PR Newswire | Jul 23, 2020 09:03AM EDT

Cash Dividend

07/23 08:00 CDT

Columbia Banking System Announces Second Quarter 2020 Results and Quarterly Cash DividendNotable Items for Second Quarter 2020-- Quarterly net income of $36.6 million and diluted earnings per share of $0.52-- Net loans increased $838.6 million, or 9% during the second quarter of 2020 from regular second quarter production of $295 million supplemented by Paycheck Protection Program loan originations-- Deposits increased $2.32 billion, or 21% during the second quarter of 2020-- Net interest margin of 3.64%, a decrease of 36 basis points from the linked quarter-- Nonperforming assets to period-end assets ratio remained stable at 0.34%-- Regular cash dividend declared of $0.28 per share TACOMA, Wash., July 23, 2020

TACOMA, Wash., July 23, 2020 /PRNewswire/ -- 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 second quarter 2020 earnings, "I'm proud of the accomplishments by our team of bankers during one of the most challenging quarters in our 27 year history. They came together to execute on our pandemic response plan while supporting each other through the professional and personal challenges of COVID-19." Mr. Stein continued, "In addition, our bankers continued to support our clients and our communities through uninterrupted access to our banking services as well as our ongoing philanthropic activities."

Balance Sheet

Total assets at June 30, 2020 were $15.92 billion, an increase of $1.88 billion from the linked quarter. Loans were $9.77 billion, up $838.6 million from March 31, 2020 as a result of loan originations of $1.26 billion partially offset by payments. Included in the loan originations for the quarter were $962.0 million of loans originated under the Paycheck Protection Program ("PPP"). Interest-earning deposits with banks were $880.2 million, an increase of $854.9 million from the linked quarter due to the surge in deposits. Debt securities available for sale were $3.69 billion at June 30, 2020, an increase of $140.7 million from $3.55 billion at March 31, 2020. Total deposits at June 30, 2020 were $13.13 billion, an increase of $2.32 billion from March 31, 2020 largely due to an increase of $1.40 billion in demand and other noninterest-bearing deposits. The deposit mix remained fairly consistent from March 31, 2020 with 51% noninterest-bearing and 49% interest-bearing. The average cost of total deposits for the quarter was 7 basis points, a decrease of 7 basis points from the first quarter of 2020. For additional information regarding this calculation, see the "Net Interest Margin" section.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "Our dedicated team of bankers worked tirelessly during the quarter assisting our clients with their PPP loan applications and loan deferral requests while providing an exceptional level of customer service during these challenging times. Their efforts resulted in robust growth in our balance sheet increasing both loans and deposits while also reducing our cost of deposits by 50%."

Income Statement

Net Interest Income

Net interest income for the second quarter of 2020 was $121.9 million, a decrease of $571 thousand and $3.3 million from the linked quarter and the prior-year period, respectively. The decrease from the linked quarter was primarily due to lower interest income on loans as the lower rate environment more than offset the increase in interest income from the rise in average loan balances. Interest income from securities decreased as a result of $1.9 million of interest income and discount accretion, in the first quarter of 2020, related to the early payoff of three securities as well as lower rates in the current quarter. Partially offsetting these decreases in interest income was a favorable variance in deposit interest expense due to the lower rate environment and lower interest expense on FHLB borrowings as a result of lower average borrowing balances. Net interest income compared to the prior-year period decreased as a result of interest income on loans being down due to the lower rate environment partially offset by an increase in interest income on securities due to higher average balances. The decrease in interest income was partially offset by favorable decreases in interest expense on interest-bearing deposits and FHLB advances resulting from lower rates. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Provision for Credit Losses

The Bank's provision for credit losses for the second quarter of 2020 was $33.5 million compared to $41.5 million for the linked quarter and $218 thousand for the comparable quarter in 2019. The provision for credit losses for the second quarter of 2020 remained elevated relative to the prior year principally as a result of COVID-19 and the downturn in the national and global economies. As a result, we added $33.5 million to our allowance for credit losses. For more information, please see the "COVID-19 Update" section of this earnings release.

Andy McDonald, Columbia's Executive Vice President and Chief Credit Officer, commented, "We continue to see modest downward pressure in credit quality migration in our loan portfolio, relative to the first quarter. Weaknesses in the retail and hospitality sectors were the primary cause, which is not surprising given the current pandemic environment. Loans migrating to nonaccrual status and net charge-offs during the quarter continue to be from issues with clients that arose prior to COVID-19. Currently, loan payment deferral requests have declined. To illustrate, in June, we extended loan payment deferrals on approximately $58 million in loans as compared to over $1.2 billion in loans in April. While our credit metrics remained stable in the second quarter, we recognize that many challenges associated with the current downturn may not materialize until later this year or next year due to uncertainty with respect to how the pandemic evolves, additional government stimulus, and the effectiveness of loan deferrals, among other factors."

Noninterest Income

Noninterest income was $37.3 million for the second quarter of 2020, an increase of $16.1 million from the linked quarter and $11.6 million from the second quarter of 2019, respectively. The increases compared to the linked quarter and the same quarter in 2019 were principally due to the sale of 17,360 shares of Visa Class B restricted stock by the Bank for a gain of $3.0 million, which resulted in an observable market price. As a result, the Company wrote up its remaining 77,683 Visa Class B restricted shares to fair value resulting in a gain of $13.4 million, for a total gain of $16.4 million. Based on the existing transfer restriction and uncertainty of Visa's litigation, the shares were previously carried at a zero-cost basis. We also recognized an $875 thousand gain on the sale of a loan that had previously been charge-off. Partially offsetting these gains were decreases in overdraft fees of $1.1 million and $1.2 million compared to the linked quarter and second quarter of 2019, respectively. The decrease in overdraft fees was due to an overall decrease in the number of transactions during this pandemic time period as well as clients generally carrying higher cash balances in their deposit accounts. In addition, the increase from the prior-year period was partially offset by a $1.1 million current period decrease in treasury management fees and a $3.0 million bank-owned life insurance benefit that was recognized during the second quarter of 2019.

Noninterest Expense

Total noninterest expense for the second quarter of 2020 was $80.8 million, a decrease of $3.4 million compared to the first quarter of 2020 principally due to lower compensation and benefits expense. Labor costs related to the origination of PPP loans during the quarter are treated as a contra expense and reduce compensation and benefits expense. These labor costs are capitalized and amortized as a reduction to interest income over the life of the loan. This decrease in noninterest expense was partially offset by an increase in regulatory premiums and provision for unfunded loan commitments. We utilized the remaining $283 thousand of our Small Bank Assessment Credit this quarter related to our FDIC deposit insurance premiums compared to an applied credit of $967 thousand during the first quarter of 2020. The provision for unfunded loan commitments increased by $1.8 million compared to the linked quarter.

Compared to the second quarter of 2019, noninterest expense decreased $5.9 million principally due to the deferral of loan origination costs related to the PPP loans discussed above. Legal and professional fees also declined compared to one year. Partially offsetting these decreases was the $2.6 million increase in the provision for unfunded loan commitments due to higher estimated loss rates and higher amounts of unfunded loan commitments.

The provision for unfunded loan commitments for the periods indicated are as follows:

Three Months Ended Six Months Ended

June 30, 2020March 31, 2020June 30, 2019June 30, 2020June 30, 2019

(in thousands)

Provision (recapture) for $ 2,800 $ 1,000 $200 $ 3,800 $ (350) unfunded loan commitments



Net Interest Margin

Columbia's net interest margin (tax equivalent) for the second quarter of 2020 was 3.64%, a decrease of 36 basis points and 76 basis points from the linked quarter and prior-year period, respectively. The decrease in the net interest margin (tax equivalent) compared to the linked quarter and prior-year period was driven by higher average interest-earning deposits with banks at an average rate of 11 basis points as well as lower rates on the loan and securities portfolios, which were exacerbated by PPP.

Columbia's operating net interest margin (tax equivalent)1 was 3.64% for the second quarter of 2020, which decreased 38 and 74 basis points compared to the linked quarter and the prior-year period, respectively. The decreases in the operating net interest margin for the second quarter of 2020 compared to the linked quarter and the prior-year period were due to the items noted in the preceding paragraph.

Operating net interest margin (tax equivalent) is a non-GAAP financial^ measure. See the section titled "Non-GAAP Financial Measures" in this1 earnings release for the reconciliation of operating net interest margin (tax equivalent) to net interest margin.

The following table highlights the yield on our paycheck protection program loans:

Three Months Ended

June 30, 2020

Paycheck Protection Program loans(dollars in thousands)

Interest income $ 4,590

Average balance $ 643,966

Yield 2.87 %

Aaron Deer, Columbia's Executive Vice President and Chief Financial Officer, stated, "The margin compression we experienced during the quarter was largely due to excess liquidity created by record deposit inflows. Of course, historically low interest rates also contributed to the pressure and, unfortunately, the rate environment may remain a challenge for some time. We will take a measured approach in deploying our excess liquidity given uncertainty as to PPP funds utilization and depositor behavior generally in the current environment."

Asset Quality

At June 30, 2020, nonperforming assets to total assets remained unchanged at 0.34% compared to March 31, 2020. Total nonperforming assets increased $6.3 million from the linked quarter due to a modest increase in commercial real estate and agriculture nonaccrual loans.

The following table sets forth information regarding nonaccrual loans and total nonperforming assets:

June 30, 2020March 31, 2020December 31, 2019

(in thousands)

Nonaccrual loans:

Commercial loans:

Commercial real estate $ 11,155 $5,518 $3,799

Commercial business 20,525 24,395 20,937

Agriculture 19,162 15,083 5,023

Construction 217 - -

Consumer loans:

One-to-four family 2,662 2,643 3,292 residential real estate

Other consumer 11 8 9

Total nonaccrual loans 53,732 47,647 33,060

OREO and other personal 747 510 552 property owned

Total nonperforming assets $ 54,479 $48,157 $33,612

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

Three Months Ended Six Months Ended

June 30, 2020March 31, 2020June 30, 2019June 30, 2020June 30, 2019

(in thousands)

Beginning $122,074 $83,968 $ 83,274 $83,968 $ 83,369 balance

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

Charge-offs:

Commercial loans:

Commercial - (101) (564) (101) (1,242) real estate

Commercial (5,442) (1,684) (4,316) (7,126) (5,822) business

Agriculture - (4,726) (61) (4,726) (139)

Construction- - (20) - (215)

Consumer loans:

One-to-four family - (10) (321) (10) (802) residential real estate

Other (198) (268) (5) (466) (55) consumer

Total (5,640) (6,789) (5,287) (12,429) (8,275) charge-offs

Recoveries:

Commercial loans:

Commercial 13 14 556 27 1,070 real estate

Commercial 811 860 492 1,671 1,019 business

Agriculture 1 41 64 42 122

Construction235 442 691 677 774

Consumer loans:

One-to-four family 422 282 450 704 784 residential real estate

Other 130 124 59 254 74 consumer

Total 1,612 1,763 2,312 3,375 3,843 recoveries

Net (4,028) (5,026) (2,975) (9,054) (4,432) charge-offs

Provision for credit 33,500 41,500 218 75,000 1,580 losses

Ending $151,546 $122,074 $ 80,517 $151,546 $ 80,517 balance



The allowance for credit losses to period-end loans was 1.55% at June 30, 2020 compared to 1.37% at March 31, 2020. Excluding PPP loans, the allowance for credit losses to period-end loans2 was 1.72%.

Allowance for credit losses to period-end loans, excluding PPP is a non-GAAP^ financial measure. See the section titled "Non-GAAP Financial Measures" in2 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.

Organizational Update

COVID-19 Update

Columbia launched two community focused initiatives in response to the pandemic, putting more than $1 million to work in support of our local communities. The Pass It On Project is designed to provide small businesses more than $500,000 to perform services for community members whose lives have been adversely impacted by the pandemic or the economic downturn it caused. The program will support more than 350 small businesses and many more individuals in the Northwest as we continue to manage through the pandemic and economic recovery. The COVID-19 Community Relief fund put more than $500,000 in the hands of 25 non-profit organizations working to provide relief for those affected by the pandemic in the Northwest.

"Each of our community programs developed in response to the pandemic honor our deep commitment to support businesses and respond to the evolving needs in our local communities," said David Moore Devine, Columbia's Executive Vice President and Chief Marketing & Experience Officer. "Small businesses are the lifeblood of our communities and by helping them thrive through the Pass It On Project, we create a ripple effect of support throughout the Northwest."

Recognition

Columbia was honored to earn recognition as the #1 bank in the Northwest region by JD Powers in the 2020 Retail Banking Satisfaction Study. The award reflects our ongoing commitment to meeting the needs of our clients with exceptional service.

Boise NeighborHub

The Bank recently announced the expansion of its new retail branch service concept to the Boise, Idaho market with the construction of a new NeighborHub, located in downtown Boise. The NeighborHub concept combines sales and support focused technology with the elevated skill set of a team of bankers with universal knowledge and expertise in handling all business and consumer needs. The location will open in the fall of 2020 and will also serve the broader community as a hub for educational seminars, local events and community functions in the evenings.

"We are excited to bring our signature NeighborHub style of banking to downtown Boise this year," said Mr. Stein. "The new location will expand our presence in the Treasure Valley and further build upon the success of the first NeighborHub location in the Seattle market."

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.28 per common share on August 19, 2020 to shareholders of record as of the close of business on August 5, 2020.

Conference Call Information

Columbia's management will discuss the second quarter 2020 financial results on a conference call scheduled for Thursday, July 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET). Interested parties may join the live-streamed event by using the site: https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166

The conference call can also be accessed on Thursday, July 23, 2020 at 10:00 a.m. Pacific Time (1:00 p.m. ET) by calling 888-286-8956; Conference ID:3787244.

A replay of the call can be accessed beginning Friday, July 24, 2020 using the site: https://engage.vevent.com/rt/columbiabankingsysteminc/index.jsp?seid=166

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank with locations throughout Washington, Oregon and Idaho. The bank has been named one of Puget Sound Business Journal's"Washington's Best Workplaces," more than 10 times and was recently honored as the #1 bank in the Northwest region by JD Power in the 2020 Retail Banking Satisfaction Study. Columbia was named the #1 bank in the Northwest on the Forbes 2020 list of "America's Best Banks" marking nearly 10 consecutive years on the publication's list of top financial institutions.

More information about Columbia can be found on its website at www.columbiabank.com.

Note Regarding Forward-Looking Statements

This news release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, descriptions of Columbia's management's expectations regarding future events and developments such as future operating results, growth in loans and deposits, continued success of Columbia's style of banking and the strength of the local economy as well as the potential effects of the COVID-19 pandemic on Columbia's business, operations, financial performance and prospects. The words "will," "believe," "expect," "intend," "should," and "anticipate" or the negative of these words or words of similar construction are intended in part to help identify forward-looking statements. Future events are difficult to predict, and the expectations described above are necessarily subject to risks and uncertainties, many of which are outside our control, that may cause actual results to differ materially and adversely. In addition to discussions about risks and uncertainties set forth from time to time in Columbia's filings with the Securities and Exchange Commission, available at the U.S. Securities and Exchange Commission's (the "SEC") website at www.sec.gov and the Company's website at www.columbiabank.com, include the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following: (1) local, national and international economic conditions may be less favorable than expected or have a more direct and pronounced effect on Columbia than expected and adversely affect Columbia's ability to continue its internal growth at historical rates and maintain the quality of its earning assets; (2) the effect of COVID-19 and other infectious illness outbreaks that may arise in the future, which has created significant uncertainties in U.S. and global markets, is expected to continue to adversely affect the businesses in which Columbia is engaged; (3) changes in interest rates could significantly reduce net interest income and negatively affect funding sources; (4) projected business increases following strategic expansion or opening or acquiring new branches may be lower than expected; (5) costs or difficulties related to the integration of acquisitions may be greater than expected; (6) competitive pressure among financial institutions may increase significantly; (7) failure to maintain effective internal control over financial reporting or disclosure controls and procedures may adversely affect our business; (8) reliance on and cost of technology may increase; and (9) changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, including with regard to COVID-19, have adversely affected and may continue to adversely affect the businesses in which Columbia is engaged. We believe the expectations reflected in our forward-looking statements are reasonable, based on information available to us on the date hereof. However, given the described uncertainties and risks, we cannot guarantee our future performance or results of operations and you should not place undue reliance on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by the federal securities laws. The factors noted above and the risks and uncertainties described in our SEC filings should be considered when reading any forward-looking statements in this release.

Contacts:Clint Stein, Aaron Deer,

President and Executive Vice President and

Chief Executive Officer Chief Financial Officer



Investor Relations

InvestorRelations@columbiabank.com

253-305-1921







CONSOLIDATED BALANCE SHEETS

Columbia Banking System, Inc.

Unaudited June 30, March 31, December 31,

2020 2020 2019

(in thousands)

ASSETS

Cash and due from $217,461 $190,399 $223,541 banks

Interest-earning 880,232 25,357 24,132 deposits with banks

Total cash and cash 1,097,693 215,756 247,673 equivalents

Debt securities available for sale at fair value (amortized cost of $3,491,307, $3,406,492 and 3,693,787 3,553,128 3,746,142 $3,703,096, respectively)

Equity securities 13,425 - -

Federal Home Loan Bank 16,280 38,280 48,120 ("FHLB") stock at cost

Loans held for sale 28,803 9,701 17,718

Loans, net of 9,771,898 8,933,321 8,743,465 unearned income

Less: Allowance for credit 151,546 122,074 83,968 losses

Loans, net 9,620,352 8,811,247 8,659,497

Interest receivable 59,149 44,577 46,839

Premises and 164,362 164,626 165,408 equipment, net

Other real estate 747 510 552 owned

Goodwill 765,842 765,842 765,842

Other intangible 30,938 33,148 35,458 assets, net

Other assets 429,566 401,688 346,275

Total assets $15,920,944$14,038,503$14,079,524

LIABILITIES AND SHAREHOLDERS' EQUITY

Deposits:

Noninterest-bearing $6,719,437 $5,323,908 $5,328,146

Interest-bearing 6,412,040 5,488,848 5,356,562

Total deposits 13,131,477 10,812,756 10,684,708

FHLB advances and Federal Reserve Bank ("FRB") 157,441 712,455 953,469 borrowings

Securities sold under 51,479 29,252 64,437 agreements to repurchase

Subordinated 35,185 35,231 35,277 debentures

Revolving line of - 5,000 - credit

Other liabilities 268,607 230,207 181,671

Total liabilities 13,644,189 11,824,901 11,919,562

Commitments and contingent liabilities

Shareholders' equity:

June 30,March December 31, 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 115,000115,000115,000

Issued 73,770 73,759 73,577 1,654,129 1,651,399 1,650,753

Outstanding 71,586 71,575 72,124

Retained earnings 512,383 495,830 519,676

Accumulated other 181,077 137,207 40,367 comprehensive income

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

Total shareholders' 2,276,755 2,213,602 2,159,962 equity

Total liabilities and $15,920,944$14,038,503$14,079,524shareholders' equity







CONSOLIDATED STATEMENTS OF INCOME

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

Unaudited June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019

Interest Income (in thousands except per share amounts)

Loans $105,496$107,366$116,585$212,862$225,001

Taxable 18,343 21,088 15,918 39,431 33,333 securities

Tax-exempt 2,257 2,302 2,712 4,559 5,681 securities

Deposits in banks136 141 207 277 295

Total interest 126,232 130,897 135,422 257,129 264,310 income

Interest Expense

Deposits 2,094 3,642 4,976 5,736 9,474

FHLB advances and1,796 4,229 4,708 6,025 7,393 FRB borrowings

Subordinated 468 468 468 936 936 debentures

Other borrowings 23 136 154 159 369

Total interest 4,381 8,475 10,306 12,856 18,172 expense

Net Interest 121,851 122,422 125,116 244,273 246,138 Income

Provision for 33,500 41,500 218 75,000 1,580 credit losses

Net interest income after 88,351 80,922 124,898 169,273 244,558 provision for credit losses

Noninterest Income

Deposit account and treasury 6,092 7,788 9,035 13,880 18,015 management fees

Card revenue 3,079 3,518 3,763 6,597 7,425

Financial services and 3,163 3,065 3,425 6,228 6,382 trust revenue

Loan revenue 5,607 4,590 3,596 10,197 5,985

Bank owned life 1,618 1,596 1,597 3,214 3,116 insurance

Investment securities gains,16,425 249 285 16,674 2,132 net

Other 1,275 401 3,947 1,676 4,289

Total noninterest37,259 21,207 25,648 58,466 47,344 income

Noninterest Expense

Compensation and 46,043 54,842 52,015 100,885 104,100 employee benefits

Occupancy 8,812 9,197 8,712 18,009 17,521

Data processing 5,454 4,840 4,601 10,294 9,270

Legal and 3,483 2,102 6,554 5,585 11,127 professional fees

Amortization of 2,210 2,310 2,649 4,520 5,397 intangibles

Business and Occupation ("B& 1,244 624 1,411 1,868 3,287 O") taxes

Advertising and 837 1,305 870 2,142 1,844 promotion

Regulatory 1,034 34 956 1,068 1,940 premiums

Net cost (benefit) of operation of (200) 12 (705) (188) (592) other real estate owned

Other 11,916 9,005 9,665 20,921 17,534

Total noninterest80,833 84,271 86,728 165,104 171,428 expense

Income before 44,777 17,858 63,818 62,635 120,474 income taxes

Provision for 8,195 3,230 12,094 11,425 22,879 income taxes

Net Income $36,582 $14,628 $51,724 $51,210 $97,595

Earnings per common share

Basic $0.52 $0.20 $0.71 $0.72 $1.33

Diluted $0.52 $0.20 $0.71 $0.72 $1.33

Dividends declared per $0.28 $0.28 $0.28 $0.56 $0.56 common share - regular

Dividends declared per - 0.22 0.14 0.22 0.28 common share - special

Dividends declared per $0.28 $0.50 $0.42 $0.78 $0.84 common share - total

Weighted average number of common 70,679 71,206 72,451 70,942 72,486 shares outstanding

Weighted average number of diluted70,711 71,264 72,451 70,981 72,487 common shares outstanding







FINANCIAL STATISTICS

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

Unaudited June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019

Earnings (dollars in thousands except per share amounts)

Net interest income$121,851 $122,422 $125,116 $244,273 $246,138

Provision for $33,500 $41,500 $218 $75,000 $1,580 credit losses

Noninterest income $37,259 $21,207 $25,648 $58,466 $47,344

Noninterest expense$80,833 $84,271 $86,728 $165,104 $171,428

Net income $36,582 $14,628 $51,724 $51,210 $97,595

Per Common Share

Earnings (basic) $0.52 $0.20 $0.71 $0.72 $1.33

Earnings (diluted) $0.52 $0.20 $0.71 $0.72 $1.33

Book value $31.80 $30.93 $29.26 $31.80 $29.26

Tangible book value per common share $20.67 $19.76 $18.20 $20.67 $18.20 (1)

Averages

Total assets $15,148,488 $13,995,632 $13,096,413 $14,572,060 $13,072,360

Interest-earning $13,657,719 $12,487,550 $11,606,727 $13,072,635 $11,584,301 assets

Loans $9,546,099 $8,815,755 $8,601,819 $9,180,927 $8,504,781

Securities, including equity $3,591,693 $3,618,567 $2,969,749 $3,605,131 $3,054,504 securities and FHLB stock

Deposits $12,220,415 $10,622,379 $10,186,371 $11,421,397 $10,228,459

Interest-bearing $6,037,107 $5,383,203 $5,174,875 $5,710,155 $5,200,493 deposits

Interest-bearing $6,514,012 $6,375,931 $5,841,425 $6,444,971 $5,822,301 liabilities

Noninterest-bearing$6,183,308 $5,239,176 $5,011,496 $5,711,242 $5,027,966 deposits

Shareholders' $2,254,349 $2,193,051 $2,096,157 $2,223,700 $2,070,636 equity

Financial Ratios

Return on average 0.97 %0.42 %1.58 %0.70 %1.49 %assets

Return on average 6.49 %2.67 %9.87 %4.61 %9.43 %common equity

Return on average tangible common 10.53 %4.72 %16.71 %7.69 %16.15 %equity (1)

Average equity to 14.88 %15.67 %16.01 %15.26 %15.84 %average assets

Shareholders' equity to total 14.30 %15.77 %16.30 %14.30 %16.30 %assets

Tangible common shareholders' 9.79 %10.68 %10.80 %9.79 %10.80 %equity to tangible assets (1)

Net interest margin3.64 %4.00 %4.40 %3.82 %4.36 %(tax equivalent)

Efficiency ratio (tax equivalent) 50.09 %57.73 %56.57 %53.72 %57.43 %(2)

Operating efficiency ratio 54.91 %57.24 %56.34 %56.08 %56.93 %(tax equivalent) (1)

Noninterest expense2.13 %2.41 %2.65 %2.27 %2.62 %ratio



June 30, March 31, December 31,

Period-end 2020 2020 2019

Total assets $15,920,944 $14,038,503 $14,079,524

Loans, net of $9,771,898 $8,933,321 $8,743,465 unearned income

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

Securities, including equity $3,723,492 $3,591,408 $3,794,262 securities and FHLB stock

Deposits $13,131,477 $10,812,756 $10,684,708

Shareholders' $2,276,755 $2,213,602 $2,159,962 equity

Nonperforming assets

Nonaccrual loans $53,732 $47,647 $33,060

Other real estate owned ("OREO") and other personal 747 510 552 property owned ("OPPO")

Total nonperforming$54,479 $48,157 $33,612 assets

Nonperforming loans0.55 %0.53 %0.38 % to period-end loans

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

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

Net loan charge-offs (for $4,028 $5,026 $306 the three months ended)

This is a non-GAAP measure. See section titled "Non-GAAP Financial(1) Measures" on the last three pages of this earnings release for a reconciliation to the most comparable GAAP measure.

(2) Noninterest expense divided by the sum of net interest income on a tax equivalent basis and noninterest income on a tax equivalent basis.







QUARTERLY FINANCIAL STATISTICS

Columbia Banking Three Months Ended System, Inc.

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

2020 2020 2019 2019 2019

Earnings (dollars in thousands except per share amounts)

Net interest income$121,851 $122,422 $124,817 $122,450 $125,116

Provision for $33,500 $41,500 $1,614 $299 $218 credit losses

Noninterest income $37,259 $21,207 $21,807 $28,030 $25,648

Noninterest expense$80,833 $84,271 $86,978 $87,076 $86,728

Net income $36,582 $14,628 $46,129 $50,727 $51,724

Per Common Share

Earnings (basic) $0.52 $0.20 $0.64 $0.70 $0.71

Earnings (diluted) $0.52 $0.20 $0.64 $0.70 $0.71

Book value $31.80 $30.93 $29.95 $29.90 $29.26

Averages

Total assets $15,148,488 $13,995,632 $13,750,840 $13,459,774 $13,096,413

Interest-earning $13,657,719 $12,487,550 $12,231,779 $11,941,578 $11,606,727 assets

Loans $9,546,099 $8,815,755 $8,742,246 $8,694,592 $8,601,819

Securities, including equity $3,591,693 $3,618,567 $3,453,554 $3,102,213 $2,969,749 securities and FHLB stock

Deposits $12,220,415 $10,622,379 $10,959,434 $10,668,767 $10,186,371

Interest-bearing $6,037,107 $5,383,203 $5,610,850 $5,517,171 $5,174,875 deposits

Interest-bearing $6,514,012 $6,375,931 $6,058,319 $5,989,042 $5,841,425 liabilities

Noninterest-bearing$6,183,308 $5,239,176 $5,348,584 $5,151,596 $5,011,496 deposits

Shareholders' $2,254,349 $2,193,051 $2,170,879 $2,152,916 $2,096,157 equity

Financial Ratios

Return on average 0.97 %0.42 %1.34 %1.51 %1.58 %assets

Return on average 6.49 %2.67 %8.50 %9.42 %9.87 %common equity

Average equity to 14.88 %15.67 %15.79 %16.00 %16.01 %average assets

Shareholders' equity to total 14.30 %15.77 %15.34 %15.71 %16.30 %assets

Net interest margin3.64 %4.00 %4.11 %4.14 %4.40 %(tax equivalent)

Period-end

Total assets $15,920,944 $14,038,503 $14,079,524 $13,757,760 $13,090,808

Loans, net of $9,771,898 $8,933,321 $8,743,465 $8,756,355 $8,646,990 unearned income

Allowance for $151,546 $122,074 $83,968 $82,660 $80,517 credit losses

Securities, including equity $3,723,492 $3,591,408 $3,794,262 $3,397,252 $2,894,218 securities and FHLB stock

Deposits $13,131,477 $10,812,756 $10,684,708 $10,855,716 $10,211,599

Shareholders' $2,276,755 $2,213,602 $2,159,962 $2,161,577 $2,133,638 equity

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

Other intangible $30,938 $33,148 $35,458 $37,908 $40,540 assets, net

Nonperforming assets

Nonaccrual loans $53,732 $47,647 $33,060 $37,021 $39,038

OREO and OPPO 747 510 552 625 1,118

Total nonperforming$54,479 $48,157 $33,612 $37,646 $40,156 assets

Nonperforming loans0.55 %0.53 %0.38 %0.42 %0.45 %to period-end loans

Nonperforming assets to 0.34 %0.34 %0.24 %0.27 %0.31 %period-end assets

Allowance for credit losses to 1.55 %1.37 %0.96 %0.94 %0.93 %period-end loans

Net loan charge-offs $4,028 $5,026 $306 $(1,844) $2,975 (recoveries)







LOAN PORTFOLIO COMPOSITION

Columbia Banking System, Inc.

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

2020 2020 2019 2019 2019

Loan Portfolio (dollars in thousands) Composition - Dollars

Commercial loans:

Commercial $4,032,643$3,969,974$3,945,853$ 3,746,365$3,689,282real estate

Commercial 3,859,513 3,169,668 2,989,613 3,057,669 3,059,066 business

Agriculture 845,950 754,491 765,371 777,619 744,481

Construction 304,015 308,186 361,533 479,171 446,101

Consumer loans:

One-to-four family 692,837 690,506 637,325 654,077 667,037 residential real estate

Other 36,940 40,496 43,770 41,454 41,023 consumer

Total loans 9,771,898 8,933,321 8,743,465 8,756,355 8,646,990

Less: Allowance for(151,546) (122,074) (83,968) (82,660) (80,517) credit losses

Total loans, $9,620,352$8,811,247$8,659,497$ 8,673,695$8,566,473net

Loans held $28,803 $9,701 $17,718 $ 15,036 $12,189 for sale





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

Loan Portfolio Composition - 2020 2020 2019 2019 2019 Percentages

Commercial loans:

Commercial real 41.2 % 44.5 %45.1 %42.7 % 42.6 % estate

Commercial 39.5 % 35.5 %34.2 %34.9 % 35.4 % business

Agriculture 8.7 % 8.4 %8.8 %8.9 % 8.6 %

Construction 3.1 % 3.4 %4.1 %5.5 % 5.2 %

Consumer loans:

One-to-four family 7.1 % 7.7 %7.3 %7.5 % 7.7 % residential real estate

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

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







DEPOSIT COMPOSITION

Columbia Banking System, Inc.

Unaudited

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

2020 2020 2019 2019 2019

Deposit Composition(dollars in thousands) - Dollars

Demand and other $6,719,437 $5,323,908 $5,328,146 $5,320,435 $5,082,219 noninterest-bearing

Money market 2,586,376 2,313,717 2,322,644 2,295,229 2,240,522

Interest-bearing 1,274,058 1,131,874 1,150,437 1,059,502 1,058,545 demand

Savings 1,035,723 905,931 882,050 892,438 887,172

Interest-bearing public funds, other623,496 405,810 301,203 629,797 270,398 than certificates of deposit

Certificates of deposit, less than 210,357 214,449 218,764 223,249 228,920 $250,000

Certificates of deposit, $250,000 104,330 109,659 151,995 107,506 105,782 or more

Certificates of deposit insured by 17,078 17,171 17,065 17,252 16,559 CDARS(r)

Brokered certificates of 8,427 12,259 12,259 18,852 40,502 deposit

Reciprocal money 552,195 377,980 300,158 291,542 281,247 market accounts

Subtotal 13,131,477 10,812,758 10,684,721 10,855,802 10,211,866

Valuation adjustment resulting from - (2) (13) (86) (267) acquisition accounting

Total deposits $13,131,477$10,812,756$10,684,708$10,855,716$10,211,599





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

Deposit Composition2020 2020 2019 2019 2019 - Percentages

Demand and other 51.2 % 49.2 %49.9 %49.0 % 49.8 % noninterest-bearing

Money market 19.7 % 21.4 %21.7 %21.1 % 21.9 %

Interest-bearing 9.7 % 10.5 %10.8 %9.8 % 10.4 % demand

Savings 7.9 % 8.4 %8.3 %8.2 % 8.7 %

Interest-bearing public funds, other4.7 % 3.8 %2.8 %5.8 % 2.7 % than certificates of deposit

Certificates of deposit, less than 1.6 % 2.0 %2.0 %2.1 % 2.2 % $250,000

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

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

Brokered certificates of 0.1 % 0.1 %0.1 %0.2 % 0.4 % deposit

Reciprocal money 4.2 % 3.4 %2.8 %2.6 % 2.7 % 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

June 30, 2020 June 30, 2019

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

(dollars in thousands)

ASSETS

Loans, net (1)(2) $9,546,099 $106,7374.50% $8,601,819 $117,9845.50%

Taxable securities 3,189,805 18,343 2.31% 2,506,672 15,918 2.55%

Tax exempt 401,888 2,857 2.86% 463,077 3,433 2.97% securities (2)

Interest-earning 519,927 136 0.11% 35,159 207 2.36% deposits with banks

Total interest-earning 13,657,719 128,073 3.77% 11,606,727 137,542 4.75% assets

Other earning 234,019 233,273 assets

Noninterest-earning1,256,750 1,256,413 assets

Total assets $15,148,488 $13,096,413

LIABILITIES AND SHAREHOLDERS' EQUITY

Money market $2,939,657 $974 0.13% $2,539,757 $2,896 0.46% accounts (3)

Interest-bearing 1,213,182 339 0.11% 1,066,876 428 0.16% demand (3)

Savings accounts 976,785 38 0.02% 891,341 43 0.02% (3)

Interest-bearing public funds, other559,256 393 0.28% 273,387 1,023 1.50% than certificates of deposit (3)

Certificates of 348,227 350 0.40% 403,514 586 0.58% deposit

Total interest-bearing 6,037,107 2,094 0.14% 5,174,875 4,976 0.39% deposits

FHLB advances and 407,035 1,796 1.77% 602,041 4,708 3.14% FRB borrowings

Subordinated 35,207 468 5.35% 35,392 468 5.30% debentures

Other borrowings and 34,663 23 0.27% 29,117 154 2.12% interest-bearing liabilities

Total interest-bearing 6,514,012 4,381 0.27% 5,841,425 10,306 0.71% liabilities

Noninterest-bearing6,183,308 5,011,496 deposits

Other noninterest-bearing196,819 147,335 liabilities

Shareholders' 2,254,349 2,096,157 equity

Total liabilities & shareholders' $15,148,488 $13,096,413 equity

Net interest income (tax $123,692 $127,236 equivalent)

Net interest margin (tax equivalent) 3.64% 4.40%

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 $5.1 million and $2.1 million for the three months ended June 30, 2020 and 2019, respectively. The incremental accretion income on acquired loans was $1.7 million and $2.7 million for the three months ended June 30, 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(2) and $1.4 million for the three months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $721 thousand for the three months ended June 30, 2020 and 2019, respectively.

Beginning July 2019, interest-bearing public funds, other than certificates(3) of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.







AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited

Three Months Ended Three Months Ended

June 30, 2020 March 31, 2020

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

(dollars in thousands)

ASSETS

Loans, net (1)(2) $9,546,099 $106,7374.50% $8,815,755 $108,6654.96%

Taxable securities 3,189,805 18,343 2.31% 3,209,110 21,088 2.64%

Tax exempt 401,888 2,857 2.86% 409,457 2,914 2.86% securities (2)

Interest-earning 519,927 136 0.11% 53,228 141 1.07% deposits with banks

Total interest-earning 13,657,719 128,073 3.77% 12,487,550 132,808 4.28% assets

Other earning 234,019 232,361 assets

Noninterest-earning1,256,750 1,275,721 assets

Total assets $15,148,488 $13,995,632

LIABILITIES AND SHAREHOLDERS' EQUITY

Money market $2,939,657 $974 0.13% $2,633,931 $1,728 0.26% accounts

Interest-bearing 1,213,182 339 0.11% 1,125,691 484 0.17% demand

Savings accounts 976,785 38 0.02% 897,276 43 0.02%

Interest-bearing public funds, other559,256 393 0.28% 355,401 903 1.02% than certificates of deposit

Certificates of 348,227 350 0.40% 370,904 484 0.52% deposit

Total interest-bearing 6,037,107 2,094 0.14% 5,383,203 3,642 0.27% deposits

FHLB advances and 407,035 1,796 1.77% 909,110 4,229 1.87% FRB borrowings

Subordinated 35,207 468 5.35% 35,253 468 5.34% debentures

Other borrowings and 34,663 23 0.27% 48,365 136 1.13% interest-bearing liabilities

Total interest-bearing 6,514,012 4,381 0.27% 6,375,931 8,475 0.53% liabilities

Noninterest-bearing6,183,308 5,239,176 deposits

Other noninterest-bearing196,819 187,474 liabilities

Shareholders' 2,254,349 2,193,051 equity

Total liabilities & shareholders' $15,148,488 $13,995,632 equity

Net interest income (tax $123,692 $124,333 equivalent)

Net interest margin (tax equivalent) 3.64% 4.00%

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 $5.1 million and $2.4 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The incremental accretion on acquired loans was $1.7 million and $1.5 million for the three months ended June 30, 2020 and March 31, 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(2) and $1.3 million for the three months ended June 30, 2020 and March 31, 2020, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $600 thousand and $612 thousand for the three months ended June 30, 2020 and March 31, 2020, respectively.







AVERAGE BALANCES AND RATES

Columbia Banking System, Inc.

Unaudited

Six Months Ended Six Months Ended

June 30, 2020 June 30, 2019

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

(dollars in thousands)

ASSETS

Loans, net (1)(2) $9,180,927 $215,4024.72% $8,504,781 $227,6995.40%

Taxable securities 3,199,458 39,431 2.48% 2,571,692 33,333 2.61%

Tax exempt 405,673 5,771 2.86% 482,812 7,191 3.00% securities (2)

Interest-earning 286,577 277 0.19% 25,016 295 2.38% deposits with banks

Total interest-earning 13,072,635 $260,8814.01% 11,584,301 $268,5184.67% assets

Other earning 233,190 232,678 assets

Noninterest-earning1,266,235 1,255,381 assets

Total assets $14,572,060 $13,072,360

LIABILITIES AND SHAREHOLDERS' EQUITY

Money market $2,786,794 $2,702 0.19% $2,562,742 $5,481 0.43% accounts (3)

Interest-bearing 1,169,436 823 0.14% 1,070,715 792 0.15% demand (3)

Savings accounts 937,030 81 0.02% 893,913 86 0.02% (3)

Interest-bearing public funds, other457,328 1,296 0.57% 268,105 1,953 1.47% than certificates of deposit (4)

Certificates of 359,567 834 0.47% 405,018 1,162 0.58% deposit

Total interest-bearing 5,710,155 5,736 0.20% 5,200,493 9,474 0.37% deposits

FHLB advances and 658,072 6,025 1.84% 551,018 7,393 2.71% FRB borrowings

Subordinated 35,230 936 5.34% 35,415 936 5.33% debentures

Other borrowings and 41,514 159 0.77% 35,375 369 2.10% interest-bearing liabilities

Total interest-bearing 6,444,971 $12,856 0.40% 5,822,301 $18,172 0.63% liabilities

Noninterest-bearing5,711,242 5,027,966 deposits

Other noninterest-bearing192,147 151,457 liabilities

Shareholders' 2,223,700 2,070,636 equity

Total liabilities & shareholders' $14,572,060 $13,072,360 equity

Net interest income (tax $248,025 $250,346 equivalent)

Net interest margin (tax equivalent) 3.82% 4.36%

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 $7.5 million and $4.3 million for the six months ended June 30, 2020 and 2019, respectively. The incremental accretion on acquired loans was $3.2 million and $4.7 million for the six months ended June 30, 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 $2.5 million(2) and $2.7 million for the six months ended June 30, 2020 and 2019, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $1.2 million and $1.5 million for the six months ended June 30, 2020 and 2019, respectively.

Beginning July 2019, interest-bearing public funds, other than certificates(3) of deposit, are presented separately in this table. Prior period amounts have been reclassified to conform to current period presentation.

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 Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019

Operating net interest margin(dollars in thousands) non-GAAP reconciliation:

Net interest income (tax $123,692 $124,333 $127,236 $248,025 $250,346 equivalent) (1)

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

Incremental accretion income on (1,675) (1,491) (2,663) (3,166) (4,698) acquired loans (2)

Premium amortization on975 1,127 1,651 2,102 3,430 acquired securities

Interest reversals on 673 788 662 1,461 1,288 nonaccrual loans

Operating net interest income$123,665 $124,757 $126,886 $248,422 $250,366 (tax equivalent) (1)

Average interest $13,657,719 $12,487,550 $11,606,727 $13,072,635 $11,584,301 earning assets

Net interest margin (tax 3.64 %4.00 %4.40 %3.82 %4.36 %equivalent) (1)

Operating net interest margin3.64 %4.02 %4.38 %3.82 %4.36 %(tax equivalent) (1)





Three Months Ended Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019

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

Noninterest expense $80,833 $84,271 $86,728 $165,104 $171,428 (numerator A)

Adjustments to arrive at operating noninterest expense:

Net benefit (cost) of 200 (4) 705 196 591 operation of OREO and OPPO

Loss on asset (220) (4) - (224) - disposals

Business and Occupation ("B&(1,244) (624) (1,411) (1,868) (3,287) O") taxes

Operating noninterest $79,569 $83,639 $86,022 $163,208 $168,732 expense (numerator B)



Net interest income (tax $123,692 $124,333 $127,236 $248,025 $250,346 equivalent) (1)

Noninterest 37,259 21,207 25,648 58,466 47,344 income

Bank owned life insurance tax 430 424 424 854 828 equivalent adjustment

Total revenue (tax $161,381 $145,964 $153,308 $307,345 $298,518 equivalent) (denominator A)



Operating net interest income$123,665 $124,757 $126,886 $248,422 $250,366 (tax equivalent) (1)

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

Investment securities loss(16,425) (249) (285) (16,674) (2,132) (gain), net

Gain on asset (26) (21) - (47) - disposals

Operating noninterest 21,238 21,361 25,787 42,599 46,040 income (tax equivalent)

Total operating revenue (tax $144,903 $146,118 $152,673 $291,021 $296,406 equivalent) (denominator B)

Efficiency ratio (tax equivalent) 50.09 %57.73 %56.57 %53.72 %57.43 %(numerator A/ denominator A)

Operating efficiency ratio (tax 54.91 %57.24 %56.34 %56.08 %56.93 %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 $1.8(1) million, $1.9 million, and $2.1 million for the three months ended June 30, 2020, March 31, 2020, and June 30, 2019, respectively, and $3.8 million and $4.2 million for the six months ended June 30, 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 Six Months Ended

June 30, March 31,June 30, June 30, June 30,

2020 2020 2019 2020 2019

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

Income before income $44,777$17,858$63,818$62,635 $120,474taxes

Provision for credit 33,500 41,500 218 75,000 1,580 losses

Pre-tax, pre-provision $78,277$59,358$64,036$137,635$122,054income

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:

June 30, March 31, June 30,

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 $2,276,755 $2,213,602 $2,133,638 (numerator A)

Adjustments to arrive at tangible common equity:

Goodwill (765,842) (765,842) (765,842)

Other intangible assets, net (30,938) (33,148) (40,540)

Tangible common equity $1,479,975 $1,414,612 $1,327,256 (numerator B)

Total assets (denominator A) $15,920,944 $14,038,503 $13,090,808

Adjustments to arrive at tangible assets:

Goodwill (765,842) (765,842) (765,842)

Other intangible assets, net (30,938) (33,148) (40,540)

Tangible assets (denominator $15,124,164 $13,239,513 $12,284,426 B)

Shareholders' equity to total assets (numerator A/ 14.30 %15.77 %16.30 %denominator A)

Tangible common shareholders' equity to tangible assets 9.79 %10.68 %10.80 %(numerator B/denominator B)

Common shares outstanding 71,586 71,575 72,924 (denominator C)

Book value per common share $31.80 $30.93 $29.26 (numerator A/denominator C)

Tangible book value per common share (numerator B/ $20.67 $19.76 $18.20 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:

June 30, March 31, June 30,

2020 2020 2019

Allowance for credit losses to period-end loans ratio non-GAAP (dollars in thousands) reconciliation:

Allowance for credit losses $151,546 $122,074 $80,517 ("ACL") (numerator)



Total loans, net of unearned 9,771,898 8,933,321 8,646,990 income (denominator A)

Less: PPP loans, net of unearned941,373 - - income (0% ACL)

Total loans, net of PPP loans $8,830,525 $8,933,321 $8,646,990 (denominator B)



ACL to period-end loans 1.55 %1.37 %0.93 %(numerator / denominator A)

ACL to period-end loans, excluding PPP loans (numerator /1.72 %1.37 %0.93 %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 Six Months Ended

June 30, March 31, June 30, June 30, June 30,

2020 2020 2019 2020 2019

Return on average tangible common(dollars in thousands) equity non-GAAP reconciliation:

Net income $36,582 $14,628 $51,724 $51,210 $97,595 (numerator A)

Adjustments to arrive at tangible income applicable to common shareholders:

Amortization of2,210 2,310 2,649 4,520 5,397 intangibles

Tax effect on intangible (464) (485) (556) (949) (1,133) amortization

Tangible income applicable to common $38,328 $16,453 $53,817 54,781 $101,859 shareholders (numerator B)

Average shareholders' $2,254,349 $2,193,051 $2,096,157 2,223,700 $2,070,636 equity (denominator A)

Adjustments to arrive at average tangible common equity:

Average (797,855) (800,079) (807,678) (798,967) (809,020) intangibles

Average tangible common$1,456,494 $1,392,972 $1,288,479 $1,424,733 $1,261,616 equity (denominator B)

Return on average common equity 6.49 %2.67 %9.87 %4.61 %9.43 %(numerator A/ denominator A) (1)

Return on average tangible common equity 10.53 %4.72 %16.71 %7.69 %16.15 %(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.