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COLUMBIA BANKING SYSTEM, INC. REPORTS FOURTH QUARTER 2023 RESULTS
$0.45						$0.44						$23.95						$16.12
Earnings per diluted common share						Operating earnings per diluted common share 1						Book value per common share						Tangible book value per common share 1

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CEO Commentary
"It was a historic year for Columbia Banking System and Umpqua Bank,” said Clint Stein, President and CEO. “We closed and integrated the transformational combination of the Northwest's premier banking organizations, expanding our footprint to encompass eight Western states as we achieved our cost-savings targets ahead of schedule and above our original projections. With the integration behind us, we are now turning our focus to optimizing performance and driving shareholder value. The fourth quarter was noisy with the FDIC special assessment and some one-time expense items. Our cost of funds is not immune to the higher-rate environment, as we had some 2022 vintage CDs reprice and saw a material increase in public deposits impact our margin. However, we believe neither of these items dilutes the quality of our core deposit base. Our scale, products, and services empower our talented base of associates to win business, which we believe long-term will drive consistent, repeatable performance.”
–Clint Stein, President and CEO of Columbia Banking System, Inc.

Jacquelynne "Jacque" Bohlen, SVP/Investor Relations Director, 503-727-4117, jacquebohlen@umpquabank.com

1 "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for the comparable GAAP measurement.

2 Periods prior to February 28, 2023, have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the merger of 0.5958.

Columbia Banking System, Inc. ("Columbia", "we", or "our") realized $143 million in annualized net merger-related cost-savings as of December 31, 2023, outpacing the $135 million target communicated when the combination was announced. As the integration process is now largely complete, we do not intend to provide future updates on cost savings realizations. However, Columbia has a history of prudent expense management, and the company will continue to evaluate opportunities for improved efficiency as part of the normal course of business to offset franchise development investments. As previously disclosed, Umpqua Bank, the primary subsidiary of Columbia, consolidated five branches during January 2024.

On February 28, 2023, Columbia completed its merger with Umpqua Holdings Corporation ("UHC"), combining the two premier banks in the Northwest to create one of the largest banks headquartered in the West (the "merger"). Columbia's financial results for any periods ended prior to February 28, 2023 reflect UHC results only on a standalone basis. In addition, Columbia's reported financial results for the first quarter of 2023 reflect UHC financial results only until the closing of the merger after the close of business on February 28, 2023. As a result of these two factors, Columbia's financial results for each of the quarters of 2023 and the year ended December 31, 2023 may not be directly comparable to prior reported periods. The number of shares issued and outstanding, earnings per share, additional paid-in capital, and all references to share quantities or metrics of Columbia have been retrospectively restated to reflect the equivalent number of shares issued in the merger as the merger was treated as a reverse merger. Under the reverse acquisition method of accounting, the assets and liabilities of Columbia as of February 28, 2023 ("historical Columbia") were recorded at their respective fair values.

Net interest income was $454 million for the fourth quarter of 2023, down $27 million from the prior quarter. The decline reflects higher deposit costs that more than offset a decline in the cost of wholesale borrowings.

Columbia's net interest margin was 3.78% for the fourth quarter of 2023, down 13 basis points from 3.91% for the third quarter of 2023. The cost of interest-bearing deposits increased 53 basis points on a linked-quarter basis to 2.54% for the fourth quarter of 2023, which compares to 2.71% for the month of December and 2.75% at December 31, 2023. Deposit costs were impacted by the full quarter's run rate of brokered deposits added during the third quarter to replace maturing FHLB advances. Further, higher public deposit balances, which reflect seasonal tax-related trends and a focused effort to attract relationship-based public funds in local communities as we work to reduce wholesale funding, also had an impact. Public balances tend to carry a higher interest rate than most other non-maturity deposit balances. Time deposits also contributed to the quarter's increased cost of deposits as many maturing balances repriced over 200 basis points higher at the expiration of their 12- and 13-month terms. Columbia's cost of interest-bearing liabilities increased 30 basis points on a linked-quarter basis to 3.02% for the fourth quarter of 2023, which compares to 3.15% for the month of December and 3.19% at December 31, 2023. A reduction in the balance of average wholesale borrowings resulted in a smaller increase in the cost of interest-bearing liabilities compared to interest-bearing deposits. Please refer to the Q4 2023 Earnings Presentation for additional net interest margin change details and interest rate sensitivity information as well as to our non-GAAP disclosures in this press release for the impact of purchase accounting accretion and amortization on individual line items.

Non-interest income was $66 million for the fourth quarter of 2023, up $22 million from the prior quarter. A $28 million favorable change in fair value adjustments and mortgage servicing rights ("MSR") hedging activity reflects a net fair value gain of $13 million in the fourth quarter, compared to a net fair value loss of $15 million in the third quarter, as detailed in our non-GAAP disclosures. This benefit was partially offset by lower mortgage servicing income following the September 30, 2023 sale of approximately one-third of Columbia's MSR assets, which reduced the serviced loan portfolio by an equivalent amount.

Non-interest expense was $337 million for the fourth quarter of 2023, up $33 million from the prior quarter. The increase was driven by a recorded $33 million expense for the special assessment from the FDIC to replenish the Deposit Insurance Fund following bank closures earlier in 2023. The fourth quarter was also impacted by other elevated expense items that offset a $12 million decline in merger-related expense, which was $7 million in the fourth quarter. Please refer to the Q4 2023 Earnings Presentation for additional expense details, including an update on realized merger-related cost-savings through December 31, 2023.

Total consolidated assets were $52.2 billion as of December 31, 2023, essentially unchanged from September 30, 2023. Cash and cash equivalents was $2.2 billion as of December 31, 2023, a decrease of $241 million relative to September 30, 2023. Including secured off-balance sheet lines of credit, total available liquidity was $18.7 billion as of December 31, 2023, representing 36% of total assets, 45% of total deposits, and 138% of uninsured deposits. Available for sale ("AFS") securities, which are held on balance sheet at fair value, were $8.8 billion as of December 31, 2023, an increase of $326 million relative to September 30, 2023, as an increase in the fair value of the portfolio and accretion of the discount on historical Columbia securities more than offset paydowns. Columbia did not purchase any securities during the fourth quarter. Please refer to the Q4 2023 Earnings Presentation for additional details related to our securities portfolio and liquidity position.

Gross loans and leases were $37.4 billion as of December 31, 2023, an increase of $271 million relative to September 30, 2023. "Higher outstanding commercial term and line balances and other relationship-driven expansion contributed to 3% annualized loan growth in the fourth quarter," stated Chris Merrywell, President of Umpqua Bank. "Our bankers remain laser-focused on generating business founded through relationships that drive balanced growth." Please refer to the Q4 2023 Earnings Presentation for additional details related to our loan portfolio, which include underwriting characteristics, the composition of our commercial portfolios, and disclosure related to our office portfolio.

Total deposits were $41.6 billion as of December 31, 2023, essentially unchanged from September 30, 2023. "While total deposit balances were stable between September and December, the mix reflects a shift into interest-bearing demand accounts," commented Mr. Merrywell. "Non-interest bearing balance changes continue to reflect customers' use of cash, which includes tax payments and lower escrow balances during the fourth quarter. Our targeted efforts to expand our network of public deposits throughout our communities helped offset seasonal customer declines without the use of wholesale funding." Please refer to the Q4 2023 Earnings Presentation for additional details related to deposit characteristics and flows.

The allowance for credit losses was $464 million, or 1.24% of loans and leases, as of December 31, 2023, compared to $438 million, or 1.18% of loans and leases, as of September 30, 2023. The provision for credit losses was $55 million for the fourth quarter of 2023, and it reflects changes in the economic forecasts used in credit models and portfolio migration trends. Please refer to the Q4 2023 Earnings Presentation for additional details related to the allowance for credit losses and other credit trends.

Net charge-offs were 0.31% of average loans and leases (annualized) for the fourth quarter of 2023, compared to 0.25% for the third quarter of 2023. Net charge-off activity continued to be centered in the FinPac portfolio as bank charge-off activity was low at 0.06% of average bank loans. As of December 31, 2023, non-performing assets were $114 million, or 0.22% of total assets, compared to $106 million, or 0.20% of total assets, as of September 30, 2023.

As of December 31, 2023, Columbia's book value per common share increased to $23.95, compared to $22.21 at September 30, 2023. The linked-quarter change in book value primarily reflects a change in accumulated other comprehensive (loss) income ("AOCI") to $(340) million at December 31, 2023, compared to $(680) million at the prior quarter-end. The change in AOCI is due primarily to a decrease in the tax-effected net unrealized loss on AFS securities to $322 million as of December 31, 2023, compared to $650 million as of September 30, 2023. As of December 31, 2023, 54% of the AFS securities portfolio was in an unrealized gain position. Tangible book value per common share1 correspondingly increased to $16.12, compared to $14.22 at September 30, 2023.

Columbia's estimated total risk-based capital ratio was 11.8% and its estimated common equity tier 1 risk-based capital ratio was 9.6% as of December 31, 2023, compared to 11.6% and 9.5%, respectively, as of September 30, 2023. Columbia remains above current “well-capitalized” regulatory minimums. "Our regulatory capital ratios continued to expand in the fourth quarter," stated Ron Farnsworth, Chief Financial Officer of Columbia. "We expect our capital position to continue to build over time, supporting our franchise expansion and increasing flexibility for capital return." The regulatory capital ratios as of December 31, 2023 are estimates, pending completion and filing of Columbia's regulatory reports.

1 "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for the comparable GAAP measurement.

Columbia's Q4 2023 Earnings Presentation provides additional disclosure. A copy will be available on our investor relations page: www.columbiabankingsystem.com.

Columbia will host its fourth quarter 2023 earnings conference call on January 24, 2024, at 2:00 p.m. PT (5:00 p.m. ET). During the call, Columbia's management will provide an update on recent activities and discuss its fourth quarter 2023 financial results. Participants may register for the call using the below link to receive dial-in details and their own unique PINs or join the audiocast. It is recommended you join 10 minutes prior to the start time.

Register for the call: https://register.vevent.com/register/BI2ed0e3ce03e94a7a968c1bbb26fa939c

Join the audiocast: https://edge.media-server.com/mmc/p/eo4z866c/

Access the replay through Columbia's investor relations page: www.columbiabankingsystem.com

Columbia (Nasdaq: COLB) is headquartered in Tacoma, Washington and is the parent company of Umpqua Bank, an award-winning western U.S. regional bank based in Lake Oswego, Oregon. In March of 2023, Columbia and Umpqua combined two of the Pacific Northwest's premier financial institutions under the Umpqua Bank brand to create one of the largest banks headquartered in the West and a top-30 U.S. bank. With over $50 billion of assets, Umpqua Bank combines the resources, sophistication and expertise of a national bank with a commitment to deliver personalized service at scale. The bank operates in Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah, and Washington and supports consumers and businesses through a full suite of services, including retail and commercial banking; Small Business Administration lending; institutional and corporate banking; and equipment leasing. Umpqua Bank customers also have access to comprehensive investment and wealth management expertise as well as healthcare and private banking through Columbia Wealth Management and Columbia Trust Company, a subsidiary of Columbia. Learn more at www.columbiabankingsystem.com.

This press release includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings with the Securities and Exchange Commission (the "SEC"). You should not place undue reliance on forward-looking statements, and we undertake no obligation to update any such statements. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "target," "projects," "outlook," "forecast," "will," "may," "could," "should," "can" and similar references to future periods. In this press release we make forward-looking statements about strategic and growth initiatives and the result of such activity. Risks that could cause results to differ from forward-looking statements we make include, without limitation: current and future economic and market conditions, including the effects of declines in housing and commercial real estate prices, high unemployment rates, continued inflation and any recession or slowdown in economic growth particularly in the western United States; economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that could result in increased loan and lease losses, especially those risks associated with concentrations in real estate related loans; our ability to effectively manage problem credits; the impact of bank failures or adverse developments at or news developments concerning other banks on general investor sentiment regarding the liquidity and stability of banks; changes in interest rates that could significantly reduce net interest income and negatively affect asset yields and valuations and funding sources; changes in the scope and cost of FDIC insurance and other coverage; our ability to successfully implement efficiency and operational excellence initiatives; our ability to successfully develop and market new products and technology; changes in laws or regulations; any failure to realize the anticipated benefits of the merger when expected or at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies; the effect of geopolitical instability, including wars, conflicts and terrorist attacks; and natural disasters and other similar unexpected events outside of our control. We also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of Columbia, market conditions, capital requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by Columbia's Board of Directors, and may be subject to regulatory approval or conditions.

(1) Periods prior to February 28, 2023, have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the merger of 0.5958.

(2) Percentage changes greater than +/-500% are considered not meaningful and are presented as "nm."

Columbia Banking System, Inc.
Consolidated Statements of Operations
(Unaudited)
						Twelve months ended												% Change (2)
($ in thousands, except per share data)						Dec 31, 2023						Dec 31, 2022						Year over Year
Interest income:
Loans and leases						$	2,113,615					$	1,050,258					101		%
Interest and dividends on investments:
Taxable						276,841						72,264						283		%
Exempt from federal income tax						24,109						5,351						351		%
Dividends						13,103						438						nm
Temporary investments and interest bearing deposits						111,659						19,706						467		%
Total interest income						2,539,327						1,148,017						121		%
Interest expense:
Deposits						461,654						48,195						nm
Securities sold under agreement to repurchase and federal funds purchased						3,923						997						293		%
Borrowings						242,914						8,920						nm
Junior and other subordinated debentures						37,665						19,889						89		%
Total interest expense						746,156						78,001						nm
Net interest income						1,793,171						1,070,016						68		%
Provision for credit losses						213,199						84,016						154		%
Non-interest income:
Service charges on deposits						65,525						48,365						35		%
Card-based fees						55,263						37,370						48		%
Brokerage revenue						13,471						90						nm
Residential mortgage banking revenue, net						16,789						106,859						(84)		%
Gain on sale of debt securities, net						13						2						nm
Gain (loss) on equity securities, net						2,300						(7,099)						nm
Gain on loan and lease sales, net						4,414						6,696						(34)		%
BOLI income						15,624						8,253						89		%
Other income (loss)						30,528						(1,008)						nm
Total non-interest income						203,927						199,528						2		%
Non-interest expense:
Salaries and employee benefits						616,103						441,226						40		%
Occupancy and equipment, net						183,480						138,451						33		%
Intangible amortization						111,296						4,095						nm
FDIC assessments						71,402						13,964						411		%
Merger-related expense						171,659						17,356						nm
Other expenses						158,760						119,858						32		%
Total non-interest expense						1,312,700						734,950						79		%
Income before provision for income taxes						471,199						450,578						5		%
Provision for income taxes						122,484						113,826						8		%
Net income						$	348,715					$	336,752					4		%
Weighted average basic shares outstanding (1)						195,304						129,277						51		%
Weighted average diluted shares outstanding (1)						195,871						129,732						51		%
Earnings per common share – basic (1)						$	1.79					$	2.60					(31)		%
Earnings per common share – diluted (1)						$	1.78					$	2.60					(32)		%

(1) Periods prior to February 28, 2023, have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the merger of 0.5958.

(2) Percentage changes greater than +/-500% are considered not meaningful and are presented as "nm."

(1) Periods prior to February 28, 2023, have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the merger of 0.5958.

(2) Percentage changes greater than +/-500% are considered not meaningful and are presented as "nm."

(1) See GAAP to Non-GAAP Reconciliation.

(2) Tax exempt interest has been adjusted to a taxable equivalent basis using a 21% tax rate.

(3) Total funding = Total deposits + Total borrowings.

(4) Estimated holding company ratios.

(5) Periods prior to February 28, 2023, have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the merger of 0.5958.

(1) See GAAP to Non-GAAP Reconciliation.

(2) Tax exempt interest has been adjusted to a taxable equivalent basis using a 21% tax rate.

(3) Total funding = Total deposits + Total borrowings.

(4) Periods prior to February 28, 2023, have been restated as a result of the adjustment to common shares outstanding based on the exchange ratio from the merger of 0.5958.

 

(1) Core deposits are defined as total deposits less time deposits greater than $250,000 and all brokered deposits.

(1) Excludes certain mortgage loans guaranteed by Ginnie Mae, which Columbia has the unilateral right to repurchase but has not done so, totaling $1.0 million, $700,000, $1.6 million, $5.4 million, and $6.6 million at December 31, 2023, September 30, 2023, June 30, 2023, March 31, 2023, and December 31, 2022, respectively.

(2) Percentage changes greater than +/-500% are considered not meaningful and are presented as "nm."

(1) For the quarter ended March 31, 2023, the provision for credit losses on loans and leases includes $88.4 million initial provision related to non-PCD loans acquired during the period.

(2) Percentage changes greater than +/-500% are considered not meaningful and are presented as "nm."