EX-99.1 2 a991colb3q2020earnings.htm PRESS RELEASE - EARNINGS AND DIVIDEND
Exhibit 99.1
FOR IMMEDIATE RELEASE
October 29, 2020
Columbia Banking System Announces Third Quarter 2020 Results
and Quarterly Cash Dividend
Notable Items for Third Quarter 2020
•Quarterly net income of $44.7 million and diluted earnings per share of $0.63
•Net loans decreased $83.0 million during the third quarter of 2020
•Deposits increased $468.8 million, or 4% during the third quarter of 2020
•Net interest margin of 3.47%, a decrease of 17 basis points from the linked quarter
•Nonperforming assets to period-end assets ratio decreased 5 basis points to 0.29%
•Loan balances subject to deferral down 93% from June 30, 2020
•Regular cash dividend declared of $0.28 per share
TACOMA, Washington, October 29, 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 third quarter 2020 earnings, “I’m extremely proud of our bankers’ commitment to our clients and communities as we push through the lingering effects of COVID-19. We continued to experience strong deposit growth during the quarter, helped by our normal seasonal inflows. Loan growth was challenged by soft borrower demand coupled with lower line utilization. Even so, earnings were supplemented as more excess liquidity was deployed into investment securities.” Mr. Stein continued, “In addition, solid performance in our mortgage lending group and improved card transaction volumes, boosted our noninterest income.”
1

Balance Sheet
Total assets at September 30, 2020 were $16.23 billion, an increase of $312.5 million from the linked quarter. Loans were $9.69 billion, down $83.0 million from June 30, 2020 as loan originations of $279.0 million were more than offset by loan payments and a decrease in loan utilization. Included in the loan originations for the quarter were $9.4 million of loans originated under the Paycheck Protection Program (“PPP”). Interest-earning deposits with banks were $736.4 million, a decrease of $143.8 million from the linked quarter. Debt securities available for sale were $4.28 billion at September 30, 2020, an increase of $587.9 million from $3.69 billion at June 30, 2020. Total deposits at September 30, 2020 were $13.60 billion, an increase of $468.8 million from June 30, 2020 largely due to an increase of $291.2 million in interest-bearing deposits. The deposit mix remained fairly consistent from June 30, 2020 with 51% noninterest-bearing and 49% interest-bearing. The average cost of total deposits for the quarter was 6 basis points, a decrease of 1 basis point from the second 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, “As the “shelter-in-place” orders were relaxed during the quarter, our small business clients returned to a new normal for their business operations. Encouragingly, despite the ongoing challenges, most business owners have an optimistic outlook, which was reflected in an uptick in loan origination activity during the last few months.”
2

Income Statement
Net Interest Income
Net interest income for the third quarter of 2020 was $124.7 million, an increase of $2.9 million and $2.3 million from the linked-quarter and the prior-year period, respectively. The increase in net interest income from the linked quarter was primarily due to lower interest expense on Federal Home Loan Bank (“FHLB”) advances as a result of a $352.9 million decrease in the average balance of FHLB advances during the third quarter of 2020. In addition, an increase in the average balance of taxable securities, partially offset by a decline in rates, also contributed to the rise in net interest income compared to the linked quarter. Net interest income compared to the prior-year period increased primarily as a result of a reduction in interest expense on deposits and FHLB advances partially offset by a decline in interest income on interest-earning assets. The reduction in deposit interest expense was due to the lower interest rate environment while the reduction in interest expense on FHLB advances was principally due to lower average balances of advances. Interest income from securities increased principally due to higher average balances. Partially offsetting these favorable changes to net interest income was a decline in loan interest income due to the lower rate environment. 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 third quarter of 2020 was $7.4 million compared to $33.5 million for the linked quarter and $299 thousand for the comparable quarter in 2019. The provision for credit losses for the third quarter of 2020 compared to the linked quarter declined due to an improved economic forecast but remained elevated relative to the prior year principally as a result of COVID-19 and the 2020 downturn in the national and global economies. For more information, please see the “COVID-19 Update” section of this earnings release.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “For the quarter, our credit metrics remained very stable by almost all measures. We are pleased that our thesis on deferrals in the professional healthcare space is playing out as we expected. In addition, the provision for credit losses for the quarter was modest compared to the prior two quarters reflecting our efforts earlier this year to quickly address the challenges the pandemic presented. In this regard, we remain cautious as we head into the winter season and gain distance from the positive effects of earlier fiscal stimulus and loan deferrals.”
3

Noninterest Income
Noninterest income was $22.5 million for the third quarter of 2020, a decrease of $14.8 million from the linked quarter and $5.6 million from the third quarter of 2019. The decrease compared to the linked quarter was principally due to the sale of Visa Class B shares during the second quarter of 2020. The Bank sold 17,360 shares of Visa Class B restricted stock for a gain of $3.0 million and 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. Partially offsetting this decrease in noninterest income was an increase in mortgage banking revenue during the third quarter of 2020 primarily due to a higher volume of mortgage loans originated and sold. The decrease in noninterest income during the third quarter of 2020 compared to the same quarter in 2019 was principally due to a $5.9 million gain from the sale-leaseback of owned real estate during the third quarter of 2019. In addition, treasury management and overdraft fees decreased by $993 thousand and $921 thousand, respectively, compared to the same quarter in 2019. 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. Partially offsetting these decreases in noninterest income was an increase in mortgage banking revenue of $2.3 million compared to the prior year period for the same reason stated above for the linked-quarter comparison.
Noninterest Expense
Total noninterest expense for the third quarter of 2020 was $85.1 million, an increase of $4.3 million compared to the second quarter of 2020 principally due to higher compensation and benefits expense partially offset by decreases in other noninterest and data processing expenses. The increase in compensation and benefits expense was due to the large deferral of labor costs related to the origination of PPP loans during the second quarter of 2020. These costs are treated as a contra expense and reduced compensation and benefits expense. As the number of PPP loan originations declined during the third quarter of 2020 compared to the second quarter, the amount of deferred labor costs decreased. This increase in noninterest expense for the third quarter of 2020 was partially offset by a decrease in the provision for unfunded loan commitments of $2.0 million, which is a component of other noninterest expense. In addition, data processing expense decreased $944 thousand due to the decline in PPP loan origination activity compared to the linked quarter.
4

Compared to the third quarter of 2019, noninterest expense decreased $2.0 million principally due to legal and professional fees and advertising and promotion expenses partially offset by an increase in other noninterest expense. Legal and professional fees declined $2.7 million while advertising and promotion expenses decreased $1.1 million. Partially offsetting these decreases was a $1.2 million increase in the provision for unfunded loan commitments due to higher estimated loss rates and higher amounts of unfunded loan commitments compared to the same period in 2019.
The provision for unfunded loan commitments for the periods indicated are as follows:

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
|  | (in thousands)
Provision (recapture) for unfunded loan commitments |  | $ | 800 |  |  | $ | 2,800 |  |  | $ | (400) |  |  | $ | 4,600 |  |  | $ | (750) |

Net Interest Margin
Columbia’s net interest margin (tax equivalent) for the third quarter of 2020 was 3.47%, a decrease of 17 basis points and 67 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 10 basis points as well as lower rates on the loan and securities portfolios.
Columbia’s operating net interest margin (tax equivalent)1 was 3.46% for the third quarter of 2020, which decreased 18 and 66 basis points compared to the linked-quarter and the prior-year period, respectively. The decreases in the operating net interest margin for the third quarter of 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 for the periods indicated:

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2020
Paycheck Protection Program loans |  | (dollars in thousands)
Interest income |  | $ | 5,263 |  |  | $ | 4,590 |  |  | $ | 9,853 |
Average balance |  | $ | 948,034 |  |  | $ | 643,966 |  |  | $ | 533,702 |
Yield |  | 2.21 | % |  | 2.87 | % |  | 2.47 | %

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.
5

Aaron James Deer, Columbia’s Executive Vice President and Chief Financial Officer, stated, “The net interest margin remained under pressure during the quarter, as ultra-low interest rates and the flat yield curve continued to weigh on asset yields. Notwithstanding some upcoming benefit from PPP forgiveness, this margin pressure is likely to remain a headwind to net interest income given the current rate outlook.”
Asset Quality
At September 30, 2020, nonperforming assets to total assets decreased to 0.29% compared to 0.34% at June 30, 2020. Total nonperforming assets decreased $6.6 million from the linked quarter due to decreases in agriculture and commercial business nonaccrual loans.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:

|  | September 30, 2020 |  | June 30, 2020 |  | December 31, 2019
|  | (in thousands)
Nonaccrual loans: |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |
Commercial real estate |  | $ | 10,362 |  |  | $ | 11,155 |  |  | $ | 3,799 |
Commercial business |  | 19,313 |  |  | 20,525 |  |  | 20,937 |
Agriculture |  | 14,913 |  |  | 19,162 |  |  | 5,023 |
Construction |  | 217 |  |  | 217 |  |  | — |
Consumer loans: |  |  |  |  |  |
One-to-four family residential real estate |  | 2,405 |  |  | 2,662 |  |  | 3,292 |
Other consumer |  | 21 |  |  | 11 |  |  | 9 |
Total nonaccrual loans |  | 47,231 |  |  | 53,732 |  |  | 33,060 |
OREO and other personal property owned |  | 623 |  |  | 747 |  |  | 552 |
Total nonperforming assets |  | $ | 47,854 |  |  | $ | 54,479 |  |  | $ | 33,612 |

Nonperforming assets to total assets was 0.29% at September 30, 2020 compared to 0.34% at June 30, 2020. Nonperforming assets to total loans was 0.49% at September 30, 2020 compared to 0.55% at June 30, 2020.
6

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

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, 2020 |  | June 30, 2020 |  | September 30, 2019 |  | September 30, 2020 |  | September 30, 2019
|  | (in thousands)
Beginning balance |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 80,517 |  |  | $ | 83,968 |  |  | $ | 83,369 |
Impact of adopting ASC 326 |  | — |  |  | — |  |  | — |  |  | 1,632 |  |  | — |
Charge-offs: |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | — |  |  | — |  |  | (466) |  |  | (101) |  |  | (1,708) |
Commercial business |  | (3,164) |  |  | (5,442) |  |  | (2,623) |  |  | (10,290) |  |  | (8,445) |
Agriculture |  | (1,269) |  |  | — |  |  | (55) |  |  | (5,995) |  |  | (194) |
Construction |  | — |  |  | — |  |  | (17) |  |  | — |  |  | (232) |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | (16) |  |  | — |  |  | (202) |  |  | (26) |  |  | (1,004) |
Other consumer |  | (133) |  |  | (198) |  |  | (9) |  |  | (599) |  |  | (64) |
Total charge-offs |  | (4,582) |  |  | (5,640) |  |  | (3,372) |  |  | (17,011) |  |  | (11,647) |
Recoveries: |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | 65 |  |  | 13 |  |  | 1,731 |  |  | 92 |  |  | 2,801 |
Commercial business |  | 1,124 |  |  | 811 |  |  | 349 |  |  | 2,795 |  |  | 1,368 |
Agriculture |  | 27 |  |  | 1 |  |  | 67 |  |  | 69 |  |  | 189 |
Construction |  | 11 |  |  | 235 |  |  | 2,555 |  |  | 688 |  |  | 3,329 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 1,301 |  |  | 422 |  |  | 440 |  |  | 2,005 |  |  | 1,224 |
Other consumer |  | 76 |  |  | 130 |  |  | 74 |  |  | 330 |  |  | 148 |
Total recoveries |  | 2,604 |  |  | 1,612 |  |  | 5,216 |  |  | 5,979 |  |  | 9,059 |
Net (charge-offs) recoveries |  | (1,978) |  |  | (4,028) |  |  | 1,844 |  |  | (11,032) |  |  | (2,588) |
Provision for credit losses |  | 7,400 |  |  | 33,500 |  |  | 299 |  |  | 82,400 |  |  | 1,879 |
Ending balance |  | $ | 156,968 |  |  | $ | 151,546 |  |  | $ | 82,660 |  |  | $ | 156,968 |  |  | $ | 82,660 |

The allowance for credit losses to period-end loans was 1.62% at September 30, 2020 co mpared to 1.55% at June 30, 2020. Excluding PPP loans, the allowance for credit losses to period-end loans 2 was 1.80% at September 30, 2020 compared to 1.72% at June 30, 2020.
Loan Deferrals
The following table shows the loan balances subject to a deferral for the periods indicated:

|  | September 30, 2020 |  | June 30, 2020
|  | (in thousands)
Loan balances subject to deferral |  | $ | 114,372 |  |  | $ | 1,595,615 |

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.
7

Organizational Update
COVID-19 Update
We continue to monitor the spread of COVID-19 in our communities and adapt to changes in guidance from local healthcare officials. The measures we have taken to provide a safe environment for our team members and clients have been effective.
Branch lobbies across the footprint have remained open for standard business hours to serve clients throughout the quarter. The diligence of our team members and their commitment to the safety of their colleagues and clients has minimized the risk of spread in our facilities and helped us keep operating with minimal disruption.
Throughout the summer our leaders prepared to support team members with school-aged children returning to distanced learning programs. These adjustments have afforded many team members the support needed to help ease the pressures of distanced learning requirements. Responding to these temporary challenges with a variety of flexible options while upholding client service standards has also allowed us to retain existing talent.
Our participation in the Small Business Administration’s (“SBA”) Paycheck Protection Program has entered a new phase as clients began submitting requests for loan forgiveness. We began processing requests as soon as the SBA formally opened their portal. As of October 26th, we have taken over 1,400 applications and approved/submitted nearly 850 of those to the SBA for more than $220.0 million.
Northwest Wildfire Response
The devastating wildfires that swept across Washington and Oregon this summer resulted in significant damage to Northwest forests and neighboring communities. Even those communities spared the devastation of the fires were met with disruption related to weeks of poor air quality. To support recovery efforts, Columbia Bank has donated $25,000 to the Red Cross Northwest Wildfire Relief Fund. In addition, the employee led non-profit Columbia Cares will provide small grants to Northwest families and individuals who have been impacted by the wildfires.
“Our communities have demonstrated tremendous resilience in the face of great challenges this year,” noted Mr. Stein. “We are pleased to support the effort to recover and rebuild through the Red Cross fund and our employee-led Columbia Cares organization.”
8

Boise NeighborHub
Columbia opened its first retail location in downtown Boise, Idaho on September 28, 2020. The Boise NeighborHub combines client-focused technology and the elevated skill set of a banker with universal sales and support expertise. The opening marks the second location of the bank’s signature NeighborHub concept, which serves the broader community as a hub for educational seminars, local events and community functions in addition to traditional banking and financial services.
“We are delighted to announce the opening of our Boise NeighborHub,” said Chris Merrywell, Executive Vice President and Chief Operating Officer. “Combined with our existing commercial and healthcare banking teams, the new location allows us to offer Boise clients access to our full suite of business, consumer and wealth management solutions.”
Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.28 per common share on November 25, 2020 to shareholders of record as of the close of business on November 11, 2020.
Common Stock Share Repurchase Program
Columbia Banking System’s board of directors has authorized a share repurchase program which permits the repurchase of up to 3.5 million shares, or approximately 5%, of the Company’s outstanding common stock. Repurchases will be made at management’s discretion. “Columbia is committed to driving long term shareholder value and we believe that having a share repurchase program as part of our capital strategy increases the options we have available to achieve this goal,” said Clint Stein, President and Chief Executive Officer.
Interest Rate Collar
Subsequent to quarter end, in October 2020, we terminated our $500 million notional interest rate collar. This termination locked in the $34.9 million value of the interest rate collar and this amount, net of deferred income taxes, will be amortized into interest income through February 2024.
9

Conference Call Information
Columbia’s management will discuss the third quarter 2020 financial results on a conference call scheduled for Thursday, October 29, 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=181
The conference call can also be accessed on Thursday, October 29, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID: 2282428.
A replay of the call can be accessed beginning Friday, October 30, 2020 using the site:
https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=181
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 James 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 |  |  |  |  |  |  | September 30, |  | June 30, |  | December 31,
|  |  |  |  |  |  | 2020 |  | 2020 |  | 2019
|  |  |  |  |  |  | (in thousands)
ASSETS |  |  |  |
Cash and due from banks |  |  |  |  |  |  | $ | 193,823 |  |  | $ | 217,461 |  |  | $ | 223,541 |
Interest-earning deposits with banks |  |  |  |  |  |  | 736,422 |  |  | 880,232 |  |  | 24,132 |
Total cash and cash equivalents |  |  |  |  |  |  | 930,245 |  |  | 1,097,693 |  |  | 247,673 |
Debt securities available for sale at fair value (amortized cost of $4,081,118, $3,491,307 and $3,703,096, respectively) |  | 4,281,720 |  |  | 3,693,787 |  |  | 3,746,142 |
Equity securities |  |  |  |  |  |  | 13,425 |  |  | 13,425 |  |  | — |
Federal Home Loan Bank (“FHLB”) stock at cost |  |  |  |  |  | 10,280 |  |  | 16,280 |  |  | 48,120 |
Loans held for sale |  |  |  |  |  |  | 24,407 |  |  | 28,803 |  |  | 17,718 |
Loans, net of unearned income |  |  |  |  |  |  | 9,688,947 |  |  | 9,771,898 |  |  | 8,743,465 |
Less: Allowance for credit losses |  |  |  |  |  | 156,968 |  |  | 151,546 |  |  | 83,968 |
Loans, net |  |  |  |  |  |  | 9,531,979 |  |  | 9,620,352 |  |  | 8,659,497 |
Interest receivable |  |  |  |  |  |  | 56,718 |  |  | 59,149 |  |  | 46,839 |
Premises and equipment, net |  |  |  |  |  |  | 164,049 |  |  | 164,362 |  |  | 165,408 |
Other real estate owned |  |  |  |  |  |  | 623 |  |  | 747 |  |  | 552 |
Goodwill |  |  |  |  |  |  | 765,842 |  |  | 765,842 |  |  | 765,842 |
Other intangible assets, net |  |  |  |  |  |  | 28,745 |  |  | 30,938 |  |  | 35,458 |
Other assets |  |  |  |  |  |  | 425,391 |  |  | 429,566 |  |  | 346,275 |
Total assets |  |  |  |  |  |  | $ | 16,233,424 |  |  | $ | 15,920,944 |  |  | $ | 14,079,524 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  |  |  |  |  |  | $ | 6,897,054 |  |  | $ | 6,719,437 |  |  | $ | 5,328,146 |
Interest-bearing |  |  |  |  |  |  | 6,703,206 |  |  | 6,412,040 |  |  | 5,356,562 |
Total deposits |  |  |  |  |  |  | 13,600,260 |  |  | 13,131,477 |  |  | 10,684,708 |
FHLB advances |  | 7,427 |  |  | 157,441 |  |  | 953,469 |
Securities sold under agreements to repurchase |  |  |  |  |  | 26,966 |  |  | 51,479 |  |  | 64,437 |
Subordinated debentures |  |  |  |  |  |  | 35,139 |  |  | 35,185 |  |  | 35,277 |
Other liabilities |  |  |  |  |  |  | 261,651 |  |  | 268,607 |  |  | 181,671 |
Total liabilities |  |  |  |  |  |  | 13,931,443 |  |  | 13,644,189 |  |  | 11,919,562 |
Commitments and contingent liabilities |  |  |  |  |  |  |  |  |  |  |
Shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |
| September 30, |  | June 30, |  | 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 | 73,797 |  |  | 73,770 |  |  | 73,577 |  |  | 1,658,203 |  |  | 1,654,129 |  |  | 1,650,753 |
Outstanding | 71,613 |  |  | 71,586 |  |  | 72,124 |  |  |  |  |  |  |
Retained earnings |  |  |  |  |  |  | 537,011 |  |  | 512,383 |  |  | 519,676 |
Accumulated other comprehensive income |  |  |  |  |  | 177,601 |  |  | 181,077 |  |  | 40,367 |
Treasury stock at cost | 2,184 |  |  | 2,184 |  |  | 1,453 |  |  | (70,834) |  |  | (70,834) |  |  | (50,834) |
Total shareholders’ equity |  |  |  |  |  |  | 2,301,981 |  |  | 2,276,755 |  |  | 2,159,962 |
Total liabilities and shareholders’ equity |  |  |  |  |  | $ | 16,233,424 |  |  | $ | 15,920,944 |  |  | $ | 14,079,524 |

12

CONSOLIDATED STATEMENTS OF INCOME |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Nine Months Ended
Unaudited |  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Interest Income |  | (in thousands except per share amounts)
Loans |  | $ | 105,739 |  |  | $ | 105,496 |  |  | $ | 112,656 |  |  | $ | 318,601 |  |  | $ | 337,657 |
Taxable securities |  | 19,102 |  |  | 18,343 |  |  | 16,457 |  |  | 58,533 |  |  | 49,790 |
Tax-exempt securities |  | 2,340 |  |  | 2,257 |  |  | 2,556 |  |  | 6,899 |  |  | 8,237 |
Deposits in banks |  | 203 |  |  | 136 |  |  | 864 |  |  | 480 |  |  | 1,159 |
Total interest income |  | 127,384 |  |  | 126,232 |  |  | 132,533 |  |  | 384,513 |  |  | 396,843 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 2,005 |  |  | 2,094 |  |  | 6,863 |  |  | 7,741 |  |  | 16,337 |
FHLB advances and Federal Reserve Bank ("FRB") borrowings |  | 166 |  |  | 1,796 |  |  | 2,569 |  |  | 6,191 |  |  | 9,962 |
Subordinated debentures |  | 468 |  |  | 468 |  |  | 468 |  |  | 1,404 |  |  | 1,404 |
Other borrowings |  | 19 |  |  | 23 |  |  | 183 |  |  | 178 |  |  | 552 |
Total interest expense |  | 2,658 |  |  | 4,381 |  |  | 10,083 |  |  | 15,514 |  |  | 28,255 |
Net Interest Income |  | 124,726 |  |  | 121,851 |  |  | 122,450 |  |  | 368,999 |  |  | 368,588 |
Provision for credit losses |  | 7,400 |  |  | 33,500 |  |  | 299 |  |  | 82,400 |  |  | 1,879 |
Net interest income after provision for credit losses |  | 117,326 |  |  | 88,351 |  |  | 122,151 |  |  | 286,599 |  |  | 366,709 |
Noninterest Income |  |  |  |  |  |  |  |  |  |
Deposit account and treasury management fees |  | 6,658 |  |  | 6,092 |  |  | 9,015 |  |  | 20,538 |  |  | 27,030 |
Card revenue |  | 3,834 |  |  | 3,079 |  |  | 4,006 |  |  | 10,431 |  |  | 11,431 |
Financial services and trust revenue |  | 3,253 |  |  | 3,163 |  |  | 3,226 |  |  | 9,481 |  |  | 9,608 |
Loan revenue |  | 6,645 |  |  | 5,607 |  |  | 3,855 |  |  | 16,842 |  |  | 9,840 |
Bank owned life insurance |  | 1,585 |  |  | 1,618 |  |  | 1,528 |  |  | 4,799 |  |  | 4,644 |
Investment securities gains, net |  | — |  |  | 16,425 |  |  | — |  |  | 16,674 |  |  | 2,132 |
Other |  | 497 |  |  | 1,275 |  |  | 6,400 |  |  | 2,173 |  |  | 10,689 |
Total noninterest income |  | 22,472 |  |  | 37,259 |  |  | 28,030 |  |  | 80,938 |  |  | 75,374 |
Noninterest Expense |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 55,133 |  |  | 46,043 |  |  | 54,459 |  |  | 156,018 |  |  | 158,559 |
Occupancy |  | 8,734 |  |  | 8,812 |  |  | 8,645 |  |  | 26,743 |  |  | 26,166 |
Data processing |  | 4,510 |  |  | 5,454 |  |  | 5,102 |  |  | 14,804 |  |  | 14,372 |
Legal and professional fees |  | 3,000 |  |  | 3,483 |  |  | 5,683 |  |  | 8,585 |  |  | 16,810 |
Amortization of intangibles |  | 2,193 |  |  | 2,210 |  |  | 2,632 |  |  | 6,713 |  |  | 8,029 |
Business and Occupation ("B&O") taxes |  | 1,559 |  |  | 1,244 |  |  | 1,325 |  |  | 3,427 |  |  | 4,612 |
Advertising and promotion |  | 680 |  |  | 837 |  |  | 1,752 |  |  | 2,822 |  |  | 3,596 |
Regulatory premiums |  | 826 |  |  | 1,034 |  |  | (38) |  |  | 1,894 |  |  | 1,902 |
Net benefit of operation of other real estate owned |  | (160) |  |  | (200) |  |  | (90) |  |  | (348) |  |  | (682) |
Other |  | 8,640 |  |  | 11,916 |  |  | 7,606 |  |  | 29,561 |  |  | 25,140 |
Total noninterest expense |  | 85,115 |  |  | 80,833 |  |  | 87,076 |  |  | 250,219 |  |  | 258,504 |
Income before income taxes |  | 54,683 |  |  | 44,777 |  |  | 63,105 |  |  | 117,318 |  |  | 183,579 |
Provision for income taxes |  | 9,949 |  |  | 8,195 |  |  | 12,378 |  |  | 21,374 |  |  | 35,257 |
Net Income |  | $ | 44,734 |  |  | $ | 36,582 |  |  | $ | 50,727 |  |  | $ | 95,944 |  |  | $ | 148,322 |
Earnings per common share |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.70 |  |  | $ | 1.35 |  |  | $ | 2.04 |
Diluted |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.70 |  |  | $ | 1.35 |  |  | $ | 2.04 |
Dividends declared per common share - regular |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.84 |  |  | $ | 0.84 |
Dividends declared per common share - special |  | — |  |  | — |  |  | — |  |  | 0.22 |  |  | 0.28 |
Dividends declared per common share - total |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 1.06 |  |  | $ | 1.12 |
Weighted average number of common shares outstanding |  | 70,726 |  |  | 70,679 |  |  | 71,803 |  |  | 70,870 |  |  | 72,256 |
Weighted average number of diluted common shares outstanding |  | 70,762 |  |  | 70,711 |  |  | 71,803 |  |  | 70,906 |  |  | 72,257 |

13

FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Nine Months Ended
Unaudited |  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Earnings |  | (dollars in thousands except per share amounts)
Net interest income |  | $ | 124,726 |  |  | $ | 121,851 |  |  | $ | 122,450 |  |  | $ | 368,999 |  |  | $ | 368,588 |
Provision for credit losses |  | $ | 7,400 |  |  | $ | 33,500 |  |  | $ | 299 |  |  | $ | 82,400 |  |  | $ | 1,879 |
Noninterest income |  | $ | 22,472 |  |  | $ | 37,259 |  |  | $ | 28,030 |  |  | $ | 80,938 |  |  | $ | 75,374 |
Noninterest expense |  | $ | 85,115 |  |  | $ | 80,833 |  |  | $ | 87,076 |  |  | $ | 250,219 |  |  | $ | 258,504 |
Net income |  | $ | 44,734 |  |  | $ | 36,582 |  |  | $ | 50,727 |  |  | $ | 95,944 |  |  | $ | 148,322 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.70 |  |  | $ | 1.35 |  |  | $ | 2.04 |
Earnings (diluted) |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.70 |  |  | $ | 1.35 |  |  | $ | 2.04 |
Book value |  | $ | 32.14 |  |  | $ | 31.80 |  |  | $ | 29.90 |  |  | $ | 32.14 |  |  | $ | 29.90 |
Tangible book value per common share (1) |  | $ | 21.05 |  |  | $ | 20.67 |  |  | $ | 18.78 |  |  | $ | 21.05 |  |  | $ | 18.78 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 15,965,485 |  |  | $ | 15,148,488 |  |  | $ | 13,459,774 |  |  | $ | 15,039,925 |  |  | $ | 13,202,917 |
Interest-earning assets |  | $ | 14,492,435 |  |  | $ | 13,657,719 |  |  | $ | 11,941,578 |  |  | $ | 13,549,356 |  |  | $ | 11,704,702 |
Loans |  | $ | 9,744,336 |  |  | $ | 9,546,099 |  |  | $ | 8,694,592 |  |  | $ | 9,370,101 |  |  | $ | 8,568,746 |
Securities, including equity securities and FHLB stock |  | $ | 3,948,041 |  |  | $ | 3,591,693 |  |  | $ | 3,102,213 |  |  | $ | 3,720,268 |  |  | $ | 3,070,582 |
Deposits |  | $ | 13,318,485 |  |  | $ | 12,220,415 |  |  | $ | 10,668,767 |  |  | $ | 12,058,376 |  |  | $ | 10,376,841 |
Interest-bearing deposits |  | $ | 6,527,695 |  |  | $ | 6,037,107 |  |  | $ | 5,517,171 |  |  | $ | 5,984,658 |  |  | $ | 5,307,212 |
Interest-bearing liabilities |  | $ | 6,659,119 |  |  | $ | 6,514,012 |  |  | $ | 5,989,042 |  |  | $ | 6,516,874 |  |  | $ | 5,878,492 |
Noninterest-bearing deposits |  | $ | 6,790,790 |  |  | $ | 6,183,308 |  |  | $ | 5,151,596 |  |  | $ | 6,073,718 |  |  | $ | 5,069,629 |
Shareholders’ equity |  | $ | 2,293,771 |  |  | $ | 2,254,349 |  |  | $ | 2,152,916 |  |  | $ | 2,247,228 |  |  | $ | 2,098,364 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.12 | % |  | 0.97 | % |  | 1.51 | % |  | 0.85 | % |  | 1.50 | %
Return on average common equity |  | 7.80 | % |  | 6.49 | % |  | 9.42 | % |  | 5.69 | % |  | 9.42 | %
Return on average tangible common equity (1) |  | 12.41 | % |  | 10.53 | % |  | 15.67 | % |  | 9.31 | % |  | 15.98 | %
Average equity to average assets |  | 14.37 | % |  | 14.88 | % |  | 16.00 | % |  | 14.94 | % |  | 15.89 | %
Shareholders' equity to total assets |  | 14.18 | % |  | 14.30 | % |  | 15.71 | % |  | 14.18 | % |  | 15.71 | %
Tangible common shareholders’ equity to tangible assets (1) |  | 9.76 | % |  | 9.79 | % |  | 10.48 | % |  | 9.76 | % |  | 10.48 | %
Net interest margin (tax equivalent) |  | 3.47 | % |  | 3.64 | % |  | 4.14 | % |  | 3.69 | % |  | 4.28 | %
Efficiency ratio (tax equivalent) (2) |  | 56.95 | % |  | 50.09 | % |  | 56.91 | % |  | 54.78 | % |  | 57.25 | %
Operating efficiency ratio (tax equivalent) (1) |  | 56.33 | % |  | 54.91 | % |  | 58.65 | % |  | 56.16 | % |  | 57.50 | %
Noninterest expense ratio |  | 2.13 | % |  | 2.13 | % |  | 2.59 | % |  | 2.22 | % |  | 2.61 | %
|  | September 30, |  | June 30, |  | December 31, |  |  |  |
Period-end |  | 2020 |  | 2020 |  | 2019 |  |  |  |
Total assets |  | $ | 16,233,424 |  |  | $ | 15,920,944 |  |  | $ | 14,079,524 |  |  |  |  |
Loans, net of unearned income |  | $ | 9,688,947 |  |  | $ | 9,771,898 |  |  | $ | 8,743,465 |  |  |  |  |
Allowance for credit losses |  | $ | 156,968 |  |  | $ | 151,546 |  |  | $ | 83,968 |  |  |  |  |
Securities, including equity securities and FHLB stock |  | $ | 4,305,425 |  |  | $ | 3,723,492 |  |  | $ | 3,794,262 |  |  |  |  |
Deposits |  | $ | 13,600,260 |  |  | $ | 13,131,477 |  |  | $ | 10,684,708 |  |  |  |  |
Shareholders’ equity |  | $ | 2,301,981 |  |  | $ | 2,276,755 |  |  | $ | 2,159,962 |  |  |  |  |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 47,231 |  |  | $ | 53,732 |  |  | $ | 33,060 |  |  |  |  |
Other real estate owned (“OREO”) and other personal property owned (“OPPO”) |  | 623 |  |  | 747 |  |  | 552 |  |  |  |  |
Total nonperforming assets |  | $ | 47,854 |  |  | $ | 54,479 |  |  | $ | 33,612 |  |  |  |  |
Nonperforming loans to period-end loans |  | 0.49 | % |  | 0.55 | % |  | 0.38 | % |  |  |  |
Nonperforming assets to period-end assets |  | 0.29 | % |  | 0.34 | % |  | 0.24 | % |  |  |  |
Allowance for credit losses to period-end loans |  | 1.62 | % |  | 1.55 | % |  | 0.96 | % |  |  |  |
Net loan charge-offs (for the three months ended) |  | $ | 1,978 |  |  | $ | 4,028 |  |  | $ | 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 |  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
|  | 2020 |  | 2020 |  | 2020 |  | 2019 |  | 2019
Earnings |  | (dollars in thousands except per share amounts)
Net interest income |  | $ | 124,726 |  |  | $ | 121,851 |  |  | $ | 122,422 |  |  | $ | 124,817 |  |  | $ | 122,450 |
Provision for credit losses |  | $ | 7,400 |  |  | $ | 33,500 |  |  | $ | 41,500 |  |  | $ | 1,614 |  |  | $ | 299 |
Noninterest income |  | $ | 22,472 |  |  | $ | 37,259 |  |  | $ | 21,207 |  |  | $ | 21,807 |  |  | $ | 28,030 |
Noninterest expense |  | $ | 85,115 |  |  | $ | 80,833 |  |  | $ | 84,271 |  |  | $ | 86,978 |  |  | $ | 87,076 |
Net income |  | $ | 44,734 |  |  | $ | 36,582 |  |  | $ | 14,628 |  |  | $ | 46,129 |  |  | $ | 50,727 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.64 |  |  | $ | 0.70 |
Earnings (diluted) |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.64 |  |  | $ | 0.70 |
Book value |  | $ | 32.14 |  |  | $ | 31.80 |  |  | $ | 30.93 |  |  | $ | 29.95 |  |  | $ | 29.90 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 15,965,485 |  |  | $ | 15,148,488 |  |  | $ | 13,995,632 |  |  | $ | 13,750,840 |  |  | $ | 13,459,774 |
Interest-earning assets |  | $ | 14,492,435 |  |  | $ | 13,657,719 |  |  | $ | 12,487,550 |  |  | $ | 12,231,779 |  |  | $ | 11,941,578 |
Loans |  | $ | 9,744,336 |  |  | $ | 9,546,099 |  |  | $ | 8,815,755 |  |  | $ | 8,742,246 |  |  | $ | 8,694,592 |
Securities, including equity securities and FHLB stock |  | $ | 3,948,041 |  |  | $ | 3,591,693 |  |  | $ | 3,618,567 |  |  | $ | 3,453,554 |  |  | $ | 3,102,213 |
Deposits |  | $ | 13,318,485 |  |  | $ | 12,220,415 |  |  | $ | 10,622,379 |  |  | $ | 10,959,434 |  |  | $ | 10,668,767 |
Interest-bearing deposits |  | $ | 6,527,695 |  |  | $ | 6,037,107 |  |  | $ | 5,383,203 |  |  | $ | 5,610,850 |  |  | $ | 5,517,171 |
Interest-bearing liabilities |  | $ | 6,659,119 |  |  | $ | 6,514,012 |  |  | $ | 6,375,931 |  |  | $ | 6,058,319 |  |  | $ | 5,989,042 |
Noninterest-bearing deposits |  | $ | 6,790,790 |  |  | $ | 6,183,308 |  |  | $ | 5,239,176 |  |  | $ | 5,348,584 |  |  | $ | 5,151,596 |
Shareholders’ equity |  | $ | 2,293,771 |  |  | $ | 2,254,349 |  |  | $ | 2,193,051 |  |  | $ | 2,170,879 |  |  | $ | 2,152,916 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.12 | % |  | 0.97 | % |  | 0.42 | % |  | 1.34 | % |  | 1.51 | %
Return on average common equity |  | 7.80 | % |  | 6.49 | % |  | 2.67 | % |  | 8.50 | % |  | 9.42 | %
Average equity to average assets |  | 14.37 | % |  | 14.88 | % |  | 15.67 | % |  | 15.79 | % |  | 16.00 | %
Shareholders’ equity to total assets |  | 14.18 | % |  | 14.30 | % |  | 15.77 | % |  | 15.34 | % |  | 15.71 | %
Net interest margin (tax equivalent) |  | 3.47 | % |  | 3.64 | % |  | 4.00 | % |  | 4.11 | % |  | 4.14 | %
Period-end |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 16,233,424 |  |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 14,079,524 |  |  | $ | 13,757,760 |
Loans, net of unearned income |  | $ | 9,688,947 |  |  | $ | 9,771,898 |  |  | $ | 8,933,321 |  |  | $ | 8,743,465 |  |  | $ | 8,756,355 |
Allowance for credit losses |  | $ | 156,968 |  |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 83,968 |  |  | $ | 82,660 |
Securities, including equity securities and FHLB stock |  | $ | 4,305,425 |  |  | $ | 3,723,492 |  |  | $ | 3,591,408 |  |  | $ | 3,794,262 |  |  | $ | 3,397,252 |
Deposits |  | $ | 13,600,260 |  |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |  |  | $ | 10,855,716 |
Shareholders’ equity |  | $ | 2,301,981 |  |  | $ | 2,276,755 |  |  | $ | 2,213,602 |  |  | $ | 2,159,962 |  |  | $ | 2,161,577 |
Goodwill |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |
Other intangible assets, net |  | $ | 28,745 |  |  | $ | 30,938 |  |  | $ | 33,148 |  |  | $ | 35,458 |  |  | $ | 37,908 |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 47,231 |  |  | $ | 53,732 |  |  | $ | 47,647 |  |  | $ | 33,060 |  |  | $ | 37,021 |
OREO and OPPO |  | 623 |  |  | 747 |  |  | 510 |  |  | 552 |  |  | 625 |
Total nonperforming assets |  | $ | 47,854 |  |  | $ | 54,479 |  |  | $ | 48,157 |  |  | $ | 33,612 |  |  | $ | 37,646 |
Nonperforming loans to period-end loans |  | 0.49 | % |  | 0.55 | % |  | 0.53 | % |  | 0.38 | % |  | 0.42 | %
Nonperforming assets to period-end assets |  | 0.29 | % |  | 0.34 | % |  | 0.34 | % |  | 0.24 | % |  | 0.27 | %
Allowance for credit losses to period-end loans |  | 1.62 | % |  | 1.55 | % |  | 1.37 | % |  | 0.96 | % |  | 0.94 | %
Net loan charge-offs (recoveries) |  | $ | 1,978 |  |  | $ | 4,028 |  |  | $ | 5,026 |  |  | $ | 306 |  |  | $ | (1,844) |

15

LOAN PORTFOLIO COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
|  | 2020 |  | 2020 |  | 2020 |  | 2019 |  | 2019
Loan Portfolio Composition - Dollars |  | (dollars in thousands)
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | $ | 4,027,035 |  |  | $ | 4,032,643 |  |  | $ | 3,969,974 |  |  | $ | 3,945,853 |  |  | $ | 3,746,365 |
Commercial business |  | 3,836,009 |  |  | 3,859,513 |  |  | 3,169,668 |  |  | 2,989,613 |  |  | 3,057,669 |
Agriculture |  | 850,290 |  |  | 845,950 |  |  | 754,491 |  |  | 765,371 |  |  | 777,619 |
Construction |  | 273,176 |  |  | 304,015 |  |  | 308,186 |  |  | 361,533 |  |  | 479,171 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 665,432 |  |  | 692,837 |  |  | 690,506 |  |  | 637,325 |  |  | 654,077 |
Other consumer |  | 37,005 |  |  | 36,940 |  |  | 40,496 |  |  | 43,770 |  |  | 41,454 |
Total loans |  | 9,688,947 |  |  | 9,771,898 |  |  | 8,933,321 |  |  | 8,743,465 |  |  | 8,756,355 |
Less: Allowance for credit losses |  | (156,968) |  |  | (151,546) |  |  | (122,074) |  |  | (83,968) |  |  | (82,660) |
Total loans, net |  | $ | 9,531,979 |  |  | $ | 9,620,352 |  |  | $ | 8,811,247 |  |  | $ | 8,659,497 |  |  | $ | 8,673,695 |
Loans held for sale |  | $ | 24,407 |  |  | $ | 28,803 |  |  | $ | 9,701 |  |  | $ | 17,718 |  |  | $ | 15,036 |

|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
Loan Portfolio Composition - Percentages |  | 2020 |  | 2020 |  | 2020 |  | 2019 |  | 2019
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | 41.5 | % |  | 41.2 | % |  | 44.5 | % |  | 45.1 | % |  | 42.7 | %
Commercial business |  | 39.6 | % |  | 39.5 | % |  | 35.5 | % |  | 34.2 | % |  | 34.9 | %
Agriculture |  | 8.8 | % |  | 8.7 | % |  | 8.4 | % |  | 8.8 | % |  | 8.9 | %
Construction |  | 2.8 | % |  | 3.1 | % |  | 3.4 | % |  | 4.1 | % |  | 5.5 | %
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 6.9 | % |  | 7.1 | % |  | 7.7 | % |  | 7.3 | % |  | 7.5 | %
Other consumer |  | 0.4 | % |  | 0.4 | % |  | 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 |  |  |  |  |  |  |  |  |  |
|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
|  | 2020 |  | 2020 |  | 2020 |  | 2019 |  | 2019
Deposit Composition - Dollars |  | (dollars in thousands)
Demand and other noninterest-bearing |  | $ | 6,897,054 |  |  | $ | 6,719,437 |  |  | $ | 5,323,908 |  |  | $ | 5,328,146 |  |  | $ | 5,320,435 |
Money market |  | 2,708,949 |  |  | 2,586,376 |  |  | 2,313,717 |  |  | 2,322,644 |  |  | 2,295,229 |
Interest-bearing demand |  | 1,322,618 |  |  | 1,274,058 |  |  | 1,131,874 |  |  | 1,150,437 |  |  | 1,059,502 |
Savings |  | 1,109,155 |  |  | 1,035,723 |  |  | 905,931 |  |  | 882,050 |  |  | 892,438 |
Interest-bearing public funds, other than certificates of deposit |  | 635,980 |  |  | 623,496 |  |  | 405,810 |  |  | 301,203 |  |  | 629,797 |
Certificates of deposit, less than $250,000 |  | 204,578 |  |  | 210,357 |  |  | 214,449 |  |  | 218,764 |  |  | 223,249 |
Certificates of deposit, $250,000 or more |  | 105,041 |  |  | 104,330 |  |  | 109,659 |  |  | 151,995 |  |  | 107,506 |
Certificates of deposit insured by CDARS® |  | 22,609 |  |  | 17,078 |  |  | 17,171 |  |  | 17,065 |  |  | 17,252 |
Brokered certificates of deposit |  | 5,000 |  |  | 8,427 |  |  | 12,259 |  |  | 12,259 |  |  | 18,852 |
Reciprocal money market accounts |  | 589,276 |  |  | 552,195 |  |  | 377,980 |  |  | 300,158 |  |  | 291,542 |
Subtotal |  | 13,600,260 |  |  | 13,131,477 |  |  | 10,812,758 |  |  | 10,684,721 |  |  | 10,855,802 |
Valuation adjustment resulting from acquisition accounting |  | — |  |  | — |  |  | (2) |  |  | (13) |  |  | (86) |
Total deposits |  | $ | 13,600,260 |  |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |  |  | $ | 10,855,716 |

|  | September 30, |  | June 30, |  | March 31, |  | December 31, |  | September 30,
Deposit Composition - Percentages |  | 2020 |  | 2020 |  | 2020 |  | 2019 |  | 2019
Demand and other noninterest-bearing |  | 50.7 | % |  | 51.2 | % |  | 49.2 | % |  | 49.9 | % |  | 49.0 | %
Money market |  | 19.9 | % |  | 19.7 | % |  | 21.4 | % |  | 21.7 | % |  | 21.1 | %
Interest-bearing demand |  | 9.7 | % |  | 9.7 | % |  | 10.5 | % |  | 10.8 | % |  | 9.8 | %
Savings |  | 8.2 | % |  | 7.9 | % |  | 8.4 | % |  | 8.3 | % |  | 8.2 | %
Interest-bearing public funds, other than certificates of deposit |  | 4.7 | % |  | 4.7 | % |  | 3.8 | % |  | 2.8 | % |  | 5.8 | %
Certificates of deposit, less than $250,000 |  | 1.5 | % |  | 1.6 | % |  | 2.0 | % |  | 2.0 | % |  | 2.1 | %
Certificates of deposit, $250,000 or more |  | 0.8 | % |  | 0.8 | % |  | 1.0 | % |  | 1.4 | % |  | 1.0 | %
Certificates of deposit insured by CDARS® |  | 0.2 | % |  | 0.1 | % |  | 0.2 | % |  | 0.2 | % |  | 0.2 | %
Brokered certificates of deposit |  | — | % |  | 0.1 | % |  | 0.1 | % |  | 0.1 | % |  | 0.2 | %
Reciprocal money market accounts |  | 4.3 | % |  | 4.2 | % |  | 3.4 | % |  | 2.8 | % |  | 2.6 | %
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
|  | September 30, 2020 |  | September 30, 2019
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,744,336 |  |  | $ | 106,945 |  |  | 4.37 | % |  | $ | 8,694,592 |  |  | $ | 114,099 |  |  | 5.21 | %
Taxable securities |  | 3,511,690 |  |  | 19,102 |  |  | 2.16 | % |  | 2,654,490 |  |  | 16,457 |  |  | 2.46 | %
Tax exempt securities (2) |  | 436,351 |  |  | 2,962 |  |  | 2.70 | % |  | 447,723 |  |  | 3,235 |  |  | 2.87 | %
Interest-earning deposits with banks |  | 800,058 |  |  | 203 |  |  | 0.10 | % |  | 144,773 |  |  | 864 |  |  | 2.37 | %
Total interest-earning assets |  | 14,492,435 |  |  | 129,212 |  |  | 3.55 | % |  | 11,941,578 |  |  | 134,655 |  |  | 4.47 | %
Other earning assets |  | 235,735 |  |  |  |  |  |  | 230,140 |  |  |  |  |
Noninterest-earning assets |  | 1,237,315 |  |  |  |  |  |  | 1,288,056 |  |  |  |  |
Total assets |  | $ | 15,965,485 |  |  |  |  |  |  | $ | 13,459,774 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts |  | $ | 3,200,407 |  |  | $ | 947 |  |  | 0.12 | % |  | $ | 2,589,390 |  |  | $ | 2,840 |  |  | 0.44 | %
Interest-bearing demand |  | 1,296,076 |  |  | 337 |  |  | 0.10 | % |  | 1,049,833 |  |  | 438 |  |  | 0.17 | %
Savings accounts |  | 1,072,472 |  |  | 36 |  |  | 0.01 | % |  | 893,395 |  |  | 49 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit |  | 621,786 |  |  | 397 |  |  | 0.25 | % |  | 602,674 |  |  | 2,879 |  |  | 1.90 | %
Certificates of deposit |  | 336,954 |  |  | 288 |  |  | 0.34 | % |  | 381,879 |  |  | 657 |  |  | 0.68 | %
Total interest-bearing deposits |  | 6,527,695 |  |  | 2,005 |  |  | 0.12 | % |  | 5,517,171 |  |  | 6,863 |  |  | 0.49 | %
FHLB advances and FRB borrowings |  | 54,173 |  |  | 166 |  |  | 1.22 | % |  | 400,956 |  |  | 2,569 |  |  | 2.54 | %
Subordinated debentures |  | 35,161 |  |  | 468 |  |  | 5.30 | % |  | 35,346 |  |  | 468 |  |  | 5.25 | %
Other borrowings and interest-bearing liabilities |  | 42,090 |  |  | 19 |  |  | 0.18 | % |  | 35,569 |  |  | 183 |  |  | 2.04 | %
Total interest-bearing liabilities |  | 6,659,119 |  |  | 2,658 |  |  | 0.16 | % |  | 5,989,042 |  |  | 10,083 |  |  | 0.67 | %
Noninterest-bearing deposits |  | 6,790,790 |  |  |  |  |  |  | 5,151,596 |  |  |  |  |
Other noninterest-bearing liabilities |  | 221,805 |  |  |  |  |  |  | 166,220 |  |  |  |  |
Shareholders’ equity |  | 2,293,771 |  |  |  |  |  |  | 2,152,916 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 15,965,485 |  |  |  |  |  |  | $ | 13,459,774 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 126,554 |  |  |  |  |  |  | $ | 124,572 |  |  |
Net interest margin (tax equivalent) |  | 3.47 | % |  |  |  |  |  | 4.14 | %

__________
(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 $5.0 million and $2.0 million for the three months ended September 30, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.7 million and $2.1 million for the three months ended September 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 September 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $622 thousand and $679 thousand for the three months ended September 30, 2020 and 2019, respectively.
18

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | September 30, 2020 |  | June 30, 2020
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,744,336 |  |  | $ | 106,945 |  |  | 4.37 | % |  | $ | 9,546,099 |  |  | $ | 106,737 |  |  | 4.50 | %
Taxable securities |  | 3,511,690 |  |  | 19,102 |  |  | 2.16 | % |  | 3,189,805 |  |  | 18,343 |  |  | 2.31 | %
Tax exempt securities (2) |  | 436,351 |  |  | 2,962 |  |  | 2.70 | % |  | 401,888 |  |  | 2,857 |  |  | 2.86 | %
Interest-earning deposits with banks |  | 800,058 |  |  | 203 |  |  | 0.10 | % |  | 519,927 |  |  | 136 |  |  | 0.11 | %
Total interest-earning assets |  | 14,492,435 |  |  | 129,212 |  |  | 3.55 | % |  | 13,657,719 |  |  | 128,073 |  |  | 3.77 | %
Other earning assets |  | 235,735 |  |  |  |  |  |  | 234,019 |  |  |  |  |
Noninterest-earning assets |  | 1,237,315 |  |  |  |  |  |  | 1,256,750 |  |  |  |  |
Total assets |  | $ | 15,965,485 |  |  |  |  |  |  | $ | 15,148,488 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts |  | $ | 3,200,407 |  |  | $ | 947 |  |  | 0.12 | % |  | $ | 2,939,657 |  |  | $ | 974 |  |  | 0.13 | %
Interest-bearing demand |  | 1,296,076 |  |  | 337 |  |  | 0.10 | % |  | 1,213,182 |  |  | 339 |  |  | 0.11 | %
Savings accounts |  | 1,072,472 |  |  | 36 |  |  | 0.01 | % |  | 976,785 |  |  | 38 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit |  | 621,786 |  |  | 397 |  |  | 0.25 | % |  | 559,256 |  |  | 393 |  |  | 0.28 | %
Certificates of deposit |  | 336,954 |  |  | 288 |  |  | 0.34 | % |  | 348,227 |  |  | 350 |  |  | 0.40 | %
Total interest-bearing deposits |  | 6,527,695 |  |  | 2,005 |  |  | 0.12 | % |  | 6,037,107 |  |  | 2,094 |  |  | 0.14 | %
FHLB advances and FRB borrowings |  | 54,173 |  |  | 166 |  |  | 1.22 | % |  | 407,035 |  |  | 1,796 |  |  | 1.77 | %
Subordinated debentures |  | 35,161 |  |  | 468 |  |  | 5.30 | % |  | 35,207 |  |  | 468 |  |  | 5.35 | %
Other borrowings and interest-bearing liabilities |  | 42,090 |  |  | 19 |  |  | 0.18 | % |  | 34,663 |  |  | 23 |  |  | 0.27 | %
Total interest-bearing liabilities |  | 6,659,119 |  |  | 2,658 |  |  | 0.16 | % |  | 6,514,012 |  |  | 4,381 |  |  | 0.27 | %
Noninterest-bearing deposits |  | 6,790,790 |  |  |  |  |  |  | 6,183,308 |  |  |  |  |
Other noninterest-bearing liabilities |  | 221,805 |  |  |  |  |  |  | 196,819 |  |  |  |  |
Shareholders’ equity |  | 2,293,771 |  |  |  |  |  |  | 2,254,349 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 15,965,485 |  |  |  |  |  |  | $ | 15,148,488 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 126,554 |  |  |  |  |  |  | $ | 123,692 |  |  |
Net interest margin (tax equivalent) |  | 3.47 | % |  |  |  |  |  | 3.64 | %

__________
(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 $5.0 million and $5.1 million for the three months ended September 30, 2020 and June 30, 2020, respectively. The incremental accretion on acquired loans was $1.7 million for both the three months ended September 30, 2020 and June 30, 2020.
(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 for both the three months ended September 30, 2020 and June 30, 2020. The tax equivalent yield adjustment to interest earned on tax exempt securities was $622 thousand and $600 thousand for the three months ended September 30, 2020 and June 30, 2020, respectively.
19

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Nine Months Ended |  | Nine Months Ended
|  | September 30, 2020 |  | September 30, 2019
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,370,101 |  |  | $ | 322,347 |  |  | 4.60 | % |  | $ | 8,568,746 |  |  | $ | 341,798 |  |  | 5.33 | %
Taxable securities |  | 3,304,295 |  |  | 58,533 |  |  | 2.37 | % |  | 2,599,595 |  |  | 49,790 |  |  | 2.56 | %
Tax exempt securities (2) |  | 415,973 |  |  | 8,733 |  |  | 2.80 | % |  | 470,987 |  |  | 10,426 |  |  | 2.96 | %
Interest-earning deposits with banks |  | 458,987 |  |  | 480 |  |  | 0.14 | % |  | 65,374 |  |  | 1,159 |  |  | 2.37 | %
Total interest-earning assets |  | 13,549,356 |  |  | $ | 390,093 |  |  | 3.85 | % |  | 11,704,702 |  |  | $ | 403,173 |  |  | 4.61 | %
Other earning assets |  | 234,044 |  |  |  |  |  |  | 231,823 |  |  |  |  |
Noninterest-earning assets |  | 1,256,525 |  |  |  |  |  |  | 1,266,392 |  |  |  |  |
Total assets |  | $ | 15,039,925 |  |  |  |  |  |  | $ | 13,202,917 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts |  | $ | 2,925,672 |  |  | $ | 3,649 |  |  | 0.17 | % |  | $ | 2,571,722 |  |  | $ | 8,321 |  |  | 0.43 | %
Interest-bearing demand |  | 1,211,958 |  |  | 1,160 |  |  | 0.13 | % |  | 1,063,678 |  |  | 1,230 |  |  | 0.15 | %
Savings accounts |  | 982,507 |  |  | 117 |  |  | 0.02 | % |  | 893,738 |  |  | 136 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit |  | 512,548 |  |  | 1,693 |  |  | 0.44 | % |  | 380,853 |  |  | 4,831 |  |  | 1.70 | %
Certificates of deposit |  | 351,973 |  |  | 1,122 |  |  | 0.43 | % |  | 397,221 |  |  | 1,819 |  |  | 0.61 | %
Total interest-bearing deposits |  | 5,984,658 |  |  | 7,741 |  |  | 0.17 | % |  | 5,307,212 |  |  | 16,337 |  |  | 0.41 | %
FHLB advances and FRB borrowings |  | 455,303 |  |  | 6,191 |  |  | 1.82 | % |  | 500,448 |  |  | 9,962 |  |  | 2.66 | %
Subordinated debentures |  | 35,207 |  |  | 1,404 |  |  | 5.33 | % |  | 35,392 |  |  | 1,404 |  |  | 5.30 | %
Other borrowings and interest-bearing liabilities |  | 41,706 |  |  | 178 |  |  | 0.57 | % |  | 35,440 |  |  | 552 |  |  | 2.08 | %
Total interest-bearing liabilities |  | 6,516,874 |  |  | $ | 15,514 |  |  | 0.32 | % |  | 5,878,492 |  |  | $ | 28,255 |  |  | 0.64 | %
Noninterest-bearing deposits |  | 6,073,718 |  |  |  |  |  |  | 5,069,629 |  |  |  |  |
Other noninterest-bearing liabilities |  | 202,105 |  |  |  |  |  |  | 156,432 |  |  |  |  |
Shareholders’ equity |  | 2,247,228 |  |  |  |  |  |  | 2,098,364 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 15,039,925 |  |  |  |  |  |  | $ | 13,202,917 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 374,579 |  |  |  |  |  |  | $ | 374,918 |  |  |
Net interest margin (tax equivalent) |  | 3.69 | % |  |  |  |  |  | 4.28 | %

__________
(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 $12.5 million and $6.3 million for the nine months ended September 30, 2020 and 2019, respectively. The incremental accretion on acquired loans was $4.8 million and $6.8 million for the nine months ended September 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 $3.7 million and $4.1 million for the nine months ended September 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.8 million and $2.2 million for the nine months ended September 30, 2020 and 2019, respectively.
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 |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Operating net interest margin non-GAAP reconciliation: |  | (dollars in thousands)
Net interest income (tax equivalent) (1) |  | $ | 126,554 |  |  | $ | 123,692 |  |  | $ | 124,572 |  |  | $ | 374,579 |  |  | $ | 374,918 |
Adjustments to arrive at operating net interest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Incremental accretion income on acquired loans (2) |  | (1,665) |  |  | (1,675) |  |  | (2,072) |  |  | (4,831) |  |  | (6,770) |
Premium amortization on acquired securities |  | 701 |  |  | 975 |  |  | 1,386 |  |  | 2,803 |  |  | 4,816 |
Interest reversals on nonaccrual loans |  | 393 |  |  | 673 |  |  | 174 |  |  | 1,854 |  |  | 1,462 |
Operating net interest income (tax equivalent) (1) |  | $ | 125,983 |  |  | $ | 123,665 |  |  | $ | 124,060 |  |  | $ | 374,405 |  |  | $ | 374,426 |
Average interest earning assets |  | $ | 14,492,435 |  |  | $ | 13,657,719 |  |  | $ | 11,941,578 |  |  | $ | 13,549,356 |  |  | $ | 11,704,702 |
Net interest margin (tax equivalent) (1) |  | 3.47 | % |  | 3.64 | % |  | 4.14 | % |  | 3.69 | % |  | 4.28 | %
Operating net interest margin (tax equivalent) (1) |  | 3.46 | % |  | 3.64 | % |  | 4.12 | % |  | 3.69 | % |  | 4.28 | %

|  | Three Months Ended |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Operating efficiency ratio non-GAAP reconciliation: |  | (dollars in thousands)
Noninterest expense (numerator A) |  | $ | 85,115 |  |  | $ | 80,833 |  |  | $ | 87,076 |  |  | $ | 250,219 |  |  | $ | 258,504 |
Adjustments to arrive at operating noninterest expense: |  |  |  |  |  |  |  |  |  |
Net benefit of operation of OREO and OPPO |  | 160 |  |  | 200 |  |  | 113 |  |  | 356 |  |  | 704 |
Loss on asset disposals |  | — |  |  | (220) |  |  | (5) |  |  | (224) |  |  | (5) |
Business and Occupation (“B&O”) taxes |  | (1,559) |  |  | (1,244) |  |  | (1,325) |  |  | (3,427) |  |  | (4,612) |
Operating noninterest expense (numerator B) |  | $ | 83,716 |  |  | $ | 79,569 |  |  | $ | 85,859 |  |  | $ | 246,924 |  |  | $ | 254,591 |
Net interest income (tax equivalent) (1) |  | $ | 126,554 |  |  | $ | 123,692 |  |  | $ | 124,572 |  |  | $ | 374,579 |  |  | $ | 374,918 |
Noninterest income |  | 22,472 |  |  | 37,259 |  |  | 28,030 |  |  | 80,938 |  |  | 75,374 |
Bank owned life insurance tax equivalent adjustment |  | 422 |  |  | 430 |  |  | 406 |  |  | 1,276 |  |  | 1,234 |
Total revenue (tax equivalent) (denominator A) |  | $ | 149,448 |  |  | $ | 161,381 |  |  | $ | 153,008 |  |  | $ | 456,793 |  |  | $ | 451,526 |
Operating net interest income (tax equivalent) (1) |  | $ | 125,983 |  |  | $ | 123,665 |  |  | $ | 124,060 |  |  | $ | 374,405 |  |  | $ | 374,426 |
Adjustments to arrive at operating noninterest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Investment securities gain, net |  | — |  |  | (16,425) |  |  | — |  |  | (16,674) |  |  | (2,132) |
Gain on asset disposals |  | (247) |  |  | (26) |  |  | (6,104) |  |  | (294) |  |  | (6,104) |
Operating noninterest income (tax equivalent) |  | 22,647 |  |  | 21,238 |  |  | 22,332 |  |  | 65,246 |  |  | 68,372 |
Total operating revenue (tax equivalent) (denominator B) |  | $ | 148,630 |  |  | $ | 144,903 |  |  | $ | 146,392 |  |  | $ | 439,651 |  |  | $ | 442,798 |
Efficiency ratio (tax equivalent) (numerator A/denominator A) |  | 56.95 | % |  | 50.09 | % |  | 56.91 | % |  | 54.78 | % |  | 57.25 | %
Operating efficiency ratio (tax equivalent) (numerator B/denominator B) |  | 56.33 | % |  | 54.91 | % |  | 58.65 | % |  | 56.16 | % |  | 57.50 | %

__________
(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 for both the three months ended September 30, 2020 and June 30, 2020, $2.1 million for the three months ended September 30, 2019 and $5.6 million and $6.3 million for the nine months ended September 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 |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Pre-tax, pre-provision income: |  | (in thousands)
Income before income taxes |  | $ | 54,683 |  |  | $ | 44,777 |  |  | $ | 63,105 |  |  | $ | 117,318 |  |  | $ | 183,579 |
Provision for credit losses |  | 7,400 |  |  | 33,500 |  |  | 299 |  |  | 82,400 |  |  | 1,879 |
Pre-tax, pre-provision income |  | $ | 62,083 |  |  | $ | 78,277 |  |  | $ | 63,404 |  |  | $ | 199,718 |  |  | $ | 185,458 |

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:

|  | September 30, |  | June 30, |  | September 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) |  | $ | 2,301,981 |  |  | $ | 2,276,755 |  |  | $ | 2,161,577 |
Adjustments to arrive at tangible common equity: |  |  |  |  |  |
Goodwill |  | (765,842) |  |  | (765,842) |  |  | (765,842) |
Other intangible assets, net |  | (28,745) |  |  | (30,938) |  |  | (37,908) |
Tangible common equity (numerator B) |  | $ | 1,507,394 |  |  | $ | 1,479,975 |  |  | $ | 1,357,827 |
Total assets (denominator A) |  | $ | 16,233,424 |  |  | $ | 15,920,944 |  |  | $ | 13,757,760 |
Adjustments to arrive at tangible assets: |  |  |  |  |  |
Goodwill |  | (765,842) |  |  | (765,842) |  |  | (765,842) |
Other intangible assets, net |  | (28,745) |  |  | (30,938) |  |  | (37,908) |
Tangible assets (denominator B) |  | $ | 15,438,837 |  |  | $ | 15,124,164 |  |  | $ | 12,954,010 |
Shareholders’ equity to total assets (numerator A/denominator A) |  | 14.18 | % |  | 14.30 | % |  | 15.71 | %
Tangible common shareholders’ equity to tangible assets (numerator B/denominator B) |  | 9.76 | % |  | 9.79 | % |  | 10.48 | %
Common shares outstanding (denominator C) |  | 71,613 |  |  | 71,586 |  |  | 72,288 |
Book value per common share (numerator A/denominator C) |  | $ | 32.14 |  |  | $ | 31.80 |  |  | $ | 29.90 |
Tangible book value per common share (numerator B/denominator C) |  | $ | 21.05 |  |  | $ | 20.67 |  |  | $ | 18.78 |

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:

|  | September 30, |  | June 30, |  | September 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) |  | $ | 156,968 |  |  | $ | 151,546 |  |  | $ | 82,660 |
Total loans, net of unearned income (denominator A) |  | 9,688,947 |  |  | 9,771,898 |  |  | 8,756,355 |
Less: PPP loans, net of unearned income (0% ACL) |  | 953,244 |  |  | 941,373 |  |  | — |
Total loans, net of PPP loans (denominator B) |  | $ | 8,735,703 |  |  | $ | 8,830,525 |  |  | $ | 8,756,355 |
ACL to period-end loans (numerator / denominator A) |  | 1.62 | % |  | 1.55 | % |  | 0.94 | %
ACL to period-end loans, excluding PPP loans (numerator / denominator B) |  | 1.80 | % |  | 1.72 | % |  | 0.94 | %

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 |  | Nine Months Ended
|  | September 30, |  | June 30, |  | September 30, |  | September 30, |  | September 30,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Return on average tangible common equity non-GAAP reconciliation: |  | (dollars in thousands)
Net income (numerator A) |  | $ | 44,734 |  |  | $ | 36,582 |  |  | $ | 50,727 |  |  | $ | 95,944 |  |  | $ | 148,322 |
Adjustments to arrive at tangible income applicable to common shareholders: |  |  |  |  |  |  |  |  |  |
Amortization of intangibles |  | 2,193 |  |  | 2,210 |  |  | 2,632 |  |  | 6,713 |  |  | 8,029 |
Tax effect on intangible amortization |  | (461) |  |  | (464) |  |  | (553) |  |  | (1,410) |  |  | (1,686) |
Tangible income applicable to common shareholders (numerator B) |  | $ | 46,466 |  |  | $ | 38,328 |  |  | $ | 52,806 |  |  | 101,247 |  |  | $ | 154,665 |
Average shareholders’ equity (denominator A) |  | $ | 2,293,771 |  |  | $ | 2,254,349 |  |  | $ | 2,152,916 |  |  | 2,247,228 |  |  | $ | 2,098,364 |
Adjustments to arrive at average tangible common equity: |  |  |  |  |  |  |  |  |  |
Average intangibles |  | (795,650) |  |  | (797,855) |  |  | (805,033) |  |  | (797,853) |  |  | (807,676) |
Average tangible common equity (denominator B) |  | $ | 1,498,121 |  |  | $ | 1,456,494 |  |  | $ | 1,347,883 |  |  | $ | 1,449,375 |  |  | $ | 1,290,688 |
Return on average common equity (numerator A/denominator A) (1) |  | 7.80 | % |  | 6.49 | % |  | 9.42 | % |  | 5.69 | % |  | 9.42 | %
Return on average tangible common equity (numerator B/denominator B) (2) |  | 12.41 | % |  | 10.53 | % |  | 15.67 | % |  | 9.31 | % |  | 15.98 | %

__________
(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