EX-99.1 2 a991colb4q2020earningsrele.htm PRESS RELEASE - EARNINGS AND DIVIDEND
Exhibit 99.1
FOR IMMEDIATE RELEASE
January 28, 2021
Columbia Banking System Announces Fourth Quarter and Full Year 2020 Results
and Quarterly Cash Dividend
Notable Items for the Fourth Quarter and Fiscal Year 2020
•Full year 2020 net income of $154.2 million and diluted earnings per share of $2.17
•Record fourth quarter net income of $58.3 million and diluted earnings per share of $0.82
•Deposits increased $269.6 million, or 2%, during the fourth quarter of 2020 and $3.19 billion, or 30%, compared to December 31, 2019
•Net interest margin of 3.52%, an increase of 5 basis points from the linked quarter
•Nonperforming assets to period-end assets ratio decreased to 0.21%
•Loan balances subject to deferral were down 91% from June 30, 2020
•Regular cash dividend declared of $0.28 per share
TACOMA, Washington, January 28, 2021 -- 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 fourth quarter 2020 earnings, “Our financial performance for the quarter and the year is a direct reflection of our bankers’ determination and tireless efforts to maintain our normal business operations throughout the extended duration of the pandemic. Our account officers worked collectively with our credit administration team to create tailored solutions that best served our client’s needs during these challenging times.” Mr. Stein continued, “I would also like to recognize the efforts of our full team for the innovation and dedication they demonstrated in meeting the needs of our clients and communities amid the myriad challenges of 2020.”
1

Balance Sheet
Total assets at December 31, 2020 were $16.58 billion, an increase of $351.4 million from the linked quarter. Loans were $9.43 billion, down $261.3 million from September 30, 2020 as loan originations of $468.1 million were more than offset by loan payments and a decrease in loan utilization as well as a decrease in PPP loans of $301.7 million principally due to loan forgiveness. Total PPP loans decreased from $953.2 million at September 30, 2020 to $651.6 million at December 31, 2020. Interest-earning deposits with banks were $434.9 million, a decrease of $301.6 million from the linked quarter. Debt securities available for sale were $5.21 billion at December 31, 2020, an increase of $928.4 million from $4.28 billion at September 30, 2020 as a result of substantial purchases during the quarter. Total deposits at December 31, 2020 were $13.87 billion, an increase of $269.6 million from September 30, 2020 largely due to an increase of $253.4 million in interest-bearing deposits. The deposit mix remained fairly consistent from September 30, 2020 with 50% noninterest-bearing and 50% interest-bearing.
Chris Merrywell, Columbia’s Executive Vice President and Chief Operating Officer, stated, “Our teams worked diligently during the fourth quarter to process new loan requests and PPP forgiveness. We are very proud of their efforts to put our clients’ needs first.”
Income Statement
Net Interest Income
Net interest income for the fourth quarter of 2020 was $131.1 million, an increase of $6.4 million and $6.3 million from the linked quarter and the prior-year period, respectively. The increase in interest income from loans as compared to the linked quarter was a result of an increase of $4.0 million in PPP loan interest and fee income principally due to the forgiveness of PPP loans as well as a $1.7 million recovery of interest related to a nonaccrual loan that paid-off during the quarter. The increase in net interest income compared to the linked quarter also benefited from an increase in interest income from securities due to two securities that had prepayment activity which contributed $2.5 million in additional interest income. Higher average balances of securities as a result of recent purchases also contributed to the increase in net interest income.
2

Net interest income compared to the prior-year period increased as a result of a reduction in interest expense of $4.2 million on deposits due to the lower rate environment. Interest income from investment securities increased approximately $3.0 million primarily due to higher average balances. Net interest income also benefited from lower interest expense of $1.8 million on FHLB advances due to lower average balances. Partially offsetting these increases to net interest income was a $3.0 million decrease to interest income from loans 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 recorded a net provision recovery for credit losses for the fourth quarter of 2020 of $4.7 million compared to net provisions of $7.4 million for the linked quarter and $1.6 million for the comparable quarter in 2019. The net provision recovery for credit losses for the current quarter was primarily due to an improved economic forecast.
Andy McDonald, Columbia’s Executive Vice President and Chief Credit Officer, commented, “We are obviously pleased with the credit metrics posted this quarter. The decline in NPAs and problem loans is notable along with the release from the provision. But, we understand we must remain diligent with respect to credit as government stimulus and other actions may have a delayed effect on the possible impacts to our loan portfolio.”
Noninterest Income
Noninterest income was $23.6 million for the fourth quarter of 2020, an increase of $1.1 million from the linked quarter and $1.8 million from the fourth quarter of 2019. The increase compared to the linked quarter was principally due to loan revenue, specifically, mortgage banking revenue, as a result of a change in the way we sold a portion of our loans held for sale, during the quarter, resulting in more favorable pricing. Additionally, included in the current quarter is an increase of $758 thousand to the fair value of the mortgage loan pipeline. The increase in noninterest income during the fourth quarter of 2020 compared to the same quarter in 2019 was principally due to an increase in loan revenue partially offset by a decrease in deposit account and treasury management fees. The increase in loan revenue was due to mortgage banking revenue which increased $3.8 million due to higher loan volume. Partially offsetting this increase was a decrease in treasury management fees of $863 thousand and a decrease in overdraft fees of $889 thousand compared to the same quarter in 2019. The decrease in overdraft fees was due to an overall decrease in the number of transactions amidst the pandemic as well as clients generally carrying higher cash balances in their deposit accounts.
3

Noninterest Expense
Total noninterest expense for the fourth quarter of 2020 was $84.3 million, a decrease of $815 thousand compared to the third quarter of 2020 principally due to lower other noninterest expense as a result of the provision recapture for unfunded loan commitments totaling $1.3 million.
Compared to the fourth quarter of 2019, noninterest expense decreased $2.7 million principally due to decreases in other noninterest expense and legal and professional fees partially offset by an increase in regulatory premiums. Other noninterest expense decreased as a result of the provision recapture for unfunded loan commitments similar to the reduction for the linked quarter and a reduction of $857 thousand in travel and entertainment expense due to COVID-19. The decrease in legal and professional fees was principally due to lower fees on reciprocal money market accounts in 2020. Partially offsetting these decreases was an increase in regulatory premiums. During the fourth quarter of 2019, the Bank utilized a portion of its Small Bank Assessment Credit to pay for FDIC deposit insurance premiums. The final portion of the credit was utilized during the second quarter of 2020.
The provision for unfunded loan commitments for the periods indicated are as follows:

|  | Three Months Ended |  | Twelve Months Ended
|  | December 31, 2020 |  | September 30, 2020 |  | December 31, 2019 |  | December 31, 2020 |  | December 31, 2019
|  | (in thousands)
Provision (recapture) for unfunded loan commitments |  | $ | (1,300) |  |  | $ | 800 |  |  | $ | (150) |  |  | $ | 3,300 |  |  | $ | (900) |

Net Interest Margin
Columbia’s net interest margin (tax equivalent) for the fourth quarter of 2020 was 3.52%, an increase of 5 basis points and a decrease of 59 basis points from the linked quarter and prior-year period, respectively. The increase in the net interest margin (tax equivalent) compared to the linked quarter was due to increased income on PPP loans due to forgiveness activity as well as a recovery of interest on a nonaccrual loan that paid-off during the quarter. Interest income on the securities portfolio also contributed to the rise in the net interest margin due to two securities that had prepayment activity. These increases were partially offset by a shift in the mix of interest-earning assets towards lower-yielding investment securities. Notably, the average cost of total deposits for the quarter was 5 basis points, a decrease of 1 basis point from the third quarter of 2020. The decrease in the net interest margin (tax equivalent) compared to the 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. For additional information regarding net interest margin, see the “Average Balances and Rates” tables.
4

Columbia’s operating net interest margin (tax equivalent)1 was 3.51% for the fourth quarter of 2020, which increased 5 points compared to the linked quarter and decreased 58 basis points compared to the prior-year period. The increase in the operating net interest margin for the fourth quarter of 2020 compared to the linked quarter and the decrease compared to the prior-year period were due to the items noted in the preceding paragraph.
The following table highlights the yield on our PPP loans for the periods indicated:

|  | Three Months Ended |  | Twelve Months Ended
|  | December 31, 2020 |  | September 30, 2020 |  | December 31, 2020
Paycheck Protection Program loans |  | (dollars in thousands)
Interest income |  | $ | 9,218 |  |  | $ | 5,263 |  |  | $ | 19,071 |
Average balance |  | $ | 822,970 |  |  | $ | 948,034 |  |  | $ | 601,602 |
Yield |  | 4.46 | % |  | 2.21 | % |  | 3.17 | %

Aaron James Deer, Columbia’s Executive Vice President and Chief Financial Officer, stated, “We had a nice increase in the margin during the fourth quarter, although it was largely due to accelerated PPP fee amortization. The recent improvement in the rate outlook gives us some optimism for future asset yield improvement, but the near-term expectation is that loan and securities yields will remain under pressure.”
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

Asset Quality
At December 31, 2020, nonperforming assets to total assets decreased to 0.21% compared to 0.29% at September 30, 2020. Total nonperforming assets decreased $12.5 million from the linked quarter due to decreases in commercial business, agriculture and commercial real estate nonaccrual loans.
The following table sets forth information regarding nonaccrual loans and total nonperforming assets:

|  | December 31, 2020 |  | September 30, 2020 |  | December 31, 2019
|  | (in thousands)
Nonaccrual loans: |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |
Commercial real estate |  | $ | 7,712 |  |  | $ | 10,362 |  |  | $ | 3,799 |
Commercial business |  | 13,222 |  |  | 19,313 |  |  | 20,937 |
Agriculture |  | 11,614 |  |  | 14,913 |  |  | 5,023 |
Construction |  | 217 |  |  | 217 |  |  | — |
Consumer loans: |  |  |  |  |  |
One-to-four family residential real estate |  | 2,001 |  |  | 2,405 |  |  | 3,292 |
Other consumer |  | 40 |  |  | 21 |  |  | 9 |
Total nonaccrual loans |  | 34,806 |  |  | 47,231 |  |  | 33,060 |
OREO and other personal property owned |  | 553 |  |  | 623 |  |  | 552 |
Total nonperforming assets |  | $ | 35,359 |  |  | $ | 47,854 |  |  | $ | 33,612 |

Nonperforming assets to total loans was 0.37% at December 31, 2020 compared to 0.49% at September 30, 2020.
6

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

|  | Three Months Ended |  | Twelve Months Ended
|  | December 31, 2020 |  | September 30, 2020 |  | December 31, 2019 |  | December 31, 2020 |  | December 31, 2019
|  | (in thousands)
Beginning balance |  | $ | 156,968 |  |  | $ | 151,546 |  |  | $ | 82,660 |  |  | $ | 83,968 |  |  | $ | 83,369 |
Impact of adopting ASC 326 |  | — |  |  | — |  |  | — |  |  | 1,632 |  |  | — |
Charge-offs: |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | (1,318) |  |  | — |  |  | (452) |  |  | (1,419) |  |  | (2,160) |
Commercial business |  | (2,106) |  |  | (3,164) |  |  | (2,845) |  |  | (12,396) |  |  | (11,290) |
Agriculture |  | (432) |  |  | (1,269) |  |  | (51) |  |  | (6,427) |  |  | (245) |
Construction |  | — |  |  | — |  |  | (10) |  |  | — |  |  | (242) |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | (58) |  |  | (16) |  |  | (192) |  |  | (84) |  |  | (1,196) |
Other consumer |  | (167) |  |  | (133) |  |  | (18) |  |  | (766) |  |  | (82) |
Total charge-offs |  | (4,081) |  |  | (4,582) |  |  | (3,568) |  |  | (21,092) |  |  | (15,215) |
Recoveries: |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | 39 |  |  | 65 |  |  | 576 |  |  | 131 |  |  | 3,377 |
Commercial business |  | 643 |  |  | 1,124 |  |  | 1,698 |  |  | 3,438 |  |  | 3,066 |
Agriculture |  | 103 |  |  | 27 |  |  | 110 |  |  | 172 |  |  | 299 |
Construction |  | 21 |  |  | 11 |  |  | 312 |  |  | 709 |  |  | 3,641 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 78 |  |  | 1,301 |  |  | 549 |  |  | 2,083 |  |  | 1,773 |
Other consumer |  | 69 |  |  | 76 |  |  | 17 |  |  | 399 |  |  | 165 |
Total recoveries |  | 953 |  |  | 2,604 |  |  | 3,262 |  |  | 6,932 |  |  | 12,321 |
Net charge-offs |  | (3,128) |  |  | (1,978) |  |  | (306) |  |  | (14,160) |  |  | (2,894) |
Provision (recapture) for credit losses |  | (4,700) |  |  | 7,400 |  |  | 1,614 |  |  | 77,700 |  |  | 3,493 |
Ending balance |  | $ | 149,140 |  |  | $ | 156,968 |  |  | $ | 83,968 |  |  | $ | 149,140 |  |  | $ | 83,968 |

The allowance for credit losses to period-end loans was 1.58% at December 31, 2020 co mpared to 1.62% at September 30, 2020. Excluding PPP loans, the allowance for credit losses to period-end loans 2 was 1.70% at December 31, 2020 compared to 1.80% at September 30, 2020.
Loan Deferrals
The following table shows the loan balances subject to deferral for the periods indicated:

|  | December 31, 2020 |  | September 30, 2020 |  | June 30, 2020
|  | (in thousands)
Loan balances subject to deferral |  | $ | 146,725 |  |  | $ | 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
Two New Directors
The appointment of two new directors was announced following a regional search during the quarter. Laura Alvarez Schrag and Tracy Mack-Askew formally joined the board on January 1, 2021. Ms. Alvarez Schrag is President of Pondera Consulting and a resident of Nampa, Idaho and Ms. Mack-Askew is General Manager-HD Vocational Platform Development of Daimler Trucks North America and a resident of Portland, Oregon.
“Ms. Alvarez Schrag and Ms. Mack-Askew bring a wealth of expertise in organizational development, governance and operations to the Board,” said Mr. Stein. “We look forward to benefiting from their business expertise and their knowledge of key Northwest markets.”
COVID-19 Update
COVID-19 continues to impact our communities. We continue to monitor changing guidance from state and local healthcare officials and adjust our protocols accordingly. Social distancing, additional cleaning protocols and other safety measures we have taken enabled us to keep our branch lobbies open to serve clients throughout the quarter. Investments in additional video conferencing tools provided a smooth transition for team members resuming remote work arrangements as states reinstituted recommendations from earlier in the spring. Employees continue to balance the challenges of life and work amidst the pandemic, such as managing distance learning routines for their children. The variety of flexibility options we have provided have supported employees while maintaining service standards.
8

Warm Hearts Winter Drive
Our sixth annual Warm Hearts Winter Drive to benefit families and individuals struggling with homelessness during the winter months raised $315,025 for more than 65 homeless and relief shelters across the Northwest.
“In a year made particularly difficult by the pandemic, the Warm Hearts Winter Drive was as important as ever,” said David Moore Devine, Columbia’s Executive Vice President and Chief Marketing & Experience Officer. “I could not be prouder of the way our bankers and other employees across the Northwest stepped up to help their neighbors. Their efforts will make a tremendous difference in the communities we serve this winter.”
The annual drive has raised nearly $1.5 million in combined donations since the program started in 2016.
Cash Dividend Announcement
Columbia will pay a regular cash dividend of $0.28 per common share on February 24, 2021 to shareholders of record as of the close of business on February 10, 2021.
Conference Call Information
Columbia’s management will discuss the fourth quarter 2020 financial results on a conference call scheduled for Thursday, January 28, 2021 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://edge.media-server.com/mmc/p/vcquk5yf
The conference call can also be accessed on Thursday, January 28, 2021 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 833-301-1160; Conference ID password: 3936658.
A replay of the call will be accessible beginning Friday, January 29, 2021 using the link below:
https://edge.media-server.com/mmc/p/vcquk5yf
9

About Columbia
Headquartered in Tacoma, Washington, Columbia Banking System, Inc. (NASDAQ: COLB) is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank with 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 #1 in Customer Satisfaction with Retail Banking in the Northwest region by J.D. Power 3 in the 2020 U.S. 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.
3 Columbia Bank received the highest score in the Northwest region of the J.D. Power 2020 U.S. Retail Banking Satisfaction Study of customer satisfaction with their own retail bank. Visit jdpower.com/awards.
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, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia’s ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) 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 |  |
| (COLB-ER) |  | (COLB&ER)

11

CONSOLIDATED BALANCE SHEETS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  | December 31, |  | September 30, |  | December 31,
|  |  |  |  |  |  | 2020 |  | 2020 |  | 2019
|  |  |  |  |  |  | (in thousands)
ASSETS |  |  |  |
Cash and due from banks |  |  |  |  |  |  | $ | 218,899 |  |  | $ | 193,823 |  |  | $ | 223,541 |
Interest-earning deposits with banks |  |  |  |  |  |  | 434,867 |  |  | 736,422 |  |  | 24,132 |
Total cash and cash equivalents |  |  |  |  |  |  | 653,766 |  |  | 930,245 |  |  | 247,673 |
Debt securities available for sale at fair value (amortized cost of $4,997,529, $4,081,118 and $3,703,096, respectively) |  | 5,210,134 |  |  | 4,281,720 |  |  | 3,746,142 |
Equity securities |  |  |  |  |  |  | 13,425 |  |  | 13,425 |  |  | — |
Federal Home Loan Bank (“FHLB”) stock at cost |  |  |  |  |  | 10,280 |  |  | 10,280 |  |  | 48,120 |
Loans held for sale |  |  |  |  |  |  | 26,481 |  |  | 24,407 |  |  | 17,718 |
Loans, net of unearned income |  |  |  |  |  |  | 9,427,660 |  |  | 9,688,947 |  |  | 8,743,465 |
Less: Allowance for credit losses |  |  |  |  |  | 149,140 |  |  | 156,968 |  |  | 83,968 |
Loans, net |  |  |  |  |  |  | 9,278,520 |  |  | 9,531,979 |  |  | 8,659,497 |
Interest receivable |  |  |  |  |  |  | 54,831 |  |  | 56,718 |  |  | 46,839 |
Premises and equipment, net |  |  |  |  |  |  | 162,059 |  |  | 164,049 |  |  | 165,408 |
Other real estate owned |  |  |  |  |  |  | 553 |  |  | 623 |  |  | 552 |
Goodwill |  |  |  |  |  |  | 765,842 |  |  | 765,842 |  |  | 765,842 |
Other intangible assets, net |  |  |  |  |  |  | 26,734 |  |  | 28,745 |  |  | 35,458 |
Other assets |  |  |  |  |  |  | 382,154 |  |  | 425,391 |  |  | 346,275 |
Total assets |  |  |  |  |  |  | $ | 16,584,779 |  |  | $ | 16,233,424 |  |  | $ | 14,079,524 |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |  |  |  |
Deposits: |  |  |  |  |  |  |  |  |  |  |
Noninterest-bearing |  |  |  |  |  |  | $ | 6,913,214 |  |  | $ | 6,897,054 |  |  | $ | 5,328,146 |
Interest-bearing |  |  |  |  |  |  | 6,956,648 |  |  | 6,703,206 |  |  | 5,356,562 |
Total deposits |  |  |  |  |  |  | 13,869,862 |  |  | 13,600,260 |  |  | 10,684,708 |
FHLB advances |  |  |  |  |  |  | 7,414 |  |  | 7,427 |  |  | 953,469 |
Securities sold under agreements to repurchase |  |  |  |  |  | 73,859 |  |  | 26,966 |  |  | 64,437 |
Subordinated debentures |  |  |  |  |  |  | 35,092 |  |  | 35,139 |  |  | 35,277 |
Other liabilities |  |  |  |  |  |  | 250,945 |  |  | 261,651 |  |  | 181,671 |
Total liabilities |  |  |  |  |  |  | 14,237,172 |  |  | 13,931,443 |  |  | 11,919,562 |
Commitments and contingent liabilities |  |  |  |  |  |  |  |  |  |  |
Shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |
| December 31, |  | September 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 | 73,782 |  |  | 73,797 |  |  | 73,577 |  |  | 1,660,998 |  |  | 1,658,203 |  |  | 1,650,753 |
Outstanding | 71,598 |  |  | 71,613 |  |  | 72,124 |  |  |  |  |  |  |
Retained earnings |  |  |  |  |  |  | 575,248 |  |  | 537,011 |  |  | 519,676 |
Accumulated other comprehensive income |  |  |  |  |  | 182,195 |  |  | 177,601 |  |  | 40,367 |
Treasury stock at cost | 2,184 |  |  | 2,184 |  |  | 1,453 |  |  | (70,834) |  |  | (70,834) |  |  | (50,834) |
Total shareholders’ equity |  |  |  |  |  |  | 2,347,607 |  |  | 2,301,981 |  |  | 2,159,962 |
Total liabilities and shareholders’ equity |  |  |  |  |  | $ | 16,584,779 |  |  | $ | 16,233,424 |  |  | $ | 14,079,524 |

12

CONSOLIDATED STATEMENTS OF INCOME |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Twelve Months Ended
Unaudited |  | December 31, |  | September 30, |  | December 31, |  | December 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Interest Income |  | (in thousands except per share amounts)
Loans |  | $ | 107,402 |  |  | $ | 105,739 |  |  | $ | 110,384 |  |  | $ | 426,003 |  |  | $ | 448,041 |
Taxable securities |  | 23,045 |  |  | 19,102 |  |  | 20,074 |  |  | 81,578 |  |  | 69,864 |
Tax-exempt securities |  | 2,668 |  |  | 2,340 |  |  | 2,498 |  |  | 9,567 |  |  | 10,735 |
Deposits in banks |  | 181 |  |  | 203 |  |  | 153 |  |  | 661 |  |  | 1,312 |
Total interest income |  | 133,296 |  |  | 127,384 |  |  | 133,109 |  |  | 517,809 |  |  | 529,952 |
Interest Expense |  |  |  |  |  |  |  |  |  |
Deposits |  | 1,626 |  |  | 2,005 |  |  | 5,809 |  |  | 9,367 |  |  | 22,146 |
FHLB advances and Federal Reserve Bank ("FRB") borrowings |  | 73 |  |  | 166 |  |  | 1,899 |  |  | 6,264 |  |  | 11,861 |
Subordinated debentures |  | 467 |  |  | 468 |  |  | 467 |  |  | 1,871 |  |  | 1,871 |
Other borrowings |  | 18 |  |  | 19 |  |  | 117 |  |  | 196 |  |  | 669 |
Total interest expense |  | 2,184 |  |  | 2,658 |  |  | 8,292 |  |  | 17,698 |  |  | 36,547 |
Net Interest Income |  | 131,112 |  |  | 124,726 |  |  | 124,817 |  |  | 500,111 |  |  | 493,405 |
Provision (recapture) for credit losses |  | (4,700) |  |  | 7,400 |  |  | 1,614 |  |  | 77,700 |  |  | 3,493 |
Net interest income after provision (recapture) for credit losses |  | 135,812 |  |  | 117,326 |  |  | 123,203 |  |  | 422,411 |  |  | 489,912 |
Noninterest Income |  |  |  |  |  |  |  |  |  |
Deposit account and treasury management fees |  | 6,481 |  |  | 6,658 |  |  | 8,665 |  |  | 27,019 |  |  | 35,695 |
Card revenue |  | 3,497 |  |  | 3,834 |  |  | 3,767 |  |  | 13,928 |  |  | 15,198 |
Financial services and trust revenue |  | 3,349 |  |  | 3,253 |  |  | 3,191 |  |  | 12,830 |  |  | 12,799 |
Loan revenue |  | 7,960 |  |  | 6,645 |  |  | 3,625 |  |  | 24,802 |  |  | 13,465 |
Bank owned life insurance |  | 1,619 |  |  | 1,585 |  |  | 1,650 |  |  | 6,418 |  |  | 6,294 |
Investment securities gains, net |  | 36 |  |  | — |  |  | — |  |  | 16,710 |  |  | 2,132 |
Other |  | 620 |  |  | 497 |  |  | 909 |  |  | 2,793 |  |  | 11,598 |
Total noninterest income |  | 23,562 |  |  | 22,472 |  |  | 21,807 |  |  | 104,500 |  |  | 97,181 |
Noninterest Expense |  |  |  |  |  |  |  |  |  |
Compensation and employee benefits |  | 53,704 |  |  | 55,133 |  |  | 54,308 |  |  | 209,722 |  |  | 212,867 |
Occupancy |  | 9,270 |  |  | 8,734 |  |  | 9,010 |  |  | 36,013 |  |  | 35,176 |
Data processing |  | 4,566 |  |  | 4,510 |  |  | 4,792 |  |  | 19,370 |  |  | 19,164 |
Legal and professional fees |  | 3,573 |  |  | 3,000 |  |  | 4,835 |  |  | 12,158 |  |  | 21,645 |
Amortization of intangibles |  | 2,011 |  |  | 2,193 |  |  | 2,450 |  |  | 8,724 |  |  | 10,479 |
Business and Occupation ("B&O") taxes |  | 1,543 |  |  | 1,559 |  |  | 1,234 |  |  | 4,970 |  |  | 5,846 |
Advertising and promotion |  | 1,644 |  |  | 680 |  |  | 1,329 |  |  | 4,466 |  |  | 4,925 |
Regulatory premiums |  | 1,062 |  |  | 826 |  |  | 18 |  |  | 2,956 |  |  | 1,920 |
Net cost (benefit) of operation of other real estate owned |  | 33 |  |  | (160) |  |  | (10) |  |  | (315) |  |  | (692) |
Other |  | 6,894 |  |  | 8,640 |  |  | 9,012 |  |  | 36,455 |  |  | 34,152 |
Total noninterest expense |  | 84,300 |  |  | 85,115 |  |  | 86,978 |  |  | 334,519 |  |  | 345,482 |
Income before income taxes |  | 75,074 |  |  | 54,683 |  |  | 58,032 |  |  | 192,392 |  |  | 241,611 |
Provision for income taxes |  | 16,774 |  |  | 9,949 |  |  | 11,903 |  |  | 38,148 |  |  | 47,160 |
Net Income |  | $ | 58,300 |  |  | $ | 44,734 |  |  | $ | 46,129 |  |  | $ | 154,244 |  |  | $ | 194,451 |
Earnings per common share |  |  |  |  |  |  |  |  |  |
Basic |  | $ | 0.82 |  |  | $ | 0.63 |  |  | $ | 0.64 |  |  | $ | 2.17 |  |  | $ | 2.68 |
Diluted |  | $ | 0.82 |  |  | $ | 0.63 |  |  | $ | 0.64 |  |  | $ | 2.17 |  |  | $ | 2.68 |
Dividends declared per common share - regular |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 1.12 |  |  | $ | 1.12 |
Dividends declared per common share - special |  | — |  |  | — |  |  | — |  |  | 0.22 |  |  | 0.28 |
Dividends declared per common share - total |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 0.28 |  |  | $ | 1.34 |  |  | $ | 1.40 |
Weighted average number of common shares outstanding |  | 70,732 |  |  | 70,726 |  |  | 71,238 |  |  | 70,835 |  |  | 71,999 |
Weighted average number of diluted common shares outstanding |  | 70,838 |  |  | 70,762 |  |  | 71,310 |  |  | 70,880 |  |  | 72,032 |

13

14

FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended |  | Twelve Months Ended
Unaudited |  | December 31, |  | September 30, |  | December 31, |  | December 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Earnings |  | (dollars in thousands except per share amounts)
Net interest income |  | $ | 131,112 |  |  | $ | 124,726 |  |  | $ | 124,817 |  |  | $ | 500,111 |  |  | $ | 493,405 |
Provision (recapture) for credit losses |  | $ | (4,700) |  |  | $ | 7,400 |  |  | $ | 1,614 |  |  | $ | 77,700 |  |  | $ | 3,493 |
Noninterest income |  | $ | 23,562 |  |  | $ | 22,472 |  |  | $ | 21,807 |  |  | $ | 104,500 |  |  | $ | 97,181 |
Noninterest expense |  | $ | 84,300 |  |  | $ | 85,115 |  |  | $ | 86,978 |  |  | $ | 334,519 |  |  | $ | 345,482 |
Net income |  | $ | 58,300 |  |  | $ | 44,734 |  |  | $ | 46,129 |  |  | $ | 154,244 |  |  | $ | 194,451 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.82 |  |  | $ | 0.63 |  |  | $ | 0.64 |  |  | $ | 2.17 |  |  | $ | 2.68 |
Earnings (diluted) |  | $ | 0.82 |  |  | $ | 0.63 |  |  | $ | 0.64 |  |  | $ | 2.17 |  |  | $ | 2.68 |
Book value |  | $ | 32.79 |  |  | $ | 32.14 |  |  | $ | 29.95 |  |  | $ | 32.79 |  |  | $ | 29.95 |
Tangible book value per common share (1) |  | $ | 21.72 |  |  | $ | 21.05 |  |  | $ | 18.84 |  |  | $ | 21.72 |  |  | $ | 18.84 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 16,477,246 |  |  | $ | 15,965,485 |  |  | $ | 13,750,840 |  |  | $ | 15,401,219 |  |  | $ | 13,341,024 |
Interest-earning assets |  | $ | 15,010,392 |  |  | $ | 14,492,435 |  |  | $ | 12,231,779 |  |  | $ | 13,916,611 |  |  | $ | 11,837,633 |
Loans |  | $ | 9,533,655 |  |  | $ | 9,744,336 |  |  | $ | 8,742,246 |  |  | $ | 9,411,213 |  |  | $ | 8,612,478 |
Securities, including equity securities and FHLB stock |  | $ | 4,765,158 |  |  | $ | 3,948,041 |  |  | $ | 3,453,554 |  |  | $ | 3,982,918 |  |  | $ | 3,167,112 |
Deposits |  | $ | 13,864,027 |  |  | $ | 13,318,485 |  |  | $ | 10,959,434 |  |  | $ | 12,512,255 |  |  | $ | 10,523,687 |
Interest-bearing deposits |  | $ | 6,873,405 |  |  | $ | 6,527,695 |  |  | $ | 5,610,850 |  |  | $ | 6,208,058 |  |  | $ | 5,383,746 |
Interest-bearing liabilities |  | $ | 6,954,287 |  |  | $ | 6,659,119 |  |  | $ | 6,058,319 |  |  | $ | 6,626,825 |  |  | $ | 5,923,818 |
Noninterest-bearing deposits |  | $ | 6,990,622 |  |  | $ | 6,790,790 |  |  | $ | 5,348,584 |  |  | $ | 6,304,197 |  |  | $ | 5,139,941 |
Shareholders’ equity |  | $ | 2,311,070 |  |  | $ | 2,293,771 |  |  | $ | 2,170,879 |  |  | $ | 2,263,276 |  |  | $ | 2,116,642 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.42 | % |  | 1.12 | % |  | 1.34 | % |  | 1.00 | % |  | 1.46 | %
Return on average common equity |  | 10.09 | % |  | 7.80 | % |  | 8.50 | % |  | 6.82 | % |  | 9.19 | %
Return on average tangible common equity (1) |  | 15.79 | % |  | 12.41 | % |  | 14.05 | % |  | 10.99 | % |  | 15.47 | %
Average equity to average assets |  | 14.03 | % |  | 14.37 | % |  | 15.79 | % |  | 14.70 | % |  | 15.87 | %
Shareholders' equity to total assets |  | 14.16 | % |  | 14.18 | % |  | 15.34 | % |  | 14.16 | % |  | 15.34 | %
Tangible common shareholders’ equity to tangible assets (1) |  | 9.85 | % |  | 9.76 | % |  | 10.23 | % |  | 9.85 | % |  | 10.23 | %
Net interest margin (tax equivalent) |  | 3.52 | % |  | 3.47 | % |  | 4.11 | % |  | 3.65 | % |  | 4.24 | %
Efficiency ratio (tax equivalent) (2) |  | 53.70 | % |  | 56.95 | % |  | 58.34 | % |  | 54.50 | % |  | 57.52 | %
Operating efficiency ratio (tax equivalent) (1) |  | 53.03 | % |  | 56.33 | % |  | 58.07 | % |  | 55.34 | % |  | 57.64 | %
Noninterest expense ratio |  | 2.05 | % |  | 2.13 | % |  | 2.53 | % |  | 2.17 | % |  | 2.59 | %
|  | December 31, |  | September 30, |  | December 31, |  |  |  |
Period-end |  | 2020 |  | 2020 |  | 2019 |  |  |  |
Total assets |  | $ | 16,584,779 |  |  | $ | 16,233,424 |  |  | $ | 14,079,524 |  |  |  |  |
Loans, net of unearned income |  | $ | 9,427,660 |  |  | $ | 9,688,947 |  |  | $ | 8,743,465 |  |  |  |  |
Allowance for credit losses |  | $ | 149,140 |  |  | $ | 156,968 |  |  | $ | 83,968 |  |  |  |  |
Securities, including equity securities and FHLB stock |  | $ | 5,233,839 |  |  | $ | 4,305,425 |  |  | $ | 3,794,262 |  |  |  |  |
Deposits |  | $ | 13,869,862 |  |  | $ | 13,600,260 |  |  | $ | 10,684,708 |  |  |  |  |
Shareholders’ equity |  | $ | 2,347,607 |  |  | $ | 2,301,981 |  |  | $ | 2,159,962 |  |  |  |  |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 34,806 |  |  | $ | 47,231 |  |  | $ | 33,060 |  |  |  |  |
Other real estate owned (“OREO”) and other personal property owned (“OPPO”) |  | 553 |  |  | 623 |  |  | 552 |  |  |  |  |
Total nonperforming assets |  | $ | 35,359 |  |  | $ | 47,854 |  |  | $ | 33,612 |  |  |  |  |
Nonperforming loans to period-end loans |  | 0.37 | % |  | 0.49 | % |  | 0.38 | % |  |  |  |
Nonperforming assets to period-end assets |  | 0.21 | % |  | 0.29 | % |  | 0.24 | % |  |  |  |
Allowance for credit losses to period-end loans |  | 1.58 | % |  | 1.62 | % |  | 0.96 | % |  |  |  |
Net loan charge-offs (for the three months ended) |  | $ | 3,128 |  |  | $ | 1,978 |  |  | $ | 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.
15

QUARTERLY FINANCIAL STATISTICS |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  | Three Months Ended
Unaudited |  | December 31, |  | September 30, |  | June 30, |  | March 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2020 |  | 2020 |  | 2019
Earnings |  | (dollars in thousands except per share amounts)
Net interest income |  | $ | 131,112 |  |  | $ | 124,726 |  |  | $ | 121,851 |  |  | $ | 122,422 |  |  | $ | 124,817 |
Provision (recapture) for credit losses |  | $ | (4,700) |  |  | $ | 7,400 |  |  | $ | 33,500 |  |  | $ | 41,500 |  |  | $ | 1,614 |
Noninterest income |  | $ | 23,562 |  |  | $ | 22,472 |  |  | $ | 37,259 |  |  | $ | 21,207 |  |  | $ | 21,807 |
Noninterest expense |  | $ | 84,300 |  |  | $ | 85,115 |  |  | $ | 80,833 |  |  | $ | 84,271 |  |  | $ | 86,978 |
Net income |  | $ | 58,300 |  |  | $ | 44,734 |  |  | $ | 36,582 |  |  | $ | 14,628 |  |  | $ | 46,129 |
Per Common Share |  |  |  |  |  |  |  |  |  |
Earnings (basic) |  | $ | 0.82 |  |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.64 |
Earnings (diluted) |  | $ | 0.82 |  |  | $ | 0.63 |  |  | $ | 0.52 |  |  | $ | 0.20 |  |  | $ | 0.64 |
Book value |  | $ | 32.79 |  |  | $ | 32.14 |  |  | $ | 31.80 |  |  | $ | 30.93 |  |  | $ | 29.95 |
Averages |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 16,477,246 |  |  | $ | 15,965,485 |  |  | $ | 15,148,488 |  |  | $ | 13,995,632 |  |  | $ | 13,750,840 |
Interest-earning assets |  | $ | 15,010,392 |  |  | $ | 14,492,435 |  |  | $ | 13,657,719 |  |  | $ | 12,487,550 |  |  | $ | 12,231,779 |
Loans |  | $ | 9,533,655 |  |  | $ | 9,744,336 |  |  | $ | 9,546,099 |  |  | $ | 8,815,755 |  |  | $ | 8,742,246 |
Securities, including equity securities and FHLB stock |  | $ | 4,765,158 |  |  | $ | 3,948,041 |  |  | $ | 3,591,693 |  |  | $ | 3,618,567 |  |  | $ | 3,453,554 |
Deposits |  | $ | 13,864,027 |  |  | $ | 13,318,485 |  |  | $ | 12,220,415 |  |  | $ | 10,622,379 |  |  | $ | 10,959,434 |
Interest-bearing deposits |  | $ | 6,873,405 |  |  | $ | 6,527,695 |  |  | $ | 6,037,107 |  |  | $ | 5,383,203 |  |  | $ | 5,610,850 |
Interest-bearing liabilities |  | $ | 6,954,287 |  |  | $ | 6,659,119 |  |  | $ | 6,514,012 |  |  | $ | 6,375,931 |  |  | $ | 6,058,319 |
Noninterest-bearing deposits |  | $ | 6,990,622 |  |  | $ | 6,790,790 |  |  | $ | 6,183,308 |  |  | $ | 5,239,176 |  |  | $ | 5,348,584 |
Shareholders’ equity |  | $ | 2,311,070 |  |  | $ | 2,293,771 |  |  | $ | 2,254,349 |  |  | $ | 2,193,051 |  |  | $ | 2,170,879 |
Financial Ratios |  |  |  |  |  |  |  |  |  |
Return on average assets |  | 1.42 | % |  | 1.12 | % |  | 0.97 | % |  | 0.42 | % |  | 1.34 | %
Return on average common equity |  | 10.09 | % |  | 7.80 | % |  | 6.49 | % |  | 2.67 | % |  | 8.50 | %
Average equity to average assets |  | 14.03 | % |  | 14.37 | % |  | 14.88 | % |  | 15.67 | % |  | 15.79 | %
Shareholders’ equity to total assets |  | 14.16 | % |  | 14.18 | % |  | 14.30 | % |  | 15.77 | % |  | 15.34 | %
Net interest margin (tax equivalent) |  | 3.52 | % |  | 3.47 | % |  | 3.64 | % |  | 4.00 | % |  | 4.11 | %
Period-end |  |  |  |  |  |  |  |  |  |
Total assets |  | $ | 16,584,779 |  |  | $ | 16,233,424 |  |  | $ | 15,920,944 |  |  | $ | 14,038,503 |  |  | $ | 14,079,524 |
Loans, net of unearned income |  | $ | 9,427,660 |  |  | $ | 9,688,947 |  |  | $ | 9,771,898 |  |  | $ | 8,933,321 |  |  | $ | 8,743,465 |
Allowance for credit losses |  | $ | 149,140 |  |  | $ | 156,968 |  |  | $ | 151,546 |  |  | $ | 122,074 |  |  | $ | 83,968 |
Securities, including equity securities and FHLB stock |  | $ | 5,233,839 |  |  | $ | 4,305,425 |  |  | $ | 3,723,492 |  |  | $ | 3,591,408 |  |  | $ | 3,794,262 |
Deposits |  | $ | 13,869,862 |  |  | $ | 13,600,260 |  |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |
Shareholders’ equity |  | $ | 2,347,607 |  |  | $ | 2,301,981 |  |  | $ | 2,276,755 |  |  | $ | 2,213,602 |  |  | $ | 2,159,962 |
Goodwill |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |  |  | $ | 765,842 |
Other intangible assets, net |  | $ | 26,734 |  |  | $ | 28,745 |  |  | $ | 30,938 |  |  | $ | 33,148 |  |  | $ | 35,458 |
Nonperforming assets |  |  |  |  |  |  |  |  |  |
Nonaccrual loans |  | $ | 34,806 |  |  | $ | 47,231 |  |  | $ | 53,732 |  |  | $ | 47,647 |  |  | $ | 33,060 |
OREO and OPPO |  | 553 |  |  | 623 |  |  | 747 |  |  | 510 |  |  | 552 |
Total nonperforming assets |  | $ | 35,359 |  |  | $ | 47,854 |  |  | $ | 54,479 |  |  | $ | 48,157 |  |  | $ | 33,612 |
Nonperforming loans to period-end loans |  | 0.37 | % |  | 0.49 | % |  | 0.55 | % |  | 0.53 | % |  | 0.38 | %
Nonperforming assets to period-end assets |  | 0.21 | % |  | 0.29 | % |  | 0.34 | % |  | 0.34 | % |  | 0.24 | %
Allowance for credit losses to period-end loans |  | 1.58 | % |  | 1.62 | % |  | 1.55 | % |  | 1.37 | % |  | 0.96 | %
Net loan charge-offs |  | $ | 3,128 |  |  | $ | 1,978 |  |  | $ | 4,028 |  |  | $ | 5,026 |  |  | $ | 306 |

16

LOAN PORTFOLIO COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  | December 31, |  | September 30, |  | June 30, |  | March 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2020 |  | 2020 |  | 2019
Loan Portfolio Composition - Dollars |  | (dollars in thousands)
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | $ | 4,062,313 |  |  | $ | 4,027,035 |  |  | $ | 4,032,643 |  |  | $ | 3,969,974 |  |  | $ | 3,945,853 |
Commercial business |  | 3,597,968 |  |  | 3,836,009 |  |  | 3,859,513 |  |  | 3,169,668 |  |  | 2,989,613 |
Agriculture |  | 779,627 |  |  | 850,290 |  |  | 845,950 |  |  | 754,491 |  |  | 765,371 |
Construction |  | 268,663 |  |  | 273,176 |  |  | 304,015 |  |  | 308,186 |  |  | 361,533 |
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 683,570 |  |  | 665,432 |  |  | 692,837 |  |  | 690,506 |  |  | 637,325 |
Other consumer |  | 35,519 |  |  | 37,005 |  |  | 36,940 |  |  | 40,496 |  |  | 43,770 |
Total loans |  | 9,427,660 |  |  | 9,688,947 |  |  | 9,771,898 |  |  | 8,933,321 |  |  | 8,743,465 |
Less: Allowance for credit losses |  | (149,140) |  |  | (156,968) |  |  | (151,546) |  |  | (122,074) |  |  | (83,968) |
Total loans, net |  | $ | 9,278,520 |  |  | $ | 9,531,979 |  |  | $ | 9,620,352 |  |  | $ | 8,811,247 |  |  | $ | 8,659,497 |
Loans held for sale |  | $ | 26,481 |  |  | $ | 24,407 |  |  | $ | 28,803 |  |  | $ | 9,701 |  |  | $ | 17,718 |

|  | December 31, |  | September 30, |  | June 30, |  | March 31, |  | December 31,
Loan Portfolio Composition - Percentages |  | 2020 |  | 2020 |  | 2020 |  | 2020 |  | 2019
Commercial loans: |  |  |  |  |  |  |  |  |  |
Commercial real estate |  | 43.0 | % |  | 41.5 | % |  | 41.2 | % |  | 44.5 | % |  | 45.1 | %
Commercial business |  | 38.2 | % |  | 39.6 | % |  | 39.5 | % |  | 35.5 | % |  | 34.2 | %
Agriculture |  | 8.3 | % |  | 8.8 | % |  | 8.7 | % |  | 8.4 | % |  | 8.8 | %
Construction |  | 2.8 | % |  | 2.8 | % |  | 3.1 | % |  | 3.4 | % |  | 4.1 | %
Consumer loans: |  |  |  |  |  |  |  |  |  |
One-to-four family residential real estate |  | 7.3 | % |  | 6.9 | % |  | 7.1 | % |  | 7.7 | % |  | 7.3 | %
Other consumer |  | 0.4 | % |  | 0.4 | % |  | 0.4 | % |  | 0.5 | % |  | 0.5 | %
Total loans |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

17

DEPOSIT COMPOSITION |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |
|  | December 31, |  | September 30, |  | June 30, |  | March 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2020 |  | 2020 |  | 2019
Deposit Composition - Dollars |  | (dollars in thousands)
Demand and other noninterest-bearing |  | $ | 6,913,214 |  |  | $ | 6,897,054 |  |  | $ | 6,719,437 |  |  | $ | 5,323,908 |  |  | $ | 5,328,146 |
Money market |  | 2,780,922 |  |  | 2,708,949 |  |  | 2,586,376 |  |  | 2,313,717 |  |  | 2,322,644 |
Interest-bearing demand |  | 1,433,083 |  |  | 1,322,618 |  |  | 1,274,058 |  |  | 1,131,874 |  |  | 1,150,437 |
Savings |  | 1,169,721 |  |  | 1,109,155 |  |  | 1,035,723 |  |  | 905,931 |  |  | 882,050 |
Interest-bearing public funds, other than certificates of deposit |  | 656,273 |  |  | 635,980 |  |  | 623,496 |  |  | 405,810 |  |  | 301,203 |
Certificates of deposit, less than $250,000 |  | 201,805 |  |  | 204,578 |  |  | 210,357 |  |  | 214,449 |  |  | 218,764 |
Certificates of deposit, $250,000 or more |  | 108,935 |  |  | 105,041 |  |  | 104,330 |  |  | 109,659 |  |  | 151,995 |
Certificates of deposit insured by CDARS® |  | 23,105 |  |  | 22,609 |  |  | 17,078 |  |  | 17,171 |  |  | 17,065 |
Brokered certificates of deposit |  | 5,000 |  |  | 5,000 |  |  | 8,427 |  |  | 12,259 |  |  | 12,259 |
Reciprocal money market accounts |  | 577,804 |  |  | 589,276 |  |  | 552,195 |  |  | 377,980 |  |  | 300,158 |
Subtotal |  | 13,869,862 |  |  | 13,600,260 |  |  | 13,131,477 |  |  | 10,812,758 |  |  | 10,684,721 |
Valuation adjustment resulting from acquisition accounting |  | — |  |  | — |  |  | — |  |  | (2) |  |  | (13) |
Total deposits |  | $ | 13,869,862 |  |  | $ | 13,600,260 |  |  | $ | 13,131,477 |  |  | $ | 10,812,756 |  |  | $ | 10,684,708 |

|  | December 31, |  | September 30, |  | June 30, |  | March 31, |  | December 31,
Deposit Composition - Percentages |  | 2020 |  | 2020 |  | 2020 |  | 2020 |  | 2019
Demand and other noninterest-bearing |  | 49.8 | % |  | 50.7 | % |  | 51.2 | % |  | 49.2 | % |  | 49.9 | %
Money market |  | 20.1 | % |  | 19.9 | % |  | 19.7 | % |  | 21.4 | % |  | 21.7 | %
Interest-bearing demand |  | 10.3 | % |  | 9.7 | % |  | 9.7 | % |  | 10.5 | % |  | 10.8 | %
Savings |  | 8.4 | % |  | 8.2 | % |  | 7.9 | % |  | 8.4 | % |  | 8.3 | %
Interest-bearing public funds, other than certificates of deposit |  | 4.7 | % |  | 4.7 | % |  | 4.7 | % |  | 3.8 | % |  | 2.8 | %
Certificates of deposit, less than $250,000 |  | 1.5 | % |  | 1.5 | % |  | 1.6 | % |  | 2.0 | % |  | 2.0 | %
Certificates of deposit, $250,000 or more |  | 0.8 | % |  | 0.8 | % |  | 0.8 | % |  | 1.0 | % |  | 1.4 | %
Certificates of deposit insured by CDARS® |  | 0.2 | % |  | 0.2 | % |  | 0.1 | % |  | 0.2 | % |  | 0.2 | %
Brokered certificates of deposit |  | — | % |  | — | % |  | 0.1 | % |  | 0.1 | % |  | 0.1 | %
Reciprocal money market accounts |  | 4.2 | % |  | 4.3 | % |  | 4.2 | % |  | 3.4 | % |  | 2.8 | %
Total |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %

18

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | December 31, 2020 |  | December 31, 2019
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,533,655 |  |  | $ | 108,576 |  |  | 4.53 | % |  | $ | 8,742,246 |  |  | $ | 111,754 |  |  | 5.07 | %
Taxable securities |  | 4,207,607 |  |  | 23,045 |  |  | 2.18 | % |  | 3,011,521 |  |  | 20,074 |  |  | 2.64 | %
Tax exempt securities (2) |  | 557,551 |  |  | 3,377 |  |  | 2.41 | % |  | 442,033 |  |  | 3,163 |  |  | 2.84 | %
Interest-earning deposits with banks |  | 711,579 |  |  | 181 |  |  | 0.10 | % |  | 35,979 |  |  | 153 |  |  | 1.69 | %
Total interest-earning assets |  | 15,010,392 |  |  | 135,179 |  |  | 3.58 | % |  | 12,231,779 |  |  | 135,144 |  |  | 4.38 | %
Other earning assets |  | 239,798 |  |  |  |  |  |  | 231,456 |  |  |  |  |
Noninterest-earning assets |  | 1,227,056 |  |  |  |  |  |  | 1,287,605 |  |  |  |  |
Total assets |  | $ | 16,477,246 |  |  |  |  |  |  | $ | 13,750,840 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts |  | $ | 3,395,343 |  |  | $ | 732 |  |  | 0.09 | % |  | $ | 2,649,404 |  |  | $ | 2,277 |  |  | 0.34 | %
Interest-bearing demand |  | 1,359,222 |  |  | 293 |  |  | 0.09 | % |  | 1,065,531 |  |  | 446 |  |  | 0.17 | %
Savings accounts |  | 1,141,165 |  |  | 36 |  |  | 0.01 | % |  | 888,895 |  |  | 47 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit |  | 638,107 |  |  | 310 |  |  | 0.19 | % |  | 616,938 |  |  | 2,413 |  |  | 1.55 | %
Certificates of deposit |  | 339,568 |  |  | 255 |  |  | 0.30 | % |  | 390,082 |  |  | 626 |  |  | 0.64 | %
Total interest-bearing deposits |  | 6,873,405 |  |  | 1,626 |  |  | 0.09 | % |  | 5,610,850 |  |  | 5,809 |  |  | 0.41 | %
FHLB advances and FRB borrowings |  | 7,420 |  |  | 73 |  |  | 3.91 | % |  | 379,975 |  |  | 1,899 |  |  | 1.98 | %
Subordinated debentures |  | 35,115 |  |  | 467 |  |  | 5.29 | % |  | 35,299 |  |  | 467 |  |  | 5.25 | %
Other borrowings and interest-bearing liabilities |  | 38,347 |  |  | 18 |  |  | 0.19 | % |  | 32,195 |  |  | 117 |  |  | 1.44 | %
Total interest-bearing liabilities |  | 6,954,287 |  |  | 2,184 |  |  | 0.12 | % |  | 6,058,319 |  |  | 8,292 |  |  | 0.54 | %
Noninterest-bearing deposits |  | 6,990,622 |  |  |  |  |  |  | 5,348,584 |  |  |  |  |
Other noninterest-bearing liabilities |  | 221,267 |  |  |  |  |  |  | 173,058 |  |  |  |  |
Shareholders’ equity |  | 2,311,070 |  |  |  |  |  |  | 2,170,879 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 16,477,246 |  |  |  |  |  |  | $ | 13,750,840 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 132,995 |  |  |  |  |  |  | $ | 126,852 |  |  |
Net interest margin (tax equivalent) |  | 3.52 | % |  |  |  |  |  | 4.11 | %

__________
(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 $9.1 million and $2.1 million for the three months ended December 31, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.3 million and $2.3 million for the three months ended December 31, 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 December 31, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $709 thousand and $665 thousand for the three months ended December 31, 2020 and 2019, respectively.
19

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Three Months Ended |  | Three Months Ended
|  | December 31, 2020 |  | September 30, 2020
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,533,655 |  |  | $ | 108,576 |  |  | 4.53 | % |  | $ | 9,744,336 |  |  | $ | 106,945 |  |  | 4.37 | %
Taxable securities |  | 4,207,607 |  |  | 23,045 |  |  | 2.18 | % |  | 3,511,690 |  |  | 19,102 |  |  | 2.16 | %
Tax exempt securities (2) |  | 557,551 |  |  | 3,377 |  |  | 2.41 | % |  | 436,351 |  |  | 2,962 |  |  | 2.70 | %
Interest-earning deposits with banks |  | 711,579 |  |  | 181 |  |  | 0.10 | % |  | 800,058 |  |  | 203 |  |  | 0.10 | %
Total interest-earning assets |  | 15,010,392 |  |  | 135,179 |  |  | 3.58 | % |  | 14,492,435 |  |  | 129,212 |  |  | 3.55 | %
Other earning assets |  | 239,798 |  |  |  |  |  |  | 235,735 |  |  |  |  |
Noninterest-earning assets |  | 1,227,056 |  |  |  |  |  |  | 1,237,315 |  |  |  |  |
Total assets |  | $ | 16,477,246 |  |  |  |  |  |  | $ | 15,965,485 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts |  | $ | 3,395,343 |  |  | $ | 732 |  |  | 0.09 | % |  | $ | 3,200,407 |  |  | $ | 947 |  |  | 0.12 | %
Interest-bearing demand |  | 1,359,222 |  |  | 293 |  |  | 0.09 | % |  | 1,296,076 |  |  | 337 |  |  | 0.10 | %
Savings accounts |  | 1,141,165 |  |  | 36 |  |  | 0.01 | % |  | 1,072,472 |  |  | 36 |  |  | 0.01 | %
Interest-bearing public funds, other than certificates of deposit |  | 638,107 |  |  | 310 |  |  | 0.19 | % |  | 621,786 |  |  | 397 |  |  | 0.25 | %
Certificates of deposit |  | 339,568 |  |  | 255 |  |  | 0.30 | % |  | 336,954 |  |  | 288 |  |  | 0.34 | %
Total interest-bearing deposits |  | 6,873,405 |  |  | 1,626 |  |  | 0.09 | % |  | 6,527,695 |  |  | 2,005 |  |  | 0.12 | %
FHLB advances and FRB borrowings |  | 7,420 |  |  | 73 |  |  | 3.91 | % |  | 54,173 |  |  | 166 |  |  | 1.22 | %
Subordinated debentures |  | 35,115 |  |  | 467 |  |  | 5.29 | % |  | 35,161 |  |  | 468 |  |  | 5.30 | %
Other borrowings and interest-bearing liabilities |  | 38,347 |  |  | 18 |  |  | 0.19 | % |  | 42,090 |  |  | 19 |  |  | 0.18 | %
Total interest-bearing liabilities |  | 6,954,287 |  |  | 2,184 |  |  | 0.12 | % |  | 6,659,119 |  |  | 2,658 |  |  | 0.16 | %
Noninterest-bearing deposits |  | 6,990,622 |  |  |  |  |  |  | 6,790,790 |  |  |  |  |
Other noninterest-bearing liabilities |  | 221,267 |  |  |  |  |  |  | 221,805 |  |  |  |  |
Shareholders’ equity |  | 2,311,070 |  |  |  |  |  |  | 2,293,771 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 16,477,246 |  |  |  |  |  |  | $ | 15,965,485 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 132,995 |  |  |  |  |  |  | $ | 126,554 |  |  |
Net interest margin (tax equivalent) |  | 3.52 | % |  |  |  |  |  | 3.47 | %

__________
(1)Nonaccrual loans have been included in the tables as loans carrying a zero yield. Amortized net deferred loan fees and net unearned discounts on acquired loans were included in the interest income calculations. The amortization of net deferred loan fees was $9.1 million and $5.0 million for the three months ended December 31, 2020 and September 30, 2020, respectively. The incremental accretion on acquired loans was $1.3 million and $1.7 million the three months ended December 31, 2020 and September 30, 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 for both the three months ended December 31, 2020 and September 30, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $709 thousand and $622 thousand for the three months ended December 31, 2020 and September 30, 2020, respectively.
20

AVERAGE BALANCES AND RATES |  |  |  |  |  |  |  |  |  |
Columbia Banking System, Inc. |  |  |  |  |  |  |  |  |  |
Unaudited |  |  |  |  |  |  |  |  |  |  |  |
|  | Twelve Months Ended |  | Twelve Months Ended
|  | December 31, 2020 |  | December 31, 2019
|  | Average Balances |  | Interest Earned / Paid |  | Average Rate |  | Average Balances |  | Interest Earned / Paid |  | Average Rate
|  | (dollars in thousands)
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Loans, net (1)(2) |  | $ | 9,411,213 |  |  | $ | 430,923 |  |  | 4.58 | % |  | $ | 8,612,478 |  |  | $ | 453,552 |  |  | 5.27 | %
Taxable securities |  | 3,531,357 |  |  | 81,578 |  |  | 2.31 | % |  | 2,703,423 |  |  | 69,864 |  |  | 2.58 | %
Tax exempt securities (2) |  | 451,561 |  |  | 12,110 |  |  | 2.68 | % |  | 463,689 |  |  | 13,589 |  |  | 2.93 | %
Interest-earning deposits with banks |  | 522,480 |  |  | 661 |  |  | 0.13 | % |  | 58,043 |  |  | 1,312 |  |  | 2.26 | %
Total interest-earning assets |  | 13,916,611 |  |  | $ | 525,272 |  |  | 3.77 | % |  | 11,837,633 |  |  | $ | 538,317 |  |  | 4.55 | %
Other earning assets |  | 235,491 |  |  |  |  |  |  | 231,731 |  |  |  |  |
Noninterest-earning assets |  | 1,249,117 |  |  |  |  |  |  | 1,271,660 |  |  |  |  |
Total assets |  | $ | 15,401,219 |  |  |  |  |  |  | $ | 13,341,024 |  |  |  |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY
Money market accounts |  | $ | 3,043,731 |  |  | $ | 4,381 |  |  | 0.14 | % |  | $ | 2,591,303 |  |  | $ | 10,598 |  |  | 0.41 | %
Interest-bearing demand |  | 1,248,975 |  |  | 1,453 |  |  | 0.12 | % |  | 1,064,145 |  |  | 1,676 |  |  | 0.16 | %
Savings accounts |  | 1,022,388 |  |  | 153 |  |  | 0.01 | % |  | 892,518 |  |  | 183 |  |  | 0.02 | %
Interest-bearing public funds, other than certificates of deposit |  | 544,109 |  |  | 2,003 |  |  | 0.37 | % |  | 440,359 |  |  | 7,244 |  |  | 1.65 | %
Certificates of deposit |  | 348,855 |  |  | 1,377 |  |  | 0.39 | % |  | 395,421 |  |  | 2,445 |  |  | 0.62 | %
Total interest-bearing deposits |  | 6,208,058 |  |  | 9,367 |  |  | 0.15 | % |  | 5,383,746 |  |  | 22,146 |  |  | 0.41 | %
FHLB advances and FRB borrowings |  | 342,721 |  |  | 6,264 |  |  | 1.83 | % |  | 470,082 |  |  | 11,861 |  |  | 2.52 | %
Subordinated debentures |  | 35,184 |  |  | 1,871 |  |  | 5.32 | % |  | 35,368 |  |  | 1,871 |  |  | 5.29 | %
Other borrowings and interest-bearing liabilities |  | 40,862 |  |  | 196 |  |  | 0.48 | % |  | 34,622 |  |  | 669 |  |  | 1.93 | %
Total interest-bearing liabilities |  | 6,626,825 |  |  | $ | 17,698 |  |  | 0.27 | % |  | 5,923,818 |  |  | $ | 36,547 |  |  | 0.62 | %
Noninterest-bearing deposits |  | 6,304,197 |  |  |  |  |  |  | 5,139,941 |  |  |  |  |
Other noninterest-bearing liabilities |  | 206,921 |  |  |  |  |  |  | 160,623 |  |  |  |  |
Shareholders’ equity |  | 2,263,276 |  |  |  |  |  |  | 2,116,642 |  |  |  |  |
Total liabilities & shareholders’ equity |  | $ | 15,401,219 |  |  |  |  |  |  | $ | 13,341,024 |  |  |  |  |
Net interest income (tax equivalent) |  | $ | 507,574 |  |  |  |  |  |  | $ | 501,770 |  |  |
Net interest margin (tax equivalent) |  | 3.65 | % |  |  |  |  |  | 4.24 | %

__________
(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 $21.6 million and $8.4 million for the twelve months ended December 31, 2020 and 2019, respectively. The incremental accretion on acquired loans was $6.2 million and $9.1 million for the twelve months ended December 31, 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 $4.9 million and $5.5 million for the twelve months ended December 31, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $2.5 million and $2.9 million for the twelve months ended December 31, 2020 and 2019, respectively.
21

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 |  | Twelve Months Ended
|  | December 31, |  | September 30, |  | December 31, |  | December 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Operating net interest margin non-GAAP reconciliation: |  | (dollars in thousands)
Net interest income (tax equivalent) (1) |  | $ | 132,995 |  |  | $ | 126,554 |  |  | $ | 126,852 |  |  | $ | 507,574 |  |  | $ | 501,770 |
Adjustments to arrive at operating net interest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Incremental accretion income on acquired loans (2) |  | (1,323) |  |  | (1,665) |  |  | (2,316) |  |  | (6,154) |  |  | (9,086) |
Premium amortization on acquired securities |  | 606 |  |  | 701 |  |  | 1,204 |  |  | 3,409 |  |  | 6,020 |
Interest reversals on nonaccrual loans |  | 146 |  |  | 393 |  |  | 209 |  |  | 2,000 |  |  | 1,671 |
Operating net interest income (tax equivalent) (1) |  | $ | 132,424 |  |  | $ | 125,983 |  |  | $ | 125,949 |  |  | $ | 506,829 |  |  | $ | 500,375 |
Average interest earning assets |  | $ | 15,010,392 |  |  | $ | 14,492,435 |  |  | $ | 12,231,779 |  |  | $ | 13,916,611 |  |  | $ | 11,837,633 |
Net interest margin (tax equivalent) (1) |  | 3.52 | % |  | 3.47 | % |  | 4.11 | % |  | 3.65 | % |  | 4.24 | %
Operating net interest margin (tax equivalent) (1) |  | 3.51 | % |  | 3.46 | % |  | 4.09 | % |  | 3.64 | % |  | 4.23 | %

|  | Three Months Ended |  | Twelve Months Ended
|  | December 31, |  | September 30, |  | December 31, |  | December 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Operating efficiency ratio non-GAAP reconciliation: |  | (dollars in thousands)
Noninterest expense (numerator A) |  | $ | 84,300 |  |  | $ | 85,115 |  |  | $ | 86,978 |  |  | $ | 334,519 |  |  | $ | 345,482 |
Adjustments to arrive at operating noninterest expense: |  |  |  |  |  |  |  |  |  |
Net benefit (cost) of operation of OREO and OPPO |  | (32) |  |  | 160 |  |  | 10 |  |  | 324 |  |  | 714 |
Loss on asset disposals |  | — |  |  | — |  |  | — |  |  | (224) |  |  | (5) |
Business and Occupation (“B&O”) taxes |  | (1,543) |  |  | (1,559) |  |  | (1,234) |  |  | (4,970) |  |  | (5,846) |
Operating noninterest expense (numerator B) |  | $ | 82,725 |  |  | $ | 83,716 |  |  | $ | 85,754 |  |  | $ | 329,649 |  |  | $ | 340,345 |
Net interest income (tax equivalent) (1) |  | $ | 132,995 |  |  | $ | 126,554 |  |  | $ | 126,852 |  |  | $ | 507,574 |  |  | $ | 501,770 |
Noninterest income |  | 23,562 |  |  | 22,472 |  |  | 21,807 |  |  | 104,500 |  |  | 97,181 |
Bank owned life insurance tax equivalent adjustment |  | 430 |  |  | 422 |  |  | 439 |  |  | 1,706 |  |  | 1,673 |
Total revenue (tax equivalent) (denominator A) |  | $ | 156,987 |  |  | $ | 149,448 |  |  | $ | 149,098 |  |  | $ | 613,780 |  |  | $ | 600,624 |
Operating net interest income (tax equivalent) (1) |  | $ | 132,424 |  |  | $ | 125,983 |  |  | $ | 125,949 |  |  | $ | 506,829 |  |  | $ | 500,375 |
Adjustments to arrive at operating noninterest income (tax equivalent): |  |  |  |  |  |  |  |  |  |
Investment securities gain, net |  | (36) |  |  | — |  |  | — |  |  | (16,710) |  |  | (2,132) |
Gain on asset disposals |  | (381) |  |  | (247) |  |  | (530) |  |  | (675) |  |  | (6,634) |
Operating noninterest income (tax equivalent) |  | 23,575 |  |  | 22,647 |  |  | 21,716 |  |  | 88,821 |  |  | 90,088 |
Total operating revenue (tax equivalent) (denominator B) |  | $ | 155,999 |  |  | $ | 148,630 |  |  | $ | 147,665 |  |  | $ | 595,650 |  |  | $ | 590,463 |
Efficiency ratio (tax equivalent) (numerator A/denominator A) |  | 53.70 | % |  | 56.95 | % |  | 58.34 | % |  | 54.50 | % |  | 57.52 | %
Operating efficiency ratio (tax equivalent) (numerator B/denominator B) |  | 53.03 | % |  | 56.33 | % |  | 58.07 | % |  | 55.34 | % |  | 57.64 | %

__________
(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 $1.9 million, $1.8 million, and $2.0 million for the three months ended December 31, 2020, September 30, 2020, and December 31, 2019, respectively; and $7.5 million and $8.4 million for the twelve months ended December 31, 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.
22

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 |  | Twelve Months Ended
|  | December 31, |  | September 30, |  | December 31, |  | December 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Pre-tax, pre-provision income: |  | (in thousands)
Income before income taxes |  | $ | 75,074 |  |  | $ | 54,683 |  |  | $ | 58,032 |  |  | $ | 192,392 |  |  | $ | 241,611 |
Provision (recapture) for credit losses |  | (4,700) |  |  | 7,400 |  |  | 1,614 |  |  | 77,700 |  |  | 3,493 |
Pre-tax, pre-provision income |  | $ | 70,374 |  |  | $ | 62,083 |  |  | $ | 59,646 |  |  | $ | 270,092 |  |  | $ | 245,104 |

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:

|  | December 31, |  | September 30, |  | December 31,
|  | 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) |  | $ | 2,347,607 |  |  | $ | 2,301,981 |  |  | $ | 2,159,962 |
Adjustments to arrive at tangible common equity: |  |  |  |  |  |
Goodwill |  | (765,842) |  |  | (765,842) |  |  | (765,842) |
Other intangible assets, net |  | (26,734) |  |  | (28,745) |  |  | (35,458) |
Tangible common equity (numerator B) |  | $ | 1,555,031 |  |  | $ | 1,507,394 |  |  | $ | 1,358,662 |
Total assets (denominator A) |  | $ | 16,584,779 |  |  | $ | 16,233,424 |  |  | $ | 14,079,524 |
Adjustments to arrive at tangible assets: |  |  |  |  |  |
Goodwill |  | (765,842) |  |  | (765,842) |  |  | (765,842) |
Other intangible assets, net |  | (26,734) |  |  | (28,745) |  |  | (35,458) |
Tangible assets (denominator B) |  | $ | 15,792,203 |  |  | $ | 15,438,837 |  |  | $ | 13,278,224 |
Shareholders’ equity to total assets (numerator A/denominator A) |  | 14.16 | % |  | 14.18 | % |  | 15.34 | %
Tangible common shareholders’ equity to tangible assets (numerator B/denominator B) |  | 9.85 | % |  | 9.76 | % |  | 10.23 | %
Common shares outstanding (denominator C) |  | 71,598 |  |  | 71,613 |  |  | 72,124 |
Book value per common share (numerator A/denominator C) |  | $ | 32.79 |  |  | $ | 32.14 |  |  | $ | 29.95 |
Tangible book value per common share (numerator B/denominator C) |  | $ | 21.72 |  |  | $ | 21.05 |  |  | $ | 18.84 |

23

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:

|  | December 31, |  | September 30, |  | December 31,
|  | 2020 |  | 2020 |  | 2019
Allowance for credit losses to period-end loans ratio non-GAAP reconciliation: |  | (dollars in thousands)
Allowance for credit losses ("ACL") (numerator) |  | $ | 149,140 |  |  | $ | 156,968 |  |  | $ | 83,968 |
Total loans, net of unearned income (denominator A) |  | 9,427,660 |  |  | 9,688,947 |  |  | 8,743,465 |
Less: PPP loans, net of unearned income (0% ACL) |  | 651,585 |  |  | 953,244 |  |  | — |
Total loans, net of PPP loans (denominator B) |  | $ | 8,776,075 |  |  | $ | 8,735,703 |  |  | $ | 8,743,465 |
ACL to period-end loans (numerator / denominator A) |  | 1.58 | % |  | 1.62 | % |  | 0.96 | %
ACL to period-end loans, excluding PPP loans (numerator / denominator B) |  | 1.70 | % |  | 1.80 | % |  | 0.96 | %

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 |  | Twelve Months Ended
|  | December 31, |  | September 30, |  | December 31, |  | December 31, |  | December 31,
|  | 2020 |  | 2020 |  | 2019 |  | 2020 |  | 2019
Return on average tangible common equity non-GAAP reconciliation: |  | (dollars in thousands)
Net income (numerator A) |  | $ | 58,300 |  |  | $ | 44,734 |  |  | $ | 46,129 |  |  | $ | 154,244 |  |  | $ | 194,451 |
Adjustments to arrive at tangible income applicable to common shareholders: |  |  |  |  |  |  |  |  |  |
Amortization of intangibles |  | 2,011 |  |  | 2,193 |  |  | 2,450 |  |  | 8,724 |  |  | 10,479 |
Tax effect on intangible amortization |  | (422) |  |  | (461) |  |  | (515) |  |  | (1,832) |  |  | (2,201) |
Tangible income applicable to common shareholders (numerator B) |  | $ | 59,889 |  |  | $ | 46,466 |  |  | $ | 48,064 |  |  | 161,136 |  |  | $ | 202,729 |
Average shareholders’ equity (denominator A) |  | $ | 2,311,070 |  |  | $ | 2,293,771 |  |  | $ | 2,170,879 |  |  | 2,263,276 |  |  | $ | 2,116,642 |
Adjustments to arrive at average tangible common equity: |  |  |  |  |  |  |  |  |  |
Average intangibles |  | (793,510) |  |  | (795,650) |  |  | (802,446) |  |  | (796,762) |  |  | (806,358) |
Average tangible common equity (denominator B) |  | $ | 1,517,560 |  |  | $ | 1,498,121 |  |  | $ | 1,368,433 |  |  | $ | 1,466,514 |  |  | $ | 1,310,284 |
Return on average common equity (numerator A/denominator A) (1) |  | 10.09 | % |  | 7.80 | % |  | 8.50 | % |  | 6.82 | % |  | 9.19 | %
Return on average tangible common equity (numerator B/denominator B) (2) |  | 15.79 | % |  | 12.41 | % |  | 14.05 | % |  | 10.99 | % |  | 15.47 | %

__________
(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.
24