Columbia Banking System Announces Second Quarter 2020 Results and Quarterly Cash Dividend

Rhea-AI Summary

Columbia Banking System (NASDAQ: COLB) reported a net interest income of $121.9 million for Q2 2020, reflecting a decline from the previous quarter. Total assets rose to $15.92 billion, with loans increasing to $9.77 billion, largely due to $962 million in Paycheck Protection Program (PPP) loans. The bank announced a cash dividend of $0.28 per share, payable August 19, 2020. Noninterest income increased to $37.3 million, driven by gains from the sale of Visa Class B shares. However, the provision for credit losses remained high at $33.5 million, primarily due to the ongoing economic impact of COVID-19.

Positive

• Total assets increased by $1.88 billion from the previous quarter to $15.92 billion.
• Loan originations included $962 million in PPP loans, enhancing liquidity.
• Cash dividend of $0.28 per share demonstrates confidence in financial stability.
• Noninterest income rose to $37.3 million, benefiting from Visa share sales.

Negative

• Net interest income declined by $571 thousand from the prior quarter.
• Provision for credit losses increased to $33.5 million, reflecting higher risk due to COVID-19 impacts.
• Net interest margin decreased by 36 basis points due to increased deposit costs and lower loan rates.

TACOMA, Wash., July 23, 2020 /PRNewswire/ -- 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 second quarter 2020 earnings, "I'm proud of the accomplishments by our team of bankers during one of the most challenging quarters in our 27 year history. They came together to execute on our pandemic response plan while supporting each other through the professional and personal challenges of COVID-19." Mr. Stein continued, "In addition, our bankers continued to support our clients and our communities through uninterrupted access to our banking services as well as our ongoing philanthropic activities."

Balance Sheet

Total assets at June 30, 2020 were $15.92 billion, an increase of $1.88 billion from the linked quarter. Loans were $9.77 billion, up $838.6 million from March 31, 2020 as a result of loan originations of $1.26 billion partially offset by payments. Included in the loan originations for the quarter were $962.0 million of loans originated under the Paycheck Protection Program ("PPP"). Interest-earning deposits with banks were $880.2 million, an increase of $854.9 million from the linked quarter due to the surge in deposits. Debt securities available for sale were $3.69 billion at June 30, 2020, an increase of $140.7 million from $3.55 billion at March 31, 2020. Total deposits at June 30, 2020 were $13.13 billion, an increase of $2.32 billion from March 31, 2020 largely due to an increase of $1.40 billion in demand and other noninterest-bearing deposits. The deposit mix remained fairly consistent from March 31, 2020 with 51% noninterest-bearing and 49% interest-bearing. The average cost of total deposits for the quarter was 7 basis points, a decrease of 7 basis points from the first quarter of 2020. For additional information regarding this calculation, see the "Net Interest Margin" section.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "Our dedicated team of bankers worked tirelessly during the quarter assisting our clients with their PPP loan applications and loan deferral requests while providing an exceptional level of customer service during these challenging times. Their efforts resulted in robust growth in our balance sheet increasing both loans and deposits while also reducing our cost of deposits by 50%."

Income Statement

Net Interest Income

Net interest income for the second quarter of 2020 was $121.9 million, a decrease of $571 thousand and $3.3 million from the linked quarter and the prior-year period, respectively. The decrease from the linked quarter was primarily due to lower interest income on loans as the lower rate environment more than offset the increase in interest income from the rise in average loan balances. Interest income from securities decreased as a result of $1.9 million of interest income and discount accretion, in the first quarter of 2020, related to the early payoff of three securities as well as lower rates in the current quarter. Partially offsetting these decreases in interest income was a favorable variance in deposit interest expense due to the lower rate environment and lower interest expense on FHLB borrowings as a result of lower average borrowing balances. Net interest income compared to the prior-year period decreased as a result of interest income on loans being down due to the lower rate environment partially offset by an increase in interest income on securities due to higher average balances. The decrease in interest income was partially offset by favorable decreases in interest expense on interest-bearing deposits and FHLB advances resulting from lower rates. 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's provision for credit losses for the second quarter of 2020 was $33.5 million compared to $41.5 million for the linked quarter and $218 thousand for the comparable quarter in 2019. The provision for credit losses for the second quarter of 2020 remained elevated relative to the prior year principally as a result of COVID-19 and the downturn in the national and global economies. As a result, we added $33.5 million to our allowance for credit losses. For more information, please see the "COVID-19 Update" section of this earnings release.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "We continue to see modest downward pressure in credit quality migration in our loan portfolio, relative to the first quarter. Weaknesses in the retail and hospitality sectors were the primary cause, which is not surprising given the current pandemic environment. Loans migrating to nonaccrual status and net charge-offs during the quarter continue to be from issues with clients that arose prior to COVID-19. Currently, loan payment deferral requests have declined. To illustrate, in June, we extended loan payment deferrals on approximately $58 million in loans as compared to over $1.2 billion in loans in April. While our credit metrics remained stable in the second quarter, we recognize that many challenges associated with the current downturn may not materialize until later this year or next year due to uncertainty with respect to how the pandemic evolves, additional government stimulus, and the effectiveness of loan deferrals, among other factors."

Noninterest Income

Noninterest income was $37.3 million for the second quarter of 2020, an increase of $16.1 million from the linked quarter and $11.6 million from the second quarter of 2019, respectively. The increases compared to the linked quarter and the same quarter in 2019 were principally due to the sale of 17,360 shares of Visa Class B restricted stock by the Bank for a gain of $3.0 million, which resulted in an observable market price. As a result, the Company wrote up its remaining 77,683 Visa Class B restricted shares to fair value resulting in a gain of $13.4 million, for a total gain of $16.4 million. Based on the existing transfer restriction and uncertainty of Visa's litigation, the shares were previously carried at a zero-cost basis. We also recognized an $875 thousand gain on the sale of a loan that had previously been charge-off. Partially offsetting these gains were decreases in overdraft fees of $1.1 million and $1.2 million compared to the linked quarter and second quarter of 2019, respectively. The decrease in overdraft fees was due to an overall decrease in the number of transactions during this pandemic time period as well as clients generally carrying higher cash balances in their deposit accounts. In addition, the increase from the prior-year period was partially offset by a $1.1 million current period decrease in treasury management fees and a $3.0 million bank-owned life insurance benefit that was recognized during the second quarter of 2019.

Noninterest Expense

Total noninterest expense for the second quarter of 2020 was $80.8 million, a decrease of $3.4 million compared to the first quarter of 2020 principally due to lower compensation and benefits expense. Labor costs related to the origination of PPP loans during the quarter are treated as a contra expense and reduce compensation and benefits expense. These labor costs are capitalized and amortized as a reduction to interest income over the life of the loan. This decrease in noninterest expense was partially offset by an increase in regulatory premiums and provision for unfunded loan commitments. We utilized the remaining $283 thousand of our Small Bank Assessment Credit this quarter related to our FDIC deposit insurance premiums compared to an applied credit of $967 thousand during the first quarter of 2020. The provision for unfunded loan commitments increased by $1.8 million compared to the linked quarter.

Compared to the second quarter of 2019, noninterest expense decreased $5.9 million principally due to the deferral of loan origination costs related to the PPP loans discussed above. Legal and professional fees also declined compared to one year. Partially offsetting these decreases was the $2.6 million increase in the provision for unfunded loan commitments due to higher estimated loss rates and higher amounts of unfunded loan commitments.

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

	Three Months Ended		Six Months Ended
	June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
	(in thousands)
Provision (recapture) for unfunded loan commitments	$	2,800			$	1,000			$	200			$	3,800			$	(350)

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the second quarter of 2020 was 3.64%, a decrease of 36 basis points and 76 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 and prior-year period was driven by higher average interest-earning deposits with banks at an average rate of 11 basis points as well as lower rates on the loan and securities portfolios, which were exacerbated by PPP.

Columbia's operating net interest margin (tax equivalent)¹ was 3.64% for the second quarter of 2020, which decreased 38 and 74 basis points compared to the linked quarter and the prior-year period, respectively. The decreases in the operating net interest margin for the second quarter of 2020 compared to the linked quarter and the prior-year period were due to the items noted in the preceding paragraph.

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.

The following table highlights the yield on our paycheck protection program loans:

		Three Months Ended
		June 30, 2020
Paycheck Protection Program loans		(dollars in thousands)
Interest income		$	4,590
Average balance		$	643,966
Yield		2.87	%

Aaron Deer, Columbia's Executive Vice President and Chief Financial Officer, stated, "The margin compression we experienced during the quarter was largely due to excess liquidity created by record deposit inflows. Of course, historically low interest rates also contributed to the pressure and, unfortunately, the rate environment may remain a challenge for some time. We will take a measured approach in deploying our excess liquidity given uncertainty as to PPP funds utilization and depositor behavior generally in the current environment."

Asset Quality

At June 30, 2020, nonperforming assets to total assets remained unchanged at 0.34% compared to March 31, 2020. Total nonperforming assets increased $6.3 million from the linked quarter due to a modest increase in commercial real estate and agriculture nonaccrual loans.

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

		June 30, 2020		March 31, 2020		December 31, 2019
		(in thousands)
Nonaccrual loans:
Commercial loans:
Commercial real estate		$	11,155			$	5,518			$	3,799
Commercial business		20,525			24,395			20,937
Agriculture		19,162			15,083			5,023
Construction		217			—			—
Consumer loans:
One-to-four family residential real estate		2,662			2,643			3,292
Other consumer		11			8			9
Total nonaccrual loans		53,732			47,647			33,060
OREO and other personal property owned		747			510			552
Total nonperforming assets		$	54,479			$	48,157			$	33,612

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

		Three Months Ended		Six Months Ended
		June 30, 2020		March 31, 2020		June 30, 2019		June 30, 2020		June 30, 2019
		(in thousands)
Beginning balance		$	122,074			$	83,968			$	83,274			$	83,968			$	83,369
Impact of adopting ASC 326		—			1,632			—			1,632			—
Charge-offs:
Commercial loans:
Commercial real estate		—			(101)			(564)			(101)			(1,242)
Commercial business		(5,442)			(1,684)			(4,316)			(7,126)			(5,822)
Agriculture		—			(4,726)			(61)			(4,726)			(139)
Construction		—			—			(20)			—			(215)
Consumer loans:
One-to-four family residential real estate		—			(10)			(321)			(10)			(802)
Other consumer		(198)			(268)			(5)			(466)			(55)
Total charge-offs		(5,640)			(6,789)			(5,287)			(12,429)			(8,275)
Recoveries:
Commercial loans:
Commercial real estate		13			14			556			27			1,070
Commercial business		811			860			492			1,671			1,019
Agriculture		1			41			64			42			122
Construction		235			442			691			677			774
Consumer loans:
One-to-four family residential real estate		422			282			450			704			784
Other consumer		130			124			59			254			74
Total recoveries		1,612			1,763			2,312			3,375			3,843
Net charge-offs		(4,028)			(5,026)			(2,975)			(9,054)			(4,432)
Provision for credit losses		33,500			41,500			218			75,000			1,580
Ending balance		$	151,546			$	122,074			$	80,517			$	151,546			$	80,517

The allowance for credit losses to period-end loans was 1.55% at June 30, 2020 compared to 1.37% at March 31, 2020. Excluding PPP loans, the allowance for credit losses to period-end loans² was 1.72%.

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.

Organizational Update

COVID-19 Update

Columbia launched two community focused initiatives in response to the pandemic, putting more than $1 million to work in support of our local communities. The Pass It On Project is designed to provide small businesses more than $500,000 to perform services for community members whose lives have been adversely impacted by the pandemic or the economic downturn it caused. The program will support more than 350 small businesses and many more individuals in the Northwest as we continue to manage through the pandemic and economic recovery. The COVID-19 Community Relief fund put more than $500,000 in the hands of 25 non-profit organizations working to provide relief for those affected by the pandemic in the Northwest.

"Each of our community programs developed in response to the pandemic honor our deep commitment to support businesses and respond to the evolving needs in our local communities," said David Moore Devine, Columbia's Executive Vice President and Chief Marketing & Experience Officer. "Small businesses are the lifeblood of our communities and by helping them thrive through the Pass It On Project, we create a ripple effect of support throughout the Northwest."

Recognition

Columbia was honored to earn recognition as the #1 bank in the Northwest region by JD Powers in the 2020 Retail Banking Satisfaction Study. The award reflects our ongoing commitment to meeting the needs of our clients with exceptional service.

Boise NeighborHub

The Bank recently announced the expansion of its new retail branch service concept to the Boise, Idaho market with the construction of a new NeighborHub, located in downtown Boise. The NeighborHub concept combines sales and support focused technology with the elevated skill set of a team of bankers with universal knowledge and expertise in handling all business and consumer needs. The location will open in the fall of 2020 and will also serve the broader community as a hub for educational seminars, local events and community functions in the evenings.

"We are excited to bring our signature NeighborHub style of banking to downtown Boise this year," said Mr. Stein. "The new location will expand our presence in the Treasure Valley and further build upon the success of the first NeighborHub location in the Seattle market."

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.28 per common share on August 19, 2020 to shareholders of record as of the close of business on August 5, 2020.

Conference Call Information

Columbia's management will discuss the second quarter 2020 financial results on a conference call scheduled for Thursday, July 23, 2020 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://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166

The conference call can also be accessed on Thursday, July 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 3787244.

A replay of the call can be accessed beginning Friday, July 24, 2020 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166

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. 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 the #1 bank in the Northwest region by JD Power in the 2020 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.

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, 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) 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 Deer,
	President and		Executive Vice President and
	Chief Executive Officer		Chief Financial Officer
	Investor Relations
	InvestorRelations@columbiabank.com
	253-305-1921

CONSOLIDATED BALANCE SHEETS
Columbia Banking System, Inc.
Unaudited				June 30,		March 31,		December 31,
							2020		2020		2019
							(in thousands)
ASSETS
Cash and due from banks							$	217,461			$	190,399			$	223,541
Interest-earning deposits with banks							880,232			25,357			24,132
Total cash and cash equivalents							1,097,693			215,756			247,673
Debt securities available for sale at fair value (amortized cost of $3,491,307, $3,406,492 and $3,703,096, respectively)		3,693,787			3,553,128			3,746,142
Equity securities							13,425			—			—
Federal Home Loan Bank ("FHLB") stock at cost						16,280			38,280			48,120
Loans held for sale							28,803			9,701			17,718
Loans, net of unearned income							9,771,898			8,933,321			8,743,465
Less: Allowance for credit losses						151,546			122,074			83,968
Loans, net							9,620,352			8,811,247			8,659,497
Interest receivable							59,149			44,577			46,839
Premises and equipment, net							164,362			164,626			165,408
Other real estate owned							747			510			552
Goodwill							765,842			765,842			765,842
Other intangible assets, net							30,938			33,148			35,458
Other assets							429,566			401,688			346,275
Total assets							$	15,920,944			$	14,038,503			$	14,079,524
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing							$	6,719,437			$	5,323,908			$	5,328,146
Interest-bearing							6,412,040			5,488,848			5,356,562
Total deposits							13,131,477			10,812,756			10,684,708
FHLB advances and Federal Reserve Bank ("FRB") borrowings		157,441			712,455			953,469
Securities sold under agreements to repurchase						51,479			29,252			64,437
Subordinated debentures							35,185			35,231			35,277
Revolving line of credit							—			5,000			—
Other liabilities							268,607			230,207			181,671
Total liabilities							13,644,189			11,824,901			11,919,562
Commitments and contingent liabilities
Shareholders' equity:
	June 30,		March 31,		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	73,770			73,759			73,577			1,654,129			1,651,399			1,650,753
Outstanding	71,586			71,575			72,124
Retained earnings							512,383			495,830			519,676
Accumulated other comprehensive income						181,077			137,207			40,367
Treasury stock at cost	2,184			2,184			1,453			(70,834)			(70,834)			(50,834)
Total shareholders' equity							2,276,755			2,213,602			2,159,962
Total liabilities and shareholders' equity						$	15,920,944			$	14,038,503			$	14,079,524

CONSOLIDATED STATEMENTS OF INCOME
Columbia Banking System, Inc.		Three Months Ended		Six Months Ended
Unaudited		June 30,		March 31,		June 30,		June 30,		June 30,
		2020		2020		2019		2020		2019
Interest Income		(in thousands except per share amounts)
Loans		$	105,496			$	107,366			$	116,585			$	212,862			$	225,001
Taxable securities		18,343			21,088			15,918			39,431			33,333
Tax-exempt securities		2,257			2,302			2,712			4,559			5,681
Deposits in banks		136			141			207			277			295
Total interest income		126,232			130,897			135,422			257,129			264,310
Interest Expense
Deposits		2,094			3,642			4,976			5,736			9,474
FHLB advances and FRB borrowings		1,796			4,229			4,708			6,025			7,393
Subordinated debentures		468			468			468			936			936
Other borrowings		23			136			154			159			369
Total interest expense		4,381			8,475			10,306			12,856			18,172
Net Interest Income		121,851			122,422			125,116			244,273			246,138
Provision for credit losses		33,500			41,500			218			75,000			1,580
Net interest income after provision for credit losses		88,351			80,922			124,898			169,273			244,558
Noninterest Income
Deposit account and treasury management fees		6,092			7,788			9,035			13,880			18,015
Card revenue		3,079			3,518			3,763			6,597			7,425
Financial services and trust revenue		3,163			3,065			3,425			6,228			6,382
Loan revenue		5,607			4,590			3,596			10,197			5,985
Bank owned life insurance		1,618			1,596			1,597			3,214			3,116
Investment securities gains, net		16,425			249			285			16,674			2,132
Other		1,275			401			3,947			1,676			4,289
Total noninterest income		37,259			21,207			25,648			58,466			47,344
Noninterest Expense
Compensation and employee benefits		46,043			54,842			52,015			100,885			104,100
Occupancy		8,812			9,197			8,712			18,009			17,521
Data processing		5,454			4,840			4,601			10,294			9,270
Legal and professional fees		3,483			2,102			6,554			5,585			11,127
Amortization of intangibles		2,210			2,310			2,649			4,520			5,397
Business and Occupation ("B&O") taxes		1,244			624			1,411			1,868			3,287
Advertising and promotion		837			1,305			870			2,142			1,844
Regulatory premiums		1,034			34			956			1,068			1,940
Net cost (benefit) of operation of other real estate owned		(200)			12			(705)			(188)			(592)
Other		11,916			9,005			9,665			20,921			17,534
Total noninterest expense		80,833			84,271			86,728			165,104			171,428
Income before income taxes		44,777			17,858			63,818			62,635			120,474
Provision for income taxes		8,195			3,230			12,094			11,425			22,879
Net Income		$	36,582			$	14,628			$	51,724			$	51,210			$	97,595
Earnings per common share
Basic		$	0.52			$	0.20			$	0.71			$	0.72			$	1.33
Diluted		$	0.52			$	0.20			$	0.71			$	0.72			$	1.33
Dividends declared per common share - regular		$	0.28			$	0.28			$	0.28			$	0.56			$	0.56
Dividends declared per common share - special		—			0.22			0.14			0.22			0.28
Dividends declared per common share - total		$	0.28			$	0.50			$	0.42			$	0.78			$	0.84
Weighted average number of common shares outstanding		70,679			71,206			72,451			70,942			72,486
Weighted average number of diluted common shares outstanding		70,711			71,264			72,451			70,981			72,487

FINANCIAL STATISTICS
Columbia Banking System, Inc.		Three Months Ended		Six Months Ended
Unaudited		June 30,		March 31,		June 30,		June 30,		June 30,
		2020		2020		2019		2020		2019
Earnings		(dollars in thousands except per share amounts)
Net interest income		$	121,851			$	122,422			$	125,116			$	244,273			$	246,138
Provision for credit losses		$	33,500			$	41,500			$	218			$	75,000			$	1,580
Noninterest income		$	37,259			$	21,207			$	25,648			$	58,466			$	47,344
Noninterest expense		$	80,833			$	84,271			$	86,728			$	165,104			$	171,428
Net income		$	36,582			$	14,628			$	51,724			$	51,210			$	97,595
Per Common Share
Earnings (basic)		$	0.52			$	0.20			$	0.71			$	0.72			$	1.33
Earnings (diluted)		$	0.52			$	0.20			$	0.71			$	0.72			$	1.33
Book value		$	31.80			$	30.93			$	29.26			$	31.80			$	29.26
Tangible book value per common share (1)		$	20.67			$	19.76			$	18.20			$	20.67			$	18.20
Averages
Total assets		$	15,148,488			$	13,995,632			$	13,096,413			$	14,572,060			$	13,072,360
Interest-earning assets		$	13,657,719			$	12,487,550			$	11,606,727			$	13,072,635			$	11,584,301
Loans		$	9,546,099			$	8,815,755			$	8,601,819			$	9,180,927			$	8,504,781
Securities, including equity securities and FHLB stock		$	3,591,693			$	3,618,567			$	2,969,749			$	3,605,131			$	3,054,504
Deposits		$	12,220,415			$	10,622,379			$	10,186,371			$	11,421,397			$	10,228,459
Interest-bearing deposits		$	6,037,107			$	5,383,203			$	5,174,875			$	5,710,155			$	5,200,493
Interest-bearing liabilities		$	6,514,012			$	6,375,931			$	5,841,425			$	6,444,971			$	5,822,301
Noninterest-bearing deposits		$	6,183,308			$	5,239,176			$	5,011,496			$	5,711,242			$	5,027,966
Shareholders' equity		$	2,254,349			$	2,193,051			$	2,096,157			$	2,223,700			$	2,070,636
Financial Ratios
Return on average assets		0.97	%		0.42	%		1.58	%		0.70	%		1.49	%
Return on average common equity		6.49	%		2.67	%		9.87	%		4.61	%		9.43	%
Return on average tangible common equity (1)		10.53	%		4.72	%		16.71	%		7.69	%		16.15	%
Average equity to average assets		14.88	%		15.67	%		16.01	%		15.26	%		15.84	%
Shareholders' equity to total assets		14.30	%		15.77	%		16.30	%		14.30	%		16.30	%
Tangible common shareholders' equity to tangible assets (1)		9.79	%		10.68	%		10.80	%		9.79	%		10.80	%
Net interest margin (tax equivalent)		3.64	%		4.00	%		4.40	%		3.82	%		4.36	%
Efficiency ratio (tax equivalent) (2)		50.09	%		57.73	%		56.57	%		53.72	%		57.43	%
Operating efficiency ratio (tax equivalent) (1)		54.91	%		57.24	%		56.34	%		56.08	%		56.93	%
Noninterest expense ratio		2.13	%		2.41	%		2.65	%		2.27	%		2.62	%
		June 30,		March 31,		December 31,
Period-end		2020		2020		2019
Total assets		$	15,920,944			$	14,038,503			$	14,079,524
Loans, net of unearned income		$	9,771,898			$	8,933,321			$	8,743,465
Allowance for credit losses		$	151,546			$	122,074			$	83,968
Securities, including equity securities and FHLB stock		$	3,723,492			$	3,591,408			$	3,794,262
Deposits		$	13,131,477			$	10,812,756			$	10,684,708
Shareholders' equity		$	2,276,755			$	2,213,602			$	2,159,962
Nonperforming assets
Nonaccrual loans		$	53,732			$	47,647			$	33,060
Other real estate owned ("OREO") and other personal property owned ("OPPO")		747			510			552
Total nonperforming assets		$	54,479			$	48,157			$	33,612
Nonperforming loans to period-end loans		0.55	%		0.53	%		0.38	%
Nonperforming assets to period-end assets		0.34	%		0.34	%		0.24	%
Allowance for credit losses to period-end loans		1.55	%		1.37	%		0.96	%
Net loan charge-offs (for the three months ended)		$	4,028			$	5,026			$	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		June 30,		March 31,		December 31,		September 30,		June 30,
		2020		2020		2019		2019		2019
Earnings		(dollars in thousands except per share amounts)
Net interest income		$	121,851			$	122,422			$	124,817			$	122,450			$	125,116
Provision for credit losses		$	33,500			$	41,500			$	1,614			$	299			$	218
Noninterest income		$	37,259			$	21,207			$	21,807			$	28,030			$	25,648
Noninterest expense		$	80,833			$	84,271			$	86,978			$	87,076			$	86,728
Net income		$	36,582			$	14,628			$	46,129			$	50,727			$	51,724
Per Common Share
Earnings (basic)		$	0.52			$	0.20			$	0.64			$	0.70			$	0.71
Earnings (diluted)		$	0.52			$	0.20			$	0.64			$	0.70			$	0.71
Book value		$	31.80			$	30.93			$	29.95			$	29.90			$	29.26
Averages
Total assets		$	15,148,488			$	13,995,632			$	13,750,840			$	13,459,774			$	13,096,413
Interest-earning assets		$	13,657,719			$	12,487,550			$	12,231,779			$	11,941,578			$	11,606,727
Loans		$	9,546,099			$	8,815,755			$	8,742,246			$	8,694,592			$	8,601,819
Securities, including equity securities and FHLB stock		$	3,591,693			$	3,618,567			$	3,453,554			$	3,102,213			$	2,969,749
Deposits		$	12,220,415			$	10,622,379			$	10,959,434			$	10,668,767			$	10,186,371
Interest-bearing deposits		$	6,037,107			$	5,383,203			$	5,610,850			$	5,517,171			$	5,174,875
Interest-bearing liabilities		$	6,514,012			$	6,375,931			$	6,058,319			$	5,989,042			$	5,841,425
Noninterest-bearing deposits		$	6,183,308			$	5,239,176			$	5,348,584			$	5,151,596			$	5,011,496
Shareholders' equity		$	2,254,349			$	2,193,051			$	2,170,879			$	2,152,916			$	2,096,157
Financial Ratios
Return on average assets		0.97	%		0.42	%		1.34	%		1.51	%		1.58	%
Return on average common equity		6.49	%		2.67	%		8.50	%		9.42	%		9.87	%
Average equity to average assets		14.88	%		15.67	%		15.79	%		16.00	%		16.01	%
Shareholders' equity to total assets		14.30	%		15.77	%		15.34	%		15.71	%		16.30	%
Net interest margin (tax equivalent)		3.64	%		4.00	%		4.11	%		4.14	%		4.40	%
Period-end
Total assets		$	15,920,944			$	14,038,503			$	14,079,524			$	13,757,760			$	13,090,808
Loans, net of unearned income		$	9,771,898			$	8,933,321			$	8,743,465			$	8,756,355			$	8,646,990
Allowance for credit losses		$	151,546			$	122,074			$	83,968			$	82,660			$	80,517
Securities, including equity securities and FHLB stock		$	3,723,492			$	3,591,408			$	3,794,262			$	3,397,252			$	2,894,218
Deposits		$	13,131,477			$	10,812,756			$	10,684,708			$	10,855,716			$	10,211,599
Shareholders' equity		$	2,276,755			$	2,213,602			$	2,159,962			$	2,161,577			$	2,133,638
Goodwill		$	765,842			$	765,842			$	765,842			$	765,842			$	765,842
Other intangible assets, net		$	30,938			$	33,148			$	35,458			$	37,908			$	40,540
Nonperforming assets
Nonaccrual loans		$	53,732			$	47,647			$	33,060			$	37,021			$	39,038
OREO and OPPO		747			510			552			625			1,118
Total nonperforming assets		$	54,479			$	48,157			$	33,612			$	37,646			$	40,156
Nonperforming loans to period-end loans		0.55	%		0.53	%		0.38	%		0.42	%		0.45	%
Nonperforming assets to period-end assets		0.34	%		0.34	%		0.24	%		0.27	%		0.31	%
Allowance for credit losses to period-end loans		1.55	%		1.37	%		0.96	%		0.94	%		0.93	%
Net loan charge-offs (recoveries)		$	4,028			$	5,026			$	306			$	(1,844)			$	2,975

LOAN PORTFOLIO COMPOSITION
Columbia Banking System, Inc.
Unaudited		June 30,		March 31,		December 31,		September 30,		June 30,
		2020		2020		2019		2019		2019
Loan Portfolio Composition - Dollars		(dollars in thousands)
Commercial loans:
Commercial real estate		$	4,032,643			$	3,969,974			$	3,945,853			$	3,746,365			$	3,689,282
Commercial business		3,859,513			3,169,668			2,989,613			3,057,669			3,059,066
Agriculture		845,950			754,491			765,371			777,619			744,481
Construction		304,015			308,186			361,533			479,171			446,101
Consumer loans:
One-to-four family residential real estate		692,837			690,506			637,325			654,077			667,037
Other consumer		36,940			40,496			43,770			41,454			41,023
Total loans		9,771,898			8,933,321			8,743,465			8,756,355			8,646,990
Less:  Allowance for credit losses		(151,546)			(122,074)			(83,968)			(82,660)			(80,517)
Total loans, net		$	9,620,352			$	8,811,247			$	8,659,497			$	8,673,695			$	8,566,473
Loans held for sale		$	28,803			$	9,701			$	17,718			$	15,036			$	12,189

		June 30,		March 31,		December 31,		September 30,		June 30,
Loan Portfolio Composition - Percentages		2020		2020		2019		2019		2019
Commercial loans:
Commercial real estate		41.2	%		44.5	%		45.1	%		42.7	%		42.6	%
Commercial business		39.5	%		35.5	%		34.2	%		34.9	%		35.4	%
Agriculture		8.7	%		8.4	%		8.8	%		8.9	%		8.6	%
Construction		3.1	%		3.4	%		4.1	%		5.5	%		5.2	%
Consumer loans:
One-to-four family residential real estate		7.1	%		7.7	%		7.3	%		7.5	%		7.7	%
Other consumer		0.4	%		0.5	%		0.5	%		0.5	%		0.5	%
Total loans		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

DEPOSIT COMPOSITION
Columbia Banking System, Inc.
Unaudited
		June 30,		March 31,		December 31,		September 30,		June 30,
		2020		2020		2019		2019		2019
Deposit Composition - Dollars		(dollars in thousands)
Demand and other noninterest-bearing		$	6,719,437			$	5,323,908			$	5,328,146			$	5,320,435			$	5,082,219
Money market		2,586,376			2,313,717			2,322,644			2,295,229			2,240,522
Interest-bearing demand		1,274,058			1,131,874			1,150,437			1,059,502			1,058,545
Savings		1,035,723			905,931			882,050			892,438			887,172
Interest-bearing public funds, other than certificates of deposit		623,496			405,810			301,203			629,797			270,398
Certificates of deposit, less than $250,000		210,357			214,449			218,764			223,249			228,920
Certificates of deposit, $250,000 or more		104,330			109,659			151,995			107,506			105,782
Certificates of deposit insured by CDARS®		17,078			17,171			17,065			17,252			16,559
Brokered certificates of deposit		8,427			12,259			12,259			18,852			40,502
Reciprocal money market accounts		552,195			377,980			300,158			291,542			281,247
Subtotal		13,131,477			10,812,758			10,684,721			10,855,802			10,211,866
Valuation adjustment resulting from acquisition accounting		—			(2)			(13)			(86)			(267)
Total deposits		$	13,131,477			$	10,812,756			$	10,684,708			$	10,855,716			$	10,211,599

		June 30,		March 31,		December 31,		September 30,		June 30,
Deposit Composition - Percentages		2020		2020		2019		2019		2019
Demand and other noninterest-bearing		51.2	%		49.2	%		49.9	%		49.0	%		49.8	%
Money market		19.7	%		21.4	%		21.7	%		21.1	%		21.9	%
Interest-bearing demand		9.7	%		10.5	%		10.8	%		9.8	%		10.4	%
Savings		7.9	%		8.4	%		8.3	%		8.2	%		8.7	%
Interest-bearing public funds, other than certificates of deposit		4.7	%		3.8	%		2.8	%		5.8	%		2.7	%
Certificates of deposit, less than $250,000		1.6	%		2.0	%		2.0	%		2.1	%		2.2	%
Certificates of deposit, $250,000 or more		0.8	%		1.0	%		1.4	%		1.0	%		1.0	%
Certificates of deposit insured by CDARS®		0.1	%		0.2	%		0.2	%		0.2	%		0.2	%
Brokered certificates of deposit		0.1	%		0.1	%		0.1	%		0.2	%		0.4	%
Reciprocal money market accounts		4.2	%		3.4	%		2.8	%		2.6	%		2.7	%
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
		June 30, 2020		June 30, 2019
		Average Balances		Interest Earned / Paid		Average Rate		Average Balances		Interest Earned / Paid		Average Rate
		(dollars in thousands)
ASSETS
Loans, net (1)(2)		$	9,546,099			$	106,737			4.50	%		$	8,601,819			$	117,984			5.50	%
Taxable securities		3,189,805			18,343			2.31	%		2,506,672			15,918			2.55	%
Tax exempt securities (2)		401,888			2,857			2.86	%		463,077			3,433			2.97	%
Interest-earning deposits with banks		519,927			136			0.11	%		35,159			207			2.36	%
Total interest-earning assets		13,657,719			128,073			3.77	%		11,606,727			137,542			4.75	%
Other earning assets		234,019							233,273
Noninterest-earning assets		1,256,750							1,256,413
Total assets		$	15,148,488							$	13,096,413
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts (3)		$	2,939,657			$	974			0.13	%		$	2,539,757			$	2,896			0.46	%
Interest-bearing demand (3)		1,213,182			339			0.11	%		1,066,876			428			0.16	%
Savings accounts (3)		976,785			38			0.02	%		891,341			43			0.02	%
Interest-bearing public funds, other than certificates of deposit (3)		559,256			393			0.28	%		273,387			1,023			1.50	%
Certificates of deposit		348,227			350			0.40	%		403,514			586			0.58	%
Total interest-bearing deposits		6,037,107			2,094			0.14	%		5,174,875			4,976			0.39	%
FHLB advances and FRB borrowings		407,035			1,796			1.77	%		602,041			4,708			3.14	%
Subordinated debentures		35,207			468			5.35	%		35,392			468			5.30	%
Other borrowings and interest-bearing liabilities		34,663			23			0.27	%		29,117			154			2.12	%
Total interest-bearing liabilities		6,514,012			4,381			0.27	%		5,841,425			10,306			0.71	%
Noninterest-bearing deposits		6,183,308							5,011,496
Other noninterest-bearing liabilities		196,819							147,335
Shareholders' equity		2,254,349							2,096,157
Total liabilities & shareholders' equity		$	15,148,488							$	13,096,413
Net interest income (tax equivalent)		$	123,692							$	127,236
Net interest margin (tax equivalent)		3.64	%						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 $5.1 million and $2.1 million for the three months ended June 30, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.7 million and $2.7 million for the three months ended June 30, 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 June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $721 thousand for the three months ended June 30, 2020 and 2019, respectively.
(3)	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.

AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
		Three Months Ended		Three Months Ended
		June 30, 2020		March 31, 2020
		Average Balances		Interest Earned / Paid		Average Rate		Average Balances		Interest Earned / Paid		Average Rate
		(dollars in thousands)
ASSETS
Loans, net (1)(2)		$	9,546,099			$	106,737			4.50	%		$	8,815,755			$	108,665			4.96	%
Taxable securities		3,189,805			18,343			2.31	%		3,209,110			21,088			2.64	%
Tax exempt securities (2)		401,888			2,857			2.86	%		409,457			2,914			2.86	%
Interest-earning deposits with banks		519,927			136			0.11	%		53,228			141			1.07	%
Total interest-earning assets		13,657,719			128,073			3.77	%		12,487,550			132,808			4.28	%
Other earning assets		234,019							232,361
Noninterest-earning assets		1,256,750							1,275,721
Total assets		$	15,148,488							$	13,995,632
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts		$	2,939,657			$	974			0.13	%		$	2,633,931			$	1,728			0.26	%
Interest-bearing demand		1,213,182			339			0.11	%		1,125,691			484			0.17	%
Savings accounts		976,785			38			0.02	%		897,276			43			0.02	%
Interest-bearing public funds, other than certificates of deposit		559,256			393			0.28	%		355,401			903			1.02	%
Certificates of deposit		348,227			350			0.40	%		370,904			484			0.52	%
Total interest-bearing deposits		6,037,107			2,094			0.14	%		5,383,203			3,642			0.27	%
FHLB advances and FRB borrowings		407,035			1,796			1.77	%		909,110			4,229			1.87	%
Subordinated debentures		35,207			468			5.35	%		35,253			468			5.34	%
Other borrowings and interest-bearing liabilities		34,663			23			0.27	%		48,365			136			1.13	%
Total interest-bearing liabilities		6,514,012			4,381			0.27	%		6,375,931			8,475			0.53	%
Noninterest-bearing deposits		6,183,308							5,239,176
Other noninterest-bearing liabilities		196,819							187,474
Shareholders' equity		2,254,349							2,193,051
Total liabilities & shareholders' equity		$	15,148,488							$	13,995,632
Net interest income (tax equivalent)		$	123,692							$	124,333
Net interest margin (tax equivalent)		3.64	%						4.00	%

(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 $5.1 million and $2.4 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The incremental accretion on acquired loans was $1.7 million and $1.5 million for the three months ended June 30, 2020 and March 31, 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 and $1.3 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $612 thousand for the three months ended June 30, 2020 and March 31, 2020, respectively.

AVERAGE BALANCES AND RATES
Columbia Banking System, Inc.
Unaudited
		Six Months Ended		Six Months Ended
		June 30, 2020		June 30, 2019
		Average Balances		Interest Earned / Paid		Average Rate		Average Balances		Interest Earned / Paid		Average Rate
		(dollars in thousands)
ASSETS
Loans, net (1)(2)		$	9,180,927			$	215,402			4.72	%		$	8,504,781			$	227,699			5.40	%
Taxable securities		3,199,458			39,431			2.48	%		2,571,692			33,333			2.61	%
Tax exempt securities (2)		405,673			5,771			2.86	%		482,812			7,191			3.00	%
Interest-earning deposits with banks		286,577			277			0.19	%		25,016			295			2.38	%
Total interest-earning assets		13,072,635			$	260,881			4.01	%		11,584,301			$	268,518			4.67	%
Other earning assets		233,190							232,678
Noninterest-earning assets		1,266,235							1,255,381
Total assets		$	14,572,060							$	13,072,360
LIABILITIES AND SHAREHOLDERS' EQUITY
Money market accounts (3)		$	2,786,794			$	2,702			0.19	%		$	2,562,742			$	5,481			0.43	%
Interest-bearing demand (3)		1,169,436			823			0.14	%		1,070,715			792			0.15	%
Savings accounts (3)		937,030			81			0.02	%		893,913			86			0.02	%
Interest-bearing public funds, other than certificates of deposit (4)		457,328			1,296			0.57	%		268,105			1,953			1.47	%
Certificates of deposit		359,567			834			0.47	%		405,018			1,162			0.58	%
Total interest-bearing deposits		5,710,155			5,736			0.20	%		5,200,493			9,474			0.37	%
FHLB advances and FRB borrowings		658,072			6,025			1.84	%		551,018			7,393			2.71	%
Subordinated debentures		35,230			936			5.34	%		35,415			936			5.33	%
Other borrowings and interest-bearing liabilities		41,514			159			0.77	%		35,375			369			2.10	%
Total interest-bearing liabilities		6,444,971			$	12,856			0.40	%		5,822,301			$	18,172			0.63	%
Noninterest-bearing deposits		5,711,242							5,027,966
Other noninterest-bearing liabilities		192,147							151,457
Shareholders' equity		2,223,700							2,070,636
Total liabilities & shareholders' equity		$	14,572,060							$	13,072,360
Net interest income (tax equivalent)		$	248,025							$	250,346
Net interest margin (tax equivalent)		3.82	%						4.36	%

(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 $7.5 million and $4.3 million for the six months ended June 30, 2020 and 2019, respectively. The incremental accretion on acquired loans was $3.2 million and $4.7 million for the six months ended June 30, 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 $2.5 million and $2.7 million for the six months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.2 million and $1.5 million for the six months ended June 30, 2020 and 2019, respectively.
(3)	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.

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		Six Months Ended
		June 30,		March 31,		June 30,		June 30,		June 30,
		2020		2020		2019		2020		2019
Operating net interest margin non-GAAP reconciliation:		(dollars in thousands)
Net interest income (tax equivalent) (1)		$	123,692			$	124,333			$	127,236			$	248,025			$	250,346
Adjustments to arrive at operating net interest income (tax equivalent):
Incremental accretion income on acquired loans (2)		(1,675)			(1,491)			(2,663)			(3,166)			(4,698)
Premium amortization on acquired securities		975			1,127			1,651			2,102			3,430
Interest reversals on nonaccrual loans		673			788			662			1,461			1,288
Operating net interest income (tax equivalent) (1)		$	123,665			$	124,757			$	126,886			$	248,422			$	250,366
Average interest earning assets		$	13,657,719			$	12,487,550			$	11,606,727			$	13,072,635			$	11,584,301
Net interest margin (tax equivalent) (1)		3.64	%		4.00	%		4.40	%		3.82	%		4.36	%
Operating net interest margin (tax equivalent) (1)		3.64	%		4.02	%		4.38	%		3.82	%		4.36	%

		Three Months Ended		Six Months Ended
		June 30,		March 31,		June 30,		June 30,		June 30,
		2020		2020		2019		2020		2019
Operating efficiency ratio non-GAAP reconciliation:		(dollars in thousands)
Noninterest expense (numerator A)		$	80,833			$	84,271			$	86,728			$	165,104			$	171,428
Adjustments to arrive at operating noninterest expense:
Net benefit (cost) of operation of OREO and OPPO		200			(4)			705			196			591
Loss on asset disposals		(220)			(4)			—			(224)			—
Business and Occupation ("B&O") taxes		(1,244)			(624)			(1,411)			(1,868)			(3,287)
Operating noninterest expense (numerator B)		$	79,569			$	83,639			$	86,022			$	163,208			$	168,732
Net interest income (tax equivalent) (1)		$	123,692			$	124,333			$	127,236			$	248,025			$	250,346
Noninterest income		37,259			21,207			25,648			58,466			47,344
Bank owned life insurance tax equivalent adjustment		430			424			424			854			828
Total revenue (tax equivalent) (denominator A)		$	161,381			$	145,964			$	153,308			$	307,345			$	298,518
Operating net interest income (tax equivalent) (1)		$	123,665			$	124,757			$	126,886			$	248,422			$	250,366
Adjustments to arrive at operating noninterest income (tax equivalent):
Investment securities loss (gain), net		(16,425)			(249)			(285)			(16,674)			(2,132)
Gain on asset disposals		(26)			(21)			—			(47)			—
Operating noninterest income (tax equivalent)		21,238			21,361			25,787			42,599			46,040
Total operating revenue (tax equivalent) (denominator B)		$	144,903			$	146,118			$	152,673			$	291,021			$	296,406
Efficiency ratio (tax equivalent) (numerator A/denominator A)		50.09	%		57.73	%		56.57	%		53.72	%		57.43	%
Operating efficiency ratio (tax equivalent) (numerator B/denominator B)		54.91	%		57.24	%		56.34	%		56.08	%		56.93	%

(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 $1.8 million, $1.9 million, and $2.1 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively, and $3.8 million and $4.2 million for the six months ended June 30, 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		Six Months Ended
		June 30,		March 31,		June 30,		June 30,		June 30,
		2020		2020		2019		2020		2019
Pre-tax, pre-provision income:		(in thousands)
Income before income taxes		$	44,777			$	17,858			$	63,818			$	62,635			$	120,474
Provision for credit losses		33,500			41,500			218			75,000			1,580
Pre-tax, pre-provision income		$	78,277			$	59,358			$	64,036			$	137,635			$	122,054

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:

		June 30,		March 31,		June 30,
		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)		$	2,276,755			$	2,213,602			$	2,133,638
Adjustments to arrive at tangible common equity:
Goodwill		(765,842)			(765,842)			(765,842)
Other intangible assets, net		(30,938)			(33,148)			(40,540)
Tangible common equity (numerator B)		$	1,479,975			$	1,414,612			$	1,327,256
Total assets (denominator A)		$	15,920,944			$	14,038,503			$	13,090,808
Adjustments to arrive at tangible assets:
Goodwill		(765,842)			(765,842)			(765,842)
Other intangible assets, net		(30,938)			(33,148)			(40,540)
Tangible assets (denominator B)		$	15,124,164			$	13,239,513			$	12,284,426
Shareholders' equity to total assets (numerator A/denominator A)		14.30	%		15.77	%		16.30	%
Tangible common shareholders' equity to tangible assets (numerator B/denominator B)		9.79	%		10.68	%		10.80	%
Common shares outstanding (denominator C)		71,586			71,575			72,924
Book value per common share (numerator A/denominator C)		$	31.80			$	30.93			$	29.26
Tangible book value per common share (numerator B/denominator C)		$	20.67			$	19.76			$	18.20

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:

		June 30,		March 31,		June 30,
		2020		2020		2019
Allowance for credit losses to period-end loans ratio non-GAAP reconciliation:		(dollars in thousands)
Allowance for credit losses ("ACL") (numerator)		$	151,546			$	122,074			$	80,517
Total loans, net of unearned income (denominator A)		9,771,898			8,933,321			8,646,990
Less: PPP loans, net of unearned income (0% ACL)		941,373			—			—
Total loans, net of PPP loans (denominator B)		$	8,830,525			$	8,933,321			$	8,646,990
ACL to period-end loans (numerator / denominator A)		1.55	%		1.37	%		0.93	%
ACL to period-end loans, excluding PPP loans (numerator / denominator B)		1.72	%		1.37	%		0.93	%

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		Six Months Ended
		June 30,		March 31,		June 30,		June 30,		June 30,
		2020		2020		2019		2020		2019
Return on average tangible common equity non-GAAP reconciliation:		(dollars in thousands)
Net income (numerator A)		$	36,582			$	14,628			$	51,724			$	51,210			$	97,595
Adjustments to arrive at tangible income applicable to common shareholders:
Amortization of intangibles		2,210			2,310			2,649			4,520			5,397
Tax effect on intangible amortization		(464)			(485)			(556)			(949)			(1,133)
Tangible income applicable to common shareholders (numerator B)		$	38,328			$	16,453			$	53,817			54,781			$	101,859
Average shareholders' equity (denominator A)		$	2,254,349			$	2,193,051			$	2,096,157			2,223,700			$	2,070,636
Adjustments to arrive at average tangible common equity:
Average intangibles		(797,855)			(800,079)			(807,678)			(798,967)			(809,020)
Average tangible common equity (denominator B)		$	1,456,494			$	1,392,972			$	1,288,479			$	1,424,733			$	1,261,616
Return on average common equity (numerator A/denominator A) (1)		6.49	%		2.67	%		9.87	%		4.61	%		9.43	%
Return on average tangible common equity (numerator B/denominator B) (2)		10.53	%		4.72	%		16.71	%		7.69	%		16.15	%

(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.

FAQ

What was Columbia Banking System's cash dividend for August 2020?

Columbia Banking System announced a cash dividend of $0.28 per common share, payable on August 19, 2020.

How did COVID-19 affect Columbia Banking System's credit provisions?

The provision for credit losses in Q2 2020 was $33.5 million, primarily due to the economic impact of COVID-19.

What key financial metrics did Columbia report for Q2 2020?

Columbia reported total assets of $15.92 billion, loans of $9.77 billion, and a net interest income of $121.9 million.

What were the net interest income trends for Columbia in Q2 2020?

Net interest income decreased by $571 thousand from the previous quarter, influenced by lower interest rates.

What increased noninterest income for Columbia in Q2 2020?

Noninterest income increased to $37.3 million, driven by gains from selling Visa Class B restricted shares.