PR Newswire | Jan 28, 2021 09:03AM EST

Quarterly Cash Dividend

01/28 08:00 CST

Columbia Banking System Announces Fourth Quarter and Full Year 2020 Results and Quarterly Cash Dividend TACOMA, Wash., Jan. 28, 2021

TACOMA, Wash., Jan. 28, 2021 /PRNewswire/ --

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

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."

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.

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.

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,September 30,December 31,December 31,December 31, 2020 2020 2019 2020 2019

(in thousands)

Provision (recapture) for $(1,300) $800 $(150) $3,300 $(900) unfunded loan commitments



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.

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, 2020September 30, 2020December 31, 2020

Paycheck Protection (dollars in thousands) Program loans

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."

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, 2020September 30, 2020December 31, 2019

(in thousands)

Nonaccrual loans:

Commercial loans:

Commercial real $ 7,712 $ 10,362 $ 3,799 estate

Commercial business13,222 19,313 20,937

Agriculture 11,614 14,913 5,023

Construction 217 217 -

Consumer loans:

One-to-four family residential real 2,001 2,405 3,292 estate

Other consumer 40 21 9

Total nonaccrual 34,806 47,231 33,060 loans

OREO and other personal property 553 623 552 owned

Total nonperforming$ 35,359 $ 47,854 $ 33,612 assets

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

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

Three Months Ended Twelve Months Ended

December 31,September 30,December 31,December 31,December 31, 2020 2020 2019 2020 2019

(in thousands)

Beginning $156,968 $151,546 $82,660 $83,968 $83,369 balance

Impact of adopting ASC- - - 1,632 - 326

Charge-offs:

Commercial loans:

Commercial (1,318) - (452) (1,419) (2,160) real estate

Commercial (2,106) (3,164) (2,845) (12,396) (11,290) business

Agriculture (432) (1,269) (51) (6,427) (245)

Construction- - (10) - (242)

Consumer loans:

One-to-four family (58) (16) (192) (84) (1,196) residential real estate

Other (167) (133) (18) (766) (82) consumer

Total (4,081) (4,582) (3,568) (21,092) (15,215) charge-offs

Recoveries:

Commercial loans:

Commercial 39 65 576 131 3,377 real estate

Commercial 643 1,124 1,698 3,438 3,066 business

Agriculture 103 27 110 172 299

Construction21 11 312 709 3,641

Consumer loans:

One-to-four family 78 1,301 549 2,083 1,773 residential real estate

Other 69 76 17 399 165 consumer

Total 953 2,604 3,262 6,932 12,321 recoveries

Net (3,128) (1,978) (306) (14,160) (2,894) charge-offs

Provision (recapture) (4,700) 7,400 1,614 77,700 3,493 for credit losses

Ending $149,140 $156,968 $83,968 $149,140 $83,968 balance



The allowance for credit losses to period-end loans was 1.58% at December 31, 2020 compared to 1.62% at September 30, 2020. Excluding PPP loans, the allowance for credit losses to period-end loan2] 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, 2020September 30, 2020June 30, 2020

(in thousands)

Loan balances subject $146,725 $ 114,372 $1,595,615 to deferral



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.

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

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. Power3 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.

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.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.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.

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)

CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited December 31, September 30,December 31,

2020 2020 2019

(in thousands)

ASSETS

Cash and due from $218,899 $193,823 $223,541 banks

Interest-earning 434,867 736,422 24,132 deposits with banks

Total cash and cash 653,766 930,245 247,673 equivalents

Debt securities available for sale at fair value (amortized cost of 5,210,134 4,281,720 3,746,142 $4,997,529, $4,081,118 and $3,703,096, respectively)

Equity securities 13,425 13,425 -

Federal Home Loan Bank ("FHLB") 10,280 10,280 48,120 stock at cost

Loans held for sale 26,481 24,407 17,718

Loans, net of 9,427,660 9,688,947 8,743,465 unearned income

Less: Allowance for 149,140 156,968 83,968 credit losses

Loans, net 9,278,520 9,531,979 8,659,497

Interest receivable 54,831 56,718 46,839

Premises and 162,059 164,049 165,408 equipment, net

Other real estate 553 623 552 owned

Goodwill 765,842 765,842 765,842

Other intangible 26,734 28,745 35,458 assets, net

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 73,859 26,966 64,437 repurchase

Subordinated 35,092 35,139 35,277 debentures

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 182,195 177,601 40,367 income

Treasury stock at 2,184 2,184 1,453 (70,834) (70,834) (50,834) cost

Total shareholders' 2,347,607 2,301,981 2,159,962 equity

Total liabilities and shareholders' $16,584,779$16,233,424$14,079,524equity

CONSOLIDATED STATEMENTS OF INCOME

Columbia Banking Three Months Ended Twelve Months Ended System, Inc.

Unaudited December September 30,December December 31,December 31, 31, 31,

2020 2020 2019 2020 2019

Interest (in thousands except per share amounts) Income

Loans $107,402$105,739 $110,384$426,003 $448,041

Taxable 23,045 19,102 20,074 81,578 69,864 securities

Tax-exempt 2,668 2,340 2,498 9,567 10,735 securities

Deposits in 181 203 153 661 1,312 banks

Total interest 133,296 127,384 133,109 517,809 529,952 income

Interest Expense

Deposits 1,626 2,005 5,809 9,367 22,146

FHLB advances and Federal 73 166 1,899 6,264 11,861 Reserve Bank ("FRB") borrowings

Subordinated467 468 467 1,871 1,871 debentures

Other 18 19 117 196 669 borrowings

Total interest 2,184 2,658 8,292 17,698 36,547 expense

Net Interest131,112 124,726 124,817 500,111 493,405 Income

Provision (recapture) (4,700) 7,400 1,614 77,700 3,493 for credit losses

Net interest income after provision 135,812 117,326 123,203 422,411 489,912 (recapture) for credit losses

Noninterest Income

Deposit account and treasury 6,481 6,658 8,665 27,019 35,695 management fees

Card revenue3,497 3,834 3,767 13,928 15,198

Financial services and3,349 3,253 3,191 12,830 12,799 trust revenue

Loan revenue7,960 6,645 3,625 24,802 13,465

Bank owned life 1,619 1,585 1,650 6,418 6,294 insurance

Investment securities 36 - - 16,710 2,132 gains, net

Other 620 497 909 2,793 11,598

Total noninterest 23,562 22,472 21,807 104,500 97,181 income

Noninterest Expense

Compensation and employee53,704 55,133 54,308 209,722 212,867 benefits

Occupancy 9,270 8,734 9,010 36,013 35,176

Data 4,566 4,510 4,792 19,370 19,164 processing

Legal and professional3,573 3,000 4,835 12,158 21,645 fees

Amortization of 2,011 2,193 2,450 8,724 10,479 intangibles

Business and Occupation 1,543 1,559 1,234 4,970 5,846 ("B&O") taxes

Advertising and 1,644 680 1,329 4,466 4,925 promotion

Regulatory 1,062 826 18 2,956 1,920 premiums

Net cost (benefit) of operation of33 (160) (10) (315) (692) other real estate owned

Other 6,894 8,640 9,012 36,455 34,152

Total noninterest 84,300 85,115 86,978 334,519 345,482 expense

Income before 75,074 54,683 58,032 192,392 241,611 income taxes

Provision for income 16,774 9,949 11,903 38,148 47,160 taxes

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$0.28 $0.28 $0.28 $1.12 $1.12 common share - regular

Dividends declared per- - - 0.22 0.28 common share - special

Dividends declared per$0.28 $0.28 $0.28 $1.34 $1.40 common share - total

Weighted average number of 70,732 70,726 71,238 70,835 71,999 common shares outstanding

Weighted average number of diluted 70,838 70,762 71,310 70,880 72,032 common shares outstanding

FINANCIAL STATISTICS

Columbia Banking Three Months Ended Twelve Months Ended System, Inc.

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 $(4,700) $7,400 $1,614 $77,700 $3,493 credit losses

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 $21.72 $21.05 $18.84 $21.72 $18.84 (1)

Averages

Total assets $16,477,246 $15,965,485 $13,750,840 $15,401,219 $13,341,024

Interest-earning $15,010,392 $14,492,435 $12,231,779 $13,916,611 $11,837,633 assets

Loans $9,533,655 $9,744,336 $8,742,246 $9,411,213 $8,612,478

Securities, including equity $4,765,158 $3,948,041 $3,453,554 $3,982,918 $3,167,112 securities and FHLB stock

Deposits $13,864,027 $13,318,485 $10,959,434 $12,512,255 $10,523,687

Interest-bearing $6,873,405 $6,527,695 $5,610,850 $6,208,058 $5,383,746 deposits

Interest-bearing $6,954,287 $6,659,119 $6,058,319 $6,626,825 $5,923,818 liabilities

Noninterest-bearing$6,990,622 $6,790,790 $5,348,584 $6,304,197 $5,139,941 deposits

Shareholders' $2,311,070 $2,293,771 $2,170,879 $2,263,276 $2,116,642 equity

Financial Ratios

Return on average 1.42 %1.12 %1.34 %1.00 %1.46 %assets

Return on average 10.09 %7.80 %8.50 %6.82 %9.19 %common equity

Return on average tangible common 15.79 %12.41 %14.05 %10.99 %15.47 %equity (1)

Average equity to 14.03 %14.37 %15.79 %14.70 %15.87 %average assets

Shareholders' equity to total 14.16 %14.18 %15.34 %14.16 %15.34 %assets

Tangible common shareholders' 9.85 %9.76 %10.23 %9.85 %10.23 %equity to tangible assets (1)

Net interest margin3.52 %3.47 %4.11 %3.65 %4.24 %(tax equivalent)

Efficiency ratio (tax equivalent) 53.70 %56.95 %58.34 %54.50 %57.52 %(2)

Operating efficiency ratio 53.03 %56.33 %58.07 %55.34 %57.64 %(tax equivalent) (1)

Noninterest expense2.05 %2.13 %2.53 %2.17 %2.59 %ratio

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 $9,427,660 $9,688,947 $8,743,465 unearned income

Allowance for $149,140 $156,968 $83,968 credit losses

Securities, including equity $5,233,839 $4,305,425 $3,794,262 securities and FHLB stock

Deposits $13,869,862 $13,600,260 $10,684,708

Shareholders' $2,347,607 $2,301,981 $2,159,962 equity

Nonperforming assets

Nonaccrual loans $34,806 $47,231 $33,060

Other real estate owned ("OREO") and other personal 553 623 552 property owned ("OPPO")

Total nonperforming$35,359 $47,854 $33,612 assets

Nonperforming loans0.37 %0.49 %0.38 % to period-end loans

Nonperforming assets to 0.21 %0.29 %0.24 % period-end assets

Allowance for credit losses to 1.58 %1.62 %0.96 % period-end loans

Net loan charge-offs (for $3,128 $1,978 $306 the three months ended)

This is a non-GAAP measure. See section titled "Non-GAAP Financial Measures"(1) 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.

QUARTERLY FINANCIAL STATISTICS

Columbia Banking Three Months Ended System, Inc.

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 $(4,700) $7,400 $33,500 $41,500 $1,614 credit losses

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 $15,010,392 $14,492,435 $13,657,719 $12,487,550 $12,231,779 assets

Loans $9,533,655 $9,744,336 $9,546,099 $8,815,755 $8,742,246

Securities, including equity $4,765,158 $3,948,041 $3,591,693 $3,618,567 $3,453,554 securities and FHLB stock

Deposits $13,864,027 $13,318,485 $12,220,415 $10,622,379 $10,959,434

Interest-bearing $6,873,405 $6,527,695 $6,037,107 $5,383,203 $5,610,850 deposits

Interest-bearing $6,954,287 $6,659,119 $6,514,012 $6,375,931 $6,058,319 liabilities

Noninterest-bearing$6,990,622 $6,790,790 $6,183,308 $5,239,176 $5,348,584 deposits

Shareholders' $2,311,070 $2,293,771 $2,254,349 $2,193,051 $2,170,879 equity

Financial Ratios

Return on average 1.42 %1.12 %0.97 %0.42 %1.34 %assets

Return on average 10.09 %7.80 %6.49 %2.67 %8.50 %common equity

Average equity to 14.03 %14.37 %14.88 %15.67 %15.79 %average assets

Shareholders' equity to total 14.16 %14.18 %14.30 %15.77 %15.34 %assets

Net interest margin3.52 %3.47 %3.64 %4.00 %4.11 %(tax equivalent)

Period-end

Total assets $16,584,779 $16,233,424 $15,920,944 $14,038,503 $14,079,524

Loans, net of $9,427,660 $9,688,947 $9,771,898 $8,933,321 $8,743,465 unearned income

Allowance for $149,140 $156,968 $151,546 $122,074 $83,968 credit losses

Securities, including equity $5,233,839 $4,305,425 $3,723,492 $3,591,408 $3,794,262 securities and FHLB stock

Deposits $13,869,862 $13,600,260 $13,131,477 $10,812,756 $10,684,708

Shareholders' $2,347,607 $2,301,981 $2,276,755 $2,213,602 $2,159,962 equity

Goodwill $765,842 $765,842 $765,842 $765,842 $765,842

Other intangible $26,734 $28,745 $30,938 $33,148 $35,458 assets, net

Nonperforming assets

Nonaccrual loans $34,806 $47,231 $53,732 $47,647 $33,060

OREO and OPPO 553 623 747 510 552

Total nonperforming$35,359 $47,854 $54,479 $48,157 $33,612 assets

Nonperforming loans0.37 %0.49 %0.55 %0.53 %0.38 %to period-end loans

Nonperforming assets to 0.21 %0.29 %0.34 %0.34 %0.24 %period-end assets

Allowance for credit losses to 1.58 %1.62 %1.55 %1.37 %0.96 %period-end loans

Net loan $3,128 $1,978 $4,028 $5,026 $306 charge-offs

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 (dollars in thousands) Composition - Dollars

Commercial loans:

Commercial $4,062,313$ 4,027,035$4,032,643$3,969,974$3,945,853real estate

Commercial 3,597,968 3,836,009 3,859,513 3,169,668 2,989,613 business

Agriculture 779,627 850,290 845,950 754,491 765,371

Construction268,663 273,176 304,015 308,186 361,533

Consumer loans:

One-to-four family 683,570 665,432 692,837 690,506 637,325 residential real estate

Other 35,519 37,005 36,940 40,496 43,770 consumer

Total loans 9,427,660 9,688,947 9,771,898 8,933,321 8,743,465

Less: Allowance (149,140) (156,968) (151,546) (122,074) (83,968) for credit losses

Total loans,$9,278,520$ 9,531,979$9,620,352$8,811,247$8,659,497net

Loans held $26,481 $ 24,407 $28,803 $9,701 $17,718 for sale

December 31,September 30,June 30,March 31,December 31,

Loan Portfolio 2020 2020 2020 2020 2019 Composition - Percentages

Commercial loans:

Commercial 43.0 %41.5 % 41.2 % 44.5 %45.1 %real estate

Commercial 38.2 %39.6 % 39.5 % 35.5 %34.2 %business

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 7.3 %6.9 % 7.1 % 7.7 %7.3 %residential real estate

Other 0.4 %0.4 % 0.4 % 0.5 %0.5 %consumer

Total loans 100.0 %100.0 % 100.0% 100.0 %100.0 %

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 in thousands) - Dollars

Demand and other $6,913,214 $6,897,054 $6,719,437 $5,323,908 $5,328,146 noninterest-bearing

Money market 2,780,922 2,708,949 2,586,376 2,313,717 2,322,644

Interest-bearing 1,433,083 1,322,618 1,274,058 1,131,874 1,150,437 demand

Savings 1,169,721 1,109,155 1,035,723 905,931 882,050

Interest-bearing public funds, other656,273 635,980 623,496 405,810 301,203 than certificates of deposit

Certificates of deposit, less than 201,805 204,578 210,357 214,449 218,764 $250,000

Certificates of deposit, $250,000 108,935 105,041 104,330 109,659 151,995 or more

Certificates of deposit insured by 23,105 22,609 17,078 17,171 17,065 CDARS(r)

Brokered certificates of 5,000 5,000 8,427 12,259 12,259 deposit

Reciprocal money 577,804 589,276 552,195 377,980 300,158 market accounts

Subtotal 13,869,862 13,600,260 13,131,477 10,812,758 10,684,721

Valuation adjustment resulting from - - - (2) (13) acquisition accounting

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 Composition2020 2020 2020 2020 2019 - Percentages

Demand and other 49.8 %50.7 % 51.2 % 49.2 %49.9 %noninterest-bearing

Money market 20.1 %19.9 % 19.7 % 21.4 %21.7 %

Interest-bearing 10.3 %9.7 % 9.7 % 10.5 %10.8 %demand

Savings 8.4 %8.2 % 7.9 % 8.4 %8.3 %

Interest-bearing public funds, other4.7 %4.7 % 4.7 % 3.8 %2.8 %than certificates of deposit

Certificates of deposit, less than 1.5 %1.5 % 1.6 % 2.0 %2.0 %$250,000

Certificates of deposit, $250,000 0.8 %0.8 % 0.8 % 1.0 %1.4 %or more

Certificates of deposit insured by 0.2 %0.2 % 0.1 % 0.2 %0.2 %CDARS(r)

Brokered certificates of - %- % 0.1 % 0.1 %0.1 %deposit

Reciprocal money 4.2 %4.3 % 4.2 % 3.4 %2.8 %market accounts

Total 100.0 %100.0 % 100.0% 100.0 %100.0 %

AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited

Three Months Ended Three Months Ended

December 31, 2020 December 31, 2019

Average Interest AverageAverage Interest Average Balances Earned / Rate Balances Earned / Rate Paid Paid

(dollars in thousands)

ASSETS

Loans, net (1)(2) $9,533,655 $108,5764.53% $8,742,246 $111,7545.07%

Taxable securities 4,207,607 23,045 2.18% 3,011,521 20,074 2.64%

Tax exempt 557,551 3,377 2.41% 442,033 3,163 2.84% securities (2)

Interest-earning 711,579 181 0.10% 35,979 153 1.69% deposits with banks

Total interest-earning 15,010,392 135,179 3.58% 12,231,779 135,144 4.38% assets

Other earning 239,798 231,456 assets

Noninterest-earning1,227,056 1,287,605 assets

Total assets $16,477,246 $13,750,840

LIABILITIES AND SHAREHOLDERS' EQUITY

Money market $3,395,343 $732 0.09% $2,649,404 $2,277 0.34% accounts

Interest-bearing 1,359,222 293 0.09% 1,065,531 446 0.17% demand

Savings accounts 1,141,165 36 0.01% 888,895 47 0.02%

Interest-bearing public funds, other638,107 310 0.19% 616,938 2,413 1.55% than certificates of deposit

Certificates of 339,568 255 0.30% 390,082 626 0.64% deposit

Total interest-bearing 6,873,405 1,626 0.09% 5,610,850 5,809 0.41% deposits

FHLB advances and 7,420 73 3.91% 379,975 1,899 1.98% FRB borrowings

Subordinated 35,115 467 5.29% 35,299 467 5.25% debentures

Other borrowings and 38,347 18 0.19% 32,195 117 1.44% interest-bearing liabilities

Total interest-bearing 6,954,287 2,184 0.12% 6,058,319 8,292 0.54% liabilities

Noninterest-bearing6,990,622 5,348,584 deposits

Other noninterest-bearing221,267 173,058 liabilities

Shareholders' 2,311,070 2,170,879 equity

Total liabilities & shareholders' $16,477,246 $13,750,840 equity

Net interest income $132,995 $126,852 (tax equivalent)

Net interest margin 3.52% 4.11% (tax equivalent)

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(1) 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.

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(2) 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.

AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited

Three Months Ended Three Months Ended

December 31, 2020 September 30, 2020

Interest Interest Earned / Average Earned / Average Average Paid Rate Average Paid Rate Balances Balances

(dollars in thousands)

ASSETS

Loans, net (1)(2) $9,533,655 $108,5764.53% $9,744,336 $106,9454.37%

Taxable securities 4,207,607 23,045 2.18% 3,511,690 19,102 2.16%

Tax exempt 557,551 3,377 2.41% 436,351 2,962 2.70% securities (2)

Interest-earning 711,579 181 0.10% 800,058 203 0.10% deposits with banks

Total interest-earning 15,010,392 135,179 3.58% 14,492,435 129,212 3.55% assets

Other earning 239,798 235,735 assets

Noninterest-earning1,227,056 1,237,315 assets

Total assets $16,477,246 $15,965,485

LIABILITIES AND SHAREHOLDERS' EQUITY

Money market $3,395,343 $732 0.09% $3,200,407 $947 0.12% accounts

Interest-bearing 1,359,222 293 0.09% 1,296,076 337 0.10% demand

Savings accounts 1,141,165 36 0.01% 1,072,472 36 0.01%

Interest-bearing public funds, other638,107 310 0.19% 621,786 397 0.25% than certificates of deposit

Certificates of 339,568 255 0.30% 336,954 288 0.34% deposit

Total interest-bearing 6,873,405 1,626 0.09% 6,527,695 2,005 0.12% deposits

FHLB advances and 7,420 73 3.91% 54,173 166 1.22% FRB borrowings

Subordinated 35,115 467 5.29% 35,161 468 5.30% debentures

Other borrowings and 38,347 18 0.19% 42,090 19 0.18% interest-bearing liabilities

Total interest-bearing 6,954,287 2,184 0.12% 6,659,119 2,658 0.16% liabilities

Noninterest-bearing6,990,622 6,790,790 deposits

Other noninterest-bearing221,267 221,805 liabilities

Shareholders' 2,311,070 2,293,771 equity

Total liabilities & shareholders' $16,477,246 $15,965,485 equity

Net interest income $132,995 $126,554 (tax equivalent)

Net interest margin 3.52% 3.47% (tax equivalent)

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(1) 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.

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(2) 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.

AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited

Twelve Months Ended Twelve Months Ended

December 31, 2020 December 31, 2019

Average Interest AverageAverage Interest Average Balances Earned / Rate Balances Earned / Rate Paid Paid

(dollars in thousands)

ASSETS

Loans, net (1)(2) $9,411,213 $430,9234.58% $8,612,478 $453,5525.27%

Taxable securities 3,531,357 81,578 2.31% 2,703,423 69,864 2.58%

Tax exempt 451,561 12,110 2.68% 463,689 13,589 2.93% securities (2)

Interest-earning 522,480 661 0.13% 58,043 1,312 2.26% deposits with banks

Total interest-earning 13,916,611 $525,2723.77% 11,837,633 $538,3174.55% assets

Other earning 235,491 231,731 assets

Noninterest-earning1,249,117 1,271,660 assets

Total assets $15,401,219 $13,341,024

LIABILITIES AND SHAREHOLDERS' EQUITY

Money market $3,043,731 $4,381 0.14% $2,591,303 $10,598 0.41% accounts

Interest-bearing 1,248,975 1,453 0.12% 1,064,145 1,676 0.16% demand

Savings accounts 1,022,388 153 0.01% 892,518 183 0.02%

Interest-bearing public funds, other544,109 2,003 0.37% 440,359 7,244 1.65% than certificates of deposit

Certificates of 348,855 1,377 0.39% 395,421 2,445 0.62% deposit

Total interest-bearing 6,208,058 9,367 0.15% 5,383,746 22,146 0.41% deposits

FHLB advances and 342,721 6,264 1.83% 470,082 11,861 2.52% FRB borrowings

Subordinated 35,184 1,871 5.32% 35,368 1,871 5.29% debentures

Other borrowings and 40,862 196 0.48% 34,622 669 1.93% interest-bearing liabilities

Total interest-bearing 6,626,825 $17,698 0.27% 5,923,818 $36,547 0.62% liabilities

Noninterest-bearing6,304,197 5,139,941 deposits

Other noninterest-bearing206,921 160,623 liabilities

Shareholders' 2,263,276 2,116,642 equity

Total liabilities & shareholders' $15,401,219 $13,341,024 equity

Net interest income $507,574 $501,770 (tax equivalent)

Net interest margin 3.65% 4.24% (tax equivalent)

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(1) 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.

Tax-exempt income is calculated on a tax equivalent basis. The tax equivalent yield adjustment to interest earned on loans was $4.9 million(2) 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.

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(dollars in thousands) non-GAAP reconciliation:

Net interest income (tax $132,995 $126,554 $126,852 $507,574 $501,770 equivalent) (1)

Adjustments to arrive at operating net interest income (tax equivalent):

Incremental accretion income on (1,323) (1,665) (2,316) (6,154) (9,086) acquired loans (2)

Premium amortization on606 701 1,204 3,409 6,020 acquired securities

Interest reversals on 146 393 209 2,000 1,671 nonaccrual loans

Operating net interest income$132,424 $125,983 $125,949 $506,829 $500,375 (tax equivalent) (1)

Average interest $15,010,392 $14,492,435 $12,231,779 $13,916,611 $11,837,633 earning assets

Net interest margin (tax 3.52 %3.47 %4.11 %3.65 %4.24 %equivalent) (1)

Operating net interest margin3.51 %3.46 %4.09 %3.64 %4.23 %(tax equivalent) (1)





Three Months Ended Twelve Months Ended

December 31, September 30, December 31, December 31, December 31,

2020 2020 2019 2020 2019

Operating efficiency (dollars in thousands) ratio non-GAAP reconciliation:

Noninterest expense $84,300 $85,115 $86,978 $334,519 $345,482 (numerator A)

Adjustments to arrive at operating noninterest expense:

Net benefit (cost) of (32) 160 10 324 714 operation of OREO and OPPO

Loss on asset - - - (224) (5) disposals

Business and Occupation ("B&(1,543) (1,559) (1,234) (4,970) (5,846) O") taxes

Operating noninterest $82,725 $83,716 $85,754 $329,649 $340,345 expense (numerator B)



Net interest income (tax $132,995 $126,554 $126,852 $507,574 $501,770 equivalent) (1)

Noninterest 23,562 22,472 21,807 104,500 97,181 income

Bank owned life insurance tax 430 422 439 1,706 1,673 equivalent adjustment

Total revenue (tax $156,987 $149,448 $149,098 $613,780 $600,624 equivalent) (denominator A)



Operating net interest income$132,424 $125,983 $125,949 $506,829 $500,375 (tax equivalent) (1)

Adjustments to arrive at operating noninterest income (tax equivalent):

Investment securities (36) - - (16,710) (2,132) gain, net

Gain on asset (381) (247) (530) (675) (6,634) disposals

Operating noninterest 23,575 22,647 21,716 88,821 90,088 income (tax equivalent)

Total operating revenue (tax $155,999 $148,630 $147,665 $595,650 $590,463 equivalent) (denominator B)

Efficiency ratio (tax equivalent) 53.70 %56.95 %58.34 %54.50 %57.52 %(numerator A/ denominator A)

Operating efficiency ratio (tax 53.03 %56.33 %58.07 %55.34 %57.64 %equivalent) (numerator B/ denominator B)

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) $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.

Beginning January 2020, incremental accretion income on purchased credit(2) 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.

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 SeptemberDecember December December 31, 30, 31, 31, 31,

2020 2020 2019 2020 2019

Pre-tax, pre-provision (in thousands) income:

Income before income$75,074$54,683$58,032$192,392$241,611taxes

Provision (recapture) for (4,700) 7,400 1,614 77,700 3,493 credit losses

Pre-tax, $70,374$62,083$59,646$270,092$245,104pre-provision income

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 (dollars in thousands except per share common share non-GAAP amounts) reconciliation:

Shareholders' equity $2,347,607 $2,301,981 $2,159,962 (numerator A)

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 $1,555,031 $1,507,394 $1,358,662 (numerator B)

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 $15,792,203 $15,438,837 $13,278,224 B)

Shareholders' equity to total assets (numerator A/ 14.16 %14.18 %15.34 %denominator A)

Tangible common shareholders' equity to tangible assets 9.85 %9.76 %10.23 %(numerator B/denominator B)

Common shares outstanding 71,598 71,613 72,124 (denominator C)

Book value per common share $32.79 $32.14 $29.95 (numerator A/denominator C)

Tangible book value per common share (numerator B/ $21.72 $21.05 $18.84 denominator C)

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 (dollars in thousands) reconciliation:

Allowance for credit losses $149,140 $156,968 $83,968 ("ACL") (numerator)



Total loans, net of unearned 9,427,660 9,688,947 8,743,465 income (denominator A)

Less: PPP loans, net of unearned651,585 953,244 - income (0% ACL)

Total loans, net of PPP loans $8,776,075 $8,735,703 $8,743,465 (denominator B)



ACL to period-end loans 1.58 %1.62 %0.96 %(numerator / denominator A)

ACL to period-end loans, excluding PPP loans (numerator /1.70 %1.80 %0.96 %denominator B)

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(dollars in thousands) equity non-GAAP reconciliation:

Net income $58,300 $44,734 $46,129 $154,244 $194,451 (numerator A)

Adjustments to arrive at tangible income applicable to common shareholders:

Amortization of2,011 2,193 2,450 8,724 10,479 intangibles

Tax effect on intangible (422) (461) (515) (1,832) (2,201) amortization

Tangible income applicable to common $59,889 $46,466 $48,064 161,136 $202,729 shareholders (numerator B)

Average shareholders' $2,311,070 $2,293,771 $2,170,879 2,263,276 $2,116,642 equity (denominator A)

Adjustments to arrive at average tangible common equity:

Average (793,510) (795,650) (802,446) (796,762) (806,358) intangibles

Average tangible common$1,517,560 $1,498,121 $1,368,433 $1,466,514 $1,310,284 equity (denominator B)

Return on average common equity 10.09 %7.80 %8.50 %6.82 %9.19 %(numerator A/ denominator A) (1)

Return on average tangible common equity 15.79 %12.41 %14.05 %10.99 %15.47 %(numerator B/ denominator B) (2)

(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.

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SOURCE Columbia Banking System Inc