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COLUMBIA BANKING SYSTEM, INC. REPORTS FIRST QUARTER 2024 RESULTS
$0.59						$0.65						$23.68						$16.03
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
"Our first quarter results reflect early progress on our targeted actions to improve our financial performance and drive shareholder value,” said Clint Stein, President and CEO. "Enterprise-wide evaluations and targeted changes resulted in tighter expense control and stabilizing deposit costs in the latter part of the quarter. We will continue to exercise prudent expense management, and we expect to see the positive financial impact of near-term initiatives fully reflected in the fourth quarter's expense run rate. Longer-term initiatives will optimize our performance from a revenue, expense, and profitability standpoint. As an organization, Columbia remains laser-focused on regaining our placement as a top-quartile bank across financial metrics as we strive to drive long-term, 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 additional information.

Columbia Banking System, Inc. ("Columbia," "we," or "our") conducted an enterprise-wide evaluation of our operations during the first quarter of 2024. The full-scale review resulted in consolidated positions, simplified reporting and organizational structures, and an improved profitability outlook. These changes are expected to be carried out during the second and third quarters of 2024. Please refer to the Q1 2024 Earnings Presentation for additional details.

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. 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 $423 million for the first quarter of 2024, down $30 million from the prior quarter. The decline reflects higher deposit costs relative to the fourth quarter and lower income earned on investment securities given slower prepayment activity.

Columbia's net interest margin was 3.52% for the first quarter of 2024, down 26 basis points from 3.78% for the fourth quarter of 2023. The contraction was driven by higher average deposit costs, which increased at an accelerated pace through the fourth quarter and into January before stabilizing in the latter part of the first quarter. The cost of interest-bearing deposits increased 34 basis points on a linked-quarter basis to 2.88% for the first quarter of 2024, which compares to 2.90% for the month of March and 2.89% at March 31, 2024. "During the first quarter, we executed a comprehensive review related to how we evaluate and approve deposit pricing," commented Tory Nixon, President of Umpqua Bank. "This resulted in enhanced pricing visibility, which contributed to stability in interest-bearing core deposit rates."

The cost of interest-bearing liabilities benefited from the movement of $1.4 billion in FHLB Advances to the Federal Reserve's Bank Term Funding Program in January, lowering the cost of these funds by approximately 75 basis points. Columbia's cost of interest-bearing liabilities increased 23 basis points on a linked-quarter basis to 3.25% for the first quarter of 2024, which compares to 3.24% for both the month of March and at March 31, 2024. Please refer to the Q1 2024 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 $50 million for the first quarter of 2024, down $15 million from the prior quarter. The decline was driven by quarterly fluctuations in fair value adjustments and mortgage servicing rights ("MSR") hedging activity, which collectively resulted in a net fair value loss of $4 million in the first quarter compared to a net fair value gain of $13 million in the fourth quarter, as detailed in our non-GAAP disclosures. Excluding these items, non-interest income increased by $1 million from the prior quarter.

Non-interest expense was $288 million for the first quarter of 2024, down $50 million from the prior quarter level. Excluding merger-related expense, exit and disposal costs, and accruals for the FDIC special assessment, non-interest expense was $277 million2, down $17 million from the prior quarter due to lower discretionary spending and other expense items compared to elevated expense items in the fourth quarter. Please refer to the Q1 2024 Earnings Presentation for additional expense details.

Total consolidated assets were $52.2 billion as of March 31, 2024, unchanged from December 31, 2023. Cash and cash equivalents was $2.2 billion as of March 31, 2024, also unchanged from December 31, 2023. Including secured off-balance sheet lines of credit, total available liquidity was $18.6 billion as of March 31, 2024, representing 36% of total assets, 45% of total deposits, and 138% of uninsured deposits. Available-for-sale securities, which are held on balance sheet at fair value, were $8.6 billion as of March 31, 2024, a decrease of $213 million relative to December 31, 2023 due to paydowns and a decline in the fair value of the portfolio. Please refer to the Q1 2024 Earnings Presentation for additional details related to our securities portfolio and liquidity position.

2 "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for additional information.

Gross loans and leases were $37.6 billion as of March 31, 2024, an increase of $200 million relative to December 31, 2023. Commercial line utilization and construction project activity were the primary contributors to the 2% annualized loan growth in the quarter. Higher commercial real estate ("CRE") term balances reflect projects that transitioned from construction to permanent financing. Excluding this shift, origination volume during the first quarter was centered in our commercial and owner-occupied CRE portfolios. Please refer to the Q1 2024 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 $41.7 billion as of March 31, 2024, an increase of $99 million relative to December 31, 2023. Customer deposits drove the quarter's increase, enabling a slight reduction in brokered deposits and borrowings. "Our teams are focused on customer deposit generation to reduce wholesale funding sources that create a drag on our earnings power," stated Mr. Nixon. "While inflationary pressures and seasonal patterns affected deposit flows, the teams generated successful momentum through targeted campaigns focused on extraordinary products and service, not price." Please refer to the Q1 2024 Earnings Presentation for additional details related to deposit characteristics and flows.

The allowance for credit losses was $437 million, or 1.16% of loans and leases, as of March 31, 2024, compared to $464 million, or 1.24% of loans and leases, as of December 31, 2023. The provision for credit losses was $17 million for the first quarter of 2024, and it reflects credit migration trends, changes in the economic forecasts used in credit models, charge-off activity, and a change within our Current Expected Credit Losses ("CECL") methodology. During the first quarter, we recalibrated the commercial CECL model to be more reflective of the post-merger loan portfolio after a full year operating as a combined organization. We believe the recalibrated CECL model is more reflective of the quality of our underwriting and borrower profiles.

Net charge-offs were 0.47% of average loans and leases (annualized) for the first quarter of 2024, compared to 0.31% for the fourth quarter of 2023. Net charge-offs in the FinPac portfolio were $24 million in the first quarter, largely unchanged from the fourth quarter, and were up $14 million in the commercial portfolio from the prior quarter, with the increase centered in a single credit. Charge-off activity in other portfolios, inclusive of a small net recovery in the CRE portfolio, was at an insignificant level. As of March 31, 2024, non-performing assets were $144 million, or 0.28% of total assets, compared to $114 million, or 0.22% of total assets, as of December 31, 2023. The quarter's increase was driven primarily by migration in our SBA portfolio and an owner-occupied CRE property. Nonperforming assets as of March 31, 2024 included $43 million of government guarantees. Please refer to the Q1 2024 Earnings Presentation for additional details related to the allowance for credit losses and other credit trends.

Columbia's book value per common share was $23.68 as of March 31, 2024, compared to $23.95 as of December 31, 2023. The linked-quarter change primarily reflects a change in accumulated other comprehensive (loss) income ("AOCI") to $(426) million at March 31, 2024, compared to $(340) million at the prior quarter-end. The change in AOCI is due primarily to an increase in the tax-effected net unrealized loss on available-for-sale securities to $413 million as of March 31, 2024, compared to $322 million as of December 31, 2023. Tangible book value per common share3 was $16.03 as of March 31, 2024, compared to $16.12 as of December 31, 2023.

Columbia's estimated total risk-based capital ratio was 12.0% and its estimated common equity tier 1 risk-based capital ratio was 9.8% as of March 31, 2024, compared to 11.9% and 9.6%, respectively, as of December 31, 2023. Columbia remains above current “well-capitalized” regulatory minimums. "Our total risk-based capital ratio at the parent company is now at our long-term target of 12%," stated Ron Farnsworth, Chief Financial Officer of Columbia. "We expect continued organic earnings generation to drive all capital ratios above target levels over time, increasing our flexibility for capital return in the future." The regulatory capital ratios as of March 31, 2024 are estimates, pending completion and filing of Columbia's regulatory reports.

3 "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for additional information.

Columbia's Q1 2024 Earnings Presentation provides additional disclosure. A copy will be available on our investor relations page: www.columbiabankingsystem.com.

Columbia will host its first quarter 2024 earnings conference call on April 25, 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 first quarter 2024 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/BI5839ee065d874d2fa744be1fe2d2558d

Join the audiocast: https://edge.media-server.com/mmc/p/jc6j526v/

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. Umpqua Bank is the largest bank headquartered in the Northwest and one of the largest banks headquartered in the West with locations in Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah, and Washington. With over $50 billion of assets, Umpqua Bank combines the resources, sophistication and expertise of a national bank with a commitment to deliver superior, personalized service. The bank 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 Advisors and Columbia Trust Company, a division of Umpqua Bank. 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. 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 and uncertainties 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 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) 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) Non-interest expense adjustments were revised subsequent to the Company's reporting of its earnings results for the three months ended December 31, 2023. The revision includes adding the FDIC special assessment to the non-interest expense adjustments, which removes the special assessment from the Company's calculation of operating non-interest expense. The Company views the special assessment as an infrequent expense that is outside the control of the Company.

(6) The operating efficiency ratio has been adjusted to remove B&O taxes and for a tax-equivalent adjustment to BOLI income. The Company views the adjusted operating efficiency ratio as a better representation of its efficiency ratio when compared to other banks as it normalizes for the tax treatment of the adjusted items. The adjustment re-aligns Columbia's calculation of its operating efficiency ratio with its pre-merger calculation.

 

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

(1) Non-accrual and 90+ days past due loans include government guarantees of $43.0 million, $31.6 million, $26.9 million, $26.6 million, and $24.4 million at March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023, respectively.

(2) Excludes certain mortgage loans guaranteed by Ginnie Mae, which Columbia has the unilateral right to repurchase but has not done so, totaling $1.6 million, $1.0 million, $700,000, $1.6 million, and $5.4 million at March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023, and March 31, 2023, respectively.

(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.

(1)Non-accrual loans and leases are included in the average balance.   

(2)Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $982,000 for the three months ended March 31, 2024, as compared to $1.1 million for the three months ended December 31, 2023 and $671,000 for the three months ended March 31, 2023.