing demand 883,366 155 0.07% 1,187,274 115 0.04%
Money market accounts 1,752,821 332 0.08% 1,612,607 275 0.07%
--------- --- --------- ---
Total interest-bearing
deposits 3,753,101 740 0.08% 3,807,710 729 0.08%
Federal Home Loan Bank
advances 121,828 154 0.51% 68,306 115 0.67%
Other borrowings 86,084 136 0.63% 25,000 119 1.90%
------ --- ------ ---
Total interest-bearing
liabilities 3,961,013 $1,030 0.10% 3,901,016 $963 0.10%
Noninterest-bearing deposits 3,225,371 2,161,171
Other noninterest-bearing
liabilities 97,902 82,073
Shareholders' equity 1,247,887 1,084,927
--------- ---------
Total liabilities &
shareholders' equity $8,532,173 $7,229,187
========== ==========
Net interest income (tax equivalent) $83,298 $77,070
======= =======
Net interest margin (tax equivalent) 4.41% 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 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
$1.5 million and $1.2 million
for the three months ended June
30, 2015 and 2014, respectively.
The incremental accretion on
acquired loans was $7.3 million
and $11.3 million for the three
months ended June 30, 2015 and
2014, respectively.
(3) Yields on a fully tax equivalent
basis. The tax equivalent yield
adjustment to interest earned on
loans was $666 thousand and $425
thousand for the three months
ended June 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 June 30, 2015 and 2014,
respectively.
AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
Six Months Ended June 30, Six Months Ended June 30,
------------------------- -------------------------
2015 2014 (1)
---- -------
Average Interest Average Average Interest Average
Balances Earned / Paid Rate Balances Earned / Paid Rate
-------- ------------- ---- -------- ------------- ----
(dollars in thousands)
ASSETS
Loans, net (1)(2)(3) $5,479,067 $143,897 5.25% $4,592,033 $133,327 5.81%
Taxable securities 1,562,776 14,787 1.89% 1,305,584 13,134 2.01%
Tax exempt securities (3) 459,853 9,311 4.05% 358,497 8,301 4.63%
Interest-earning deposits
with banks 43,054 53 0.25% 36,043 44 0.24%
------ --- ------ ---
Total interest-earning assets 7,544,750 $168,048 4.45% 6,292,157 $154,806 4.92%
Other earning assets 147,321 128,703
Noninterest-earning assets 826,976 765,849
------- -------
Total assets $8,519,047 $7,186,709
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit $496,101 $476 0.19% $491,731 $687 0.28%
Savings accounts 626,036 36 0.01% 520,678 28 0.01%
Interest-bearing demand 1,047,844 293 0.06% 1,178,042 223 0.04%
Money market accounts 1,784,198 683 0.08% 1,599,686 543 0.07%
--------- --- --------- ---
Total interest-bearing
deposits 3,954,179 1,488 0.08% 3,790,137 1,481 0.08%
Federal Home Loan Bank
advances 125,812 313 0.50% 69,491 229 0.66%
Other borrowings 97,066 282 0.58% 25,000 238 1.90%
------ --- ------ ---
Total interest-bearing
liabilities 4,177,057 $2,083 0.10% 3,884,628 $1,948 0.10%
Noninterest-bearing deposits 2,999,075 2,145,407
Other noninterest-bearing
liabilities 98,526 80,485
Shareholders' equity 1,244,389 1,076,189
--------- ---------
Total liabilities &
shareholders' equity $8,519,047 $7,186,709
========== ==========
Net interest income (tax equivalent) $165,965 $152,858
======== ========
Net interest margin (tax equivalent) 4.40% 4.86%
==== ====
(1) Adjusted to conform to the
current period presentation. The
adjustment was limited to
including historically disclosed
"covered loans" amounts into the
respective row for loans, net as
covered loans are no longer
disclosed separately in the
consolidated balance sheets or
statements of income.
(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
$2.6 million and $2.1 million
for the six months ended June
30, 2015 and 2014, respectively.
The incremental accretion on
certain loans was $14.8 million
and $23.6 million for the six
months ended June 30, 2015 and
2014, respectively.
(3) Yields on a fully tax equivalent
basis. The tax equivalent yield
adjustment to interest earned on
loans was $1.3 million and $782
thousand for the six months
ended June 30, 2015 and 2014,
respectively. The tax equivalent
yield adjustment to interest
earned on tax exempt securities
was $3.3 million and $3.0
million for the six months ended
June 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 June 30, Six Months Ended June 30,
---------------------------
2015 2014 2015 2014
---- ---- ---- ----
Operating net interest
margin non-GAAP
reconciliation: (dollars in thousands)
Net interest income
(tax equivalent) (1) $83,298 $77,070 $165,965 $152,858
------- ------- -------- --------
Adjustments to arrive
at operating net
interest income (tax
equivalent):
Incremental accretion
income on FDIC
purchased credit
impaired loans (2,367) (5,734) (4,814) (12,223)
Incremental accretion
income on other FDIC
acquired loans (15) (95) (132) (299)
Incremental accretion
income on other
acquired loans (4,889) (5,481) (9,823) (11,096)
Premium amortization
on acquired
securities 2,706 1,554 5,567 3,179
Interest reversals on
nonaccrual loans 156 392 806 680
Operating net interest
income (tax
equivalent) (1) $78,889 $67,706 $157,569 $133,099
======= ======= ======== ========
Average interest
earning assets $7,560,288 $6,339,102 $7,544,750 $6,292,157
Net interest margin
(tax equivalent) (1) 4.41% 4.86% 4.40% 4.86%
Operating net interest
margin (tax
equivalent) (1) 4.17% 4.27% 4.18% 4.23%
Three Months Ended June 30, Six Months Ended June 30,
---------------------------
2015 2014 2015 2014
---- ---- ---- ----
Operating efficiency
ratio non-GAAP
reconciliation: (dollars in thousands)
Noninterest expense
(numerator A) $68,471 $57,764 $135,205 $115,150
Adjustments to arrive
at operating
noninterest expense:
Acquisition-related
expenses (5,643) (672) (8,617) (1,638)
Net benefit of
operation of OREO and
OPPO 561 117 1,802 95
FDIC clawback
liability expense 30 103 7 (101)
Loss on asset
disposals (10) (431) (106) (450)
State of Washington
Business and
Occupation ("B&O")
taxes (1,327) (972) (2,456) (2,047)
Operating noninterest
expense (numerator B) $62,082 $55,909 $125,835 $111,009
Net interest income
(tax equivalent) (1) $83,298 $77,070 $165,965 $152,858
Noninterest income 21,462 14,627 44,229 28,635
Bank owned life
insurance tax
equivalent adjustment 649 556 1,230 1,105
--- --- ----- -----
Total revenue (tax
equivalent)
(denominator A) $105,409 $92,253 $211,424 $182,598
Operating net interest
income (tax
equivalent) (1) $78,889 $67,706 $157,569 $133,099
Adjustments to arrive
at operating
noninterest income
(tax equivalent):
Investment securities
gains, net (343) (296) (1,064) (519)
Gain on asset
disposals (5) (18) (5) (50)
Change in FDIC loss-
sharing asset 1,494 5,050 1,344 9,869
Operating noninterest
income (tax
equivalent) 23,257 19,919 45,734 39,040
------ ------ ------ ------
Total operating
revenue (tax
equivalent)
(denominator B) $102,146 $87,625 $203,303 $172,139
Efficiency ratio (tax
equivalent)
(numerator A/
denominator A) 64.96% 62.61% 63.95% 63.06%
Operating efficiency
ratio (tax
equivalent)
(numerator B/
denominator B) 60.78% 63.80% 61.90% 64.49%
(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 $2.3 million and $1.9 million for the
three months ended June 30, 2015 and 2014, respectively, and an
addition to net interest income of $4.6 million and $3.8 million
for the six months ended June 30, 2015 and 2014, respectively.
Non-GAAP Financial Measures - Continued
The Company considers its ratio of allowance for loan and lease losses to period-end loans, excluding acquired loans to be an important measurement because it more closely reflects the ongoing allowance coverage and provides a ratio that is more comparable to other bank holding companies that have not had similar acquisitions. Despite the importance of this ratio to the Company, there are no standardized definitions for it and, as a result, the Company's calculations may not be comparable with other organizations. Also, there may be limits in the usefulness of this measure 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 table reconciles the Company's calculation of the allowance for loan and lease losses to period-end loans, excluding acquired loans:
June 30, March 31, December 31,
2015 2015 2014
---- ---- ----
(dollars in thousands)
Allowance for loan and
lease losses
(numerator A) $69,257 $70,234 $69,569
Less: Allowance for
loan and lease losses
attributable to
acquired loans (20,941) (24,100) (23,212)
------- ------- -------
Equals: Allowance for
loan and lease
losses, excluding
acquired loans
(numerator B) $48,316 46,134 46,357
Loans, net of unearned
income (denominator
A) $5,611,897 $5,450,895 $5,445,378
Less: acquired loans,
net (1,481,817) (1,519,334) (1,615,496)
---------- ---------- ----------
Equals: Loans,
excluding acquired
loans, net of
unearned income
(denominator B) $4,130,080 $3,931,561 $3,829,882
Allowance for loan and
lease losses to
period-end loans
(numerator A/
denominator A) 1.23% 1.29% 1.28%
Allowance for loan and
lease losses to
period-end loans,
excluding acquired
loans (numerator B/
denominator B) 1.17% 1.17% 1.21%
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SOURCE Columbia Banking System, Inc.
