Columbia Banking System Announces Second Quarter 2018 Results and Quarterly Cash Dividend

News provided by

Jul 26, 2018, 09:00 ET

TACOMA, Wash., July 26, 2018 /PRNewswire/ --

Highlights

Record quarterly net income of $41.7 million; diluted earnings per share of $0.57, which included $0.03 per share negative impact from acquisition-related expenses
Net interest margin of 4.29%, up 7 basis points from linked quarter
Record second quarter loan production of $372.7 million
Nonperforming assets to period end assets ratio decreased to 0.61%

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 second quarter 2018 earnings, "Our bankers had a very successful quarter in generating a record level of production, while at the same time working down nonperforming assets. Year over year, we have seen earnings before income taxes grow more than 35%."

Balance Sheet

Total assets at June 30, 2018 were $12.63 billion, an increase of $98.0 million from March 31, 2018. Loans were $8.45 billion, up $114.5 million from March 31, 2018 as loan originations of $372.7 million and increased seasonal line utilization were partially offset by payments. Debt securities available for sale were $2.65 billion at June 30, 2018, an increase of $22.2 million, or 1% from $2.62 billion at March 31, 2018. Total deposits at June 30, 2018 were $10.38 billion, a decrease of $11.5 million from March 31, 2018. Core deposits comprised 95% of total deposits and were $9.89 billion at June 30, 2018, a decrease of $8.5 million from March 31, 2018. The average cost of total deposits for the quarter was 0.10%, unchanged from the first quarter of 2018.

Income Statement

Net Interest Income

Net interest income for the second quarter of 2018 was $116.7 million, an increase of $1.2 million from the linked quarter and an increase of $30.5 million from the prior year period. The increase from the linked quarter was due to higher rates on earning assets and the increase from the prior year period was primarily due to income from earning assets acquired in the Pacific Continental acquisition, which closed on November 1, 2017, as well as higher rates on earning assets. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" table.

Noninterest Income

Noninterest income was $23.7 million for the second quarter of 2018, an increase of $549 thousand from the first quarter of 2018. The linked quarter increase was principally due to higher card revenue and financial services and trust revenue, partially offset by lower other noninterest income. Compared to the second quarter of 2017, noninterest income decreased by $443 thousand. The decrease was due to the lack of merchant processing revenue in the current quarter as a result of the sale of our merchant card services portfolio in the third quarter of 2017, partially offset by an increase in treasury management fees. As a result of the merchant card services portfolio sale, we now share with the buyer in merchant services revenue and include such amounts in "Card revenue." For the current quarter, this net revenue share was $855 thousand. Also contributing to the decrease in noninterest income compared to the prior year period was our change to net presentation of interchange revenue pursuant to the adoption of new revenue recognition accounting guidance on January 1, 2018. Specifically, $1.2 million of payment card network expenses that would have historically been presented in other noninterest expense are now presented in card revenue.

Noninterest Expense

Total noninterest expense for the second quarter of 2018 was $84.6 million, a decrease of $1.3 million from the first quarter of 2018. After removing the effect of acquisition-related expenses of $2.8 million, noninterest expense for the current quarter was essentially flat from the linked quarter on the same basis as higher OREO and legal and professional fees were offset by lower compensation and employee benefits and other noninterest expense. Compared to the second quarter of 2017, noninterest expense increased $15.8 million. This increase was driven by additional, ongoing expenses resulting from our November 1, 2017 acquisition of Pacific Continental and $1.8 million higher acquisition-related expenses in the current quarter.

Provision for Income Taxes

Our effective tax rate for the current quarter was 19.3%, compared to 14.6% and 29.1% for the linked and prior year periods, respectively. The increase from the linked period is due to the tax benefit of discrete items such as share-based compensation recorded in the first quarter. The decrease from the prior year period was principally attributable to the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which lowered the corporate tax rate to 21% from 35%. The prior year period's effective tax rate reflected the then-enacted 35% corporate tax rate reduced by favorable tax attributes of certain earning assets and discrete tax benefits from share-based compensation.

Our effective tax rate remains below the statutory tax rate due to tax-exempt income from municipal securities, bank owned life insurance and certain loan receivables.

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the second quarter of 2018 was 4.29%, an increase of 7 basis points from the linked quarter and 17 basis points from the prior year period. The increases were due to higher rates on interest-earning assets. Columbia's operating net interest margin (tax equivalent)⁽¹⁾was 4.27% for the second quarter of 2018, an increase of 9 basis points from the linked quarter and an increase of 18 basis points from the prior year period. These increases were due to higher rates on interest-earning assets, which more than offset the more modest increase in rates on interest-bearing liabilities from the comparative periods.

Greg Sigrist, Columbia's Executive Vice President and Chief Financial Officer, commented, "Columbia's net interest margin continues to benefit from the strength of our core deposits."

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															Six Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,			June 30,			June 30,
	2018			2018			2017			2017			2017			2018			2017
	*(dollars in thousands)*
Incremental accretion income due to:
FDIC purchased credit impaired loans	$	326		$	329		$	265		$	972		$	753		$	655		$	2,870
Other acquired loans	2,690			3,370			2,482			1,903			2,356			6,060			4,304
Incremental accretion income	$	3,016		$	3,699		$	2,747		$	2,875		$	3,109		$	6,715		$	7,174

Net interest margin (tax equivalent)	4.29		%	4.22		%	4.20		%	4.20		%	4.12		%	4.26		%	4.16		%
Operating net interest margin (tax equivalent) (1)	4.27		%	4.18		%	4.25		%	4.15		%	4.09		%	4.22		%	4.09		%

__________

(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.

Asset Quality

At June 30, 2018, nonperforming assets to total assets were 0.61% compared to 0.72% at March 31, 2018. Total nonperforming assets decreased $13.4 million from the linked quarter due to a $9.0 million decrease in nonaccrual loans and a decrease in other real estate owned.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "For the quarter, we enjoyed a modest decline in non-performing assets and saw continued positive migration in portfolio metrics overall. However, we took a rather large charge-off in the agricultural portfolio during the quarter, which principally drove the provision. Absent this event, it was a strong quarter for the bank from a credit perspective."

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

	June 30, 2018		March 31, 2018		December 31, 2017
	*(in thousands)*
Nonaccrual loans:
Commercial business	$	52,036	$	57,619	$	45,460
Real estate:
One-to-four family residential	976		1,054		785
Commercial and multifamily residential	11,118		14,539		13,941
Total real estate	12,094		15,593		14,726
Real estate construction:
One-to-four family residential	389		1,210		1,854
Total real estate construction	389		1,210		1,854
Consumer	4,985		4,042		4,149
Total nonaccrual loans	69,504		78,464		66,189
Other real estate owned and other personal property owned	7,080		11,507		13,298
Total nonperforming assets	$	76,584	$	89,971	$	79,487

The following table provides an analysis of the Company's allowance for loan and lease losses:

	Three Months Ended						Six Months Ended
	June 30, 2018		March 31, 2018		June 30, 2017		June 30, 2018		June 30, 2017
	*(in thousands)*
Beginning balance	$	79,827	$	75,646	$	71,021	$	75,646	$	70,043
Charge-offs:
Commercial business	(5,775)		(2,477)		(3,600)		(8,252)		(4,727)
One-to-four family residential real estate	—		—		(153)		—		(460)
Commercial and multifamily residential real estate	—		(223)		—		(223)		—
One-to-four family residential real estate construction	—		—		—		—		(14)
Consumer	(232)		(264)		(465)		(496)		(893)
Purchased credit impaired	(1,235)		(1,343)		(1,800)		(2,578)		(3,739)
Total charge-offs	(7,242)		(4,307)		(6,018)		(11,549)		(9,833)
Recoveries:
Commercial business	1,543		802		2,944		2,345		3,309
One-to-four family residential real estate	196		172		223		368		340
Commercial and multifamily residential real estate	640		159		127		799		205
One-to-four family residential real estate construction	14		19		58		33		87
Consumer	270		260		248		530		533
Purchased credit impaired	927		1,224		1,204		2,151		2,348
Total recoveries	3,590		2,636		4,804		6,226		6,822
Net charge-offs	(3,652)		(1,671)		(1,214)		(5,323)		(3,011)
Provision for loan and lease losses	3,975		5,852		3,177		9,827		5,952
Ending balance	$	80,150	$	79,827	$	72,984	$	80,150	$	72,984

The allowance for loan losses to period end loans was 0.95% at June 30, 2018 compared to 0.96% at March 31, 2018. For the second quarter of 2018, Columbia recorded a net provision for loan and lease losses of $4.0 million compared to a net provision of $5.9 million 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 current quarter consisted of $4.6 million of provision expense for loan losses, excluding PCI loans and a provision recapture of $575 thousand for PCI loans.

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.26 per common share on August 22, 2018 to shareholders of record as of the close of business on August 8, 2018.

Conference Call Information

Columbia's management will discuss the second quarter 2018 financial results on a conference call scheduled for Thursday, July 26, 2018 at 1:00 p.m. Pacific Time (4:00 p.m. ET). Interested parties may join the live-streamed event by using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~072618

The conference call can also be accessed on Thursday, July 26, 2018 at 1:00 p.m. Pacific Time (4:00 p.m. ET) by calling 888-286-8956; Conference ID: 7677614.

A replay of the call can be accessed beginning Friday, July 27, 2018 using the site:

https://engage.vevent.com/rt/columbiabankingsysteminc~072618

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 12th consecutive year, the bank was named in 2018 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked 11th on the 2018 Forbes list of best banks.

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

Note Regarding Forward-Looking Statements

This news release includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward looking statements include, but are not limited to, descriptions of Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy. The words "will," "believe," "expect," "intend," "should," and "anticipate" or the negative of these words or words of similar construction are intended in part to help identify forward looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risks and uncertainties, many of which are outside our control, that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, including the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q, (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (3) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (4) costs or difficulties related to the integration of acquisitions may be greater than expected; (5) competitive pressure among financial institutions may increase significantly; and (6) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

Contacts:	Hadley S. Robbins,
	President and
	Chief Executive Officer

	Gregory A. Sigrist,
	Executive Vice President and
	Chief Financial Officer

	Investor Relations
	[email protected]
	253-305-1921

*CONSOLIDATED BALANCE SHEETS*
*Columbia Banking System, Inc.*
Unaudited				June 30,		March 31,		December 31,
				2018		2018		2017
				*(in thousands)*
ASSETS
Cash and due from banks				$	224,370	$	206,532	$	244,615
Interest-earning deposits with banks				39,169		87,124		97,918
Total cash and cash equivalents				263,539		293,656		342,533
Debt securities available for sale at fair value				2,646,208		2,624,045		2,737,751
Equity securities at fair value				4,963		5,000		5,080
Federal Home Loan Bank ("FHLB") stock at cost				13,960		11,640		10,440
Loans held for sale				6,773		4,312		5,766
Loans, net of unearned income				8,454,107		8,339,631		8,358,657
Less: allowance for loan and lease losses				80,150		79,827		75,646
Loans, net				8,373,957		8,259,804		8,283,011
Interest receivable				43,105		41,795		40,881
Premises and equipment, net				168,315		168,366		169,490
Other real estate owned				7,080		11,507		13,298
Goodwill				765,842		765,842		765,842
Other intangible assets, net				51,897		54,985		58,173
Other assets				282,947		289,684		284,621
Total assets				$	12,628,586	$	12,530,636	$	12,716,886
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing				$	4,953,993	$	4,927,226	$	5,081,901
Interest-bearing				5,430,011		5,468,297		5,450,184
Total deposits				10,384,004		10,395,523		10,532,085
FHLB advances				99,549		41,564		11,579
Securities sold under agreements to repurchase				46,229		24,247		79,059
Subordinated debentures				35,555		35,601		35,647
Junior subordinated debentures				—		—		8,248
Other liabilities				98,368		85,778		100,346
Total liabilities				10,663,705		10,582,713		10,766,964
Commitments and contingent liabilities
	June 30,	March 31,	December 31,
	2018	2018	2017
	*(in thousands)*
Common stock (no par value)
Authorized shares	115,000	115,000	115,000
Issued and outstanding	73,245	73,240	73,020	1,636,903		1,634,916		1,634,705
Retained earnings				383,899		361,140		337,442
Accumulated other comprehensive loss				(55,921)		(48,133)		(22,225)
Total shareholders' equity				1,964,881		1,947,923		1,949,922
Total liabilities and shareholders' equity				$	12,628,586	$	12,530,636	$	12,716,886

*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,
	2018		2018		2017		2018		2017
*Interest Income*	*(in thousands except per share)*
Loans	$	105,412	$	103,027	$	75,579	$	208,439	$	149,699
Taxable securities	11,923		12,708		9,468		24,631		20,454
Tax-exempt securities	3,063		3,064		2,716		6,127		5,407
Deposits in banks	151		345		23		496		42
Total interest income	120,549		119,144		87,786		239,693		175,602
*Interest Expense*
Deposits	2,572		2,509		908		5,081		1,695
FHLB advances	815		570		591		1,385		816
Subordinated debentures	468		468		—		936		—
Other borrowings	20		116		126		136		255
Total interest expense	3,875		3,663		1,625		7,538		2,766
*Net Interest Income*	116,674		115,481		86,161		232,155		172,836
Provision for loan and lease losses	3,975		5,852		3,177		9,827		5,952
Net interest income after provision for loan and lease losses	112,699		109,629		82,984		222,328		166,884
*Noninterest Income*
Deposit account and treasury management fees	8,683		8,740		7,396		17,423		14,683
Card revenue	6,616		5,813		6,202		12,429		11,925
Financial services and trust revenue	3,219		2,730		3,036		5,949		5,875
Loan revenue	3,054		3,186		2,989		6,240		6,582
Merchant processing revenue	—		—		2,264		—		4,283
Bank owned life insurance	1,712		1,426		1,433		3,138		2,713
Investment securities gains (losses), net	(33)		22		—		(11)		—
Change in FDIC loss-sharing asset	—		—		(173)		—		(447)
Other	441		1,226		988		1,667		3,380
Total noninterest income	23,692		23,143		24,135		46,835		48,994
*Noninterest Expense*
Compensation and employee benefits	48,949		50,570		38,393		99,519		79,218
Occupancy	9,276		10,121		7,577		19,397		14,768
Merchant processing expense	—		—		1,147		—		2,196
Advertising and promotion	1,622		1,429		1,137		3,051		1,954
Data processing	5,221		5,270		4,741		10,491		8,949
Legal and professional fees	4,171		3,237		2,947		7,408		6,316
Taxes, licenses and fees	1,560		1,425		748		2,985		1,989
Regulatory premiums	937		937		741		1,874		1,517
Net cost (benefit) of operation of other real estate owned	758		1		(1)		759		151
Amortization of intangibles	3,088		3,188		1,249		6,276		2,598
Other	9,061		9,809		10,188		18,870		18,197
Total noninterest expense	84,643		85,987		68,867		170,630		137,853
Income before income taxes	51,748		46,785		38,252		98,533		78,025
Provision for income taxes	9,999		6,815		11,120		16,814		21,694
*Net Income*	$	41,749	$	39,970	$	27,132	$	81,719	$	56,331
Earnings per common share
Basic	$	0.57	$	0.55	$	0.47	$	1.12	$	0.97
Diluted	$	0.57	$	0.55	$	0.47	$	1.12	$	0.97
Dividends declared per common share	$	0.26	$	0.22	$	0.22	$	0.48	$	0.44
Weighted average number of common shares outstanding	72,385		72,300		57,520		72,343		57,437
Weighted average number of diluted common shares outstanding	72,390		72,305		57,525		72,347		57,442

*FINANCIAL STATISTICS*
*Columbia Banking System, Inc.*	Three Months Ended									Six Months Ended
Unaudited	June 30,			March 31,			June 30,			June 30,			June 30,
	2018			2018			2017			2018			2017
Earnings	*(dollars in thousands except per share amounts)*
Net interest income	$	116,674		$	115,481		$	86,161		$	232,155		$	172,836
Provision for loan and lease losses	$	3,975		$	5,852		$	3,177		$	9,827		$	5,952
Noninterest income	$	23,692		$	23,143		$	24,135		$	46,835		$	48,994
Noninterest expense	$	84,643		$	85,987		$	68,867		$	170,630		$	137,853
Acquisition-related expense (included in noninterest expense)	$	2,822		$	4,265		$	1,023		$	7,087		$	2,387
Net income	$	41,749		$	39,970		$	27,132		$	81,719		$	56,331
Per Common Share
Earnings (basic)	$	0.57		$	0.55		$	0.47		$	1.12		$	0.97
Earnings (diluted)	$	0.57		$	0.55		$	0.47		$	1.12		$	0.97
Book value	$	26.83		$	26.60		$	22.23		$	26.83		$	22.23
Tangible book value per common share (2)	$	15.66		$	15.39		$	15.42		$	15.66		$	15.42
Averages
Total assets	$	12,529,540		$	12,603,144		$	9,597,274		$	12,566,138		$	9,535,827
Interest-earning assets	$	11,052,807		$	11,122,753		$	8,651,735		$	11,087,587		$	8,586,376
Loans	$	8,389,230		$	8,348,740		$	6,325,462		$	8,369,097		$	6,262,190
Securities, including equity securities and FHLB stock	$	2,628,292		$	2,682,250		$	2,316,077		$	2,655,122		$	2,313,299
Deposits	$	10,264,822		$	10,334,480		$	7,965,868		$	10,299,459		$	7,960,292
Interest-bearing deposits	$	5,390,869		$	5,405,730		$	4,123,135		$	5,398,259		$	4,120,882
Interest-bearing liabilities	$	5,611,055		$	5,627,853		$	4,367,216		$	5,619,408		$	4,315,724
Noninterest-bearing deposits	$	4,873,953		$	4,928,750		$	3,842,733		$	4,901,200		$	3,839,410
Shareholders' equity	$	1,954,552		$	1,949,275		$	1,295,564		$	1,951,928		$	1,278,702
Financial Ratios
Return on average assets	1.33		%	1.27		%	1.13		%	1.30		%	1.18		%
Return on average common equity	8.54		%	8.20		%	8.38		%	8.37		%	8.81		%
Return on average tangible common equity (2)	15.57		%	15.08		%	12.46		%	15.33		%	13.19		%
Average equity to average assets	15.60		%	15.47		%	13.50		%	15.53		%	13.41		%
Shareholders equity to total assets	15.56		%	15.55		%	13.39		%	15.56		%	13.39		%
Tangible common shareholders' equity to tangible assets (2)	9.71		%	9.63		%	9.69		%	9.71		%	9.69		%
Net interest margin (tax equivalent)	4.29		%	4.22		%	4.12		%	4.26		%	4.16		%
Efficiency ratio (tax equivalent) (1)	59.29		%	61.04		%	60.42		%	60.16		%	60.19		%
Operating efficiency ratio (tax equivalent) (2)	56.02		%	57.59		%	57.23		%	56.80		%	58.15		%
Noninterest expense ratio	2.70		%	2.73		%	2.87		%	2.72		%	2.89		%
Core noninterest expense ratio (2)	2.61		%	2.59		%	2.73		%	2.60		%	2.79		%
	June 30,			March 31,			December 31,
Period end	2018			2018			2017
Total assets	$	12,628,586		$	12,530,636		$	12,716,886
Loans, net of unearned income	$	8,454,107		$	8,339,631		$	8,358,657
Allowance for loan and lease losses	$	80,150		$	79,827		$	75,646
Securities, including equity securities and FHLB stock	$	2,665,131		$	2,640,685		$	2,753,271
Deposits	$	10,384,004		$	10,395,523		$	10,532,085
Core deposits	$	9,888,696		$	9,897,185		$	10,039,557
Shareholders' equity	$	1,964,881		$	1,947,923		$	1,949,922
Nonperforming assets
Nonaccrual loans	$	69,504		$	78,464		$	66,189
Other real estate owned ("OREO") and other personal property owned ("OPPO")	7,080			11,507			13,298
Total nonperforming assets	$	76,584		$	89,971		$	79,487
Nonperforming loans to period-end loans	0.82		%	0.94		%	0.79		%
Nonperforming assets to period-end assets	0.61		%	0.72		%	0.63		%
Allowance for loan and lease losses to period-end loans	0.95		%	0.96		%	0.91		%
Net loan charge-offs (recoveries) (3)	$	3,652		$	1,671		$	(703)

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

(2) 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.

(3) For the three months ended.

*QUARTERLY FINANCIAL STATISTICS*
*Columbia Banking System, Inc.*	Three Months Ended
Unaudited	June 30,			March 31,			December 31,			September 30,			June 30,
	2018			2018			2017			2017			2017
Earnings	*(dollars in thousands except per share)*
Net interest income	$	116,674		$	115,481		$	106,224		$	88,929		$	86,161
Provision (recapture) for loan and lease losses	$	3,975		$	5,852		$	3,327		$	(648)		$	3,177
Noninterest income	$	23,692		$	23,143		$	23,581		$	37,067		$	24,135
Noninterest expense	$	84,643		$	85,987		$	85,627		$	67,537		$	68,867
Acquisition-related expense (included in noninterest expense)	$	2,822		$	4,265		$	13,638		$	1,171		$	1,023
Net income	$	41,749		$	39,970		$	15,728		$	40,769		$	27,132
Per Common Share
Earnings (basic)	$	0.57		$	0.55		$	0.23		$	0.70		$	0.47
Earnings (diluted)	$	0.57		$	0.55		$	0.23		$	0.70		$	0.47
Book value	$	26.83		$	26.60		$	26.70		$	22.76		$	22.23
Tangible book value per common share (1)	$	15.66		$	15.39		$	15.42		$	15.96		$	15.42
Averages
Total assets	$	12,529,540		$	12,603,144		$	11,751,049		$	9,695,005		$	9,597,274
Interest-earning assets	$	11,052,807		$	11,122,753		$	10,453,097		$	8,750,561		$	8,651,735
Loans	$	8,389,230		$	8,348,740		$	7,749,420		$	6,441,537		$	6,325,462
Securities, including equity securities and FHLB stock	$	2,628,292		$	2,682,250		$	2,539,321		$	2,236,235		$	2,316,077
Deposits	$	10,264,822		$	10,334,480		$	9,804,456		$	8,187,337		$	7,965,868
Interest-bearing deposits	$	5,390,869		$	5,405,730		$	5,033,980		$	4,200,580		$	4,123,135
Interest-bearing liabilities	$	5,611,055		$	5,627,853		$	5,127,100		$	4,285,936		$	4,367,216
Noninterest-bearing deposits	$	4,873,953		$	4,928,750		$	4,770,476		$	3,986,757		$	3,842,733
Shareholders' equity	$	1,954,552		$	1,949,275		$	1,754,745		$	1,323,794		$	1,295,564
Financial Ratios
Return on average assets	1.33		%	1.27		%	0.54		%	1.68		%	1.13		%
Return on average common equity	8.54		%	8.20		%	3.59		%	12.32		%	8.38		%
Return on average tangible common equity (1)	15.57		%	15.08		%	6.37		%	17.93		%	12.46		%
Average equity to average assets	15.60		%	15.47		%	14.93		%	13.65		%	13.50		%
Shareholders' equity to total assets	15.56		%	15.55		%	15.33		%	13.54		%	13.39		%
Tangible common shareholders' equity to tangible assets (1)	9.71		%	9.63		%	9.47		%	9.89		%	9.69		%
Net interest margin (tax equivalent)	4.29		%	4.22		%	4.20		%	4.20		%	4.12		%
Period end
Total assets	$	12,628,586		$	12,530,636		$	12,716,886		$	9,814,578		$	9,685,110
Loans, net of unearned income	$	8,454,107		$	8,339,631		$	8,358,657		$	6,512,006		$	6,423,074
Allowance for loan and lease losses	$	80,150		$	79,827		$	75,646		$	71,616		$	72,984
Securities, including equity securities and FHLB stock	$	2,665,131		$	2,640,685		$	2,753,271		$	2,218,113		$	2,280,996
Deposits	$	10,384,004		$	10,395,523		$	10,532,085		$	8,341,717		$	8,072,464
Core deposits	$	9,888,696		$	9,897,185		$	10,039,557		$	7,999,499		$	7,721,766
Shareholders' equity	$	1,964,881		$	1,947,923		$	1,949,922		$	1,328,428		$	1,297,314
Goodwill	$	765,842		$	765,842		$	765,842		$	382,762		$	382,762
Other intangible assets, net	$	51,897		$	54,985		$	58,173		$	13,845		$	15,033
Nonperforming assets
Nonaccrual loans	$	69,504		$	78,464		$	66,189		$	40,317		$	36,824
OREO and OPPO	7,080			11,507			13,298			3,682			4,058
Total nonperforming assets	$	76,584		$	89,971		$	79,487		$	43,999		$	40,882
Nonperforming loans to period-end loans	0.82		%	0.94		%	0.79		%	0.62		%	0.57		%
Nonperforming assets to period-end assets	0.61		%	0.72		%	0.63		%	0.45		%	0.42		%
Allowance for loan and lease losses to period-end loans	0.95		%	0.96		%	0.91		%	1.10		%	1.14		%
Net loan charge-offs (recoveries)	$	3,652		$	1,671		$	(703)		$	720		$	1,214

(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.

*LOAN PORTFOLIO COMPOSITION*
*Columbia Banking System, Inc.*
Unaudited	June 30,		March 31,		December 31,		September 30,		June 30,
	2018		2018		2017		2017		2017
Loan Portfolio Composition - Dollars	*(dollars in thousands)*
Commercial business	$	3,538,492	$	3,402,162	$	3,377,324	$	2,735,206	$	2,704,468
Real estate:
One-to-four family residential	180,522		182,302		188,396		176,487		173,150
Commercial and multifamily residential	3,758,207		3,776,709		3,825,739		2,825,794		2,787,560
Total real estate	3,938,729		3,959,011		4,014,135		3,002,281		2,960,710
Real estate construction:
One-to-four family residential	206,181		208,441		200,518		145,419		139,956
Commercial and multifamily residential	387,951		385,339		371,931		213,939		195,565
Total real estate construction	594,132		593,780		572,449		359,358		335,521
Consumer	326,402		323,631		334,190		323,913		323,187
Purchased credit impaired	101,782		109,299		112,670		120,477		129,853
Subtotal loans	8,499,537		8,387,883		8,410,768		6,541,235		6,453,739
Less: Net unearned income	(45,430)		(48,252)		(52,111)		(29,229)		(30,665)
Loans, net of unearned income	8,454,107		8,339,631		8,358,657		6,512,006		6,423,074
Less: Allowance for loan and lease losses	(80,150)		(79,827)		(75,646)		(71,616)		(72,984)
Total loans, net	8,373,957		8,259,804		8,283,011		6,440,390		6,350,090
Loans held for sale	$	6,773	$	4,312	$	5,766	$	7,802	$	6,918

Loan Portfolio Composition - Percentages	June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017		June 30, 2017
Commercial business	41.9	%	40.8	%	40.4	%	42.0	%	42.1	%
Real estate:
One-to-four family residential	2.1	%	2.2	%	2.3	%	2.7	%	2.7	%
Commercial and multifamily residential	44.4	%	45.3	%	45.8	%	43.3	%	43.5	%
Total real estate	46.5	%	47.5	%	48.1	%	46.0	%	46.2	%
Real estate construction:
One-to-four family residential	2.4	%	2.5	%	2.4	%	2.2	%	2.2	%
Commercial and multifamily residential	4.6	%	4.6	%	4.4	%	3.3	%	3.0	%
Total real estate construction	7.0	%	7.1	%	6.8	%	5.5	%	5.2	%
Consumer	3.9	%	3.9	%	4.0	%	5.0	%	5.0	%
Purchased credit impaired	1.2	%	1.3	%	1.3	%	1.9	%	2.0	%
Subtotal loans	100.5	%	100.6	%	100.6	%	100.4	%	100.5	%
Less: Net unearned income	(0.5)	%	(0.6)	%	(0.6)	%	(0.4)	%	(0.5)	%
Loans, net of unearned income	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,
	2018		2018		2017		2017		2017
Deposit Composition - Dollars	*(dollars in thousands)*
Core deposits:
Demand and other non-interest bearing	$	4,953,993	$	4,927,226	$	5,081,901	$	4,119,950	$	3,905,652
Interest bearing demand	1,278,686		1,328,756		1,265,212		1,009,378		988,532
Money market	2,513,648		2,477,487		2,543,712		1,821,262		1,787,101
Savings	875,707		886,171		861,941		772,858		756,825
Certificates of deposit, less than $250,000	266,662		277,545		286,791		276,051		283,656
Total core deposits	9,888,696		9,897,185		10,039,557		7,999,499		7,721,766

Certificates of deposit, $250,000 or more	91,578		96,333		100,399		84,105		81,861
Certificates of deposit insured by CDARS® (1)	23,492		23,191		25,374		20,690		19,276
Brokered certificates of deposit	68,870		76,931		78,481		—		—
Reciprocal money market accounts (1)	311,935		302,544		289,031		237,421		249,554
Subtotal	10,384,571		10,396,184		10,532,842		8,341,715		8,072,457
Premium (discount) resulting from acquisition date fair value adjustment	(567)		(661)		(757)		2		7
Total deposits	$	10,384,004	$	10,395,523	$	10,532,085	$	8,341,717	$	8,072,464

Deposit Composition - Percentages	June 30, 2018		March 31, 2018		December 31, 2017		September 30, 2017		June 30, 2017
Core deposits:
Demand and other non-interest bearing	47.7	%	47.4	%	48.2	%	49.4	%	48.4	%
Interest bearing demand	12.3	%	12.8	%	12.0	%	12.1	%	12.2	%
Money market	24.2	%	23.8	%	24.2	%	21.8	%	22.1	%
Savings	8.4	%	8.5	%	8.2	%	9.3	%	9.4	%
Certificates of deposit, less than $250,000	2.6	%	2.7	%	2.7	%	3.3	%	3.5	%
Total core deposits	95.2	%	95.2	%	95.3	%	95.9	%	95.6	%

Certificates of deposit, $250,000 or more	0.9	%	0.9	%	1.0	%	1.0	%	1.0	%
Certificates of deposit insured by CDARS® (1)	0.2	%	0.2	%	0.2	%	0.2	%	0.2	%
Brokered certificates of deposit	0.7	%	0.7	%	0.7	%	—	%	—	%
Reciprocal money market accounts (1)	3.0	%	3.0	%	2.8	%	2.9	%	3.2	%
Total	100.0	%	100.0	%	100.0	%	100.0	%	100.0	%

__________

(1) For periods prior to June 30, 2018, CDARS® and reciprocal money market accounts were considered to be brokered deposits by regulatory authorities and were reported as such on quarterly Call Reports. With the passage of The Economic Growth, Regulatory Relief and Consumer Protection Act in May 2018, these items are no longer considered brokered deposits.

*AVERAGE BALANCES AND RATES*
*Columbia Banking System, Inc.*
Unaudited
	Three Months Ended						Three Months Ended
	June 30, 2018						June 30, 2017
	Average Balances		Interest Earned / Paid		Average Rate		Average Balances		Interest Earned / Paid		Average Rate
	*(dollars in thousands)*
ASSETS
Loans, net (1)(2)	$	8,389,230	$	106,526	5.08	%	$	6,325,462	$	77,030	4.87	%
Taxable securities	2,111,086		11,923		2.26	%	1,861,895		9,468		2.03	%
Tax exempt securities (2)	517,206		3,877		3.00	%	454,182		4,179		3.68	%
Interest-earning deposits with banks	35,285		151		1.71	%	10,196		23		0.90	%
Total interest-earning assets	11,052,807		$	122,477	4.43	%	8,651,735		$	90,700	4.19	%
Other earning assets	221,141						173,044
Noninterest-earning assets	1,255,592						772,495
Total assets	$	12,529,540					$	9,597,274
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit	$	464,217	$	549	0.47	%	$	386,361	$	95	0.10	%
Savings accounts	875,529		30		0.01	%	755,253		19		0.01	%
Interest-bearing demand	1,295,409		608		0.19	%	983,936		192		0.08	%
Money market accounts	2,755,714		1,385		0.20	%	1,997,585		602		0.12	%
Total interest-bearing deposits	5,390,869		2,572		0.19	%	4,123,135		908		0.09	%
FHLB advances	156,512		815		2.08	%	195,369		591		1.21	%
Subordinated debentures	35,577		468		5.26	%	—		—		—	%
Other borrowings	28,097		20		0.28	%	48,712		126		1.03	%
Total interest-bearing liabilities	5,611,055		$	3,875	0.28	%	4,367,216		$	1,625	0.15	%
Noninterest-bearing deposits	4,873,953						3,842,733
Other noninterest-bearing liabilities	89,980						91,761
Shareholders' equity	1,954,552						1,295,564
Total liabilities & shareholders' equity	$	12,529,540					$	9,597,274
Net interest income (tax equivalent)			$	118,602					$	89,075
Net interest margin (tax equivalent)					4.29	%					4.12	%


(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 $2.1 million and $1.8 million for the three month periods ended June 30, 2018 and June 30, 2017, respectively. The incremental accretion on acquired loans was $3.0 million and $3.1 million for the three months ended June 30, 2018 and 2017, respectively.
(2)	Tax-exempt income is calculated on a tax equivalent basis at a rate of 21% for 2018 and 35% for 2017. The tax equivalent yield adjustment to interest earned on loans was $1.1 million and $1.5 million for the three months ended June 30, 2018 and 2017, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $814 thousand and $1.5 million for the three month periods ended June 30, 2018 and 2017, respectively.

*AVERAGE BALANCES AND RATES*
*Columbia Banking System, Inc.*
Unaudited
	Three Months Ended						Three Months Ended
	June 30, 2018						March 31, 2018
	Average Balances		Interest Earned / Paid		Average Rate		Average Balances		Interest Earned / Paid		Average Rate
	*(dollars in thousands)*
ASSETS
Loans, net (1)(2)	$	8,389,230	$	106,526	5.08	%	$	8,348,740	$	104,091	4.99	%
Taxable securities	2,111,086		11,923		2.26	%	2,158,039		12,708		2.36	%
Tax exempt securities (2)	517,206		3,877		3.00	%	524,211		3,878		2.96	%
Interest-earning deposits with banks	35,285		151		1.71	%	91,763		345		1.50	%
Total interest-earning assets	11,052,807		$	122,477	4.43	%	11,122,753		$	121,022	4.35	%
Other earning assets	221,141						218,126
Noninterest-earning assets	1,255,592						1,262,265
Total assets	$	12,529,540					$	12,603,144
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit	$	464,217	$	549	0.47	%	$	479,729	$	526	0.44	%
Savings accounts	875,529		30		0.01	%	878,170		41		0.02	%
Interest-bearing demand	1,295,409		608		0.19	%	1,252,823		535		0.17	%
Money market accounts	2,755,714		1,385		0.20	%	2,795,008		1,407		0.20	%
Total interest-bearing deposits	5,390,869		2,572		0.19	%	5,405,730		2,509		0.19	%
FHLB advances	156,512		815		2.08	%	125,660		570		1.81	%
Subordinated debentures	35,577		468		5.26	%	35,623		468		5.26	%
Other borrowings	28,097		20		0.28	%	60,840		116		0.76	%
Total interest-bearing liabilities	5,611,055		$	3,875	0.28	%	5,627,853		$	3,663	0.26	%
Noninterest-bearing deposits	4,873,953						4,928,750
Other noninterest-bearing liabilities	89,980						97,266
Shareholders' equity	1,954,552						1,949,275
Total liabilities & shareholders' equity	$	12,529,540					$	12,603,144
Net interest income (tax equivalent)			$	118,602					$	117,359
Net interest margin (tax equivalent)					4.29	%					4.22	%


(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 $2.1 million and $2.2 million for the three month periods ended June 30, 2018 and March 31, 2018, respectively. The incremental accretion on acquired loans was $3.0 million and $3.7 million for the three months ended June 30, 2018 and March 31, 2018, respectively.
(2)	Tax-exempt income is calculated on a tax equivalent basis at a rate of 21% for 2018. The tax equivalent yield adjustment to interest earned on loans was $1.1 million for both the three months ended June 30, 2018 and March 31, 2018. The tax equivalent yield adjustment to interest earned on tax exempt securities was $814 thousand for both the three month periods ended June 30, 2018 and March 31, 2018.

*AVERAGE BALANCES AND RATES*
*Columbia Banking System, Inc.*
Unaudited
	Six Months Ended June 30,						Six Months Ended June 30,
	2018						2017
	Average Balances		Interest Earned / Paid		Average Rate		Average Balances		Interest Earned / Paid		Average Rate
	*(dollars in thousands)*
ASSETS
Loans, net (1)(2)	$	8,369,097	$	210,617	5.03	%	$	6,262,190	$	152,544	4.87	%
Taxable securities	2,134,433		24,631		2.31	%	1,861,762		20,454		2.20	%
Tax exempt securities (2)	520,689		7,755		2.98	%	451,537		8,319		3.68	%
Interest-earning deposits with banks	63,368		496		1.57	%	10,887		42		0.77	%
Total interest-earning assets	11,087,587		$	243,499	4.39	%	8,586,376		$	181,359	4.22	%
Other earning assets	219,642						175,554
Noninterest-earning assets	1,258,909						773,897
Total assets	$	12,566,138					$	9,535,827
LIABILITIES AND SHAREHOLDERS' EQUITY
Certificates of deposit	$	471,930	$	1,075	0.46	%	$	392,798	$	190	0.10	%
Savings accounts	876,842		71		0.02	%	746,988		38		0.01	%
Interest-bearing demand	1,274,234		1,143		0.18	%	978,279		351		0.07	%
Money market accounts	2,775,253		2,792		0.20	%	2,002,817		1,116		0.11	%
Total interest-bearing deposits	5,398,259		5,081		0.19	%	4,120,882		1,695		0.08	%
FHLB advances	141,171		1,385		1.96	%	138,787		816		1.18	%
Subordinated debentures	35,600		936		5.26	%	—		—		—	%
Other borrowings	44,378		136		0.61	%	56,055		255		0.91	%
Total interest-bearing liabilities	5,619,408		$	7,538	0.27	%	4,315,724		$	2,766	0.13	%
Noninterest-bearing deposits	4,901,200						3,839,410
Other noninterest-bearing liabilities	93,602						101,991
Shareholders' equity	1,951,928						1,278,702
Total liabilities & shareholders' equity	$	12,566,138					$	9,535,827
Net interest income (tax equivalent)			$	235,961					$	178,593
Net interest margin (tax equivalent)					4.26	%					4.16	%


(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 $4.3 million and $3.4 million for the six months ended June 30, 2018 and 2017, respectively. The incremental accretion on acquired loans was $6.7 million and $7.2 million for the six months ended June 30, 2018 and 2017, respectively.
(2)	Tax-exempt income is calculated on a tax equivalent basis at a rate of 21% for 2018 and 35% for 2017. The tax equivalent yield adjustment to interest earned on loans was $2.2 million and $2.8 million for the six months ended June 30, 2018 and 2017, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.6 million and $2.9 million for the six months ended June 30, 2018 and 2017, respectively.

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									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2018			2018			2017			2018			2017
Operating net interest margin non-GAAP reconciliation:	*(dollars in thousands)*
Net interest income (tax equivalent) (1)	$	118,602		$	117,359		$	89,075		$	235,961		$	178,593
Adjustments to arrive at operating net interest income (tax equivalent):
Incremental accretion income on FDIC purchased credit impaired loans	(326)			(329)			(753)			(655)			(2,870)
Incremental accretion income on other acquired loans	(2,690)			(3,370)			(2,356)			(6,060)			(4,304)
Premium amortization on acquired securities	2,131			2,075			1,669			4,206			3,131
Interest reversals on nonaccrual loans	253			417			747			670			1,012
Operating net interest income (tax equivalent) (1)	$	117,970		$	116,152		$	88,382		$	234,122		$	175,562
Average interest earning assets	$	11,052,807		$	11,122,753		$	8,651,735		$	11,087,587		$	8,586,376
Net interest margin (tax equivalent) (1)	4.29		%	4.22		%	4.12		%	4.26		%	4.16		%
Operating net interest margin (tax equivalent) (1)	4.27		%	4.18		%	4.09		%	4.22		%	4.09		%

	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2018			2018			2017			2018			2017
Operating efficiency ratio non-GAAP reconciliation:	*(dollars in thousands)*
Noninterest expense (numerator A)	$	84,643		$	85,987		$	68,867		$	170,630		$	137,853
Adjustments to arrive at operating noninterest expense:
Acquisition-related expenses	(2,822)			(4,265)			(1,023)			(7,087)			(2,387)
Net benefit (cost) of operation of OREO and OPPO	(758)			4			1			(754)			(149)
FDIC clawback liability recovery	—			—			—			—			54
Loss on asset disposals	(1)			—			(8)			(1)			(14)
Termination of FDIC loss share agreements charge	—			—			(2,409)			—			(2,409)
State of Washington Business and Occupation ("B&O") taxes	(1,459)			(1,317)			(642)			(2,776)			(1,765)
Operating noninterest expense (numerator B)	$	79,603		$	80,409		$	64,786		$	160,012		$	131,183

Net interest income (tax equivalent) (1)	$	118,602		$	117,359		$	89,075		$	235,961		$	178,593
Noninterest income	23,692			23,143			24,135			46,835			48,994
Bank owned life insurance tax equivalent adjustment	455			379			772			834			1,461
Total revenue (tax equivalent) (denominator A)	$	142,749		$	140,881		$	113,982		$	283,630		$	229,048

Operating net interest income (tax equivalent) (1)	$	117,970		$	116,152		$	88,382		$	234,122		$	175,562
Adjustments to arrive at operating noninterest income (tax equivalent):
Investment securities gains (loss), net	33			(22)			—			11			—
Gain on asset disposals	(47)			(35)			(256)			(82)			(285)
Mortgage loan repurchase liability adjustment	—			—			—			—			(573)
Change in FDIC loss-sharing asset	—			—			173			—			447
Operating noninterest income (tax equivalent)	24,133			23,465			24,824			47,598			50,044
Total operating revenue (tax equivalent) (denominator B)	$	142,103		$	139,617		$	113,206		$	281,720		$	225,606
Efficiency ratio (tax equivalent) (numerator A/denominator A)	59.29		%	61.04		%	60.42		%	60.16		%	60.19		%
Operating efficiency ratio (tax equivalent) (numerator B/denominator B)	56.02		%	57.59		%	57.23		%	56.80		%	58.15		%

__________

(1) Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $1.9 million for both the three month periods ended June 30, 2018 and March 31, 2018, $2.9 million for the three month periods ended June 30, 2017; and $3.8 million and $5.8 million for the six month periods ended June 30, 2018 and June 30, 2017, respectively.

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									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2018			2018			2017			2018			2017
Core noninterest expense ratio non-GAAP reconciliation:	*(dollars in thousands)*
Noninterest expense (numerator A)	$	84,643		$	85,987		$	68,867		$	170,630		$	137,853
Adjustments to arrive at core noninterest expense:
FDIC clawback liability recovery	—			—			—			—			54
Acquisition-related expenses	(2,822)			(4,265)			(1,023)			(7,087)			(2,387)
Net benefit (cost) of operation of OREO and OPPO (3)	—			—			1			—			(149)
Termination of FDIC loss share agreements charge	—			—			(2,409)			—			(2,409)
Core noninterest expense (numerator B)	$	81,821		$	81,722		$	65,436		$	163,543		$	132,962
Average assets (denominator)	$	12,529,540		$	12,603,144		$	9,597,274		$	12,566,138		$	9,535,827
Noninterest expense ratio (numerator A/denominator) (1)	2.70		%	2.73		%	2.87		%	2.72		%	2.89		%
Core noninterest expense ratio (numerator B/denominator) (2)	2.61		%	2.59		%	2.73		%	2.60		%	2.79		%

__________
(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.
(3)	Effective January 1, 2018, core noninterest expense no longer excludes net benefit (cost) of operation of OREO and OPPO.

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,			December 31,
	2018			2018			2017
Tangible common equity ratio and tangible book value per common share non-GAAP reconciliation:	*(dollars in thousands)*
Shareholders' equity (numerator A)	$	1,964,881		$	1,947,923		$	1,949,922
Adjustments to arrive at tangible common equity:
Goodwill	(765,842)			(765,842)			(765,842)
Other intangible assets, net	(51,897)			(54,985)			(58,173)
Tangible common equity (numerator B)	$	1,147,142		$	1,127,096		$	1,125,907
Total assets (denominator A)	$	12,628,586		$	12,530,636		$	12,716,886
Adjustments to arrive at tangible assets:
Goodwill	(765,842)			(765,842)			(765,842)
Other intangible assets, net	(51,897)			(54,985)			(58,173)
Tangible assets (denominator B)	$	11,810,847		$	11,709,809		$	11,892,871
Shareholders' equity to total assets (numerator A/denominator A)	15.56		%	15.55		%	15.33		%
Tangible common shareholders' equity to tangible assets (numerator B/denominator B)	9.71		%	9.63		%	9.47		%
Common shares outstanding (denominator C)	73,245			73,240			73,020
Book value per common share (numerator A/denominator C)	$	26.83		$	26.60		$	26.70
Tangible book value per common share (numerator B/denominator C)	$	15.66		$	15.39		$	15.42

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, 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,
	2018			2018			2017			2018			2017
Return on average tangible common equity non-GAAP reconciliation:	*(dollars in thousands)*
Net income (numerator A)	$	41,749		$	39,970		$	27,132		$	81,719		$	56,331
Adjustments to arrive at tangible income applicable to common shareholders:
Amortization of intangibles	3,088			3,188			1,249			6,276			2,598
Tax effect on intangible amortization	(649)			(669)			(437)			(1,318)			(909)
Tangible income applicable to common shareholders (numerator B)	$	44,188		$	42,489		$	27,944		86,677			$	58,020
Average shareholders' equity (denominator A)	$	1,954,552		$	1,949,275		$	1,295,564		1,951,928			$	1,278,702
Adjustments to arrive at average tangible common equity:
Average preferred equity	—			—			—			—			(135)
Average intangibles	(819,211)			(822,376)			(398,385)			(820,785)			(399,025)
Average tangible common equity (denominator B)	$	1,135,341		$	1,126,899		$	897,179		$	1,131,143		$	879,542
Return on average common equity (numerator A/denominator A) (1)	8.54		%	8.20		%	8.38		%	8.37		%	8.81		%
Return on average tangible common equity (numerator B/denominator B) (2)	15.57		%	15.08		%	12.46		%	15.33		%	13.19		%

__________
(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.