EX-99.1 2 a991colb3q2016earningsrele.htm EARNINGS PRESS RELEASE
Exhibit 99.1
FOR IMMEDIATE RELEASE
October 27, 2016
Contacts: Melanie J. Dressel,
President and
Chief Executive Officer
(253) 305-1911
Clint E. Stein,
Executive Vice President
and Chief Financial Officer
(253) 593-8304
Columbia Banking System Announces Third Quarter 2016 Results
Highlights

• | Net income of $27.5 million with diluted earnings per common share of $0.47

• | Record new loan production for the quarter of $375.3 million, resulting in solid loan growth of $152.6 million, or 10% annualized

• | Deposits increased $384.6 million during the quarter, resulting in growth of 10% from 3Q 2015

• | Nonperforming assets to period end assets ratio improves to 0.32%, lowest in 8 years

• | Net interest margin expanded to 4.13%

• | For the seventh time, Melanie Dressel honored as one of The 25 Most Powerful Women in Banking by American Banker Magazine

TACOMA, Washington, October 27, 2016 -- Melanie Dressel, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB) (“Columbia”), said today upon the release of Columbia’s third quarter 2016 earnings, “The competitive landscape and interest rate environment remain challenging. However, we are very pleased with our results for the third quarter, which built upon the momentum of our second quarter performance. Our bankers delivered another impressive quarter of record loan production while maintaining good portfolio diversification. We also had outstanding year-over-year deposit growth of 10%, while our cost of funds remained one of the best in the country.”
1

Balance Sheet
Total assets at September 30, 2016 were $9.59 billion, an increase of $233.1 million from June 30, 2016. Loan growth of $152.6 million during the quarter was driven by strong loan originations of $375.3 million. Loan production was diversified across the portfolio sectors, with growth primarily centered in commercial business loans. Securities available for sale were $2.36 billion at September 30, 2016, an increase of $80.5 million, or 4% from $2.28 billion at June 30, 2016. Total deposits at September 30, 2016 were $8.06 billion, an increase of $384.6 million from $7.67 billion at June 30, 2016. Core deposits comprised 97% of total deposits and were $7.81 billion at September 30, 2016, an increase of $361.1 million from June 30, 2016. The average cost of total deposits for the quarter was 0.04%, unchanged from the second quarter of 2016.
Income Statement
Net Interest Income
Net interest income for the third quarter of 2016 was $85.6 million, an increase of $3.4 million and $3.9 million from the linked and prior year periods, respectively. The linked quarter increase was driven principally by higher loan and securities volumes as well as higher rates on loans. The increase from the prior year period was also due to higher loan and securities volumes, partially offset by lower incremental accretion income on loans, which was $1.8 million lower in the current quarter as compared to the third quarter of 2015. For additional information regarding net interest income, see the “Average Balances and Rates” table.
Noninterest Income
Noninterest income was $23.2 million for the third quarter of 2016, an increase of $1.2 million compared to $21.9 million for the second quarter of 2016. The linked quarter increase was due to lower expense related to the change in FDIC loss-sharing asset as well as higher investment security gains. Compared to the third quarter of 2015, noninterest income increased by $667 thousand due to lower expenses from the FDIC loss-sharing asset. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format below.
2

The change in the FDIC loss-sharing asset has been a significant component of noninterest income but, as our larger loss-sharing agreements have expired, the significance has diminished. The following table reflects the income statement components of the change in the FDIC loss-sharing asset:

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2016 |  | 2016 |  | 2015 |  | 2016 |  | 2015
|  | (in thousands)
Adjustments reflected in income |  |  |  |  |  |  |  |  |  |
Amortization, net |  | $ | (315 | ) |  | $ | (883 | ) |  | $ | (1,416 | ) |  | (2,530 | ) |  | (5,086 | )
Loan impairment (recapture) |  | 266 |  |  | (20 | ) |  | (119 | ) |  | 393 |  |  | 1,413 |
Sales of other real estate owned |  | (49 | ) |  | (24 | ) |  | (126 | ) |  | 71 |  |  | (753 | )
Valuation adjustments on other real estate owned |  | — |  |  | (40 | ) |  | 25 |  |  | (22 | ) |  | 1,148 |
Other |  | (6 | ) |  | (23 | ) |  | 1 |  |  | (109 | ) |  | 299 |
Change in FDIC loss-sharing asset |  | $ | (104 | ) |  | $ | (990 | ) |  | $ | (1,635 | ) |  | $ | (2,197 | ) |  | $ | (2,979 | )

Noninterest Expense
Total noninterest expense for the third quarter of 2016 was $67.3 million, an increase of $3.5 million from $63.8 million for the second quarter of 2016. The increase was due to both higher compensation and benefits expense as well as higher advertising costs in the current quarter. The increase in compensation and benefits was due to recognizing additional incentive expense from record loan production, deposit growth and improved financial performance. The higher advertising costs were the result of refreshed television commercials and the associated media costs during the current quarter.
Compared to the third quarter of 2015, noninterest expense increased $3.2 million, or 5%, from $64.1 million. After removing the effect of the acquisition-related expenses of $428 thousand in the prior year period, noninterest expense for the current quarter was $3.6 million higher than the third quarter of 2015. This increase was due to higher compensation and benefits as well as higher advertising costs as noted above. These increases were partially offset by decreased expenses related to other real estate owned as well as reduced regulatory premiums in the current quarter.
3

Net Interest Margin (“NIM”)
Columbia’s net interest margin (tax equivalent) for the third quarter of 2016 was 4.13%, an increase of 3 basis points from the linked quarter and decline of 24 basis points from prior year period. The increase from the linked quarter was due to higher loan rates. The decrease from the prior year period was due to both lower incremental accretion income on acquired loans and lower yielding originated loans. Incremental accretion income was $4.6 million in the current period compared to $6.4 million in the prior year quarter. Columbia’s operating net interest margin (tax equivalent)(1) was 4.03% for the third quarter of 2016, an increase of 3 basis points from 4.00% for the second quarter of 2016 and down 15 basis points compared to 4.18% for the third quarter of 2015 as a result of lower yielding originated loans.
The following table shows the impact to interest income resulting from income accretion on acquired loan portfolios as well as the net interest margin and operating net interest margin:

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | September 30, |  | September 30,
|  | 2016 |  | 2016 |  | 2016 |  | 2015 |  | 2015 |  | 2016 |  | 2015
|  | (dollars in thousands)
Incremental accretion income due to: |  |  |  |  |  |  |  |  |  |  |  |  |  |
FDIC purchased credit impaired loans |  | $ | 1,816 |  |  | $ | 1,300 |  |  | $ | 1,657 |  |  | $ | 2,200 |  |  | $ | 2,082 |  |  | $ | 4,773 |  |  | $ | 6,896 |
Other FDIC acquired loans (2) |  | — |  |  | — |  |  | — |  |  | 68 |  |  | 34 |  |  | — |  |  | 166 |
Other acquired loans |  | 2,749 |  |  | 3,074 |  |  | 3,073 |  |  | 3,746 |  |  | 4,293 |  |  | 8,896 |  |  | 14,116 |
Incremental accretion income |  | $ | 4,565 |  |  | $ | 4,374 |  |  | $ | 4,730 |  |  | $ | 6,014 |  |  | $ | 6,409 |  |  | $ | 13,669 |  |  | $ | 21,178 |
Net interest margin (tax equivalent) |  | 4.13 | % |  | 4.10 | % |  | 4.13 | % |  | 4.25 | % |  | 4.37 | % |  | 4.12 | % |  | 4.39 | %
Operating net interest margin (tax equivalent) (1) |  | 4.03 | % |  | 4.00 | % |  | 4.03 | % |  | 4.09 | % |  | 4.18 | % |  | 4.02 | % |  | 4.18 | %

__________
(1) Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled “Non-GAAP Financial Measures” on the last pages of this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.
(2) For 2016, incremental accretion income on other FDIC acquired loans is no longer considered significant.
4

Asset Quality
At September 30, 2016, nonperforming assets to total assets were 0.32% compared to 0.36% at June 30, 2016 and 0.39% at December 31, 2015. Total nonperforming assets decreased $3.2 million from the linked quarter due to a $1.5 million decrease in nonaccrual loans as well as a decrease in other real estate owned.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:

|  | September 30, 2016 |  | June 30, 2016 |  | December 31, 2015
|  | (in thousands)
Nonaccrual loans: |  |  |  |  |  |
Commercial business |  | $ | 9,502 |  |  | $ | 9,548 |  |  | $ | 9,437 |
Real estate: |  |  |  |  |  |
One-to-four family residential |  | 579 |  |  | 957 |  |  | 820 |
Commercial and multifamily residential |  | 7,052 |  |  | 7,834 |  |  | 9,513 |
Total real estate |  | 7,631 |  |  | 8,791 |  |  | 10,333 |
Real estate construction: |  |  |  |  |  |
One-to-four family residential |  | 461 |  |  | 562 |  |  | 928 |
Total real estate construction |  | 461 |  |  | 562 |  |  | 928 |
Consumer |  | 3,772 |  |  | 4,014 |  |  | 766 |
Total nonaccrual loans |  | 21,366 |  |  | 22,915 |  |  | 21,464 |
Other real estate owned and other personal property owned |  | 8,994 |  |  | 10,613 |  |  | 13,738 |
Total nonperforming assets |  | $ | 30,360 |  |  | $ | 33,528 |  |  | $ | 35,202 |

5

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

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, 2016 |  | June 30, 2016 |  | September 30, 2015 |  | September 30, 2016 |  | September 30, 2015
|  | (in thousands)
Beginning balance |  | $ | 69,304 |  |  | $ | 69,264 |  |  | $ | 69,257 |  |  | $ | 68,172 |  |  | $ | 69,569 |
Charge-offs: |  |  |  |  |  |  |  |  |  |
Commercial business |  | (2,159 | ) |  | (2,941 | ) |  | (2,570 | ) |  | (8,873 | ) |  | (6,082 | )
One-to-four family residential real estate |  | — |  |  | (35 | ) |  | — |  |  | (35 | ) |  | (297 | )
Commercial and multifamily residential real estate |  | — |  |  | (26 | ) |  | (198 | ) |  | (26 | ) |  | (241 | )
Consumer |  | (383 | ) |  | (334 | ) |  | (311 | ) |  | (983 | ) |  | (1,521 | )
Purchased credit impaired |  | (2,062 | ) |  | (2,898 | ) |  | (3,198 | ) |  | (7,826 | ) |  | (10,174 | )
Total charge-offs |  | (4,604 | ) |  | (6,234 | ) |  | (6,277 | ) |  | (17,743 | ) |  | (18,315 | )
Recoveries: |  |  |  |  |  |  |  |  |  |
Commercial business |  | 854 |  |  | 753 |  |  | 623 |  |  | 2,269 |  |  | 1,450 |
One-to-four family residential real estate |  | 81 |  |  | 20 |  |  | 261 |  |  | 142 |  |  | 288 |
Commercial and multifamily residential real estate |  | 20 |  |  | 130 |  |  | 417 |  |  | 219 |  |  | 3,698 |
One-to-four family residential real estate construction |  | 21 |  |  | 5 |  |  | 105 |  |  | 280 |  |  | 141 |
Commercial and multifamily residential real estate construction |  | 107 |  |  | 1 |  |  | 2 |  |  | 109 |  |  | 7 |
Consumer |  | 399 |  |  | 201 |  |  | 297 |  |  | 765 |  |  | 707 |
Purchased credit impaired |  | 2,216 |  |  | 1,524 |  |  | 1,533 |  |  | 5,291 |  |  | 5,262 |
Total recoveries |  | 3,698 |  |  | 2,634 |  |  | 3,238 |  |  | 9,075 |  |  | 11,553 |
Net charge-offs |  | (906 | ) |  | (3,600 | ) |  | (3,039 | ) |  | (8,668 | ) |  | (6,762 | )
Provision for loan and lease losses |  | 1,866 |  |  | 3,640 |  |  | 2,831 |  |  | 10,760 |  |  | 6,242 |
Ending balance |  | $ | 70,264 |  |  | $ | 69,304 |  |  | $ | 69,049 |  |  | $ | 70,264 |  |  | $ | 69,049 |

The allowance for loan losses to period end loans was 1.12% at September 30, 2016 compared to 1.13% at June 30, 2016 and 1.18% at December 31, 2015. For the third quarter of 2016, Columbia recorded a net provision for loan and lease losses of $1.9 million compared to a net provision of $3.6 million for the linked quarter and $2.8 million for the comparable quarter last year. The provision for loan and lease losses recorded during the current quarter was due to growth in the loan portfolio and net charge-off activity.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “As we have previously stated, we are pleased with our low level of nonperforming assets, which for the quarter remained below our long standing target of 50 basis points. We first achieved this metric a year ago and still believe this ratio will move within a range on either side of 50 basis points within the normal course of business for this point in the credit cycle.”
6

Impact of FDIC Acquired Loan Accounting
While the significance of the FDIC acquired loan accounting has diminished over time, the following table illustrates the impact to earnings associated with Columbia’s FDIC acquired loan portfolios:

FDIC Acquired Loan Accounting |  |  |  |
|  | Three Months Ended |  | Nine Months Ended
|  | September 30, 2016 |  | June 30, 2016 |  | September 30, 2015 |  | September 30, 2016 |  | September 30, 2015
|  | (in thousands)
Incremental accretion income on FDIC purchased credit impaired loans |  | $ | 1,816 |  |  | $ | 1,300 |  |  | $ | 2,082 |  |  | $ | 4,773 |  |  | $ | 6,896 |
Incremental accretion income on other FDIC acquired loans (1) |  | — |  |  | — |  |  | 34 |  |  | — |  |  | 166 |
Recapture (provision) for losses on FDIC purchased credit impaired loans |  | 433 |  |  | (91 | ) |  | 519 |  |  | (311 | ) |  | (2,566 | )
Change in FDIC loss-sharing asset |  | (104 | ) |  | (990 | ) |  | (1,635 | ) |  | (2,197 | ) |  | (2,979 | )
FDIC clawback liability expense |  | (29 | ) |  | (70 | ) |  | (174 | ) |  | (308 | ) |  | (167 | )
Pre-tax earnings impact |  | $ | 2,116 |  |  | $ | 149 |  |  | $ | 826 |  |  | $ | 1,957 |  |  | $ | 1,350 |

_________
(1) For 2016, incremental accretion income on other FDIC acquired loans is no longer considered significant.
The incremental accretion income on FDIC purchased credit impaired loans represents the amount of income recorded above the contractual rate stated in the individual loan notes. At September 30, 2016, the accretable yield on purchased credit impaired loans was $48.9 million. Accretable yield is subject to change based upon expected future loan cash flows, which are remeasured by Columbia on a quarterly basis.
The $104 thousand change in the FDIC loss-sharing asset in the current quarter reduced noninterest income and consisted primarily of $315 thousand in amortization expense. Additional details of the components of the change in the FDIC loss-sharing asset are provided in tabular format in the section titled “Noninterest Income” in the prior pages.
7

Organizational Update
Ms. Dressel commented, “We continue to emphasize efficiencies designed to improve our financial performance, always keeping in mind our core value of customer service. To that end, we consolidated two branches in Idaho and one branch in Oregon during the third quarter, and currently operate 143 locations throughout our footprint.”
For the seventh time, “American Banker” magazine recently named Melanie Dressel one of the Top 25 Most Powerful Women in Banking. She ranked #22 on the annual list, which highlights the professional achievements and business acumen of the industry’s leading women who are using their influence to make banking and their communities better. Ms. Dressel commented, “This recognition truly acknowledges the hard work and dedication of the entire team of Columbia Bankers.”
In recognition of the success and innovation of the bank’s Warm Hearts Winter Drive campaign to provide support for organizations serving the homeless, Senior Vice President and Marketing Director David Devine was the winner of the prestigious 2016 George Bailey Distinguished Service Award by the American Bankers Association Foundation. Hadley Robbins, Executive Vice President and Chief Operating Officer said, “David’s leadership initiating the Warm Hearts drive and the tireless efforts of each employee to ensure its success are a testament to Columbia Bank’s core value of community service.”
Conference Call Information
Columbia’s management will discuss the third quarter 2016 results on a conference call scheduled for Thursday, October 27, 2016 at 1:00 p.m. Pacific Daylight Time (4:00 p.m. Eastern Daylight Time). Interested parties may listen to this discussion by calling 1-866-378-3802; Conference ID code #22782094.
A conference call replay will be available from approximately 4:00 p.m. PDT on October 27, 2016 through midnight PDT on November 3, 2016. The conference call replay can be accessed by dialing 1-855-859-2056 and entering Conference ID code #22782094.
8

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 tenth consecutive year, the bank was named in 2016 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked in the top 20 on the 2016 Forbes list of best banks in the country for the fifth year in a row.
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.
9

FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Nine Months Ended
Unaudited |  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2016 |  | 2016 |  | 2015 |  | 2016 |  | 2015
Earnings |  | (dollars in thousands except per share amounts)
Net interest income |  | $ | 85,572 |  |  | $ | 82,140 |  |  | $ | 81,694 |  |  | $ | 247,882 |  |  | $ | 243,068 |
Provision for loan and lease losses |  | $ | 1,866 |  |  | $ | 3,640 |  |  | $ | 2,831 |  |  | $ | 10,760 |  |  | $ | 6,242 |
Noninterest income |  | $ | 23,166 |  |  | $ | 21,940 |  |  | $ | 22,499 |  |  | $ | 65,752 |  |  | $ | 66,728 |
Noninterest expense |  | $ | 67,264 |  |  | $ | 63,790 |  |  | $ | 64,067 |  |  | $ | 196,128 |  |  | $ | 199,272 |
Acquisition-related expense (included in noninterest expense) |  | $ | — |  |  | $ | — |  |  | $ | 428 |  |  | $ | 2,436 |  |  | $ | 9,045 |
Net income |  | $ | 27,484 |  |  | $ | 25,405 |  |  | $ | 25,780 |  |  | $ | 74,148 |  |  | $ | 72,087 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.47 |  |  | $ | 0.44 |  |  | $ | 0.45 |  |  | $ | 1.28 |  |  | $ | 1.25 |
Earnings (diluted) |  | $ | 0.47 |  |  | $ | 0.44 |  |  | $ | 0.45 |  |  | $ | 1.28 |  |  | $ | 1.25 |
Book value |  | $ | 21.96 |  |  | $ | 21.93 |  |  | $ | 21.69 |  |  | $ | 21.96 |  |  | $ | 21.69 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 9,493,451 |  |  | $ | 9,230,791 |  |  | $ | 8,672,692 |  |  | $ | 9,225,466 |  |  | $ | 8,570,825 |
Interest-earning assets |  | $ | 8,544,876 |  |  | $ | 8,285,183 |  |  | $ | 7,711,531 |  |  | $ | 8,279,639 |  |  | $ | 7,600,954 |
Loans |  | $ | 6,179,163 |  |  | $ | 5,999,428 |  |  | $ | 5,712,614 |  |  | $ | 6,002,656 |  |  | $ | 5,557,771 |
Securities, including Federal Home Loan Bank stock |  | $ | 2,351,093 |  |  | $ | 2,262,012 |  |  | $ | 1,945,174 |  |  | $ | 2,253,877 |  |  | $ | 1,996,527 |
Deposits |  | $ | 7,918,532 |  |  | $ | 7,622,266 |  |  | $ | 7,233,863 |  |  | $ | 7,663,099 |  |  | $ | 7,047,818 |
Interest-bearing deposits |  | $ | 4,118,787 |  |  | $ | 4,026,384 |  |  | $ | 3,910,695 |  |  | $ | 4,043,105 |  |  | $ | 3,939,525 |
Interest-bearing liabilities |  | $ | 4,295,485 |  |  | $ | 4,264,792 |  |  | $ | 4,007,198 |  |  | $ | 4,228,531 |  |  | $ | 4,119,815 |
Noninterest-bearing deposits |  | $ | 3,799,745 |  |  | $ | 3,595,882 |  |  | $ | 3,323,168 |  |  | $ | 3,619,994 |  |  | $ | 3,108,293 |
Shareholders' equity |  | $ | 1,278,588 |  |  | $ | 1,267,670 |  |  | $ | 1,239,830 |  |  | $ | 1,268,261 |  |  | $ | 1,242,853 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.16 | % |  | 1.10 | % |  | 1.19 | % |  | 1.07 | % |  | 1.12 | %
Return on average common equity |  | 8.60 | % |  | 8.02 | % |  | 8.32 | % |  | 7.80 | % |  | 7.74 | %
Average equity to average assets |  | 13.47 | % |  | 13.73 | % |  | 14.30 | % |  | 13.75 | % |  | 14.50 | %
Net interest margin (tax equivalent) |  | 4.13 | % |  | 4.10 | % |  | 4.37 | % |  | 4.12 | % |  | 4.39 | %
Efficiency ratio (tax equivalent) (1) |  | 60.02 | % |  | 59.30 | % |  | 59.69 | % |  | 60.62 | % |  | 62.51 | %
Operating efficiency ratio (tax equivalent) (2) |  | 60.47 | % |  | 58.81 | % |  | 58.85 | % |  | 59.58 | % |  | 60.86 | %
|  | September 30, |  | June 30, |  | December 31, |  |  |  |
Period end |  | 2016 |  | 2016 |  | 2015 |  |  |  |
Total assets |  | $ | 9,586,754 |  |  | $ | 9,353,651 |  |  | 8,951,697 |  |  |  |  |
Loans, net of unearned income |  | $ | 6,259,757 |  |  | $ | 6,107,143 |  |  | 5,815,027 |  |  |  |  |
Allowance for loan and lease losses |  | $ | 70,264 |  |  | $ | 69,304 |  |  | 68,172 |  |  |  |  |
Securities, including Federal Home Loan Bank stock |  | $ | 2,372,724 |  |  | $ | 2,297,713 |  |  | 2,170,416 |  |  |  |  |
Deposits |  | $ | 8,057,816 |  |  | $ | 7,673,213 |  |  | 7,438,829 |  |  |  |  |
Core deposits |  | $ | 7,809,064 |  |  | $ | 7,447,963 |  |  | 7,238,713 |  |  |  |  |
Shareholders' equity |  | $ | 1,276,735 |  |  | $ | 1,274,479 |  |  | 1,242,128 |  |  |  |  |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 21,366 |  |  | $ | 22,915 |  |  | 21,464 |  |  |  |  |
Other real estate owned ("OREO") and other personal property owned ("OPPO") |  | 8,994 |  |  | 10,613 |  |  | 13,738 |  |  |  |  |
Total nonperforming assets |  | $ | 30,360 |  |  | $ | 33,528 |  |  | $ | 35,202 |  |  |  |  |
Nonperforming loans to period-end loans |  | 0.34 | % |  | 0.38 | % |  | 0.37 | % |  |  |  |
Nonperforming assets to period-end assets |  | 0.32 | % |  | 0.36 | % |  | 0.39 | % |  |  |  |
Allowance for loan and lease losses to period-end loans |  | 1.12 | % |  | 1.13 | % |  | 1.17 | % |  |  |  |
Net loan charge-offs |  | $ | 906 |  | (3) | $ | 3,600 |  | (4) | $ | 3,226 |  | (5) |  |  |
(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) The operating efficiency ratio (tax equivalent) is a non-GAAP financial measure. See section titled "Non-GAAP Financial Measures" on the last page of this earnings release for the reconciliation of the operating efficiency ratio (tax equivalent) to the efficiency ratio (tax equivalent).
(3) For the three months ended September 30, 2016. |  |  |  |  |  |  |  |  |  |
(4) For the three months ended June 30, 2016. |  |  |  |  |  |  |  |
(5) For the three months ended December 31, 2015. |  |  |  |  |  |  |  |

10

QUARTERLY FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended
Unaudited |  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
|  | 2016 |  | 2016 |  | 2016 |  | 2015 |  | 2015
|  | (dollars in thousands except per share)
Earnings |  |
Net interest income |  | $ | 85,572 |  |  | $ | 82,140 |  |  | $ | 80,170 |  |  | $ | 81,819 |  |  | $ | 81,694 |
Provision for loan and lease losses |  | $ | 1,866 |  |  | $ | 3,640 |  |  | $ | 5,254 |  |  | $ | 2,349 |  |  | $ | 2,831 |
Noninterest income |  | $ | 23,166 |  |  | $ | 21,940 |  |  | $ | 20,646 |  |  | $ | 24,745 |  |  | $ | 22,499 |
Noninterest expense |  | $ | 67,264 |  |  | $ | 63,790 |  |  | $ | 65,074 |  |  | $ | 66,877 |  |  | $ | 64,067 |
Acquisition-related expense (included in noninterest expense) |  | $ | — |  |  | $ | — |  |  | $ | 2,436 |  |  | $ | 1,872 |  |  | $ | 428 |
Net income |  | $ | 27,484 |  |  | $ | 25,405 |  |  | $ | 21,259 |  |  | $ | 26,740 |  |  | $ | 25,780 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.47 |  |  | $ | 0.44 |  |  | $ | 0.37 |  |  | $ | 0.46 |  |  | $ | 0.45 |
Earnings (diluted) |  | $ | 0.47 |  |  | $ | 0.44 |  |  | $ | 0.37 |  |  | $ | 0.46 |  |  | $ | 0.45 |
Book value |  | $ | 21.96 |  |  | $ | 21.93 |  |  | $ | 21.70 |  |  | $ | 21.48 |  |  | $ | 21.69 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 9,493,451 |  |  | $ | 9,230,791 |  |  | $ | 8,949,212 |  |  | $ | 8,905,743 |  |  | $ | 8,672,692 |
Interest-earning assets |  | $ | 8,544,876 |  |  | $ | 8,285,183 |  |  | $ | 8,005,945 |  |  | $ | 7,937,308 |  |  | $ | 7,711,531 |
Loans |  | $ | 6,179,163 |  |  | $ | 5,999,428 |  |  | $ | 5,827,440 |  |  | $ | 5,762,048 |  |  | $ | 5,712,614 |
Securities, including Federal Home Loan Bank stock |  | $ | 2,351,093 |  |  | $ | 2,262,012 |  |  | $ | 2,147,457 |  |  | $ | 2,136,703 |  |  | $ | 1,945,174 |
Deposits |  | $ | 7,918,532 |  |  | $ | 7,622,266 |  |  | $ | 7,445,693 |  |  | $ | 7,440,628 |  |  | $ | 7,233,863 |
Interest-bearing deposits |  | $ | 4,118,787 |  |  | $ | 4,026,384 |  |  | $ | 3,983,314 |  |  | $ | 3,933,001 |  |  | $ | 3,910,695 |
Interest-bearing liabilities |  | $ | 4,295,485 |  |  | $ | 4,264,792 |  |  | $ | 4,124,582 |  |  | $ | 4,031,214 |  |  | $ | 4,007,198 |
Noninterest-bearing deposits |  | $ | 3,799,745 |  |  | $ | 3,595,882 |  |  | $ | 3,462,379 |  |  | $ | 3,507,627 |  |  | $ | 3,323,168 |
Shareholders' equity |  | $ | 1,278,588 |  |  | $ | 1,267,670 |  |  | $ | 1,258,411 |  |  | $ | 1,259,117 |  |  | $ | 1,239,830 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.16 | % |  | 1.10 | % |  | 0.95 | % |  | 1.20 | % |  | 1.19 | %
Return on average common equity |  | 8.60 | % |  | 8.02 | % |  | 6.76 | % |  | 8.50 | % |  | 8.32 | %
Average equity to average assets |  | 13.47 | % |  | 13.73 | % |  | 14.06 | % |  | 14.14 | % |  | 14.30 | %
Net interest margin (tax equivalent) |  | 4.13 | % |  | 4.10 | % |  | 4.13 | % |  | 4.25 | % |  | 4.37 | %
Period end |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 9,586,754 |  |  | $ | 9,353,651 |  |  | $ | 9,035,932 |  |  | $ | 8,951,697 |  |  | $ | 8,755,984 |
Loans, net of unearned income |  | $ | 6,259,757 |  |  | $ | 6,107,143 |  |  | $ | 5,877,283 |  |  | $ | 5,815,027 |  |  | $ | 5,746,511 |
Allowance for loan and lease losses |  | $ | 70,264 |  |  | $ | 69,304 |  |  | $ | 69,264 |  |  | $ | 68,172 |  |  | $ | 69,049 |
Securities, including Federal Home Loan Bank stock |  | $ | 2,372,724 |  |  | $ | 2,297,713 |  |  | $ | 2,196,407 |  |  | $ | 2,170,416 |  |  | $ | 2,037,666 |
Deposits |  | $ | 8,057,816 |  |  | $ | 7,673,213 |  |  | $ | 7,596,949 |  |  | $ | 7,438,829 |  |  | $ | 7,314,805 |
Core deposits |  | $ | 7,809,064 |  |  | $ | 7,447,963 |  |  | $ | 7,384,622 |  |  | $ | 7,238,713 |  |  | $ | 7,104,554 |
Shareholders' equity |  | $ | 1,276,735 |  |  | $ | 1,274,479 |  |  | $ | 1,260,788 |  |  | $ | 1,242,128 |  |  | $ | 1,254,136 |
Nonperforming, assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 21,366 |  |  | $ | 22,915 |  |  | $ | 36,891 |  |  | $ | 21,464 |  |  | $ | 19,080 |
OREO and OPPO |  | 8,994 |  |  | 10,613 |  |  | 12,427 |  |  | 13,738 |  |  | 19,475 |
Total nonperforming assets |  | $ | 30,360 |  |  | $ | 33,528 |  |  | $ | 49,318 |  |  | $ | 35,202 |  |  | $ | 38,555 |
Nonperforming loans to period-end loans |  | 0.34 | % |  | 0.38 | % |  | 0.63 | % |  | 0.37 | % |  | 0.33 | %
Nonperforming assets to period-end assets |  | 0.32 | % |  | 0.36 | % |  | 0.55 | % |  | 0.39 | % |  | 0.44 | %
Allowance for loan and lease losses to period-end loans |  | 1.12 | % |  | 1.13 | % |  | 1.18 | % |  | 1.17 | % |  | 1.20 | %
Net loan charge-offs |  | $ | 906 |  |  | $ | 3,600 |  |  | $ | 4,162 |  |  | $ | 3,226 |  |  | $ | 3,039 |

11

LOAN PORTFOLIO COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
|  | 2016 |  | 2016 |  | 2016 |  | 2015 |  | 2015
Loan Portfolio Composition - Dollars |  | (dollars in thousands)
Commercial business |  | $ | 2,630,017 |  |  | $ | 2,518,682 |  |  | $ | 2,401,193 |  |  | $ | 2,362,575 |  |  | $ | 2,354,731 |
Real estate: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 168,511 |  |  | 172,957 |  |  | 175,050 |  |  | 176,295 |  |  | 177,108 |
Commercial and multifamily residential |  | 2,686,783 |  |  | 2,651,476 |  |  | 2,520,352 |  |  | 2,491,736 |  |  | 2,449,847 |
Total real estate |  | 2,855,294 |  |  | 2,824,433 |  |  | 2,695,402 |  |  | 2,668,031 |  |  | 2,626,955 |
Real estate construction: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 130,163 |  |  | 129,195 |  |  | 133,447 |  |  | 135,874 |  |  | 136,783 |
Commercial and multifamily residential |  | 202,014 |  |  | 185,315 |  |  | 183,548 |  |  | 167,413 |  |  | 134,097 |
Total real estate construction |  | 332,177 |  |  | 314,510 |  |  | 316,995 |  |  | 303,287 |  |  | 270,880 |
Consumer |  | 325,741 |  |  | 325,632 |  |  | 329,902 |  |  | 342,601 |  |  | 348,315 |
Purchased credit impaired |  | 152,764 |  |  | 161,107 |  |  | 173,201 |  |  | 180,906 |  |  | 191,066 |
Subtotal loans |  | 6,295,993 |  |  | 6,144,364 |  |  | 5,916,693 |  |  | 5,857,400 |  |  | 5,791,947 |
Less: Net unearned income |  | (36,236 | ) |  | (37,221 | ) |  | (39,410 | ) |  | (42,373 | ) |  | (45,436 | )
Loans, net of unearned income |  | 6,259,757 |  |  | 6,107,143 |  |  | 5,877,283 |  |  | 5,815,027 |  |  | 5,746,511 |
Less: Allowance for loan and lease losses |  | (70,264 | ) |  | (69,304 | ) |  | (69,264 | ) |  | (68,172 | ) |  | (69,049 | )
Total loans, net |  | 6,189,493 |  |  | 6,037,839 |  |  | 5,808,019 |  |  | 5,746,855 |  |  | 5,677,462 |
Loans held for sale |  | $ | 3,361 |  |  | $ | 7,649 |  |  | $ | 3,681 |  |  | $ | 4,509 |  |  | $ | 6,637 |

|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
Loan Portfolio Composition - Percentages |  | 2016 |  | 2016 |  | 2016 |  | 2015 |  | 2015
Commercial business |  | 42.0 | % |  | 41.2 | % |  | 40.9 | % |  | 40.6 | % |  | 41.0 | %
Real estate: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 2.7 | % |  | 2.8 | % |  | 3.0 | % |  | 3.0 | % |  | 3.1 | %
Commercial and multifamily residential |  | 43.0 | % |  | 43.6 | % |  | 42.9 | % |  | 42.9 | % |  | 42.6 | %
Total real estate |  | 45.7 | % |  | 46.4 | % |  | 45.9 | % |  | 45.9 | % |  | 45.7 | %
Real estate construction: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 2.1 | % |  | 2.1 | % |  | 2.3 | % |  | 2.3 | % |  | 2.4 | %
Commercial and multifamily residential |  | 3.2 | % |  | 3.0 | % |  | 3.1 | % |  | 2.9 | % |  | 2.3 | %
Total real estate construction |  | 5.3 | % |  | 5.1 | % |  | 5.4 | % |  | 5.2 | % |  | 4.7 | %
Consumer |  | 5.2 | % |  | 5.3 | % |  | 5.6 | % |  | 5.9 | % |  | 6.1 | %
Purchased credit impaired |  | 2.4 | % |  | 2.6 | % |  | 2.9 | % |  | 3.1 | % |  | 3.3 | %
Subtotal loans |  | 100.6 | % |  | 100.6 | % |  | 100.7 | % |  | 100.7 | % |  | 100.8 | %
Less: Net unearned income |  | (0.6 | )% |  | (0.6 | )% |  | (0.7 | )% |  | (0.7 | )% |  | (0.8 | )%
Loans, net of unearned income |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

12

DEPOSIT COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |
|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
|  | 2016 |  | 2016 |  | 2016 |  | 2015 |  | 2015
Deposit Composition - Dollars |  | (dollars in thousands)
Core deposits: |  |  |  |  |  |  |  |  |  |
Demand and other non-interest bearing |  | $ | 3,942,434 |  |  | $ | 3,652,951 |  |  | $ | 3,553,468 |  |  | $ | 3,507,358 |  |  | $ | 3,386,968 |
Interest bearing demand |  | 963,242 |  |  | 957,548 |  |  | 958,469 |  |  | 925,909 |  |  | 911,686 |
Money market |  | 1,873,376 |  |  | 1,818,337 |  |  | 1,838,364 |  |  | 1,788,552 |  |  | 1,776,087 |
Savings |  | 714,047 |  |  | 692,694 |  |  | 695,588 |  |  | 657,016 |  |  | 651,695 |
Certificates of deposit, less than $250,000 |  | 315,965 |  |  | 326,433 |  |  | 338,733 |  |  | 359,878 |  |  | 378,118 |
Total core deposits |  | 7,809,064 |  |  | 7,447,963 |  |  | 7,384,622 |  |  | 7,238,713 |  |  | 7,104,554 |
Certificates of deposit, $250,000 or more |  | 79,590 |  |  | 72,812 |  |  | 70,571 |  |  | 72,126 |  |  | 65,699 |
Certificates of deposit insured by CDARS® |  | 16,951 |  |  | 22,755 |  |  | 24,752 |  |  | 26,901 |  |  | 26,975 |
Brokered money market accounts |  | 152,151 |  |  | 129,590 |  |  | 116,878 |  |  | 100,854 |  |  | 117,196 |
Subtotal |  | 8,057,756 |  |  | 7,673,120 |  |  | 7,596,823 |  |  | 7,438,594 |  |  | 7,314,424 |
Premium resulting from acquisition date fair value adjustment |  | 60 |  |  | 93 |  |  | 126 |  |  | 235 |  |  | 381 |
Total deposits |  | $ | 8,057,816 |  |  | $ | 7,673,213 |  |  | $ | 7,596,949 |  |  | $ | 7,438,829 |  |  | $ | 7,314,805 |

|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
Deposit Composition - Percentages |  | 2016 |  | 2016 |  | 2016 |  | 2015 |  | 2015
Core deposits: |  |  |  |  |  |  |  |  |  |
Demand and other non-interest bearing |  | 48.9 | % |  | 47.6 | % |  | 46.8 | % |  | 47.2 | % |  | 46.3 | %
Interest bearing demand |  | 12.0 | % |  | 12.5 | % |  | 12.6 | % |  | 12.4 | % |  | 12.5 | %
Money market |  | 23.2 | % |  | 23.7 | % |  | 24.2 | % |  | 24.0 | % |  | 24.3 | %
Savings |  | 8.9 | % |  | 9.0 | % |  | 9.2 | % |  | 8.8 | % |  | 8.9 | %
Certificates of deposit, less than $250,000 |  | 3.9 | % |  | 4.3 | % |  | 4.5 | % |  | 4.8 | % |  | 5.2 | %
Total core deposits |  | 96.9 | % |  | 97.1 | % |  | 97.3 | % |  | 97.2 | % |  | 97.2 | %
Certificates of deposit, $250,000 or more |  | 1.0 | % |  | 0.9 | % |  | 0.9 | % |  | 1.0 | % |  | 0.8 | %
Certificates of deposit insured by CDARS® |  | 0.2 | % |  | 0.3 | % |  | 0.3 | % |  | 0.4 | % |  | 0.4 | %
Brokered money market accounts |  | 1.9 | % |  | 1.7 | % |  | 1.5 | % |  | 1.4 | % |  | 1.6 | %
Total |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

13

CONSOLIDATED STATEMENTS OF INCOME |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Nine Months Ended
Unaudited |  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2016 |  | 2016 |  | 2015 (1) |  | 2016 |  | 2015 (1)
|  | (in thousands except per share)
Interest Income |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 74,956 |  |  | $ | 71,651 |  |  | $ | 72,242 |  |  | $ | 216,923 |  |  | $ | 214,808 |
Taxable securities |  | 8,988 |  |  | 8,829 |  |  | 7,472 |  |  | 25,834 |  |  | 22,258 |
Tax-exempt securities |  | 2,799 |  |  | 2,795 |  |  | 2,920 |  |  | 8,397 |  |  | 8,972 |
Deposits in banks |  | 15 |  |  | 28 |  |  | 31 |  |  | 81 |  |  | 84 |
Total interest income |  | 86,758 |  |  | 83,303 |  |  | 82,665 |  |  | 251,235 |  |  | 246,122 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 823 |  |  | 787 |  |  | 756 |  |  | 2,352 |  |  | 2,244 |
Federal Home Loan Bank advances |  | 229 |  |  | 241 |  |  | 78 |  |  | 594 |  |  | 391 |
Other borrowings |  | 134 |  |  | 135 |  |  | 137 |  |  | 407 |  |  | 419 |
Total interest expense |  | 1,186 |  |  | 1,163 |  |  | 971 |  |  | 3,353 |  |  | 3,054 |
Net Interest Income |  | 85,572 |  |  | 82,140 |  |  | 81,694 |  |  | 247,882 |  |  | 243,068 |
Provision for loan and lease losses |  | 1,866 |  |  | 3,640 |  |  | 2,831 |  |  | 10,760 |  |  | 6,242 |
Net interest income after provision for loan and lease losses |  | 83,706 |  |  | 78,500 |  |  | 78,863 |  |  | 237,122 |  |  | 236,826 |
Noninterest Income |  |  |  |  |  |  |  |  |  |
Deposit account and treasury management fees (1) |  | 7,222 |  |  | 7,093 |  |  | 7,230 |  |  | 21,304 |  |  | 21,441 |
Card revenue (1) |  | 6,114 |  |  | 6,051 |  |  | 5,849 |  |  | 17,817 |  |  | 16,914 |
Financial services and trust revenue (1) |  | 2,746 |  |  | 2,780 |  |  | 3,316 |  |  | 8,347 |  |  | 9,657 |
Loan revenue (1) |  | 2,949 |  |  | 2,802 |  |  | 3,200 |  |  | 8,013 |  |  | 8,125 |
Merchant processing revenue |  | 2,352 |  |  | 2,272 |  |  | 2,422 |  |  | 6,726 |  |  | 6,802 |
Bank owned life insurance |  | 1,073 |  |  | 1,270 |  |  | 1,086 |  |  | 3,459 |  |  | 3,370 |
Investment securities gains, net |  | 572 |  |  | 229 |  |  | 236 |  |  | 1,174 |  |  | 1,300 |
Change in FDIC loss-sharing asset |  | (104 | ) |  | (990 | ) |  | (1,635 | ) |  | (2,197 | ) |  | (2,979 | )
Other (1) |  | 242 |  |  | 433 |  |  | 795 |  |  | 1,109 |  |  | 2,098 |
Total noninterest income |  | 23,166 |  |  | 21,940 |  |  | 22,499 |  |  | 65,752 |  |  | 66,728 |
Noninterest Expense |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 38,476 |  |  | 37,291 |  |  | 35,175 |  |  | 112,086 |  |  | 112,721 |
Occupancy |  | 8,219 |  |  | 7,652 |  |  | 8,101 |  |  | 26,044 |  |  | 24,781 |
Merchant processing expense |  | 1,161 |  |  | 1,118 |  |  | 1,090 |  |  | 3,312 |  |  | 3,146 |
Advertising and promotion |  | 1,993 |  |  | 1,043 |  |  | 1,354 |  |  | 3,878 |  |  | 3,480 |
Data processing |  | 4,275 |  |  | 3,929 |  |  | 3,796 |  |  | 12,350 |  |  | 13,022 |
Legal and professional fees |  | 2,264 |  |  | 1,777 |  |  | 2,173 |  |  | 5,366 |  |  | 7,527 |
Taxes, licenses and fees |  | 1,491 |  |  | 1,298 |  |  | 1,344 |  |  | 4,079 |  |  | 4,003 |
Regulatory premiums |  | 776 |  |  | 1,068 |  |  | 1,084 |  |  | 2,985 |  |  | 3,626 |
Net cost (benefit) of operation of other real estate owned |  | (249 | ) |  | 84 |  |  | 240 |  |  | (61 | ) |  | (1,569 | )
Amortization of intangibles |  | 1,460 |  |  | 1,483 |  |  | 1,695 |  |  | 4,526 |  |  | 5,230 |
Other |  | 7,398 |  |  | 7,047 |  |  | 8,015 |  |  | 21,563 |  |  | 23,305 |
Total noninterest expense |  | 67,264 |  |  | 63,790 |  |  | 64,067 |  |  | 196,128 |  |  | 199,272 |
Income before income taxes |  | 39,608 |  |  | 36,650 |  |  | 37,295 |  |  | 106,746 |  |  | 104,282 |
Provision for income taxes |  | 12,124 |  |  | 11,245 |  |  | 11,515 |  |  | 32,598 |  |  | 32,195 |
Net Income |  | $ | 27,484 |  |  | $ | 25,405 |  |  | $ | 25,780 |  |  | $ | 74,148 |  |  | $ | 72,087 |
Earnings per common share |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.47 |  |  | $ | 0.44 |  |  | $ | 0.45 |  |  | $ | 1.28 |  |  | $ | 1.25 |
Diluted |  | $ | 0.47 |  |  | $ | 0.44 |  |  | $ | 0.45 |  |  | $ | 1.28 |  |  | $ | 1.25 |
Dividends paid per common share |  | $ | 0.39 |  |  | $ | 0.37 |  |  | $ | 0.34 |  |  | $ | 1.14 |  |  | $ | 0.98 |
Weighted average number of common shares outstanding |  | 57,215 |  |  | 57,185 |  |  | 57,051 |  |  | 57,173 |  |  | 57,007 |
Weighted average number of diluted common shares outstanding |  | 57,225 |  |  | 57,195 |  |  | 57,064 |  |  | 57,183 |  |  | 57,021 |

__________
(1) Reclassified to conform to the current period’s presentation. Reclassifications consisted of disaggregating fee revenue previously presented in ‘Service charges and other fees’ and certain revenue previously presented in ‘Other’ into the presentation above. The Company made these reclassifications to provide additional information about its sources of noninterest income. There was no change to total noninterest income as previously reported as a result of these reclassifications.
14

CONSOLIDATED BALANCE SHEETS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  | September 30, |  | June 30, |  | December 31,
|  |  |  |  |  |  | 2016 |  | 2016 |  | 2015
|  |  |  |  |  |  | (in thousands)
ASSETS |  |
Cash and due from banks |  |  |  |  |  |  | $ | 180,839 |  |  | $ | 167,172 |  |  | $ | 166,929 |
Interest-earning deposits with banks |  |  |  |  |  |  | 11,225 |  |  | 11,216 |  |  | 8,373 |
Total cash and cash equivalents |  |  |  |  |  |  | 192,064 |  |  | 178,388 |  |  | 175,302 |
Securities available for sale at fair value (amortized cost of $2,324,721, $2,237,264 and $2,157,610, respectively) |  | 2,360,084 |  |  | 2,279,552 |  |  | 2,157,694 |
Federal Home Loan Bank stock at cost |  |  |  |  |  |  | 12,640 |  |  | 18,161 |  |  | 12,722 |
Loans held for sale |  |  |  |  |  |  | 3,361 |  |  | 7,649 |  |  | 4,509 |
Loans, net of unearned income of ($36,236), ($37,221) and ($42,373), respectively |  | 6,259,757 |  |  | 6,107,143 |  |  | 5,815,027 |
Less: allowance for loan and lease losses |  |  |  |  |  |  | 70,264 |  |  | 69,304 |  |  | 68,172 |
Loans, net |  |  |  |  |  |  | 6,189,493 |  |  | 6,037,839 |  |  | 5,746,855 |
FDIC loss-sharing asset |  |  |  |  |  |  | 3,592 |  |  | 4,266 |  |  | 6,568 |
Interest receivable |  |  |  |  |  |  | 31,606 |  |  | 29,738 |  |  | 27,877 |
Premises and equipment, net |  |  |  |  |  |  | 152,908 |  |  | 156,446 |  |  | 164,239 |
Other real estate owned |  |  |  |  |  |  | 8,994 |  |  | 10,613 |  |  | 13,738 |
Goodwill |  |  |  |  |  |  | 382,762 |  |  | 382,762 |  |  | 382,762 |
Other intangible assets, net |  |  |  |  |  |  | 19,051 |  |  | 20,511 |  |  | 23,577 |
Other assets |  |  |  |  |  |  | 230,199 |  |  | 227,726 |  |  | 235,854 |
Total assets |  |  |  |  |  |  | $ | 9,586,754 |  |  | $ | 9,353,651 |  |  | $ | 8,951,697 |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  |  |  |  |  |  | $ | 3,942,434 |  |  | $ | 3,652,951 |  |  | $ | 3,507,358 |
Interest-bearing |  |  |  |  |  |  | 4,115,382 |  |  | 4,020,262 |  |  | 3,931,471 |
Total deposits |  |  |  |  |  |  | 8,057,816 |  |  | 7,673,213 |  |  | 7,438,829 |
Federal Home Loan Bank advances |  |  |  |  |  |  | 66,502 |  |  | 204,512 |  |  | 68,531 |
Securities sold under agreements to repurchase |  | 69,189 |  |  | 89,218 |  |  | 99,699 |
Other liabilities |  |  |  |  |  |  | 116,512 |  |  | 112,229 |  |  | 102,510 |
Total liabilities |  |  |  |  |  |  | 8,310,019 |  |  | 8,079,172 |  |  | 7,709,569 |
Commitments and contingent liabilities |  |  |  |  |  |  |  |  |  |  |
| September 30, |  | June 30, |  | December 31, |  |  |  |  |  |
| 2016 |  | 2016 |  | 2015 |  |  |  |  |  |
Preferred stock (no par value) | (in thousands) |  |  |  |  |  |
Authorized shares | 2,000 |  |  | 2,000 |  |  | 2,000 |  |  |  |  |  |  |
Issued and outstanding | 9 |  |  | 9 |  |  | 9 |  |  | 2,217 |  |  | 2,217 |  |  | 2,217 |
Common stock (no par value) |  |  |  |  |  |  |  |  |  |  |
Authorized shares | 115,000 |  |  | 115,000 |  |  | 115,000 |  |  |  |  |  |  |
Issued and outstanding | 58,043 |  |  | 58,025 |  |  | 57,724 |  |  | 994,098 |  |  | 992,343 |  |  | 990,281 |
Retained earnings |  |  |  |  |  |  | 263,915 |  |  | 259,108 |  |  | 255,925 |
Accumulated other comprehensive income (loss) |  |  |  |  |  | 16,505 |  |  | 20,811 |  |  | (6,295 | )
Total shareholders' equity |  |  |  |  |  |  | 1,276,735 |  |  | 1,274,479 |  |  | 1,242,128 |
Total liabilities and shareholders' equity |  |  |  |  |  | $ | 9,586,754 |  |  | $ | 9,353,651 |  |  | $ | 8,951,697 |

15

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | September 30, 2016 |  | September 30, 2015
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 6,179,163 |  |  | $ | 76,195 |  |  | 4.93 | % |  | $ | 5,712,614 |  |  | $ | 73,231 |  |  | 5.13 | %
Taxable securities |  | 1,870,466 |  |  | 8,988 |  |  | 1.92 | % |  | 1,498,211 |  |  | 7,472 |  |  | 1.99 | %
Tax exempt securities (2) |  | 480,627 |  |  | 4,306 |  |  | 3.58 | % |  | 446,963 |  |  | 4,491 |  |  | 4.02 | %
Interest-earning deposits with banks |  | 14,620 |  |  | 15 |  |  | 0.41 | % |  | 53,743 |  |  | 31 |  |  | 0.23 | %
Total interest-earning assets |  | 8,544,876 |  |  | $ | 89,504 |  |  | 4.19 | % |  | 7,711,531 |  |  | $ | 85,225 |  |  | 4.42 | %
Other earning assets |  | 155,663 |  |  |  |  |  |  | 149,895 |  |  |  |  |
Noninterest-earning assets |  | 792,912 |  |  |  |  |  |  | 811,266 |  |  |  |  |
Total assets |  | $ | 9,493,451 |  |  |  |  |  |  | $ | 8,672,692 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit |  | $ | 417,887 |  |  | $ | 124 |  |  | 0.12 | % |  | $ | 480,132 |  |  | $ | 213 |  |  | 0.18 | %
Savings accounts |  | 705,923 |  |  | 18 |  |  | 0.01 | % |  | 643,672 |  |  | 17 |  |  | 0.01 | %
Interest-bearing demand |  | 961,527 |  |  | 189 |  |  | 0.08 | % |  | 916,388 |  |  | 158 |  |  | 0.07 | %
Money market accounts |  | 2,033,450 |  |  | 492 |  |  | 0.10 | % |  | 1,870,503 |  |  | 368 |  |  | 0.08 | %
Total interest-bearing deposits |  | 4,118,787 |  |  | 823 |  |  | 0.08 | % |  | 3,910,695 |  |  | 756 |  |  | 0.08 | %
Federal Home Loan Bank advances |  | 96,931 |  |  | 229 |  |  | 0.95 | % |  | 13,968 |  |  | 78 |  |  | 2.23 | %
Other borrowings |  | 79,767 |  |  | 134 |  |  | 0.67 | % |  | 82,535 |  |  | 137 |  |  | 0.66 | %
Total interest-bearing liabilities |  | 4,295,485 |  |  | $ | 1,186 |  |  | 0.11 | % |  | 4,007,198 |  |  | $ | 971 |  |  | 0.10 | %
Noninterest-bearing deposits |  | 3,799,745 |  |  |  |  |  |  | 3,323,168 |  |  |  |  |
Other noninterest-bearing liabilities |  | 119,633 |  |  |  |  |  |  | 102,496 |  |  |  |  |
Shareholders’ equity |  | 1,278,588 |  |  |  |  |  |  | 1,239,830 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 9,493,451 |  |  |  |  |  |  | $ | 8,672,692 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 88,318 |  |  |  |  |  |  | $ | 84,254 |  |  |
Net interest margin (tax equivalent) |  | 4.13 | % |  |  |  |  |  | 4.37 | %

(1) | Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $1.4 million and $1.2 million for the three month periods ended September 30, 2016 and September 30, 2015, respectively. The incremental accretion on acquired loans was $4.6 million and $6.4 million for the three months ended September 30, 2016 and 2015, 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 $989 thousand for the three months ended September 30, 2016 and 2015, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million for both three months ended September 30, 2016 and 2015.

16

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | September 30, 2016 |  | June 30, 2016
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 6,179,163 |  |  | $ | 76,195 |  |  | 4.93 | % |  | $ | 5,999,428 |  |  | $ | 72,952 |  |  | 4.86 | %
Taxable securities |  | 1,870,466 |  |  | 8,988 |  |  | 1.92 | % |  | 1,801,195 |  |  | 8,829 |  |  | 1.96 | %
Tax exempt securities (2) |  | 480,627 |  |  | 4,306 |  |  | 3.58 | % |  | 460,817 |  |  | 4,300 |  |  | 3.73 | %
Interest-earning deposits with banks |  | 14,620 |  |  | 15 |  |  | 0.41 | % |  | 23,743 |  |  | 28 |  |  | 0.47 | %
Total interest-earning assets |  | 8,544,876 |  |  | $ | 89,504 |  |  | 4.19 | % |  | 8,285,183 |  |  | $ | 86,109 |  |  | 4.16 | %
Other earning assets |  | 155,663 |  |  |  |  |  |  | 154,843 |  |  |  |  |
Noninterest-earning assets |  | 792,912 |  |  |  |  |  |  | 790,765 |  |  |  |  |
Total assets |  | $ | 9,493,451 |  |  |  |  |  |  | $ | 9,230,791 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit |  | $ | 417,887 |  |  | $ | 124 |  |  | 0.12 | % |  | $ | 428,279 |  |  | $ | 140 |  |  | 0.13 | %
Savings accounts |  | 705,923 |  |  | 18 |  |  | 0.01 | % |  | 692,179 |  |  | 18 |  |  | 0.01 | %
Interest-bearing demand |  | 961,527 |  |  | 189 |  |  | 0.08 | % |  | 949,669 |  |  | 183 |  |  | 0.08 | %
Money market accounts |  | 2,033,450 |  |  | 492 |  |  | 0.10 | % |  | 1,956,257 |  |  | 446 |  |  | 0.09 | %
Total interest-bearing deposits |  | 4,118,787 |  |  | 823 |  |  | 0.08 | % |  | 4,026,384 |  |  | 787 |  |  | 0.08 | %
Federal Home Loan Bank advances |  | 96,931 |  |  | 229 |  |  | 0.95 | % |  | 161,637 |  |  | 241 |  |  | 0.60 | %
Other borrowings |  | 79,767 |  |  | 134 |  |  | 0.67 | % |  | 76,771 |  |  | 135 |  |  | 0.70 | %
Total interest-bearing liabilities |  | 4,295,485 |  |  | $ | 1,186 |  |  | 0.11 | % |  | 4,264,792 |  |  | $ | 1,163 |  |  | 0.11 | %
Noninterest-bearing deposits |  | 3,799,745 |  |  |  |  |  |  | 3,595,882 |  |  |  |  |
Other noninterest-bearing liabilities |  | 119,633 |  |  |  |  |  |  | 102,447 |  |  |  |  |
Shareholders’ equity |  | 1,278,588 |  |  |  |  |  |  | 1,267,670 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 9,493,451 |  |  |  |  |  |  | $ | 9,230,791 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 88,318 |  |  |  |  |  |  | $ | 84,946 |  |  |
Net interest margin (tax equivalent) |  | 4.13 | % |  |  |  |  |  | 4.10 | %

(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 $1.4 million and $1.2 million for the three month periods ended September 30, 2016 and June 30, 2016. The incremental accretion on acquired loans was $4.6 million and $4.4 million for the three months ended September 30, 2016 and June 30, 2016, 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 September 30, 2016 and June 30, 2016, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million and $1.6 million for the three month periods ended September 30, 2016 and June 30, 2016, respectively.

17

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Nine Months Ended September 30, |  | Nine Months Ended September 30,
|  | 2016 |  | 2015
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 6,002,656 |  |  | $ | 220,445 |  |  | 4.90 | % |  | $ | 5,557,771 |  |  | $ | 217,128 |  |  | 5.21 | %
Taxable securities |  | 1,787,288 |  |  | 25,834 |  |  | 1.93 | % |  | 1,541,018 |  |  | 22,258 |  |  | 1.93 | %
Tax exempt securities (2) |  | 466,589 |  |  | 12,918 |  |  | 3.69 | % |  | 455,509 |  |  | 13,802 |  |  | 4.04 | %
Interest-earning deposits with banks |  | 23,106 |  |  | 81 |  |  | 0.47 | % |  | 46,656 |  |  | 84 |  |  | 0.24 | %
Total interest-earning assets |  | 8,279,639 |  |  | $ | 259,278 |  |  | 4.18 | % |  | 7,600,954 |  |  | $ | 253,272 |  |  | 4.44 | %
Other earning assets |  | 154,950 |  |  |  |  |  |  | 148,189 |  |  |  |  |
Noninterest-earning assets |  | 790,877 |  |  |  |  |  |  | 821,682 |  |  |  |  |
Total assets |  | $ | 9,225,466 |  |  |  |  |  |  | $ | 8,570,825 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit |  | $ | 431,643 |  |  | $ | 408 |  |  | 0.13 | % |  | $ | 490,720 |  |  | $ | 689 |  |  | 0.19 | %
Savings accounts |  | 691,379 |  |  | 53 |  |  | 0.01 | % |  | 631,979 |  |  | 53 |  |  | 0.01 | %
Interest-bearing demand |  | 946,437 |  |  | 541 |  |  | 0.08 | % |  | 1,003,544 |  |  | 451 |  |  | 0.06 | %
Money market accounts |  | 1,973,646 |  |  | 1,350 |  |  | 0.09 | % |  | 1,813,282 |  |  | 1,051 |  |  | 0.08 | %
Total interest-bearing deposits |  | 4,043,105 |  |  | 2,352 |  |  | 0.08 | % |  | 3,939,525 |  |  | 2,244 |  |  | 0.08 | %
Federal Home Loan Bank advances |  | 103,023 |  |  | 594 |  |  | 0.77 | % |  | 88,121 |  |  | 391 |  |  | 0.59 | %
Other borrowings |  | 82,403 |  |  | 407 |  |  | 0.66 | % |  | 92,169 |  |  | 419 |  |  | 0.61 | %
Total interest-bearing liabilities |  | 4,228,531 |  |  | $ | 3,353 |  |  | 0.11 | % |  | 4,119,815 |  |  | $ | 3,054 |  |  | 0.10 | %
Noninterest-bearing deposits |  | 3,619,994 |  |  |  |  |  |  | 3,108,293 |  |  |  |  |
Other noninterest-bearing liabilities |  | 108,680 |  |  |  |  |  |  | 99,864 |  |  |  |  |
Shareholders’ equity |  | 1,268,261 |  |  |  |  |  |  | 1,242,853 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 9,225,466 |  |  |  |  |  |  | $ | 8,570,825 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 255,925 |  |  |  |  |  |  | $ | 250,218 |  |  |
Net interest margin (tax equivalent) |  | 4.12 | % |  |  |  |  |  | 4.39 | %

(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 $3.6 million and $3.8 million for the nine months ended September 30, 2016 and 2015, respectively. The incremental accretion on acquired loans was $13.7 million and $21.2 million for the nine months ended September 30, 2016 and 2015, respectively.

(2) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $3.5 million and $2.3 million for the nine months ended September 30, 2016 and 2015, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $4.5 million and $4.8 million for the nine months ended September 30, 2016 and 2015, respectively.

18

Non-GAAP Financial Measures
The Company considers its operating net interest margin and operating efficiency ratios to be important measurements as they more closely reflect the ongoing operating performance of the Company. Despite the importance of the operating net interest margin and operating efficiency ratio to the Company, there are no standardized definitions for them and, as a result, the Company’s calculations may not be comparable with other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.
The following tables reconcile the Company’s calculation of the operating net interest margin and operating efficiency ratio:

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2016 |  | 2016 |  | 2015 |  | 2016 |  | 2015
Operating net interest margin non-GAAP reconciliation: |  | (dollars in thousands)
Net interest income (tax equivalent) (1) |  | $ | 88,318 |  |  | $ | 84,946 |  |  | $ | 84,254 |  |  | $ | 255,925 |  |  | $ | 250,218 |
Adjustments to arrive at operating net interest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Incremental accretion income on FDIC purchased credit impaired loans |  | (1,816 | ) |  | (1,300 | ) |  | (2,082 | ) |  | (4,773 | ) |  | (6,896 | )
Incremental accretion income on other FDIC acquired loans (2) |  | — |  |  | — |  |  | (34 | ) |  | — |  |  | (166 | )
Incremental accretion income on other acquired loans |  | (2,749 | ) |  | (3,074 | ) |  | (4,293 | ) |  | (8,896 | ) |  | (14,116 | )
Premium amortization on acquired securities |  | 1,991 |  |  | 2,075 |  |  | 2,396 |  |  | 6,390 |  |  | 7,964 |
Interest reversals on nonaccrual loans |  | 266 |  |  | 107 |  |  | 325 |  |  | 826 |  |  | 1,131 |
Operating net interest income (tax equivalent) (1) |  | $ | 86,010 |  |  | $ | 82,754 |  |  | $ | 80,566 |  |  | $ | 249,472 |  |  | $ | 238,135 |
Average interest earning assets |  | $ | 8,544,876 |  |  | $ | 8,285,183 |  |  | $ | 7,711,531 |  |  | $ | 8,279,639 |  |  | $ | 7,600,954 |
Net interest margin (tax equivalent) (1) |  | 4.13 | % |  | 4.10 | % |  | 4.37 | % |  | 4.12 | % |  | 4.39 | %
Operating net interest margin (tax equivalent) (1) |  | 4.03 | % |  | 4.00 | % |  | 4.18 | % |  | 4.02 | % |  | 4.18 | %

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2016 |  | 2016 |  | 2015 |  | 2016 |  | 2015
Operating efficiency ratio non-GAAP reconciliation: |  | (dollars in thousands)
Noninterest expense (numerator A) |  | $ | 67,264 |  |  | $ | 63,790 |  |  | $ | 64,067 |  |  | $ | 196,128 |  |  | $ | 199,272 |
Adjustments to arrive at operating noninterest expense: |  |  |  |  |  |  |  |  |  |
Acquisition-related expenses |  | — |  |  | — |  |  | (428 | ) |  | (2,436 | ) |  | (9,045 | )
Net benefit (cost) of operation of OREO and OPPO |  | 254 |  |  | (84 | ) |  | (228 | ) |  | 68 |  |  | 1,574 |
FDIC clawback liability expense |  | (29 | ) |  | (70 | ) |  | (174 | ) |  | (308 | ) |  | (167 | )
Loss on asset disposals |  | (31 | ) |  | (7 | ) |  | (274 | ) |  | (198 | ) |  | (381 | )
State of Washington Business and Occupation ("B&O") taxes |  | (1,382 | ) |  | (1,204 | ) |  | (1,212 | ) |  | (3,757 | ) |  | (3,668 | )
Operating noninterest expense (numerator B) |  | $ | 66,076 |  |  | $ | 62,425 |  |  | $ | 61,751 |  |  | $ | 189,497 |  |  | $ | 187,585 |
Net interest income (tax equivalent) (1) |  | $ | 88,318 |  |  | $ | 84,946 |  |  | $ | 84,254 |  |  | $ | 255,925 |  |  | $ | 250,218 |
Noninterest income |  | 23,166 |  |  | 21,940 |  |  | 22,499 |  |  | 65,752 |  |  | 66,728 |
Bank owned life insurance tax equivalent adjustment |  | 577 |  |  | 685 |  |  | 585 |  |  | 1,862 |  |  | 1,815 |
Total revenue (tax equivalent) (denominator A) |  | $ | 112,061 |  |  | $ | 107,571 |  |  | $ | 107,338 |  |  | $ | 323,539 |  |  | $ | 318,761 |
Operating net interest income (tax equivalent) (1) |  | $ | 86,010 |  |  | $ | 82,754 |  |  | $ | 80,566 |  |  | $ | 249,472 |  |  | $ | 238,135 |
Adjustments to arrive at operating noninterest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Investment securities gains, net |  | (572 | ) |  | (229 | ) |  | (236 | ) |  | (1,174 | ) |  | (1,300 | )
Gain on asset disposals |  | (16 | ) |  | (2 | ) |  | (120 | ) |  | (72 | ) |  | (125 | )
Change in FDIC loss-sharing asset |  | 104 |  |  | 990 |  |  | 1,635 |  |  | 2,197 |  |  | 2,979 |
Operating noninterest income (tax equivalent) |  | 23,259 |  |  | 23,384 |  |  | 24,363 |  |  | 68,565 |  |  | 70,097 |
Total operating revenue (tax equivalent) (denominator B) |  | $ | 109,269 |  |  | $ | 106,138 |  |  | $ | 104,929 |  |  | $ | 318,037 |  |  | $ | 308,232 |
Efficiency ratio (tax equivalent) (numerator A/denominator A) |  | 60.02 | % |  | 59.30 | % |  | 59.69 | % |  | 60.62 | % |  | 62.51 | %
Operating efficiency ratio (tax equivalent) (numerator B/denominator B) |  | 60.47 | % |  | 58.81 | % |  | 58.85 | % |  | 59.58 | % |  | 60.86 | %

__________
(1) Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $2.7 million, $2.8 million and $2.6 million for the three months ended September 30, 2016, June 30, 2016 and September 30, 2015, respectively; and $8.0 million and $7.2 million for the nine months ended September 30, 2016 and September 30, 2015, respectively.
(2) For 2016, incremental accretion income on other FDIC acquired loans is no longer considered significant and will no longer be tracked for these non-GAAP financial measures.
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