Notable Items for Fourth Quarter and Fiscal Year 2022

  • Record full year net income of $250.2 million and diluted earnings per share of $3.20
  • Record quarterly net income of $68.9 million and diluted earnings per share of $0.88, which included a $0.05 per share reduction stemming from merger-related expenses
  • Net interest margin of 3.64%, an increase of 17 basis points from the linked quarter
  • Fourth quarter loan production of $402.5 million and full year production of $2.20 billion
  • Nonperforming assets to period-end assets ratio of 0.07%
  • Expect to close the merger with Umpqua Holdings after close of business on February 28, 2023, subject to the satisfaction of closing conditions
  • Regular cash dividend declared of $0.30 per share

TACOMA, Wash, Jan. 24, 2023 /PRNewswire/ -- Columbia Banking System, Inc. (NASDAQ: COLB) ("Columbia", "we" or "us"), the parent company of Columbia Bank (the "Bank"), announced record earnings for the fourth quarter of $68.9 million and diluted earnings per share of $0.88. Clint Stein, President and Chief Executive Officer said today upon the release of Columbia's earnings, "Words cannot describe how proud I am of what our team accomplished in 2022. Their determination and commitment to our stakeholders resulted in record performance for the quarter and year while preparing for our transformative merger with Umpqua Holdings." He continued, "Record annual and quarterly revenue and earnings reflect the continued energy, commitment and discipline of our bankers on our frontline and in our back office as they continue to concentrate on doing what is best for our customers and communities over the long term."

Balance Sheet

Total assets at December 31, 2022 were $20.27 billion, a decrease of $139.5 million from the linked quarter. Loans were $11.61 billion, down $81.3 million from September 30, 2022, mainly attributable to loan payments partially offset by loan originations of $402.5 million. Debt securities in total were $6.62 billion, a decrease of $156.2 million from $6.78 billion at September 30, 2022 substantially driven by maturities and repayments partially offset by fair value movement related to the available-for-sale portfolio. Total deposits at December 31, 2022 were $16.71 billion, a decrease of $1.23 billion from September 30, 2022. The deposit mix remained consistent from September 30, 2022 with 50% noninterest-bearing and 50% interest-bearing.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "While loans declined slightly during the quarter from normal seasonality, loan growth for the year was strong and the overall loan portfolio yield rose as we selectively considered the long-term impact of deals in our pipeline." He continued, "We continue to focus on the whole client relationship including loans, deposits and investments."

Income Statement

Net Interest Income

Net interest income for the fourth quarter of 2022 was $166.7 million, an increase of $4.2 million from the linked quarter and an increase of $21.2 million from the prior-year period. The increase from the linked quarter was primarily due to higher loan interest income as a result of increased average rates partially offset by lower interest income from securities due to decreased average balances. In addition, there was higher interest expense due to increased average balances and higher rates of FHLB advances and increased deposit interest expense driven by higher average rates. The increase in net interest income from the prior-year period was mainly due to higher interest income from loans partially offset by higher deposit interest expense due to higher average rates, increased average balances of FHLB advances and lower interest income from securities. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Provision for Credit Losses

Columbia recorded a $2.4 million provision for credit losses for the fourth quarter of 2022 compared to a $5.3 million provision for the linked quarter and an $11.1 million provision for the comparable quarter in 2021. The provision for credit losses was mainly due to a less favorable economic forecast.

Noninterest Income

Noninterest income was $23.3 million for the fourth quarter of 2022, a decrease of $3.3 million from the linked quarter and a decrease of $909 thousand from the fourth quarter of 2021. The linked quarter decrease was primarily due to a $3.7 million gain from the sale-leaseback of owned real estate recorded in the prior period partially offset by current quarter bank owned life insurance gains of $354 thousand. The decrease in noninterest income during the fourth quarter of 2022 compared to the same quarter in 2021 was mainly due to lower loan revenue, principally a result of lower mortgage banking revenue and loan-related fees. This was partially offset by higher financial services revenue and increased deposit account and treasury management fees.

Noninterest Expense

Total noninterest expense for the fourth quarter of 2022 was $100.5 million, a decrease of $941 thousand compared to the third quarter of 2022. Total merger-related expenses for the quarter were $4.9 million, which compares to the linked quarter of $3.2 million. The largest contributor to the decrease in noninterest expense was related to lower net loan expenses and lower compensation and employee benefits driven by decreased incentive expense. This was partially offset by increased merger-related data processing and legal expenses incurred during the quarter. Compared to the fourth quarter of 2021, noninterest expense decreased $2.1 million, mostly attributable to a decrease in merger-related compensation and employee benefit expenses related to our fourth quarter 2021 acquisition of Bank of Commerce Holdings. Decreased merger-related expenses also contributed to the decrease from the prior-year period.

The provision for credit losses on unfunded loan commitments, a component of other noninterest expense, for the periods indicated are as follows:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021














(in thousands)

Provision (recapture) for credit losses on unfunded
loan commitments


$ (500)


$ (500)


$ (2,000)


$ (500)


$ 200

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the fourth quarter of 2022 was 3.64%, an increase of 17 basis points from the linked quarter and an increase of 59 basis points from the prior-year period. The increase in the net interest margin (tax equivalent) compared to the linked quarter and prior-year period was predominantly driven by higher average loan rates and a stronger earning assets mix. This was partially offset by a shift in the funding mix from deposits to higher-costing FHLB advances. The average cost of total deposits for the quarter was 18 basis points compared to 10 basis points for the linked quarter. The increase was predominantly related to higher rates associated with public funds deposits and money market accounts. For additional information regarding net interest margin, see the "Average Balances and Rates" tables.

Columbia's operating net interest margin (tax equivalent)1 was 3.67% for the fourth quarter of 2022, an increase of 17 basis points from the linked quarter and an increase of 59 basis points from the prior-year period. The increase in the operating net interest margin for the fourth quarter of 2022 compared to the linked quarter and the prior-year period were both due to higher average loan rates and a stronger earning assets mix partially offset by a higher-costing funding mix as noted above.

Aaron James Deer, Columbia's Executive Vice President and Chief Financial Officer, said, "Our margin benefited from the continued impact of rising rates on the loan portfolio, which was partly offset by the impact of the shift in funding mix from deposits to higher-costing borrowings." He continued, "Our cost of funds is still among the lowest in the industry on the strength of our low-cost, relationship-focused deposit base."

Asset Quality

Nonperforming assets to total assets were 0.07% at December 31, 2022 and September 30, 2022. Total nonperforming assets decreased $44 thousand from the linked quarter, primarily due to decreases in commercial business, commercial real estate and other consumer nonaccrual loans, nearly offset by increases in agriculture and one-to-four family residential real estate nonaccrual loans.

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



December 31, 2022


September 30, 2022


December 31, 2021










(in thousands)

Nonaccrual loans:







Commercial loans:







Commercial real estate


$ 3,244


$ 3,431


$ 1,872

Commercial business


5,133


7,181


13,321

Agriculture


4,367


2,179


5,396

Consumer loans:







One-to-four family residential real estate


685


602


2,433

Other consumer


12


92


19

Total nonaccrual loans


13,441


13,485


23,041

OREO and other personal property owned




381

Total nonperforming assets


$ 13,441


$ 13,485


$ 23,422

Nonperforming assets to total loans were 0.12% at December 31, 2022 and September 30, 2022.

The following table provides an analysis of the Company's allowance for credit losses:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021














(in thousands)

Beginning balance


$ 154,871


$ 149,935


$ 142,785


$ 155,578


$ 149,140

Initial ACL recorded for PCD loans acquired during the period




2,616



2,616

Charge-offs:











Commercial loans:











Commercial real estate




(728)


(299)


(1,044)

Commercial business


(89)


(296)


(871)


(2,108)


(6,364)

Agriculture


(69)


(706)


(200)


(799)


(322)

Consumer loans:











One-to-four family residential real estate




(24)


(3)


(170)

Other consumer


(322)


(430)


(355)


(1,240)


(1,163)

Total charge-offs


(480)


(1,432)


(2,178)


(4,449)


(9,063)

Recoveries:











Commercial loans:











Commercial real estate


35


11


63


207


633

Commercial business


613


482


446


2,183


4,862

Agriculture


622


98


332


869


355

Construction


234


9


18


387


593

Consumer loans:











One-to-four family residential real estate


27


331


150


943


907

Other consumer


116


187


246


770


735

Total recoveries


1,647


1,118


1,255


5,359


8,085

Net (charge-offs) recoveries


1,167


(314)


(923)


910


(978)

Provision for credit losses


2,400


5,250


11,100


1,950


4,800

Ending balance


$ 158,438


$ 154,871


$ 155,578


$ 158,438


$ 155,578

The allowance for credit losses to period-end loans was 1.36% at December 31, 2022 compared to 1.32% at September 30, 2022. Excluding PPP loans, the allowance for credit losses to period-end loans2 was 1.37% at December 31, 2022 compared to 1.33% at September 30, 2022.

Organizational Update

Umpqua Merger

On January 9, 2023, we announced that we had received approval of the Federal Deposit Insurance Corporation ("FDIC") related to the merger with Umpqua Holdings Corporation, the final outstanding regulatory approval necessary to complete the transaction, and the deal is expected to close after close of business on February 28, 2023 with a core-system conversion anticipated soon thereafter. "The dedication and perseverance of each and every one of our associates over the past 15 months as they worked to build on the existing relationships while simultaneously supporting and executing merger integration planning efforts has been outstanding," said Clint Stein. He continued, "Every single associate has contributed, and I could not be more confident in what we will accomplish as we work to serve all of our clients and communities as a premier western regional bank."

Warm Hearts

The 2022 "Warm Hearts Winter Drive" to end homelessness raised $278 thousand in the fourth quarter, bringing our eight-year drive total to $2.1 million. Funds raised this year benefited nearly 70 shelters across the Columbia Bank footprint. "The commitment and passion of our associates and clients to help families struggling with homelessness during the difficult winter months is inspiring," said David Moore Devine, Chief Marketing and Experience Officer. He continued, "It has been especially gratifying to see our associates' care, focus and dedication to supporting the drive and their communities notwithstanding responsibilities associated with the merger and other activities."

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.30 per common share on February 21, 2023 to shareholders of record as of the close of business on February 6, 2023.

Conference Call Information

Columbia's management will discuss the fourth quarter and full-year 2022 financial results on a conference call scheduled for Tuesday, January 24, 2023 at 11:00 a.m. Pacific Time (2:00 p.m. ET). Interested parties may register for the call to receive dial-in details and their own unique PIN using the following link:

https://register.vevent.com/register/BIb1b0b02fb69840d9bf7c2798adcdc01a

Alternatively, the webcast can be joined by using the following link:

https://edge.media-server.com/mmc/p/sgycoxq4

A replay of the webcast will be accessible beginning Wednesday, January 25, 2023 using the link below:

https://edge.media-server.com/mmc/p/sgycoxq4

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. (NASDAQ: COLB) is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank with offices in Washington, Oregon, California, Idaho, Utah, and Arizona. The bank has been named one of Puget Sound Business Journal's "Washington's Best Workplaces," more than 10 times. Columbia was named on the Forbes 2022 list of "America's Best Banks" marking 11 consecutive years on the publication's list of top financial institutions.

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 as well as the potential effects of the COVID-19 pandemic on Columbia's business, operations, financial performance and prospects. 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 (the "SEC"), 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:

  • national and global economic conditions could be less favorable than expected or could have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth and maintain the quality of our earning assets;
  • the markets where we operate and make loans could face challenges;
  • the risks presented by the economy, which could adversely affect credit quality, collateral values, including real estate collateral, investment values, liquidity and loan originations and loan portfolio delinquency rates;
  • continued increases in inflation, and the risk that information may differ, possibly materially, from expectations, and actions taken by the Board of Governors of the Federal Reserve System in response to inflation and their potential impact on economic conditions including the possibility of a recession or economic downturn;
  • risks related to the proposed merger with Umpqua including, among others, (i) failure to complete the merger with Umpqua or unexpected delays related to the merger or either party's inability to satisfy other closing conditions required to complete the merger, (ii) certain restrictions during the pendency of the proposed transaction with Umpqua that may impact the parties' ability to pursue certain business opportunities or strategic transactions, (iii) diversion of management's attention from ongoing business operations and opportunities, (iv) cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (v) the integration of each party's management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (vi) deposit attrition, customer or employee loss and/or revenue loss as a result of the proposed merger, and (vii) expenses related to the proposed merger being greater than expected;
  • the efficiencies and enhanced financial and operating performance we expect to realize from investments in personnel, acquisitions and infrastructure may not be realized;
  • the ability to successfully integrate future acquired entities;
  • interest rate changes could significantly reduce net interest income and negatively affect asset yields and funding sources;
  • the effect of the discontinuation or replacement of LIBOR;
  • results of operations following strategic expansion, including the impact of acquired loans on our earnings, could differ from expectations;
  • changes in the scope and cost of FDIC insurance and other coverages;
  • changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies could materially affect our financial statements and how we report those results, and expectations and preliminary analysis relating to how such changes will affect our financial results could prove incorrect;
  • changes in laws and regulations affecting our businesses, including changes in the enforcement and interpretation of such laws and regulations by applicable governmental and regulatory agencies;
  • increased competition among financial institutions and nontraditional providers of financial services;
  • continued consolidation in the financial services industry resulting in the creation of larger financial institutions that have greater resources could change the competitive landscape;
  • the goodwill we have recorded in connection with acquisitions could become impaired, which may have an adverse impact on our earnings and capital;
  • our ability to identify and address cyber-security risks, including security breaches, "denial of service attacks," "hacking" and identity theft;
  • any material failure or interruption of our information and communications systems;
  • inability to keep pace with technological changes;
  • our ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk and regulatory and compliance risk;
  • failure to maintain effective internal control over financial reporting or disclosure controls and procedures;
  • the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia's invasion of Ukraine;
  • our profitability measures could be adversely affected if we are unable to effectively manage our capital;
  • the risks from climate change and its potential to disrupt our business and adversely impact the operations and creditworthiness of our customers;
  • natural disasters, including earthquakes, tsunamis, flooding, fires and other unexpected events;
  • the effect of COVID-19 and other infectious illness outbreaks that may arise in the future, which has created significant impacts and uncertainties in U.S. and global markets;
  • changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, including with regard to COVID-19; and
  • the effects of any damage to our reputation resulting from developments related to any of the items identified above.

Additional factors that could cause results to differ materially from those described above can be found in Columbia's Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the SEC and available on Columbia's website, www.columbiabank.com, under the heading "Financial Information" and in other documents Columbia files with the SEC, and in Umpqua's Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the SEC and available on Umpqua's investor relations website, www.umpquabank.com, under the heading "Financials," and in other documents Umpqua files with the SEC.

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. Neither Columbia nor Umpqua assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws.

Contacts:

Clint Stein,


Aaron James Deer,


President and


Executive Vice President and


Chief Executive Officer


Chief Financial Officer






Investor Relations




InvestorRelations@columbiabank.com




253-471-4065




(COLB-ER)



CONSOLIDATED BALANCE SHEETS











Columbia Banking System, Inc.












Unaudited







December 31,


September 30,


December 31,








2022


2022


2021




















(in thousands)

ASSETS





Cash and due from banks







$ 262,458


$ 263,551


$ 153,414

Interest-earning deposits with banks







29,283


54,124


671,300

Total cash and cash equivalents






291,741


317,675


824,714

Debt securities available for sale at fair value (amortized cost of $5,282,846,
$5,447,566 and $5,898,041, respectively)


4,589,099


4,700,821


5,910,999

Debt securities held to maturity at amortized cost (fair value of $1,722,778,
$1,747,282 and $2,122,606, respectively)


2,034,792


2,079,285


2,148,327

Equity securities







13,425


13,425


13,425

Federal Home Loan Bank ("FHLB") stock at cost






48,160


10,560


10,280

Loans held for sale







76,843


1,251


9,774

Loans, net of unearned income







11,610,973


11,692,261


10,641,937

Less: Allowance for credit losses






158,438


154,871


155,578

Loans, net







11,452,535


11,537,390


10,486,359

Interest receivable







64,908


61,652


56,019

Premises and equipment, net







160,578


161,853


172,144

Other real estate owned









381

Goodwill







823,172


823,172


823,172

Other intangible assets, net







25,949


27,921


34,647

Other assets







684,641


670,364


455,092

Total assets







$ 20,265,843


$ 20,405,369


$ 20,945,333

LIABILITIES AND SHAREHOLDERS' EQUITY









Deposits:












Noninterest-bearing







$ 8,373,350


$ 8,911,267


$ 8,856,714

Interest-bearing







8,338,100


9,030,058


9,153,401

Total deposits







16,711,450


17,941,325


18,010,115

FHLB advances







954,315


14,322


7,359

Securities sold under agreements to repurchase






95,168


48,733


86,013

Subordinated debentures







10,000


10,000


10,000

Junior subordinated debentures







10,310


10,310


10,310

Other liabilities







271,447


265,198


232,794

Total liabilities







18,052,690


18,289,888


18,356,591

Commitments and contingent liabilities







Shareholders' equity:













December 31,


September 30,


December 31,








2022


2022


2021




















(in thousands)







Preferred stock (no par value)












Authorized shares

2,000


2,000


2,000







Common stock (no par value)












Authorized shares

115,000


115,000


115,000







Issued

80,830


80,831


80,695


1,944,471


1,940,385


1,930,187

Outstanding

78,646


78,647


78,511







Retained earnings







850,011


804,774


694,227

Accumulated other comprehensive income (loss)






(510,495)


(558,844)


35,162

Treasury stock at cost

2,184


2,184


2,184


(70,834)


(70,834)


(70,834)

Total shareholders' equity







2,213,153


2,115,481


2,588,742

Total liabilities and shareholders' equity






$ 20,265,843


$ 20,405,369


$ 20,945,333

CONSOLIDATED STATEMENTS OF INCOME











Columbia Banking System, Inc.


Three Months Ended


Twelve Months Ended

Unaudited


December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Interest Income


(in thousands except per share amounts)

Loans


$ 146,769


$ 130,908


$ 110,575


$ 495,829


$ 415,770

Taxable securities


29,313


31,987


33,654


133,084


107,594

Tax-exempt securities


3,678


3,662


3,447


14,820


11,746

Deposits in banks


375


1,191


360


2,748


955

Total interest income


180,135


167,748


148,036


646,481


536,065

Interest Expense











Deposits


7,827


4,446


1,807


16,533


6,186

FHLB advances and Federal Reserve Bank ("FRB")
borrowings


4,406


109


74


4,659


291

Subordinated debentures


271


220


561


807


1,932

Other borrowings


938


481


71


1,646


137

Total interest expense


13,442


5,256


2,513


23,645


8,546

Net Interest Income


166,693


162,492


145,523


622,836


527,519

Provision for credit losses


2,400


5,250


11,100


1,950


4,800












Net interest income after provision for credit losses


164,293


157,242


134,423


620,886


522,719

Noninterest Income











Deposit account and treasury management fees


7,992


8,181


7,155


31,498


27,107

Card revenue


5,200


4,988


5,108


20,186


18,503

Financial services and trust revenue


4,543


4,292


3,877


17,659


15,753

Loan revenue


2,655


2,853


4,977


12,582


22,044

Bank owned life insurance


1,885


1,939


1,753


7,636


6,533

Investment securities gains (losses), net


(9)




(9)


314

Other


1,065


4,374


1,370


9,592


3,840

Total noninterest income


23,331


26,627


24,240


99,144


94,094

Noninterest Expense











Compensation and employee benefits


59,930


60,744


64,169


241,139


224,034

Occupancy


10,040


10,469


10,076


41,150


37,815

Data processing and software


11,060


10,548


9,130


41,117


33,498

Legal and professional fees


4,839


4,022


7,937


20,578


18,910

Amortization of intangibles


1,972


2,219


2,376


8,698


7,987

Business and Occupation ("B&O") taxes


1,853


1,771


1,571


6,797


5,903

Advertising and promotion


1,198


830


1,357


3,962


3,383

Regulatory premiums


1,840


1,782


1,481


6,619


4,912

Net cost (benefit) of operation of other real estate
owned


(8)


(4)


14


114


66

Other


7,781


9,065


4,511


32,209


23,796

Total noninterest expense


100,505


101,446


102,622


402,383


360,304

Income before income taxes


87,119


82,423


56,041


317,647


256,509

Provision for income taxes


18,213


17,481


13,130


67,469


53,689

Net Income


$ 68,906


$ 64,942


$ 42,911


$ 250,178


$ 202,820

Earnings per common share











Basic


$ 0.88


$ 0.83


$ 0.55


$ 3.20


$ 2.79

Diluted


$ 0.88


$ 0.83


$ 0.55


$ 3.20


$ 2.78

Dividends declared per common share (1)


$ 0.30


$ 0.30


$ —


$ 1.20


$ 1.14












Weighted average number of common shares
outstanding


78,104


78,100


77,784


78,047


72,683

Weighted average number of diluted common shares
outstanding


78,371


78,233


77,977


78,193


72,873


(1)

No dividends were declared during the three months ended December 31, 2021 as dividends were declared on September 30, 2021.
Accordingly, the three months ended September 30, 2021 included both the July 29, 2021 declaration and the September 30, 2021 declaration.

FINANCIAL STATISTICS











Columbia Banking System, Inc.


Three Months Ended


Twelve Months Ended

Unaudited


December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Earnings


(dollars in thousands except per share amounts)

Net interest income


$ 166,693


$ 162,492


$ 145,523


$ 622,836


$ 527,519

Provision for credit losses


$ 2,400


$ 5,250


$ 11,100


$ 1,950


$ 4,800

Noninterest income


$ 23,331


$ 26,627


$ 24,240


$ 99,144


$ 94,094

Noninterest expense


$ 100,505


$ 101,446


$ 102,622


$ 402,383


$ 360,304

Merger-related expense (included in noninterest expense)


$ 4,897


$ 3,246


$ 11,812


$ 19,101


$ 14,514

Net income


$ 68,906


$ 64,942


$ 42,911


$ 250,178


$ 202,820

Per Common Share











Earnings (basic)


$ 0.88


$ 0.83


$ 0.55


$ 3.20


$ 2.79

Earnings (diluted)


$ 0.88


$ 0.83


$ 0.55


$ 3.20


$ 2.78

Book value


$ 28.14


$ 26.90


$ 32.97


$ 28.14


$ 32.97

Tangible book value per common share (1)


$ 17.34


$ 16.08


$ 22.05


$ 17.34


$ 22.05

Averages











Total assets


$ 20,270,911


$ 20,698,252


$ 20,857,983


$ 20,671,949


$ 18,448,135

Interest-earning assets


$ 18,378,384


$ 18,864,445


$ 19,186,398


$ 18,868,795


$ 16,910,818

Loans


$ 11,663,093


$ 11,513,653


$ 10,545,172


$ 11,211,442


$ 9,832,385

Securities, including debt securities, equity securities and FHLB
stock


$ 6,666,850


$ 7,130,114


$ 7,693,659


$ 7,320,503


$ 6,353,278

Deposits


$ 17,367,875


$ 18,075,358


$ 17,935,311


$ 17,922,958


$ 15,722,403

Interest-bearing deposits


$ 8,671,874


$ 9,196,381


$ 9,147,184


$ 9,149,447


$ 7,910,523

Interest-bearing liabilities


$ 9,173,526


$ 9,292,615


$ 9,255,214


$ 9,342,996


$ 8,008,221

Noninterest-bearing deposits


$ 8,696,001


$ 8,878,977


$ 8,788,127


$ 8,773,511


$ 7,811,880

Shareholders' equity


$ 2,129,671


$ 2,271,012


$ 2,584,110


$ 2,307,453


$ 2,402,455

Financial Ratios











Return on average assets


1.36 %


1.26 %


0.82 %


1.21 %


1.10 %

Return on average common equity


12.94 %


11.44 %


6.64 %


10.84 %


8.44 %

Return on average tangible common equity (1)


22.03 %


18.81 %


10.36 %


17.68 %


13.10 %

Average equity to average assets


10.51 %


10.97 %


12.39 %


11.16 %


13.02 %

Shareholders' equity to total assets


10.92 %


10.37 %


12.36 %


10.92 %


12.36 %

Tangible common shareholders' equity to tangible assets (1)


7.03 %


6.47 %


8.62 %


7.03 %


8.62 %

Net interest margin (tax equivalent)


3.64 %


3.47 %


3.05 %


3.34 %


3.17 %

Efficiency ratio (tax equivalent) (2)


52.29 %


52.84 %


59.57 %


54.95 %


57.09 %

Operating efficiency ratio (tax equivalent) (1)


48.38 %


50.73 %


51.48 %


51.14 %


53.92 %

Noninterest expense ratio


1.98 %


1.96 %


1.97 %


1.95 %


1.95 %

Core noninterest expense ratio (1)


1.89 %


1.90 %


1.74 %


1.85 %


1.87 %














December 31,


September 30,


December 31,





Period-end


2022


2022


2021





Total assets


$ 20,265,843


$ 20,405,369


$ 20,945,333





Loans, net of unearned income


$ 11,610,973


$ 11,692,261


$ 10,641,937





Allowance for credit losses


$ 158,438


$ 154,871


$ 155,578





Securities, including debt securities, equity securities and FHLB
stock


$ 6,685,476


$ 6,804,091


$ 8,083,031





Deposits


$ 16,711,450


$ 17,941,325


$ 18,010,115





Shareholders' equity


$ 2,213,153


$ 2,115,481


$ 2,588,742





Nonperforming assets











Nonaccrual loans


$ 13,441


$ 13,485


$ 23,041





Other real estate owned ("OREO") and other personal property
owned ("OPPO")




381





Total nonperforming assets


$ 13,441


$ 13,485


$ 23,422





Nonperforming loans to period-end loans


0.12 %


0.12 %


0.22 %





Nonperforming assets to period-end assets


0.07 %


0.07 %


0.11 %





Allowance for credit losses to period-end loans


1.36 %


1.32 %


1.46 %





Net loan charge-offs (recoveries) (for the three months ended)


$ (1,167)


$ 314


$ 923






(1)

This is a non-GAAP measure. See section titled "Non-GAAP Financial Measures" on the last three pages of this earnings release for a reconciliation to the most comparable
GAAP measure.

(2)

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

QUARTERLY FINANCIAL STATISTICS











Columbia Banking System, Inc.


Three Months Ended

Unaudited


December 31,


September 30,


June 30,


March 31,


December 31,



2022


2022


2022


2022


2021












Earnings


(dollars in thousands except per share amounts)

Net interest income


$ 166,693


$ 162,492


$ 147,451


$ 146,200


$ 145,523

Provision (recapture) for credit losses


$ 2,400


$ 5,250


$ 2,100


$ (7,800)


$ 11,100

Noninterest income


$ 23,331


$ 26,627


$ 25,006


$ 24,180


$ 24,240

Noninterest expense


$ 100,505


$ 101,446


$ 95,379


$ 105,053


$ 102,622

Merger-related expense (included in noninterest expense)


$ 4,897


$ 3,246


$ 3,901


$ 7,057


$ 11,812

Net income


$ 68,906


$ 64,942


$ 58,808


$ 57,522


$ 42,911

Per Common Share











Earnings (basic)


$ 0.88


$ 0.83


$ 0.75


$ 0.74


$ 0.55

Earnings (diluted)


$ 0.88


$ 0.83


$ 0.75


$ 0.74


$ 0.55

Book value


$ 28.14


$ 26.90


$ 28.53


$ 30.02


$ 32.97

Averages











Total assets


$ 20,270,911


$ 20,698,252


$ 20,770,202


$ 20,955,666


$ 20,857,983

Interest-earning assets


$ 18,378,384


$ 18,864,445


$ 18,975,517


$ 19,266,644


$ 19,186,398

Loans


$ 11,663,093


$ 11,513,653


$ 10,989,493


$ 10,665,242


$ 10,545,172

Securities, including debt securities, equity securities and
FHLB stock


$ 6,666,850


$ 7,130,114


$ 7,491,299


$ 8,010,607


$ 7,693,659

Deposits


$ 17,367,875


$ 18,075,358


$ 18,157,075


$ 18,097,872


$ 17,935,311

Interest-bearing deposits


$ 8,671,874


$ 9,196,381


$ 9,335,004


$ 9,402,040


$ 9,147,184

Interest-bearing liabilities


$ 9,173,526


$ 9,292,615


$ 9,414,361


$ 9,495,579


$ 9,255,214

Noninterest-bearing deposits


$ 8,696,001


$ 8,878,977


$ 8,822,071


$ 8,695,832


$ 8,788,127

Shareholders' equity


$ 2,129,671


$ 2,271,012


$ 2,298,611


$ 2,535,376


$ 2,584,110

Financial Ratios











Return on average assets


1.36 %


1.26 %


1.13 %


1.10 %


0.82 %

Return on average common equity


12.94 %


11.44 %


10.23 %


9.08 %


6.64 %

Average equity to average assets


10.51 %


10.97 %


11.07 %


12.10 %


12.39 %

Shareholders' equity to total assets


10.92 %


10.37 %


10.91 %


11.26 %


12.36 %

Net interest margin (tax equivalent)


3.64 %


3.47 %


3.16 %


3.12 %


3.05 %

Period-end











Total assets


$ 20,265,843


$ 20,405,369


$ 20,564,390


$ 20,963,958


$ 20,945,333

Loans, net of unearned income


$ 11,610,973


$ 11,692,261


$ 11,322,387


$ 10,759,684


$ 10,641,937

Allowance for credit losses


$ 158,438


$ 154,871


$ 149,935


$ 146,949


$ 155,578

Securities, including debt securities, equity securities and
FHLB stock


$ 6,685,476


$ 6,804,091


$ 7,295,528


$ 7,753,513


$ 8,083,031

Deposits


$ 16,711,450


$ 17,941,325


$ 17,956,926


$ 18,299,213


$ 18,010,115

Shareholders' equity


$ 2,213,153


$ 2,115,481


$ 2,243,218


$ 2,360,779


$ 2,588,742

Goodwill


$ 823,172


$ 823,172


$ 823,172


$ 823,172


$ 823,172

Other intangible assets, net


$ 25,949


$ 27,921


$ 30,140


$ 32,359


$ 34,647

Nonperforming assets











Nonaccrual loans


$ 13,441


$ 13,485


$ 16,998


$ 17,441


$ 23,041

OREO and OPPO




33


381


381

Total nonperforming assets


$ 13,441


$ 13,485


$ 17,031


$ 17,822


$ 23,422












Nonperforming loans to period-end loans


0.12 %


0.12 %


0.15 %


0.16 %


0.22 %

Nonperforming assets to period-end assets


0.07 %


0.07 %


0.08 %


0.09 %


0.11 %

Allowance for credit losses to period-end loans


1.36 %


1.32 %


1.32 %


1.37 %


1.46 %

Net loan charge-offs (recoveries)


$ (1,167)


$ 314


$ (886)


$ 829


$ 923

LOAN PORTFOLIO COMPOSITION











Columbia Banking System, Inc.











Unaudited


December 31,


September 30,


June 30,


March 31,


December 31,



2022


2022


2022


2022


2021












Loan Portfolio Composition - Dollars


(dollars in thousands)

Commercial loans:











Commercial real estate


$ 5,352,785


$ 5,375,051


$ 5,251,100


$ 5,047,472


$ 4,981,263

Commercial business


3,750,564


3,783,696


3,646,956


3,492,307


3,423,268

Agriculture


848,903


903,260


853,099


765,319


795,715

Construction


540,861


512,308


482,211


409,242


384,755

Consumer loans:











One-to-four family residential real estate


1,077,494


1,071,222


1,042,190


1,003,157


1,013,908

Other consumer


40,366


46,724


46,831


42,187


43,028

Total loans


11,610,973


11,692,261


11,322,387


10,759,684


10,641,937

Less: Allowance for credit losses


(158,438)


(154,871)


(149,935)


(146,949)


(155,578)

Total loans, net


$ 11,452,535


$ 11,537,390


$ 11,172,452


$ 10,612,735


$ 10,486,359

Loans held for sale


$ 76,843


$ 1,251


$ 3,718


$ 4,271


$ 9,774














December 31,


September 30,


June 30,


March 31,


December 31,

Loan Portfolio Composition - Percentages


2022


2022


2022


2022


2021

Commercial loans:











Commercial real estate


46.1 %


45.9 %


46.4 %


46.9 %


46.8 %

Commercial business


32.3 %


32.4 %


32.2 %


32.5 %


32.2 %

Agriculture


7.3 %


7.7 %


7.5 %


7.1 %


7.5 %

Construction


4.7 %


4.4 %


4.3 %


3.8 %


3.6 %

Consumer loans:











One-to-four family residential real estate


9.3 %


9.2 %


9.2 %


9.3 %


9.5 %

Other consumer


0.3 %


0.4 %


0.4 %


0.4 %


0.4 %

Total loans


100.0 %


100.0 %


100.0 %


100.0 %


100.0 %

DEPOSIT COMPOSITION











Columbia Banking System, Inc.











Unaudited













December 31,


September 30,


June 30,


March 31,


December 31,



2022


2022


2022


2022


2021












Deposit Composition - Dollars


(dollars in thousands)

Demand and other noninterest-bearing


$ 8,373,350


$ 8,911,267


$ 8,741,488


$ 8,790,138


$ 8,856,714

Money market


2,972,838


3,355,705


3,402,555


3,501,723


3,525,299

Interest-bearing demand


1,980,631


2,047,169


2,104,118


2,103,053


1,999,407

Savings


1,555,765


1,657,799


1,646,363


1,637,451


1,617,546

Interest-bearing public funds, other than certificates of deposit


670,580


701,741


737,297


775,048


779,146

Certificates of deposit, less than $250,000


215,848


221,087


232,063


239,863


249,120

Certificates of deposit, $250,000 or more


124,411


127,229


138,945


145,372


160,490

Certificates of deposit insured by the CD Option of IntraFi
Network Deposits


21,828


22,730


29,178


32,608


35,611

Reciprocal money market accounts


796,199


896,414


924,552


1,073,405


786,046

Subtotal


16,711,450


17,941,141


17,956,559


18,298,661


18,009,379

Valuation adjustment resulting from acquisition
accounting



184


367


552


736

Total deposits


$ 16,711,450


$ 17,941,325


$ 17,956,926


$ 18,299,213


$ 18,010,115














December 31,


September 30,


June 30,


March 31,


December 31,

Deposit Composition - Percentages


2022


2022


2022


2022


2021

Demand and other noninterest-bearing


50.1 %


49.8 %


48.7 %


48.1 %


49.1 %

Money market


17.8 %


18.7 %


18.9 %


19.1 %


19.6 %

Interest-bearing demand


11.9 %


11.4 %


11.7 %


11.5 %


11.1 %

Savings


9.3 %


9.2 %


9.2 %


8.9 %


9.0 %

Interest-bearing public funds, other than certificates of
deposit


4.0 %


3.9 %


4.1 %


4.2 %


4.3 %

Certificates of deposit, less than $250,000


1.3 %


1.2 %


1.3 %


1.3 %


1.4 %

Certificates of deposit, $250,000 or more


0.7 %


0.7 %


0.8 %


0.8 %


0.9 %

Certificates of deposit insured by the CD Option of IntraFi
Network Deposits


0.1 %


0.1 %


0.2 %


0.2 %


0.2 %

Reciprocal money market accounts


4.8 %


5.0 %


5.1 %


5.9 %


4.4 %

Total


100.0 %


100.0 %


100.0 %


100.0 %


100.0 %

AVERAGE BALANCES AND RATES











Columbia Banking System, Inc.











Unaudited















Three Months Ended


Three Months Ended



December 31, 2022


December 31, 2021



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate
















(dollars in thousands)

ASSETS













Loans, net (1)(2)


$ 11,663,093


$ 147,487


5.02 %


$ 10,545,172


$ 111,709


4.20 %

Taxable securities


5,998,033


29,313


1.94 %


6,934,477


33,654


1.93 %

Tax exempt securities (2)


668,817


4,656


2.76 %


759,182


4,364


2.28 %

Interest-earning deposits with banks


48,441


375


3.07 %


947,567


360


0.15 %

Total interest-earning assets


18,378,384


181,831


3.93 %


19,186,398


150,087


3.10 %

Other earning assets


307,831






276,828





Noninterest-earning assets


1,584,696






1,394,757





Total assets


$ 20,270,911






$ 20,857,983





LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$ 4,025,034


$ 2,760


0.27 %


$ 4,339,959


$ 951


0.09 %

Interest-bearing demand


1,991,397


673


0.13 %


1,967,559


376


0.08 %

Savings accounts


1,604,668


69


0.02 %


1,593,434


78


0.02 %

Interest-bearing public funds, other than certificates of deposit


681,829


3,961


2.30 %


787,395


252


0.13 %

Certificates of deposit


368,946


364


0.39 %


458,837


150


0.13 %

Total interest-bearing deposits


8,671,874


7,827


0.36 %


9,147,184


1,807


0.08 %

FHLB advances and FRB borrowings


425,059


4,406


4.11 %


7,368


74


3.98 %

Subordinated debentures


10,000


271


10.75 %


43,859


561


5.07 %

Other borrowings and interest-bearing liabilities


66,593


938


5.59 %


56,803


71


0.50 %

Total interest-bearing liabilities


9,173,526


13,442


0.58 %


9,255,214


2,513


0.11 %

Noninterest-bearing deposits


8,696,001






8,788,127





Other noninterest-bearing liabilities


271,713






230,532





Shareholders' equity


2,129,671






2,584,110





Total liabilities & shareholders' equity


$ 20,270,911






$ 20,857,983





Net interest income (tax equivalent)


$ 168,389






$ 147,574



Net interest margin (tax equivalent)


3.64 %






3.05 %


(1)

Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned
discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $2.1
million and $6.2 million for the three months ended December 31, 2022 and 2021, respectively. The net incremental amortization on
acquired loans was $669 thousand for the three months ended December 31, 2022 compared to net incremental accretion of $16
thousand for the three months ended December 31, 2021.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $718
thousand and $1.1 million for the three months ended December 31, 2022 and 2021, respectively. The tax equivalent yield adjustment
to interest earned on tax exempt securities was $978 thousand and $917 thousand for the three months ended December 31, 2022
and 2021, respectively.

AVERAGE BALANCES AND RATES











Columbia Banking System, Inc.











Unaudited















Three Months Ended


Three Months Ended



December 31, 2022


September 30, 2022



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate
















(dollars in thousands)

ASSETS













Loans, net (1)(2)


$ 11,663,093


$ 147,487


5.02 %


$ 11,513,653


$ 132,302


4.56 %

Taxable securities


5,998,033


29,313


1.94 %


6,419,977


31,987


1.98 %

Tax exempt securities (2)


668,817


4,656


2.76 %


710,137


4,635


2.59 %

Interest-earning deposits with banks


48,441


375


3.07 %


220,678


1,191


2.14 %

Total interest-earning assets


18,378,384


181,831


3.93 %


18,864,445


170,115


3.58 %

Other earning assets


307,831






306,200





Noninterest-earning assets


1,584,696






1,527,607





Total assets


$ 20,270,911






$ 20,698,252





LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$ 4,025,034


$ 2,760


0.27 %


$ 4,342,054


$ 1,378


0.13 %

Interest-bearing demand


1,991,397


673


0.13 %


2,085,124


419


0.08 %

Savings accounts


1,604,668


69


0.02 %


1,658,078


82


0.02 %

Interest-bearing public funds, other than
certificates of deposit


681,829


3,961


2.30 %


724,502


2,410


1.32 %

Certificates of deposit


368,946


364


0.39 %


386,623


157


0.16 %

Total interest-bearing deposits


8,671,874


7,827


0.36 %


9,196,381


4,446


0.19 %

FHLB advances and FRB borrowings


425,059


4,406


4.11 %


11,512


109


3.76 %

Subordinated debentures


10,000


271


10.75 %


10,000


220


8.73 %

Other borrowings and interest-bearing
liabilities


66,593


938


5.59 %


74,722


481


2.55 %

Total interest-bearing liabilities


9,173,526


13,442


0.58 %


9,292,615


5,256


0.22 %

Noninterest-bearing deposits


8,696,001






8,878,977





Other noninterest-bearing liabilities


271,713






255,648





Shareholders' equity


2,129,671






2,271,012





Total liabilities & shareholders'
equity


$ 20,270,911






$ 20,698,252





Net interest income (tax equivalent)


$ 168,389






$ 164,859



Net interest margin (tax equivalent)


3.64 %






3.47 %


(1)

Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned
discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $2.1
million for both the three months ended December 31, 2022 and September 30, 2022, respectively. The net incremental amortization
on acquired loans was $669 thousand and $871 thousand for the three months ended December 31, 2022 and September 30, 2022,
respectively.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $718
thousand and $1.4 million for the three months ended December 31, 2022 and September 30, 2022, respectively. The tax equivalent
yield adjustment to interest earned on tax exempt securities was $978 thousand and $973 thousand for the three months ended
December 31, 2022 and September 30, 2022, respectively.

AVERAGE BALANCES AND RATES











Columbia Banking System, Inc.











Unaudited















Twelve Months Ended


Twelve Months Ended



December 31, 2022


December 31, 2021



Average

Balances


Interest

Earned / Paid


Average

Rate


Average

Balances


Interest

Earned / Paid


Average

Rate
















(dollars in thousands)

ASSETS













Loans, net (1)(2)


$ 11,211,442


$ 500,112


4.46 %


$ 9,832,385


$ 420,439


4.28 %

Taxable securities


6,595,476


133,084


2.02 %


5,701,810


107,594


1.89 %

Tax exempt securities (2)


725,027


18,759


2.59 %


651,468


14,869


2.28 %

Interest-earning deposits with banks


336,850


2,748


0.82 %


725,155


955


0.13 %

Total interest-earning assets


18,868,795


$ 654,703


3.47 %


16,910,818


$ 543,857


3.22 %

Other earning assets


305,683






252,476





Noninterest-earning assets


1,497,471






1,284,841





Total assets


$ 20,671,949






$ 18,448,135





LIABILITIES AND SHAREHOLDERS' EQUITY

Money market accounts


$ 4,324,611


$ 6,098


0.14 %


$ 3,805,723


$ 3,083


0.08 %

Interest-bearing demand


2,056,059


1,877


0.09 %


1,637,531


1,225


0.07 %

Savings accounts


1,633,354


306


0.02 %


1,382,277


217


0.02 %

Interest-bearing public funds, other than
certificates of deposit


734,667


7,582


1.03 %


721,090


1,005


0.14 %

Certificates of deposit


400,756


670


0.17 %


363,902


656


0.18 %

Total interest-bearing deposits


9,149,447


16,533


0.18 %


7,910,523


6,186


0.08 %

FHLB advances and FRB borrowings


113,683


4,659


4.10 %


7,388


291


3.94 %

Subordinated debentures


10,000


807


8.07 %


37,258


1,932


5.19 %

Other borrowings and interest-bearing
liabilities


69,866


1,646


2.36 %


53,052


137


0.26 %

Total interest-bearing liabilities


9,342,996


$ 23,645


0.25 %


8,008,221


$ 8,546


0.11 %

Noninterest-bearing deposits


8,773,511






7,811,880





Other noninterest-bearing liabilities


247,989






225,579





Shareholders' equity


2,307,453






2,402,455





Total liabilities & shareholders'
equity


$ 20,671,949






$ 18,448,135





Net interest income (tax equivalent)


$ 631,058






$ 535,311



Net interest margin (tax equivalent)


3.34 %






3.17 %


(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 $11.2
million and $32.2 million for the twelve months ended December 31, 2022 and 2021, respectively. The net incremental amortization
on acquired loans was $3.9 million for the twelve months ended December 31, 2022 compared to net incremental accretion of $2.8
million for the twelve months ended December 31, 2021.

(2)

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $4.3
million and $4.7 million for the twelve months ended December 31, 2022 and 2021, respectively. The tax equivalent yield adjustment
to interest earned on tax exempt securities was $3.9 million and $3.1 million for the twelve months ended December 31, 2022 and
2021, respectively.

Non-GAAP Financial Measures

The Company considers its operating net interest margin (tax equivalent) 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 (tax equivalent) and operating efficiency ratio to the Company, there are no standardized definitions for these metrics. As a result, the Company's calculations may not be comparable with those of 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 (tax equivalent) and operating efficiency ratio:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Operating net interest margin non-GAAP reconciliation:


(dollars in thousands)

Net interest income (tax equivalent) (1)


$ 168,389


$ 164,859


$ 147,574


$ 631,058


$ 535,311

Adjustments to arrive at operating net interest income (tax
equivalent):











Premium amortization (discount accretion) on acquired loans


669


871


(16)


3,943


(2,811)

Premium amortization on acquired securities


812


877


1,278


3,852


2,752

Operating net interest income (tax equivalent) (1)


$ 169,870


$ 166,607


$ 148,836


$ 638,853


$ 535,252












Average interest earning assets


$ 18,378,384


$ 18,864,445


$ 19,186,398


$ 18,868,795


$ 16,910,818

Net interest margin (tax equivalent) (1)


3.64 %


3.47 %


3.05 %


3.34 %


3.17 %

Operating net interest margin (tax equivalent) (1)


3.67 %


3.50 %


3.08 %


3.39 %


3.17 %














Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Operating efficiency ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$ 100,505


$ 101,446


$ 102,622


$ 402,383


$ 360,304

Adjustments to arrive at operating noninterest expense:











Merger-related expenses


(4,897)


(3,246)


(11,812)


(19,101)


(14,514)

Net benefit (cost) of operation of OREO and OPPO


8


4


(14)


(114)


(56)

Loss on asset disposals


(46)


(13)


(10)


(99)


(29)

B&O taxes


(1,853)


(1,771)


(1,571)


(6,797)


(5,903)

Operating noninterest expense (numerator B)


$ 93,717


$ 96,420


$ 89,215


$ 376,272


$ 339,802












Net interest income (tax equivalent) (1)


$ 168,389


$ 164,859


$ 147,574


$ 631,058


$ 535,311

Noninterest income


23,331


26,627


24,240


99,144


94,094

Bank owned life insurance tax equivalent adjustment


501


516


466


2,030


1,737

Total revenue (tax equivalent) (denominator A)


$ 192,221


$ 192,002


$ 172,280


$ 732,232


$ 631,142












Operating net interest income (tax equivalent) (1)


$ 169,870


$ 166,607


$ 148,836


$ 638,853


$ 535,252

Adjustments to arrive at operating noninterest income (tax
equivalent):











Investment securities loss (gain), net


9




9


(314)

Gain on asset disposals


(11)


(3,696)


(242)


(4,218)


(529)

Operating noninterest income (tax equivalent)


23,830


23,447


24,464


96,965


94,988

Total operating revenue (tax equivalent) (denominator B)


$ 193,700


$ 190,054


$ 173,300


$ 735,818


$ 630,240

Efficiency ratio (tax equivalent) (numerator A/denominator A)


52.29 %


52.84 %


59.57 %


54.95 %


57.09 %

Operating efficiency ratio (tax equivalent) (numerator
B/denominator B)


48.38 %


50.73 %


51.48 %


51.14 %


53.92 %


(1)

Tax-exempt interest income has been adjusted to a tax equivalent basis. The amount of such adjustment was an addition to net interest income of $1.7
million and $2.4 million for the three months ended December 31, 2022 and September 30, 2022, respectively, $2.1 million for the three months ended
December 31, 2021 and $8.2 million and $7.8 million for the twelve months ended December 31, 2022 and December 31, 2021, respectively.

Non-GAAP Financial Measures - Continued

The Company also considers its core noninterest expense ratio to be a useful measurement as it more closely reflects the ongoing operating performance of the Company. Despite the usefulness of the core noninterest expense ratio to the Company, there is not a standardized definition for it, as a result, the Company's calculations may not be comparable with those of other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the core noninterest expense ratio:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Core noninterest expense ratio non-GAAP reconciliation:


(dollars in thousands)

Noninterest expense (numerator A)


$ 100,505


$ 101,446


$ 102,622


$ 402,383


$ 360,304

Adjustments to arrive at core noninterest expense:











Merger-related expenses


(4,897)


(3,246)


(11,812)


(19,101)


(14,514)

Core noninterest expense (numerator B)


$ 95,608


$ 98,200


$ 90,810


$ 383,282


$ 345,790












Average assets (denominator)


$ 20,270,911


$ 20,698,252


$ 20,857,983


$ 20,671,949


$ 18,448,135

Noninterest expense ratio (numerator A/denominator) (1)


1.98 %


1.96 %


1.97 %


1.95 %


1.95 %

Core noninterest expense ratio (numerator B/denominator)


1.89 %


1.90 %


1.74 %


1.85 %


1.87 %


(1)

For the purpose of this ratio, interim noninterest expense has been annualized.

(2)

For the purpose of this ratio, interim core noninterest expense has been annualized.

The Company considers its pre-tax, pre-provision income to be a useful measurement in evaluating the earnings of the Company as it provides a method to assess income. Despite the usefulness of this measure to the Company, there is not a standardized definition for it. As a result, the Company's calculation may not always be comparable with those of other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the pre-tax, pre-provision income:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Pre-tax, pre-provision income:


(in thousands)

Income before income taxes


$ 87,119


$ 82,423


$ 56,041


$ 317,647


$ 256,509

Provision (recapture) for credit losses


2,400


5,250


11,100


1,950


4,800

Provision (recapture) for unfunded commitments


(500)


(500)


(2,000)


(500)


200

B&O taxes


1,853


1,771


1,571


6,797


5,903

Pre-tax, pre-provision income


$ 90,872


$ 88,944


$ 66,712


$ 325,894


$ 267,412

Non-GAAP Financial Measures - Continued

The Company considers its tangible common equity ratio and tangible book value per share ratio to be useful measurements in evaluating the capital adequacy of the Company as they provide a method to assess management's success in utilizing our tangible capital. Despite the usefulness of these ratios to the Company, there is not a standardized definition for these metrics. As a result, the Company's calculation may not always be comparable with those of other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the tangible common equity ratio and tangible book value per share ratio:



December 31,


September 30,


December 31,



2022


2022


2021








Tangible common equity ratio and tangible book value per common share non-GAAP
reconciliation:


(dollars in thousands except per share amounts)

Shareholders' equity (numerator A)


$ 2,213,153


$ 2,115,481


$ 2,588,742

Adjustments to arrive at tangible common equity:







Goodwill


(823,172)


(823,172)


(823,172)

Other intangible assets, net


(25,949)


(27,921)


(34,647)

Tangible common equity (numerator B)


$ 1,364,032


$ 1,264,388


$ 1,730,923








Total assets (denominator A)


$ 20,265,843


$ 20,405,369


$ 20,945,333

Adjustments to arrive at tangible assets:







Goodwill


(823,172)


(823,172)


(823,172)

Other intangible assets, net


(25,949)


(27,921)


(34,647)

Tangible assets (denominator B)


$ 19,416,722


$ 19,554,276


$ 20,087,514








Shareholders' equity to total assets (numerator A/denominator A)


10.92 %


10.37 %


12.36 %

Tangible common shareholders' equity to tangible assets (numerator B/denominator B)


7.03 %


6.47 %


8.62 %

Common shares outstanding (denominator C)


78,646


78,647


78,511

Book value per common share (numerator A/denominator C)


$ 28.14


$ 26.90


$ 32.97

Tangible book value per common share (numerator B/denominator C)


$ 17.34


$ 16.08


$ 22.05

The Company considers its ratio of allowance for credit losses to period-end loans, excluding PPP loans, to be a useful measurement in evaluating the adequacy of the amount of allowance for credit losses to loans of the Company, as PPP loans are guaranteed by the U.S. Small Business Administration and thus do not require the same amount of reserve for credit losses as do other loans. Despite the usefulness of this ratio to the Company, there is not a standardized definition for it. As a result, the Company's calculation may not always be comparable with those of other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the allowance for credit losses to period-end loans, excluding PPP loans:



December 31,


September 30,


December 31,



2022


2022


2021








Allowance coverage ratio non-GAAP reconciliation:


(dollars in thousands)

Allowance for credit losses ("ACL") (numerator)


$ 158,438


$ 154,871


$ 155,578








Total loans (denominator A)


11,610,973


11,692,261


10,641,937

Less: PPP loans (0% Allowance)


9,997


15,378


184,132

Total loans, net of PPP loans (denominator B)


$ 11,600,976


$ 11,676,883


$ 10,457,805








ACL to period end loans (numerator / denominator A)


1.36 %


1.32 %


1.46 %

ACL to period end loans, excluding PPP loans (numerator / denominator B)


1.37 %


1.33 %


1.49 %

Non-GAAP Financial Measures - Continued

The Company also considers its return on average tangible common equity ratio to be a useful measurement as it evaluates the Company's ongoing ability to generate returns for its common shareholders. By removing the impact of intangible assets and their related amortization and tax effects, the performance of the business can be evaluated, whether acquired or developed internally. Despite the usefulness of this ratio to the Company, there is not a standardized definition for it. As a result, the Company's calculation may not always be comparable with those of other organizations. The Company encourages readers to consider its consolidated financial statements in their entirety and not to rely on any single financial measure.

The following table reconciles the Company's calculation of the return on average tangible common shareholders' equity ratio:



Three Months Ended


Twelve Months Ended



December 31,


September 30,


December 31,


December 31,


December 31,



2022


2022


2021


2022


2021












Return on average tangible common equity non-GAAP
reconciliation:


(dollars in thousands)

Net income (numerator A)


$ 68,906


$ 64,942


$ 42,911


$ 250,178


$ 202,820

Adjustments to arrive at tangible income applicable to
common shareholders:











Amortization of intangibles


1,972


2,219


2,376


8,698


7,987

Tax effect on intangible amortization


(414)


(466)


(499)


(1,827)


(1,677)

Tangible income applicable to common shareholders
(numerator B)


$ 70,464


$ 66,695


$ 44,788


257,049


$ 209,130












Average shareholders' equity (denominator A)


$ 2,129,671


$ 2,271,012


$ 2,584,110


2,307,453


$ 2,402,455

Adjustments to arrive at average tangible common equity:











Average intangibles


(850,331)


(852,468)


(854,985)


(853,622)


(806,345)

Average tangible common equity (denominator B)


$ 1,279,340


$ 1,418,544


$ 1,729,125


$ 1,453,831


$ 1,596,110












Return on average common equity (numerator A/denominator
A) (1)


12.94 %


11.44 %


6.64 %


10.84 %


8.44 %

Return on average tangible common equity (numerator

B/denominator B) (2)


22.03 %


18.81 %


10.36 %


17.68 %


13.10 %


(1)

For the purpose of this ratio, interim net income has been annualized.

(2)

For the purpose of this ratio, interim tangible income applicable to common shareholders has been annualized.

1

Operating net interest margin (tax equivalent) is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.

2

Allowance for credit losses to period-end loans, excluding PPP loans is a non-GAAP financial measure. See the section titled "Non-GAAP Financial Measures" in this earnings release for the reconciliation of allowance for credit losses to period-end loans to allowance for credit losses to period-end loans, excluding PPP loans.

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SOURCE Columbia Banking System Inc

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