EX-99.1 2 a991colb3q2019earnings.htm PRESS RELEASE - EARNINGS AND DIVIDEND Exhibit


Exhibit 99.1

cbsystemsolidbuga14.jpg

FOR IMMEDIATE RELEASE

October 24, 2019

                        


Columbia Banking System Announces Third Quarter 2019 Results,
and Quarterly Cash Dividend



Highlights

•
Quarterly net income of $50.7 million and diluted earnings per share of $0.70, inclusive of a $4.7 million gain, net of tax, from the sale-leaseback of owned real estate
•
Net loans increased $109.4 million, or 5.1% on an annualized basis from loan production of $383.0 million
•
Nonperforming assets to period end assets ratio improved for the seventh consecutive quarter to 0.27%
•
Repurchased 676 thousand shares of common stock during the quarter
•
Regular cash dividend declared of $0.28 per share


TACOMA, Washington, October 24, 2019 -- Hadley Robbins, 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 2019 earnings, “Third quarter results reflected our focus on executing on our fundamentals. We responsibly built loan totals, increased deposits, and improved our credit quality metrics. Operating expenses were well controlled and meaningful progress was made in moving a number of digital initiatives to completion. Net income for the quarter was one of our strongest at $50.7 million and is a tribute to the dedication and hard work of the Columbia Bank team.”




Balance Sheet
Total assets at September 30, 2019 were $13.76 billion, an increase of $667.0 million from the linked quarter. Loans were $8.76 billion, up $109.4 million, or 5.1% annualized, from June 30, 2019 as a result of loan originations of $383.0 million and increased seasonal line utilization partially offset by payments. Securities available for sale were $3.37 billion at September 30, 2019, an increase of $503.2 million from $2.86 billion at June 30, 2019. Total deposits at September 30, 2019 were $10.86 billion, an increase of $644.1 million from June 30, 2019. Deposit mix remained fairly consistent from June 30, 2019 with 49% noninterest-bearing and 51% interest-bearing. The average cost of total deposits for the quarter was 26 basis points, an increase of 6 basis points from the second quarter of 2019, which was impacted by the increase in public funds. For additional information regarding this calculation, see the “Net Interest Margin” section.
Greg Sigrist, Columbia’s Executive Vice President and Chief Financial Officer, stated, “We selectively increased public funds by approximately $300 million in the third quarter as an alternative funding source, with a corresponding increase in our investment securities, as we expanded our interest rate risk strategy to partially mitigate the impact of further interest rate cuts. Although this did increase our cost of deposits by 6 basis points, our relationship deposit franchise is well intact and continues to benefit from having nearly half of our deposits in noninterest-bearing accounts.”
Income Statement
Net Interest Income
Net interest income for the third quarter of 2019 was $122.5 million, a decrease of $2.7 million and $346 thousand from the linked quarter and the prior year period, respectively. After taking into consideration the $4.9 million of interest recoveries on nonaccrual loans received in the second quarter of 2019, net interest income was $2.2 million higher than the second quarter of 2019. This increase was due to lower Federal Home Loan Bank (“FHLB”) interest expense and higher interest income on interest earning assets due to higher average volumes, partially offset by higher deposit interest expense due to higher average balances and rates on interest-bearing public funds, excluding certificates of deposit. Net interest income compared to the prior year period was relatively unchanged. The increase in interest income from higher average balances of interest-earning assets in the third quarter of 2019 was offset by higher interest expense from higher average balances of FHLB advances and interest-bearing public funds, excluding certificates of deposit. For additional information regarding net interest income, see the “Net Interest Margin” section and the “Average Balances and Rates” tables.

2


Noninterest Income
Noninterest income was $28.0 million for the third quarter of 2019, an increase of $2.4 million and $7.0 million from the second quarter of 2019 and the prior year period, respectively. The linked quarter increase was principally due to a $5.9 million gain from the sale-leaseback of owned real estate during the third quarter of 2019. This gain was partially offset by $3.0 million in bank-owned life insurance (“BOLI”) benefits and a $667 thousand gain on disposal of loans realized during the second quarter of 2019. The increase from the prior year period was primarily due to the previously noted sale-leaseback gain in the third quarter of 2019.
Noninterest Expense
Total noninterest expense for the third quarter of 2019 was $87.1 million, an increase of $348 thousand and $4.2 million from the linked quarter and the prior year period, respectively. The increase in noninterest expense was a result of higher salaries, other compensation and incentive plan expenses, which were partially offset by lower provision for off-balance sheet reserves during the quarter. After removing acquisition-related expenses of $1.1 million from the third quarter of 2018, year over year noninterest expense increased $5.3 million, or 7%. This increase was primarily driven by higher compensation and employee benefits expense, which was partially offset by a decrease in regulatory premium expenses. The Bank’s Federal Deposit Insurance Corporation (“FDIC”) deposit insurance expense was reduced due to the utilization of a portion of our FDIC Small Bank Assessment Credit.
Net Interest Margin
Beginning January 2019, our net interest margin was calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

3


Columbia’s net interest margin (tax equivalent) for the third quarter of 2019 was 4.14%, a decrease of 26 basis points and 23 basis points from the linked quarter and prior year period, respectively. The decrease in the net interest margin (tax equivalent) compared to the linked quarter was driven by the previously noted $4.9 million, or 17 basis points, of loan interest recoveries received in the second quarter of 2019. The remainder of the decline was largely driven by the net impact of the approximately $300 million increase in securities and public funds as part of the expanded interest rate risk strategy. Additionally, a benefit from deposit inflows was largely offset by lower yields on loans and investments. Further, the decline related to the interest rate environment was offset by changes in the mix and volume of interest-earning assets as well as lower levels of FHLB advances. Compared to the prior year period, the decreased net interest margin (tax equivalent) was driven by higher rates on our deposits and borrowings as well as lower accretion income on acquired loans as reflected in the table below.
Columbia’s operating net interest margin (tax equivalent)(2) was 4.12% for the third quarter of 2019, which decreased 26 and 22 basis points compared to the linked quarter and the prior year period, respectively. The decreases in the operating net interest margin for the third quarter of 2019 compared to the linked quarter and the prior year quarter were due to the items previously noted in the preceding paragraph, except for the lower accretion income, which is not included in the operating net interest margin.
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,
 
 
2019
 
2019
 
2019
 
2018
 
2018
 
2019
 
2018
 
 
(dollars in thousands)
Incremental accretion income due to:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Purchased credit impaired loans
 
$
113

 
$
579

 
$
288

 
$
395

 
$
585

 
$
980

 
$
1,240

Other acquired loans
 
1,959

 
2,084

 
1,747

 
2,218

 
2,643

 
5,790

 
8,703

Incremental accretion income
 
$
2,072

 
$
2,663

 
$
2,035

 
$
2,613

 
$
3,228

 
$
6,770

 
$
9,943

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest margin (tax equivalent) (1)
 
4.14
%
 
4.40
%
 
4.32
%
 
4.36
%
 
4.37
%
 
4.28
%
 
4.32
%
Operating net interest margin (tax equivalent) (1)(2)
 
4.12
%
 
4.38
%
 
4.33
%
 
4.34
%
 
4.34
%
 
4.28
%
 
4.29
%
__________
(1) Beginning January 2019, net interest margin (tax equivalent) and operating net interest margin (tax equivalent) were calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(2) 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.


4


Asset Quality
At September 30, 2019, nonperforming assets to total assets were 0.27% compared to 0.31% at June 30, 2019. Total nonperforming assets decreased $2.5 million from the linked quarter due to a decrease in both nonaccrual loans and OREO.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “Our credit metrics continue to perform better than our peer group average. This is reflective of the commitment our bankers have to our risk disciplines as well as the diligent efforts of our special assets team. The quarter benefited from $1.8 million in net recoveries which allowed us to keep our credit cost to a minimum.”
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:
 
 
September 30, 2019
 
June 30, 2019
 
December 31, 2018
 
 
(in thousands)
Nonaccrual loans:
 
 
 
 
 
 
Commercial business
 
$
24,408

 
$
23,997

 
$
35,513

Real estate:
 
 
 
 
 
 
One-to-four family residential
 
574

 
860

 
1,158

Commercial and multifamily residential
 
10,083

 
11,843

 
14,904

Total real estate
 
10,657

 
12,703

 
16,062

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

 
—

 
318

Consumer
 
1,956

 
2,338

 
2,949

Total nonaccrual loans
 
37,021

 
39,038

 
54,842

OREO and other personal property owned
 
625

 
1,118

 
6,049

Total nonperforming assets
 
$
37,646

 
$
40,156

 
$
60,891


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, 2019
 
June 30, 2019
 
September 30, 2018
 
September 30, 2019
 
September 30, 2018
 
 
(in thousands)
Beginning balance, loans excluding PCI loans
 
$
77,248

 
$
80,029

 
$
75,368

 
$
79,758

 
$
68,739

Beginning balance, PCI loans
 
3,269

 
3,245

 
4,782

 
3,611

 
6,907

Beginning balance
 
80,517

 
83,274

 
80,150

 
83,369

 
75,646

Charge-offs:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
(2,365
)
 
(4,118
)
 
(606
)
 
(7,732
)
 
(8,858
)
One-to-four family residential real estate
 
—

 
—

 
—

 
(2
)
 
—

Commercial and multifamily residential real estate
 
—

 
—

 
—

 
—

 
(223
)
One-to-four family residential real estate construction
 
—

 
—

 
—

 
(170
)
 
—

Consumer
 
(285
)
 
(354
)
 
(277
)
 
(1,117
)
 
(773
)
Purchased credit impaired
 
(722
)
 
(815
)
 
(1,208
)
 
(2,626
)
 
(3,786
)
Total charge-offs
 
(3,372
)
 
(5,287
)
 
(2,091
)
 
(11,647
)
 
(13,640
)
Recoveries:
 
 
 
 
 
 
 
 
 
 
Commercial business
 
358

 
547

 
547

 
1,385

 
2,892

One-to-four family residential real estate
 
65

 
20

 
21

 
102

 
389

Commercial and multifamily residential real estate
 
184

 
33

 
213

 
248

 
1,012

One-to-four family residential real estate construction
 
2,471

 
661

 
583

 
3,192

 
616

Commercial and multifamily residential real estate construction
 
—

 
1

 
—

 
1

 
—

Consumer
 
326

 
178

 
266

 
742

 
796

Purchased credit impaired
 
1,812

 
872

 
945

 
3,389

 
3,096

Total recoveries
 
5,216

 
2,312

 
2,575

 
9,059

 
8,801

Net (charge-offs) recoveries
 
1,844

 
(2,975
)
 
484

 
(2,588
)
 
(4,839
)
Provision for loan and lease losses, excluding PCI loans
 
1,600

 
251

 
3,655

 
3,195

 
15,180

Recapture of loan and lease losses, PCI loans
 
(1,301
)
 
(33
)
 
(502
)
 
(1,316
)
 
(2,200
)
Provision for loan and lease losses
 
299

 
218

 
3,153

 
1,879

 
12,980

Ending balance, loans excluding PCI loans
 
79,602

 
77,248

 
79,770

 
79,602

 
79,770

Ending balance, PCI loans
 
3,058

 
3,269

 
4,017

 
3,058

 
4,017

Ending balance
 
$
82,660

 
$
80,517

 
$
83,787

 
$
82,660

 
$
83,787

The allowance for loan and lease losses to period end loans was 0.94% at September 30, 2019 compared to 0.93% at June 30, 2019. For the third quarter of 2019, Columbia recorded a net provision for loan and lease losses of $299 thousand compared to a net provision of $218 thousand for the linked quarter and a net provision of $3.2 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the third quarter of 2019 consisted of $1.6 million of provision expense for loans, excluding PCI loans, and a provision recapture of $1.3 million for PCI loans.

6


Organizational Update
During the quarter, the Company announced the upcoming retirement of Mr. Robbins and its related succession planning activities. Mr. Robbins stated, “I am proud to pass the torch to Clint who has a 14 year proven track record of success in helping grow Columbia Bank to where we are today. The various roles that Clint has held while at Columbia Bank have prepared him well for this next phase of his career. He is very well respected among our investors, community leaders and employees.”
During the first nine months of 2019, the Bank received the following accolades:
•
Hadley Robbins was named to the inaugural Power 100 list of the most influential leaders in the region by the Puget Sound Business Journal;
•
Selected as one of the Top Corporate Philanthropists for 2019 by the Portland Business Journal;
•
Received an Extraordinary Banking Award for 2019 by the Institute of Extraordinary Banking;
•
Named to the list of Top Workplaces in 2018 by Portland’s Oregonian;
•
Honored as one of Oregon’s Most Admired Companies in 2018 by the Portland Business Journal;
•
For the 13th consecutive year, named as one of Washington’s Best Workplaces by Puget Sound Business Journal;
•
Winner of the 2018 Corporate Citizenship Award for midsize companies in Washington state from the Puget Sound Business Journal;
•
Selected as Best Bank and Best Large Business in The Best of South Sound reader’s choice poll for 2019 by South Sound Magazine;
•
Received the Corporate Award of the Year for work with Small Business Association Loans to minority owned businesses from the Oregon Association of Minority Entrepreneurs;
•
Selected as one of the Best Banks in the Best of The Mid-Valley, in the annual reader’s poll by the Salem Statesman Journal;
•
Columbia Bank’s Board of Directors was awarded the Governance Award for their service to the Bank and the community by Seattle Business Magazine;
•
Recognized as one of the Best Places to Work in Idaho by Populus Marketing Research;
•
Awarded the 2018 National Association of Secretaries of State Medallion for outstanding work to improve lives in Washington communities from The State of Washington Secretary of State’s Office; and
•
Selected as one of America’s Best Banks of 2019 among the nation’s 100 largest publicly traded banks and thrifts by Forbes.

7


Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.28 per common share on November 20, 2019 to shareholders of record as of the close of business on November 6, 2019.
Conference Call Information
Columbia’s management will discuss the third quarter 2019 financial results on a conference call scheduled for Thursday, October 24, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT). Interested parties may join the live-streamed event by using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~102419
The conference call can also be accessed on Thursday, October 24, 2019 at 10:00 a.m. Pacific Daylight Time (1:00 p.m. EDT) by calling 888-286-8956; Conference ID: 7935679.
A replay of the call can be accessed beginning Friday, October 25, 2019 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc~102419
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 13th consecutive year, the bank was named in 2019 as one of Puget Sound Business Journal's “Washington’s Best Workplaces.” For the 8th consecutive year, Columbia was included in the 2019 Forbes America’s Best Banks list.
More information about Columbia can be found on its website at www.columbiabank.com.

8


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, include 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; (6) failure to maintain effective internal controls over financial reporting or disclosure controls and procedures may adversely affect our business; (7) reliance on and cost of technology may increase; and (8) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

Contacts:
Hadley S. Robbins,
 
President and
 
Chief Executive Officer
 
 
 
Gregory A. Sigrist,
 
Executive Vice President and
 
Chief Financial Officer
 
 
 
Investor Relations
 
InvestorRelations@columbiabank.com
 
253-305-1921

9



CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
September 30,
 
June 30,
 
December 31,
 
 
 
 
 
 
 
2019
 
2019
 
2018
 
 
 
 
 
 
 
(in thousands)
ASSETS
 
 
Cash and due from banks
 
 
 
 
 
 
$
278,461

 
$
224,327

 
$
260,180

Interest-earning deposits with banks
 
 
 
 
 
 
20,144

 
34,332

 
17,407

Total cash and cash equivalents
 
 
 
 
 
 
298,605

 
258,659

 
277,587

Debt securities available for sale at fair value
 
 
 
 
 
3,367,572

 
2,864,418

 
3,167,448

Federal Home Loan Bank (“FHLB”) stock at cost
 
 
 
 
 
29,680

 
29,800

 
25,960

Loans held for sale
 
 
 
 
 
 
15,036

 
12,189

 
3,849

Loans, net of unearned income
 
 
 
 
 
 
8,756,355

 
8,646,990

 
8,391,511

Less: allowance for loan and lease losses
 
 
 
 
 
82,660

 
80,517

 
83,369

Loans, net
 
 
 
 
 
 
8,673,695

 
8,566,473

 
8,308,142

Interest receivable
 
 
 
 
 
 
48,503

 
46,878

 
45,323

Premises and equipment, net
 
 
 
 
 
 
165,431

 
167,295

 
168,788

Other real estate owned
 
 
 
 
 
 
625

 
1,118

 
6,019

Goodwill
 
 
 
 
 
 
765,842

 
765,842

 
765,842

Other intangible assets, net
 
 
 
 
 
 
37,908

 
40,540

 
45,937

Other assets
 
 
 
 
 
 
354,863

 
337,596

 
280,250

Total assets
 
 
 
 
 
 
$
13,757,760

 
$
13,090,808

 
$
13,095,145

LIABILITIES AND SHAREHOLDERS’ EQUITY
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing
 
 
 
 
 
 
$
5,320,435

 
$
5,082,219

 
$
5,227,216

Interest-bearing
 
 
 
 
 
 
5,535,281

 
5,129,380

 
5,230,910

Total deposits
 
 
 
 
 
 
10,855,716

 
10,211,599

 
10,458,126

FHLB advances
 
 
 
 
 
 
492,482

 
495,496

 
399,523

Securities sold under agreements to repurchase
 
 
 
 
 
24,489

 
50,226

 
61,094

Subordinated debentures
 
 
 
 
 
 
35,323

 
35,370

 
35,462

Other liabilities
 
 
 
 
 
 
188,173

 
164,479

 
107,291

Total liabilities
 
 
 
 
 
 
11,596,183

 
10,957,170

 
11,061,496

Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 30,
 
December 31,
 
 
 
 
 
 
 
2019
 
2019
 
2018
 
 
 
 
 
 
 
(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
73,588

 
73,548

 
73,249

 
1,648,335

 
1,648,335

 
1,642,246

Outstanding
72,288

 
72,924

 
73,249

 
 
 
 
 
 
Retained earnings
 
 
 
 
 
 
493,738

 
463,429

 
426,708

Accumulated other comprehensive income (loss)
 
 
 
 
 
64,884

 
47,150

 
(35,305
)
Treasury stock at cost
1,300

 
624

 
—

 
(45,380
)
 
(21,863
)
 
—

Total shareholders’ equity
 
 
 
 
 
 
2,161,577

 
2,133,638

 
2,033,649

Total liabilities and shareholders’ equity
 
 
 
 
 
$
13,757,760

 
$
13,090,808

 
$
13,095,145



10


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,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Interest Income
 
(in thousands except per share amounts)
Loans
 
$
112,656

 
$
116,585

 
$
109,748

 
$
337,657

 
$
318,187

Taxable securities
 
16,457

 
15,918

 
14,654

 
49,790

 
39,285

Tax-exempt securities
 
2,556

 
2,712

 
3,069

 
8,237

 
9,196

Deposits in banks
 
864

 
207

 
104

 
1,159

 
600

Total interest income
 
132,533

 
135,422

 
127,575

 
396,843

 
367,268

Interest Expense
 
 
 
 
 
 
 
 
 
 
Deposits
 
6,863

 
4,976

 
3,193

 
16,337

 
8,274

FHLB advances
 
2,569

 
4,708

 
966

 
9,962

 
2,351

Subordinated debentures
 
468

 
468

 
468

 
1,404

 
1,404

Other borrowings
 
183

 
154

 
152

 
552

 
288

Total interest expense
 
10,083

 
10,306

 
4,779

 
28,255

 
12,317

Net Interest Income
 
122,450

 
125,116

 
122,796

 
368,588

 
354,951

Provision for loan and lease losses
 
299

 
218

 
3,153

 
1,879

 
12,980

Net interest income after provision for loan and lease losses
 
122,151

 
124,898

 
119,643

 
366,709

 
341,971

Noninterest Income
 
 
 
 
 
 
 
 
 
 
Deposit account and treasury management fees
 
9,015

 
9,035

 
9,266

 
27,030

 
26,689

Card revenue
 
4,006

 
3,763

 
3,714

 
11,431

 
16,143

Financial services and trust revenue
 
3,226

 
3,425

 
2,975

 
9,608

 
8,924

Loan revenue
 
3,855

 
3,596

 
3,282

 
9,840

 
9,522

Bank owned life insurance
 
1,528

 
1,597

 
1,402

 
4,644

 
4,540

Investment securities gains (losses), net
 
—

 
285

 
(62
)
 
2,132

 
(73
)
Other
 
6,400

 
3,947

 
442

 
10,689

 
2,109

Total noninterest income
 
28,030

 
25,648

 
21,019

 
75,374

 
67,854

Noninterest Expense
 
 
 
 
 
 
 
 
 
 
Compensation and employee benefits
 
54,459

 
52,015

 
49,419

 
158,559

 
148,938

Occupancy
 
8,645

 
8,712

 
8,321

 
26,166

 
27,718

Data processing
 
5,102

 
4,601

 
4,466

 
14,372

 
14,957

Legal and professional fees
 
5,683

 
6,554

 
4,695

 
16,810

 
12,103

Amortization of intangibles
 
2,632

 
2,649

 
3,070

 
8,029

 
9,346

Business and Occupation ("B&O") taxes (1)
 
1,325

 
1,411

 
1,478

 
4,612

 
4,254

Advertising and promotion
 
1,752

 
870

 
1,472

 
3,596

 
4,523

Regulatory premiums
 
(38
)
 
956

 
904

 
1,902

 
2,778

Net cost (benefit) of operation of other real estate owned
 
(90
)
 
(705
)
 
485

 
(682
)
 
1,244

Other (1)
 
7,606

 
9,665

 
8,531

 
25,140

 
27,610

Total noninterest expense
 
87,076

 
86,728

 
82,841

 
258,504

 
253,471

Income before income taxes
 
63,105

 
63,818

 
57,821

 
183,579

 
156,354

Provision for income taxes
 
12,378

 
12,094

 
11,406

 
35,257

 
28,220

Net Income
 
$
50,727

 
$
51,724

 
$
46,415

 
$
148,322

 
$
128,134

Earnings per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.70

 
$
0.71

 
$
0.63

 
$
2.04

 
$
1.75

Diluted
 
$
0.70

 
$
0.71

 
$
0.63

 
$
2.04

 
$
1.75

Dividends declared per common share - regular
 
$
0.28

 
$
0.28

 
$
0.26

 
$
0.84

 
$
0.74

Dividends declared per common share - special
 
—

 
0.14

 
—

 
0.28

 
—

   Dividends declared per common share - total
 
$
0.28

 
$
0.42

 
$
0.26

 
$
1.12

 
$
0.74

Weighted average number of common shares outstanding
 
71,803

 
72,451

 
72,427

 
72,256

 
72,370

Weighted average number of diluted common shares outstanding
 
71,803

 
72,451

 
72,432

 
72,257

 
72,374

__________
(1) Beginning the first quarter of 2019, B&O taxes were reported separately from other taxes, licenses and fees, which are now reported under “other noninterest expense.” Prior periods have been reclassified to conform to current period presentation.

11


FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
 
Nine Months Ended
Unaudited
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
122,450

 
$
125,116

 
$
122,796

 
$
368,588

 
$
354,951

Provision for loan and lease losses
 
$
299

 
$
218

 
$
3,153

 
$
1,879

 
$
12,980

Noninterest income
 
$
28,030

 
$
25,648

 
$
21,019

 
$
75,374

 
$
67,854

Noninterest expense
 
$
87,076

 
$
86,728

 
$
82,841

 
$
258,504

 
$
253,471

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

 
$
—

 
$
1,081

 
$
—

 
$
8,168

Net income
 
$
50,727

 
$
51,724

 
$
46,415

 
$
148,322

 
$
128,134

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.70

 
$
0.71

 
$
0.63

 
$
2.04

 
$
1.75

Earnings (diluted)
 
$
0.70

 
$
0.71

 
$
0.63

 
$
2.04

 
$
1.75

Book value
 
$
29.90

 
$
29.26

 
$
27.05

 
$
29.90

 
$
27.05

Tangible book value per common share (1)
 
$
18.78

 
$
18.20

 
$
15.93

 
$
18.78

 
$
15.93

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,459,774

 
$
13,096,413

 
$
12,805,131

 
$
13,202,917

 
$
12,646,678

Interest-earning assets
 
$
11,941,578

 
$
11,606,727

 
$
11,326,629

 
$
11,704,702

 
$
11,168,143

Loans
 
$
8,694,592

 
$
8,601,819

 
$
8,456,632

 
$
8,568,746

 
$
8,398,596

Securities, including equity securities and FHLB stock
 
$
3,102,213

 
$
2,969,749

 
$
2,849,495

 
$
3,070,582

 
$
2,720,625

Deposits
 
$
10,668,767

 
$
10,186,370

 
$
10,478,800

 
$
10,376,841

 
$
10,359,896

Interest-bearing deposits
 
$
5,517,171

 
$
5,174,875

 
$
5,376,300

 
$
5,307,212

 
$
5,390,859

Interest-bearing liabilities
 
$
5,989,042

 
$
5,841,425

 
$
5,620,997

 
$
5,878,492

 
$
5,619,943

Noninterest-bearing deposits
 
$
5,151,596

 
$
5,011,496

 
$
5,102,500

 
$
5,069,629

 
$
4,969,037

Shareholders’ equity
 
$
2,152,916

 
$
2,096,157

 
$
1,983,317

 
$
2,098,364

 
$
1,962,506

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.51
%
 
1.58
%
 
1.45
%
 
1.50
%
 
1.35
%
Return on average common equity
 
9.42
%
 
9.87
%
 
9.36
%
 
9.42
%
 
8.71
%
Return on average tangible common equity (1)
 
15.67
%
 
16.71
%
 
16.74
%
 
15.98
%
 
15.80
%
Average equity to average assets
 
16.00
%
 
16.01
%
 
15.49
%
 
15.89
%
 
15.52
%
Shareholders equity to total assets
 
15.71
%
 
16.30
%
 
15.29
%
 
15.71
%
 
15.29
%
Tangible common shareholders’ equity to tangible assets (1)
 
10.48
%
 
10.80
%
 
9.61
%
 
10.48
%
 
9.61
%
Net interest margin (tax equivalent) (2)
 
4.14
%
 
4.40
%
 
4.37
%
 
4.28
%
 
4.32
%
Efficiency ratio (tax equivalent) (3)
 
56.91
%
 
56.57
%
 
56.67
%
 
57.25
%
 
58.97
%
Operating efficiency ratio (tax equivalent) (1)
 
58.65
%
 
56.34
%
 
54.83
%
 
57.50
%
 
56.13
%
Noninterest expense ratio
 
2.59
%
 
2.65
%
 
2.59
%
 
2.61
%
 
2.67
%
Core noninterest expense ratio (1)
 
2.59
%
 
2.65
%
 
2.55
%
 
2.61
%
 
2.59
%
 
 
September 30,
 
June 30,
 
December 31,
 
 
 
 
Period end
 
2019
 
2019
 
2018
 
 
 
 
Total assets
 
$
13,757,760

 
$
13,090,808

 
$
13,095,145

 
 
 
 
Loans, net of unearned income
 
$
8,756,355

 
$
8,646,990

 
$
8,391,511

 
 
 
 
Allowance for loan and lease losses
 
$
82,660

 
$
80,517

 
$
83,369

 
 
 
 
Securities, including equity securities and FHLB stock
 
$
3,397,252

 
$
2,894,218

 
$
3,193,408

 
 
 
 
Deposits
 
$
10,855,716

 
$
10,211,599

 
$
10,458,126

 
 
 
 
Shareholders’ equity
 
$
2,161,577

 
$
2,133,638

 
$
2,033,649

 
 
 
 
Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
37,021

 
$
39,038

 
$
54,842

 
 
 
 
Other real estate owned (“OREO”) and other personal property owned (“OPPO”)
 
625

 
1,118

 
6,049

 
 
 
 
Total nonperforming assets
 
$
37,646

 
$
40,156

 
$
60,891

 
 
 
 
Nonperforming loans to period-end loans
 
0.42
%
 
0.45
%
 
0.65
%
 
 
 
 
Nonperforming assets to period-end assets
 
0.27
%
 
0.31
%
 
0.46
%
 
 
 
 
Allowance for loan and lease losses to period-end loans
 
0.94
%
 
0.93
%
 
0.99
%
 
 
 
 
Net loan charge-offs (recoveries) (for the three months ended)
 
$
(1,844
)
 
$
2,975

 
$
2,207

 
 
 
 
__________
(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) Beginning January 2019, net interest margin was calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(3) Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.

12


QUARTERLY FINANCIAL STATISTICS
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
Three Months Ended
Unaudited
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2019
 
2019
 
2019
 
2018
 
2018
Earnings
 
(dollars in thousands except per share amounts)
Net interest income
 
$
122,450

 
$
125,116

 
$
121,022

 
$
123,888

 
$
122,796

Provision for loan and lease losses
 
$
299

 
$
218

 
$
1,362

 
$
1,789

 
$
3,153

Noninterest income
 
$
28,030

 
$
25,648

 
$
21,696

 
$
20,402

 
$
21,019

Noninterest expense
 
$
87,076

 
$
86,728

 
$
84,700

 
$
87,019

 
$
82,841

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

 
$
—

 
$
—

 
$
493

 
$
1,081

Net income
 
$
50,727

 
$
51,724

 
$
45,871

 
$
44,748

 
$
46,415

Per Common Share
 
 
 
 
 
 
 
 
 
 
Earnings (basic)
 
$
0.70

 
$
0.71

 
$
0.63

 
$
0.61

 
$
0.63

Earnings (diluted)
 
$
0.70

 
$
0.71

 
$
0.63

 
$
0.61

 
$
0.63

Book value
 
$
29.90

 
$
29.26

 
$
28.39

 
$
27.76

 
$
27.05

Averages
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,459,774

 
$
13,096,413

 
$
13,048,041

 
$
12,957,754

 
$
12,805,131

Interest-earning assets
 
$
11,941,578

 
$
11,606,727

 
$
11,561,627

 
$
11,458,470

 
$
11,326,629

Loans
 
$
8,694,592

 
$
8,601,819

 
$
8,406,664

 
$
8,441,354

 
$
8,456,632

Securities, including equity securities and FHLB stock
 
$
3,102,213

 
$
2,969,749

 
$
3,140,201

 
$
2,998,638

 
$
2,849,495

Deposits
 
$
10,668,767

 
$
10,186,371

 
$
10,271,016

 
$
10,560,280

 
$
10,478,800

Interest-bearing deposits
 
$
5,517,171

 
$
5,174,875

 
$
5,226,396

 
$
5,298,590

 
$
5,376,300

Interest-bearing liabilities
 
$
5,989,042

 
$
5,841,425

 
$
5,802,965

 
$
5,599,646

 
$
5,620,997

Noninterest-bearing deposits
 
$
5,151,596

 
$
5,011,496

 
$
5,044,620

 
$
5,261,690

 
$
5,102,500

Shareholders’ equity
 
$
2,152,916

 
$
2,096,157

 
$
2,044,832

 
$
1,988,981

 
$
1,983,317

Financial Ratios
 
 
 
 
 
 
 
 
 
 
Return on average assets
 
1.51
%
 
1.58
%
 
1.41
%
 
1.38
%
 
1.45
%
Return on average common equity
 
9.42
%
 
9.87
%
 
8.97
%
 
9.00
%
 
9.36
%
Average equity to average assets
 
16.00
%
 
16.01
%
 
15.67
%
 
15.35
%
 
15.49
%
Shareholders’ equity to total assets
 
15.71
%
 
16.30
%
 
15.99
%
 
15.53
%
 
15.29
%
Net interest margin (tax equivalent) (1)
 
4.14
%
 
4.40
%
 
4.32
%
 
4.36
%
 
4.37
%
Period end
 
 
 
 
 
 
 
 
 
 
Total assets
 
$
13,757,760

 
$
13,090,808

 
$
13,064,436

 
$
13,095,145

 
$
12,956,596

Loans, net of unearned income
 
$
8,756,355

 
$
8,646,990

 
$
8,520,798

 
$
8,391,511

 
$
8,514,317

Allowance for loan and lease losses
 
$
82,660

 
$
80,517

 
$
83,274

 
$
83,369

 
$
83,787

Securities, including equity securities and FHLB stock
 
$
3,397,252

 
$
2,894,218

 
$
3,052,870

 
$
3,193,408

 
$
2,942,655

Deposits
 
$
10,855,716

 
$
10,211,599

 
$
10,369,009

 
$
10,458,126

 
$
10,603,957

Shareholders’ equity
 
$
2,161,577

 
$
2,133,638

 
$
2,088,620

 
$
2,033,649

 
$
1,981,395

Goodwill
 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

 
$
765,842

Other intangible assets, net
 
$
37,908

 
$
40,540

 
$
43,189

 
$
45,937

 
$
48,827

Nonperforming assets
 
 
 
 
 
 
 
 
 
 
Nonaccrual loans
 
$
37,021

 
$
39,038

 
$
52,615

 
$
54,842

 
$
60,332

OREO and OPPO
 
625

 
1,118

 
6,075

 
6,049

 
7,415

Total nonperforming assets
 
$
37,646

 
$
40,156

 
$
58,690

 
$
60,891

 
$
67,747

Nonperforming loans to period-end loans
 
0.42
%
 
0.45
%
 
0.62
%
 
0.65
%
 
0.71
%
Nonperforming assets to period-end assets
 
0.27
%
 
0.31
%
 
0.45
%
 
0.46
%
 
0.52
%
Allowance for loan and lease losses to period-end loans
 
0.94
%
 
0.93
%
 
0.98
%
 
0.99
%
 
0.98
%
Net loan charge-offs (recoveries)
 
$
(1,844
)
 
$
2,975

 
$
1,457

 
$
2,207

 
$
(484
)
__________
(1) Beginning January 2019, net interest margin was calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.


13


LOAN PORTFOLIO COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2019
 
2019
 
2019
 
2018
 
2018
Loan Portfolio Composition - Dollars
 
(dollars in thousands)
Commercial business
 
$
3,707,314

 
$
3,644,051

 
$
3,509,472

 
$
3,438,422

 
$
3,554,147

Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
273,079

 
279,091

 
282,673

 
238,367

 
232,924

Commercial and multifamily residential
 
3,975,647

 
3,913,546

 
3,917,833

 
3,846,027

 
3,786,615

Total real estate
 
4,248,726

 
4,192,637

 
4,200,506

 
4,084,394

 
4,019,539

Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
195,198

 
201,783

 
207,900

 
217,790

 
211,629

Commercial and multifamily residential
 
261,786

 
255,452

 
240,458

 
284,394

 
349,328

Total real estate construction
 
456,984

 
457,235

 
448,358

 
502,184

 
560,957

Consumer
 
297,009

 
305,752

 
312,886

 
318,945

 
327,863

Purchased credit impaired
 
81,777

 
84,730

 
88,257

 
89,760

 
95,936

Subtotal loans
 
8,791,810

 
8,684,405

 
8,559,479

 
8,433,705

 
8,558,442

Less: Net unearned income
 
(35,455
)
 
(37,415
)
 
(38,681
)
 
(42,194
)
 
(44,125
)
Loans, net of unearned income
 
8,756,355

 
8,646,990

 
8,520,798

 
8,391,511

 
8,514,317

Less: Allowance for loan and lease losses
 
(82,660
)
 
(80,517
)
 
(83,274
)
 
(83,369
)
 
(83,787
)
Total loans, net
 
8,673,695

 
8,566,473

 
8,437,524

 
8,308,142

 
8,430,530

Loans held for sale
 
$
15,036

 
$
12,189

 
$
4,017

 
$
3,849

 
$
5,275


 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
Loan Portfolio Composition - Percentages
 
2019
 
2019
 
2019
 
2018
 
2018
Commercial business
 
42.3
 %
 
42.1
 %
 
41.2
 %
 
41.0
 %
 
41.7
 %
Real estate:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
3.1
 %
 
3.2
 %
 
3.3
 %
 
2.8
 %
 
2.7
 %
Commercial and multifamily residential
 
45.5
 %
 
45.3
 %
 
46.1
 %
 
45.8
 %
 
44.5
 %
Total real estate
 
48.6
 %
 
48.5
 %
 
49.4
 %
 
48.6
 %
 
47.2
 %
Real estate construction:
 
 
 
 
 
 
 
 
 
 
One-to-four family residential
 
2.2
 %
 
2.3
 %
 
2.4
 %
 
2.6
 %
 
2.5
 %
Commercial and multifamily residential
 
3.0
 %
 
3.0
 %
 
2.8
 %
 
3.4
 %
 
4.1
 %
Total real estate construction
 
5.2
 %
 
5.3
 %
 
5.2
 %
 
6.0
 %
 
6.6
 %
Consumer
 
3.4
 %
 
3.5
 %
 
3.7
 %
 
3.8
 %
 
3.9
 %
Purchased credit impaired
 
0.9
 %
 
1.0
 %
 
1.0
 %
 
1.1
 %
 
1.1
 %
Subtotal loans
 
100.4
 %
 
100.4
 %
 
100.5
 %
 
100.5
 %
 
100.5
 %
Less: Net unearned income
 
(0.4
)%
 
(0.4
)%
 
(0.5
)%
 
(0.5
)%
 
(0.5
)%
Loans, net of unearned income
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %
 
100.0
 %


14


DEPOSIT COMPOSITION
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
 
 
2019
 
2019
 
2019
 
2018
 
2018
Deposit Composition - Dollars
 
(dollars in thousands)
Demand and other noninterest-bearing
 
$
5,320,435

 
$
5,082,219

 
$
5,106,568

 
$
5,227,216

 
$
5,250,222

Money market (1)
 
2,295,229

 
2,240,522

 
2,311,937

 
2,294,125

 
2,341,830

Interest-bearing demand (1)
 
1,059,502

 
1,058,545

 
1,078,849

 
1,084,863

 
1,111,809

Savings (1)
 
892,438

 
887,172

 
896,458

 
889,849

 
908,194

Interest-bearing public funds, other than certificates of deposit (1)
 
629,797

 
270,398

 
269,156

 
233,938

 
220,840

Certificates of deposit, less than $250,000
 
223,249

 
228,920

 
236,014

 
243,849

 
251,792

Certificates of deposit, $250,000 or more
 
107,506

 
105,782

 
101,965

 
89,473

 
90,387

Certificates of deposit insured by CDARS®
 
17,252

 
16,559

 
22,890

 
23,580

 
23,841

Brokered certificates of deposit
 
18,852

 
40,502

 
51,375

 
57,930

 
65,476

Reciprocal money market accounts
 
291,542

 
281,247

 
294,096

 
313,692

 
340,044

Subtotal
 
10,855,802

 
10,211,866

 
10,369,308

 
10,458,515

 
10,604,435

Valuation adjustment resulting from acquisition accounting
 
(86
)
 
(267
)
 
(299
)
 
(389
)
 
(478
)
Total deposits
 
$
10,855,716

 
$
10,211,599

 
$
10,369,009

 
$
10,458,126

 
$
10,603,957

 
 
September 30,
 
June 30,
 
March 31,
 
December 31,
 
September 30,
Deposit Composition - Percentages
 
2019
 
2019
 
2019
 
2018
 
2018
Demand and other noninterest-bearing
 
49.0
%
 
49.8
%
 
49.2
%
 
50.0
%
 
49.5
%
Money market (1)
 
21.1
%
 
21.9
%
 
22.3
%
 
21.9
%
 
22.1
%
Interest-bearing demand (1)
 
9.8
%
 
10.4
%
 
10.4
%
 
10.4
%
 
10.5
%
Savings (1)
 
8.2
%
 
8.7
%
 
8.6
%
 
8.5
%
 
8.6
%
Interest-bearing public funds, other than certificates of deposit (1)
 
5.8
%
 
2.7
%
 
2.6
%
 
2.2
%
 
2.1
%
Certificates of deposit, less than $250,000
 
2.1
%
 
2.2
%
 
2.3
%
 
2.3
%
 
2.4
%
Certificates of deposit, $250,000 or more
 
1.0
%
 
1.0
%
 
1.0
%
 
0.9
%
 
0.9
%
Certificates of deposit insured by CDARS®
 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
 
0.2
%
Brokered certificates of deposit
 
0.2
%
 
0.4
%
 
0.5
%
 
0.6
%
 
0.6
%
Reciprocal money market accounts
 
2.6
%
 
2.7
%
 
2.9
%
 
3.0
%
 
3.1
%
Total
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
 
100.0
%
__________
(1) Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.

15


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2019
 
September 30, 2018
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net (1)(2)
 
$
8,694,592

 
$
114,099

 
5.21
%
 
$
8,456,632

 
$
110,925

 
5.20
%
Taxable securities
 
2,654,490

 
16,457

 
2.46
%
 
2,336,405

 
14,654

 
2.49
%
Tax exempt securities (2)
 
447,723

 
3,235

 
2.87
%
 
513,090

 
3,885

 
3.00
%
Interest-earning deposits with banks
 
144,773

 
864

 
2.37
%
 
20,502

 
104

 
2.01
%
Total interest-earning assets
 
11,941,578

 
134,655

 
4.47
%
 
11,326,629

 
129,568

 
4.54
%
Other earning assets
 
230,140

 
 
 
 
 
228,332

 
 
 
 
Noninterest-earning assets
 
1,288,056

 
 
 
 
 
1,250,170

 
 
 
 
Total assets
 
$
13,459,774

 
 
 
 
 
$
12,805,131

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts (4)
 
2,589,390

 
2,840

 
0.44
%
 
2,727,928

 
1,671

 
0.24
%
Interest-bearing demand (4)
 
1,049,833

 
438

 
0.17
%
 
1,089,324

 
437

 
0.16
%
Savings accounts (4)
 
893,395

 
49

 
0.02
%
 
888,997

 
31

 
0.01
%
Interest-bearing public funds, other than certificates of deposit (4)
 
602,674

 
2,879

 
1.90
%
 
229,855

 
510

 
0.88
%
Certificates of deposit
 
381,879

 
657

 
0.68
%
 
440,196

 
544

 
0.49
%
Total interest-bearing deposits
 
5,517,171

 
6,863

 
0.49
%
 
5,376,300

 
3,193

 
0.24
%
FHLB advances
 
400,956

 
2,569

 
2.54
%
 
167,531

 
966

 
2.29
%
Subordinated debentures
 
35,346

 
468

 
5.25
%
 
35,530

 
468

 
5.23
%
Other borrowings and interest-bearing liabilities
 
35,569

 
183

 
2.04
%
 
41,636

 
152

 
1.45
%
Total interest-bearing liabilities
 
5,989,042

 
10,083

 
0.67
%
 
5,620,997

 
4,779

 
0.34
%
Noninterest-bearing deposits
 
5,151,596

 
 
 
 
 
5,102,500

 
 
 
 
Other noninterest-bearing liabilities
 
166,220

 
 
 
 
 
98,317

 
 
 
 
Shareholders’ equity
 
2,152,916

 
 
 
 
 
1,983,317

 
 
 
 
Total liabilities & shareholders’ equity
 
$
13,459,774

 
 
 
 
 
$
12,805,131

 
 
 
 
Net interest income (tax equivalent)
 
$
124,572

 
 
 
 
 
$
124,789

 
 
Net interest margin (tax equivalent)
 
4.14
%
 
 
 
 
 
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 $2.0 million and $2.5 million for the three months ended September 30, 2019 and 2018, respectively. The incremental accretion income on acquired loans was $2.1 million and $3.2 million for the three months ended September 30, 2019 and 2018, respectively.
(2)
Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million and $1.2 million for the three months ended September 30, 2019 and 2018, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $679 thousand and $816 thousand for the three months ended September 30, 2019 and 2018, respectively.
(3)
Beginning January 2019, average rates were calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(4)
Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.

16


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Three Months Ended
 
 
September 30, 2019
 
June 30, 2019
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net (1)(2)
 
$
8,694,592

 
$
114,099

 
5.21
%
 
$
8,601,819

 
$
117,984

 
5.50
%
Taxable securities
 
2,654,490

 
16,457

 
2.46
%
 
2,506,672

 
15,918

 
2.55
%
Tax exempt securities (2)
 
447,723

 
3,235

 
2.87
%
 
463,077

 
3,433

 
2.97
%
Interest-earning deposits with banks
 
144,773

 
864

 
2.37
%
 
35,159

 
207

 
2.36
%
Total interest-earning assets
 
11,941,578

 
134,655

 
4.47
%
 
11,606,727

 
137,542

 
4.75
%
Other earning assets
 
230,140

 
 
 
 
 
233,273

 
 
 
 
Noninterest-earning assets
 
1,288,056

 
 
 
 
 
1,256,413

 
 
 
 
Total assets
 
$
13,459,774

 
 
 
 
 
$
13,096,413

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts (4)
 
$
2,589,390

 
$
2,840

 
0.44
%
 
$
2,539,757

 
$
2,896

 
0.46
%
Interest-bearing demand (4)
 
1,049,833

 
438

 
0.17
%
 
1,066,876

 
428

 
0.16
%
Savings accounts (4)
 
893,395

 
49

 
0.02
%
 
891,341

 
43

 
0.02
%
Interest-bearing public funds, other than certificates of deposit (4)
 
602,674

 
2,879

 
1.90
%
 
273,387

 
1,023

 
1.50
%
Certificates of deposit
 
381,879

 
657

 
0.68
%
 
403,514

 
586

 
0.58
%
Total interest-bearing deposits
 
5,517,171

 
6,863

 
0.49
%
 
5,174,875

 
4,976

 
0.39
%
FHLB advances
 
400,956

 
2,569

 
2.54
%
 
602,041

 
4,708

 
3.14
%
Subordinated debentures
 
35,346

 
468

 
5.25
%
 
35,392

 
468

 
5.30
%
Other borrowings and interest-bearing liabilities
 
35,569

 
183

 
2.04
%
 
29,117

 
154

 
2.12
%
Total interest-bearing liabilities
 
5,989,042

 
10,083

 
0.67
%
 
5,841,425

 
10,306

 
0.71
%
Noninterest-bearing deposits
 
5,151,596

 
 
 
 
 
5,011,496

 
 
 
 
Other noninterest-bearing liabilities
 
166,220

 
 
 
 
 
147,335

 
 
 
 
Shareholders’ equity
 
2,152,916

 
 
 
 
 
2,096,157

 
 
 
 
Total liabilities & shareholders’ equity
 
$
13,459,774

 
 
 
 
 
$
13,096,413

 
 
 
 
Net interest income (tax equivalent)
 
$
124,572

 
 
 
 
 
$
127,236

 
 
Net interest margin (tax equivalent)
 
4.14
%
 
 
 
 
 
4.40
%
__________
(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 $2.0 million and $2.1 million for the three months ended September 30, 2019 and June 30, 2019, respectively. The incremental accretion on acquired loans was $2.1 million and $2.7 million for the three months ended September 30, 2019 and June 30, 2019, respectively.
(2)
Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.4 million and $1.4 million for the three months ended September 30, 2019 and June 30, 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $679 thousand and $721 thousand for the three months ended September 30, 2019 and June 30, 2019, respectively.
(3)
Beginning January 2019, average rates were calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(4)
Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.

17


AVERAGE BALANCES AND RATES
 
 
 
 
 
 
 
 
 
 
Columbia Banking System, Inc.
 
 
 
 
 
 
 
 
 
 
Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Nine Months Ended
 
Nine Months Ended
 
 
September 30, 2019
 
September 30, 2018
 
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
Average
Balances
 
Interest
Earned / Paid
 
Average
Rate (3)
 
 
(dollars in thousands)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
Loans, net (1)(2)
 
$
8,568,746

 
$
341,798

 
5.33
%
 
$
8,398,596

 
$
321,542

 
5.12
%
Taxable securities
 
2,599,595

 
49,790

 
2.56
%
 
2,202,497

 
39,285

 
2.38
%
Tax exempt securities (2)
 
470,987

 
10,426

 
2.96
%
 
518,128

 
11,640

 
3.00
%
Interest-earning deposits with banks
 
65,374

 
1,159

 
2.37
%
 
48,922

 
600

 
1.64
%
Total interest-earning assets
 
11,704,702

 
$
403,173

 
4.61
%
 
11,168,143

 
$
373,067

 
4.47
%
Other earning assets
 
231,823

 
 
 
 
 
222,570

 
 
 
 
Noninterest-earning assets
 
1,266,392

 
 
 
 
 
1,255,965

 
 
 
 
Total assets
 
$
13,202,917

 
 
 
 
 
$
12,646,678

 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts (4)
 
$
2,571,722

 
$
8,321

 
0.43
%
 
$
2,704,471

 
$
4,025

 
0.20
%
Interest-bearing demand (4)
 
1,063,678

 
1,230

 
0.15
%
 
1,097,523

 
1,161

 
0.14
%
Savings accounts (4)
 
893,738

 
136

 
0.02
%
 
880,561

 
102

 
0.02
%
Interest-bearing public funds, other than certificates of deposit (4)
 
380,853

 
4,831

 
1.70
%
 
247,068

 
1,367

 
0.74
%
Certificates of deposit
 
397,221

 
1,819

 
0.61
%
 
461,236

 
1,619

 
0.47
%
Total interest-bearing deposits
 
5,307,212

 
16,337

 
0.41
%
 
5,390,859

 
8,274

 
0.21
%
FHLB advances
 
500,448

 
9,962

 
2.66
%
 
150,054

 
2,351

 
2.09
%
Subordinated debentures
 
35,392

 
1,404

 
5.30
%
 
35,577

 
1,404

 
5.28
%
Other borrowings and interest-bearing liabilities
 
35,440

 
552

 
2.08
%
 
43,453

 
288

 
0.89
%
Total interest-bearing liabilities
 
5,878,492

 
$
28,255

 
0.64
%
 
5,619,943

 
$
12,317

 
0.29
%
Noninterest-bearing deposits
 
5,069,629

 
 
 
 
 
4,969,037

 
 
 
 
Other noninterest-bearing liabilities
 
156,432

 
 
 
 
 
95,192

 
 
 
 
Shareholders’ equity
 
2,098,364

 
 
 
 
 
1,962,506

 
 
 
 
Total liabilities & shareholders’ equity
 
$
13,202,917

 
 
 
 
 
$
12,646,678

 
 
 
 
Net interest income (tax equivalent)
 
$
374,918

 
 
 
 
 
$
360,750

 
 
Net interest margin (tax equivalent)
 
4.28
%
 
 
 
 
 
4.32
%
__________
(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 $6.3 million and $6.8 million for the nine months ended September 30, 2019 and 2018, respectively. The incremental accretion on acquired loans was $6.8 million and $9.9 million for the nine months ended September 30, 2019 and 2018, respectively.
(2)
Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $4.1 million and $3.4 million for the nine months ended September 30, 2019 and 2018, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.2 million and $2.4 million for the nine months ended September 30, 2019 and 2018, respectively.
(3)
Beginning January 2019, average rate was calculated using the actual number of days to be on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.
(4)
Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.

18


Non-GAAP Financial Measures
The Company considers its operating net interest margin 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 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,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Operating net interest margin non-GAAP reconciliation:
 
(dollars in thousands)
Net interest income (tax equivalent) (1)
 
$
124,572

 
$
127,236

 
$
124,789

 
$
374,918

 
$
360,750

Adjustments to arrive at operating net interest income (tax equivalent):
 
 
 
 
 
 
 
 
 
 
Incremental accretion income on purchased credit impaired loans
 
(113
)
 
(579
)
 
(585
)
 
(980
)
 
(1,240
)
Incremental accretion income on other acquired loans
 
(1,959
)
 
(2,084
)
 
(2,643
)
 
(5,790
)
 
(8,703
)
Premium amortization on acquired securities
 
1,386

 
1,651

 
1,859

 
4,816

 
6,065

Interest reversals on nonaccrual loans
 
174

 
662

 
477

 
1,462

 
1,147

Operating net interest income (tax equivalent) (1)
 
$
124,060

 
$
126,886

 
$
123,897

 
$
374,426

 
$
358,019

Average interest earning assets
 
$
11,941,578

 
$
11,606,727

 
$
11,326,629

 
$
11,704,702

 
$
11,168,143

Net interest margin (tax equivalent) (1)(2)
 
4.14
%
 
4.40
%
 
4.37
%
 
4.28
%
 
4.32
%
Operating net interest margin (tax equivalent) (1)(2)
 
4.12
%
 
4.38
%
 
4.34
%
 
4.28
%
 
4.29
%
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Operating efficiency ratio non-GAAP reconciliation:
 
(dollars in thousands)
Noninterest expense (numerator A)
 
$
87,076

 
$
86,728

 
$
82,841

 
$
258,504

 
$
253,471

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

 
—

 
(1,081
)
 
—

 
(8,168
)
Net benefit (cost) of operation of OREO and OPPO
 
113

 
705

 
(485
)
 
704

 
(1,239
)
Loss on asset disposals
 
(5
)
 
—

 
(110
)
 
(5
)
 
(111
)
Business and Occupation (“B&O”) taxes
 
(1,325
)
 
(1,411
)
 
(1,478
)
 
(4,612
)
 
(4,254
)
Operating noninterest expense (numerator B)
 
$
85,859

 
$
86,022

 
$
79,687

 
$
254,591

 
$
239,699

 
 
 
 
 
 
 
 
 
 
 
Net interest income (tax equivalent) (1)
 
$
124,572

 
$
127,236

 
$
124,789

 
$
374,918

 
$
360,750

Noninterest income
 
28,030

 
25,648

 
21,019

 
75,374

 
67,854

Bank owned life insurance tax equivalent adjustment
 
406

 
424

 
373

 
1,234

 
1,207

Total revenue (tax equivalent) (denominator A)
 
$
153,008

 
$
153,308

 
$
146,181

 
$
451,526

 
$
429,811

 
 
 
 
 
 
 
 
 
 
 
Operating net interest income (tax equivalent) (1)
 
$
124,060

 
$
126,886

 
$
123,897

 
$
374,426

 
$
358,019

Adjustments to arrive at operating noninterest income (tax equivalent):
 
 
 
 
 
 
 
 
 
 
Investment securities loss (gain), net
 
—

 
(285
)
 
62

 
(2,132
)
 
73

Gain on asset disposals
 
(6,104
)
 
—

 
(29
)
 
(6,104
)
 
(111
)
Operating noninterest income (tax equivalent)
 
22,332

 
25,787

 
21,425

 
68,372

 
69,023

Total operating revenue (tax equivalent) (denominator B)
 
$
146,392

 
$
152,673

 
$
145,322

 
$
442,798

 
$
427,042

Efficiency ratio (tax equivalent) (numerator A/denominator A)
 
56.91
%
 
56.57
%
 
56.67
%
 
57.25
%
 
58.97
%
Operating efficiency ratio (tax equivalent) (numerator B/denominator B)
 
58.65
%
 
56.34
%
 
54.83
%
 
57.50
%
 
56.13
%
__________
(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 $2.1 million, $2.1 million, and $2.0 million for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018, respectively; and $6.3 million and $5.8 million for the nine month periods ended September 30, 2019 and 2018, respectively.
(2) Beginning January 2019, net interest margin (tax equivalent) and operating net interest margin (tax equivalent) were calculated using the actual number of days and on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.


19


Non-GAAP Financial Measures - Continued
The Company also considers its core noninterest expense ratio to be a useful measurement as it more closely reflects the ongoing operating performance of the Company. Despite the usefulness of the core noninterest expense ratio to the Company, there is not a standardized definition for it, as a result, the Company’s calculations may not be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.
The following table reconciles the Company’s calculation of the core noninterest expense ratio:
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Core noninterest expense ratio non-GAAP reconciliation:
 
(dollars in thousands)
Noninterest expense (numerator A)
 
$
87,076

 
$
86,728

 
$
82,841

 
$
258,504

 
$
253,471

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

 
—

 
(1,081
)
 
—

 
(8,168
)
Core noninterest expense (numerator B)
 
$
87,076

 
$
86,728

 
$
81,760

 
$
258,504

 
$
245,303

Average assets (denominator)
 
$
13,459,774

 
$
13,096,413

 
$
12,805,131

 
$
13,202,917

 
$
12,646,678

Noninterest expense ratio (numerator A/denominator) (1)
 
2.59
%
 
2.65
%
 
2.59
%
 
2.61
%
 
2.67
%
Core noninterest expense ratio (numerator B/denominator) (2)
 
2.59
%
 
2.65
%
 
2.55
%
 
2.61
%
 
2.59
%
__________
(1) For the purpose of this ratio, interim noninterest expense has been annualized.
(2) For the purpose of this ratio, interim core noninterest expense has been annualized.

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:
 
 
September 30,
 
June 30,
 
September 30,
 
 
2019
 
2019
 
2018
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)
 
$
2,161,577

 
$
2,133,638

 
$
1,981,395

Adjustments to arrive at tangible common equity:
 
 
 
 
 
 
Goodwill
 
(765,842
)
 
(765,842
)
 
(765,842
)
Other intangible assets, net
 
(37,908
)
 
(40,540
)
 
(48,827
)
Tangible common equity (numerator B)
 
$
1,357,827

 
$
1,327,256

 
$
1,166,726

Total assets (denominator A)
 
$
13,757,760

 
$
13,090,808

 
$
12,956,596

Adjustments to arrive at tangible assets:
 
 
 
 
 
 
Goodwill
 
(765,842
)
 
(765,842
)
 
(765,842
)
Other intangible assets, net
 
(37,908
)
 
(40,540
)
 
(48,827
)
Tangible assets (denominator B)
 
$
12,954,010

 
$
12,284,426

 
$
12,141,927

Shareholders’ equity to total assets (numerator A/denominator A)
 
15.71
%
 
16.30
%
 
15.29
%
Tangible common shareholders’ equity to tangible assets (numerator B/denominator B)
 
10.48
%
 
10.80
%
 
9.61
%
Common shares outstanding (denominator C)
 
72,288

 
72,924

 
73,260

Book value per common share (numerator A/denominator C)
 
$
29.90

 
$
29.26

 
$
27.05

Tangible book value per common share (numerator B/denominator C)
 
$
18.78

 
$
18.20

 
$
15.93


20


Non-GAAP Financial Measures - Continued
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, and, 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
 
Nine Months Ended
 
 
September 30,
 
June 30,
 
September 30,
 
September 30,
 
September 30,
 
 
2019
 
2019
 
2018
 
2019
 
2018
Return on average tangible common equity non-GAAP reconciliation:
 
(dollars in thousands)
Net income (numerator A)
 
$
50,727

 
$
51,724

 
$
46,415

 
$
148,322

 
$
128,134

Adjustments to arrive at tangible income applicable to common shareholders:
 
 
 
 
 
 
 
 
 
 
Amortization of intangibles
 
2,632

 
2,649

 
3,070

 
8,029

 
9,346

Tax effect on intangible amortization
 
(553
)
 
(556
)
 
(645
)
 
(1,686
)
 
(1,963
)
Tangible income applicable to common shareholders (numerator B)
 
$
52,806

 
$
53,817

 
$
48,840

 
154,665

 
$
135,517

Average shareholders’ equity (denominator A)
 
$
2,152,916

 
$
2,096,157

 
$
1,983,317

 
2,098,364

 
$
1,962,506

Adjustments to arrive at average tangible common equity:
 
 
 
 
 
 
 
 
 
 
Average intangibles
 
(805,033
)
 
(807,678
)
 
(816,128
)
 
(807,676
)
 
(819,215
)
Average tangible common equity (denominator B)
 
$
1,347,883

 
$
1,288,479

 
$
1,167,189

 
$
1,290,688

 
$
1,143,291

Return on average common equity (numerator A/denominator A) (1)
 
9.42
%
 
9.87
%
 
9.36
%
 
9.42
%
 
8.71
%
Return on average tangible common equity (numerator B/denominator B) (2)
 
15.67
%
 
16.71
%
 
16.74
%
 
15.98
%
 
15.80
%
__________
(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.

21