EX-99.1 2 a991colb2q2017earningsrele.htm PRESS RELEASE - EARNINGS AND DIVIDEND
Exhibit 99.1
FOR IMMEDIATE RELEASE
July 27, 2017
Columbia Banking System Announces Second Quarter 2017 Results
and Quarterly Cash Dividend
Highlights

• | Record second quarter net income of $27.1 million; diluted earnings per share of $0.47

• | New loan production for the quarter of $316.2 million and loan growth of $194.9 million

• | Terminated all existing loss share agreements with the FDIC

• | Nonperforming assets to period end assets ratio remains low at 0.42%

TACOMA, Washington, July 27, 2017 -- 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 2017 earnings, “I’m pleased with our record setting earnings for the quarter, especially in light of the impact of the $2.4 million expense we recognized to terminate our FDIC loss sharing agreements, which when combined with the $1.0 million of acquisition-related expense recorded in the quarter, reduced our earnings per share by $0.04.” Mr. Robbins continued, “Our record first half 2017 earnings is a direct reflection on the efforts of our bankers, who remain focused on developing new relationships while deepening existing ones.”
1

Balance Sheet
Total assets at June 30, 2017 were $9.69 billion, an increase of $157.8 million from March 31, 2017. Loans grew $194.9 million during the quarter due to strong loan originations of $316.2 million and seasonal increases in line utilization. Securities available for sale were $2.26 billion at June 30, 2017, a decrease of $66.7 million, or 3% from $2.33 billion at March 31, 2017. Total deposits at June 30, 2017 were $8.07 billion, a decrease of $16.4 million from March 31, 2017. Core deposits comprised 96% of total deposits and were $7.72 billion at June 30, 2017, a decrease of $72.8 million from March 31, 2017. The average cost of total deposits for the quarter was 0.05%, an increase of one basis point from the first quarter of 2017.
Income Statement
Net Interest Income
Net interest income for the second quarter of 2017 was $86.2 million, a decrease of $514 thousand from the linked period and an increase of $4.0 million from the prior year period. The linked quarter decrease was principally from taxable securities income, whose yields during the first quarter of 2017 benefited from a market-driven reduction in premium amortization. Also contributing to the decrease was incremental accretion from purchased loans, which was $956 thousand lower than the linked period. The increase from the prior year period was due to higher loan and securities volumes, partially offset by lower incremental accretion. Incremental accretion income from purchased loans in the current period was $1.3 million lower than the prior year period. For additional information regarding net interest income, see the “Average Balances and Rates” table.
Noninterest Income
Noninterest income was $24.1 million for the second quarter of 2017, a decrease of $724 thousand compared to $24.9 million for the first quarter of 2017. The linked quarter decrease was principally due to lower bank owned life insurance (“BOLI”) benefits in the current period as well as a $573 thousand benefit from re-measuring our mortgage repurchase liability in the linked period. Both the BOLI and mortgage repurchase benefits were recorded to other noninterest income. Compared to the second quarter of 2016, noninterest income increased by $2.2 million due to lower expenses from the FDIC loss-sharing asset as well as higher other noninterest income, principally from a current quarter BOLI benefit of $430 thousand, with no such BOLI benefit in the prior year period.
2

Noninterest Expense
Total noninterest expense for the second quarter of 2017 was $68.9 million, a decrease of $119 thousand from the first quarter of 2017. The small improvement resulted from lower compensation costs being offset by the $2.4 million charge from early termination of our FDIC loss-sharing agreements; the early termination charge was recognized in other noninterest expense. The lower compensation costs stemmed from additional stock compensation expense recognized in the linked quarter due to the immediate vesting of certain restricted share awards as well as additional payroll taxes.
Compared to the second quarter of 2016, noninterest expense increased $5.1 million, or 8%, from $63.8 million. The increase was due to the previously noted charge from early termination of loss-sharing agreements as well as $1.0 million of acquisition-related expenses recognized in the current quarter. In addition, legal and professional fees were higher due to costs from both our investment in a customer relationship management application and the search for a permanent Chief Executive Officer.
Net Interest Margin
Columbia’s net interest margin (tax equivalent) for the second quarter of 2017 was 4.12%, a decrease of 8 basis points from the linked quarter and an increase of 2 basis points from the prior year period. The decrease from the linked quarter was due to higher linked quarter interest income from taxable securities, which was driven by reduced amortization of premiums as well as lower incremental accretion in the current quarter. The increase from the prior year quarter was due to higher loan and security volumes, partially offset by lower incremental accretion. Columbia’s operating net interest margin (tax equivalent)(1) was 4.09% for the second quarter of 2017, unchanged from the linked quarter and an increase of 9 basis points from the prior year period due to higher loan and security volumes.
3

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,
|  | 2017 |  | 2017 |  | 2016 |  | 2016 |  | 2016 |  | 2017 |  | 2016
|  | (dollars in thousands)
Incremental accretion income due to: |  |  |  |  |  |  |  |  |  |  |  |  |  |
FDIC purchased credit impaired loans |  | $ | 753 |  |  | $ | 2,117 |  |  | $ | 1,199 |  |  | $ | 1,816 |  |  | $ | 1,300 |  |  | $ | 2,870 |  |  | $ | 2,957 |
Other acquired loans |  | 2,356 |  |  | 1,948 |  |  | 3,087 |  |  | 2,749 |  |  | 3,074 |  |  | 4,304 |  |  | 6,147 |
Incremental accretion income |  | $ | 3,109 |  |  | $ | 4,065 |  |  | $ | 4,286 |  |  | $ | 4,565 |  |  | $ | 4,374 |  |  | $ | 7,174 |  |  | $ | 9,104 |
Net interest margin (tax equivalent) |  | 4.12 | % |  | 4.20 | % |  | 4.11 | % |  | 4.13 | % |  | 4.10 | % |  | 4.16 | % |  | 4.12 | %
Operating net interest margin (tax equivalent) (1) |  | 4.09 | % |  | 4.09 | % |  | 3.99 | % |  | 4.03 | % |  | 4.00 | % |  | 4.09 | % |  | 4.01 | %

__________
(1) Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled “Non-GAAP Financial Measures” on the last page of this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.
Asset Quality
At June 30, 2017, nonperforming assets to total assets were 0.42% compared to 0.32% at March 31, 2017 and 0.35% at December 31, 2016. Total nonperforming assets increased $10.8 million from the linked quarter due to an $11.3 million increase in nonaccrual loans, partially offset by a decrease in other real estate owned.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:

|  | June 30, 2017 |  | March 31, 2017 |  | December 31, 2016
|  | (in thousands)
Nonaccrual loans: |  |  |  |  |  |
Commercial business |  | $ | 24,747 |  |  | $ | 10,848 |  |  | $ | 11,555 |
Real estate: |  |  |  |  |  |
One-to-four family residential |  | 697 |  |  | 450 |  |  | 568 |
Commercial and multifamily residential |  | 7,267 |  |  | 10,237 |  |  | 11,187 |
Total real estate |  | 7,964 |  |  | 10,687 |  |  | 11,755 |
Real estate construction: |  |  |  |  |  |
One-to-four family residential |  | 241 |  |  | 213 |  |  | 563 |
Total real estate construction |  | 241 |  |  | 213 |  |  | 563 |
Consumer |  | 3,872 |  |  | 3,799 |  |  | 3,883 |
Total nonaccrual loans |  | 36,824 |  |  | 25,547 |  |  | 27,756 |
Other real estate owned and other personal property owned |  | 4,058 |  |  | 4,519 |  |  | 5,998 |
Total nonperforming assets |  | $ | 40,882 |  |  | $ | 30,066 |  |  | $ | 33,754 |

4

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

|  | Three Months Ended |  | Six Months Ended
|  | June 30, 2017 |  | March 31, 2017 |  | June 30, 2016 |  | June 30, 2017 |  | June 30, 2016
|  | (in thousands)
Beginning balance |  | $ | 71,021 |  |  | $ | 70,043 |  |  | $ | 69,264 |  |  | $ | 70,043 |  |  | $ | 68,172 |
Charge-offs: |  |  |  |  |  |  |  |  |  |
Commercial business |  | (3,600 | ) |  | (1,127 | ) |  | (2,941 | ) |  | (4,727 | ) |  | (6,714 | )
One-to-four family residential real estate |  | (153 | ) |  | (307 | ) |  | (35 | ) |  | (460 | ) |  | (35 | )
Commercial and multifamily residential real estate |  | — |  |  | — |  |  | (26 | ) |  | — |  |  | (26 | )
One-to-four family residential real estate construction |  | — |  |  | (14 | ) |  | — |  |  | (14 | ) |  | — |
Consumer |  | (465 | ) |  | (428 | ) |  | (334 | ) |  | (893 | ) |  | (600 | )
Purchased credit impaired |  | (1,800 | ) |  | (1,939 | ) |  | (2,898 | ) |  | (3,739 | ) |  | (5,764 | )
Total charge-offs |  | (6,018 | ) |  | (3,815 | ) |  | (6,234 | ) |  | (9,833 | ) |  | (13,139 | )
Recoveries: |  |  |  |  |  |  |  |  |  |
Commercial business |  | 2,944 |  |  | 365 |  |  | 753 |  |  | 3,309 |  |  | 1,415 |
One-to-four family residential real estate |  | 223 |  |  | 117 |  |  | 20 |  |  | 340 |  |  | 61 |
Commercial and multifamily residential real estate |  | 127 |  |  | 78 |  |  | 130 |  |  | 205 |  |  | 199 |
One-to-four family residential real estate construction |  | 58 |  |  | 29 |  |  | 5 |  |  | 87 |  |  | 259 |
Commercial and multifamily residential real estate construction |  | — |  |  | — |  |  | 1 |  |  | — |  |  | 2 |
Consumer |  | 248 |  |  | 285 |  |  | 201 |  |  | 533 |  |  | 366 |
Purchased credit impaired |  | 1,204 |  |  | 1,144 |  |  | 1,524 |  |  | 2,348 |  |  | 3,075 |
Total recoveries |  | 4,804 |  |  | 2,018 |  |  | 2,634 |  |  | 6,822 |  |  | 5,377 |
Net charge-offs |  | (1,214 | ) |  | (1,797 | ) |  | (3,600 | ) |  | (3,011 | ) |  | (7,762 | )
Provision for loan and lease losses |  | 3,177 |  |  | 2,775 |  |  | 3,640 |  |  | 5,952 |  |  | 8,894 |
Ending balance |  | $ | 72,984 |  |  | $ | 71,021 |  |  | $ | 69,304 |  |  | $ | 72,984 |  |  | $ | 69,304 |

The allowance for loan losses to period end loans was 1.14% at both June 30, 2017 and March 31, 2017. For the second quarter of 2017, Columbia recorded a net provision for loan and lease losses of $3.2 million compared to a net provision of $2.8 million for the linked quarter and $3.6 million for the comparable quarter last year. The net provision for loan and lease losses recorded during the current quarter consisted of $3.9 million of provision for loan losses for loans, excluding PCI loans, partially offset by a provision recovery of $738 thousand for PCI loans.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “Our nonperforming assets ratio of 42 basis points reflects the strength of our regional economy and the diversification within our loan portfolio.”
5

Organizational Update
Mr. Robbins commented, “Our pending acquisition of Pacific Continental Corporation is progressing. As announced last month, we have received the required shareholder approvals to complete the merger. Once the remaining regulatory approvals are obtained, we look forward to joining these two great companies together to the benefit of our customers, shareholders and the communities we serve. In addition, we regularly evaluate the alignment of our products and services with the needs of our clients. Given rapid technology changes in the payments industry, we are shifting our merchant card services business to an industry leading, third-party provider. We believe this transition will better serve our business clients via a broad selection of competitive, best-in-class payment processing solutions. This transaction will result in a one-time $14.0 million gain which will be recognized in the third quarter of 2017.”
Mr. Robbins continued, “I’m pleased to have recently announced some organization changes that are occurring at the Company. Clint Stein’s transition from Chief Financial Officer to Chief Operating Officer provides a great opportunity for leadership continuity as the two of us and our teams, have worked closely on the majority of our recently completed and in process strategic business initiatives. In addition to the national search for our next CFO, we have a search underway for an executive level Chief Risk Officer. This role will oversee the maturation of our existing enterprise risk management program and position us for future growth.”
Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.22 per common share on August 23, 2017 to shareholders of record as of the close of business on August 9, 2017.
Conference Call Information
Columbia’s management will discuss the second quarter 2017 results on a conference call scheduled for Thursday, July 27, 2017 at 1:00 p.m. Pacific Time (4:00 p.m. ET). Interested parties join the live-streamed event and a replay of the event by using the site:
https://engage.vevent.com/rt/columbiabankingsystemincao~48444274
The conference call can also be accessed on Thursday, July 27, 2017 at 1:00 p.m. Pacific Time (4:00 p.m. ET) by calling 1-888-286-8956; Conference ID code #48444274.
6

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 eleventh consecutive year, the bank was named in 2017 as one of Puget Sound Business Journal's "Washington's Best Workplaces." Columbia ranked in the top 30 on the 2017 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; (6) legislation or regulatory requirements or changes may adversely affect the businesses in which Columbia is engaged; and (7) the proposed merger with Pacific Continental Corporation (“Pacific Continental”) may not close when expected or at all because required regulatory or other approvals and other conditions to closing are not received or satisfied on a timely basis or at all, which may have an effect on the trading prices of Columbia’s stock. 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.
7

Additional Information
In connection with the Agreement and Plan of Merger, dated as of January 9, 2017, by and between Columbia Banking System, Inc. and Pacific Continental, Columbia has filed with the SEC a Registration Statement on Form S-4 that includes a Joint Proxy Statement of Columbia and Pacific Continental and a Prospectus of Columbia, as well as other relevant documents concerning the proposed transaction. Shareholders of Columbia and Pacific Continental are urged to carefully read the Registration Statement and the Joint Proxy Statement/Prospectus regarding the transaction in their entirety and any other relevant documents filed with the SEC, as well as any amendments or supplements to those documents, because they contain important information. Shareholders of Columbia and Pacific Continental are also urged to carefully review and consider each of Columbia’s and Pacific Continental’s public filings with the SEC, including but not limited to their Annual Reports on Form 10-K, their proxy statements, their Current Reports on Form 8-K and their Quarterly Reports on Form 10-Q. A definitive Joint Proxy Statement/Prospectus has been sent to the shareholders of each institution seeking any required shareholder approvals. The Joint Proxy Statement/Prospectus and other relevant materials filed with the SEC may be obtained free of charge at the SEC’s Website at http://www.sec.gov. PACIFIC CONTINENTAL AND COLUMBIA SHAREHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTION.
Investors will also be able to obtain these documents, free of charge, from Pacific Continental by accessing Pacific Continental’s website at www.therightbank.com under the link “Investor Relations” or from Columbia at www.columbiabank.com under the tab “About” and then under the heading “Investor Relations.” Copies can also be obtained, free of charge, by directing a written request to Columbia, Attention: Corporate Secretary, 1301 A Street, Suite 800, Tacoma, Washington 98401-2156 or to Pacific Continental, Attention: Corporate Secretary, 111 West Seventh Avenue, P.O. Box 10727, Eugene Oregon 97440-2727.

Contacts: | Hadley S. Robbins,
| President and
| Chief Executive Officer
| Clint E. Stein,
| Executive Vice President and
| Chief Financial Officer
| Investor Relations
| (253) 305-1921

8

FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Six Months Ended
Unaudited |  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2017 |  | 2017 |  | 2016 |  | 2017 |  | 2016
Earnings |  | (dollars in thousands except per share amounts)
Net interest income |  | $ | 86,161 |  |  | $ | 86,675 |  |  | $ | 82,140 |  |  | $ | 172,836 |  |  | $ | 162,310 |
Provision for loan and lease losses |  | $ | 3,177 |  |  | $ | 2,775 |  |  | $ | 3,640 |  |  | $ | 5,952 |  |  | $ | 8,894 |
Noninterest income |  | $ | 24,135 |  |  | $ | 24,859 |  |  | $ | 21,940 |  |  | $ | 48,994 |  |  | $ | 42,586 |
Noninterest expense |  | $ | 68,867 |  |  | $ | 68,986 |  |  | $ | 63,790 |  |  | $ | 137,853 |  |  | $ | 128,864 |
Acquisition-related expense (included in noninterest expense) |  | $ | 1,023 |  |  | $ | 1,364 |  |  | $ | — |  |  | $ | 2,387 |  |  | $ | 2,436 |
Net income |  | $ | 27,132 |  |  | $ | 29,199 |  |  | $ | 25,405 |  |  | $ | 56,331 |  |  | $ | 46,664 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.47 |  |  | $ | 0.50 |  |  | $ | 0.44 |  |  | $ | 0.97 |  |  | $ | 0.80 |
Earnings (diluted) |  | $ | 0.47 |  |  | $ | 0.50 |  |  | $ | 0.44 |  |  | $ | 0.97 |  |  | $ | 0.80 |
Book value |  | $ | 22.23 |  |  | $ | 21.86 |  |  | $ | 21.93 |  |  | $ | 22.23 |  |  | $ | 21.93 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 9,597,274 |  |  | $ | 9,473,698 |  |  | $ | 9,230,791 |  |  | $ | 9,535,827 |  |  | $ | 9,090,001 |
Interest-earning assets |  | $ | 8,651,735 |  |  | $ | 8,520,291 |  |  | $ | 8,285,183 |  |  | $ | 8,586,376 |  |  | $ | 8,145,564 |
Loans |  | $ | 6,325,462 |  |  | $ | 6,198,215 |  |  | $ | 5,999,428 |  |  | $ | 6,262,190 |  |  | $ | 5,913,434 |
Securities, including Federal Home Loan Bank stock |  | $ | 2,316,077 |  |  | $ | 2,310,490 |  |  | $ | 2,262,012 |  |  | $ | 2,313,299 |  |  | $ | 2,204,734 |
Deposits |  | $ | 7,965,868 |  |  | $ | 7,954,653 |  |  | $ | 7,622,266 |  |  | $ | 7,960,292 |  |  | $ | 7,533,980 |
Interest-bearing deposits |  | $ | 4,123,135 |  |  | $ | 4,118,604 |  |  | $ | 4,026,384 |  |  | $ | 4,120,882 |  |  | $ | 4,004,849 |
Interest-bearing liabilities |  | $ | 4,367,216 |  |  | $ | 4,263,660 |  |  | $ | 4,264,792 |  |  | $ | 4,315,724 |  |  | $ | 4,194,687 |
Noninterest-bearing deposits |  | $ | 3,842,733 |  |  | $ | 3,836,049 |  |  | $ | 3,595,882 |  |  | $ | 3,839,410 |  |  | $ | 3,529,131 |
Shareholders' equity |  | $ | 1,295,564 |  |  | $ | 1,261,652 |  |  | $ | 1,267,670 |  |  | $ | 1,278,702 |  |  | $ | 1,263,040 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.13 | % |  | 1.23 | % |  | 1.10 | % |  | 1.18 | % |  | 1.03 | %
Return on average common equity |  | 8.38 | % |  | 9.26 | % |  | 8.02 | % |  | 8.81 | % |  | 7.39 | %
Average equity to average assets |  | 13.50 | % |  | 13.32 | % |  | 13.73 | % |  | 13.41 | % |  | 13.89 | %
Net interest margin (tax equivalent) |  | 4.12 | % |  | 4.20 | % |  | 4.10 | % |  | 4.16 | % |  | 4.12 | %
Efficiency ratio (tax equivalent) (1) |  | 60.42 | % |  | 59.95 | % |  | 59.30 | % |  | 60.19 | % |  | 60.93 | %
Operating efficiency ratio (tax equivalent) (2) |  | 57.23 | % |  | 59.07 | % |  | 58.81 | % |  | 58.15 | % |  | 59.12 | %
|  | June 30, |  | March 31, |  | December 31, |  |  |  |
Period end |  | 2017 |  | 2017 |  | 2016 |  |  |  |
Total assets |  | $ | 9,685,110 |  |  | $ | 9,527,272 |  |  | $ | 9,509,607 |  |  |  |  |
Loans, net of unearned income |  | $ | 6,423,074 |  |  | $ | 6,228,136 |  |  | $ | 6,213,423 |  |  |  |  |
Allowance for loan and lease losses |  | $ | 72,984 |  |  | $ | 71,021 |  |  | $ | 70,043 |  |  |  |  |
Securities, including Federal Home Loan Bank stock |  | $ | 2,280,996 |  |  | $ | 2,341,959 |  |  | $ | 2,288,817 |  |  |  |  |
Deposits |  | $ | 8,072,464 |  |  | $ | 8,088,827 |  |  | $ | 8,059,415 |  |  |  |  |
Core deposits |  | $ | 7,721,766 |  |  | $ | 7,794,590 |  |  | $ | 7,749,568 |  |  |  |  |
Shareholders' equity |  | $ | 1,297,314 |  |  | $ | 1,275,343 |  |  | $ | 1,251,012 |  |  |  |  |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 36,824 |  |  | $ | 25,547 |  |  | $ | 27,756 |  |  |  |  |
Other real estate owned ("OREO") and other personal property owned ("OPPO") |  | 4,058 |  |  | 4,519 |  |  | 5,998 |  |  |  |  |
Total nonperforming assets |  | $ | 40,882 |  |  | $ | 30,066 |  |  | $ | 33,754 |  |  |  |  |
Nonperforming loans to period-end loans |  | 0.57 | % |  | 0.41 | % |  | 0.45 | % |  |  |  |
Nonperforming assets to period-end assets |  | 0.42 | % |  | 0.32 | % |  | 0.35 | % |  |  |  |
Allowance for loan and lease losses to period-end loans |  | 1.14 | % |  | 1.14 | % |  | 1.13 | % |  |  |  |
Net loan charge-offs |  | $ | 1,214 |  | (3) | $ | 1,797 |  | (4) | $ | 239 |  | (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 June 30, 2017. |  |  |  |  |  |  |  |  |  |
(4) For the three months ended March 31, 2017. |  |  |  |  |  |  |  |
(5) For the three months ended December 31, 2016. . |  |  |  |  |  |  |  |

9

QUARTERLY FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended
Unaudited |  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
|  | 2017 |  | 2017 |  | 2016 |  | 2016 |  | 2016
|  | (dollars in thousands except per share)
Earnings |  |
Net interest income |  | $ | 86,161 |  |  | $ | 86,675 |  |  | $ | 85,737 |  |  | $ | 85,572 |  |  | $ | 82,140 |
Provision for loan and lease losses |  | $ | 3,177 |  |  | $ | 2,775 |  |  | $ | 18 |  |  | $ | 1,866 |  |  | $ | 3,640 |
Noninterest income |  | $ | 24,135 |  |  | $ | 24,859 |  |  | $ | 22,330 |  |  | $ | 23,166 |  |  | $ | 21,940 |
Noninterest expense |  | $ | 68,867 |  |  | $ | 68,986 |  |  | $ | 65,014 |  |  | $ | 67,264 |  |  | $ | 63,790 |
Acquisition-related expense (included in noninterest expense) |  | $ | 1,023 |  |  | $ | 1,364 |  |  | $ | 291 |  |  | $ | — |  |  | $ | — |
Net income |  | $ | 27,132 |  |  | $ | 29,199 |  |  | $ | 30,718 |  |  | $ | 27,484 |  |  | $ | 25,405 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.47 |  |  | $ | 0.50 |  |  | $ | 0.53 |  |  | $ | 0.47 |  |  | $ | 0.44 |
Earnings (diluted) |  | $ | 0.47 |  |  | $ | 0.50 |  |  | $ | 0.53 |  |  | $ | 0.47 |  |  | $ | 0.44 |
Book value |  | $ | 22.23 |  |  | $ | 21.86 |  |  | $ | 21.52 |  |  | $ | 21.96 |  |  | $ | 21.93 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 9,597,274 |  |  | $ | 9,473,698 |  |  | $ | 9,568,214 |  |  | $ | 9,493,451 |  |  | $ | 9,230,791 |
Interest-earning assets |  | $ | 8,651,735 |  |  | $ | 8,520,291 |  |  | $ | 8,612,498 |  |  | $ | 8,544,876 |  |  | $ | 8,285,183 |
Loans |  | $ | 6,325,462 |  |  | $ | 6,198,215 |  |  | $ | 6,200,506 |  |  | $ | 6,179,163 |  |  | $ | 5,999,428 |
Securities, including Federal Home Loan Bank stock |  | $ | 2,316,077 |  |  | $ | 2,310,490 |  |  | $ | 2,314,521 |  |  | $ | 2,351,093 |  |  | $ | 2,262,012 |
Deposits |  | $ | 7,965,868 |  |  | $ | 7,954,653 |  |  | $ | 8,105,522 |  |  | $ | 7,918,532 |  |  | $ | 7,622,266 |
Interest-bearing deposits |  | $ | 4,123,135 |  |  | $ | 4,118,604 |  |  | $ | 4,151,695 |  |  | $ | 4,118,787 |  |  | $ | 4,026,384 |
Interest-bearing liabilities |  | $ | 4,367,216 |  |  | $ | 4,263,660 |  |  | $ | 4,222,820 |  |  | $ | 4,295,485 |  |  | $ | 4,264,792 |
Noninterest-bearing deposits |  | $ | 3,842,733 |  |  | $ | 3,836,049 |  |  | $ | 3,953,827 |  |  | $ | 3,799,745 |  |  | $ | 3,595,882 |
Shareholders' equity |  | $ | 1,295,564 |  |  | $ | 1,261,652 |  |  | $ | 1,274,388 |  |  | $ | 1,278,588 |  |  | $ | 1,267,670 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.13 | % |  | 1.23 | % |  | 1.28 | % |  | 1.16 | % |  | 1.10 | %
Return on average common equity |  | 8.38 | % |  | 9.26 | % |  | 9.65 | % |  | 8.60 | % |  | 8.02 | %
Average equity to average assets |  | 13.50 | % |  | 13.32 | % |  | 13.32 | % |  | 13.47 | % |  | 13.73 | %
Net interest margin (tax equivalent) |  | 4.12 | % |  | 4.20 | % |  | 4.11 | % |  | 4.13 | % |  | 4.10 | %
Period end |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 9,685,110 |  |  | $ | 9,527,272 |  |  | $ | 9,509,607 |  |  | $ | 9,586,754 |  |  | $ | 9,353,651 |
Loans, net of unearned income |  | $ | 6,423,074 |  |  | $ | 6,228,136 |  |  | $ | 6,213,423 |  |  | $ | 6,259,757 |  |  | $ | 6,107,143 |
Allowance for loan and lease losses |  | $ | 72,984 |  |  | $ | 71,021 |  |  | $ | 70,043 |  |  | $ | 70,264 |  |  | $ | 69,304 |
Securities, including Federal Home Loan Bank stock |  | $ | 2,280,996 |  |  | $ | 2,341,959 |  |  | $ | 2,288,817 |  |  | $ | 2,372,724 |  |  | $ | 2,297,713 |
Deposits |  | $ | 8,072,464 |  |  | $ | 8,088,827 |  |  | $ | 8,059,415 |  |  | $ | 8,057,816 |  |  | $ | 7,673,213 |
Core deposits |  | $ | 7,721,766 |  |  | $ | 7,794,590 |  |  | $ | 7,749,568 |  |  | $ | 7,809,064 |  |  | $ | 7,447,963 |
Shareholders' equity |  | $ | 1,297,314 |  |  | $ | 1,275,343 |  |  | $ | 1,251,012 |  |  | $ | 1,276,735 |  |  | $ | 1,274,479 |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 36,824 |  |  | $ | 25,547 |  |  | $ | 27,756 |  |  | $ | 21,366 |  |  | $ | 22,915 |
OREO and OPPO |  | 4,058 |  |  | 4,519 |  |  | 5,998 |  |  | 8,994 |  |  | 10,613 |
Total nonperforming assets |  | $ | 40,882 |  |  | $ | 30,066 |  |  | $ | 33,754 |  |  | $ | 30,360 |  |  | $ | 33,528 |
Nonperforming loans to period-end loans |  | 0.57 | % |  | 0.41 | % |  | 0.45 | % |  | 0.34 | % |  | 0.38 | %
Nonperforming assets to period-end assets |  | 0.42 | % |  | 0.32 | % |  | 0.35 | % |  | 0.32 | % |  | 0.36 | %
Allowance for loan and lease losses to period-end loans |  | 1.14 | % |  | 1.14 | % |  | 1.13 | % |  | 1.12 | % |  | 1.13 | %
Net loan charge-offs |  | $ | 1,214 |  |  | $ | 1,797 |  |  | $ | 239 |  |  | $ | 906 |  |  | $ | 3,600 |

10

LOAN PORTFOLIO COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
|  | 2017 |  | 2017 |  | 2016 |  | 2016 |  | 2016
Loan Portfolio Composition - Dollars |  | (dollars in thousands)
Commercial business |  | $ | 2,704,468 |  |  | $ | 2,559,247 |  |  | $ | 2,551,054 |  |  | $ | 2,630,017 |  |  | $ | 2,518,682 |
Real estate: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 173,150 |  |  | 172,581 |  |  | 170,331 |  |  | 168,511 |  |  | 172,957 |
Commercial and multifamily residential |  | 2,787,560 |  |  | 2,783,433 |  |  | 2,719,830 |  |  | 2,686,783 |  |  | 2,651,476 |
Total real estate |  | 2,960,710 |  |  | 2,956,014 |  |  | 2,890,161 |  |  | 2,855,294 |  |  | 2,824,433 |
Real estate construction: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 139,956 |  |  | 115,219 |  |  | 121,887 |  |  | 130,163 |  |  | 129,195 |
Commercial and multifamily residential |  | 195,565 |  |  | 172,896 |  |  | 209,118 |  |  | 202,014 |  |  | 185,315 |
Total real estate construction |  | 335,521 |  |  | 288,115 |  |  | 331,005 |  |  | 332,177 |  |  | 314,510 |
Consumer |  | 323,187 |  |  | 318,069 |  |  | 329,261 |  |  | 325,741 |  |  | 325,632 |
Purchased credit impaired |  | 129,853 |  |  | 138,903 |  |  | 145,660 |  |  | 152,764 |  |  | 161,107 |
Subtotal loans |  | 6,453,739 |  |  | 6,260,348 |  |  | 6,247,141 |  |  | 6,295,993 |  |  | 6,144,364 |
Less: Net unearned income |  | (30,665 | ) |  | (32,212 | ) |  | (33,718 | ) |  | (36,236 | ) |  | (37,221 | )
Loans, net of unearned income |  | 6,423,074 |  |  | 6,228,136 |  |  | 6,213,423 |  |  | 6,259,757 |  |  | 6,107,143 |
Less: Allowance for loan and lease losses |  | (72,984 | ) |  | (71,021 | ) |  | (70,043 | ) |  | (70,264 | ) |  | (69,304 | )
Total loans, net |  | 6,350,090 |  |  | 6,157,115 |  |  | 6,143,380 |  |  | 6,189,493 |  |  | 6,037,839 |
Loans held for sale |  | $ | 6,918 |  |  | $ | 3,245 |  |  | $ | 5,846 |  |  | $ | 3,361 |  |  | $ | 7,649 |

|  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
Loan Portfolio Composition - Percentages |  | 2017 |  | 2017 |  | 2016 |  | 2016 |  | 2016
Commercial business |  | 42.1 | % |  | 41.1 | % |  | 41.1 | % |  | 42.0 | % |  | 41.2 | %
Real estate: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 2.7 | % |  | 2.8 | % |  | 2.7 | % |  | 2.7 | % |  | 2.8 | %
Commercial and multifamily residential |  | 43.5 | % |  | 44.7 | % |  | 43.7 | % |  | 43.0 | % |  | 43.6 | %
Total real estate |  | 46.2 | % |  | 47.5 | % |  | 46.4 | % |  | 45.7 | % |  | 46.4 | %
Real estate construction: |  |  |  |  |  |  |  |  |  |
One-to-four family residential |  | 2.2 | % |  | 1.8 | % |  | 2.0 | % |  | 2.1 | % |  | 2.1 | %
Commercial and multifamily residential |  | 3.0 | % |  | 2.8 | % |  | 3.4 | % |  | 3.2 | % |  | 3.0 | %
Total real estate construction |  | 5.2 | % |  | 4.6 | % |  | 5.4 | % |  | 5.3 | % |  | 5.1 | %
Consumer |  | 5.0 | % |  | 5.1 | % |  | 5.3 | % |  | 5.2 | % |  | 5.3 | %
Purchased credit impaired |  | 2.0 | % |  | 2.2 | % |  | 2.3 | % |  | 2.4 | % |  | 2.6 | %
Subtotal loans |  | 100.5 | % |  | 100.5 | % |  | 100.5 | % |  | 100.6 | % |  | 100.6 | %
Less: Net unearned income |  | (0.5 | )% |  | (0.5 | )% |  | (0.5 | )% |  | (0.6 | )% |  | (0.6 | )%
Loans, net of unearned income |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

11

DEPOSIT COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |
|  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
|  | 2017 |  | 2017 |  | 2016 |  | 2016 |  | 2016
Deposit Composition - Dollars |  | (dollars in thousands)
Core deposits: |  |  |  |  |  |  |  |  |  |
Demand and other non-interest bearing |  | $ | 3,905,652 |  |  | $ | 3,958,106 |  |  | $ | 3,944,495 |  |  | $ | 3,942,434 |  |  | $ | 3,652,951 |
Interest bearing demand |  | 988,532 |  |  | 985,954 |  |  | 985,293 |  |  | 963,242 |  |  | 957,548 |
Money market |  | 1,787,101 |  |  | 1,798,034 |  |  | 1,791,283 |  |  | 1,873,376 |  |  | 1,818,337 |
Savings |  | 756,825 |  |  | 759,002 |  |  | 723,667 |  |  | 714,047 |  |  | 692,694 |
Certificates of deposit, less than $250,000 |  | 283,656 |  |  | 293,494 |  |  | 304,830 |  |  | 315,965 |  |  | 326,433 |
Total core deposits |  | 7,721,766 |  |  | 7,794,590 |  |  | 7,749,568 |  |  | 7,809,064 |  |  | 7,447,963 |
Certificates of deposit, $250,000 or more |  | 81,861 |  |  | 74,460 |  |  | 79,424 |  |  | 79,590 |  |  | 72,812 |
Certificates of deposit insured by CDARS® |  | 19,276 |  |  | 20,994 |  |  | 22,039 |  |  | 16,951 |  |  | 22,755 |
Brokered money market accounts |  | 249,554 |  |  | 198,768 |  |  | 208,348 |  |  | 152,151 |  |  | 129,590 |
Subtotal |  | 8,072,457 |  |  | 8,088,812 |  |  | 8,059,379 |  |  | 8,057,756 |  |  | 7,673,120 |
Premium resulting from acquisition date fair value adjustment |  | 7 |  |  | 15 |  |  | 36 |  |  | 60 |  |  | 93 |
Total deposits |  | $ | 8,072,464 |  |  | $ | 8,088,827 |  |  | $ | 8,059,415 |  |  | $ | 8,057,816 |  |  | $ | 7,673,213 |

|  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
Deposit Composition - Percentages |  | 2017 |  | 2017 |  | 2016 |  | 2016 |  | 2016
Core deposits: |  |  |  |  |  |  |  |  |  |
Demand and other non-interest bearing |  | 48.4 | % |  | 48.9 | % |  | 48.9 | % |  | 48.9 | % |  | 47.6 | %
Interest bearing demand |  | 12.2 | % |  | 12.2 | % |  | 12.2 | % |  | 12.0 | % |  | 12.5 | %
Money market |  | 22.1 | % |  | 22.2 | % |  | 22.2 | % |  | 23.2 | % |  | 23.7 | %
Savings |  | 9.4 | % |  | 9.4 | % |  | 9.0 | % |  | 8.9 | % |  | 9.0 | %
Certificates of deposit, less than $250,000 |  | 3.5 | % |  | 3.6 | % |  | 3.8 | % |  | 3.9 | % |  | 4.3 | %
Total core deposits |  | 95.6 | % |  | 96.3 | % |  | 96.1 | % |  | 96.9 | % |  | 97.1 | %
Certificates of deposit, $250,000 or more |  | 1.0 | % |  | 0.9 | % |  | 1.0 | % |  | 1.0 | % |  | 0.9 | %
Certificates of deposit insured by CDARS® |  | 0.2 | % |  | 0.3 | % |  | 0.3 | % |  | 0.2 | % |  | 0.3 | %
Brokered money market accounts |  | 3.2 | % |  | 2.5 | % |  | 2.6 | % |  | 1.9 | % |  | 1.7 | %
Total |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

12

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,
|  | 2017 |  | 2017 |  | 2016 |  | 2017 |  | 2016
|  | (in thousands except per share)
Interest Income |  |  |  |  |  |  |  |  |  |
Loans |  | $ | 75,579 |  |  | $ | 74,120 |  |  | $ | 71,651 |  |  | $ | 149,699 |  |  | $ | 141,967 |
Taxable securities |  | 9,468 |  |  | 10,986 |  |  | 8,829 |  |  | 20,454 |  |  | 16,846 |
Tax-exempt securities |  | 2,716 |  |  | 2,691 |  |  | 2,795 |  |  | 5,407 |  |  | 5,598 |
Deposits in banks |  | 23 |  |  | 19 |  |  | 28 |  |  | 42 |  |  | 66 |
Total interest income |  | 87,786 |  |  | 87,816 |  |  | 83,303 |  |  | 175,602 |  |  | 164,477 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 908 |  |  | 787 |  |  | 787 |  |  | 1,695 |  |  | 1,529 |
Federal Home Loan Bank advances |  | 591 |  |  | 225 |  |  | 241 |  |  | 816 |  |  | 365 |
Other borrowings |  | 126 |  |  | 129 |  |  | 135 |  |  | 255 |  |  | 273 |
Total interest expense |  | 1,625 |  |  | 1,141 |  |  | 1,163 |  |  | 2,766 |  |  | 2,167 |
Net Interest Income |  | 86,161 |  |  | 86,675 |  |  | 82,140 |  |  | 172,836 |  |  | 162,310 |
Provision for loan and lease losses |  | 3,177 |  |  | 2,775 |  |  | 3,640 |  |  | 5,952 |  |  | 8,894 |
Net interest income after provision for loan and lease losses |  | 82,984 |  |  | 83,900 |  |  | 78,500 |  |  | 166,884 |  |  | 153,416 |
Noninterest Income |  |  |  |  |  |  |  |  |  |
Deposit account and treasury management fees |  | 7,396 |  |  | 7,287 |  |  | 7,093 |  |  | 14,683 |  |  | 14,082 |
Card revenue |  | 6,202 |  |  | 5,723 |  |  | 6,051 |  |  | 11,925 |  |  | 11,703 |
Financial services and trust revenue |  | 3,036 |  |  | 2,839 |  |  | 2,780 |  |  | 5,875 |  |  | 5,601 |
Loan revenue |  | 2,989 |  |  | 3,593 |  |  | 2,802 |  |  | 6,582 |  |  | 5,064 |
Merchant processing revenue |  | 2,264 |  |  | 2,019 |  |  | 2,272 |  |  | 4,283 |  |  | 4,374 |
Bank owned life insurance |  | 1,433 |  |  | 1,280 |  |  | 1,270 |  |  | 2,713 |  |  | 2,386 |
Investment securities gains, net |  | — |  |  | — |  |  | 229 |  |  | — |  |  | 602 |
Change in FDIC loss-sharing asset |  | (173 | ) |  | (274 | ) |  | (990 | ) |  | (447 | ) |  | (2,093 | )
Other |  | 988 |  |  | 2,392 |  |  | 433 |  |  | 3,380 |  |  | 867 |
Total noninterest income |  | 24,135 |  |  | 24,859 |  |  | 21,940 |  |  | 48,994 |  |  | 42,586 |
Noninterest Expense |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 38,393 |  |  | 40,825 |  |  | 37,291 |  |  | 79,218 |  |  | 73,610 |
Occupancy |  | 7,577 |  |  | 7,191 |  |  | 7,652 |  |  | 14,768 |  |  | 17,825 |
Merchant processing expense |  | 1,147 |  |  | 1,049 |  |  | 1,118 |  |  | 2,196 |  |  | 2,151 |
Advertising and promotion |  | 1,137 |  |  | 817 |  |  | 1,043 |  |  | 1,954 |  |  | 1,885 |
Data processing |  | 4,741 |  |  | 4,208 |  |  | 3,929 |  |  | 8,949 |  |  | 8,075 |
Legal and professional fees |  | 2,947 |  |  | 3,369 |  |  | 1,777 |  |  | 6,316 |  |  | 3,102 |
Taxes, licenses and fees |  | 748 |  |  | 1,241 |  |  | 1,298 |  |  | 1,989 |  |  | 2,588 |
Regulatory premiums |  | 741 |  |  | 776 |  |  | 1,068 |  |  | 1,517 |  |  | 2,209 |
Net cost (benefit) of operation of other real estate owned |  | (1 | ) |  | 152 |  |  | 84 |  |  | 151 |  |  | 188 |
Amortization of intangibles |  | 1,249 |  |  | 1,349 |  |  | 1,483 |  |  | 2,598 |  |  | 3,066 |
Other |  | 10,188 |  |  | 8,009 |  |  | 7,047 |  |  | 18,197 |  |  | 14,165 |
Total noninterest expense |  | 68,867 |  |  | 68,986 |  |  | 63,790 |  |  | 137,853 |  |  | 128,864 |
Income before income taxes |  | 38,252 |  |  | 39,773 |  |  | 36,650 |  |  | 78,025 |  |  | 67,138 |
Provision for income taxes |  | 11,120 |  |  | 10,574 |  |  | 11,245 |  |  | 21,694 |  |  | 20,474 |
Net Income |  | $ | 27,132 |  |  | $ | 29,199 |  |  | $ | 25,405 |  |  | $ | 56,331 |  |  | $ | 46,664 |
Earnings per common share |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.47 |  |  | $ | 0.50 |  |  | $ | 0.44 |  |  | $ | 0.97 |  |  | $ | 0.80 |
Diluted |  | $ | 0.47 |  |  | $ | 0.50 |  |  | $ | 0.44 |  |  | $ | 0.97 |  |  | $ | 0.80 |
Dividends paid per common share - regular |  | $ | 0.22 |  |  | $ | 0.22 |  |  | $ | 0.19 |  |  | $ | 0.44 |  |  | $ | 0.37 |
Dividends paid per common share - special |  | $ | — |  |  | $ | — |  |  | $ | 0.18 |  |  | $ | — |  |  | $ | 0.38 |
Dividends paid per common share - total |  | $ | 0.22 |  |  | $ | 0.22 |  |  | $ | 0.37 |  |  | $ | 0.44 |  |  | $ | 0.75 |
Weighted average number of common shares outstanding |  | 57,520 |  |  | 57,388 |  |  | 57,185 |  |  | 57,437 |  |  | 57,149 |
Weighted average number of diluted common shares outstanding |  | 57,525 |  |  | 57,394 |  |  | 57,195 |  |  | 57,442 |  |  | 57,160 |

13

CONSOLIDATED BALANCE SHEETS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  | June 30, |  | March 31, |  | December 31,
|  |  |  |  |  |  | 2017 |  | 2017 |  | 2016
|  |  |  |  |  |  | (in thousands)
ASSETS |  |
Cash and due from banks |  |  |  |  |  |  | $ | 197,623 |  |  | $ | 169,697 |  |  | $ | 193,038 |
Interest-earning deposits with banks |  |  |  |  |  |  | 14,425 |  |  | 13,124 |  |  | 31,200 |
Total cash and cash equivalents |  |  |  |  |  |  | 212,048 |  |  | 182,821 |  |  | 224,238 |
Securities available for sale at fair value (amortized cost of $2,272,959, $2,349,149 and $2,299,037, respectively) |  | 2,264,636 |  |  | 2,331,359 |  |  | 2,278,577 |
Federal Home Loan Bank stock at cost |  | 16,360 |  |  | 10,600 |  |  | 10,240 |
Loans held for sale |  |  |  |  |  |  | 6,918 |  |  | 3,245 |  |  | 5,846 |
Loans, net of unearned income of ($30,665), ($32,212) and ($33,718), respectively |  | 6,423,074 |  |  | 6,228,136 |  |  | 6,213,423 |
Less: allowance for loan and lease losses |  |  |  |  |  | 72,984 |  |  | 71,021 |  |  | 70,043 |
Loans, net |  |  |  |  |  |  | 6,350,090 |  |  | 6,157,115 |  |  | 6,143,380 |
FDIC loss-sharing asset |  |  |  |  |  |  | — |  |  | 3,239 |  |  | 3,535 |
Interest receivable |  |  |  |  |  |  | 30,856 |  |  | 31,345 |  |  | 30,074 |
Premises and equipment, net |  |  |  |  |  |  | 146,728 |  |  | 148,541 |  |  | 150,342 |
Other real estate owned |  |  |  |  |  |  | 4,058 |  |  | 4,519 |  |  | 5,998 |
Goodwill |  |  |  |  |  |  | 382,762 |  |  | 382,762 |  |  | 382,762 |
Other intangible assets, net |  |  |  |  |  |  | 15,033 |  |  | 16,282 |  |  | 17,631 |
Other assets |  |  |  |  |  |  | 255,621 |  |  | 255,444 |  |  | 256,984 |
Total assets |  |  |  |  |  |  | $ | 9,685,110 |  |  | $ | 9,527,272 |  |  | $ | 9,509,607 |
LIABILITIES AND SHAREHOLDERS' EQUITY |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  |  |  |  |  |  | $ | 3,905,652 |  |  | $ | 3,958,106 |  |  | $ | 3,944,495 |
Interest-bearing |  |  |  |  |  |  | 4,166,812 |  |  | 4,130,721 |  |  | 4,114,920 |
Total deposits |  |  |  |  |  |  | 8,072,464 |  |  | 8,088,827 |  |  | 8,059,415 |
Federal Home Loan Bank advances |  |  |  |  |  |  | 159,474 |  |  | 15,483 |  |  | 6,493 |
Securities sold under agreements to repurchase |  | 65,895 |  |  | 46,914 |  |  | 80,822 |
Other liabilities |  |  |  |  |  |  | 89,963 |  |  | 100,705 |  |  | 111,865 |
Total liabilities |  |  |  |  |  |  | 8,387,796 |  |  | 8,251,929 |  |  | 8,258,595 |
Commitments and contingent liabilities |  |  |  |  |  |  |  |  |  |
| June 30, |  | March 31, |  | December 31, |  |  |  |  |  |
| 2017 |  | 2017 |  | 2016 |  |  |  |  |  |
Preferred stock (no par value) | (in thousands) |  |  |  |  |  |
Authorized shares | 2,000 |  |  | 2,000 |  |  | 2,000 |  |  |  |  |  |  |
Issued and outstanding | — |  |  | — |  |  | 9 |  |  | — |  |  | — |  |  | 2,217 |
Common stock (no par value) |  |  |  |  |  |  |  |  |  |  |
Authorized shares | 115,000 |  |  | 115,000 |  |  | 115,000 |  |  |  |  |  |  |
Issued and outstanding | 58,353 |  |  | 58,329 |  |  | 58,042 |  |  | 1,001,292 |  |  | 999,702 |  |  | 995,837 |
Retained earnings |  |  |  |  |  |  | 302,550 |  |  | 288,247 |  |  | 271,957 |
Accumulated other comprehensive loss |  |  |  |  |  | (6,528 | ) |  | (12,606 | ) |  | (18,999 | )
Total shareholders' equity |  |  |  |  |  |  | 1,297,314 |  |  | 1,275,343 |  |  | 1,251,012 |
Total liabilities and shareholders' equity |  |  |  |  |  | $ | 9,685,110 |  |  | $ | 9,527,272 |  |  | $ | 9,509,607 |

14

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | June 30, 2017 |  | 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) |  | $ | 6,325,462 |  |  | $ | 77,030 |  |  | 4.87 | % |  | $ | 5,999,428 |  |  | $ | 72,952 |  |  | 4.86 | %
Taxable securities |  | 1,861,895 |  |  | 9,468 |  |  | 2.03 | % |  | 1,801,195 |  |  | 8,829 |  |  | 1.96 | %
Tax exempt securities (2) |  | 454,182 |  |  | 4,179 |  |  | 3.68 | % |  | 460,817 |  |  | 4,300 |  |  | 3.73 | %
Interest-earning deposits with banks |  | 10,196 |  |  | 23 |  |  | 0.90 | % |  | 23,743 |  |  | 28 |  |  | 0.47 | %
Total interest-earning assets |  | 8,651,735 |  |  | $ | 90,700 |  |  | 4.19 | % |  | 8,285,183 |  |  | $ | 86,109 |  |  | 4.16 | %
Other earning assets |  | 173,044 |  |  |  |  |  |  | 154,843 |  |  |  |  |
Noninterest-earning assets |  | 772,495 |  |  |  |  |  |  | 790,765 |  |  |  |  |
Total assets |  | $ | 9,597,274 |  |  |  |  |  |  | $ | 9,230,791 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit |  | $ | 386,361 |  |  | $ | 95 |  |  | 0.10 | % |  | $ | 428,279 |  |  | $ | 140 |  |  | 0.13 | %
Savings accounts |  | 755,253 |  |  | 19 |  |  | 0.01 | % |  | 692,179 |  |  | 18 |  |  | 0.01 | %
Interest-bearing demand |  | 983,936 |  |  | 192 |  |  | 0.08 | % |  | 949,669 |  |  | 183 |  |  | 0.08 | %
Money market accounts |  | 1,997,585 |  |  | 602 |  |  | 0.12 | % |  | 1,956,257 |  |  | 446 |  |  | 0.09 | %
Total interest-bearing deposits |  | 4,123,135 |  |  | 908 |  |  | 0.09 | % |  | 4,026,384 |  |  | 787 |  |  | 0.08 | %
Federal Home Loan Bank advances |  | 195,369 |  |  | 591 |  |  | 1.21 | % |  | 161,637 |  |  | 241 |  |  | 0.60 | %
Other borrowings |  | 48,712 |  |  | 126 |  |  | 1.03 | % |  | 76,771 |  |  | 135 |  |  | 0.70 | %
Total interest-bearing liabilities |  | 4,367,216 |  |  | $ | 1,625 |  |  | 0.15 | % |  | 4,264,792 |  |  | $ | 1,163 |  |  | 0.11 | %
Noninterest-bearing deposits |  | 3,842,733 |  |  |  |  |  |  | 3,595,882 |  |  |  |  |
Other noninterest-bearing liabilities |  | 91,761 |  |  |  |  |  |  | 102,447 |  |  |  |  |
Shareholders’ equity |  | 1,295,564 |  |  |  |  |  |  | 1,267,670 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 9,597,274 |  |  |  |  |  |  | $ | 9,230,791 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 89,075 |  |  |  |  |  |  | $ | 84,946 |  |  |
Net interest margin (tax equivalent) |  | 4.12 | % |  |  |  |  |  | 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 $1.8 million and $1.2 million for the three month periods ended June 30, 2017 and June 30, 2016, respectively. The incremental accretion on acquired loans was $3.1 million and $4.4 million for the three months ended June 30, 2017 and 2016, respectively.

(2) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.5 million and $1.3 million for the three months ended June 30, 2017 and 2016, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million for the three months ended June 30, 2017 and 2016, respectively.

15

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | June 30, 2017 |  | March 31, 2017
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 6,325,462 |  |  | $ | 77,030 |  |  | 4.87 | % |  | $ | 6,198,215 |  |  | $ | 75,514 |  |  | 4.87 | %
Taxable securities |  | 1,861,895 |  |  | 9,468 |  |  | 2.03 | % |  | 1,861,627 |  |  | 10,986 |  |  | 2.36 | %
Tax exempt securities (2) |  | 454,182 |  |  | 4,179 |  |  | 3.68 | % |  | 448,863 |  |  | 4,140 |  |  | 3.69 | %
Interest-earning deposits with banks |  | 10,196 |  |  | 23 |  |  | 0.90 | % |  | 11,586 |  |  | 19 |  |  | 0.66 | %
Total interest-earning assets |  | 8,651,735 |  |  | $ | 90,700 |  |  | 4.19 | % |  | 8,520,291 |  |  | $ | 90,659 |  |  | 4.26 | %
Other earning assets |  | 173,044 |  |  |  |  |  |  | 178,091 |  |  |  |  |
Noninterest-earning assets |  | 772,495 |  |  |  |  |  |  | 775,316 |  |  |  |  |
Total assets |  | $ | 9,597,274 |  |  |  |  |  |  | $ | 9,473,698 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit |  | $ | 386,361 |  |  | $ | 95 |  |  | 0.10 | % |  | $ | 399,306 |  |  | $ | 95 |  |  | 0.10 | %
Savings accounts |  | 755,253 |  |  | 19 |  |  | 0.01 | % |  | 738,631 |  |  | 19 |  |  | 0.01 | %
Interest-bearing demand |  | 983,936 |  |  | 192 |  |  | 0.08 | % |  | 972,560 |  |  | 159 |  |  | 0.07 | %
Money market accounts |  | 1,997,585 |  |  | 602 |  |  | 0.12 | % |  | 2,008,107 |  |  | 514 |  |  | 0.10 | %
Total interest-bearing deposits |  | 4,123,135 |  |  | 908 |  |  | 0.09 | % |  | 4,118,604 |  |  | 787 |  |  | 0.08 | %
Federal Home Loan Bank advances |  | 195,369 |  |  | 591 |  |  | 1.21 | % |  | 81,577 |  |  | 225 |  |  | 1.10 | %
Other borrowings |  | 48,712 |  |  | 126 |  |  | 1.03 | % |  | 63,479 |  |  | 129 |  |  | 0.81 | %
Total interest-bearing liabilities |  | 4,367,216 |  |  | $ | 1,625 |  |  | 0.15 | % |  | 4,263,660 |  |  | $ | 1,141 |  |  | 0.11 | %
Noninterest-bearing deposits |  | 3,842,733 |  |  |  |  |  |  | 3,836,049 |  |  |  |  |
Other noninterest-bearing liabilities |  | 91,761 |  |  |  |  |  |  | 112,337 |  |  |  |  |
Shareholders’ equity |  | 1,295,564 |  |  |  |  |  |  | 1,261,652 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 9,597,274 |  |  |  |  |  |  | $ | 9,473,698 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 89,075 |  |  |  |  |  |  | $ | 89,518 |  |  |
Net interest margin (tax equivalent) |  | 4.12 | % |  |  |  |  |  | 4.20 | %

(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 $1.8 million and $1.6 million for the three month periods ended June 30, 2017 and March 31, 2017. The incremental accretion on acquired loans was $3.1 million and $4.1 million for the three months ended June 30, 2017 and March 31, 2017, respectively.

(2) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.5 million and $1.4 million for the three months ended June 30, 2017 and March 31, 2017, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.5 million and $1.4 million for the three month periods ended June 30, 2017 and March 31, 2017, respectively.

16

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Six Months Ended June 30, |  | Six Months Ended June 30,
|  | 2017 |  | 2016
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 6,262,190 |  |  | $ | 152,544 |  |  | 4.87 | % |  | $ | 5,913,434 |  |  | $ | 144,250 |  |  | 4.88 | %
Taxable securities |  | 1,861,762 |  |  | 20,454 |  |  | 2.20 | % |  | 1,745,242 |  |  | 16,846 |  |  | 1.93 | %
Tax exempt securities (2) |  | 451,537 |  |  | 8,319 |  |  | 3.68 | % |  | 459,492 |  |  | 8,612 |  |  | 3.75 | %
Interest-earning deposits with banks |  | 10,887 |  |  | 42 |  |  | 0.77 | % |  | 27,396 |  |  | 66 |  |  | 0.48 | %
Total interest-earning assets |  | 8,586,376 |  |  | $ | 181,359 |  |  | 4.22 | % |  | 8,145,564 |  |  | $ | 169,774 |  |  | 4.17 | %
Other earning assets |  | 175,554 |  |  |  |  |  |  | 154,589 |  |  |  |  |
Noninterest-earning assets |  | 773,897 |  |  |  |  |  |  | 789,848 |  |  |  |  |
Total assets |  | $ | 9,535,827 |  |  |  |  |  |  | $ | 9,090,001 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Certificates of deposit |  | $ | 392,798 |  |  | $ | 190 |  |  | 0.10 | % |  | $ | 438,597 |  |  | $ | 284 |  |  | 0.13 | %
Savings accounts |  | 746,988 |  |  | 38 |  |  | 0.01 | % |  | 684,027 |  |  | 35 |  |  | 0.01 | %
Interest-bearing demand |  | 978,279 |  |  | 351 |  |  | 0.07 | % |  | 938,809 |  |  | 352 |  |  | 0.07 | %
Money market accounts |  | 2,002,817 |  |  | 1,116 |  |  | 0.11 | % |  | 1,943,416 |  |  | 858 |  |  | 0.09 | %
Total interest-bearing deposits |  | 4,120,882 |  |  | 1,695 |  |  | 0.08 | % |  | 4,004,849 |  |  | 1,529 |  |  | 0.08 | %
Federal Home Loan Bank advances |  | 138,787 |  |  | 816 |  |  | 1.18 | % |  | 106,103 |  |  | 365 |  |  | 0.69 | %
Other borrowings |  | 56,055 |  |  | 255 |  |  | 0.91 | % |  | 83,735 |  |  | 273 |  |  | 0.65 | %
Total interest-bearing liabilities |  | 4,315,724 |  |  | $ | 2,766 |  |  | 0.13 | % |  | 4,194,687 |  |  | $ | 2,167 |  |  | 0.10 | %
Noninterest-bearing deposits |  | 3,839,410 |  |  |  |  |  |  | 3,529,131 |  |  |  |  |
Other noninterest-bearing liabilities |  | 101,991 |  |  |  |  |  |  | 103,143 |  |  |  |  |
Shareholders’ equity |  | 1,278,702 |  |  |  |  |  |  | 1,263,040 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 9,535,827 |  |  |  |  |  |  | $ | 9,090,001 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 178,593 |  |  |  |  |  |  | $ | 167,607 |  |  |
Net interest margin (tax equivalent) |  | 4.16 | % |  |  |  |  |  | 4.12 | %

(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 $3.4 million and $2.3 million for the six months ended June 30, 2017 and 2016, respectively. The incremental accretion on acquired loans was $7.2 million and $9.1 million for the six months ended June 30, 2017 and 2016, respectively.

(2) | Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.8 million and $2.3 million for the six months ended June 30, 2017 and 2016, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.9 million and $3.0 million for the six months ended June 30, 2017 and 2016, respectively.

17

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,
|  | 2017 |  | 2017 |  | 2016 |  | 2017 |  | 2016
Operating net interest margin non-GAAP reconciliation: |  | (dollars in thousands)
Net interest income (tax equivalent) (1) |  | $ | 89,075 |  |  | $ | 89,518 |  |  | $ | 84,946 |  |  | $ | 178,593 |  |  | $ | 167,607 |
Adjustments to arrive at operating net interest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Incremental accretion income on FDIC purchased credit impaired loans |  | (753 | ) |  | (2,117 | ) |  | (1,300 | ) |  | (2,870 | ) |  | (2,957 | )
Incremental accretion income on other acquired loans |  | (2,356 | ) |  | (1,948 | ) |  | (3,074 | ) |  | (4,304 | ) |  | (6,147 | )
Premium amortization on acquired securities |  | 1,669 |  |  | 1,462 |  |  | 2,075 |  |  | 3,131 |  |  | 4,399 |
Interest reversals on nonaccrual loans |  | 747 |  |  | 265 |  |  | 107 |  |  | 1,012 |  |  | 560 |
Operating net interest income (tax equivalent) (1) |  | $ | 88,382 |  |  | $ | 87,180 |  |  | $ | 82,754 |  |  | $ | 175,562 |  |  | $ | 163,462 |
Average interest earning assets |  | $ | 8,651,735 |  |  | $ | 8,520,291 |  |  | $ | 8,285,183 |  |  | $ | 8,586,376 |  |  | $ | 8,145,564 |
Net interest margin (tax equivalent) (1) |  | 4.12 | % |  | 4.20 | % |  | 4.10 | % |  | 4.16 | % |  | 4.12 | %
Operating net interest margin (tax equivalent) (1) |  | 4.09 | % |  | 4.09 | % |  | 4.00 | % |  | 4.09 | % |  | 4.01 | %

|  | Three Months Ended |  | Six Months Ended
|  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2017 |  | 2017 |  | 2016 |  | 2017 |  | 2016
Operating efficiency ratio non-GAAP reconciliation: |  | (dollars in thousands)
Noninterest expense (numerator A) |  | $ | 68,867 |  |  | $ | 68,986 |  |  | $ | 63,790 |  |  | $ | 137,853 |  |  | $ | 128,864 |
Adjustments to arrive at operating noninterest expense: |  |  |  |  |  |  |  |  |  |
Acquisition-related expenses |  | (1,023 | ) |  | (1,364 | ) |  | — |  |  | (2,387 | ) |  | (2,436 | )
Net benefit (cost) of operation of OREO and OPPO |  | 1 |  |  | (150 | ) |  | (84 | ) |  | (149 | ) |  | (186 | )
FDIC clawback liability recovery (expense) |  | — |  |  | 54 |  |  | (70 | ) |  | 54 |  |  | (279 | )
Loss on asset disposals |  | (8 | ) |  | (6 | ) |  | (7 | ) |  | (14 | ) |  | (167 | )
Termination of FDIC loss share agreements charge |  | (2,409 | ) |  | — |  |  | — |  |  | (2,409 | ) |  | — |
State of Washington Business and Occupation ("B&O") taxes |  | (642 | ) |  | (1,123 | ) |  | (1,204 | ) |  | (1,765 | ) |  | (2,375 | )
Operating noninterest expense (numerator B) |  | $ | 64,786 |  |  | $ | 66,397 |  |  | $ | 62,425 |  |  | $ | 131,183 |  |  | $ | 123,421 |
Net interest income (tax equivalent) (1) |  | $ | 89,075 |  |  | $ | 89,518 |  |  | $ | 84,946 |  |  | $ | 178,593 |  |  | $ | 167,607 |
Noninterest income |  | 24,135 |  |  | 24,859 |  |  | 21,940 |  |  | 48,994 |  |  | 42,586 |
Bank owned life insurance tax equivalent adjustment |  | 772 |  |  | 689 |  |  | 685 |  |  | 1,461 |  |  | 1,285 |
Total revenue (tax equivalent) (denominator A) |  | $ | 113,982 |  |  | $ | 115,066 |  |  | $ | 107,571 |  |  | $ | 229,048 |  |  | $ | 211,478 |
Operating net interest income (tax equivalent) (1) |  | $ | 88,382 |  |  | $ | 87,180 |  |  | $ | 82,754 |  |  | $ | 175,562 |  |  | $ | 163,462 |
Adjustments to arrive at operating noninterest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Investment securities gains, net |  | — |  |  | — |  |  | (229 | ) |  | — |  |  | (602 | )
Gain on asset disposals |  | (256 | ) |  | (29 | ) |  | (2 | ) |  | (285 | ) |  | (56 | )
Mortgage loan repurchase liability adjustment |  | — |  |  | (573 | ) |  | — |  |  | (573 | ) |  | — |
Change in FDIC loss-sharing asset |  | 173 |  |  | 274 |  |  | 990 |  |  | 447 |  |  | 2,093 |
Operating noninterest income (tax equivalent) |  | 24,824 |  |  | 25,220 |  |  | 23,384 |  |  | 50,044 |  |  | 45,306 |
Total operating revenue (tax equivalent) (denominator B) |  | $ | 113,206 |  |  | $ | 112,400 |  |  | $ | 106,138 |  |  | $ | 225,606 |  |  | $ | 208,768 |
Efficiency ratio (tax equivalent) (numerator A/denominator A) |  | 60.42 | % |  | 59.95 | % |  | 59.30 | % |  | 60.19 | % |  | 60.93 | %
Operating efficiency ratio (tax equivalent) (numerator B/denominator B) |  | 57.23 | % |  | 59.07 | % |  | 58.81 | % |  | 58.15 | % |  | 59.12 | %

__________
(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 $2.9 million for the three month period ended June 30, 2017, $2.8 million for the three month periods ended March 31, 2017 and June 30, 2016, respectively; and $5.8 million and $5.3 million for the six month periods ended June 30, 2017 and June 30, 2016, respectively.
18