COLUMBIA BANKING SYSTEM, INC. TACOMA, Wash., April 27, 2016 /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 first quarter 2016 earnings, "Our reported earnings were muted by the last of the Intermountain acquisition expense, increased provision expense and lower accretion income. In the near term, the current rate environment is challenging for organic loan growth to fully offset the runoff in accretion income. Aside from our reported earnings, we had some very positive outcomes in the quarter. These include the highest first quarter loan production we have ever achieved, continued growth during what is historically our slowest quarter for deposit gathering, and meaningful expense control." Ms. Dressel continued, "Despite the uptick in provision expense for the quarter, we remain confident in the overall quality of our loan portfolio."
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Balance Sheet
Total assets at March 31, 2016 were $9.04 billion, an increase of $84.2 million from December 31, 2015 as deposit account net inflows were used to fund loan growth and purchase investment securities. Loan growth of $62.3 million during the quarter was driven by strong loan originations of $254 million. Loan production was diversified across the portfolio sectors but centered in our commercial business sector. Securities were $2.20 billion at March 31, 2016, an increase of $26.0 million, or 1% from $2.17 billion at December 31, 2015. Total deposits at March 31, 2016 were $7.60 billion, an increase of $158.1 million from $7.44 billion at December 31, 2015. Core deposits comprised 96% of total deposits and were $7.29 billion at March 31, 2016, an increase of $157.2 million from December 31, 2015. The average rate on interest-bearing deposits and total deposits for the quarter was 0.07% and 0.04%, respectively, remaining unchanged from the fourth quarter of 2015.
Income Statement
Net Interest Income
Net interest income for the first quarter of 2016 was $80.2 million, a decrease of $1.6 million and $194 thousand from the linked and prior year first quarter, respectively. The linked quarter decrease was the result of one less day of interest accruals in the current quarter and a decline in incremental accretion income on loans, partially offset by higher loan volumes. The decrease from the prior year period is attributed to lower incremental accretion income, which in the current quarter is $2.8 million less than the first quarter of 2015. For additional information regarding net interest income, see the "Average Balances and Rates" table.
Noninterest Income
Noninterest income was $20.6 million for the first quarter of 2016, a decrease of $4.1 million compared to $24.7 million for the fourth quarter of 2015. The linked quarter decrease was primarily due to the $3.1 million accrual adjustment recorded during the fourth quarter of 2015 through other noninterest income related to the mortgage repurchase liability resulting from our acquisition of West Coast Bank. Additionally, income from interest rate contracts associated with commercial loan products was $428 thousand lower than the linked quarter.
Compared to the first quarter of 2015, noninterest income declined by $2.1 million primarily due to the change in FDIC loss-sharing asset, which accounted for $1.3 million of the decrease. In addition, other noninterest income was lower in the current quarter due to a $402 thousand decrease related to gains on disposals of loans.
The change in the FDIC loss-sharing asset has been a significant component of noninterest income, but over time the significance has diminished. The following table reflects the income statement components of the change in the FDIC loss-sharing asset:
Three Months Ended
------------------
March 31, December 31, March 31,
2016 2015 2015
---- ---- ----
(in thousands)
Adjustments reflected in
income
Amortization, net (1,332) (1,098) (2,294)
Loan impairment 147 855 1,532
Sale of other real estate 144 (484) (420)
Write-downs of other real
estate 18 10 1,071
Other (80) (314) 261
--- ---- ---
Change in FDIC loss-
sharing asset $(1,103) $(1,031) $150
======= ======= ====
Noninterest Expense
Total noninterest expense for the first quarter of 2016 was $65.1 million, a decrease of $1.8 million compared to $66.9 million for the fourth quarter of 2015. After removing the effect of the acquisition-related expenses, which were predominantly related to occupancy in the current quarter, noninterest expense for the current quarter was $2.4 million lower than the fourth quarter of 2015 on the same basis. The decrease was due in part to $852 thousand higher occupancy costs recorded in the prior quarter related to the write-down of land pending sale, which was sold during the current quarter. Also contributing to the decrease was lower expense related to the FDIC clawback liability of $209 thousand during the current quarter compared to $813 thousand in the prior quarter. The linked quarter reduction in legal and professional expense was principally driven by higher fees incurred in the fourth quarter of 2015 for regulatory exams and filings.
Compared to the first quarter of 2015, noninterest expense decreased $1.7 million, or 2%, from $66.7 million. This decrease was due to lower compensation and benefits and was partially offset by higher net OREO expenses. OREO expenses were a net cost of $104 thousand in the current quarter but were a net benefit of $1.2 million in the first quarter of 2015.
Net Interest Margin ("NIM")
Columbia's net interest margin (tax equivalent) for the first quarter of 2016 was 4.13%, a decline of 12 and 26 basis points from the linked and prior year quarters, respectively. The decline was due to both lower incremental accretion on acquired loans and lower yielding originated loans. Incremental accretion income was $4.7 million in the current period compared to $7.5 million in the prior year quarter. Columbia's operating net interest margin (tax equivalent)((1) )was 4.03% for the first quarter of 2016, a decrease of 6 basis points from 4.09% for the fourth quarter of 2015 and down 15 basis points compared to 4.18% for the first quarter of 2015 as a result of the continuing low interest rate environment.
The following table shows the impact to interest income resulting from income accretion on acquired loan portfolios as well as the net interest margin and operating net interest margin:
Three Months Ended
------------------
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
---- ---- ---- ---- ----
(dollars in thousands)
Incremental
accretion income
due to:
FDIC purchased
credit impaired
loans $1,657 $2,200 $2,082 $2,367 $2,447
Other FDIC
acquired loans
(2) - 68 34 15 117
Other acquired
loans 3,073 3,746 4,293 4,889 4,934
----- ----- ----- ----- -----
Incremental
accretion income $4,730 $6,014 $6,409 $7,271 $7,498
====== ====== ====== ====== ======
Net interest
margin (tax
equivalent) 4.13% 4.25% 4.37% 4.41% 4.39%
Operating net
interest margin
(tax equivalent)
(1) 4.03% 4.09% 4.18% 4.17% 4.18%
(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.
(2) For 2016, incremental accretion
income on other FDIC acquired
loans is no longer considered
significant.
Asset Quality
At March 31, 2016, nonperforming assets to total assets were 0.55% compared to 0.39% at December 31, 2015. Total nonperforming assets increased $14.1 million due to a $15.4 million increase in nonaccrual loans, partially offset by a decrease in other real estate owned.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
March 31, 2016 December 31,
2015
-------------- -------------
(in thousands)
Nonaccrual
loans:
Commercial
business $22,559 $9,437
Real estate:
One-to-four
family
residential 730 820
Commercial and
multifamily
residential 8,117 9,513
----- -----
Total real
estate 8,847 10,333
Real estate
construction:
One-to-four
family
residential 768 928
--- ---
Total real
estate
construction 768 928
Consumer 4,717 766
----- ---
Total
nonaccrual
loans 36,891 21,464
Other real
estate owned
and other
personal
property
owned 12,427 13,738
Total
nonperforming
assets $49,318 $35,202
======= =======
The following table provides an analysis of the Company's allowance for loan and lease losses:
Three Months Ended
------------------
March 31, 2016 December 31,
2015 March 31, 2015
-------------- ------------- --------------
(in thousands)
Beginning balance $68,172 $69,049 $69,569
Charge-offs:
Commercial business (3,773) (2,184) (1,426)
One-to-four family
residential real estate - (79) (8)
Commercial and
multifamily residential
real estate - (264) -
Consumer (266) (545) (891)
Purchased credit impaired (2,866) (3,680) (4,100)
------ ------ ------
Total charge-offs (6,905) (6,752) (6,425)
Recoveries:
Commercial business 662 886 618
One-to-four family
residential real estate 41 19 12
Commercial and
multifamily residential
real estate 69 277 3,261
One-to-four family
residential real estate
construction 254 52 28
Commercial and
multifamily residential
real estate construction 1 1 3
Consumer 165 224 273
Purchased credit impaired 1,551 2,067 1,686
----- ----- -----
Total recoveries 2,743 3,526 5,881
----- ----- -----
Net charge-offs (4,162) (3,226) (544)
Provision for loan and
lease losses 5,254 2,349 1,209
----- ----- -----
Ending balance $69,264 $68,172 $70,234
======= ======= =======
The allowance for loan losses to period end loans was 1.18% at March 31, 2016 compared to 1.17% at December 31, 2015. For the first quarter of 2016, Columbia recorded a net provision for loan and lease losses of $5.3 million compared to a net provision of $1.2 million for the comparable quarter last year. The provision for loan and lease losses recorded during the current quarter was due to net charge-off activity, $3.5 million of which stemmed from two commercial business loans, and organic loan growth.
Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, stated, "Our provision for the first quarter was primarily driven by charge-offs which rose six basis points to 28 basis points on an annualized basis when compared to last quarter. While not a big jump quarter over quarter, it nevertheless did have an impact." Mr. McDonald continued, "We are still satisfied with how our loan portfolio is behaving. Nonperforming assets at 55 basis points and an impaired asset capital ratio of less than 16% continue to reflect strong performance."
Impact of FDIC Acquired Loan Accounting
While the significance of the FDIC acquired loan accounting has diminished over time, the following table illustrates the impact to earnings associated with Columbia's FDIC acquired loan portfolios:
FDIC Acquired Loan Accounting
Three Months Ended
------------------
March 31, 2016 December 31,
2015 March 31, 2015
-------------- ------------- --------------
(in thousands)
Incremental
accretion
income on
FDIC
purchased
credit
impaired
loans $1,657 $2,200 $2,447
Incremental
accretion
income on
other FDIC
acquired
loans (1) - 68 117
Provision for
losses on
FDIC
purchased
credit
impaired
loans (653) (1,349) (2,609)
Change in FDIC
loss-sharing
asset (1,103) (1,031) 150
FDIC clawback
liability
expense (209) (812) (23)
Pre-tax
earnings
impact $(308) $(924) $82
===== ===== ===
For 2016, incremental
accretion income on other
FDIC acquired loans is no
longer considered
(1) significant.
The incremental accretion income on FDIC purchased credit impaired loans represents the amount of income recorded above the contractual rate stated in the individual loan notes. At March 31, 2016, the accretable yield on purchased credit impaired loans was $56.6 million. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis.
The $1.1 million change in the FDIC loss-sharing asset in the current quarter reduced noninterest income and consisted primarily of $1.3 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 prior pages.
Organizational Update
Ms. Dressel commented, "We carefully evaluate opportunities to improve our noninterest expense, particularly in light of continued pressure from the prolonged low interest rate environment. Our goal, as always, is to improve operating leverage while not sacrificing our commitment to customer service. To that end, during 2015 we consolidated four branches and during the first quarter of 2016 we consolidated an additional branch as a part of this objective."
Ms. Dressel continued, "Since our founding, we have maintained a strong commitment to being actively engaged in the communities we have the privilege to serve. We were very pleased to be recently recognized by the Puget Sound Business Journal as one of Washington State's 75 Top Corporate Philanthropists for 2016."
Regular and Special Cash Dividends
A regular cash dividend of $0.19 per common share, and per common share equivalent for holders of preferred stock, will be paid on May 25, 2016 to shareholders of record as of the close of business on May 11, 2016. In addition, a special cash dividend of $0.18 per common share, and per common share equivalent for holders of preferred stock, which will also be paid on May 25, 2016 to shareholders of record as of the close of business on May 11, 2016.
Ms. Dressel commented, "We are pleased that our financial performance allows us to increase our regular dividend from the prior quarter by 6% to $0.19 per share, and to pay a special cash dividend for the ninth consecutive quarter. Along with our regular dividend, the special dividend constitutes a payout ratio of 100% for the quarter and a dividend yield of 4.67% based on our closing price on April 27, 2016."
Conference Call Information
Columbia's management will discuss the first quarter 2016 results on a conference call scheduled for Thursday, April 28, 2016 at 1:00 p.m. Pacific Daylight Time (4:00 p.m. Eastern Daylight Time). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #22782081.
A conference call replay will be available from approximately 4:00 p.m. PDT on April 28, 2016 through 9:00 p.m. PDT on May 5, 2016. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #22782081.
About Columbia
Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank, with locations throughout Washington, Oregon and Idaho. For the ninth consecutive year, the bank was named in 2015 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked in the top 20 on the 2016 Forbes list of best banks in the country for the fifth 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. These forward looking statements include, but are not limited to, descriptions of Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words "will," "believe," "expect," "intend," "should," and "anticipate" or the negative of these words or words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risks and uncertainties, many of which are outside our control, that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the 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, (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates could significantly reduce net interest income 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 which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.
Contacts: 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
------------------
Unaudited March 31, December 31, March 31,
2016 2015 2015
---- ---- ----
Earnings (dollars in thousands except per share amounts)
--------
Net interest income $80,170 $81,819 $80,364
Provision for loan and lease losses $5,254 $2,349 $1,209
Noninterest income $20,646 $24,745 $22,767
Noninterest expense $65,074 $66,877 $66,734
Acquisition-related expense
(included in noninterest expense) $2,436 $1,872 $2,974
Net income $21,259 $26,740 $24,361
Per Common Share
----------------
Earnings (basic) $0.37 $0.46 $0.42
Earnings (diluted) $0.37 $0.46 $0.42
Book value $21.70 $21.48 $21.53
Averages
--------
Total assets $8,949,212 $8,905,743 $8,505,776
Interest-earning assets $8,005,945 $7,937,308 $7,529,040
Loans $5,827,440 $5,762,048 $5,414,942
Securities, including Federal Home
Loan Bank stock $2,147,457 $2,136,703 $2,068,806
Deposits $7,445,693 $7,440,628 $6,927,756
Interest-bearing deposits $3,983,314 $3,933,001 $4,157,491
Interest-bearing liabilities $4,124,582 $4,031,214 $4,395,502
Noninterest-bearing deposits $3,462,379 $3,507,627 $2,770,265
Shareholders' equity $1,258,411 $1,259,117 $1,240,853
Financial Ratios
----------------
Return on average assets 0.95% 1.20% 1.15%
Return on average common equity 6.76% 8.50% 7.86%
Average equity to average assets 14.06% 14.14% 14.59%
Net interest margin (tax
equivalent) 4.13% 4.25% 4.39%
Efficiency ratio (tax equivalent)
(1) 62.63% 60.99% 62.95%
Operating efficiency ratio (tax
equivalent) (2) 59.43% 60.53% 63.02%
March 31, December 31,
Period end 2016 2015
---------- ---- ----
Total assets $9,035,932 $8,951,697
Loans, net of unearned income $5,877,283 $5,815,027
Allowance for loan and lease losses $69,264 $68,172
Securities, including Federal Home
Loan Bank stock $2,196,407 $2,170,416
Deposits $7,596,949 $7,438,829
Core deposits $7,285,067 $7,127,866
Shareholders' equity $1,260,788 $1,242,128
Nonperforming assets
--------------------
Nonaccrual loans $36,891 $21,464
Other real estate owned ("OREO")
and other personal property owned
("OPPO") 12,427 13,738
Total nonperforming assets $49,318 $35,202
======= =======
Nonperforming loans to period-end
loans 0.63% 0.37%
Nonperforming assets to period-end
assets 0.55% 0.39%
Allowance for loan and lease losses
to period-end loans 1.18% 1.17%
Net loan charge-offs $4,162 (3) $3,226 (4)
(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 three months ended March
31, 2016.
(4) For the three months ended
December 31, 2015.
QUARTERLY FINANCIAL STATISTICS
Columbia Banking System, Inc. Three Months Ended
------------------
Unaudited March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
---- ---- ---- ---- ----
(dollars in thousands except per share)
Earnings
--------
Net interest income $80,170 $81,819 $81,694 $81,010 $80,364
Provision for loan and lease losses $5,254 $2,349 $2,831 $2,202 $1,209
Noninterest income $20,646 $24,745 $22,499 $21,462 $22,767
Noninterest expense $65,074 $66,877 $64,067 $68,471 $66,734
Acquisition-related expense
(included in noninterest expense) $2,436 $1,872 $428 $5,643 $2,974
Net income $21,259 $26,740 $25,780 $21,946 $24,361
Per Common Share
----------------
Earnings (basic) $0.37 $0.46 $0.45 $0.38 $0.42
Earnings (diluted) $0.37 $0.46 $0.45 $0.38 $0.42
Book value $21.70 $21.48 $21.69 $21.38 $21.53
Averages
--------
Total assets $8,949,212 $8,905,743 $8,672,692 $8,532,173 $8,505,776
Interest-earning assets $8,005,945 $7,937,308 $7,711,531 $7,560,288 $7,529,040
Loans $5,827,440 $5,762,048 $5,712,614 $5,542,489 $5,414,942
Securities, including Federal Home
Loan Bank stock $2,147,457 $2,136,703 $1,945,174 $1,976,959 $2,068,806
Deposits $7,445,693 $7,440,628 $7,233,863 $6,978,472 $6,927,756
Interest-bearing deposits $3,983,314 $3,933,001 $3,910,695 $3,753,101 $4,157,491
Interest-bearing liabilities $4,124,582 $4,031,214 $4,007,198 $3,961,013 $4,395,502
Noninterest-bearing deposits $3,462,379 $3,507,627 $3,323,168 $3,225,371 $2,770,265
Shareholders' equity $1,258,411 $1,259,117 $1,239,830 $1,247,887 $1,240,853
Financial Ratios
----------------
Return on average assets 0.95% 1.20% 1.19% 1.03% 1.15%
Return on average common equity 6.76% 8.50% 8.32% 7.04% 7.86%
Average equity to average assets 14.06% 14.14% 14.30% 14.63% 14.59%
Net interest margin (tax
equivalent) 4.13% 4.25% 4.37% 4.41% 4.39%
Period end
----------
Total assets $9,035,932 $8,951,697 $8,755,984 $8,518,019 $8,552,902
Loans, net of unearned income $5,877,283 $5,815,027 $5,746,511 $5,611,897 $5,450,895
Allowance for loan and lease losses $69,264 $68,172 $69,049 $69,257 $70,234
Securities, including Federal Home
Loan Bank stock $2,196,407 $2,170,416 $2,037,666 $1,926,248 $2,040,163
Deposits $7,596,949 $7,438,829 $7,314,805 $7,044,373 $7,074,965
Core deposits $7,285,067 $7,127,866 $6,986,206 $6,737,969 $6,771,755
Shareholders' equity $1,260,788 $1,242,128 $1,254,136 $1,236,214 $1,244,443
Nonperforming, assets
---------------------
Nonaccrual loans $36,891 $21,464 $19,080 $25,746 $31,828
OREO and OPPO 12,427 13,738 19,475 20,665 23,347
------ ------ ------ ------ ------
Total nonperforming assets $49,318 $35,202 $38,555 $46,411 $55,175
------- ------- ------- ------- -------
Nonperforming loans to period-end
loans 0.63% 0.37% 0.33% 0.46% 0.58%
Nonperforming assets to period-end
assets 0.55% 0.39% 0.44% 0.54% 0.65%
Allowance for loan and lease losses
to period-end loans 1.18% 1.17% 1.20% 1.23% 1.29%
Net loan charge-offs $4,162 $3,226 $3,039 $3,179 $544
LOAN PORTFOLIO COMPOSITION
Columbia Banking System, Inc.
Unaudited March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
---- ---- ---- ---- ----
Loan Portfolio
Composition -
Dollars (dollars in thousands)
--------------
Commercial business $2,401,193 $2,362,575 $2,354,731 $2,255,468 $2,139,873
Real estate:
One-to-four family
residential 175,050 176,295 177,108 181,849 173,739
Commercial and
multifamily
residential 2,520,352 2,491,736 2,449,847 2,406,594 2,374,454
--------- --------- --------- --------- ---------
Total real estate 2,695,402 2,668,031 2,626,955 2,588,443 2,548,193
Real estate
construction:
One-to-four family
residential 133,447 135,874 136,783 127,311 124,017
Commercial and
multifamily
residential 183,548 167,413 134,097 129,302 119,880
------- ------- ------- ------- -------
Total real estate
construction 316,995 303,287 270,880 256,613 243,897
Consumer 329,902 342,601 348,315 358,365 352,960
Purchased credit
impaired 173,201 180,906 191,066 202,367 219,839
------- ------- ------- ------- -------
Subtotal loans 5,916,693 5,857,400 5,791,947 5,661,256 5,504,762
Less: Net unearned
income (39,410) (42,373) (45,436) (49,359) (53,867)
------- ------- ------- ------- -------
Loans, net of
unearned income 5,877,283 5,815,027 5,746,511 5,611,897 5,450,895
Less: Allowance for
loan and lease
losses (69,264) (68,172) (69,049) (69,257) (70,234)
Total loans, net 5,808,019 5,746,855 5,677,462 5,542,640 5,380,661
========= ========= ========= ========= =========
Loans held for sale $3,681 $4,509 $6,637 $4,220 $3,545
====== ====== ====== ====== ======
March 31, December 31, September 30, June 30, March 31,
Loan Portfolio
Composition -
Percentages 2016 2015 2015 2015 2015
-------------- ---- ---- ---- ---- ----
Commercial business 40.9% 40.6% 41.0% 40.2% 39.3%
Real estate:
One-to-four family
residential 3.0% 3.0% 3.1% 3.2% 3.2%
Commercial and
multifamily
residential 42.9% 42.9% 42.6% 42.9% 43.5%
---- ---- ---- ---- ----
Total real estate 45.9% 45.9% 45.7% 46.1% 46.7%
Real estate
construction:
One-to-four family
residential 2.3% 2.3% 2.4% 2.3% 2.3%
Commercial and
multifamily
residential 3.1% 2.9% 2.3% 2.3% 2.2%
--- --- --- --- ---
Total real estate
construction 5.4% 5.2% 4.7% 4.6% 4.5%
Consumer 5.6% 5.9% 6.1% 6.4% 6.5%
Purchased credit
impaired 2.9% 3.1% 3.3% 3.6% 4.0%
--- --- --- --- ---
Subtotal loans 100.7% 100.7% 100.8% 100.9% 101.0%
Less: Net unearned
income (0.7)% (0.7)% (0.8)% (0.9)% (1.0)%
----- ----- ----- ----- -----
Loans, net of
unearned income 100.0% 100.0% 100.0% 100.0% 100.0%
DEPOSIT COMPOSITION
Columbia Banking System, Inc.
Unaudited
March 31, December 31, September 30, June 30, March 31,
2016 2015 2015 2015 2015
---- ---- ---- ---- ----
Deposit Composition -
Dollars (dollars in thousands)
---------------------
Core deposits:
Demand and other non-
interest bearing $3,553,468 $3,507,358 $3,386,968 $3,207,538 $3,260,376
Interest bearing
demand 958,469 925,909 911,686 912,637 901,684
Money market 1,838,364 1,788,552 1,776,087 1,718,000 1,700,014
Savings 695,588 657,016 651,695 630,897 630,423
Certificates of
deposit less than
$100,000 239,178 249,031 259,770 268,897 279,258
------- ------- ------- ------- -------
Total core deposits 7,285,067 7,127,866 6,986,206 6,737,969 6,771,755
Certificates of
deposit greater than
$100,000 170,126 182,973 184,047 194,449 199,728
Certificates of
deposit insured by
CDARS(R) 24,752 26,901 26,975 18,357 18,430
Brokered money market
accounts 116,878 100,854 117,196 93,061 84,336
------- ------- ------- ------ ------
Subtotal 7,596,823 7,438,594 7,314,424 7,043,836 7,074,249
Premium resulting
from acquisition
date fair value
adjustment 126 235 381 537 716
--- --- --- --- ---
Total deposits $7,596,949 $7,438,829 $7,314,805 $7,044,373 $7,074,965
========== ========== ========== ========== ==========
March 31, December 31, September 30, June 30, March 31,
Deposit Composition -
Percentages 2016 2015 2015 2015 2015
--------------------- ---- ---- ---- ---- ----
Core deposits:
Demand and other non-
interest bearing 46.8% 47.2% 46.3% 45.5% 46.2%
Interest bearing
demand 12.6% 12.4% 12.5% 13.0% 12.7%
Money market 24.2% 24.0% 24.3% 24.4% 24.0%
Savings 9.2% 8.8% 8.9% 9.0% 8.9%
Certificates of
deposit less than
$100,000 3.1% 3.3% 3.6% 3.8% 3.9%
--- --- --- --- ---
Total core deposits 95.9% 95.7% 95.6% 95.7% 95.7%
Certificates of
deposit greater than
$100,000 2.3% 2.5% 2.4% 2.7% 2.8%
Certificates of
deposit insured by
CDARS(R) 0.3% 0.4% 0.4% 0.3% 0.3%
Brokered money market
accounts 1.5% 1.4% 1.6% 1.3% 1.2%
--- --- --- --- ---
Total 100.0% 100.0% 100.0% 100.0% 100.0%
CONSOLIDATED STATEMENTS OF INCOME
Columbia Banking
System, Inc. Three Months Ended
------------------
Unaudited March 31, December 31, March 31,
2016 2015 (1) 2015 (1)
---- ------- -------
(in thousands except per share)
Interest Income
Loans $70,316 $71,358 $70,822
Taxable securities 8,017 8,516 7,526
Tax-exempt
securities 2,803 2,870 3,042
Deposits in banks 38 25 27
--- --- ---
Total interest
income 81,174 82,769 81,417
Interest Expense
Deposits 742 733 748
Federal Home Loan
Bank advances 124 83 159
Other borrowings 138 134 146
--- --- ---
Total interest
expense 1,004 950 1,053
----- --- -----
Net Interest Income 80,170 81,819 80,364
Provision for loan
and lease losses 5,254 2,349 1,209
----- ----- -----
Net interest income
after provision for
loan and lease
losses 74,916 79,470 79,155
Noninterest Income
Deposit account and
treasury management
fees (1) 6,989 7,010 6,860
Card revenue (1) 5,652 5,776 5,363
Financial services
and trust revenue
(1) 2,821 2,940 3,124
Loan revenue (1) 2,262 2,808 2,603
Merchant processing
revenue 2,102 2,173 2,040
Bank owned life
insurance 1,116 1,071 1,078
Investment
securities gains,
net 373 281 721
Change in FDIC loss-
sharing asset (1,103) (1,031) 150
Other (1) 434 3,717 828
--- ----- ---
Total noninterest
income 20,646 24,745 22,767
Noninterest Expense
Compensation and
employee benefits 36,319 36,689 39,100
Occupancy 10,173 10,037 7,993
Merchant processing
expense 1,033 1,058 977
Advertising and
promotion 842 1,233 931
Data processing 4,146 4,399 4,984
Legal and
professional fees 1,325 2,081 2,507
Taxes, licenses and
fees 1,290 1,392 1,232
Regulatory premiums 1,141 1,180 1,221
Net cost (benefit)
of operation of
other real estate
owned 104 (60) (1,246)
Amortization of
intangibles 1,583 1,652 1,817
Other 7,118 7,216 7,218
----- ----- -----
Total noninterest
expense 65,074 66,877 66,734
------ ------ ------
Income before income
taxes 30,488 37,338 35,188
Provision for income
taxes 9,229 10,598 10,827
----- ------ ------
Net Income $21,259 $26,740 $24,361
======= ======= =======
Earnings per common
share
Basic $0.37 $0.46 $0.42
Diluted $0.37 $0.46 $0.42
Dividends paid per
common share $0.38 $0.36 $0.30
Weighted average
number of common
shares outstanding 57,114 57,057 56,965
Weighted average
number of diluted
common shares
outstanding 57,125 57,070 56,978
(1) Reclassified to conform to the current
period's presentation.
Reclassifications consisted of
disaggregating income previously
presented as 'Service charges and other
fees' and certain income previously
presented in 'Other' into the
presentation above. There was no
change to total noninterest income as
previously reported as a result of
these reclassifications.
CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
Unaudited March 31, December 31,
2016 2015
---- ----
(in thousands)
ASSETS
Cash and due from banks $150,683 $166,929
Interest-earning deposits with banks 38,248 8,373
------ -----
Total cash and cash equivalents 188,931 175,302
Securities available for sale at fair value (amortized cost of $2,156,999 and $2,157,610, respectively) 2,186,166 2,157,694
Federal Home Loan Bank stock at cost 10,241 12,722
Loans held for sale 3,681 4,509
Loans, net of unearned income of ($39,410) and ($42,373), respectively 5,877,283 5,815,027
Less: allowance for loan and lease losses 69,264 68,172
------ ------
Loans, net 5,808,019 5,746,855
FDIC loss-sharing asset 5,954 6,568
Interest receivable 29,304 27,877
Premises and equipment, net 158,101 164,239
Other real estate owned 12,427 13,738
Goodwill 382,762 382,762
Other intangible assets, net 21,994 23,577
Other assets 228,352 235,854
Total assets $9,035,932 $8,951,697
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $3,553,468 $3,507,358
Interest-bearing 4,043,481 3,931,471
--------- ---------
Total deposits 7,596,949 7,438,829
Federal Home Loan Bank advances 6,521 68,531
Securities sold under agreements to
repurchase 73,839 99,699
Other liabilities 97,835 102,510
------ -------
Total liabilities 7,775,144 7,709,569
Commitments and contingent liabilities
March 31, December 31,
2016 2015
---- ----
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 115,000 115,000
Issued and outstanding 58,008 57,724 991,026 990,281
Retained earnings 255,202 255,925
Accumulated other comprehensive income
(loss) 12,343 (6,295)
------ ------
Total shareholders' equity 1,260,788 1,242,128
Total liabilities and shareholders' equity $9,035,932 $8,951,697
========== ==========
AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
Three Months Ended Three Months Ended
------------------ ------------------
March 31, 2016 March 31, 2015
-------------- --------------
Average Interest Average Average Interest Average
Balances Earned / Paid Rate Balances Earned / Paid Rate
-------- ------------- ---- -------- ------------- ----
(dollars in thousands)
ASSETS
Loans, net (1)(2) $5,827,440 $71,298 4.89% $5,414,942 $71,487 5.28%
Taxable securities 1,689,289 8,017 1.90% 1,609,323 7,526 1.87%
Tax exempt securities (2) 458,168 4,312 3.76% 459,483 4,680 4.07%
Interest-earning deposits
with banks 31,048 38 0.49% 45,292 27 0.24%
------ --- ------ ---
Total interest-earning
assets 8,005,945 $83,665 4.18% 7,529,040 $83,720 4.45%
Other earning assets 154,336 146,055
Noninterest-earning assets 788,931 830,681
------- -------
Total assets $8,949,212 $8,505,776
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit $448,915 $144 0.13% $502,287 $240 0.19%
Savings accounts 675,876 17 0.01% 625,132 19 0.01%
Interest-bearing demand 927,948 169 0.07% 1,214,149 138 0.05%
Money market accounts 1,930,575 412 0.09% 1,815,923 351 0.08%
--------- --- --------- ---
Total interest-bearing
deposits 3,983,314 742 0.07% 4,157,491 748 0.07%
Federal Home Loan Bank
advances 50,569 124 0.98% 129,841 159 0.49%
Other borrowings 90,699 138 0.61% 108,170 146 0.54%
------ --- ------- ---
Total interest-bearing
liabilities 4,124,582 $1,004 0.10% 4,395,502 $1,053 0.10%
Noninterest-bearing
deposits 3,462,379 2,770,265
Other noninterest-bearing
liabilities 103,840 99,156
Shareholders' equity 1,258,411 1,240,853
--------- ---------
Total liabilities &
shareholders' equity $8,949,212 $8,505,776
========== ==========
Net interest income (tax equivalent) $82,661 $82,667
======= =======
Net interest margin (tax equivalent) 4.13% 4.39%
==== ====
(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
$1.1 million for both three
month periods ended March 31,
2016 and March 31, 2015. The
incremental accretion on
acquired loans was $4.7 million
and $7.5 million for the three
months ended March 31, 2016 and
2015, respectively.
(2) Tax-exempt income is calculated
on a tax equivalent basis. The
tax equivalent yield adjustment
to interest earned on loans was
$982 thousand and $665 thousand
for the three months ended
March 31, 2016 and 2015,
respectively. The tax
equivalent yield adjustment to
interest earned on tax exempt
securities was $1.5 million and
$1.6 million for the three
months ended March 31, 2016 and
2015, respectively.
AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
Three Months Ended Three Months Ended
------------------ ------------------
March 31, 2016 December 31, 2015
-------------- -----------------
Average Interest Average Average Interest Average
Balances Earned / Paid Rate Balances Earned / Paid Rate
-------- ------------- ---- -------- ------------- ----
(dollars in thousands)
ASSETS
Loans, net (1)(2) $5,827,440 $71,298 4.89% $5,762,048 $72,322 5.02%
Taxable securities 1,689,289 8,017 1.90% 1,686,594 8,516 2.02%
Tax exempt securities (2) 458,168 4,312 3.76% 450,109 4,417 3.93%
Interest-earning deposits
with banks 31,048 38 0.49% 38,557 25 0.26%
------ --- ------ ---
Total interest-earning
assets 8,005,945 $83,665 4.18% 7,937,308 $85,280 4.30%
Other earning assets 154,336 153,298
Noninterest-earning assets 788,931 815,137
------- -------
Total assets $8,949,212 $8,905,743
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit $448,915 $144 0.13% $460,858 $179 0.16%
Savings accounts 675,876 17 0.01% 653,738 17 0.01%
Interest-bearing demand 927,948 169 0.07% 920,021 161 0.07%
Money market accounts 1,930,575 412 0.09% 1,898,384 376 0.08%
--------- --- --------- ---
Total interest-bearing
deposits 3,983,314 742 0.07% 3,933,001 733 0.07%
Federal Home Loan Bank
advances 50,569 124 0.98% 18,915 83 1.76%
Other borrowings 90,699 138 0.61% 79,298 134 0.68%
------ --- ------ ---
Total interest-bearing
liabilities 4,124,582 $1,004 0.10% 4,031,214 $950 0.09%
Noninterest-bearing
deposits 3,462,379 3,507,627
Other noninterest-bearing
liabilities 103,840 107,785
Shareholders' equity 1,258,411 1,259,117
--------- ---------
Total liabilities &
shareholders' equity $8,949,212 $8,905,743
========== ==========
Net interest income (tax equivalent) $82,661 $84,330
======= =======
Net interest margin (tax equivalent) 4.13% 4.25%
==== ====
(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 $1.1 million for both
three month periods ended March
31, 2016 and December 31, 2015.
The incremental accretion on
acquired loans was $4.7 million
and $6.0 million for the three
months ended March 31, 2016 and
December 31, 2015, respectively.
(2) Tax-exempt income is calculated
on a tax equivalent basis. The
tax equivalent yield adjustment
to interest earned on loans was
$982 thousand and $964 thousand
for the three months ended March
31, 2016 and December 31, 2015,
respectively. The tax equivalent
yield adjustment to interest
earned on tax exempt securities
was $1.5 million for both three
month periods ended March 31,
2016 and December 31, 2015.
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. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.
The following tables reconcile the Company's calculation of the operating net interest margin and operating efficiency ratio:
Three Months Ended
------------------
March 31, December 31, March 31,
2016 2015 2015
---- ---- ----
Operating net interest
margin non-GAAP
reconciliation: (dollars in thousands)
Net interest income
(tax equivalent) (1) $82,661 $84,330 $82,667
------- ------- -------
Adjustments to arrive
at operating net
interest income (tax
equivalent):
Incremental accretion
income on FDIC
purchased credit
impaired loans (1,657) (2,200) (2,447)
Incremental accretion
income on other FDIC
acquired loans (2) - (68) (117)
Incremental accretion
income on other
acquired loans (3,073) (3,746) (4,934)
Premium amortization on
acquired securities 2,324 2,253 2,861
Interest reversals on
nonaccrual loans 453 582 650
Operating net interest
income (tax
equivalent) (1) $80,708 $81,151 $78,680
======= ======= =======
Average interest
earning assets $8,005,945 $7,937,308 $7,529,040
Net interest margin
(tax equivalent) (1) 4.13% 4.25% 4.39%
Operating net interest
margin (tax
equivalent) (1) 4.03% 4.09% 4.18%
Three Months Ended
------------------
March 31, December 31, March 31,
2016 2015 2015
---- ---- ----
Operating efficiency
ratio non-GAAP
reconciliation: (dollars in thousands)
Noninterest expense
(numerator A) $65,074 $66,877 $66,734
Adjustments to arrive
at operating
noninterest expense:
Acquisition-related
expenses (2,436) (1,872) (2,974)
Net benefit (cost) of
operation of OREO and
OPPO (102) 150 1,241
FDIC clawback liability
expense (209) (812) (23)
Loss on asset disposals (160) (52) (96)
State of Washington
Business and
Occupation ("B&O")
taxes (1,171) (1,294) (1,129)
Operating noninterest
expense (numerator B) $60,996 $62,997 $63,753
Net interest income
(tax equivalent) (1) $82,661 $84,330 $82,667
Noninterest income 20,646 24,745 22,767
Bank owned life
insurance tax
equivalent adjustment 600 576 581
--- --- ---
Total revenue (tax
equivalent)
(denominator A) $103,907 $109,651 $106,015
Operating net interest
income (tax
equivalent) (1) $80,708 $81,151 $78,680
Adjustments to arrive
at operating
noninterest income
(tax equivalent):
Investment securities
gains, net (373) (281) (721)
Gain on asset disposals (54) (4) -
Mortgage loan
repurchase liability
adjustment - (3,147) -
Change in FDIC loss-
sharing asset 1,103 1,031 (150)
-----
Operating noninterest
income (tax
equivalent) 21,922 22,920 22,477
------ ------ ------
Total operating revenue
(tax equivalent)
(denominator B) $102,630 $104,071 $101,157
Efficiency ratio (tax
equivalent) (numerator
A/denominator A) 62.63% 60.99% 62.95%
Operating efficiency
ratio (tax equivalent)
(numerator B/
denominator B) 59.43% 60.53% 63.02%
(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 $2.5
million, $2.5 million and $2.3 million
for the three months ended March 31,
2016, December 31, 2015 and March 31,
2015, respectively.
(2) For 2016, incremental accretion income
on other FDIC acquired loans is no
longer considered significant and will
no longer be tracked for these non-
GAAP financial measures.
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SOURCE Columbia Banking System, Inc.
