Chronicle Journal: Finance

Columbia Banking System Announces Fourth Quarter and Full Year 2020 Results and Quarterly Cash Dividend

TACOMA, Wash., Jan. 28, 2021 /PRNewswire/ -- 

Columbia Banking System Logo. (PRNewsFoto/Columbia Banking System, Inc.)

Notable Items for the Fourth Quarter and Fiscal Year 2020

  • Full year 2020 net income of $154.2 million and diluted earnings per share of $2.17
  • Record fourth quarter net income of $58.3 million and diluted earnings per share of $0.82
  • Deposits increased $269.6 million, or 2%, during the fourth quarter of 2020 and $3.19 billion, or 30%, compared to December 31, 2019
  • Net interest margin of 3.52%, an increase of 5 basis points from the linked quarter
  • Nonperforming assets to period-end assets ratio decreased to 0.21%
  • Loan balances subject to deferral were down 91% from June 30, 2020
  • Regular cash dividend declared of $0.28 per share

Clint Stein, President and Chief Executive Officer of Columbia Banking System, Inc. and Columbia Bank (NASDAQ: COLB) ("Columbia"), said today upon the release of Columbia's fourth quarter 2020 earnings, "Our financial performance for the quarter and the year is a direct reflection of our bankers' determination and tireless efforts to maintain our normal business operations throughout the extended duration of the pandemic. Our account officers worked collectively with our credit administration team to create tailored solutions that best served our client's needs during these challenging times." Mr. Stein continued, "I would also like to recognize the efforts of our full team for the innovation and dedication they demonstrated in meeting the needs of our clients and communities amid the myriad challenges of 2020."

Balance Sheet

Total assets at December 31, 2020 were $16.58 billion, an increase of $351.4 million from the linked quarter. Loans were $9.43 billion, down $261.3 million from September 30, 2020 as loan originations of $468.1 million were more than offset by loan payments and a decrease in loan utilization as well as a decrease in PPP loans of $301.7 million principally due to loan forgiveness. Total PPP loans decreased from $953.2 million at September 30, 2020 to $651.6 million at December 31, 2020. Interest-earning deposits with banks were $434.9 million, a decrease of $301.6 million from the linked quarter. Debt securities available for sale were $5.21 billion at December 31, 2020, an increase of $928.4 million from $4.28 billion at September 30, 2020 as a result of substantial purchases during the quarter. Total deposits at December 31, 2020 were $13.87 billion, an increase of $269.6 million from September 30, 2020 largely due to an increase of $253.4 million in interest-bearing deposits. The deposit mix remained fairly consistent from September 30, 2020 with 50% noninterest-bearing and 50% interest-bearing. 

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "Our teams worked diligently during the fourth quarter to process new loan requests and PPP forgiveness. We are very proud of their efforts to put our clients' needs first."

Income Statement

Net Interest Income

Net interest income for the fourth quarter of 2020 was $131.1 million, an increase of $6.4 million and $6.3 million from the linked quarter and the prior-year period, respectively. The increase in interest income from loans as compared to the linked quarter was a result of an increase of $4.0 million in PPP loan interest and fee income principally due to the forgiveness of PPP loans as well as a $1.7 million recovery of interest related to a nonaccrual loan that paid-off during the quarter. The increase in net interest income compared to the linked quarter also benefited from an increase in interest income from securities due to two securities that had prepayment activity which contributed $2.5 million in additional interest income. Higher average balances of securities as a result of recent purchases also contributed to the increase in net interest income.

Net interest income compared to the prior-year period increased as a result of a reduction in interest expense of $4.2 million on deposits due to the lower rate environment. Interest income from investment securities increased approximately $3.0 million primarily due to higher average balances. Net interest income also benefited from lower interest expense of $1.8 million on FHLB advances due to lower average balances. Partially offsetting these increases to net interest income was a $3.0 million decrease to interest income from loans due to the lower rate environment. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Provision for Credit Losses

The Bank recorded a net provision recovery for credit losses for the fourth quarter of 2020 of $4.7 million compared to net provisions of $7.4 million for the linked quarter and $1.6 million for the comparable quarter in 2019. The net provision recovery for credit losses for the current quarter was primarily due to an improved economic forecast.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "We are obviously pleased with the credit metrics posted this quarter. The decline in NPAs and problem loans is notable along with the release from the provision. But, we understand we must remain diligent with respect to credit as government stimulus and other actions may have a delayed effect on the possible impacts to our loan portfolio."

Noninterest Income

Noninterest income was $23.6 million for the fourth quarter of 2020, an increase of $1.1 million from the linked quarter and $1.8 million from the fourth quarter of 2019. The increase compared to the linked quarter was principally due to loan revenue, specifically, mortgage banking revenue, as a result of a change in the way we sold a portion of our loans held for sale, during the quarter, resulting in more favorable pricing. Additionally, included in the current quarter is an increase of $758 thousand to the fair value of the mortgage loan pipeline. The increase in noninterest income during the fourth quarter of 2020 compared to the same quarter in 2019 was principally due to an increase in loan revenue partially offset by a decrease in deposit account and treasury management fees. The increase in loan revenue was due to mortgage banking revenue which increased $3.8 million due to higher loan volume. Partially offsetting this increase was a decrease in treasury management fees of $863 thousand and a decrease in overdraft fees of $889 thousand compared to the same quarter in 2019. The decrease in overdraft fees was due to an overall decrease in the number of transactions amidst the pandemic as well as clients generally carrying higher cash balances in their deposit accounts.

Noninterest Expense

Total noninterest expense for the fourth quarter of 2020 was $84.3 million, a decrease of $815 thousand compared to the third quarter of 2020 principally due to lower other noninterest expense as a result of the provision recapture for unfunded loan commitments totaling $1.3 million.

Compared to the fourth quarter of 2019, noninterest expense decreased $2.7 million principally due to decreases in other noninterest expense and legal and professional fees partially offset by an increase in regulatory premiums. Other noninterest expense decreased as a result of the provision recapture for unfunded loan commitments similar to the reduction for the linked quarter and a reduction of $857 thousand in travel and entertainment expense due to COVID-19. The decrease in legal and professional fees was principally due to lower fees on reciprocal money market accounts in 2020. Partially offsetting these decreases was an increase in regulatory premiums. During the fourth quarter of 2019, the Bank utilized a portion of its Small Bank Assessment Credit to pay for FDIC deposit insurance premiums. The final portion of the credit was utilized during the second quarter of 2020.

The provision for unfunded loan commitments for the periods indicated are as follows:



Three Months Ended


Twelve Months Ended



December 31,
2020


September 30,
2020


December 31,
2019


December 31,
2020


December 31,
2019



(in thousands)

Provision (recapture) for unfunded loan commitments


$

(1,300)



$

800



$

(150)



$

3,300



$

(900)























Net Interest Margin

Columbia's net interest margin (tax equivalent) for the fourth quarter of 2020 was 3.52%, an increase of 5 basis points and a decrease of 59 basis points from the linked quarter and prior-year period, respectively. The increase in the net interest margin (tax equivalent) compared to the linked quarter was due to increased income on PPP loans due to forgiveness activity as well as a recovery of interest on a nonaccrual loan that paid-off during the quarter. Interest income on the securities portfolio also contributed to the rise in the net interest margin due to two securities that had prepayment activity. These increases were partially offset by a shift in the mix of interest-earning assets towards lower-yielding investment securities. Notably, the average cost of total deposits for the quarter was 5 basis points, a decrease of 1 basis point from the third quarter of 2020. The decrease in the net interest margin (tax equivalent) compared to the prior-year period was driven by higher average interest-earning deposits with banks at an average rate of 10 basis points as well as lower rates on the loan and securities portfolios. For additional information regarding net interest margin, see the "Average Balances and Rates" tables.

Columbia's operating net interest margin (tax equivalent)1 was 3.51% for the fourth quarter of 2020, which increased 5 points compared to the linked quarter and decreased 58 basis points compared to the prior-year period. The increase in the operating net interest margin for the fourth quarter of 2020 compared to the linked quarter and the decrease compared to the prior-year period were due to the items noted in the preceding paragraph.

The following table highlights the yield on our PPP loans for the periods indicated:



Three Months Ended


Twelve Months Ended



December 31, 2020


September 30, 2020


December 31, 2020

Paycheck Protection Program loans


(dollars in thousands)

Interest income


$

9,218



$

5,263



$

19,071


Average balance


$

822,970



$

948,034



$

601,602


Yield


4.46

%


2.21

%


3.17

%

Aaron James Deer, Columbia's Executive Vice President and Chief Financial Officer, stated, "We had a nice increase in the margin during the fourth quarter, although it was largely due to accelerated PPP fee amortization. The recent improvement in the rate outlook gives us some optimism for future asset yield improvement, but the near-term expectation is that loan and securities yields will remain under pressure."

Asset Quality

At December 31, 2020, nonperforming assets to total assets decreased to 0.21% compared to 0.29% at September 30, 2020. Total nonperforming assets decreased $12.5 million from the linked quarter due to decreases in commercial business, agriculture and commercial real estate nonaccrual loans.

The following table sets forth information regarding nonaccrual loans and total nonperforming assets:



December 31, 2020


September 30, 2020


December 31, 2019



(in thousands)

Nonaccrual loans:







Commercial loans:







Commercial real estate


$

7,712



$

10,362



$

3,799


Commercial business


13,222



19,313



20,937


Agriculture


11,614



14,913



5,023


Construction


217



217




Consumer loans:







One-to-four family residential real estate


2,001



2,405



3,292


Other consumer


40



21



9


Total nonaccrual loans


34,806



47,231



33,060


OREO and other personal property owned


553



623



552


Total nonperforming assets


$

35,359



$

47,854



$

33,612


Nonperforming assets to total loans was 0.37% at December 31, 2020 compared to 0.49% at September 30, 2020.

The following table provides an analysis of the Company's allowance for credit losses:



Three Months Ended


Twelve Months Ended



December 31,
2020


September 30,
2020


December 31,
2019


December 31,
2020


December 31,
2019



(in thousands)

Beginning balance


$

156,968



$

151,546



$

82,660



$

83,968



$

83,369


Impact of adopting ASC 326








1,632




Charge-offs:











Commercial loans:











Commercial real estate


(1,318)





(452)



(1,419)



(2,160)


Commercial business


(2,106)



(3,164)



(2,845)



(12,396)



(11,290)


Agriculture


(432)



(1,269)



(51)



(6,427)



(245)


Construction






(10)





(242)


Consumer loans:











One-to-four family residential real estate


(58)



(16)



(192)



(84)



(1,196)


Other consumer


(167)



(133)



(18)



(766)



(82)


Total charge-offs


(4,081)



(4,582)



(3,568)



(21,092)



(15,215)


Recoveries:











Commercial loans:











Commercial real estate


39



65



576



131



3,377


Commercial business


643



1,124



1,698



3,438



3,066


Agriculture


103



27



110



172



299


Construction


21



11



312



709



3,641


Consumer loans:











One-to-four family residential real estate


78



1,301



549



2,083



1,773


Other consumer


69



76



17



399



165


Total recoveries


953



2,604



3,262



6,932



12,321


Net charge-offs


(3,128)



(1,978)



(306)



(14,160)



(2,894)


Provision (recapture) for credit losses


(4,700)



7,400



1,614



77,700



3,493


Ending balance


$

149,140



$

156,968



$

83,968



$

149,140



$

83,968













The allowance for credit losses to period-end loans was 1.58% at December 31, 2020 compared to 1.62% at September 30, 2020. Excluding PPP loans, the allowance for credit losses to period-end loan2] was 1.70% at December 31, 2020 compared to 1.80% at September 30, 2020.

Loan Deferrals

The following table shows the loan balances subject to deferral for the periods indicated:



December 31, 2020


September 30, 2020


June 30, 2020



(in thousands)

Loan balances subject to deferral


$

146,725



$

114,372



$

1,595,615















Organizational Update

Two New Directors

The appointment of two new directors was announced following a regional search during the quarter. Laura Alvarez Schrag and Tracy Mack-Askew formally joined the board on January 1, 2021. Ms. Alvarez Schrag is President of Pondera Consulting and a resident of Nampa, Idaho and Ms. Mack-Askew is General Manager-HD Vocational Platform Development of Daimler Trucks North America and a resident of Portland, Oregon.

"Ms. Alvarez Schrag and Ms. Mack-Askew bring a wealth of expertise in organizational development, governance and operations to the Board," said Mr. Stein. "We look forward to benefiting from their business expertise and their knowledge of key Northwest markets."

COVID-19 Update

COVID-19 continues to impact our communities. We continue to monitor changing guidance from state and local healthcare officials and adjust our protocols accordingly. Social distancing, additional cleaning protocols and other safety measures we have taken enabled us to keep our branch lobbies open to serve clients throughout the quarter. Investments in additional video conferencing tools provided a smooth transition for team members resuming remote work arrangements as states reinstituted recommendations from earlier in the spring. Employees continue to balance the challenges of life and work amidst the pandemic, such as managing distance learning routines for their children. The variety of flexibility options we have provided have supported employees while maintaining service standards.

Warm Hearts Winter Drive

Our sixth annual Warm Hearts Winter Drive to benefit families and individuals struggling with homelessness during the winter months raised $315,025 for more than 65 homeless and relief shelters across the Northwest.

"In a year made particularly difficult by the pandemic, the Warm Hearts Winter Drive was as important as ever," said David Moore Devine, Columbia's Executive Vice President and Chief Marketing & Experience Officer. "I could not be prouder of the way our bankers and other employees across the Northwest stepped up to help their neighbors. Their efforts will make a tremendous difference in the communities we serve this winter."

The annual drive has raised nearly $1.5 million in combined donations since the program started in 2016.

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.28 per common share on February 24, 2021 to shareholders of record as of the close of business on February 10, 2021.

Conference Call Information

Columbia's management will discuss the fourth quarter 2020 financial results on a conference call scheduled for Thursday, January 28, 2021 at 10:00 a.m. Pacific Time (1:00 p.m. ET). Interested parties may join the live-streamed event by using the site: https://edge.media-server.com/mmc/p/vcquk5yf  

The conference call can also be accessed on Thursday, January 28, 2021 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 833-301-1160; Conference ID password:  3936658.

A replay of the call will be accessible beginning Friday, January 29, 2021 using the link below:
https://edge.media-server.com/mmc/p/vcquk5yf  

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. (NASDAQ: COLB) is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank with locations throughout Washington, Oregon and Idaho. The bank has been named one of Puget Sound Business Journal's "Washington's Best Workplaces," more than 10 times and was recently honored as #1 in Customer Satisfaction with Retail Banking in the Northwest region by J.D. Power3 in the 2020 U.S. Retail Banking Satisfaction Study. Columbia was named the #1 bank in the Northwest on the Forbes 2020 list of "America's Best Banks" marking nearly 10 consecutive years on the publication's list of top financial institutions.

More information about Columbia can be found on its website at www.columbiabank.com.

1 Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.
2 Allowance for credit losses to period-end loans, excluding PPP is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of allowance for credit losses to period-end loans to allowance for credit losses to period-end loans, excluding PPP loans.
3 Columbia Bank received the highest score in the Northwest region of the J.D. Power 2020 U.S. Retail Banking Satisfaction Study of customer satisfaction with their own retail bank. Visit jdpower.com/awards.

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 as well as the potential effects of the COVID-19 pandemic on Columbia's business, operations, financial performance and prospects. 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 U.S. Securities and Exchange Commission's (the "SEC") 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) the effect of COVID-19 and other infectious illness outbreaks that may arise in the future, which has created significant uncertainties in U.S. and global markets, is expected to continue to adversely affect the businesses in which Columbia is engaged; (3) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (4) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (5) costs or difficulties related to the integration of acquisitions may be greater than expected; (6) competitive pressure among financial institutions may increase significantly; (7) failure to maintain effective internal control over financial reporting or disclosure controls and procedures may adversely affect our business; (8) reliance on and cost of technology may increase; and (9) changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, including with regard to COVID-19, have adversely affected and may continue to 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:

Clint Stein,


Aaron James Deer,


President and


Executive Vice President and


Chief Executive Officer


Chief Financial Officer






Investor Relations




InvestorRelations@columbiabank.com




253-305-1921




(COLB-ER)



 

CONSOLIDATED BALANCE SHEETS







Columbia Banking System, Inc.








Unaudited







December 31,


September 30,


December 31,








2020


2020


2019








(in thousands)

ASSETS





Cash and due from banks







$

218,899



$

193,823



$

223,541


Interest-earning deposits with banks







434,867



736,422



24,132


Total cash and cash equivalents







653,766



930,245



247,673


Debt securities available for sale at fair value (amortized cost of $4,997,529, $4,081,118 and $3,703,096, respectively)










5,210,134



4,281,720



3,746,142


Equity securities







13,425



13,425




Federal Home Loan Bank ("FHLB") stock at cost






10,280



10,280



48,120


Loans held for sale







26,481



24,407



17,718


Loans, net of unearned income







9,427,660



9,688,947



8,743,465


Less: Allowance for credit losses








149,140



156,968



83,968


Loans, net







9,278,520



9,531,979



8,659,497


Interest receivable







54,831



56,718



46,839


Premises and equipment, net







162,059



164,049



165,408


Other real estate owned







553



623



552


Goodwill







765,842



765,842



765,842


Other intangible assets, net







26,734



28,745



35,458


Other assets







382,154



425,391



346,275


Total assets







$

16,584,779



$

16,233,424



$

14,079,524


LIABILITIES AND SHAREHOLDERS' EQUITY









Deposits:












Noninterest-bearing







$

6,913,214



$

6,897,054



$

5,328,146


Interest-bearing







6,956,648



6,703,206



5,356,562


Total deposits







13,869,862



13,600,260



10,684,708


FHLB advances







7,414



7,427



953,469


Securities sold under agreements to repurchase








73,859



26,966



64,437


Subordinated debentures







35,092



35,139



35,277


Other liabilities







250,945



261,651



181,671


Total liabilities







14,237,172



13,931,443



11,919,562


Commitments and contingent liabilities












Shareholders' equity:













December 31,


September 30,


December 31,








2020


2020


2019








(in thousands)







Preferred stock (no par value)












Authorized shares

2,000



2,000



2,000








Common stock (no par value)












Authorized shares

115,000



115,000



115,000








Issued

73,782



73,797



73,577



1,660,998



1,658,203



1,650,753


Outstanding

71,598



71,613



72,124








Retained earnings







575,248



537,011



519,676


Accumulated other comprehensive income








182,195



177,601



40,367


Treasury stock at cost

2,184



2,184



1,453



(70,834)



(70,834)



(50,834)


Total shareholders' equity







2,347,607



2,301,981



2,159,962


Total liabilities and shareholders' equity








$

16,584,779



$

16,233,424



$

14,079,524


 

CONSOLIDATED STATEMENTS OF INCOME














Columbia Banking System, Inc.


Three Months Ended


Twelve Months Ended

Unaudited


December 31,


September 30,


December 31,


December 31,


December 31,



2020


2020


2019


2020


2019

Interest Income


(in thousands except per share amounts)

Loans


$

107,402



$

105,739



$

110,384



$

426,003



$

448,041


Taxable securities


23,045



19,102



20,074



81,578



69,864


Tax-exempt securities


2,668



2,340



2,498



9,567



10,735


Deposits in banks


181



203



153



661



1,312


Total interest income


133,296



127,384



133,109



517,809



529,952


Interest Expense











Deposits


1,626



2,005



5,809



9,367



22,146


FHLB advances and Federal Reserve Bank ("FRB") borrowings


73



166



1,899



6,264



11,861


Subordinated debentures


467



468



467



1,871



1,871


Other borrowings


18



19



117



196



669


Total interest expense


2,184



2,658



8,292



17,698



36,547


Net Interest Income


131,112



124,726



124,817



500,111



493,405


Provision (recapture) for credit losses


(4,700)



7,400



1,614



77,700



3,493


Net interest income after provision (recapture) for credit losses


135,812



117,326



123,203



422,411



489,912


Noninterest Income











Deposit account and treasury management fees


6,481



6,658



8,665



27,019



35,695


Card revenue


3,497



3,834



3,767



13,928



15,198


Financial services and trust revenue


3,349



3,253



3,191



12,830



12,799


Loan revenue


7,960



6,645



3,625



24,802



13,465


Bank owned life insurance


1,619



1,585



1,650



6,418



6,294


Investment securities gains, net


36







16,710



2,132


Other


620



497



909



2,793



11,598


Total noninterest income


23,562



22,472



21,807



104,500



97,181


Noninterest Expense











Compensation and employee benefits


53,704



55,133



54,308



209,722



212,867


Occupancy


9,270



8,734



9,010



36,013



35,176


Data processing


4,566



4,510



4,792



19,370



19,164


Legal and professional fees


3,573



3,000



4,835



12,158



21,645


Amortization of intangibles


2,011



2,193



2,450



8,724



10,479


Business and Occupation ("B&O") taxes


1,543



1,559



1,234



4,970



5,846


Advertising and promotion


1,644



680



1,329



4,466



4,925


Regulatory premiums


1,062



826



18



2,956



1,920


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


33



(160)



(10)



(315)



(692)


Other


6,894



8,640



9,012



36,455



34,152


Total noninterest expense


84,300



85,115



86,978



334,519



345,482


Income before income taxes


75,074



54,683



58,032



192,392



241,611


Provision for income taxes


16,774



9,949



11,903



38,148



47,160


Net Income


$

58,300



$

44,734



$

46,129



$

154,244



$

194,451


Earnings per common share











Basic


$

0.82



$

0.63



$

0.64



$

2.17



$

2.68


Diluted


$

0.82



$

0.63



$

0.64



$

2.17



$

2.68


Dividends declared per common share - regular


$

0.28



$

0.28



$

0.28



$

1.12



$

1.12


Dividends declared per common share - special








0.22



0.28


Dividends declared per common share - total


$

0.28



$

0.28



$

0.28



$

1.34



$

1.40


Weighted average number of common shares outstanding


70,732



70,726



71,238



70,835



71,999


Weighted average number of diluted common shares outstanding


70,838



70,762



71,310



70,880



72,032


 

FINANCIAL STATISTICS











Columbia Banking System, Inc.


Three Months Ended


Twelve Months Ended

Unaudited


December 31,


September 30,


December 31,


December 31,


December 31,



2020


2020


2019


2020


2019

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

131,112



$

124,726



$

124,817



$

500,111



$

493,405


Provision (recapture) for credit losses


$

(4,700)



$

7,400



$

1,614



$

77,700



$

3,493


Noninterest income


$

23,562



$

22,472



$

21,807



$

104,500



$

97,181


Noninterest expense


$

84,300



$

85,115



$

86,978



$

334,519



$

345,482


Net income


$

58,300



$

44,734



$

46,129



$

154,244



$

194,451


Per Common Share











Earnings (basic)


$

0.82



$

0.63



$

0.64



$

2.17



$

2.68


Earnings (diluted)


$

0.82



$

0.63



$

0.64



$

2.17



$

2.68


Book value


$

32.79



$

32.14



$

29.95



$

32.79



$

29.95


Tangible book value per common share (1)


$

21.72



$

21.05



$

18.84



$

21.72



$

18.84


Averages











Total assets


$

16,477,246



$

15,965,485



$

13,750,840



$

15,401,219



$

13,341,024


Interest-earning assets


$

15,010,392



$

14,492,435



$

12,231,779



$

13,916,611



$

11,837,633


Loans


$

9,533,655



$

9,744,336



$

8,742,246



$

9,411,213



$

8,612,478


Securities, including equity securities and FHLB stock


$

4,765,158



$

3,948,041



$

3,453,554



$

3,982,918



$

3,167,112


Deposits


$

13,864,027



$

13,318,485



$

10,959,434



$

12,512,255



$

10,523,687


Interest-bearing deposits


$

6,873,405



$

6,527,695



$

5,610,850



$

6,208,058



$

5,383,746


Interest-bearing liabilities


$

6,954,287



$

6,659,119



$

6,058,319



$

6,626,825



$

5,923,818


Noninterest-bearing deposits


$

6,990,622



$

6,790,790



$

5,348,584



$

6,304,197



$

5,139,941


Shareholders' equity


$

2,311,070



$

2,293,771



$

2,170,879



$

2,263,276



$

2,116,642


Financial Ratios











Return on average assets


1.42

%


1.12

%


1.34

%


1.00

%


1.46

%

Return on average common equity


10.09

%


7.80

%


8.50

%


6.82

%


9.19

%

Return on average tangible common equity (1)


15.79

%


12.41

%


14.05

%


10.99

%


15.47

%

Average equity to average assets


14.03

%


14.37

%


15.79

%


14.70

%


15.87

%

Shareholders' equity to total assets


14.16

%


14.18

%


15.34

%


14.16

%


15.34

%

Tangible common shareholders' equity to tangible assets (1)


9.85

%


9.76

%


10.23

%


9.85

%


10.23

%

Net interest margin (tax equivalent)


3.52

%


3.47

%


4.11

%


3.65

%


4.24

%

Efficiency ratio (tax equivalent) (2)


53.70

%


56.95

%


58.34

%


54.50

%


57.52

%

Operating efficiency ratio (tax equivalent) (1)


53.03

%


56.33

%


58.07

%


55.34

%


57.64

%

Noninterest expense ratio


2.05

%


2.13

%


2.53

%


2.17

%


2.59

%



December 31,


September 30,


December 31,





Period-end


2020


2020


2019





Total assets


$

16,584,779



$

16,233,424



$

14,079,524






Loans, net of unearned income


$

9,427,660



$

9,688,947



$

8,743,465






Allowance for credit losses


$

149,140



$

156,968



$

83,968






Securities, including equity securities and FHLB stock


$

5,233,839



$

4,305,425



$

3,794,262






Deposits


$

13,869,862



$

13,600,260



$

10,684,708






Shareholders' equity


$

2,347,607



$

2,301,981



$

2,159,962






Nonperforming assets











Nonaccrual loans


$

34,806



$

47,231



$

33,060






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


553



623



552






Total nonperforming assets


$

35,359



$

47,854



$

33,612






Nonperforming loans to period-end loans


0.37

%


0.49

%


0.38

%





Nonperforming assets to period-end assets


0.21

%


0.29

%


0.24

%





Allowance for credit losses to period-end loans


1.58

%


1.62

%


0.96

%





Net loan charge-offs (for the three months ended)


$

3,128



$

1,978



$

306














(1)

This is a non-GAAP measure. See section titled "Non-GAAP Financial Measures" on the last three pages of this earnings release for a reconciliation to the most comparable GAAP measure.

(2)

Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.

 

QUARTERLY FINANCIAL STATISTICS











Columbia Banking System, Inc.


Three Months Ended

Unaudited


December 31,


September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2020


2019

Earnings


(dollars in thousands except per share amounts)

Net interest income


$

131,112



$

124,726



$

121,851



$

122,422



$

124,817


Provision (recapture) for credit losses


$

(4,700)



$

7,400



$

33,500



$

41,500



$

1,614


Noninterest income


$

23,562



$

22,472



$

37,259



$

21,207



$

21,807


Noninterest expense


$

84,300



$

85,115



$

80,833



$

84,271



$

86,978


Net income


$

58,300



$

44,734



$

36,582



$

14,628



$

46,129


Per Common Share











Earnings (basic)


$

0.82



$

0.63



$

0.52



$

0.20



$

0.64


Earnings (diluted)


$

0.82



$

0.63



$

0.52



$

0.20



$

0.64


Book value


$

32.79



$

32.14



$

31.80



$

30.93



$

29.95


Averages











Total assets


$

16,477,246



$

15,965,485



$

15,148,488



$

13,995,632



$

13,750,840


Interest-earning assets


$

15,010,392



$

14,492,435



$

13,657,719



$

12,487,550



$

12,231,779


Loans


$

9,533,655



$

9,744,336



$

9,546,099



$

8,815,755



$

8,742,246


Securities, including equity securities and FHLB stock


$

4,765,158



$

3,948,041



$

3,591,693



$

3,618,567



$

3,453,554


Deposits


$

13,864,027



$

13,318,485



$

12,220,415



$

10,622,379



$

10,959,434


Interest-bearing deposits


$

6,873,405



$

6,527,695



$

6,037,107



$

5,383,203



$

5,610,850


Interest-bearing liabilities


$

6,954,287



$

6,659,119



$

6,514,012



$

6,375,931



$

6,058,319


Noninterest-bearing deposits


$

6,990,622



$

6,790,790



$

6,183,308



$

5,239,176



$

5,348,584


Shareholders' equity


$

2,311,070



$

2,293,771



$

2,254,349



$

2,193,051



$

2,170,879


Financial Ratios











Return on average assets


1.42

%


1.12

%


0.97

%


0.42

%


1.34

%

Return on average common equity


10.09

%


7.80

%


6.49

%


2.67

%


8.50

%

Average equity to average assets


14.03

%


14.37

%


14.88

%


15.67

%


15.79

%

Shareholders' equity to total assets


14.16

%


14.18

%


14.30

%


15.77

%


15.34

%

Net interest margin (tax equivalent)


3.52

%


3.47

%


3.64

%


4.00

%


4.11

%

Period-end











Total assets


$

16,584,779



$

16,233,424



$

15,920,944



$

14,038,503



$

14,079,524


Loans, net of unearned income


$

9,427,660



$

9,688,947



$

9,771,898



$

8,933,321



$

8,743,465


Allowance for credit losses


$

149,140



$

156,968



$

151,546



$

122,074



$

83,968


Securities, including equity securities and FHLB stock


$

5,233,839



$

4,305,425



$

3,723,492



$

3,591,408



$

3,794,262


Deposits


$

13,869,862



$

13,600,260



$

13,131,477



$

10,812,756



$

10,684,708


Shareholders' equity


$

2,347,607



$

2,301,981



$

2,276,755



$

2,213,602



$

2,159,962


Goodwill


$

765,842



$

765,842



$

765,842



$

765,842



$

765,842


Other intangible assets, net


$

26,734



$

28,745



$

30,938



$

33,148



$

35,458


Nonperforming assets











Nonaccrual loans


$

34,806



$

47,231



$

53,732



$

47,647



$

33,060


OREO and OPPO


553



623



747



510



552


Total nonperforming assets


$

35,359



$

47,854



$

54,479



$

48,157



$

33,612


Nonperforming loans to period-end loans


0.37

%


0.49

%


0.55

%


0.53

%


0.38

%

Nonperforming assets to period-end assets


0.21

%


0.29

%


0.34

%


0.34

%


0.24

%

Allowance for credit losses to period-end loans


1.58

%


1.62

%


1.55

%


1.37

%


0.96

%

Net loan charge-offs


$

3,128



$

1,978



$

4,028



$

5,026



$

306


 

LOAN PORTFOLIO COMPOSITION











Columbia Banking System, Inc.











Unaudited


December 31,


September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2020


2019

Loan Portfolio Composition - Dollars


(dollars in thousands)

Commercial loans:











Commercial real estate


$

4,062,313



$

4,027,035



$

4,032,643



$

3,969,974



$

3,945,853


Commercial business


3,597,968



3,836,009



3,859,513



3,169,668



2,989,613


Agriculture


779,627



850,290



845,950



754,491



765,371


Construction


268,663



273,176



304,015



308,186



361,533


Consumer loans:











One-to-four family residential real estate


683,570



665,432



692,837



690,506



637,325


Other consumer


35,519



37,005



36,940



40,496



43,770


Total loans


9,427,660



9,688,947



9,771,898



8,933,321



8,743,465


Less:  Allowance for credit losses


(149,140)



(156,968)



(151,546)



(122,074)



(83,968)


Total loans, net


$

9,278,520



$

9,531,979



$

9,620,352



$

8,811,247



$

8,659,497


Loans held for sale


$

26,481



$

24,407



$

28,803



$

9,701



$

17,718


 



December 31,


September 30,


June 30,


March 31,


December 31,

Loan Portfolio Composition - Percentages


2020


2020


2020


2020


2019

Commercial loans:











Commercial real estate


43.0

%


41.5

%


41.2

%


44.5

%


45.1

%

Commercial business


38.2

%


39.6

%


39.5

%


35.5

%


34.2

%

Agriculture


8.3

%


8.8

%


8.7

%


8.4

%


8.8

%

Construction


2.8

%


2.8

%


3.1

%


3.4

%


4.1

%

Consumer loans:











One-to-four family residential real estate


7.3

%


6.9

%


7.1

%


7.7

%


7.3

%

Other consumer


0.4

%


0.4

%


0.4

%


0.5

%


0.5

%

Total loans


100.0

%


100.0

%


100.0

%


100.0

%


100.0

%

 

DEPOSIT COMPOSITION











Columbia Banking System, Inc.











Unaudited













December 31,


September 30,


June 30,


March 31,


December 31,



2020


2020


2020


2020


2019

Deposit Composition - Dollars


(dollars in thousands)

Demand and other noninterest-bearing


$

6,913,214



$

6,897,054



$

6,719,437



$

5,323,908



$

5,328,146


Money market


2,780,922



2,708,949



2,586,376



2,313,717



2,322,644


Interest-bearing demand


1,433,083



1,322,618



1,274,058



1,131,874



1,150,437


Savings


1,169,721



1,109,155



1,035,723



905,931



882,050


Interest-bearing public funds, other than certificates of deposit


656,273



635,980



623,496



405,810



301,203


Certificates of deposit, less than $250,000


201,805



204,578



210,357



214,449



218,764


Certificates of deposit, $250,000 or more


108,935



105,041



104,330



109,659



151,995


Certificates of deposit insured by CDARS®


23,105



22,609



17,078



17,171



17,065


Brokered certificates of deposit


5,000



5,000



8,427



12,259



12,259


Reciprocal money market accounts


577,804



589,276



552,195



377,980



300,158


Subtotal


13,869,862



13,600,260



13,131,477



10,812,758



10,684,721


Valuation adjustment resulting from acquisition accounting








(2)



(13)


Total deposits


$

13,869,862



$

13,600,260



$

13,131,477



$

10,812,756



$

10,684,708


 



December 31,


September 30,


June 30,


March 31,


December 31,

Deposit Composition - Percentages


2020


2020


2020


2020


2019

Demand and other noninterest-bearing


49.8

%


50.7

%


51.2

%


49.2

%


49.9

%

Money market


20.1

%


19.9

%


19.7

%


21.4

%


21.7

%

Interest-bearing demand


10.3

%


9.7

%


9.7

%


10.5

%


10.8

%

Savings


8.4

%


8.2

%


7.9

%


8.4

%


8.3

%

Interest-bearing public funds, other than certificates of deposit


4.7

%


4.7

%


4.7

%


3.8

%


2.8

%

Certificates of deposit, less than $250,000


1.5

%


1.5

%


1.6

%


2.0

%


2.0

%

Certificates of deposit, $250,000 or more


0.8

%


0.8

%


0.8

%


1.0

%


1.4

%

Certificates of deposit insured by CDARS®


0.2

%


0.2

%


0.1

%


0.2

%


0.2

%

Brokered certificates of deposit


%


%


0.1

%


0.1

%


0.1

%

Reciprocal money market accounts


4.2

%


4.3

%


4.2

%


3.4

%


2.8

%

Total


100.0

%


100.0

%


100.0

%


100.0

%


100.0

%

 

AVERAGE BALANCES AND RATES















Columbia Banking System, Inc.















Unaudited















Three Months Ended


Three Months Ended



December 31, 2020


December 31, 2019



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

9,533,655



$

108,576



4.53

%


$

8,742,246



$

111,754



5.07

%

Taxable securities


4,207,607



23,045



2.18

%


3,011,521



20,074



2.64

%

Tax exempt securities (2)


557,551



3,377



2.41

%


442,033



3,163



2.84

%

Interest-earning deposits with banks


711,579



181



0.10

%


35,979



153



1.69

%

Total interest-earning assets


15,010,392



135,179



3.58

%


12,231,779



135,144



4.38

%

Other earning assets


239,798







231,456






Noninterest-earning assets


1,227,056







1,287,605






Total assets


$

16,477,246







$

13,750,840






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$

3,395,343



$

732



0.09

%


$

2,649,404



$

2,277



0.34

%

Interest-bearing demand


1,359,222



293



0.09

%


1,065,531



446



0.17

%

Savings accounts


1,141,165



36



0.01

%


888,895



47



0.02

%

Interest-bearing public funds, other than certificates of deposit


638,107



310



0.19

%


616,938



2,413



1.55

%

Certificates of deposit


339,568



255



0.30

%


390,082



626



0.64

%

Total interest-bearing deposits


6,873,405



1,626



0.09

%


5,610,850



5,809



0.41

%

FHLB advances and FRB borrowings


7,420



73



3.91

%


379,975



1,899



1.98

%

Subordinated debentures


35,115



467



5.29

%


35,299



467



5.25

%

Other borrowings and interest-bearing liabilities


38,347



18



0.19

%


32,195



117



1.44

%

Total interest-bearing liabilities


6,954,287



2,184



0.12

%


6,058,319



8,292



0.54

%

Noninterest-bearing deposits


6,990,622







5,348,584






Other noninterest-bearing liabilities


221,267







173,058






Shareholders' equity


2,311,070







2,170,879






Total liabilities & shareholders' equity


$

16,477,246







$

13,750,840






Net interest income (tax equivalent)






$

132,995







$

126,852




Net interest margin (tax equivalent)










3.52

%






4.11

%








(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 $9.1 million and $2.1 million for the three months ended December 31, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.3 million and $2.3 million for the three months ended December 31, 2020 and 2019, 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 $1.4 million for the three months ended December 31, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $709 thousand and $665 thousand for the three months ended December 31, 2020 and 2019, respectively.

 

AVERAGE BALANCES AND RATES















Columbia Banking System, Inc.















Unaudited















Three Months Ended


Three Months Ended



December 31, 2020


September 30, 2020



 

Average
Balances


Interest
Earned / Paid


Average
Rate


 

Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

9,533,655



$

108,576



4.53

%


$

9,744,336



$

106,945



4.37

%

Taxable securities


4,207,607



23,045



2.18

%


3,511,690



19,102



2.16

%

Tax exempt securities (2)


557,551



3,377



2.41

%


436,351



2,962



2.70

%

Interest-earning deposits with banks


711,579



181



0.10

%


800,058



203



0.10

%

Total interest-earning assets


15,010,392



135,179



3.58

%


14,492,435



129,212



3.55

%

Other earning assets


239,798







235,735






Noninterest-earning assets


1,227,056







1,237,315






Total assets


$

16,477,246







$

15,965,485






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$

3,395,343



$

732



0.09

%


$

3,200,407



$

947



0.12

%

Interest-bearing demand


1,359,222



293



0.09

%


1,296,076



337



0.10

%

Savings accounts


1,141,165



36



0.01

%


1,072,472



36



0.01

%

Interest-bearing public funds, other than certificates of deposit


638,107



310



0.19

%


621,786



397



0.25

%

Certificates of deposit


339,568



255



0.30

%


336,954



288



0.34

%

Total interest-bearing deposits


6,873,405



1,626



0.09

%


6,527,695



2,005



0.12

%

FHLB advances and FRB borrowings


7,420



73



3.91

%


54,173



166



1.22

%

Subordinated debentures


35,115



467



5.29

%


35,161



468



5.30

%

Other borrowings and interest-bearing liabilities


38,347



18



0.19

%


42,090



19



0.18

%

Total interest-bearing liabilities


6,954,287



2,184



0.12

%


6,659,119



2,658



0.16

%

Noninterest-bearing deposits


6,990,622







6,790,790






Other noninterest-bearing liabilities


221,267







221,805






Shareholders' equity


2,311,070







2,293,771






Total liabilities & shareholders' equity


$

16,477,246







$

15,965,485






Net interest income (tax equivalent)






$

132,995







$

126,554




Net interest margin (tax equivalent)










3.52

%






3.47

%















(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 $9.1 million and $5.0 million for the three months ended December 31, 2020 and September 30, 2020, respectively. The incremental accretion on acquired loans was $1.3 million and $1.7 million the three months ended December 31, 2020 and September 30, 2020, 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 for both the three months ended December 31, 2020 and September 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $709 thousand and $622 thousand for the three months ended December 31, 2020 and September 30, 2020, respectively.

 

AVERAGE BALANCES AND RATES















Columbia Banking System, Inc.















Unaudited















Twelve Months Ended


Twelve Months Ended



December 31, 2020


December 31, 2019



Average
Balances


Interest
Earned / Paid


Average
Rate


Average
Balances


Interest
Earned / Paid


Average
Rate



(dollars in thousands)

ASSETS













Loans, net (1)(2)


$

9,411,213



$

430,923



4.58

%


$

8,612,478



$

453,552



5.27

%

Taxable securities


3,531,357



81,578



2.31

%


2,703,423



69,864



2.58

%

Tax exempt securities (2)


451,561



12,110



2.68

%


463,689



13,589



2.93

%

Interest-earning deposits with banks


522,480



661



0.13

%


58,043



1,312



2.26

%

Total interest-earning assets


13,916,611



$

525,272



3.77

%


11,837,633



$

538,317



4.55

%

Other earning assets


235,491







231,731






Noninterest-earning assets


1,249,117







1,271,660






Total assets


$

15,401,219







$

13,341,024






LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$

3,043,731



$

4,381



0.14

%


$

2,591,303



$

10,598



0.41

%

Interest-bearing demand


1,248,975



1,453



0.12

%


1,064,145



1,676



0.16

%

Savings accounts


1,022,388



153



0.01

%


892,518



183



0.02

%

Interest-bearing public funds, other than certificates of deposit


544,109



2,003



0.37

%


440,359



7,244



1.65

%

Certificates of deposit


348,855



1,377



0.39

%


395,421



2,445



0.62

%

Total interest-bearing deposits


6,208,058



9,367



0.15

%


5,383,746



22,146



0.41

%

FHLB advances and FRB borrowings


342,721



6,264



1.83

%


470,082



11,861



2.52

%

Subordinated debentures


35,184



1,871



5.32

%


35,368



1,871



5.29

%

Other borrowings and interest-bearing liabilities


40,862



196



0.48

%


34,622



669



1.93

%

Total interest-bearing liabilities


6,626,825



$

17,698



0.27

%


5,923,818



$

36,547



0.62

%

Noninterest-bearing deposits


6,304,197







5,139,941






Other noninterest-bearing liabilities


206,921







160,623






Shareholders' equity


2,263,276







2,116,642






Total liabilities & shareholders' equity


$

15,401,219







$

13,341,024






Net interest income (tax equivalent)






$

507,574







$

501,770




Net interest margin (tax equivalent)










3.65

%






4.24

%









(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 $21.6 million and $8.4 million for the twelve months ended December 31, 2020 and 2019, respectively. The incremental accretion on acquired loans was $6.2 million and $9.1 million for the twelve months ended December 31, 2020 and 2019, respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $4.9 million and $5.5 million for the twelve months ended December 31, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.5 million and $2.9 million for the twelve months ended December 31, 2020 and 2019, respectively.

Non-GAAP Financial Measures

The Company considers its operating net interest margin (tax equivalent) and operating efficiency ratios to be useful measurements as they more closely reflect the ongoing operating performance of the Company. Despite the usefulness of the operating net interest margin (tax equivalent) and operating efficiency ratio to the Company, there are no standardized definitions for them. 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 (tax equivalent) and operating efficiency ratio:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2020


2020


2019


2020


2019

Operating net interest margin non-GAAP reconciliation:


(dollars in thousands)

Net interest income (tax equivalent) (1)


$

132,995



$

126,554



$

126,852



$

507,574



$

501,770


Adjustments to arrive at operating net interest income (tax equivalent):











Incremental accretion income on acquired loans (2)


(1,323)



(1,665)



(2,316)



(6,154)



(9,086)


Premium amortization on acquired securities


606



701



1,204



3,409



6,020


Interest reversals on nonaccrual loans


146



393



209



2,000



1,671


Operating net interest income (tax equivalent) (1)


$

132,424



$

125,983



$

125,949



$

506,829



$

500,375


Average interest earning assets


$

15,010,392



$

14,492,435



$

12,231,779



$

13,916,611



$

11,837,633


Net interest margin (tax equivalent) (1)


3.52

%


3.47

%


4.11

%


3.65

%


4.24

%

Operating net interest margin (tax equivalent) (1)


3.51

%


3.46

%


4.09

%


3.64

%


4.23

%





Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2020


2020


2019


2020


2019

Operating efficiency ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$

84,300



$

85,115



$

86,978



$

334,519



$

345,482


Adjustments to arrive at operating noninterest expense:











Net benefit (cost) of operation of OREO and OPPO


(32)



160



10



324



714


Loss on asset disposals








(224)



(5)


Business and Occupation ("B&O") taxes


(1,543)



(1,559)



(1,234)



(4,970)



(5,846)


Operating noninterest expense (numerator B)


$

82,725



$

83,716



$

85,754



$

329,649



$

340,345













Net interest income (tax equivalent) (1)


$

132,995



$

126,554



$

126,852



$

507,574



$

501,770


Noninterest income


23,562



22,472



21,807



104,500



97,181


Bank owned life insurance tax equivalent adjustment


430



422



439



1,706



1,673


Total revenue (tax equivalent) (denominator A)


$

156,987



$

149,448



$

149,098



$

613,780



$

600,624













Operating net interest income (tax equivalent) (1)


$

132,424



$

125,983



$

125,949



$

506,829



$

500,375


Adjustments to arrive at operating noninterest income (tax equivalent):











Investment securities gain, net


(36)







(16,710)



(2,132)


Gain on asset disposals


(381)



(247)



(530)



(675)



(6,634)


Operating noninterest income (tax equivalent)


23,575



22,647



21,716



88,821



90,088


Total operating revenue (tax equivalent) (denominator B)


$

155,999



$

148,630



$

147,665



$

595,650



$

590,463


Efficiency ratio (tax equivalent) (numerator A/denominator A)


53.70

%


56.95

%


58.34

%


54.50

%


57.52

%

Operating efficiency ratio (tax equivalent) (numerator B/denominator B)


53.03

%


56.33

%


58.07

%


55.34

%


57.64

%









(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 $1.9 million, $1.8 million, and $2.0 million for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively; and $7.5 million and $8.4 million for the twelve months ended December 31, 2020 and 2019, respectively.

(2)

Beginning January 2020, incremental accretion income on purchased credit impaired loans is no longer presented separate from incremental accretion income on other acquired loans. Prior period amounts have been reclassified to conform with current period presentation.

Non-GAAP Financial Measures - Continued

The Company considers its pre-tax, pre-provision income to be a useful measurement in evaluating the earnings of the Company as it provides a method to assess income. Despite the usefulness of this measure to the Company, there is not a standardized definition for it. As a result, the Company's calculation may not always be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the pre-tax, pre-provision income:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2020


2020


2019


2020


2019

Pre-tax, pre-provision income:


(in thousands)

Income before income taxes


$

75,074



$

54,683



$

58,032



$

192,392



$

241,611


Provision (recapture) for credit losses


(4,700)



7,400



1,614



77,700



3,493


Pre-tax, pre-provision income


$

70,374



$

62,083



$

59,646



$

270,092



$

245,104


The Company considers its tangible common equity ratio and tangible book value per share ratio to be useful measurements in evaluating the capital adequacy of the Company as they provide a method to assess management's success in utilizing our tangible capital. Despite the usefulness of these ratios to the Company, there is not a standardized definition for them. As a result, the Company's calculation may not always 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 tangible common equity ratio:



December 31,


September 30,


December 31,



2020


2020


2019

Tangible common equity ratio and tangible book value per common share non-GAAP reconciliation:


(dollars in thousands except per share amounts)

Shareholders' equity (numerator A)


$

2,347,607



$

2,301,981



$

2,159,962


Adjustments to arrive at tangible common equity:







Goodwill


(765,842)



(765,842)



(765,842)


Other intangible assets, net


(26,734)



(28,745)



(35,458)


Tangible common equity (numerator B)


$

1,555,031



$

1,507,394



$

1,358,662


Total assets (denominator A)


$

16,584,779



$

16,233,424



$

14,079,524


Adjustments to arrive at tangible assets:







Goodwill


(765,842)



(765,842)



(765,842)


Other intangible assets, net


(26,734)



(28,745)



(35,458)


Tangible assets (denominator B)


$

15,792,203



$

15,438,837



$

13,278,224


Shareholders' equity to total assets (numerator A/denominator A)


14.16

%


14.18

%


15.34

%

Tangible common shareholders' equity to tangible assets (numerator B/denominator B)


9.85

%


9.76

%


10.23

%

Common shares outstanding (denominator C)


71,598



71,613



72,124


Book value per common share (numerator A/denominator C)


$

32.79



$

32.14



$

29.95


Tangible book value per common share (numerator B/denominator C)


$

21.72



$

21.05



$

18.84


Non-GAAP Financial Measures - Continued

The Company considers its ratio of allowance for credit losses to period-end loans, excluding PPP loans, to be a useful measurement in evaluating the adequacy of the amount of allowance for credit losses to loans of the Company as PPP loans are guaranteed by the U.S. Small Business Administration and thus do not require the same amount of reserve for credit losses as do other loans. Despite the usefulness of this ratio to the Company, there is not a standardized definition for it. As a result, the Company's calculation may not always be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the allowance for credit losses to period-end loans:



December 31,


September 30,


December 31,



2020


2020


2019

Allowance for credit losses to period-end loans ratio non-GAAP reconciliation:


(dollars in thousands)

Allowance for credit losses ("ACL") (numerator)


$

149,140



$

156,968



$

83,968









Total loans, net of unearned income (denominator A)


9,427,660



9,688,947



8,743,465


Less: PPP loans, net of unearned income (0% ACL)


651,585



953,244




Total loans, net of PPP loans (denominator B)


$

8,776,075



$

8,735,703



$

8,743,465









ACL to period-end loans (numerator / denominator A)


1.58

%


1.62

%


0.96

%

ACL to period-end loans, excluding PPP loans (numerator / denominator B)


1.70

%


1.80

%


0.96

%

The Company also considers its return on average tangible common equity ratio to be a useful measurement as it evaluates the Company's ongoing ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the business can be evaluated, whether acquired or developed internally. Despite the usefulness of this ratio to the Company, there is not a standardized definition for it. As a result, the Company's calculation may not always 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 return on average tangible common shareholders' equity ratio:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2020


2020


2019


2020


2019

Return on average tangible common equity non-GAAP reconciliation:


(dollars in thousands)

Net income (numerator A)


$

58,300



$

44,734



$

46,129



$

154,244



$

194,451


Adjustments to arrive at tangible income applicable to common shareholders:











Amortization of intangibles


2,011



2,193



2,450



8,724



10,479


Tax effect on intangible amortization


(422)



(461)



(515)



(1,832)



(2,201)


Tangible income applicable to common shareholders (numerator B)


$

59,889



$

46,466



$

48,064



161,136



$

202,729


Average shareholders' equity (denominator A)


$

2,311,070



$

2,293,771



$

2,170,879



2,263,276



$

2,116,642


Adjustments to arrive at average tangible common equity:











Average intangibles


(793,510)



(795,650)



(802,446)



(796,762)



(806,358)


Average tangible common equity (denominator B)


$

1,517,560



$

1,498,121



$

1,368,433



$

1,466,514



$

1,310,284


Return on average common equity (numerator A/denominator A) (1)


10.09

%


7.80

%


8.50

%


6.82

%


9.19

%

Return on average tangible common equity (numerator B/denominator B) (2)


15.79

%


12.41

%


14.05

%


10.99

%


15.47

%









(1)

 For the purpose of this ratio, interim net income has been annualized.

(2)

 For the purpose of this ratio, interim tangible income applicable to common shareholders has been annualized.

 

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SOURCE Columbia Banking System Inc

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