UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 27, 2016
COLUMBIA BANKING SYSTEM, INC.
(Exact name of registrant as specified in its charter)
Washington
 
0-20288
 
91-1422237
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
 
 
 
1301 A Street
Tacoma, WA
 
 
 
98402
(Address of principal executive offices)
 
 
 
(Zip Code)
Registrant’s telephone number, including area code: (253) 305-1900
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



Items to be Included in this Report
Item 2.02 Results of Operations and Financial Condition
On October 27, 2016 , Columbia Banking System, Inc. issued a press release reporting its financial results for the quarter ended September 30, 2016 . A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Item 8.01 Other Events
On October 27, 2016 , Columbia Banking System, Inc. issued a press release announcing a regular quarterly cash dividend of $0.20 per common share and per share equivalent for holders of preferred stock and a special dividend of $0.19 per common share and per share equivalent for holders of preferred stock. The dividends will be paid on November 23, 2016 to shareholders of record at the close of business on November 9, 2016 . A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits
(d) The following exhibits are being furnished herewith:
99.1
Press Release dated October 27, 2016 reporting the financial results of Columbia Banking System, Inc. for the quarter ended September 30, 2016 .

99.2
Press Release dated October 27, 2016 announcing a regular quarterly dividend and a special cash dividend.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
COLUMBIA BANKING SYSTEM, INC.
 
 
 
 
 
 
Date:
October 27, 2016
 
 
 
/s/ MELANIE J. DRESSEL
 
 
 
 
 
Melanie J. Dressel
 
 
 
 
 
President and Chief Executive Officer



EXHIBIT INDEX
99.1
Press Release dated October 27, 2016 reporting the financial results of Columbia Banking System, Inc. for the quarter ended September 30, 2016 .

99.2
Press Release dated October 27, 2016 announcing a regular quarterly dividend and a special cash dividend.







Exhibit 99.1

CBSYSTEMINCHORIZ4CSOLIDBUG.JPG

FOR IMMEDIATE RELEASE
October 27, 2016

Contacts:      Melanie J. Dressel,
President and
Chief Executive Officer
(253) 305-1911

Clint E. Stein,
Executive Vice President
and Chief Financial Officer
(253) 593-8304

Columbia Banking System Announces Third Quarter 2016 Results

Highlights

•
Net income of $27.5 million with diluted earnings per common share of $0.47
•
Record new loan production for the quarter of $375.3 million , resulting in solid loan growth of $152.6 million , or 10% annualized
•
Deposits increased $384.6 million during the quarter, resulting in growth of 10% from 3Q 2015
•
Nonperforming assets to period end assets ratio improves to 0.32% , lowest in 8 years
•
Net interest margin expanded to 4.13%
•
For the seventh time, Melanie Dressel honored as one of The 25 Most Powerful Women in Banking by American Banker Magazine


TACOMA, Washington, October 27, 2016 -- Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB) (“Columbia”), said today upon the release of Columbia’s third quarter 2016 earnings, “The competitive landscape and interest rate environment remain challenging. However, we are very pleased with our results for the third quarter, which built upon the momentum of our second quarter performance. Our bankers delivered another impressive quarter of record loan production while maintaining good portfolio diversification. We also had outstanding year-over-year deposit growth of 10%, while our cost of funds remained one of the best in the country.”

1


Balance Sheet
Total assets at September 30, 2016 were $9.59 billion , an increase of $233.1 million from June 30, 2016 . Loan growth of $152.6 million during the quarter was driven by strong loan originations of $375.3 million . Loan production was diversified across the portfolio sectors, with growth primarily centered in commercial business loans. Securities available for sale were $2.36 billion at September 30, 2016 , an increase of $80.5 million , or 4% from $2.28 billion at June 30, 2016 . Total deposits at September 30, 2016 were $8.06 billion , an increase of $384.6 million from $7.67 billion at June 30, 2016 . Core deposits comprised 97% of total deposits and were $7.81 billion at September 30, 2016 , an increase of $361.1 million from June 30, 2016 . The average cost of total deposits for the quarter was 0.04% , unchanged from the second quarter of 2016.
Income Statement
Net Interest Income
Net interest income for the third quarter of 2016 was $85.6 million , an increase of $3.4 million and $3.9 million from the linked and prior year periods, respectively. The linked quarter increase was driven principally by higher loan and securities volumes as well as higher rates on loans. The increase from the prior year period was also due to higher loan and securities volumes, partially offset by lower incremental accretion income on loans, which was $1.8 million lower in the current quarter as compared to the third quarter of 2015. For additional information regarding net interest income, see the “Average Balances and Rates” table.
Noninterest Income
Noninterest income was $23.2 million for the third quarter of 2016 , an increase of $1.2 million compared to $21.9 million for the second quarter of 2016 . The linked quarter increase was due to lower expense related to the change in FDIC loss-sharing asset as well as higher investment security gains.    Compared to the third quarter of 2015 , noninterest income increased by $667 thousand due to lower expenses from the FDIC loss-sharing asset. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format below.

2


The change in the FDIC loss-sharing asset has been a significant component of noninterest income but, as our larger loss-sharing agreements have expired, the significance has diminished. The following table reflects the income statement components of the change in the FDIC loss-sharing asset:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
2016
 
2015
 
 
(in thousands)
Adjustments reflected in income
 
 
 
 
 
 
 
 
 
 
Amortization, net
 
$
(315
)
 
$
(883
)
 
$
(1,416
)
 
(2,530
)
 
(5,086
)
Loan impairment (recapture)
 
266

 
(20
)
 
(119
)
 
393

 
1,413

Sales of other real estate owned
 
(49
)
 
(24
)
 
(126
)
 
71

 
(753
)
Valuation adjustments on other real estate owned
 
—

 
(40
)
 
25

 
(22
)
 
1,148

Other
 
(6
)
 
(23
)
 
1

 
(109
)
 
299

Change in FDIC loss-sharing asset
 
$
(104
)
 
$
(990
)
 
$
(1,635
)
 
$
(2,197
)
 
$
(2,979
)
Noninterest Expense
Total noninterest expense for the third quarter of 2016 was $67.3 million , an increase of $3.5 million from $63.8 million for the second quarter of 2016 . The increase was due to both higher compensation and benefits expense as well as higher advertising costs in the current quarter. The increase in compensation and benefits was due to recognizing additional incentive expense from record loan production, deposit growth and improved financial performance. The higher advertising costs were the result of refreshed television commercials and the associated media costs during the current quarter.
Compared to the third quarter of 2015, noninterest expense increased $3.2 million , or 5% , from $64.1 million . After removing the effect of the acquisition-related expenses of $428 thousand in the prior year period, noninterest expense for the current quarter was $3.6 million higher than the third quarter of 2015. This increase was due to higher compensation and benefits as well as higher advertising costs as noted above. These increases were partially offset by decreased expenses related to other real estate owned as well as reduced regulatory premiums in the current quarter.

3


Net Interest Margin (“NIM”)
Columbia’s net interest margin (tax equivalent) for the third quarter of 2016 was 4.13% , an increase of 3 basis points from the linked quarter and decline of 24 basis points from prior year period. The increase from the linked quarter was due to higher loan rates. The decrease from the prior year period was due to both lower incremental accretion income on acquired loans and lower yielding originated loans. Incremental accretion income was $4.6 million in the current period compared to $6.4 million in the prior year quarter. Columbia’s operating net interest margin (tax equivalent) (1) was 4.03% for the third quarter of 2016 , an increase of 3 basis points from 4.00% for the second quarter of 2016 and down 15 basis points compared to 4.18% for the third quarter of 2015 as a result of lower yielding originated loans.
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
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2016
 
2015
 
2015
 
2016
 
2015
 
 
(dollars in thousands)
Incremental accretion income due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FDIC purchased credit impaired loans
 
$
1,816

 
$
1,300

 
$
1,657

 
$
2,200

 
$
2,082

 
$
4,773

 
$
6,896

Other FDIC acquired loans (2)
 
—

 
—

 
—

 
68

 
34

 
—

 
166

Other acquired loans
 
2,749

 
3,074

 
3,073

 
3,746

 
4,293

 
8,896

 
14,116

Incremental accretion income
 
$
4,565

 
$
4,374

 
$
4,730

 
$
6,014

 
$
6,409

 
$
13,669

 
$
21,178

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (tax equivalent)
 
4.13
%
 
4.10
%
 
4.13
%
 
4.25
%
 
4.37
%
 
4.12
%
 
4.39
%
Operating net interest margin (tax equivalent) (1)
 
4.03
%
 
4.00
%
 
4.03
%
 
4.09
%
 
4.18
%
 
4.02
%
 
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.

4


Asset Quality
At September 30, 2016 , nonperforming assets to total assets were 0.32% compared to 0.36% at June 30, 2016 and 0.39% at December 31, 2015 . Total nonperforming assets decreased $3.2 million from the linked quarter due to a $1.5 million decrease in nonaccrual loans as well as a decrease in other real estate owned.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
 
 
September 30, 2016
 
June 30, 2016
 
December 31, 2015
 
 
(in thousands)
Nonaccrual loans:
 
 
 
 
 
 
Commercial business
 
$
9,502

 
$
9,548

 
$
9,437

Real estate:
 
 
 
 
 
 
One-to-four family residential
 
579

 
957

 
820

Commercial and multifamily residential
 
7,052

 
7,834

 
9,513

Total real estate
 
7,631

 
8,791

 
10,333

Real estate construction:
 
 
 
 
 
 
One-to-four family residential
 
461

 
562

 
928

Total real estate construction
 
461

 
562

 
928

Consumer
 
3,772

 
4,014

 
766

Total nonaccrual loans
 
21,366

 
22,915

 
21,464

Other real estate owned and other personal property owned
 
8,994

 
10,613

 
13,738

Total nonperforming assets
 
$
30,360

 
$
33,528

 
$
35,202



5


The following table provides an analysis of the Company's allowance for loan and lease losses:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2016
 
June 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
 
 
(in thousands)
Beginning balance
 
$
69,304

 
$
69,264

 
$
69,257

 
$
68,172

 
$
69,569

Charge-offs:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
(2,159
)
 
(2,941
)
 
(2,570
)
 
(8,873
)
 
(6,082
)
One-to-four family residential real estate
 
—

 
(35
)
 
—

 
(35
)
 
(297
)
Commercial and multifamily residential real estate
 
—

 
(26
)
 
(198
)
 
(26
)
 
(241
)
Consumer
 
(383
)
 
(334
)
 
(311
)
 
(983
)
 
(1,521
)
Purchased credit impaired
 
(2,062
)
 
(2,898
)
 
(3,198
)
 
(7,826
)
 
(10,174
)
Total charge-offs
 
(4,604
)
 
(6,234
)
 
(6,277
)
 
(17,743
)
 
(18,315
)
Recoveries:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
854

 
753

 
623

 
2,269

 
1,450

One-to-four family residential real estate
 
81

 
20

 
261

 
142

 
288

Commercial and multifamily residential real estate
 
20

 
130

 
417

 
219

 
3,698

One-to-four family residential real estate construction
 
21

 
5

 
105

 
280

 
141

Commercial and multifamily residential real estate construction
 
107

 
1

 
2

 
109

 
7

Consumer
 
399

 
201

 
297

 
765

 
707

Purchased credit impaired
 
2,216

 
1,524

 
1,533

 
5,291

 
5,262

Total recoveries
 
3,698

 
2,634

 
3,238

 
9,075

 
11,553

Net charge-offs
 
(906
)
 
(3,600
)
 
(3,039
)
 
(8,668
)
 
(6,762
)
Provision for loan and lease losses
 
1,866

 
3,640

 
2,831

 
10,760

 
6,242

Ending balance
 
$
70,264

 
$
69,304

 
$
69,049

 
$
70,264

 
$
69,049

The allowance for loan losses to period end loans was 1.12% at September 30, 2016 compared to 1.13% at June 30, 2016 and 1.18% at December 31, 2015 . For the third quarter of 2016 , Columbia recorded a net provision for loan and lease losses of $1.9 million compared to a net provision of $3.6 million for the linked quarter and $2.8 million for the comparable quarter last year. The provision for loan and lease losses recorded during the current quarter was due to growth in the loan portfolio and net charge-off activity.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “As we have previously stated, we are pleased with our low level of nonperforming assets, which for the quarter remained below our long standing target of 50 basis points. We first achieved this metric a year ago and still believe this ratio will move within a range on either side of 50 basis points within the normal course of business for this point in the credit cycle.”

6


Impact of FDIC Acquired Loan Accounting
While the significance of the FDIC acquired loan accounting has diminished over time, the following table illustrates the impact to earnings associated with Columbia’s FDIC acquired loan portfolios:
FDIC Acquired Loan Accounting
 
 
 
 
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30, 2016
 
June 30, 2016
 
September 30, 2015
 
September 30, 2016
 
September 30, 2015
 
 
(in thousands)
Incremental accretion income on FDIC purchased credit impaired loans
 
$
1,816

 
$
1,300

 
$
2,082

 
$
4,773

 
$
6,896

Incremental accretion income on other FDIC acquired loans (1)
 
—

 
—

 
34

 
—

 
166

Recapture (provision) for losses on FDIC purchased credit impaired loans
 
433

 
(91
)
 
519

 
(311
)
 
(2,566
)
Change in FDIC loss-sharing asset
 
(104
)
 
(990
)
 
(1,635
)
 
(2,197
)
 
(2,979
)
FDIC clawback liability expense
 
(29
)
 
(70
)
 
(174
)
 
(308
)
 
(167
)
Pre-tax earnings impact
 
$
2,116

 
$
149

 
$
826

 
$
1,957

 
$
1,350

_________
(1) For 2016, incremental accretion income on other FDIC acquired loans is no longer considered 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 September 30, 2016 , the accretable yield on purchased credit impaired loans was $48.9 million. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis.
The $104 thousand change in the FDIC loss-sharing asset in the current quarter reduced noninterest income and consisted primarily of $315 thousand 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.


7


Organizational Update
Ms. Dressel commented, “We continue to emphasize efficiencies designed to improve our financial performance, always keeping in mind our core value of customer service. To that end, we consolidated two branches in Idaho and one branch in Oregon during the third quarter, and currently operate 143 locations throughout our footprint.”
For the seventh time, “American Banker” magazine recently named Melanie Dressel one of the Top 25 Most Powerful Women in Banking. She ranked #22 on the annual list, which highlights the professional achievements and business acumen of the industry’s leading women who are using their influence to make banking and their communities better. Ms. Dressel commented, “This recognition truly acknowledges the hard work and dedication of the entire team of Columbia Bankers.”
In recognition of the success and innovation of the bank’s Warm Hearts Winter Drive campaign to provide support for organizations serving the homeless, Senior Vice President and Marketing Director David Devine was the winner of the prestigious 2016 George Bailey Distinguished Service Award by the American Bankers Association Foundation. Hadley Robbins, Executive Vice President and Chief Operating Officer said, “David’s leadership initiating the Warm Hearts drive and the tireless efforts of each employee to ensure its success are a testament to Columbia Bank’s core value of community service.”

Conference Call Information
Columbia’s management will discuss the third quarter 2016 results on a conference call scheduled for Thursday, October 27, 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 #22782094.
A conference call replay will be available from approximately 4:00 p.m. PDT on October 27, 2016 through midnight PDT on November 3, 2016. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #22782094.

8


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 tenth consecutive year, the bank was named in 2016 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.


9



FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Nine Months Ended
Unaudited
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
2016
 
2015
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
85,572

 
$
82,140

 
$
81,694

 
$
247,882

 
$
243,068

Provision for loan and lease losses
 
$
1,866

 
$
3,640

 
$
2,831

 
$
10,760

 
$
6,242

Noninterest income
 
$
23,166

 
$
21,940

 
$
22,499

 
$
65,752

 
$
66,728

Noninterest expense
 
$
67,264

 
$
63,790

 
$
64,067

 
$
196,128

 
$
199,272

Acquisition-related expense (included in noninterest expense)
 
$
—

 
$
—

 
$
428

 
$
2,436

 
$
9,045

Net income
 
$
27,484

 
$
25,405

 
$
25,780

 
$
74,148

 
$
72,087

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.47

 
$
0.44

 
$
0.45

 
$
1.28

 
$
1.25

Earnings (diluted)
 
$
0.47

 
$
0.44

 
$
0.45

 
$
1.28

 
$
1.25

Book value
 
$
21.96

 
$
21.93

 
$
21.69

 
$
21.96

 
$
21.69

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
9,493,451

 
$
9,230,791

 
$
8,672,692

 
$
9,225,466

 
$
8,570,825

Interest-earning assets
 
$
8,544,876

 
$
8,285,183

 
$
7,711,531

 
$
8,279,639

 
$
7,600,954

Loans
 
$
6,179,163

 
$
5,999,428

 
$
5,712,614

 
$
6,002,656

 
$
5,557,771

Securities, including Federal Home Loan Bank stock
 
$
2,351,093

 
$
2,262,012

 
$
1,945,174

 
$
2,253,877

 
$
1,996,527

Deposits
 
$
7,918,532

 
$
7,622,266

 
$
7,233,863

 
$
7,663,099

 
$
7,047,818

Interest-bearing deposits
 
$
4,118,787

 
$
4,026,384

 
$
3,910,695

 
$
4,043,105

 
$
3,939,525

Interest-bearing liabilities
 
$
4,295,485

 
$
4,264,792

 
$
4,007,198

 
$
4,228,531

 
$
4,119,815

Noninterest-bearing deposits
 
$
3,799,745

 
$
3,595,882

 
$
3,323,168

 
$
3,619,994

 
$
3,108,293

Shareholders' equity
 
$
1,278,588

 
$
1,267,670

 
$
1,239,830

 
$
1,268,261

 
$
1,242,853

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.16
%
 
1.10
%
 
1.19
%
 
1.07
%
 
1.12
%
Return on average common equity
 
8.60
%
 
8.02
%
 
8.32
%
 
7.80
%
 
7.74
%
Average equity to average assets
 
13.47
%
 
13.73
%
 
14.30
%
 
13.75
%
 
14.50
%
Net interest margin (tax equivalent)
 
4.13
%
 
4.10
%
 
4.37
%
 
4.12
%
 
4.39
%
Efficiency ratio (tax equivalent) (1)
 
60.02
%
 
59.30
%
 
59.69
%
 
60.62
%
 
62.51
%
Operating efficiency ratio (tax equivalent) (2)
 
60.47
%
 
58.81
%
 
58.85
%
 
59.58
%
 
60.86
%
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 30,
 
December 31,
 
 
 
 
Period end
 
2016
 
2016
 
2015
 
 
 
 
Total assets
 
$
9,586,754

 
$
9,353,651

 
8,951,697

 
 
 
 
Loans, net of unearned income
 
$
6,259,757

 
$
6,107,143

 
5,815,027

 
 
 
 
Allowance for loan and lease losses
 
$
70,264

 
$
69,304

 
68,172

 
 
 
 
Securities, including Federal Home Loan Bank stock
 
$
2,372,724

 
$
2,297,713

 
2,170,416

 
 
 
 
Deposits
 
$
8,057,816

 
$
7,673,213

 
7,438,829

 
 
 
 
Core deposits
 
$
7,809,064

 
$
7,447,963

 
7,238,713

 
 
 
 
Shareholders' equity
 
$
1,276,735

 
$
1,274,479

 
1,242,128

 
 
 
 
Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
21,366

 
$
22,915

 
21,464

 
 
 
 
Other real estate owned ("OREO") and other personal property owned ("OPPO")
 
8,994

 
10,613

 
13,738

 
 
 
 
Total nonperforming assets
 
$
30,360

 
$
33,528

 
$
35,202

 
 
 
 
Nonperforming loans to period-end loans
 
0.34
%
 
0.38
%
 
0.37
%
 
 
 
 
Nonperforming assets to period-end assets
 
0.32
%
 
0.36
%
 
0.39
%
 
 
 
 
Allowance for loan and lease losses to period-end loans
 
1.12
%
 
1.13
%
 
1.17
%
 
 
 
 
Net loan charge-offs
 
$
906

(3)
$
3,600

(4)
$
3,226

(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 page 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 September 30, 2016.
 
 
 
 
 
 
 
 
 
 
(4) For the three months ended June 30, 2016.
 
 
 
 
 
 
 
 
(5) For the three months ended December 31, 2015.
 
 
 
 
 
 
 
 

10


QUARTERLY FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2016
 
2016
 
2016
 
2015
 
2015
 
 
(dollars in thousands except per share)
Earnings
 
 
Net interest income
 
$
85,572

 
$
82,140

 
$
80,170

 
$
81,819

 
$
81,694

Provision for loan and lease losses
 
$
1,866

 
$
3,640

 
$
5,254

 
$
2,349

 
$
2,831

Noninterest income
 
$
23,166

 
$
21,940

 
$
20,646

 
$
24,745

 
$
22,499

Noninterest expense
 
$
67,264

 
$
63,790

 
$
65,074

 
$
66,877

 
$
64,067

Acquisition-related expense (included in noninterest expense)
 
$
—

 
$
—

 
$
2,436

 
$
1,872

 
$
428

Net income
 
$
27,484

 
$
25,405

 
$
21,259

 
$
26,740

 
$
25,780

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.47

 
$
0.44

 
$
0.37

 
$
0.46

 
$
0.45

Earnings (diluted)
 
$
0.47

 
$
0.44

 
$
0.37

 
$
0.46

 
$
0.45

Book value
 
$
21.96

 
$
21.93

 
$
21.70

 
$
21.48

 
$
21.69

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
9,493,451

 
$
9,230,791

 
$
8,949,212

 
$
8,905,743

 
$
8,672,692

Interest-earning assets
 
$
8,544,876

 
$
8,285,183

 
$
8,005,945

 
$
7,937,308

 
$
7,711,531

Loans
 
$
6,179,163

 
$
5,999,428

 
$
5,827,440

 
$
5,762,048

 
$
5,712,614

Securities, including Federal Home Loan Bank stock
 
$
2,351,093

 
$
2,262,012

 
$
2,147,457

 
$
2,136,703

 
$
1,945,174

Deposits
 
$
7,918,532

 
$
7,622,266

 
$
7,445,693

 
$
7,440,628

 
$
7,233,863

Interest-bearing deposits
 
$
4,118,787

 
$
4,026,384

 
$
3,983,314

 
$
3,933,001

 
$
3,910,695

Interest-bearing liabilities
 
$
4,295,485

 
$
4,264,792

 
$
4,124,582

 
$
4,031,214

 
$
4,007,198

Noninterest-bearing deposits
 
$
3,799,745

 
$
3,595,882

 
$
3,462,379

 
$
3,507,627

 
$
3,323,168

Shareholders' equity
 
$
1,278,588

 
$
1,267,670

 
$
1,258,411

 
$
1,259,117

 
$
1,239,830

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.16
%
 
1.10
%
 
0.95
%
 
1.20
%
 
1.19
%
Return on average common equity
 
8.60
%
 
8.02
%
 
6.76
%
 
8.50
%
 
8.32
%
Average equity to average assets
 
13.47
%
 
13.73
%
 
14.06
%
 
14.14
%
 
14.30
%
Net interest margin (tax equivalent)
 
4.13
%
 
4.10
%
 
4.13
%
 
4.25
%
 
4.37
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
9,586,754

 
$
9,353,651

 
$
9,035,932

 
$
8,951,697

 
$
8,755,984

Loans, net of unearned income
 
$
6,259,757

 
$
6,107,143

 
$
5,877,283

 
$
5,815,027

 
$
5,746,511

Allowance for loan and lease losses
 
$
70,264

 
$
69,304

 
$
69,264

 
$
68,172

 
$
69,049

Securities, including Federal Home Loan Bank stock
 
$
2,372,724

 
$
2,297,713

 
$
2,196,407

 
$
2,170,416

 
$
2,037,666

Deposits
 
$
8,057,816

 
$
7,673,213

 
$
7,596,949

 
$
7,438,829

 
$
7,314,805

Core deposits
 
$
7,809,064

 
$
7,447,963

 
$
7,384,622

 
$
7,238,713

 
$
7,104,554

Shareholders' equity
 
$
1,276,735

 
$
1,274,479

 
$
1,260,788

 
$
1,242,128

 
$
1,254,136

Nonperforming, assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
21,366

 
$
22,915

 
$
36,891

 
$
21,464

 
$
19,080

OREO and OPPO
 
8,994

 
10,613

 
12,427

 
13,738

 
19,475

Total nonperforming assets
 
$
30,360

 
$
33,528

 
$
49,318

 
$
35,202

 
$
38,555

Nonperforming loans to period-end loans
 
0.34
%
 
0.38
%
 
0.63
%
 
0.37
%
 
0.33
%
Nonperforming assets to period-end assets
 
0.32
%
 
0.36
%
 
0.55
%
 
0.39
%
 
0.44
%
Allowance for loan and lease losses to period-end loans
 
1.12
%
 
1.13
%
 
1.18
%
 
1.17
%
 
1.20
%
Net loan charge-offs
 
$
906

 
$
3,600

 
$
4,162

 
$
3,226

 
$
3,039


11


LOAN PORTFOLIO COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2016
 
2016
 
2016
 
2015
 
2015
Loan Portfolio Composition - Dollars
 
(dollars in thousands)
Commercial business
 
$
2,630,017

 
$
2,518,682

 
$
2,401,193

 
$
2,362,575

 
$
2,354,731

Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
168,511

 
172,957

 
175,050

 
176,295

 
177,108

Commercial and multifamily residential
 
2,686,783

 
2,651,476

 
2,520,352

 
2,491,736

 
2,449,847

Total real estate
 
2,855,294

 
2,824,433

 
2,695,402

 
2,668,031

 
2,626,955

Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
130,163

 
129,195

 
133,447

 
135,874

 
136,783

Commercial and multifamily residential
 
202,014

 
185,315

 
183,548

 
167,413

 
134,097

Total real estate construction
 
332,177

 
314,510

 
316,995

 
303,287

 
270,880

Consumer
 
325,741

 
325,632

 
329,902

 
342,601

 
348,315

Purchased credit impaired
 
152,764

 
161,107

 
173,201

 
180,906

 
191,066

Subtotal loans
 
6,295,993

 
6,144,364

 
5,916,693

 
5,857,400

 
5,791,947

Less: Net unearned income
 
(36,236
)
 
(37,221
)
 
(39,410
)
 
(42,373
)
 
(45,436
)
Loans, net of unearned income
 
6,259,757

 
6,107,143

 
5,877,283

 
5,815,027

 
5,746,511

Less: Allowance for loan and lease losses
 
(70,264
)
 
(69,304
)
 
(69,264
)
 
(68,172
)
 
(69,049
)
Total loans, net
 
6,189,493

 
6,037,839

 
5,808,019

 
5,746,855

 
5,677,462

Loans held for sale
 
$
3,361

 
$
7,649

 
$
3,681

 
$
4,509

 
$
6,637


 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
Loan Portfolio Composition - Percentages
 
2016
 
2016
 
2016
 
2015
 
2015
Commercial business
 
42.0
 %
 
41.2
 %
 
40.9
 %
 
40.6
 %
 
41.0
 %
Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
2.7
 %
 
2.8
 %
 
3.0
 %
 
3.0
 %
 
3.1
 %
Commercial and multifamily residential
 
43.0
 %
 
43.6
 %
 
42.9
 %
 
42.9
 %
 
42.6
 %
Total real estate
 
45.7
 %
 
46.4
 %
 
45.9
 %
 
45.9
 %
 
45.7
 %
Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
2.1
 %
 
2.1
 %
 
2.3
 %
 
2.3
 %
 
2.4
 %
Commercial and multifamily residential
 
3.2
 %
 
3.0
 %
 
3.1
 %
 
2.9
 %
 
2.3
 %
Total real estate construction
 
5.3
 %
 
5.1
 %
 
5.4
 %
 
5.2
 %
 
4.7
 %
Consumer
 
5.2
 %
 
5.3
 %
 
5.6
 %
 
5.9
 %
 
6.1
 %
Purchased credit impaired
 
2.4
 %
 
2.6
 %
 
2.9
 %
 
3.1
 %
 
3.3
 %
Subtotal loans
 
100.6
 %
 
100.6
 %
 
100.7
 %
 
100.7
 %
 
100.8
 %
Less: Net unearned income
 
(0.6
)%
 
(0.6
)%
 
(0.7
)%
 
(0.7
)%
 
(0.8
)%
Loans, net of unearned income
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %


12


DEPOSIT COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2016
 
2016
 
2016
 
2015
 
2015
Deposit Composition - Dollars
 
(dollars in thousands)
Core deposits:
 
 
 
 
 
 
 
 
 
 
Demand and other non-interest bearing
 
$
3,942,434

 
$
3,652,951

 
$
3,553,468

 
$
3,507,358

 
$
3,386,968

Interest bearing demand
 
963,242

 
957,548

 
958,469

 
925,909

 
911,686

Money market
 
1,873,376

 
1,818,337

 
1,838,364

 
1,788,552

 
1,776,087

Savings
 
714,047

 
692,694

 
695,588

 
657,016

 
651,695

Certificates of deposit, less than $250,000
 
315,965

 
326,433

 
338,733

 
359,878

 
378,118

Total core deposits
 
7,809,064

 
7,447,963

 
7,384,622

 
7,238,713

 
7,104,554

 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit, $250,000 or more
 
79,590

 
72,812

 
70,571

 
72,126

 
65,699

Certificates of deposit insured by CDARS®
 
16,951

 
22,755

 
24,752

 
26,901

 
26,975

Brokered money market accounts
 
152,151

 
129,590

 
116,878

 
100,854

 
117,196

Subtotal
 
8,057,756

 
7,673,120

 
7,596,823

 
7,438,594

 
7,314,424

Premium resulting from acquisition date fair value adjustment
 
60

 
93

 
126

 
235

 
381

Total deposits
 
$
8,057,816

 
$
7,673,213

 
$
7,596,949

 
$
7,438,829

 
$
7,314,805

 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
Deposit Composition - Percentages
 
2016
 
2016
 
2016
 
2015
 
2015
Core deposits:
 
 
 
 
 
 
 
 
 
 
Demand and other non-interest bearing
 
48.9
%
 
47.6
%
 
46.8
%
 
47.2
%
 
46.3
%
Interest bearing demand
 
12.0
%
 
12.5
%
 
12.6
%
 
12.4
%
 
12.5
%
Money market
 
23.2
%
 
23.7
%
 
24.2
%
 
24.0
%
 
24.3
%
Savings
 
8.9
%
 
9.0
%
 
9.2
%
 
8.8
%
 
8.9
%
Certificates of deposit, less than $250,000
 
3.9
%
 
4.3
%
 
4.5
%
 
4.8
%
 
5.2
%
Total core deposits
 
96.9
%
 
97.1
%
 
97.3
%
 
97.2
%
 
97.2
%
 
 
 
 
 
 
 
 
 
 
 
Certificates of deposit, $250,000 or more
 
1.0
%
 
0.9
%
 
0.9
%
 
1.0
%
 
0.8
%
Certificates of deposit insured by CDARS®
 
0.2
%
 
0.3
%
 
0.3
%
 
0.4
%
 
0.4
%
Brokered money market accounts
 
1.9
%
 
1.7
%
 
1.5
%
 
1.4
%
 
1.6
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%


13


CONSOLIDATED STATEMENTS OF INCOME
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Nine Months Ended
Unaudited
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2015 (1)
 
2016
 
2015 (1)
 
 
(in thousands except per share)
Interest Income
 
 
 
 
 
 
 
 
 
 
Loans
 
$
74,956

 
$
71,651

 
$
72,242

 
$
216,923

 
$
214,808

Taxable securities
 
8,988

 
8,829

 
7,472

 
25,834

 
22,258

Tax-exempt securities
 
2,799

 
2,795

 
2,920

 
8,397

 
8,972

Deposits in banks
 
15

 
28

 
31

 
81

 
84

Total interest income
 
86,758

 
83,303

 
82,665

 
251,235

 
246,122

Interest Expense
 
 
 
 
 
 
 
 
 
 
Deposits
 
823

 
787

 
756

 
2,352

 
2,244

Federal Home Loan Bank advances
 
229

 
241

 
78

 
594

 
391

Other borrowings
 
134

 
135

 
137

 
407

 
419

Total interest expense
 
1,186

 
1,163

 
971

 
3,353

 
3,054

Net Interest Income
 
85,572

 
82,140

 
81,694

 
247,882

 
243,068

Provision for loan and lease losses
 
1,866

 
3,640

 
2,831

 
10,760

 
6,242

Net interest income after provision for loan and lease losses
 
83,706

 
78,500

 
78,863

 
237,122

 
236,826

Noninterest Income
 
 
 
 
 
 
 
 
 
 
Deposit account and treasury management fees (1)
 
7,222

 
7,093

 
7,230

 
21,304

 
21,441

Card revenue (1)
 
6,114

 
6,051

 
5,849

 
17,817

 
16,914

Financial services and trust revenue (1)
 
2,746

 
2,780

 
3,316

 
8,347

 
9,657

Loan revenue (1)
 
2,949

 
2,802

 
3,200

 
8,013

 
8,125

Merchant processing revenue
 
2,352

 
2,272

 
2,422

 
6,726

 
6,802

Bank owned life insurance
 
1,073

 
1,270

 
1,086

 
3,459

 
3,370

Investment securities gains, net
 
572

 
229

 
236

 
1,174

 
1,300

Change in FDIC loss-sharing asset
 
(104
)
 
(990
)
 
(1,635
)
 
(2,197
)
 
(2,979
)
Other (1)
 
242

 
433

 
795

 
1,109

 
2,098

Total noninterest income
 
23,166

 
21,940

 
22,499

 
65,752

 
66,728

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
38,476

 
37,291

 
35,175

 
112,086

 
112,721

Occupancy
 
8,219

 
7,652

 
8,101

 
26,044

 
24,781

Merchant processing expense
 
1,161

 
1,118

 
1,090

 
3,312

 
3,146

Advertising and promotion
 
1,993

 
1,043

 
1,354

 
3,878

 
3,480

Data processing
 
4,275

 
3,929

 
3,796

 
12,350

 
13,022

Legal and professional fees
 
2,264

 
1,777

 
2,173

 
5,366

 
7,527

Taxes, licenses and fees
 
1,491

 
1,298

 
1,344

 
4,079

 
4,003

Regulatory premiums
 
776

 
1,068

 
1,084

 
2,985

 
3,626

Net cost (benefit) of operation of other real estate owned
 
(249
)
 
84

 
240

 
(61
)
 
(1,569
)
Amortization of intangibles
 
1,460

 
1,483

 
1,695

 
4,526

 
5,230

Other
 
7,398

 
7,047

 
8,015

 
21,563

 
23,305

Total noninterest expense
 
67,264

 
63,790

 
64,067

 
196,128

 
199,272

Income before income taxes
 
39,608

 
36,650

 
37,295

 
106,746

 
104,282

Provision for income taxes
 
12,124

 
11,245

 
11,515

 
32,598

 
32,195

Net Income
 
$
27,484

 
$
25,405

 
$
25,780

 
$
74,148

 
$
72,087

Earnings per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.47

 
$
0.44

 
$
0.45

 
$
1.28

 
$
1.25

Diluted
 
$
0.47

 
$
0.44

 
$
0.45

 
$
1.28

 
$
1.25

Dividends paid per common share
 
$
0.39

 
$
0.37

 
$
0.34

 
$
1.14

 
$
0.98

Weighted average number of common shares outstanding
 
57,215

 
57,185

 
57,051

 
57,173

 
57,007

Weighted average number of diluted common shares outstanding
 
57,225

 
57,195

 
57,064

 
57,183

 
57,021

__________
(1) Reclassified to conform to the current period’s presentation. Reclassifications consisted of disaggregating fee revenue previously presented in ‘Service charges and other fees’ and certain revenue previously presented in ‘Other’ into the presentation above. The Company made these reclassifications to provide additional information about its sources of noninterest income. There was no change to total noninterest income as previously reported as a result of these reclassifications.

14


CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
September 30,
 
June 30,
 
December 31,
 
 
 
 
 
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
 
 
 
 
 
$
180,839

 
$
167,172

 
$
166,929

Interest-earning deposits with banks
 
 
 
 
 
 
11,225

 
11,216

 
8,373

Total cash and cash equivalents
 
 
 
 
 
 
192,064

 
178,388

 
175,302

Securities available for sale at fair value (amortized cost of $2,324,721, $2,237,264 and $2,157,610, respectively)
 
2,360,084

 
2,279,552

 
2,157,694

Federal Home Loan Bank stock at cost
 
 
 
 
 
 
12,640

 
18,161

 
12,722

Loans held for sale
 
 
 
 
 
 
3,361

 
7,649

 
4,509

Loans, net of unearned income of ($36,236), ($37,221) and ($42,373), respectively
 
6,259,757

 
6,107,143

 
5,815,027

Less: allowance for loan and lease losses
 
 
 
 
 
 
70,264

 
69,304

 
68,172

Loans, net
 
 
 
 
 
 
6,189,493

 
6,037,839

 
5,746,855

FDIC loss-sharing asset
 
 
 
 
 
 
3,592

 
4,266

 
6,568

Interest receivable
 
 
 
 
 
 
31,606

 
29,738

 
27,877

Premises and equipment, net
 
 
 
 
 
 
152,908

 
156,446

 
164,239

Other real estate owned
 
 
 
 
 
 
8,994

 
10,613

 
13,738

Goodwill
 
 
 
 
 
 
382,762

 
382,762

 
382,762

Other intangible assets, net
 
 
 
 
 
 
19,051

 
20,511

 
23,577

Other assets
 
 
 
 
 
 
230,199

 
227,726

 
235,854

Total assets
 
 
 
 
 
 
$
9,586,754

 
$
9,353,651

 
$
8,951,697

LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing
 
 
 
 
 
 
$
3,942,434

 
$
3,652,951

 
$
3,507,358

Interest-bearing
 
 
 
 
 
 
4,115,382

 
4,020,262

 
3,931,471

Total deposits
 
 
 
 
 
 
8,057,816

 
7,673,213

 
7,438,829

Federal Home Loan Bank advances
 
 
 
 
 
 
66,502

 
204,512

 
68,531

Securities sold under agreements to repurchase
 
69,189

 
89,218

 
99,699

Other liabilities
 
 
 
 
 
 
116,512

 
112,229

 
102,510

Total liabilities
 
 
 
 
 
 
8,310,019

 
8,079,172

 
7,709,569

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 30,
 
December 31,
 
 
 
 
 
 
 
2016
 
2016
 
2015
 
 
 
 
 
 
Preferred stock (no par value)
(in thousands)
 
 
 
 
 
 
Authorized shares
2,000

 
2,000

 
2,000

 
 
 
 
 
 
Issued and outstanding
9

 
9

 
9

 
2,217

 
2,217

 
2,217

Common stock (no par value)
 
 
 
 
 
 
 
 
 
 
 
Authorized shares
115,000

 
115,000

 
115,000

 
 
 
 
 
 
Issued and outstanding
58,043

 
58,025

 
57,724

 
994,098

 
992,343

 
990,281

Retained earnings
 
 
 
 
 
 
263,915

 
259,108

 
255,925

Accumulated other comprehensive income (loss)
 
 
 
 
 
16,505

 
20,811

 
(6,295
)
Total shareholders' equity
 
 
 
 
 
 
1,276,735

 
1,274,479

 
1,242,128

Total liabilities and shareholders' equity
 
 
 
 
 
$
9,586,754

 
$
9,353,651

 
$
8,951,697




15


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2016
 
September 30, 2015
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net   (1)(2)
 
$
6,179,163

 
$
76,195

 
4.93
%
 
$
5,712,614

 
$
73,231

 
5.13
%
Taxable securities
 
1,870,466

 
8,988

 
1.92
%
 
1,498,211

 
7,472

 
1.99
%
Tax exempt securities (2)
 
480,627

 
4,306

 
3.58
%
 
446,963

 
4,491

 
4.02
%
Interest-earning deposits with banks
 
14,620

 
15

 
0.41
%
 
53,743

 
31

 
0.23
%
Total interest-earning assets
 
8,544,876

 
$
89,504

 
4.19
%
 
7,711,531

 
$
85,225

 
4.42
%
Other earning assets
 
155,663

 
 
 
 
 
149,895

 
 
 
 
Noninterest-earning assets
 
792,912

 
 
 
 
 
811,266

 
 
 
 
Total assets
 
$
9,493,451

 
 
 
 
 
$
8,672,692

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit
 
$
417,887

 
$
124

 
0.12
%
 
$
480,132

 
$
213

 
0.18
%
Savings accounts
 
705,923

 
18

 
0.01
%
 
643,672

 
17

 
0.01
%
Interest-bearing demand
 
961,527

 
189

 
0.08
%
 
916,388

 
158

 
0.07
%
Money market accounts
 
2,033,450

 
492

 
0.10
%
 
1,870,503

 
368

 
0.08
%
Total interest-bearing deposits
 
4,118,787

 
823

 
0.08
%
 
3,910,695

 
756

 
0.08
%
Federal Home Loan Bank advances
 
96,931

 
229

 
0.95
%
 
13,968

 
78

 
2.23
%
Other borrowings
 
79,767

 
134

 
0.67
%
 
82,535

 
137

 
0.66
%
Total interest-bearing liabilities
 
4,295,485

 
$
1,186

 
0.11
%
 
4,007,198

 
$
971

 
0.10
%
Noninterest-bearing deposits
 
3,799,745

 
 
 
 
 
3,323,168

 
 
 
 
Other noninterest-bearing liabilities
 
119,633

 
 
 
 
 
102,496

 
 
 
 
Shareholders’ equity
 
1,278,588

 
 
 
 
 
1,239,830

 
 
 
 
Total liabilities & shareholders’ equity
 
$
9,493,451

 
 
 
 
 
$
8,672,692

 
 
 
 
Net interest income (tax equivalent)
 
$
88,318

 
 
 
 
 
$
84,254

 
 
Net interest margin (tax equivalent)
 
4.13
%
 
 
 
 
 
4.37
%

(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 $1.4 million and $1.2 million for the three month periods ended September 30, 2016 and September 30, 2015 , respectively. The incremental accretion on acquired loans was $4.6 million and $6.4 million for the three months ended September 30, 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 $1.2 million and $989 thousand for the three months ended September 30, 2016 and 2015 , respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million for both three months ended September 30, 2016 and 2015 .



16


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2016
 
June 30, 2016
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net   (1)(2)
 
$
6,179,163

 
$
76,195

 
4.93
%
 
$
5,999,428

 
$
72,952

 
4.86
%
Taxable securities
 
1,870,466

 
8,988

 
1.92
%
 
1,801,195

 
8,829

 
1.96
%
Tax exempt securities (2)
 
480,627

 
4,306

 
3.58
%
 
460,817

 
4,300

 
3.73
%
Interest-earning deposits with banks
 
14,620

 
15

 
0.41
%
 
23,743

 
28

 
0.47
%
Total interest-earning assets
 
8,544,876

 
$
89,504

 
4.19
%
 
8,285,183

 
$
86,109

 
4.16
%
Other earning assets
 
155,663

 
 
 
 
 
154,843

 
 
 
 
Noninterest-earning assets
 
792,912

 
 
 
 
 
790,765

 
 
 
 
Total assets
 
$
9,493,451

 
 
 
 
 
$
9,230,791

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit
 
$
417,887

 
$
124

 
0.12
%
 
$
428,279

 
$
140

 
0.13
%
Savings accounts
 
705,923

 
18

 
0.01
%
 
692,179

 
18

 
0.01
%
Interest-bearing demand
 
961,527

 
189

 
0.08
%
 
949,669

 
183

 
0.08
%
Money market accounts
 
2,033,450

 
492

 
0.10
%
 
1,956,257

 
446

 
0.09
%
Total interest-bearing deposits
 
4,118,787

 
823

 
0.08
%
 
4,026,384

 
787

 
0.08
%
Federal Home Loan Bank advances
 
96,931

 
229

 
0.95
%
 
161,637

 
241

 
0.60
%
Other borrowings
 
79,767

 
134

 
0.67
%
 
76,771

 
135

 
0.70
%
Total interest-bearing liabilities
 
4,295,485

 
$
1,186

 
0.11
%
 
4,264,792

 
$
1,163

 
0.11
%
Noninterest-bearing deposits
 
3,799,745

 
 
 
 
 
3,595,882

 
 
 
 
Other noninterest-bearing liabilities
 
119,633

 
 
 
 
 
102,447

 
 
 
 
Shareholders’ equity
 
1,278,588

 
 
 
 
 
1,267,670

 
 
 
 
Total liabilities & shareholders’ equity
 
$
9,493,451

 
 
 
 
 
$
9,230,791

 
 
 
 
Net interest income (tax equivalent)
 
$
88,318

 
 
 
 
 
$
84,946

 
 
Net interest margin (tax equivalent)
 
4.13
%
 
 
 
 
 
4.10
%

(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 $1.4 million and $1.2 million for the three month periods ended September 30, 2016 and June 30, 2016 . The incremental accretion on acquired loans was $4.6 million and $4.4 million for the three months ended September 30, 2016 and June 30, 2016 , respectively.
(2)
Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.2 million and $1.3 million for the three months ended September 30, 2016 and June 30, 2016 , respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million and $1.6 million for the three month periods ended September 30, 2016 and June 30, 2016 , respectively.


17


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net (1)(2)
 
$
6,002,656

 
$
220,445

 
4.90
%
 
$
5,557,771

 
$
217,128

 
5.21
%
Taxable securities
 
1,787,288

 
25,834

 
1.93
%
 
1,541,018

 
22,258

 
1.93
%
Tax exempt securities (2)
 
466,589

 
12,918

 
3.69
%
 
455,509

 
13,802

 
4.04
%
Interest-earning deposits with banks
 
23,106

 
81

 
0.47
%
 
46,656

 
84

 
0.24
%
Total interest-earning assets
 
8,279,639

 
$
259,278

 
4.18
%
 
7,600,954

 
$
253,272

 
4.44
%
Other earning assets
 
154,950

 
 
 
 
 
148,189

 
 
 
 
Noninterest-earning assets
 
790,877

 
 
 
 
 
821,682

 
 
 
 
Total assets
 
$
9,225,466

 
 
 
 
 
$
8,570,825

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit
 
$
431,643

 
$
408

 
0.13
%
 
$
490,720

 
$
689

 
0.19
%
Savings accounts
 
691,379

 
53

 
0.01
%
 
631,979

 
53

 
0.01
%
Interest-bearing demand
 
946,437

 
541

 
0.08
%
 
1,003,544

 
451

 
0.06
%
Money market accounts
 
1,973,646

 
1,350

 
0.09
%
 
1,813,282

 
1,051

 
0.08
%
Total interest-bearing deposits
 
4,043,105

 
2,352

 
0.08
%
 
3,939,525

 
2,244

 
0.08
%
Federal Home Loan Bank advances
 
103,023

 
594

 
0.77
%
 
88,121

 
391

 
0.59
%
Other borrowings
 
82,403

 
407

 
0.66
%
 
92,169

 
419

 
0.61
%
Total interest-bearing liabilities
 
4,228,531

 
$
3,353

 
0.11
%
 
4,119,815

 
$
3,054

 
0.10
%
Noninterest-bearing deposits
 
3,619,994

 
 
 
 
 
3,108,293

 
 
 
 
Other noninterest-bearing liabilities
 
108,680

 
 
 
 
 
99,864

 
 
 
 
Shareholders’ equity
 
1,268,261

 
 
 
 
 
1,242,853

 
 
 
 
Total liabilities & shareholders’ equity
 
$
9,225,466

 
 
 
 
 
$
8,570,825

 
 
 
 
Net interest income (tax equivalent)
 
$
255,925

 
 
 
 
 
$
250,218

 
 
Net interest margin (tax equivalent)
 
4.12
%
 
 
 
 
 
4.39
%

(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 $3.6 million and $3.8 million for the nine months ended September 30, 2016 and 2015 , respectively. The incremental accretion on acquired loans was $13.7 million and $21.2 million for the nine months ended September 30, 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 $3.5 million and $2.3 million for the nine months ended September 30, 2016 and 2015 , respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.5 million and $4.8 million for the nine months ended September 30, 2016 and 2015 , respectively.


18


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
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
2016
 
2015
Operating net interest margin non-GAAP reconciliation:
 
(dollars in thousands)
Net interest income (tax equivalent) (1)
 
$
88,318

 
$
84,946

 
$
84,254

 
$
255,925

 
$
250,218

Adjustments to arrive at operating net interest income (tax equivalent):
 
 
 
 
 
 
 
 
 
 
Incremental accretion income on FDIC purchased credit impaired loans
 
(1,816
)
 
(1,300
)
 
(2,082
)
 
(4,773
)
 
(6,896
)
Incremental accretion income on other FDIC acquired loans (2)
 
—

 
—

 
(34
)
 
—

 
(166
)
Incremental accretion income on other acquired loans
 
(2,749
)
 
(3,074
)
 
(4,293
)
 
(8,896
)
 
(14,116
)
Premium amortization on acquired securities
 
1,991

 
2,075

 
2,396

 
6,390

 
7,964

Interest reversals on nonaccrual loans
 
266

 
107

 
325

 
826

 
1,131

Operating net interest income (tax equivalent) (1)
 
$
86,010

 
$
82,754

 
$
80,566

 
$
249,472

 
$
238,135

Average interest earning assets
 
$
8,544,876

 
$
8,285,183

 
$
7,711,531

 
$
8,279,639

 
$
7,600,954

Net interest margin (tax equivalent) (1)
 
4.13
%
 
4.10
%
 
4.37
%
 
4.12
%
 
4.39
%
Operating net interest margin (tax equivalent) (1)
 
4.03
%
 
4.00
%
 
4.18
%
 
4.02
%
 
4.18
%
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2016
 
2016
 
2015
 
2016
 
2015
Operating efficiency ratio non-GAAP reconciliation:
 
(dollars in thousands)
Noninterest expense (numerator A)
 
$
67,264

 
$
63,790

 
$
64,067

 
$
196,128

 
$
199,272

Adjustments to arrive at operating noninterest expense:
 
 
 
 
 
 
 
 
 
 
Acquisition-related expenses
 
—

 
—

 
(428
)
 
(2,436
)
 
(9,045
)
Net benefit (cost) of operation of OREO and OPPO
 
254

 
(84
)
 
(228
)
 
68

 
1,574

FDIC clawback liability expense
 
(29
)
 
(70
)
 
(174
)
 
(308
)
 
(167
)
Loss on asset disposals
 
(31
)
 
(7
)
 
(274
)
 
(198
)
 
(381
)
State of Washington Business and Occupation ("B&O") taxes
 
(1,382
)
 
(1,204
)
 
(1,212
)
 
(3,757
)
 
(3,668
)
Operating noninterest expense (numerator B)
 
$
66,076

 
$
62,425

 
$
61,751

 
$
189,497

 
$
187,585

 
 
 
 
 
 
 
 
 
 
 
Net interest income (tax equivalent) (1)
 
$
88,318

 
$
84,946

 
$
84,254

 
$
255,925

 
$
250,218

Noninterest income
 
23,166

 
21,940

 
22,499

 
65,752

 
66,728

Bank owned life insurance tax equivalent adjustment
 
577

 
685

 
585

 
1,862

 
1,815

Total revenue (tax equivalent) (denominator A)
 
$
112,061

 
$
107,571

 
$
107,338

 
$
323,539

 
$
318,761

 
 
 
 
 
 
 
 
 
 
 
Operating net interest income (tax equivalent) (1)
 
$
86,010

 
$
82,754

 
$
80,566

 
$
249,472

 
$
238,135

Adjustments to arrive at operating noninterest income (tax equivalent):
 
 
 
 
 
 
 
 
 
 
Investment securities gains, net
 
(572
)
 
(229
)
 
(236
)
 
(1,174
)
 
(1,300
)
Gain on asset disposals
 
(16
)
 
(2
)
 
(120
)
 
(72
)
 
(125
)
Change in FDIC loss-sharing asset
 
104

 
990

 
1,635

 
2,197

 
2,979

Operating noninterest income (tax equivalent)
 
23,259

 
23,384

 
24,363

 
68,565

 
70,097

Total operating revenue (tax equivalent) (denominator B)
 
$
109,269

 
$
106,138

 
$
104,929

 
$
318,037

 
$
308,232

Efficiency ratio (tax equivalent) (numerator A/denominator A)
 
60.02
%
 
59.30
%
 
59.69
%
 
60.62
%
 
62.51
%
Operating efficiency ratio (tax equivalent) (numerator B/denominator B)
 
60.47
%
 
58.81
%
 
58.85
%
 
59.58
%
 
60.86
%
__________
(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 $2.7 million , $2.8 million and $2.6 million  for the three months ended  September 30, 2016 , June 30, 2016 and  September 30, 2015 , respectively; and $8.0 million and $7.2 million for the nine months ended September 30, 2016 and September 30, 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.

19


Exhibit 99.2
CBSYSTEMINCHORIZ4CSOLIDBUG.JPG
FOR IMMEDIATE RELEASE
October 27, 2016

Contacts:      Melanie J. Dressel,
President and
Chief Executive Officer
(253) 305-1911

Clint E. Stein,
Executive Vice President
and Chief Financial Officer
(253) 593-8304


Columbia Banking System Announces Regular Cash Dividend of $0.20
and Declares Special Cash Dividend of $0.19


TACOMA, Washington--- Columbia Banking System, Inc. (NASDAQ: COLB) announced today that a quarterly cash dividend of $0.20 per common share, and per common share equivalent for holders of preferred stock, will be paid on November 23, 2016 to shareholders of record as of the close of business on November 9, 2016 .

In addition, the Board of Directors declared a special cash dividend of $0.19 per common share, and per common share equivalent for holders of preferred stock, which will also be paid on November 23, 2016 to shareholders of record as of the close of business on November 9, 2016 .

Melanie Dressel, President and Chief Executive Officer noted, "In addition to our regular cash dividend, our financial performance provides us with the opportunity to pay a special cash dividend for the eleventh consecutive quarter. The regular dividend combined with the special dividend constitutes a payout ratio of 83% for the quarter and a dividend yield of 4.9% based on the closing price of our stock on October 26, 2016."





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 tenth consecutive year, the bank was named in 2016 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 .
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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.