Worth Watching Stock for Traders: Columbia Banking System (COLB)

 Columbia Banking System (COLB) changed -0.16% to recent value of $37.97. The stock transacted 284325 shares during most recent day however it has an average volume of 278.98K shares. It spotted trading -6.81% off 52-week high price. On the other end, the stock has been noted 24.34% away from the low price over the last 52-weeks.

Hadley Robbins, President and Chief Executive Officer of Columbia Banking System and Columbia Bank (NASDAQ: COLB) (“Columbia”), said upon the release of Columbia’s third quarter 2019 earnings, “Third quarter results reflected our focus on executing on our fundamentals. We responsibly built loan totals, increased deposits, and improved our credit quality metrics. Operating expenses were well controlled and meaningful progress was made in moving a number of digital initiatives to completion. Net income for the quarter was one of our strongest at $50.7 million and is a tribute to the dedication and hard work of the Columbia Bank team.”

Balance Sheet

Total assets at September 30, 2019 were $13.76 billion, an increase of $667.0 million from the linked quarter. Loans were $8.76 billion, up $109.4 million, or 5.1% annualized, from June 30, 2019 as a result of loan originations of $383.0 million and increased seasonal line utilization partially offset by payments. Securities available for sale were $3.37 billion at September 30, 2019, an increase of $503.2 million from $2.86 billion at June 30, 2019. Total deposits at September 30, 2019 were $10.86 billion, an increase of $644.1 million from June 30, 2019. Deposit mix remained fairly consistent from June 30, 2019 with 49% noninterest-bearing and 51% interest-bearing. The average cost of total deposits for the quarter was 26 basis points, an increase of 6 basis points from the second quarter of 2019, which was impacted by the increase in public funds. For additional information regarding this calculation, see the “Net Interest Margin” section.

Greg Sigrist, Columbia’s Executive Vice President and Chief Financial Officer, stated, “We selectively increased public funds by approximately $300 million in the third quarter as an alternative funding source, with a corresponding increase in our investment securities, as we expanded our interest rate risk strategy to partially mitigate the impact of further interest rate cuts. Although this did increase our cost of deposits by 6 basis points, our relationship deposit franchise is well intact and continues to benefit from having nearly half of our deposits in noninterest-bearing accounts.”

Income Statement

Net Interest Income

Net interest income for the third quarter of 2019 was $122.5 million, a decrease of $2.7 million and $346 thousand from the linked quarter and the prior year period, respectively. After taking into consideration the $4.9 million of interest recoveries on nonaccrual loans received in the second quarter of 2019, net interest income was $2.2 million higher than the second quarter of 2019. This increase was due to lower Federal Home Loan Bank (“FHLB”) interest expense and higher interest income on interest earning assets due to higher average volumes, partially offset by higher deposit interest expense due to higher average balances and rates on interest-bearing public funds, excluding certificates of deposit. Net interest income compared to the prior year period was relatively unchanged. The increase in interest income from higher average balances of interest-earning assets in the third quarter of 2019 was offset by higher interest expense from higher average balances of FHLB advances and interest-bearing public funds, excluding certificates of deposit. For additional information regarding net interest income, see the “Net Interest Margin” section and the “Average Balances and Rates” tables.

Noninterest Income

Noninterest income was $28.0 million for the third quarter of 2019, an increase of $2.4 million and $7.0 million from the second quarter of 2019 and the prior year period, respectively. The linked quarter increase was principally due to a $5.9 million gain from the sale-leaseback of owned real estate during the third quarter of 2019. This gain was partially offset by $3.0 million in bank-owned life insurance (“BOLI”) benefits and a $667 thousand gain on disposal of loans realized during the second quarter of 2019. The increase from the prior year period was primarily due to the previously noted sale-leaseback gain in the third quarter of 2019.

Noninterest Expense

Total noninterest expense for the third quarter of 2019 was $87.1 million, an increase of $348 thousand and $4.2 million from the linked quarter and the prior year period, respectively. The increase in noninterest expense was a result of higher salaries, other compensation and incentive plan expenses, which were partially offset by lower provision for off-balance sheet reserves during the quarter. After removing acquisition-related expenses of $1.1 million from the third quarter of 2018, year over year noninterest expense increased $5.3 million, or 7%. This increase was primarily driven by higher compensation and employee benefits expense, which was partially offset by a decrease in regulatory premium expenses. The Bank’s Federal Deposit Insurance Corporation (“FDIC”) deposit insurance expense was reduced due to the utilization of a portion of our FDIC Small Bank Assessment Credit.

Net Interest Margin

Beginning January 2019, our net interest margin was calculated using the actual number of days on an actual/actual basis. This change was done to provide more meaningful trend information for our net interest margin regardless of the number of days in the period. Prior periods, which were previously reported on a 30/360 basis, have been restated to conform to the current basis.

Columbia’s net interest margin (tax equivalent) for the third quarter of 2019 was 4.14%, a decrease of 26 basis points and 23 basis points from the linked quarter and prior year period, respectively. The decrease in the net interest margin (tax equivalent) compared to the linked quarter was driven by the previously noted $4.9 million, or 17 basis points, of loan interest recoveries received in the second quarter of 2019. The remainder of the decline was largely driven by the net impact of the approximately $300 million increase in securities and public funds as part of the expanded interest rate risk strategy. Additionally, a benefit from deposit inflows was largely offset by lower yields on loans and investments. Further, the decline related to the interest rate environment was offset by changes in the mix and volume of interest-earning assets as well as lower levels of FHLB advances. Compared to the prior year period, the decreased net interest margin (tax equivalent) was driven by higher rates on our deposits and borrowings as well as lower accretion income on acquired loans as reflected in the table below.

 

Columbia’s operating net interest margin (tax equivalent)(2) was 4.12% for the third quarter of 2019, which decreased 26 and 22 basis points compared to the linked quarter and the prior year period, respectively. The decreases in the operating net interest margin for the third quarter of 2019 compared to the linked quarter and the prior year quarter were due to the items previously noted in the preceding paragraph, except for the lower accretion income, which is not included in the operating net interest margin.

COLB has an operating margin of 93.20% while its profit margin remained 35.80% for the last 12 months. Its earnings per share (EPS) expected to touch remained 14.50% for this year while earning per share for the next 5-years is expected to reach at 8.00%.

The company has 72.31M of outstanding shares and 72.29M shares were floated in the market. The price moved ahead of 4.09% from the mean of 20 days, 6.10% from mean of 50 days SMA and performed 6.22% from mean of 200 days price. Company’s performance for the week was 3.21%, 3.69% for month and YTD performance remained 5.41%.

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