Columbia Banking System Earnings 2019-03-31

COLB 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________________

FORM 10-Q

_____________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019.



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 0-20288

_________________________________________________________________________

COLUMBIA BANKING SYSTEM, INC.

(Exact name of registrant as specified in its charter)

_______________________________________________________________



Washington		91-1422237
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

1301 A Street Tacoma, Washington		98402-2156
(Address of principal executive offices)		(Zip Code)

(253) 305-1900

(Registrant’s telephone number, including area code)



Securities Registered Pursuant to Section 12(b) of the Act:
Common Stock, No Par Value	COLB	NASDAQ Global Select Market
(Title of each class)	(Trading symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer	x	Accelerated filer	¨

Non-accelerated filer	¨	Smaller reporting company	¨

		Emerging growth company	¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

The number of shares of common stock outstanding at April 30, 2019 was 73,555,751.

TABLE OF CONTENTS



		Page
	PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)

	Consolidated Balance Sheets - March 31, 2019 and December 31, 2018	2

	Consolidated Statements of Income - three months ended March 31, 2019 and 2018	3

	Consolidated Statements of Comprehensive Income - three months ended March 31, 2019 and 2018	4

	Consolidated Statements of Changes in Shareholders’ Equity - three months ended March 31, 2019 and 2018	5

	Consolidated Statements of Cash Flows - three months ended March 31, 2019 and 2018	6

	Notes to Unaudited Consolidated Financial Statements	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	51

Item 4.	Controls and Procedures	51

	PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	52

Item 1A.	Risk Factors	52

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3.	Defaults Upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	53

	Signatures	54

Table of Contents

PART I - FINANCIAL INFORMATION

Glossary of Acronyms, Abbreviations, and Terms

The acronyms, abbreviations, and terms listed below are used in various sections of the Form 10-Q, including “Item 1. Financial Statements” and “Item 2. Management Discussion and Analysis of Financial Condition and Results of Operations.”



ALLL	Allowance for loan and lease losses	FDIC	Federal Deposit Insurance Corporation
ASC	Accounting Standards Codification	FHLB	Federal Home Loan Bank of Des Moines
ASU	Accounting Standards Update	FRB	Federal Reserve Bank
ATM	Automated Teller Machine	LIBOR	London Interbank Offering Rate
Basel III	A comprehensive capital framework and rules for U.S. banking organizations approved by the FRB and the FDIC in 2013	NIM	Net Interest Margin
B&O	Business and Occupation	OPPO	Other Personal Property Owned
CDI	Core Deposit Intangible	OREO	Other Real Estate Owned
CECL	Current Expected Credit Loss	Pacific Continental	Pacific Continental Corporation
CDARS^®	Certificate of Deposit Account Registry Service	PCI	Purchased Credit Impaired
CET1	Common Equity Tier 1	REASD	Real Estate Appraisal Services Department
CEO	Chief Executive Officer	SBA	Small Business Administration
CFO	Chief Financial Officer	SEC	Securities and Exchange Commission
Dodd-Frank Act	Dodd-Frank Wall Street Reform and Consumer Protection Act	TDRs	Troubled Debt Restructurings
EPS	Earnings Per Share	GAAP	Generally Accepted Accounting Principles
FASB	Financial Accounting Standards Board

Table of Contents

Item 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

(Unaudited)



			March 31, 2019		December 31, 2018
ASSETS			(in thousands)
Cash and due from banks			$	178,591	$	260,180
Interest-earning deposits with banks			33,482		17,407
Total cash and cash equivalents			212,073		277,587
Debt securities available for sale at fair value			3,027,270		3,167,448
FHLB stock at cost			25,600		25,960
Loans held for sale			4,017		3,849
Loans, net of unearned income			8,520,798		8,391,511
Less: ALLL			83,274		83,369
Loans, net			8,437,524		8,308,142
Interest receivable			46,835		45,323
Premises and equipment, net			168,139		168,788
OREO			6,075		6,019
Goodwill			765,842		765,842
Other intangible assets, net			43,189		45,937
Other assets			327,872		280,250
Total assets			$	13,064,436	$	13,095,145
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits:
Noninterest-bearing			$	5,106,568	$	5,227,216
Interest-bearing			5,262,441		5,230,910
Total deposits			10,369,009		10,458,126
FHLB advances			390,510		399,523
Securities sold under agreements to repurchase			23,018		61,094
Subordinated debentures			35,416		35,462
Other liabilities			157,863		107,291
Total liabilities			10,975,816		11,061,496
Commitments and contingent liabilities (Note 11)
Shareholders’ equity:
	March 31, 2019	December 31, 2018
	(in thousands)
Preferred stock (no par value)
Authorized shares	2,000	2,000
Common stock (no par value)
Authorized shares	115,000	115,000
Issued and outstanding	73,565	73,249	1,642,977		1,642,246
Retained earnings			442,597		426,708
Accumulated other comprehensive income (loss)			3,046		(35,305		)
Total shareholders’ equity			2,088,620		2,033,649
Total liabilities and shareholders’ equity			$	13,064,436	$	13,095,145

See accompanying Notes to unaudited Consolidated Financial Statements.

Table of Contents

CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking System, Inc.

(Unaudited)



	Three Months Ended
	March 31,
	2019		2018
	(in thousands except per share amounts)
Interest Income
Loans	$	108,416	$	103,027
Taxable securities	17,415		12,708
Tax-exempt securities	2,969		3,064
Deposits in banks	88		345
Total interest income	128,888		119,144
Interest Expense
Deposits	4,498		2,509
FHLB advances	2,685		570
Subordinated debentures	468		468
Other borrowings	215		116
Total interest expense	7,866		3,663
Net Interest Income	121,022		115,481
Provision for loan and lease losses	1,362		5,852
Net interest income after provision for loan and lease losses	119,660		109,629
Noninterest Income
Deposit account and treasury management fees	8,980		8,740
Card revenue	3,662		5,813
Financial services and trust revenue	2,957		2,730
Loan revenue	2,389		3,186
Bank owned life insurance	1,519		1,426
Investment securities gains, net	1,847		22
Other	342		1,226
Total noninterest income	21,696		23,143
Noninterest Expense
Compensation and employee benefits	52,085		50,570
Occupancy	8,809		10,121
Data processing	4,669		5,270
Legal and professional fees	4,573		3,237
Amortization of intangibles	2,748		3,188
B&O taxes (1)	1,876		1,317
Advertising and promotion	974		1,429
Regulatory premiums	984		937
Net cost of operation of OREO	113		1
Other (1)	7,869		9,917
Total noninterest expense	84,700		85,987
Income before income taxes	56,656		46,785
Income tax provision	10,785		6,815
Net Income	$	45,871	$	39,970
Earnings per common share
Basic	$	0.63	$	0.55
Diluted	$	0.63	$	0.55
Weighted average number of common shares outstanding	72,521		72,300
Weighted average number of diluted common shares outstanding	72,524		72,305

__________

(1) Beginning the first quarter of 2019, B&O taxes are 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.

See accompanying Notes to unaudited Consolidated Financial Statements.

Table of Contents

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Columbia Banking System, Inc.

(Unaudited)



	Three Months Ended
	March 31,
	2019		2018
	(in thousands)
Net income	$	45,871	$	39,970
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) from securities:
Net unrealized holding gain (loss) from available for sale debt securities arising during the period, net of tax of ($9,713) and $7,891	32,063		(26,048		)
Reclassification adjustment of net (gain) loss from sale of available for sale debt securities included in income, net of tax of ($430) and $24	1,417		(78		)
Net unrealized gain (loss) from securities, net of reclassification adjustment	33,480		(26,126		)
Pension plan liability adjustment:
Amortization of unrecognized net actuarial loss included in net periodic pension cost, net of tax of ($19) and ($19)	61		61
Pension plan liability adjustment, net	61		61
Unrealized gain from cash flow hedging instruments:
Net unrealized gain in cash flow hedging instruments arising during the period, net of tax of ($1,458) and $0	4,810		—
Net unrealized gain from cash flow hedging instruments, net of reclassification adjustment	4,810		—
Other comprehensive income (loss)	38,351		(26,065		)
Total comprehensive income	$	84,222	$	13,905

See accompanying Notes to unaudited Consolidated Financial Statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Columbia Banking System, Inc.

(Unaudited)



	Common Stock					Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	Number of Shares		Amount			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Shareholders’ Equity
	(in thousands except per share amounts)
Balance at January 1, 2019	73,249		$	1,642,246		$	426,708		$	(35,305	)	$	2,033,649
Adjustment to opening retained earnings pursuant to adoption of ASU 2016-02	—		—			782			—			782
Net income	—		—			45,871			—			45,871
Other comprehensive income	—		—			—			38,351			38,351
Issuance of common stock - stock option and other plans	25		878			—			—			878
Issuance of common stock - restricted stock awards, net of canceled awards	355		2,285			—			—			2,285
Purchase and retirement of common stock	(64	)	(2,432		)	—			—			(2,432		)
Cash dividends declared on common stock ($0.42 per share)	—		—			(30,764		)	—			(30,764		)
Balance at March 31, 2019	73,565		$	1,642,977		$	442,597		$	3,046		$	2,088,620
Balance at January 1, 2018	73,020		$	1,634,705		$	337,442		$	(22,225	)	$	1,949,922
Adjustment to opening retained earnings pursuant to adoption of ASU 2016-01	—		—			(203		)	157			(46		)
Net income	—		—			39,970			—			39,970
Other comprehensive loss	—		—			—			(26,065		)	(26,065		)
Issuance of common stock - stock option and other plans	17		719			—			—			719
Activity in deferred compensation plan	—		3			—			—			3
Issuance of common stock - restricted stock awards, net of canceled awards	263		2,064			—			—			2,064
Purchase and retirement of common stock	(60	)	(2,575		)	—			—			(2,575		)
Cash dividends declared on common stock ($0.22 per share)	—		—			(16,069		)	—			(16,069		)
Balance at March 31, 2018	73,240		$	1,634,916		$	361,140		$	(48,133	)	$	1,947,923

See accompanying Notes to unaudited Consolidated Financial Statements.

Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS Columbia Banking System, Inc. (Unaudited)

	Three Months Ended March 31,
	2019			2018
	(in thousands)
Cash Flows From Operating Activities
Net income	$	45,871		$	39,970
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan and lease losses	1,362			5,852
Stock-based compensation expense	2,285			2,064
Depreciation, amortization and accretion	8,182			7,618
Investment securities gains, net	(1,847		)	(22		)
Net realized (gain) loss on sale of premises and equipment and loans held for investment	1			(630		)
Net realized loss o

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$37.20	74	$2,740

10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-05-22	Officers, Shareholder Vote
8-K	2019-04-25	Earnings, Other Events, Exhibits
8-K	2019-01-24	Earnings, Other Events, Exhibits
8-K	2019-01-24	Earnings, Other Events, Exhibits
8-K	2018-12-11	Officers
8-K	2018-10-25	Earnings, Other Events, Exhibits
8-K	2018-07-26	Earnings, Other Events, Exhibits
8-K	2018-07-25	Officers
8-K	2018-06-04	Officers
8-K	2018-05-23	Shareholder Vote
8-K	2018-05-02	Officers, Exhibits
8-K	2018-04-26	Earnings, Other Events, Exhibits
8-K	2018-01-24	Officers, Exhibits
8-K	2018-01-19	Other Events, Exhibits

ERIC	Ericsson Lm Telephone	30,370
AAT	American Assets Trust	2,180
MNR	Monmouth Real Estate Investment	1,300
MTSC	MTS Systems	1,020
WINA	Winmark	668
MCRB	Seres Therapeutics	196
WCVC	West Coast Ventures Group	0
NOVC	Novation Companies	0
CINAV	Cole Real Estate Income Strategy	0
ECIA	Encision	0

EX-10.1	ex101steinclinteffecti.htm
EX-10.2	dowserp022519.htm
EX-10.3	dowendorsementmethodsp.htm
EX-10.4	dowfirstamendmenttoend.htm
EX-31.1	colb1q2019ex311.htm
EX-31.2	colb1q2019ex312.htm
EX-32	colb1q2019ex32.htm