EX-99.1 2 a991colb2q2020earnings.htm PRESS RELEASE - EARNINGS AND DIVIDEND
Exhibit 99.1
FOR IMMEDIATE RELEASE
July 23, 2020
Columbia Banking System Announces Second Quarter 2020 Results
and Quarterly Cash Dividend
Notable Items for Second Quarter 2020
•Quarterly net income of $36.6 million and diluted earnings per share of $0.52
•Net loans increased $838.6 million, or 9% during the second quarter of 2020 from regular second quarter production of $295 million supplemented by Paycheck Protection Program loan originations
•Deposits increased $2.32 billion, or 21% during the second quarter of 2020
•Net interest margin of 3.64%, a decrease of 36 basis points from the linked quarter
•Nonperforming assets to period-end assets ratio remained stable at 0.34%
•Regular cash dividend declared of $0.28 per share
TACOMA, Washington, July 23, 2020 -- Clint Stein, President and Chief Executive Officer of Columbia Banking System, Inc. and Columbia Bank (NASDAQ: COLB) (“Columbia”), said today upon the release of Columbia’s second quarter 2020 earnings, “I’m proud of the accomplishments by our team of bankers during one of the most challenging quarters in our 27 year history. They came together to execute on our pandemic response plan while supporting each other through the professional and personal challenges of COVID-19.” Mr. Stein continued, “In addition, our bankers continued to support our clients and our communities through uninterrupted access to our banking services as well as our ongoing philanthropic activities.”
1

Balance Sheet
Total assets at June 30, 2020 were $15.92 billion, an increase of $1.88 billion from the linked quarter. Loans were $9.77 billion, up $838.6 million from March 31, 2020 as a result of loan originations of $1.26 billion partially offset by payments. Included in the loan originations for the quarter were $962.0 million of loans originated under the Paycheck Protection Program (“PPP”). Interest-earning deposits with banks were $880.2 million, an increase of $854.9 million from the linked quarter due to the surge in deposits. Debt securities available for sale were $3.69 billion at June 30, 2020, an increase of $140.7 million from $3.55 billion at March 31, 2020. Total deposits at June 30, 2020 were $13.13 billion, an increase of $2.32 billion from March 31, 2020 largely due to an increase of $1.40 billion in demand and other noninterest-bearing deposits. The deposit mix remained fairly consistent from March 31, 2020 with 51% noninterest-bearing and 49% interest-bearing. The average cost of total deposits for the quarter was 7 basis points, a decrease of 7 basis points from the first quarter of 2020. For additional information regarding this calculation, see the “Net Interest Margin” section.
Chris Merrywell, Columbia’s Executive Vice President and Chief Operating Officer, stated, “Our dedicated team of bankers worked tirelessly during the quarter assisting our clients with their PPP loan applications and loan deferral requests while providing an exceptional level of customer service during these challenging times. Their efforts resulted in robust growth in our balance sheet increasing both loans and deposits while also reducing our cost of deposits by 50%.”
2

Income Statement
Net Interest Income
Net interest income for the second quarter of 2020 was $121.9 million, a decrease of $571 thousand and $3.3 million from the linked quarter and the prior-year period, respectively. The decrease from the linked quarter was primarily due to lower interest income on loans as the lower rate environment more than offset the increase in interest income from the rise in average loan balances. Interest income from securities decreased as a result of $1.9 million of interest income and discount accretion, in the first quarter of 2020, related to the early payoff of three securities as well as lower rates in the current quarter. Partially offsetting these decreases in interest income was a favorable variance in deposit interest expense due to the lower rate environment and lower interest expense on FHLB borrowings as a result of lower average borrowing balances. Net interest income compared to the prior-year period decreased as a result of interest income on loans being down due to the lower rate environment partially offset by an increase in interest income on securities due to higher average balances. The decrease in interest income was partially offset by favorable decreases in interest expense on interest-bearing deposits and FHLB advances resulting from lower rates. For additional information regarding net interest income, see the “Net Interest Margin” section and the “Average Balances and Rates” tables.
Provision for Credit Losses
The Bank’s provision for credit losses for the second quarter of 2020 was $33.5 million compared to $41.5 million for the linked quarter and $218 thousand for the comparable quarter in 2019. The provision for credit losses for the second quarter of 2020 remained elevated relative to the prior year principally as a result of COVID-19 and the downturn in the national and global economies. As a result, we added $33.5 million to our allowance for credit losses. For more information, please see the “COVID-19 Update” section of this earnings release.
3

Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “We continue to see modest downward pressure in credit quality migration in our loan portfolio, relative to the first quarter. Weaknesses in the retail and hospitality sectors were the primary cause, which is not surprising given the current pandemic environment. Loans migrating to nonaccrual status and net charge-offs during the quarter continue to be from issues with clients that arose prior to COVID-19. Currently, loan payment deferral requests have declined. To illustrate, in June, we extended loan payment deferrals on approximately $58 million in loans as compared to over $1.2 billion in loans in April. While our credit metrics remained stable in the second quarter, we recognize that many challenges associated with the current downturn may not materialize until later this year or next year due to uncertainty with respect to how the pandemic evolves, additional government stimulus, and the effectiveness of loan deferrals, among other factors.”
Noninterest Income
Noninterest income was $37.3 million for the second quarter of 2020, an increase of $16.1 million from the linked quarter and $11.6 million from the second quarter of 2019, respectively. The increases compared to the linked quarter and the same quarter in 2019 were principally due to the sale of 17,360 shares of Visa Class B restricted stock by the Bank for a gain of $3.0 million, which resulted in an observable market price. As a result, the Company wrote up its remaining 77,683 Visa Class B restricted shares to fair value resulting in a gain of $13.4 million, for a total gain of $16.4 million. Based on the existing transfer restriction and uncertainty of Visa’s litigation, the shares were previously carried at a zero-cost basis. We also recognized an $875 thousand gain on the sale of a loan that had previously been charge-off. Partially offsetting these gains were decreases in overdraft fees of $1.1 million and $1.2 million compared to the linked quarter and second quarter of 2019, respectively. The decrease in overdraft fees was due to an overall decrease in the number of transactions during this pandemic time period as well as clients generally carrying higher cash balances in their deposit accounts. In addition, the increase from the prior-year period was partially offset by a $1.1 million current period decrease in treasury management fees and a $3.0 million bank-owned life insurance benefit that was recognized during the second quarter of 2019.
4

Noninterest Expense
Total noninterest expense for the second quarter of 2020 was $80.8 million, a decrease of $3.4 million compared to the first quarter of 2020 principally due to lower compensation and benefits expense. Labor costs related to the origination of PPP loans during the quarter are treated as a contra expense and reduce compensation and benefits expense. These labor costs are capitalized and amortized as a reduction to interest income over the life of the loan. This decrease in noninterest expense was partially offset by an increase in regulatory premiums and provision for unfunded loan commitments. We utilized the remaining $283 thousand of our Small Bank Assessment Credit this quarter related to our FDIC deposit insurance premiums compared to an applied credit of $967 thousand during the first quarter of 2020. The provision for unfunded loan commitments increased by $1.8 million compared to the linked quarter.
Compared to the second quarter of 2019, noninterest expense decreased $5.9 million principally due to the deferral of loan origination costs related to the PPP loans discussed above. Legal and professional fees also declined compared to one year. Partially offsetting these decreases was the $2.6 million increase in the provision for unfunded loan commitments due to higher estimated loss rates and higher amounts of unfunded loan commitments.
The provision for unfunded loan commitments for the periods indicated are as follows:

|  | Three Months Ended |  |  |  |  |  | Six Months Ended |  |
|  | June 30, 2020 |  | March 31, 2020 |  | June 30, 2019 |  | June 30, 2020 |  | June 30, 2019
|  | (in thousands) |  |  |  |  |  |  |  |
Provision (recapture) for unfunded loan commitments |  | $ | 2,800 |  |  | $ | 1,000 |  |  | $ | 200 |  |  | $ | 3,800 |  |  | $ | (350) |

Net Interest Margin
Columbia’s net interest margin (tax equivalent) for the second quarter of 2020 was 3.64%, a decrease of 36 basis points and 76 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 and prior-year period was driven by higher average interest-earning deposits with banks at an average rate of 11 basis points as well as lower rates on the loan and securities portfolios, which were exacerbated by PPP.
5

Columbia’s operating net interest margin (tax equivalent)1 was 3.64% for the second quarter of 2020, which decreased 38 and 74 basis points compared to the linked quarter and the prior-year period, respectively. The decreases in the operating net interest margin for the second quarter of 2020 compared to the linked quarter and the prior-year period were due to the items noted in the preceding paragraph.
The following table highlights the yield on our paycheck protection program loans:

|  | Three Months Ended
|  | June 30, 2020
Paycheck Protection Program loans |  | (dollars in thousands)
Interest income |  | $ | 4,590 |
Average balance |  | $ | 643,966 |
Yield |  | 2.87 | %

Aaron Deer, Columbia’s Executive Vice President and Chief Financial Officer, stated, “The margin compression we experienced during the quarter was largely due to excess liquidity created by record deposit inflows. Of course, historically low interest rates also contributed to the pressure and, unfortunately, the rate environment may remain a challenge for some time. We will take a measured approach in deploying our excess liquidity given uncertainty as to PPP funds utilization and depositor behavior generally in the current environment.”
Asset Quality
At June 30, 2020, nonperforming assets to total assets remained unchanged at 0.34% compared to March 31, 2020. Total nonperforming assets increased $6.3 million from the linked quarter due to a modest increase in commercial real estate and agriculture nonaccrual loans.
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.
6

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

|  | June 30, 2020 |  | March 31, 2020 |  | December 31, 2019
|  | (in thousands) |  |  |  |
Nonaccrual loans: |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |
Commercial real estate |  | $ | 11,155 |  |  | $ | 5,518 |  |  | $ | 3,799 |
Commercial business |  | 20,525 |  |  | 24,395 |  |  | 20,937 |
Agriculture |  | 19,162 |  |  | 15,083 |  |  | 5,023 |
Construction |  | 217 |  |  | — |  |  | — |
Consumer loans: |  |  |  |  |  |
One-to-four family residential real estate |  | 2,662 |  |  | 2,643 |  |  | 3,292 |
Other consumer |  | 11 |  |  | 8 |  |  | 9 |
Total nonaccrual loans |  | 53,732 |  |  | 47,647 |  |  | 33,060 |
OREO and other personal property owned |  | 747 |  |  | 510 |  |  | 552 |
Total nonperforming assets |  | $ | 54,479 |  |  | $ | 48,157 |  |  | $ | 33,612 |

7

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

|  | Three Months Ended |  |  |  |  |  | Six Months Ended |  |
|  | June 30, 2020 |  | March 31, 2020 |  | June 30, 2019 |  | June 30, 2020 |  | June 30, 2019
|  | (in thousands) |  |  |  |  |  |  |  |
Beginning balance |  | $ | 122,074 |  |  | $ | 83,968 |  |  | $ | 83,274 |  |  | $ | 83,968 |  |  | $ | 83,369 |
Impact of adopting ASC 326 |  | — |  |  | 1,632 |  |  | — |  |  | 1,632 |  |  | — |
Charge-offs: |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | — |  |  | (101) |  |  | (564) |  |  | (101) |  |  | (1,242) |
Commercial business |  | (5,442) |  |  | (1,684) |  |  | (4,316) |  |  | (7,126) |  |  | (5,822) |
Agriculture |  | — |  |  | (4,726) |  |  | (61) |  |  | (4,726) |  |  | (139) |
Construction |  | — |  |  | — |  |  | (20) |  |  | — |  |  | (215) |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | — |  |  | (10) |  |  | (321) |  |  | (10) |  |  | (802) |
Other consumer |  | (198) |  |  | (268) |  |  | (5) |  |  | (466) |  |  | (55) |
Total charge-offs |  | (5,640) |  |  | (6,789) |  |  | (5,287) |  |  | (12,429) |  |  | (8,275) |
Recoveries: |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | 13 |  |  | 14 |  |  | 556 |  |  | 27 |  |  | 1,070 |
Commercial business |  | 811 |  |  | 860 |  |  | 492 |  |  | 1,671 |  |  | 1,019 |
Agriculture |  | 1 |  |  | 41 |  |  | 64 |  |  | 42 |  |  | 122 |
Construction |  | 235 |  |  | 442 |  |  | 691 |  |  | 677 |  |  | 774 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 422 |  |  | 282 |  |  | 450 |  |  | 704 |  |  | 784 |
Other consumer |  | 130 |  |  | 124 |  |  | 59 |  |  | 254 |  |  | 74 |
Total recoveries |  | 1,612 |  |  | 1,763 |  |  | 2,312 |  |  | 3,375 |  |  | 3,843 |
Net charge-offs |  | (4,028) |  |  | (5,026) |  |  | (2,975) |  |  | (9,054) |  |  | (4,432) |
Provision for credit losses |  | 33,500 |  |  | 41,500 |  |  | 218 |  |  | 75,000 |  |  | 1,580 |
Ending balance |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 80,517 |  |  | $ | 151,546 |  |  | $ | 80,517 |

The allowance for credit losses to period-end loans was 1.55% at June 30, 2020 co mpared to 1.37% at March 31, 2020. Excluding PPP loans, the allowance for credit losses to period-end loans2 was 1.72%.
2 Allowance for credit losses to period-end loans, excluding PPP 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.
8

Organizational Update
COVID-19 Update
Columbia launched two community focused initiatives in response to the pandemic, putting more than $1 million to work in support of our local communities. The Pass It On Project is designed to provide small businesses more than $500,000 to perform services for community members whose lives have been adversely impacted by the pandemic or the economic downturn it caused. The program will support more than 350 small businesses and many more individuals in the Northwest as we continue to manage through the pandemic and economic recovery. The COVID-19 Community Relief fund put more than $500,000 in the hands of 25 non-profit organizations working to provide relief for those affected by the pandemic in the Northwest.
“Each of our community programs developed in response to the pandemic honor our deep commitment to support businesses and respond to the evolving needs in our local communities,” said David Moore Devine, Columbia’s Executive Vice President and Chief Marketing & Experience Officer. “Small businesses are the lifeblood of our communities and by helping them thrive through the Pass It On Project, we create a ripple effect of support throughout the Northwest.”
Recognition
Columbia was honored to earn recognition as the #1 bank in the Northwest region by JD Powers in the 2020 Retail Banking Satisfaction Study. The award reflects our ongoing commitment to meeting the needs of our clients with exceptional service.
Boise NeighborHub
The Bank recently announced the expansion of its new retail branch service concept to the Boise, Idaho market with the construction of a new NeighborHub, located in downtown Boise. The NeighborHub concept combines sales and support focused technology with the elevated skill set of a team of bankers with universal knowledge and expertise in handling all business and consumer needs. The location will open in the fall of 2020 and will also serve the broader community as a hub for educational seminars, local events and community functions in the evenings.
“We are excited to bring our signature NeighborHub style of banking to downtown Boise this year,” said Mr. Stein. “The new location will expand our presence in the Treasure Valley and further build upon the success of the first NeighborHub location in the Seattle market.”
9

Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.28 per common share on August 19, 2020 to shareholders of record as of the close of business on August 5, 2020.
Conference Call Information
Columbia’s management will discuss the second quarter 2020 financial results on a conference call scheduled for Thursday, July 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET). Interested parties may join the live-streamed event by using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166
The conference call can also be accessed on Thursday, July 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 3787244.
A replay of the call can be accessed beginning Friday, July 24, 2020 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166
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. The bank has been named one of Puget Sound Business Journal's “Washington’s Best Workplaces,” more than 10 times and was recently honored as the #1 bank in the Northwest region by JD Power in the 2020 Retail Banking Satisfaction Study. Columbia was named the #1 bank in the Northwest on the Forbes 2020 list of “America’s Best Banks” marking nearly 10 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.
10

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, available at the U.S. Securities and Exchange Commission’s (the “SEC”) website at www.sec.gov and the Company’s website at www.columbiabank.com, include 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) the effect of COVID-19 and other infectious illness outbreaks that may arise in the future, which has created significant uncertainties in U.S. and global markets, is expected to continue to adversely affect the businesses in which Columbia is engaged; (3) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (4) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (5) costs or difficulties related to the integration of acquisitions may be greater than expected; (6) competitive pressure among financial institutions may increase significantly; (7) failure to maintain effective internal control over financial reporting or disclosure controls and procedures may adversely affect our business; (8) reliance on and cost of technology may increase; and (9) changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, including with regard to COVID-19, have adversely affected and may continue to adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

Contacts: | Clint Stein, |  | Aaron Deer,
| President and |  | Executive Vice President and
| Chief Executive Officer |  | Chief Financial Officer
| Investor Relations |  |
| InvestorRelations@columbiabank.com |  |
| 253-305-1921 |  |

11

CONSOLIDATED BALANCE SHEETS |  |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  | June 30, |  | March 31, |  | December 31,
|  |  |  |  |  |  | 2020 |  | 2020 |  | 2019
|  |  |  |  |  |  | (in thousands) |  |  |  |
ASSETS |  |  |  |  |  |  |  |  |  |  |
Cash and due from banks |  |  |  |  |  |  | $ | 217,461 |  |  | $ | 190,399 |  |  | $ | 223,541 |
Interest-earning deposits with banks |  |  |  |  |  |  | 880,232 |  |  | 25,357 |  |  | 24,132 |
Total cash and cash equivalents |  |  |  |  |  |  | 1,097,693 |  |  | 215,756 |  |  | 247,673 |
Debt securities available for sale at fair value (amortized cost of $3,491,307, $3,406,492 and $3,703,096, respectively) |  |  |  |  |  |  | 3,693,787 |  |  | 3,553,128 |  |  | 3,746,142 |
Equity securities |  |  |  |  |  |  | 13,425 |  |  | — |  |  | — |
Federal Home Loan Bank (“FHLB”) stock at cost |  |  |  |  |  |  | 16,280 |  |  | 38,280 |  |  | 48,120 |
Loans held for sale |  |  |  |  |  |  | 28,803 |  |  | 9,701 |  |  | 17,718 |
Loans, net of unearned income |  |  |  |  |  |  | 9,771,898 |  |  | 8,933,321 |  |  | 8,743,465 |
Less: Allowance for credit losses |  |  |  |  |  |  | 151,546 |  |  | 122,074 |  |  | 83,968 |
Loans, net |  |  |  |  |  |  | 9,620,352 |  |  | 8,811,247 |  |  | 8,659,497 |
Interest receivable |  |  |  |  |  |  | 59,149 |  |  | 44,577 |  |  | 46,839 |
Premises and equipment, net |  |  |  |  |  |  | 164,362 |  |  | 164,626 |  |  | 165,408 |
Other real estate owned |  |  |  |  |  |  | 747 |  |  | 510 |  |  | 552 |
Goodwill |  |  |  |  |  |  | 765,842 |  |  | 765,842 |  |  | 765,842 |
Other intangible assets, net |  |  |  |  |  |  | 30,938 |  |  | 33,148 |  |  | 35,458 |
Other assets |  |  |  |  |  |  | 429,566 |  |  | 401,688 |  |  | 346,275 |
Total assets |  |  |  |  |  |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 14,079,524 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  |  |  |  |  |  | $ | 6,719,437 |  |  | $ | 5,323,908 |  |  | $ | 5,328,146 |
Interest-bearing |  |  |  |  |  |  | 6,412,040 |  |  | 5,488,848 |  |  | 5,356,562 |
Total deposits |  |  |  |  |  |  | 13,131,477 |  |  | 10,812,756 |  |  | 10,684,708 |
FHLB advances and Federal Reserve Bank ("FRB") borrowings |  |  |  |  |  |  | 157,441 |  |  | 712,455 |  |  | 953,469 |
Securities sold under agreements to repurchase |  |  |  |  |  |  | 51,479 |  |  | 29,252 |  |  | 64,437 |
Subordinated debentures |  |  |  |  |  |  | 35,185 |  |  | 35,231 |  |  | 35,277 |
Revolving line of credit |  |  |  |  |  |  | — |  |  | 5,000 |  |  | — |
Other liabilities |  |  |  |  |  |  | 268,607 |  |  | 230,207 |  |  | 181,671 |
Total liabilities |  |  |  |  |  |  | 13,644,189 |  |  | 11,824,901 |  |  | 11,919,562 |
Commitments and contingent liabilities |  |  |  |  |  |  |  |  |  |  |
Shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |
| June 30, |  | March 31, |  | December 31, |  |  |  |  |  |
| 2020 |  | 2020 |  | 2019 |  |  |  |  |  |
| (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 | 73,770 |  |  | 73,759 |  |  | 73,577 |  |  | 1,654,129 |  |  | 1,651,399 |  |  | 1,650,753 |
Outstanding | 71,586 |  |  | 71,575 |  |  | 72,124 |  |  |  |  |  |  |
Retained earnings |  |  |  |  |  |  | 512,383 |  |  | 495,830 |  |  | 519,676 |
Accumulated other comprehensive income |  |  |  |  |  |  | 181,077 |  |  | 137,207 |  |  | 40,367 |
Treasury stock at cost | 2,184 |  |  | 2,184 |  |  | 1,453 |  |  | (70,834) |  |  | (70,834) |  |  | (50,834) |
Total shareholders’ equity |  |  |  |  |  |  | 2,276,755 |  |  | 2,213,602 |  |  | 2,159,962 |
Total liabilities and shareholders’ equity |  |  |  |  |  |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 14,079,524 |

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,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Interest Income |  | (in thousands except per share amounts) |  |  |  |  |  |  |  |
Loans |  | $ | 105,496 |  |  | $ | 107,366 |  |  | $ | 116,585 |  |  | $ | 212,862 |  |  | $ | 225,001 |
Taxable securities |  | 18,343 |  |  | 21,088 |  |  | 15,918 |  |  | 39,431 |  |  | 33,333 |
Tax-exempt securities |  | 2,257 |  |  | 2,302 |  |  | 2,712 |  |  | 4,559 |  |  | 5,681 |
Deposits in banks |  | 136 |  |  | 141 |  |  | 207 |  |  | 277 |  |  | 295 |
Total interest income |  | 126,232 |  |  | 130,897 |  |  | 135,422 |  |  | 257,129 |  |  | 264,310 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 2,094 |  |  | 3,642 |  |  | 4,976 |  |  | 5,736 |  |  | 9,474 |
FHLB advances and FRB borrowings |  | 1,796 |  |  | 4,229 |  |  | 4,708 |  |  | 6,025 |  |  | 7,393 |
Subordinated debentures |  | 468 |  |  | 468 |  |  | 468 |  |  | 936 |  |  | 936 |
Other borrowings |  | 23 |  |  | 136 |  |  | 154 |  |  | 159 |  |  | 369 |
Total interest expense |  | 4,381 |  |  | 8,475 |  |  | 10,306 |  |  | 12,856 |  |  | 18,172 |
Net Interest Income |  | 121,851 |  |  | 122,422 |  |  | 125,116 |  |  | 244,273 |  |  | 246,138 |
Provision for credit losses |  | 33,500 |  |  | 41,500 |  |  | 218 |  |  | 75,000 |  |  | 1,580 |
Net interest income after provision for credit losses |  | 88,351 |  |  | 80,922 |  |  | 124,898 |  |  | 169,273 |  |  | 244,558 |
Noninterest Income |  |  |  |  |  |  |  |  |  |
Deposit account and treasury management fees |  | 6,092 |  |  | 7,788 |  |  | 9,035 |  |  | 13,880 |  |  | 18,015 |
Card revenue |  | 3,079 |  |  | 3,518 |  |  | 3,763 |  |  | 6,597 |  |  | 7,425 |
Financial services and trust revenue |  | 3,163 |  |  | 3,065 |  |  | 3,425 |  |  | 6,228 |  |  | 6,382 |
Loan revenue |  | 5,607 |  |  | 4,590 |  |  | 3,596 |  |  | 10,197 |  |  | 5,985 |
Bank owned life insurance |  | 1,618 |  |  | 1,596 |  |  | 1,597 |  |  | 3,214 |  |  | 3,116 |
Investment securities gains, net |  | 16,425 |  |  | 249 |  |  | 285 |  |  | 16,674 |  |  | 2,132 |
Other |  | 1,275 |  |  | 401 |  |  | 3,947 |  |  | 1,676 |  |  | 4,289 |
Total noninterest income |  | 37,259 |  |  | 21,207 |  |  | 25,648 |  |  | 58,466 |  |  | 47,344 |
Noninterest Expense |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 46,043 |  |  | 54,842 |  |  | 52,015 |  |  | 100,885 |  |  | 104,100 |
Occupancy |  | 8,812 |  |  | 9,197 |  |  | 8,712 |  |  | 18,009 |  |  | 17,521 |
Data processing |  | 5,454 |  |  | 4,840 |  |  | 4,601 |  |  | 10,294 |  |  | 9,270 |
Legal and professional fees |  | 3,483 |  |  | 2,102 |  |  | 6,554 |  |  | 5,585 |  |  | 11,127 |
Amortization of intangibles |  | 2,210 |  |  | 2,310 |  |  | 2,649 |  |  | 4,520 |  |  | 5,397 |
Business and Occupation ("B&O") taxes |  | 1,244 |  |  | 624 |  |  | 1,411 |  |  | 1,868 |  |  | 3,287 |
Advertising and promotion |  | 837 |  |  | 1,305 |  |  | 870 |  |  | 2,142 |  |  | 1,844 |
Regulatory premiums |  | 1,034 |  |  | 34 |  |  | 956 |  |  | 1,068 |  |  | 1,940 |
Net cost (benefit) of operation of other real estate owned |  | (200) |  |  | 12 |  |  | (705) |  |  | (188) |  |  | (592) |
Other |  | 11,916 |  |  | 9,005 |  |  | 9,665 |  |  | 20,921 |  |  | 17,534 |
Total noninterest expense |  | 80,833 |  |  | 84,271 |  |  | 86,728 |  |  | 165,104 |  |  | 171,428 |
Income before income taxes |  | 44,777 |  |  | 17,858 |  |  | 63,818 |  |  | 62,635 |  |  | 120,474 |
Provision for income taxes |  | 8,195 |  |  | 3,230 |  |  | 12,094 |  |  | 11,425 |  |  | 22,879 |
Net Income |  | $ | 36,582 |  |  | $ | 14,628 |  |  | $ | 51,724 |  |  | $ | 51,210 |  |  | $ | 97,595 |
Earnings per common share |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.71 |  |  | $ | 0.72 |  |  | $ | 1.33 |
Diluted |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.71 |  |  | $ | 0.72 |  |  | $ | 1.33 |
Dividends declared per common share - regular |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.56 |  |  | $ | 0.56 |
Dividends declared per common share - special |  | — |  |  | 0.22 |  |  | 0.14 |  |  | 0.22 |  |  | 0.28 |
Dividends declared per common share - total |  | $ | 0.28 |  |  | $ | 0.50 |  |  | $ | 0.42 |  |  | $ | 0.78 |  |  | $ | 0.84 |
Weighted average number of common shares outstanding |  | 70,679 |  |  | 71,206 |  |  | 72,451 |  |  | 70,942 |  |  | 72,486 |
Weighted average number of diluted common shares outstanding |  | 70,711 |  |  | 71,264 |  |  | 72,451 |  |  | 70,981 |  |  | 72,487 |

13

FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  |  |  |  |  | Six Months Ended |  |
Unaudited |  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Earnings |  | (dollars in thousands except per share amounts) |  |  |  |  |  |  |  |
Net interest income |  | $ | 121,851 |  |  | $ | 122,422 |  |  | $ | 125,116 |  |  | $ | 244,273 |  |  | $ | 246,138 |
Provision for credit losses |  | $ | 33,500 |  |  | $ | 41,500 |  |  | $ | 218 |  |  | $ | 75,000 |  |  | $ | 1,580 |
Noninterest income |  | $ | 37,259 |  |  | $ | 21,207 |  |  | $ | 25,648 |  |  | $ | 58,466 |  |  | $ | 47,344 |
Noninterest expense |  | $ | 80,833 |  |  | $ | 84,271 |  |  | $ | 86,728 |  |  | $ | 165,104 |  |  | $ | 171,428 |
Net income |  | $ | 36,582 |  |  | $ | 14,628 |  |  | $ | 51,724 |  |  | $ | 51,210 |  |  | $ | 97,595 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.71 |  |  | $ | 0.72 |  |  | $ | 1.33 |
Earnings (diluted) |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.71 |  |  | $ | 0.72 |  |  | $ | 1.33 |
Book value |  | $ | 31.80 |  |  | $ | 30.93 |  |  | $ | 29.26 |  |  | $ | 31.80 |  |  | $ | 29.26 |
Tangible book value per common share (1) |  | $ | 20.67 |  |  | $ | 19.76 |  |  | $ | 18.20 |  |  | $ | 20.67 |  |  | $ | 18.20 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 15,148,488 |  |  | $ | 13,995,632 |  |  | $ | 13,096,413 |  |  | $ | 14,572,060 |  |  | $ | 13,072,360 |
Interest-earning assets |  | $ | 13,657,719 |  |  | $ | 12,487,550 |  |  | $ | 11,606,727 |  |  | $ | 13,072,635 |  |  | $ | 11,584,301 |
Loans |  | $ | 9,546,099 |  |  | $ | 8,815,755 |  |  | $ | 8,601,819 |  |  | $ | 9,180,927 |  |  | $ | 8,504,781 |
Securities, including equity securities and FHLB stock |  | $ | 3,591,693 |  |  | $ | 3,618,567 |  |  | $ | 2,969,749 |  |  | $ | 3,605,131 |  |  | $ | 3,054,504 |
Deposits |  | $ | 12,220,415 |  |  | $ | 10,622,379 |  |  | $ | 10,186,371 |  |  | $ | 11,421,397 |  |  | $ | 10,228,459 |
Interest-bearing deposits |  | $ | 6,037,107 |  |  | $ | 5,383,203 |  |  | $ | 5,174,875 |  |  | $ | 5,710,155 |  |  | $ | 5,200,493 |
Interest-bearing liabilities |  | $ | 6,514,012 |  |  | $ | 6,375,931 |  |  | $ | 5,841,425 |  |  | $ | 6,444,971 |  |  | $ | 5,822,301 |
Noninterest-bearing deposits |  | $ | 6,183,308 |  |  | $ | 5,239,176 |  |  | $ | 5,011,496 |  |  | $ | 5,711,242 |  |  | $ | 5,027,966 |
Shareholders’ equity |  | $ | 2,254,349 |  |  | $ | 2,193,051 |  |  | $ | 2,096,157 |  |  | $ | 2,223,700 |  |  | $ | 2,070,636 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 0.97 | % |  | 0.42 | % |  | 1.58 | % |  | 0.70 | % |  | 1.49 | %
Return on average common equity |  | 6.49 | % |  | 2.67 | % |  | 9.87 | % |  | 4.61 | % |  | 9.43 | %
Return on average tangible common equity (1) |  | 10.53 | % |  | 4.72 | % |  | 16.71 | % |  | 7.69 | % |  | 16.15 | %
Average equity to average assets |  | 14.88 | % |  | 15.67 | % |  | 16.01 | % |  | 15.26 | % |  | 15.84 | %
Shareholders' equity to total assets |  | 14.30 | % |  | 15.77 | % |  | 16.30 | % |  | 14.30 | % |  | 16.30 | %
Tangible common shareholders’ equity to tangible assets (1) |  | 9.79 | % |  | 10.68 | % |  | 10.80 | % |  | 9.79 | % |  | 10.80 | %
Net interest margin (tax equivalent) |  | 3.64 | % |  | 4.00 | % |  | 4.40 | % |  | 3.82 | % |  | 4.36 | %
Efficiency ratio (tax equivalent) (2) |  | 50.09 | % |  | 57.73 | % |  | 56.57 | % |  | 53.72 | % |  | 57.43 | %
Operating efficiency ratio (tax equivalent) (1) |  | 54.91 | % |  | 57.24 | % |  | 56.34 | % |  | 56.08 | % |  | 56.93 | %
Noninterest expense ratio |  | 2.13 | % |  | 2.41 | % |  | 2.65 | % |  | 2.27 | % |  | 2.62 | %
|  | June 30, |  | March 31, |  | December 31, |  |  |  |
Period-end |  | 2020 |  | 2020 |  | 2019 |  |  |  |
Total assets |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 14,079,524 |  |  |  |  |
Loans, net of unearned income |  | $ | 9,771,898 |  |  | $ | 8,933,321 |  |  | $ | 8,743,465 |  |  |  |  |
Allowance for credit losses |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 83,968 |  |  |  |  |
Securities, including equity securities and FHLB stock |  | $ | 3,723,492 |  |  | $ | 3,591,408 |  |  | $ | 3,794,262 |  |  |  |  |
Deposits |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |  |  |  |  |
Shareholders’ equity |  | $ | 2,276,755 |  |  | $ | 2,213,602 |  |  | $ | 2,159,962 |  |  |  |  |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 53,732 |  |  | $ | 47,647 |  |  | $ | 33,060 |  |  |  |  |
Other real estate owned (“OREO”) and other personal property owned (“OPPO”) |  | 747 |  |  | 510 |  |  | 552 |  |  |  |  |
Total nonperforming assets |  | $ | 54,479 |  |  | $ | 48,157 |  |  | $ | 33,612 |  |  |  |  |
Nonperforming loans to period-end loans |  | 0.55 | % |  | 0.53 | % |  | 0.38 | % |  |  |  |
Nonperforming assets to period-end assets |  | 0.34 | % |  | 0.34 | % |  | 0.24 | % |  |  |  |
Allowance for credit losses to period-end loans |  | 1.55 | % |  | 1.37 | % |  | 0.96 | % |  |  |  |
Net loan charge-offs (for the three months ended) |  | $ | 4,028 |  |  | $ | 5,026 |  |  | $ | 306 |  |  |  |  |

__________
(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.
14

QUARTERLY FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  |  |  |  |  |  |  |
Unaudited |  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Earnings |  | (dollars in thousands except per share amounts) |  |  |  |  |  |  |  |
Net interest income |  | $ | 121,851 |  |  | $ | 122,422 |  |  | $ | 124,817 |  |  | $ | 122,450 |  |  | $ | 125,116 |
Provision for credit losses |  | $ | 33,500 |  |  | $ | 41,500 |  |  | $ | 1,614 |  |  | $ | 299 |  |  | $ | 218 |
Noninterest income |  | $ | 37,259 |  |  | $ | 21,207 |  |  | $ | 21,807 |  |  | $ | 28,030 |  |  | $ | 25,648 |
Noninterest expense |  | $ | 80,833 |  |  | $ | 84,271 |  |  | $ | 86,978 |  |  | $ | 87,076 |  |  | $ | 86,728 |
Net income |  | $ | 36,582 |  |  | $ | 14,628 |  |  | $ | 46,129 |  |  | $ | 50,727 |  |  | $ | 51,724 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.64 |  |  | $ | 0.70 |  |  | $ | 0.71 |
Earnings (diluted) |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.64 |  |  | $ | 0.70 |  |  | $ | 0.71 |
Book value |  | $ | 31.80 |  |  | $ | 30.93 |  |  | $ | 29.95 |  |  | $ | 29.90 |  |  | $ | 29.26 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 15,148,488 |  |  | $ | 13,995,632 |  |  | $ | 13,750,840 |  |  | $ | 13,459,774 |  |  | $ | 13,096,413 |
Interest-earning assets |  | $ | 13,657,719 |  |  | $ | 12,487,550 |  |  | $ | 12,231,779 |  |  | $ | 11,941,578 |  |  | $ | 11,606,727 |
Loans |  | $ | 9,546,099 |  |  | $ | 8,815,755 |  |  | $ | 8,742,246 |  |  | $ | 8,694,592 |  |  | $ | 8,601,819 |
Securities, including equity securities and FHLB stock |  | $ | 3,591,693 |  |  | $ | 3,618,567 |  |  | $ | 3,453,554 |  |  | $ | 3,102,213 |  |  | $ | 2,969,749 |
Deposits |  | $ | 12,220,415 |  |  | $ | 10,622,379 |  |  | $ | 10,959,434 |  |  | $ | 10,668,767 |  |  | $ | 10,186,371 |
Interest-bearing deposits |  | $ | 6,037,107 |  |  | $ | 5,383,203 |  |  | $ | 5,610,850 |  |  | $ | 5,517,171 |  |  | $ | 5,174,875 |
Interest-bearing liabilities |  | $ | 6,514,012 |  |  | $ | 6,375,931 |  |  | $ | 6,058,319 |  |  | $ | 5,989,042 |  |  | $ | 5,841,425 |
Noninterest-bearing deposits |  | $ | 6,183,308 |  |  | $ | 5,239,176 |  |  | $ | 5,348,584 |  |  | $ | 5,151,596 |  |  | $ | 5,011,496 |
Shareholders’ equity |  | $ | 2,254,349 |  |  | $ | 2,193,051 |  |  | $ | 2,170,879 |  |  | $ | 2,152,916 |  |  | $ | 2,096,157 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 0.97 | % |  | 0.42 | % |  | 1.34 | % |  | 1.51 | % |  | 1.58 | %
Return on average common equity |  | 6.49 | % |  | 2.67 | % |  | 8.50 | % |  | 9.42 | % |  | 9.87 | %
Average equity to average assets |  | 14.88 | % |  | 15.67 | % |  | 15.79 | % |  | 16.00 | % |  | 16.01 | %
Shareholders’ equity to total assets |  | 14.30 | % |  | 15.77 | % |  | 15.34 | % |  | 15.71 | % |  | 16.30 | %
Net interest margin (tax equivalent) |  | 3.64 | % |  | 4.00 | % |  | 4.11 | % |  | 4.14 | % |  | 4.40 | %
Period-end |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 14,079,524 |  |  | $ | 13,757,760 |  |  | $ | 13,090,808 |
Loans, net of unearned income |  | $ | 9,771,898 |  |  | $ | 8,933,321 |  |  | $ | 8,743,465 |  |  | $ | 8,756,355 |  |  | $ | 8,646,990 |
Allowance for credit losses |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 83,968 |  |  | $ | 82,660 |  |  | $ | 80,517 |
Securities, including equity securities and FHLB stock |  | $ | 3,723,492 |  |  | $ | 3,591,408 |  |  | $ | 3,794,262 |  |  | $ | 3,397,252 |  |  | $ | 2,894,218 |
Deposits |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |  |  | $ | 10,855,716 |  |  | $ | 10,211,599 |
Shareholders’ equity |  | $ | 2,276,755 |  |  | $ | 2,213,602 |  |  | $ | 2,159,962 |  |  | $ | 2,161,577 |  |  | $ | 2,133,638 |
Goodwill |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |
Other intangible assets, net |  | $ | 30,938 |  |  | $ | 33,148 |  |  | $ | 35,458 |  |  | $ | 37,908 |  |  | $ | 40,540 |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 53,732 |  |  | $ | 47,647 |  |  | $ | 33,060 |  |  | $ | 37,021 |  |  | $ | 39,038 |
OREO and OPPO |  | 747 |  |  | 510 |  |  | 552 |  |  | 625 |  |  | 1,118 |
Total nonperforming assets |  | $ | 54,479 |  |  | $ | 48,157 |  |  | $ | 33,612 |  |  | $ | 37,646 |  |  | $ | 40,156 |
Nonperforming loans to period-end loans |  | 0.55 | % |  | 0.53 | % |  | 0.38 | % |  | 0.42 | % |  | 0.45 | %
Nonperforming assets to period-end assets |  | 0.34 | % |  | 0.34 | % |  | 0.24 | % |  | 0.27 | % |  | 0.31 | %
Allowance for credit losses to period-end loans |  | 1.55 | % |  | 1.37 | % |  | 0.96 | % |  | 0.94 | % |  | 0.93 | %
Net loan charge-offs (recoveries) |  | $ | 4,028 |  |  | $ | 5,026 |  |  | $ | 306 |  |  | $ | (1,844) |  |  | $ | 2,975 |

15

LOAN PORTFOLIO COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Loan Portfolio Composition - Dollars |  | (dollars in thousands) |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | $ | 4,032,643 |  |  | $ | 3,969,974 |  |  | $ | 3,945,853 |  |  | $ | 3,746,365 |  |  | $ | 3,689,282 |
Commercial business |  | 3,859,513 |  |  | 3,169,668 |  |  | 2,989,613 |  |  | 3,057,669 |  |  | 3,059,066 |
Agriculture |  | 845,950 |  |  | 754,491 |  |  | 765,371 |  |  | 777,619 |  |  | 744,481 |
Construction |  | 304,015 |  |  | 308,186 |  |  | 361,533 |  |  | 479,171 |  |  | 446,101 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 692,837 |  |  | 690,506 |  |  | 637,325 |  |  | 654,077 |  |  | 667,037 |
Other consumer |  | 36,940 |  |  | 40,496 |  |  | 43,770 |  |  | 41,454 |  |  | 41,023 |
Total loans |  | 9,771,898 |  |  | 8,933,321 |  |  | 8,743,465 |  |  | 8,756,355 |  |  | 8,646,990 |
Less: Allowance for credit losses |  | (151,546) |  |  | (122,074) |  |  | (83,968) |  |  | (82,660) |  |  | (80,517) |
Total loans, net |  | $ | 9,620,352 |  |  | $ | 8,811,247 |  |  | $ | 8,659,497 |  |  | $ | 8,673,695 |  |  | $ | 8,566,473 |
Loans held for sale |  | $ | 28,803 |  |  | $ | 9,701 |  |  | $ | 17,718 |  |  | $ | 15,036 |  |  | $ | 12,189 |

|  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
Loan Portfolio Composition - Percentages |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | 41.2 | % |  | 44.5 | % |  | 45.1 | % |  | 42.7 | % |  | 42.6 | %
Commercial business |  | 39.5 | % |  | 35.5 | % |  | 34.2 | % |  | 34.9 | % |  | 35.4 | %
Agriculture |  | 8.7 | % |  | 8.4 | % |  | 8.8 | % |  | 8.9 | % |  | 8.6 | %
Construction |  | 3.1 | % |  | 3.4 | % |  | 4.1 | % |  | 5.5 | % |  | 5.2 | %
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 7.1 | % |  | 7.7 | % |  | 7.3 | % |  | 7.5 | % |  | 7.7 | %
Other consumer |  | 0.4 | % |  | 0.5 | % |  | 0.5 | % |  | 0.5 | % |  | 0.5 | %
Total loans |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

16

DEPOSIT COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |
|  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Deposit Composition - Dollars |  | (dollars in thousands) |  |  |  |  |  |  |  |
Demand and other noninterest-bearing |  | $ | 6,719,437 |  |  | $ | 5,323,908 |  |  | $ | 5,328,146 |  |  | $ | 5,320,435 |  |  | $ | 5,082,219 |
Money market |  | 2,586,376 |  |  | 2,313,717 |  |  | 2,322,644 |  |  | 2,295,229 |  |  | 2,240,522 |
Interest-bearing demand |  | 1,274,058 |  |  | 1,131,874 |  |  | 1,150,437 |  |  | 1,059,502 |  |  | 1,058,545 |
Savings |  | 1,035,723 |  |  | 905,931 |  |  | 882,050 |  |  | 892,438 |  |  | 887,172 |
Interest-bearing public funds, other than certificates of deposit |  | 623,496 |  |  | 405,810 |  |  | 301,203 |  |  | 629,797 |  |  | 270,398 |
Certificates of deposit, less than $250,000 |  | 210,357 |  |  | 214,449 |  |  | 218,764 |  |  | 223,249 |  |  | 228,920 |
Certificates of deposit, $250,000 or more |  | 104,330 |  |  | 109,659 |  |  | 151,995 |  |  | 107,506 |  |  | 105,782 |
Certificates of deposit insured by CDARS® |  | 17,078 |  |  | 17,171 |  |  | 17,065 |  |  | 17,252 |  |  | 16,559 |
Brokered certificates of deposit |  | 8,427 |  |  | 12,259 |  |  | 12,259 |  |  | 18,852 |  |  | 40,502 |
Reciprocal money market accounts |  | 552,195 |  |  | 377,980 |  |  | 300,158 |  |  | 291,542 |  |  | 281,247 |
Subtotal |  | 13,131,477 |  |  | 10,812,758 |  |  | 10,684,721 |  |  | 10,855,802 |  |  | 10,211,866 |
Valuation adjustment resulting from acquisition accounting |  | — |  |  | (2) |  |  | (13) |  |  | (86) |  |  | (267) |
Total deposits |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |  |  | $ | 10,855,716 |  |  | $ | 10,211,599 |

|  | June 30, |  | March 31, |  | December 31, |  | September 30, |  | June 30,
Deposit Composition - Percentages |  | 2020 |  | 2020 |  | 2019 |  | 2019 |  | 2019
Demand and other noninterest-bearing |  | 51.2 | % |  | 49.2 | % |  | 49.9 | % |  | 49.0 | % |  | 49.8 | %
Money market |  | 19.7 | % |  | 21.4 | % |  | 21.7 | % |  | 21.1 | % |  | 21.9 | %
Interest-bearing demand |  | 9.7 | % |  | 10.5 | % |  | 10.8 | % |  | 9.8 | % |  | 10.4 | %
Savings |  | 7.9 | % |  | 8.4 | % |  | 8.3 | % |  | 8.2 | % |  | 8.7 | %
Interest-bearing public funds, other than certificates of deposit |  | 4.7 | % |  | 3.8 | % |  | 2.8 | % |  | 5.8 | % |  | 2.7 | %
Certificates of deposit, less than $250,000 |  | 1.6 | % |  | 2.0 | % |  | 2.0 | % |  | 2.1 | % |  | 2.2 | %
Certificates of deposit, $250,000 or more |  | 0.8 | % |  | 1.0 | % |  | 1.4 | % |  | 1.0 | % |  | 1.0 | %
Certificates of deposit insured by CDARS® |  | 0.1 | % |  | 0.2 | % |  | 0.2 | % |  | 0.2 | % |  | 0.2 | %
Brokered certificates of deposit |  | 0.1 | % |  | 0.1 | % |  | 0.1 | % |  | 0.2 | % |  | 0.4 | %
Reciprocal money market accounts |  | 4.2 | % |  | 3.4 | % |  | 2.8 | % |  | 2.6 | % |  | 2.7 | %
Total |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

17

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  |  |  |  |  | Three Months Ended |  |  |  |
|  | June 30, 2020 |  |  |  |  |  | June 30, 2019 |  |  |  |
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands) |  |  |  |  |  |  |  |  |  |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,546,099 |  |  | $ | 106,737 |  |  | 4.50 | % |  | $ | 8,601,819 |  |  | $ | 117,984 |  |  | 5.50 | %
Taxable securities |  | 3,189,805 |  |  | 18,343 |  |  | 2.31 | % |  | 2,506,672 |  |  | 15,918 |  |  | 2.55 | %
Tax exempt securities (2) |  | 401,888 |  |  | 2,857 |  |  | 2.86 | % |  | 463,077 |  |  | 3,433 |  |  | 2.97 | %
Interest-earning deposits with banks |  | 519,927 |  |  | 136 |  |  | 0.11 | % |  | 35,159 |  |  | 207 |  |  | 2.36 | %
Total interest-earning assets |  | 13,657,719 |  |  | 128,073 |  |  | 3.77 | % |  | 11,606,727 |  |  | 137,542 |  |  | 4.75 | %
Other earning assets |  | 234,019 |  |  |  |  |  |  | 233,273 |  |  |  |  |
Noninterest-earning assets |  | 1,256,750 |  |  |  |  |  |  | 1,256,413 |  |  |  |  |
Total assets |  | $ | 15,148,488 |  |  |  |  |  |  | $ | 13,096,413 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts (3) |  | $ | 2,939,657 |  |  | $ | 974 |  |  | 0.13 | % |  | $ | 2,539,757 |  |  | $ | 2,896 |  |  | 0.46 | %
Interest-bearing demand (3) |  | 1,213,182 |  |  | 339 |  |  | 0.11 | % |  | 1,066,876 |  |  | 428 |  |  | 0.16 | %
Savings accounts (3) |  | 976,785 |  |  | 38 |  |  | 0.02 | % |  | 891,341 |  |  | 43 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit (3) |  | 559,256 |  |  | 393 |  |  | 0.28 | % |  | 273,387 |  |  | 1,023 |  |  | 1.50 | %
Certificates of deposit |  | 348,227 |  |  | 350 |  |  | 0.40 | % |  | 403,514 |  |  | 586 |  |  | 0.58 | %
Total interest-bearing deposits |  | 6,037,107 |  |  | 2,094 |  |  | 0.14 | % |  | 5,174,875 |  |  | 4,976 |  |  | 0.39 | %
FHLB advances and FRB borrowings |  | 407,035 |  |  | 1,796 |  |  | 1.77 | % |  | 602,041 |  |  | 4,708 |  |  | 3.14 | %
Subordinated debentures |  | 35,207 |  |  | 468 |  |  | 5.35 | % |  | 35,392 |  |  | 468 |  |  | 5.30 | %
Other borrowings and interest-bearing liabilities |  | 34,663 |  |  | 23 |  |  | 0.27 | % |  | 29,117 |  |  | 154 |  |  | 2.12 | %
Total interest-bearing liabilities |  | 6,514,012 |  |  | 4,381 |  |  | 0.27 | % |  | 5,841,425 |  |  | 10,306 |  |  | 0.71 | %
Noninterest-bearing deposits |  | 6,183,308 |  |  |  |  |  |  | 5,011,496 |  |  |  |  |
Other noninterest-bearing liabilities |  | 196,819 |  |  |  |  |  |  | 147,335 |  |  |  |  |
Shareholders’ equity |  | 2,254,349 |  |  |  |  |  |  | 2,096,157 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 15,148,488 |  |  |  |  |  |  | $ | 13,096,413 |  |  |  |  |
Net interest income (tax equivalent) |  |  |  | $ | 123,692 |  |  |  |  |  |  | $ | 127,236 |  |  |
Net interest margin (tax equivalent) |  |  |  |  |  | 3.64 | % |  |  |  |  |  | 4.40 | %

__________
(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 $5.1 million and $2.1 million for the three months ended June 30, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.7 million and $2.7 million for the three months ended June 30, 2020 and 2019, respectively.
(2)Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.2 million and $1.4 million for the three months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $721 thousand for the three months ended June 30, 2020 and 2019, respectively.
(3)Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.
18

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  |  |  |  |  | Three Months Ended |  |  |  |
|  | June 30, 2020 |  |  |  |  |  | March 31, 2020 |  |  |  |
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands) |  |  |  |  |  |  |  |  |  |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,546,099 |  |  | $ | 106,737 |  |  | 4.50 | % |  | $ | 8,815,755 |  |  | $ | 108,665 |  |  | 4.96 | %
Taxable securities |  | 3,189,805 |  |  | 18,343 |  |  | 2.31 | % |  | 3,209,110 |  |  | 21,088 |  |  | 2.64 | %
Tax exempt securities (2) |  | 401,888 |  |  | 2,857 |  |  | 2.86 | % |  | 409,457 |  |  | 2,914 |  |  | 2.86 | %
Interest-earning deposits with banks |  | 519,927 |  |  | 136 |  |  | 0.11 | % |  | 53,228 |  |  | 141 |  |  | 1.07 | %
Total interest-earning assets |  | 13,657,719 |  |  | 128,073 |  |  | 3.77 | % |  | 12,487,550 |  |  | 132,808 |  |  | 4.28 | %
Other earning assets |  | 234,019 |  |  |  |  |  |  | 232,361 |  |  |  |  |
Noninterest-earning assets |  | 1,256,750 |  |  |  |  |  |  | 1,275,721 |  |  |  |  |
Total assets |  | $ | 15,148,488 |  |  |  |  |  |  | $ | 13,995,632 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts |  | $ | 2,939,657 |  |  | $ | 974 |  |  | 0.13 | % |  | $ | 2,633,931 |  |  | $ | 1,728 |  |  | 0.26 | %
Interest-bearing demand |  | 1,213,182 |  |  | 339 |  |  | 0.11 | % |  | 1,125,691 |  |  | 484 |  |  | 0.17 | %
Savings accounts |  | 976,785 |  |  | 38 |  |  | 0.02 | % |  | 897,276 |  |  | 43 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit |  | 559,256 |  |  | 393 |  |  | 0.28 | % |  | 355,401 |  |  | 903 |  |  | 1.02 | %
Certificates of deposit |  | 348,227 |  |  | 350 |  |  | 0.40 | % |  | 370,904 |  |  | 484 |  |  | 0.52 | %
Total interest-bearing deposits |  | 6,037,107 |  |  | 2,094 |  |  | 0.14 | % |  | 5,383,203 |  |  | 3,642 |  |  | 0.27 | %
FHLB advances and FRB borrowings |  | 407,035 |  |  | 1,796 |  |  | 1.77 | % |  | 909,110 |  |  | 4,229 |  |  | 1.87 | %
Subordinated debentures |  | 35,207 |  |  | 468 |  |  | 5.35 | % |  | 35,253 |  |  | 468 |  |  | 5.34 | %
Other borrowings and interest-bearing liabilities |  | 34,663 |  |  | 23 |  |  | 0.27 | % |  | 48,365 |  |  | 136 |  |  | 1.13 | %
Total interest-bearing liabilities |  | 6,514,012 |  |  | 4,381 |  |  | 0.27 | % |  | 6,375,931 |  |  | 8,475 |  |  | 0.53 | %
Noninterest-bearing deposits |  | 6,183,308 |  |  |  |  |  |  | 5,239,176 |  |  |  |  |
Other noninterest-bearing liabilities |  | 196,819 |  |  |  |  |  |  | 187,474 |  |  |  |  |
Shareholders’ equity |  | 2,254,349 |  |  |  |  |  |  | 2,193,051 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 15,148,488 |  |  |  |  |  |  | $ | 13,995,632 |  |  |  |  |
Net interest income (tax equivalent) |  |  |  | $ | 123,692 |  |  |  |  |  |  | $ | 124,333 |  |  |
Net interest margin (tax equivalent) |  |  |  |  |  | 3.64 | % |  |  |  |  |  | 4.00 | %

__________
(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 $5.1 million and $2.4 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The incremental accretion on acquired loans was $1.7 million and $1.5 million for the three months ended June 30, 2020 and March 31, 2020, respectively.
(2)Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $1.2 million and $1.3 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $612 thousand for the three months ended June 30, 2020 and March 31, 2020, respectively.
19

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Six Months Ended |  |  |  |  |  | Six Months Ended |  |  |  |
|  | June 30, 2020 |  |  |  |  |  | June 30, 2019 |  |  |  |
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands) |  |  |  |  |  |  |  |  |  |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,180,927 |  |  | $ | 215,402 |  |  | 4.72 | % |  | $ | 8,504,781 |  |  | $ | 227,699 |  |  | 5.40 | %
Taxable securities |  | 3,199,458 |  |  | 39,431 |  |  | 2.48 | % |  | 2,571,692 |  |  | 33,333 |  |  | 2.61 | %
Tax exempt securities (2) |  | 405,673 |  |  | 5,771 |  |  | 2.86 | % |  | 482,812 |  |  | 7,191 |  |  | 3.00 | %
Interest-earning deposits with banks |  | 286,577 |  |  | 277 |  |  | 0.19 | % |  | 25,016 |  |  | 295 |  |  | 2.38 | %
Total interest-earning assets |  | 13,072,635 |  |  | $ | 260,881 |  |  | 4.01 | % |  | 11,584,301 |  |  | $ | 268,518 |  |  | 4.67 | %
Other earning assets |  | 233,190 |  |  |  |  |  |  | 232,678 |  |  |  |  |
Noninterest-earning assets |  | 1,266,235 |  |  |  |  |  |  | 1,255,381 |  |  |  |  |
Total assets |  | $ | 14,572,060 |  |  |  |  |  |  | $ | 13,072,360 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Money market accounts (3) |  | $ | 2,786,794 |  |  | $ | 2,702 |  |  | 0.19 | % |  | $ | 2,562,742 |  |  | $ | 5,481 |  |  | 0.43 | %
Interest-bearing demand (3) |  | 1,169,436 |  |  | 823 |  |  | 0.14 | % |  | 1,070,715 |  |  | 792 |  |  | 0.15 | %
Savings accounts (3) |  | 937,030 |  |  | 81 |  |  | 0.02 | % |  | 893,913 |  |  | 86 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit (4) |  | 457,328 |  |  | 1,296 |  |  | 0.57 | % |  | 268,105 |  |  | 1,953 |  |  | 1.47 | %
Certificates of deposit |  | 359,567 |  |  | 834 |  |  | 0.47 | % |  | 405,018 |  |  | 1,162 |  |  | 0.58 | %
Total interest-bearing deposits |  | 5,710,155 |  |  | 5,736 |  |  | 0.20 | % |  | 5,200,493 |  |  | 9,474 |  |  | 0.37 | %
FHLB advances and FRB borrowings |  | 658,072 |  |  | 6,025 |  |  | 1.84 | % |  | 551,018 |  |  | 7,393 |  |  | 2.71 | %
Subordinated debentures |  | 35,230 |  |  | 936 |  |  | 5.34 | % |  | 35,415 |  |  | 936 |  |  | 5.33 | %
Other borrowings and interest-bearing liabilities |  | 41,514 |  |  | 159 |  |  | 0.77 | % |  | 35,375 |  |  | 369 |  |  | 2.10 | %
Total interest-bearing liabilities |  | 6,444,971 |  |  | $ | 12,856 |  |  | 0.40 | % |  | 5,822,301 |  |  | $ | 18,172 |  |  | 0.63 | %
Noninterest-bearing deposits |  | 5,711,242 |  |  |  |  |  |  | 5,027,966 |  |  |  |  |
Other noninterest-bearing liabilities |  | 192,147 |  |  |  |  |  |  | 151,457 |  |  |  |  |
Shareholders’ equity |  | 2,223,700 |  |  |  |  |  |  | 2,070,636 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 14,572,060 |  |  |  |  |  |  | $ | 13,072,360 |  |  |  |  |
Net interest income (tax equivalent) |  |  |  | $ | 248,025 |  |  |  |  |  |  | $ | 250,346 |  |  |
Net interest margin (tax equivalent) |  |  |  |  |  | 3.82 | % |  |  |  |  |  | 4.36 | %

__________
(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 $7.5 million and $4.3 million for the six months ended June 30, 2020 and 2019, respectively. The incremental accretion on acquired loans was $3.2 million and $4.7 million for the six months ended June 30, 2020 and 2019, respectively.
(2)Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $2.5 million and $2.7 million for the six months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.2 million and $1.5 million for the six months ended June 30, 2020 and 2019, respectively.
(3)Beginning July 2019, interest-bearing public funds, other than certificates of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.
20

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 them. 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 (tax equivalent) and operating efficiency ratio:

|  | Three Months Ended |  |  |  |  |  | Six Months Ended |  |
|  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Operating net interest margin non-GAAP reconciliation: |  | (dollars in thousands) |  |  |  |  |  |  |  |
Net interest income (tax equivalent) (1) |  | $ | 123,692 |  |  | $ | 124,333 |  |  | $ | 127,236 |  |  | $ | 248,025 |  |  | $ | 250,346 |
Adjustments to arrive at operating net interest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Incremental accretion income on acquired loans (2) |  | (1,675) |  |  | (1,491) |  |  | (2,663) |  |  | (3,166) |  |  | (4,698) |
Premium amortization on acquired securities |  | 975 |  |  | 1,127 |  |  | 1,651 |  |  | 2,102 |  |  | 3,430 |
Interest reversals on nonaccrual loans |  | 673 |  |  | 788 |  |  | 662 |  |  | 1,461 |  |  | 1,288 |
Operating net interest income (tax equivalent) (1) |  | $ | 123,665 |  |  | $ | 124,757 |  |  | $ | 126,886 |  |  | $ | 248,422 |  |  | $ | 250,366 |
Average interest earning assets |  | $ | 13,657,719 |  |  | $ | 12,487,550 |  |  | $ | 11,606,727 |  |  | $ | 13,072,635 |  |  | $ | 11,584,301 |
Net interest margin (tax equivalent) (1) |  | 3.64 | % |  | 4.00 | % |  | 4.40 | % |  | 3.82 | % |  | 4.36 | %
Operating net interest margin (tax equivalent) (1) |  | 3.64 | % |  | 4.02 | % |  | 4.38 | % |  | 3.82 | % |  | 4.36 | %

|  | Three Months Ended |  |  |  |  |  | Six Months Ended |  |
|  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Operating efficiency ratio non-GAAP reconciliation: |  | (dollars in thousands) |  |  |  |  |  |  |  |
Noninterest expense (numerator A) |  | $ | 80,833 |  |  | $ | 84,271 |  |  | $ | 86,728 |  |  | $ | 165,104 |  |  | $ | 171,428 |
Adjustments to arrive at operating noninterest expense: |  |  |  |  |  |  |  |  |  |
Net benefit (cost) of operation of OREO and OPPO |  | 200 |  |  | (4) |  |  | 705 |  |  | 196 |  |  | 591 |
Loss on asset disposals |  | (220) |  |  | (4) |  |  | — |  |  | (224) |  |  | — |
Business and Occupation (“B&O”) taxes |  | (1,244) |  |  | (624) |  |  | (1,411) |  |  | (1,868) |  |  | (3,287) |
Operating noninterest expense (numerator B) |  | $ | 79,569 |  |  | $ | 83,639 |  |  | $ | 86,022 |  |  | $ | 163,208 |  |  | $ | 168,732 |
Net interest income (tax equivalent) (1) |  | $ | 123,692 |  |  | $ | 124,333 |  |  | $ | 127,236 |  |  | $ | 248,025 |  |  | $ | 250,346 |
Noninterest income |  | 37,259 |  |  | 21,207 |  |  | 25,648 |  |  | 58,466 |  |  | 47,344 |
Bank owned life insurance tax equivalent adjustment |  | 430 |  |  | 424 |  |  | 424 |  |  | 854 |  |  | 828 |
Total revenue (tax equivalent) (denominator A) |  | $ | 161,381 |  |  | $ | 145,964 |  |  | $ | 153,308 |  |  | $ | 307,345 |  |  | $ | 298,518 |
Operating net interest income (tax equivalent) (1) |  | $ | 123,665 |  |  | $ | 124,757 |  |  | $ | 126,886 |  |  | $ | 248,422 |  |  | $ | 250,366 |
Adjustments to arrive at operating noninterest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Investment securities loss (gain), net |  | (16,425) |  |  | (249) |  |  | (285) |  |  | (16,674) |  |  | (2,132) |
Gain on asset disposals |  | (26) |  |  | (21) |  |  | — |  |  | (47) |  |  | — |
Operating noninterest income (tax equivalent) |  | 21,238 |  |  | 21,361 |  |  | 25,787 |  |  | 42,599 |  |  | 46,040 |
Total operating revenue (tax equivalent) (denominator B) |  | $ | 144,903 |  |  | $ | 146,118 |  |  | $ | 152,673 |  |  | $ | 291,021 |  |  | $ | 296,406 |
Efficiency ratio (tax equivalent) (numerator A/denominator A) |  | 50.09 | % |  | 57.73 | % |  | 56.57 | % |  | 53.72 | % |  | 57.43 | %
Operating efficiency ratio (tax equivalent) (numerator B/denominator B) |  | 54.91 | % |  | 57.24 | % |  | 56.34 | % |  | 56.08 | % |  | 56.93 | %

__________
(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 $1.8 million, $1.9 million, and $2.1 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively, and $3.8 million and $4.2 million for the six months ended June 30, 2020 and 2019, respectively.
(2) Beginning January 2020, incremental accretion income on purchased credit impaired loans is no longer presented separate from incremental accretion income on other acquired loans. Prior period amounts have been reclassified to conform with current period presentation.
21

Non-GAAP Financial Measures - Continued
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 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 |  |  |  |  |  | Six Months Ended |  |
|  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Pre-tax, pre-provision income: |  | (in thousands) |  |  |  |  |  |  |  |
Income before income taxes |  | $ | 44,777 |  |  | $ | 17,858 |  |  | $ | 63,818 |  |  | $ | 62,635 |  |  | $ | 120,474 |
Provision for credit losses |  | 33,500 |  |  | 41,500 |  |  | 218 |  |  | 75,000 |  |  | 1,580 |
Pre-tax, pre-provision income |  | $ | 78,277 |  |  | $ | 59,358 |  |  | $ | 64,036 |  |  | $ | 137,635 |  |  | $ | 122,054 |

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

|  | June 30, |  | March 31, |  | June 30,
|  | 2020 |  | 2020 |  | 2019
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) |  | $ | 2,276,755 |  |  | $ | 2,213,602 |  |  | $ | 2,133,638 |
Adjustments to arrive at tangible common equity: |  |  |  |  |  |
Goodwill |  | (765,842) |  |  | (765,842) |  |  | (765,842) |
Other intangible assets, net |  | (30,938) |  |  | (33,148) |  |  | (40,540) |
Tangible common equity (numerator B) |  | $ | 1,479,975 |  |  | $ | 1,414,612 |  |  | $ | 1,327,256 |
Total assets (denominator A) |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 13,090,808 |
Adjustments to arrive at tangible assets: |  |  |  |  |  |
Goodwill |  | (765,842) |  |  | (765,842) |  |  | (765,842) |
Other intangible assets, net |  | (30,938) |  |  | (33,148) |  |  | (40,540) |
Tangible assets (denominator B) |  | $ | 15,124,164 |  |  | $ | 13,239,513 |  |  | $ | 12,284,426 |
Shareholders’ equity to total assets (numerator A/denominator A) |  | 14.30 | % |  | 15.77 | % |  | 16.30 | %
Tangible common shareholders’ equity to tangible assets (numerator B/denominator B) |  | 9.79 | % |  | 10.68 | % |  | 10.80 | %
Common shares outstanding (denominator C) |  | 71,586 |  |  | 71,575 |  |  | 72,924 |
Book value per common share (numerator A/denominator C) |  | $ | 31.80 |  |  | $ | 30.93 |  |  | $ | 29.26 |
Tangible book value per common share (numerator B/denominator C) |  | $ | 20.67 |  |  | $ | 19.76 |  |  | $ | 18.20 |

22

Non-GAAP Financial Measures - Continued
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 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:

|  | June 30, |  | March 31, |  | June 30,
|  | 2020 |  | 2020 |  | 2019
Allowance for credit losses to period-end loans ratio non-GAAP reconciliation: |  | (dollars in thousands) |  |  |  |
Allowance for credit losses ("ACL") (numerator) |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 80,517 |
Total loans, net of unearned income (denominator A) |  | 9,771,898 |  |  | 8,933,321 |  |  | 8,646,990 |
Less: PPP loans, net of unearned income (0% ACL) |  | 941,373 |  |  | — |  |  | — |
Total loans, net of PPP loans (denominator B) |  | $ | 8,830,525 |  |  | $ | 8,933,321 |  |  | $ | 8,646,990 |
ACL to period-end loans (numerator / denominator A) |  | 1.55 | % |  | 1.37 | % |  | 0.93 | %
ACL to period-end loans, excluding PPP loans (numerator / denominator B) |  | 1.72 | % |  | 1.37 | % |  | 0.93 | %

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

|  | Three Months Ended |  |  |  |  |  | Six Months Ended |  |
|  | June 30, |  | March 31, |  | June 30, |  | June 30, |  | June 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Return on average tangible common equity non-GAAP reconciliation: |  | (dollars in thousands) |  |  |  |  |  |  |  |
Net income (numerator A) |  | $ | 36,582 |  |  | $ | 14,628 |  |  | $ | 51,724 |  |  | $ | 51,210 |  |  | $ | 97,595 |
Adjustments to arrive at tangible income applicable to common shareholders: |  |  |  |  |  |  |  |  |  |
Amortization of intangibles |  | 2,210 |  |  | 2,310 |  |  | 2,649 |  |  | 4,520 |  |  | 5,397 |
Tax effect on intangible amortization |  | (464) |  |  | (485) |  |  | (556) |  |  | (949) |  |  | (1,133) |
Tangible income applicable to common shareholders (numerator B) |  | $ | 38,328 |  |  | $ | 16,453 |  |  | $ | 53,817 |  |  | 54,781 |  |  | $ | 101,859 |
Average shareholders’ equity (denominator A) |  | $ | 2,254,349 |  |  | $ | 2,193,051 |  |  | $ | 2,096,157 |  |  | 2,223,700 |  |  | $ | 2,070,636 |
Adjustments to arrive at average tangible common equity: |  |  |  |  |  |  |  |  |  |
Average intangibles |  | (797,855) |  |  | (800,079) |  |  | (807,678) |  |  | (798,967) |  |  | (809,020) |
Average tangible common equity (denominator B) |  | $ | 1,456,494 |  |  | $ | 1,392,972 |  |  | $ | 1,288,479 |  |  | $ | 1,424,733 |  |  | $ | 1,261,616 |
Return on average common equity (numerator A/denominator A) (1) |  | 6.49 | % |  | 2.67 | % |  | 9.87 | % |  | 4.61 | % |  | 9.43 | %
Return on average tangible common equity (numerator B/denominator B) (2) |  | 10.53 | % |  | 4.72 | % |  | 16.71 | % |  | 7.69 | % |  | 16.15 | %

__________
(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.
23