Columbia Banking System, Inc. (NASDAQ:COLB) Q4 2023 Earnings Conference Call January 24, 2024 5:00 PM ET Company Participants Jacque Bohlen - Investor Relations Director Clint Stein - President and Chief Executive Officer Ron Farnsworth - Chief Financial Officer Frank Namdar - Chief Credit Officer Tory Nixon - President, Umpqua Bank Chris Merrywell - President, Umpqua Bank Conference Call Participants David Feaster - Raymond James Timur Braziler - Wells Fargo Brandon King - Truist Chris McGratty - KBW Jeff ...

For the quarter ended December 2023, Columbia Banking (COLB) reported revenue of $519.16 million, up 173.2% over the same period last year. EPS came in at $0.44, compared to $0.93 in the year-ago quarter.The reported revenue compares to the Zacks Consensus Estimate of $531.1 million, representing a surprise of -2.25%. The company delivered an EPS surprise of -45.00%, with the consensus EPS estimate being $0.80.While investors scrutinize revenue and earnings changes year-over-year and how they compare with W ...

4 th Quarter 2023 Earnings Presentation January 24, 2024 2 Disclaimer FORWARD-LOOKING STATEMENTS This presentation includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings ...

In its upcoming report, Columbia Banking (COLB) is predicted by Wall Street analysts to post quarterly earnings of $0.80 per share, reflecting a decline of 14% compared to the same period last year. Revenues are forecasted to be $531.1 million, representing a year-over-year increase of 179.5%.The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. This reflects how the analysts covering the stock have collectively reevaluated their initial estimates during this timeframe.Ahe ...

The following tables present the amortized cost, unrealized gains, unrealized losses, and approximate fair values of debt securities as of the dates presented: The Company elected to exclude accrued interest receivable from the amortized cost basis of debt securities disclosed throughout this note. Interest accrued on investment securities totaled $33.6 million and $10.6 million as of September 30, 2023 and December 31, 2022, respectively, and is included in Other Assets. | --- | --- | --- | --- | --- | --- ...

Columbia Banking System, Inc. (NASDAQ:COLB) Q3 2023 Earnings Conference Call October 18, 2023 5:00 PM ET Company Participants Jacque Bohlen - Investor Relations Director Clint Stein - President and Chief Executive Officer Ron Farnsworth - Chief Financial Officer Frank Namdar - Chief Credit Officer Chris Merrywell - President, Umpqua Bank Tory Nixon - President, Umpqua Bank Conference Call Participants Jeff Rulis - D.A. Davidson David Feaster - Raymond James Timur Braziler - Wells Fargo Brody Preston - UBS C ...

United States Securities and Exchange Commission Washington, D.C. 20549 ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to . 1301 A Street Tacoma, Washington 98402-2156 (Address of Principal Executive Offices)(Zip Code) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period tha ...

FORWARD-LOOKING STATEMENTS Merger Update: Cost Synergies Remain on Track for Completion by September 30, 2023 5 ■ We continue to maintain an elevated cash position on the balance sheet to maintain flexibility, and we intend to continue to do so for the foreseeable future. ■ Market liquidity tightening, the impact of inflation on customer spending, and businesses' use of cash continued to pressure customer deposit balances during the second quarter. 2 nd Quarter 2023 Earnings Presentation REVERSE ACQUISITION ...

Columbia Banking System, Inc. (NASDAQ:COLB) Q2 2023 Earnings Conference Call July 19, 2023 5:30 PM ET Company Participants Jacque Bohlen - Investor Relations Clint Stein - President and Chief Executive Officer Chris Merrywell - President, Umpqua Bank Tory Nixon - President, Umpqua Bank Ron Farnsworth - Chief Financial Officer Frank Namdar - Chief Credit Officer Conference Call Participants Jeff Rulis - D.A. Davidson Matthew Clark - Piper Sandler Chris McGratty - KBW Janet Lee - JPMorgan Jared Shaw - Wells F ...

[GLOSSARY](index=3&type=section&id=GLOSSARY) This section provides definitions for key terms and acronyms used throughout the report, ensuring clarity and consistent understanding of financial and operational terminology - The glossary defines key terms like ACL (Allowance for credit losses), CECL (Current Expected Credit Losses), Columbia (Columbia Banking System, Inc.), Merger (Umpqua Holdings Corporation merged with Columbia), MSR (Mortgage servicing rights), and UHC (Umpqua Holdings Corporation)[7](index=7&type=chunk) [PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive income, changes in shareholders' equity, and cash flows, along with detailed notes on significant accounting policies, the UHC merger, and various financial components [Condensed Consolidated Balance Sheets (unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(unaudited)) The balance sheet shows a significant increase in total assets and liabilities as of March 31, 2023, primarily driven by the Umpqua Holdings Corporation (UHC) merger, reflecting substantial growth in cash, investment securities, loans, and deposits | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Assets | $53,994,226 | $31,848,639 | $22,145,587 | 69.5% | | Total Liabilities | $49,109,503 | $29,368,813 | $19,740,690 | 67.2% | | Total Deposits | $41,586,347 | $27,065,612 | $14,520,735 | 53.6% | | Total Shareholders' Equity | $4,884,723 | $2,479,826 | $2,404,897 | 96.9% | [Condensed Consolidated Statements of Operations (unaudited)](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(unaudited)) The company reported a net loss of **$14.04 million** for the three months ended March 31, 2023, a significant decline from a net income of **$91.16 million** in the prior year period, primarily due to increased provision for credit losses and non-interest expenses | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :---------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Net (Loss) Income | $(14,038) | $91,157 | $(105,195) | -115.4% | | Total Interest Income | $475,951 | $235,940 | $240,011 | 101.7% | | Total Interest Expense | $101,253 | $7,177 | $94,076 | 1310.8% | | Provision for Credit Losses | $105,539 | $4,804 | $100,735 | 2096.9% | | Total Non-Interest Expense | $342,818 | $182,430 | $160,388 | 87.9% | | Basic (Loss) Earnings Per Common Share | $(0.09) | $0.71 | $(0.80) | -112.7% | [Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)%20(unaudited)) The company reported comprehensive income of **$112.69 million** for the three months ended March 31, 2023, a significant improvement from a comprehensive loss of **$94.36 million** in the prior year, driven by a substantial net change in unrealized gains for available-for-sale securities and junior subordinated debentures | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------------------------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Comprehensive Income (Loss) | $112,692 | $(94,358) | $207,050 | 219.4% | | Net Change in Unrealized Gains (Losses) for Available-for-Sale Securities (net of tax) | $107,611 | $(176,079) | $283,690 | 161.1% | | Net Change in Unrealized Gains (Losses) for Junior Subordinated Debentures (net of tax) | $19,101 | $(9,436) | $28,537 | 302.4% | [Condensed Consolidated Statements of Changes in Shareholders' Equity (unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity%20(unaudited)) Total shareholders' equity significantly increased to **$4.88 billion** as of March 31, 2023, from **$2.48 billion** at December 31, 2022, primarily due to the issuance of common stock related to the UHC merger | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Shareholders' Equity | $4,884,723 | $2,479,826 | $2,404,897 | 96.9% | | Stock related to Merger | $2,337,632 | N/A | N/A | N/A | | Net Loss for the period | $(14,038) | N/A | N/A | N/A | | Other Comprehensive Income, net of tax | $126,730 | N/A | N/A | N/A | [Condensed Consolidated Statements of Cash Flows (unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(unaudited)) For the three months ended March 31, 2023, the company experienced a net increase in cash and cash equivalents of **$2.34 billion**, reaching **$3.64 billion**, primarily driven by significant cash provided by financing activities related to the merger | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------------ | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Net Increase (Decrease) in Cash and Cash Equivalents | $2,340,542 | $(96,185) | $2,436,727 | 2533.4% | | Net Cash Provided by Financing Activities | $1,918,196 | $62,629 | $1,855,567 | 2962.7% | | Net Cash Provided by (Used in) Investing Activities | $461,313 | $(434,139) | $895,452 | 206.2% | | Net Cash (Used in) Provided by Operating Activities | $(38,967) | $275,325 | $(314,292) | -114.1% | | Cash and Cash Equivalents, End of Period | $3,635,185 | $2,665,436 | $969,749 | 36.4% | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering significant accounting policies, the UHC business combination, investment securities, loans and leases, allowance for credit losses, goodwill, mortgage servicing rights, borrowings, commitments, derivatives, earnings per share, fair value measurements, and income taxes [Note 1 – Summary of Significant Accounting Policies](index=10&type=section&id=Note%201%20%E2%80%93%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the significant accounting policies, including the basis of financial statement presentation following the reverse merger of UHC into Columbia on February 28, 2023, and details the accounting for business combinations, financial instruments, and new accounting guidance - The merger of UHC into Columbia on February 28, 2023, was accounted for as a reverse merger, with **UHC deemed the acquirer** for financial reporting purposes, and Columbia's financial results prior to the merger date reflect UHC standalone results[28](index=28&type=chunk)[29](index=29&type=chunk) - The company now reports as a **single reportable segment**, realigned after the merger[32](index=32&type=chunk) - The company adopted ASU No. 2021-08 (Business Combinations) and ASU No. 2022-02 (Financial Instruments - Credit Losses) on January 1, 2023, with **no material impact** on consolidated financial statements[85](index=85&type=chunk)[86](index=86&type=chunk) - An enterprise-wide LIBOR transition program is in place to manage the discontinuance of LIBOR, utilizing optional expedients and exceptions[87](index=87&type=chunk)[88](index=88&type=chunk)[89](index=89&type=chunk) [Note 2 – Business Combination](index=18&type=section&id=Note%202%20%E2%80%93%20Business%20Combination) This note details the merger of UHC into Columbia on February 28, 2023, accounted for as a reverse merger where UHC was the accounting acquirer, resulting in Columbia recording **$1.03 billion** in goodwill and acquiring **$19.23 billion** in assets and assuming **$17.92 billion** in liabilities - UHC merged with and into Columbia on February 28, 2023, accounted for as a reverse merger with **UHC as the financial reporting acquirer**[93](index=93&type=chunk)[94](index=94&type=chunk) Purchase Price Allocation (in thousands) | Metric | Amount (in thousands) | | :-------------------------------------------------------------------- | :-------------------- | | Purchase Price Consideration | $2,337,632 | | Goodwill Recorded | $1,030,142 | | Total Assets Acquired | $19,226,816 | | Total Liabilities Assumed | $17,919,326 | | Net Assets Acquired | $1,307,490 | Merger-Related Expenses (in thousands) | Merger-Related Expense Category | Three Months Ended March 31, 2023 (in thousands) | | :------------------------------ | :--------------------------------------------- | | Legal and professional | $49,419 | | Personnel | $21,455 | | Premises and equipment | $21,265 | | Charitable contributions | $20,000 | | Other | $3,759 | | **Total merger-related expenses** | **$115,898** | [Note 3 – Investment Securities](index=23&type=section&id=Note%203%20%E2%80%93%20Investment%20Securities) As of March 31, 2023, the company's total available-for-sale securities significantly increased to **$9.25 billion** from **$3.20 billion** at December 31, 2022, primarily due to the merger, with a net unrealized loss of **$396.7 million** mainly from mortgage-backed securities Investment Securities Available-for-Sale (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Available-for-Sale Securities (Fair Value) | $9,249,600 | $3,196,166 | $6,053,434 | 189.4% | | Net Unrealized Loss (Available-for-Sale) | $(396,677) | $(542,115) | $145,438 | -26.8% | - Unrealized losses are primarily due to changes in market interest rates or widening market spreads, not credit quality, and **no allowance for credit losses** was deemed necessary[124](index=124&type=chunk)[372](index=372&type=chunk) Pledged Securities (March 31, 2023, in thousands) | Pledged Securities (March 31, 2023) | Amortized Cost (in thousands) | Fair Value (in thousands) | | :---------------------------------- | :---------------------------- | :------------------------ | | Total Pledged Securities | $4,859,076 | $4,483,066 | [Note 4 – Loans and Leases](index=25&type=section&id=Note%204%20%E2%80%93%20Loans%20and%20Leases) Total loans and leases outstanding increased significantly to **$37.09 billion** as of March 31, 2023, from **$26.16 billion** at December 31, 2022, primarily due to the UHC merger, with commercial real estate and residential mortgages constituting the largest segments Total Loans and Leases (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------ | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Loans and Leases (net of deferred fees and costs) | $37,091,280 | $26,155,981 | $10,935,299 | 41.8% | Major Loan and Lease Types (March 31, 2023, in thousands) | Major Loan and Lease Types (March 31, 2023) | Amount (in thousands) | % of Total | | :-------------------------- | :-------------------- | :--------- | | Commercial real estate | $19,009,213 | 51.2% | | Commercial | $9,837,803 | 26.5% | | Residential | $8,057,966 | 21.7% | | Consumer & other | $186,298 | 0.5% | | **Total** | **$37,091,280** | **100%** | - Of the net loans acquired in the merger, **$402.8 million** were identified as Purchased Credit-Deteriorated (PCD) assets, with an Allowance for Credit Loss (ACL) of **$26.49 million** at acquisition[107](index=107&type=chunk) [Note 5 – Allowance for Credit Losses](index=26&type=section&id=Note%205%20%E2%80%93%20Allowance%20for%20Credit%20Losses) The Allowance for Credit Losses (ACL) increased to **$436.49 million** as of March 31, 2023, from **$315.36 million** at December 31, 2022, primarily due to the initial provision for acquired Columbia loan portfolios and changes in economic forecasts Allowance for Credit Losses (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Allowance for Credit Losses | $436,493 | $315,356 | $121,137 | 38.4% | | Initial ACL on PCD loans acquired | $26,492 | N/A | N/A | N/A | | Initial provision for non-PCD loans acquired | $88,400 | N/A | N/A | N/A | | Net Charge-offs (3 months ended) | $(16,661) | $(12,510) | $(4,151) | 33.2% | - The increase in ACL is primarily due to the initial provision for acquired Columbia loan portfolios and changes in economic assumptions, with the Bank using **Moody's Analytics' February baseline economic forecast**[134](index=134&type=chunk)[151](index=151&type=chunk)[382](index=382&type=chunk) Economic Forecast (Moody's Analytics February Baseline) | Economic Forecast (Moody's Analytics February Baseline) | 2023 | 2024 | 2025 | 2026 | | :-------------------------------------- | :--- | :--- | :--- | :--- | | U.S. real GDP average annualized growth | 1.3% | 2.2% | 2.7% | 2.6% | | U.S. unemployment rate average | 3.5% | 3.9% | 4.0% | 4.1% | | Forecasted average federal funds rate | 4.8% | 4.2% | 3.2% | 2.5% | - Collateral Dependent Loans (CDLs) totaled **$98.3 million** (amortized cost basis) as of March 31, 2023[159](index=159&type=chunk) [Note 6 – Goodwill and Other Intangible Assets](index=40&type=section&id=Note%206%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) The company recorded **$1.03 billion** in goodwill and **$702.32 million** in other intangible assets as of March 31, 2023, primarily due to the UHC merger, with other intangibles mainly core deposit intangibles amortized over 10 years Goodwill and Other Intangible Assets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | | Goodwill | $1,030,142 | $0 | $1,030,142 | | Other Intangible Assets, Net | $702,315 | $4,745 | $697,570 | - Goodwill represents the excess of the purchase price over the fair value of assets acquired, net of liabilities assumed, and is **not amortized but tested for impairment**[100](index=100&type=chunk)[62](index=62&type=chunk) - Core deposit intangibles are amortized on an **accelerated basis over a 10-year period**[462](index=462&type=chunk) Expected Amortization of Intangible Assets (in thousands) | Year | Expected Amortization (in thousands) | | :--------- | :--------------------------- | | 2023 | $104,017 | | 2024 | $123,735 | | 2025 | $108,589 | | 2026 | $94,502 | | 2027 | $80,415 | | Thereafter | $191,057 | | **Total** | **$702,315** | [Note 7 – Residential Mortgage Servicing Rights](index=41&type=section&id=Note%207%20%E2%80%93%20Residential%20Mortgage%20Servicing%20Rights) Residential Mortgage Servicing Rights (MSR) decreased slightly to **$178.80 million** as of March 31, 2023, from **$185.02 million** at December 31, 2022, primarily due to the collection/realization of expected cash flows and changes in valuation inputs Residential Mortgage Servicing Rights (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | MSR Balance, End of Period | $178,800 | $185,017 | $(6,217) | -3.4% | | Additions for new MSR capitalized | $1,601 | $3,740 | $(2,139) | -57.2% | | Changes due to collection/realization of expected cash flows over time | $(4,881) | $(4,986) | $105 | -2.1% | | Changes due to valuation inputs or assumptions | $(2,937) | $(9,914) | $6,977 | -70.4% | MSR as a Percentage of Serviced Loans | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | MSR as a percentage of serviced loans | 1.38% | 1.42% | [Note 8 – Borrowings](index=41&type=section&id=Note%208%20%E2%80%93%20Borrowings) Total borrowings significantly increased to **$6.0 billion** as of March 31, 2023, from **$906.2 million** at December 31, 2022, primarily driven by **$5.9 billion** in FHLB advances, including **$2.3 billion** from the merger and an additional **$2.8 billion** in net short-term advances Borrowings Outstanding (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Borrowings Outstanding | $5,950,000 | $906,175 | $5,043,825 | 556.6% | | FHLB Advances | $5,900,000 | $906,200 | $4,993,800 | 551.1% | - The increase in FHLB advances includes **$2.3 billion** from the merger and an additional **$2.8 billion** in net short-term advances borrowed to fund liquidity[393](index=393&type=chunk) - Available lines of credit at March 31, 2023, included **$5.5 billion** from FHLB, **$1.3 billion** from the Federal Reserve, **$2.3 billion** from the FRB Bank Term Funding Program, and **$600.0 million** from uncommitted federal funds lines[398](index=398&type=chunk)[480](index=480&type=chunk) [Note 9 – Commitments and Contingencies](index=42&type=section&id=Note%209%20%E2%80%93%20Commitments%20and%20Contingencies) The company has various off-balance-sheet commitments and contingent liabilities, including **$11.96 billion** in commitments to extend credit and **$155.89 million** in standby letters of credit as of March 31, 2023, and is vigorously defending a class action lawsuit with potential damages between **$386.2 million** and **$429.8 million** Commitments and Contingent Liabilities (March 31, 2023, in thousands) | Commitments and Contingent Liabilities (March 31, 2023) | Amount (in thousands) | | :-------------------------------------------------- | :-------------------- | | Commitments to extend credit | $11,963,019 | | Forward sales commitments | $61,000 | | Commitments to originate residential mortgage loans held for sale | $39,898 | | Standby letters of credit | $155,886 | - A class action complaint was filed against Umpqua Bank alleging aiding and abetting a Ponzi scheme, with plaintiffs estimating damages between **$386.2 million** and **$429.8 million**, and Umpqua Bank intends to vigorously defend the matter[188](index=188&type=chunk) - Accrued legal matters totaled **$3.9 million** as of March 31, 2023[485](index=485&type=chunk) - A concentration of credit risk exists in real estate-related loans, representing approximately **74% of the Bank's loan and lease portfolio** at March 31, 2023[191](index=191&type=chunk) [Note 10 – Derivatives](index=44&type=section&id=Note%2010%20%E2%80%93%20Derivatives) The company uses derivatives, primarily forward delivery contracts, interest rate futures, and interest rate swaps, as economic hedges to manage interest rate risk, with a notional amount of interest rate swaps at **$8.6 billion** as of March 31, 2023, and reported a total derivative loss of **$1.76 million** for the three months ended March 31, 2023 - The company uses derivatives (forward delivery contracts, interest rate futures, interest rate swaps) as economic hedges for interest rate risk in mortgage loans held for sale and MSRs; none are designated as hedging instruments[77](index=77&type=chunk)[192](index=192&type=chunk) Interest Rate Swaps | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Interest Rate Swaps (Notional Amount) | **$8.6 billion** | **$7.3 billion** | | Number of Interest Rate Swaps | 1,338 | 922 | Total Derivative (Losses) Gains (in thousands) | Metric | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :--------------------------------------------- | :--------------------------------------------- | :-------------------- | :--------- | | Total Derivative (Losses) Gains | $(1,761) | $27,505 | $(29,266) | -106.4% | - The Bank has solely executed swaps indexed to Term SOFR since the end of 2021, and LIBOR-indexed junior subordinated debentures will transition to Term SOFR[207](index=207&type=chunk)[422](index=422&type=chunk) [Note 11 – Earnings Per Common Share](index=45&type=section&id=Note%2011%20%E2%80%93%20Earnings%20Per%20Common%20Share) Basic and diluted earnings per common share were **$(0.09)** for the three months ended March 31, 2023, a decrease from **$0.71** and **$0.70** respectively in the prior year period, reflecting the net loss reported for the quarter and increased weighted average common shares outstanding due to the merger Earnings Per Common Share | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | | Basic (Loss) Earnings Per Common Share | $(0.09) | $0.71 | | Diluted (Loss) Earnings Per Common Share | $(0.09) | $0.70 | | Weighted Average Number of Common Shares Outstanding - Basic (in thousands) | 156,383 | 129,159 | [Note 12 – Fair Value Measurement](index=46&type=section&id=Note%2012%20%E2%80%93%20Fair%20Value%20Measurement) The company measures various financial assets and liabilities at fair value, categorized into a three-level hierarchy, with total assets measured at fair value of **$9.89 billion** and total liabilities of **$559.57 million** as of March 31, 2023, with residential mortgage servicing rights and junior subordinated debentures being significant Level 3 measurements Assets and Liabilities Measured at Fair Value (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :------------------------------------------ | :---------------------------- | :----------------------------- | | Total Assets Measured at Fair Value | $9,887,728 | $3,826,814 | | Total Liabilities Measured at Fair Value | $559,566 | $594,844 | Significant Level 3 Financial Instruments (March 31, 2023, in thousands) | Significant Level 3 Financial Instruments (March 31, 2023) | Fair Value (in thousands) | | :------------------------------------------------------- | :------------------------ | | Residential mortgage servicing rights | $178,800 | | Interest rate lock commitments (assets) | $176 | | Junior subordinated debentures | $297,721 | | Interest rate lock commitments (liabilities) | $39 | Level 3 Instrument Significant Unobservable Inputs (March 31, 2023) | Level 3 Instrument | Significant Unobservable Inputs (March 31, 2023) | | :-------------------------------- | :--------------------------------------------- | | Residential mortgage servicing rights | Constant prepayment rate (5.92% - 44.13%), Discount rate (9.50% - 15.98%) | | Junior subordinated debentures | Credit spread (2.53% - 6.91%) | - A **$25.8 million** unrealized gain on junior subordinated debentures (net of tax **$19.1 million**) was recorded in Q1 2023, primarily due to an increase in the discount rate/credit spread[237](index=237&type=chunk) [Note 13 – Income Taxes](index=52&type=section&id=Note%2013%20%E2%80%93%20Income%20Taxes) The company's consolidated effective tax rate for the three months ended March 31, 2023, was **25.8%**, and it holds a net deferred tax asset of **$351.2 million**, including **$42.4 million** in federal and state Net Operating Loss (NOL) carry-forwards, expecting full realization of these benefits Income Tax Metrics | Metric | Three Months Ended March 31, 2023 | | :-------------------------- | :-------------------------------- | | Consolidated Effective Tax Rate | 25.8% | | Net Deferred Tax Asset (March 31, 2023) | **$351.2 million** | | Federal and State NOL Carry-forwards (March 32, 2023) | **$42.4 million** | - The effective tax rate differed from the statutory rate principally due to state taxes and income on tax-exempt investment securities[258](index=258&type=chunk)[336](index=336&type=chunk) - The company believes it is more likely than not that it will fully realize the benefit of its federal and state NOL and tax carry-forwards, and thus has **not provided a valuation allowance** against its deferred tax assets[244](index=244&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting the impact of the UHC merger, key financial performance metrics, critical accounting estimates, and detailed analysis of income, expenses, asset quality, liquidity, and capital resources [Forward-Looking Statements](index=53&type=section&id=Forward-Looking%20Statements) This section highlights that the report contains forward-looking statements regarding the combined company's prospects post-merger, financial performance, economic forecasts, and various risks, cautioning that actual results may differ materially due to numerous factors - The report contains forward-looking statements that predict future results, performance, or events, identified by words like 'anticipates,' 'expects,' 'believes,' 'estimates,' and 'intends'[259](index=259&type=chunk) - Actual results could differ materially due to risks such as changes in economic conditions, increased loan losses, interest rate volatility, bank failures, regulatory changes, cyber-attacks, merger integration issues, geopolitical instability, and natural disasters[248](index=248&type=chunk)[260](index=260&type=chunk) - Forward-looking statements are made as of the report date, and the company does not intend to update them[261](index=261&type=chunk) [General](index=54&type=section&id=General) Columbia Banking System, Inc. completed its merger with Umpqua Holdings Corporation on February 28, 2023, creating a large bank in the West, with core systems conversion completed on March 20, 2023, and branch consolidations ongoing, providing a broad range of banking and financial services across several western states - Columbia Banking System, Inc. completed its merger with Umpqua Holdings Corporation on February 28, 2023, forming one of the **largest banks headquartered in the West**[262](index=262&type=chunk) - Core systems conversion was completed on March 20, 2023, and branch consolidations are scheduled through the second quarter of 2023[262](index=262&type=chunk) - The company provides banking and financial services across Oregon, Washington, California, Idaho, Nevada, Arizona, Colorado, and Utah through Umpqua Bank and its subsidiaries[263](index=263&type=chunk) [Executive Overview](index=55&type=section&id=Executive%20Overview) The company reported a net loss of **$(0.09)** per diluted common share for Q1 2023, primarily due to increased non-interest expenses (merger-related) and higher provision for credit losses, while total assets grew to **$54.0 billion** and deposits to **$41.6 billion**, largely driven by the merger Key Financial Metrics | Metric | Q1 2023 | Q4 2022 | Change | | :------------------------------------------ | :------ | :------ | :----- | | Earnings per diluted common share | $(0.09) | $0.64 | $(0.73) | | Net interest margin (tax-equivalent) | 4.08% | 4.01% | +0.07% | | Total Assets | **$54.0 billion** | **$31.8 billion** | +**$22.2 billion** | | Total Deposits | **$41.6 billion** | **$27.1 billion** | +**$14.5 billion** | | Non-Interest Expense | **$342.8 million** | **$195.0 million** | +**$147.8 million** | | Provision for Credit Losses | **$105.5 million** | **$32.9 million** | +**$72.6 million** | | Total Available Liquidity | **$17.9 billion** | N/A | N/A | - The increase in total assets and deposits was primarily due to the **$19.2 billion** in acquired assets and **$15.2 billion** in deposits from the merger[265](index=265&type=chunk)[276](index=276&type=chunk) - The increase in non-interest expense was largely due to **$104.3 million** in merger-related expenses[275](index=275&type=chunk) [Critical Accounting Estimates](index=56&type=section&id=Critical%20Accounting%20Estimates) Management's critical accounting estimates, particularly for the Allowance for Credit Losses (ACL), business combinations, and goodwill, involve significant judgment and assumptions, relying on complex models and economic forecasts, and are subject to refinement and potential impairment - Critical accounting estimates include the Allowance for Credit Losses (ACL), business combinations, and goodwill, which require difficult, subjective, or complex judgments[285](index=285&type=chunk) - The ACL methodology uses complex models with specific macroeconomic variables and qualitative factors to estimate expected credit losses over the financial asset's contractual term[287](index=287&type=chunk)[302](index=302&type=chunk) - Business combinations are accounted for using the acquisition method, recording acquired assets and liabilities at fair value, with any excess purchase price recorded as goodwill, and these fair value estimates are subject to refinement and potential impairment[271](index=271&type=chunk)[290](index=290&type=chunk) [Results of Operations](index=58&type=section&id=Results%20of%20Operations) The company experienced a net loss of **$14.0 million** in Q1 2023, a decrease from **$83.0 million** net income in Q4 2022, primarily due to increased non-interest expense and provision for credit losses, partially offset by higher net interest income [Net Interest Income](index=60&type=section&id=Net%20Interest%20Income) Net interest income increased to **$374.7 million** for Q1 2023, up from **$305.5 million** in Q4 2022 and **$228.8 million** in Q1 2022, driven by higher interest and fees on loans and leases and taxable investments, benefiting from rising interest rates and the merger Net Interest Income (in thousands) | Metric | Q1 2023 (in thousands) | Q4 2022 (in thousands) | Q1 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Net Interest Income | $374,698 | $305,491 | $228,763 | | Net Interest Margin (tax-equivalent) | 4.08% | 4.01% | 3.14% | - The increase in net interest income was driven by a **$91.2 million** increase in interest and fees on loans and leases and a **$21.6 million** increase in interest on taxable investments quarter-over-quarter, primarily due to higher interest rates and the merger[297](index=297&type=chunk)[318](index=318&type=chunk) - Higher funding costs, due to rising interest rates and changes in deposit mix, partially offset the increase in interest income[297](index=297&type=chunk)[299](index=299&type=chunk)[320](index=320&type=chunk) [Provision for Credit Losses](index=62&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses significantly increased to **$105.5 million** for Q1 2023, compared to **$32.9 million** in Q4 2022 and **$4.8 million** in Q1 2022, primarily due to an **$88.4 million** initial provision for non-PCD loans acquired through the merger and changes in economic forecasts Provision for Credit Losses (in thousands) | Metric | Q1 2023 (in thousands) | Q4 2022 (in thousands) | Q1 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Provision for Credit Losses | $105,539 | $32,900 | $4,804 | | Net Charge-offs | $16,661 | $12,510 | $5,544 | | Annualized Provision for Credit Losses (% of average outstanding loans and leases) | 1.43% | 0.51% | 0.09% | | Annualized Net Charge-offs (% of average outstanding loans and leases) | 0.23% | 0.19% | 0.10% | - The primary driver for the increase in provision was an **$88.4 million** initial provision for historical Columbia non-PCD loans related to the merger, in addition to changes in the economic forecast[278](index=278&type=chunk)[324](index=324&type=chunk)[327](index=327&type=chunk) - The majority of net charge-offs related to leases and equipment finance loans within the commercial loan portfolio[325](index=325&type=chunk)[328](index=328&type=chunk) [Non-Interest Income](index=63&type=section&id=Non-Interest%20Income) Total non-interest income increased to **$54.7 million** for Q1 2023, up from **$34.9 million** in Q4 2022, but decreased from **$79.97 million** in Q1 2022, with the quarterly increase driven by favorable fair value adjustments and MSR hedging activity, while the year-over-year decrease was primarily due to a significant decline in residential mortgage banking revenue Non-Interest Income (in thousands) | Metric | Q1 2023 (in thousands) | Q4 2022 (in thousands) | Q1 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Total Non-Interest Income | $54,735 | $34,879 | $79,969 | | Residential Mortgage Banking Revenue, Net | $7,816 | $(1,812) | $60,786 | - Quarter-over-quarter increase was driven by a **$16.2 million** favorable change in cumulative fair value adjustments and MSR hedging activity, and one month of higher income from the merger[264](index=264&type=chunk)[315](index=315&type=chunk)[340](index=340&type=chunk) - Year-over-year decrease was primarily due to a **$53.0 million** decline in residential mortgage banking revenue, resulting from lower origination volumes and gain on sale margins due to rising interest rates[307](index=307&type=chunk)[341](index=341&type=chunk) [Non-Interest Expense](index=65&type=section&id=Non-Interest%20Expense) Total non-interest expense significantly increased to **$342.8 million** for Q1 2023, up from **$195.0 million** in Q4 2022 and **$182.4 million** in Q1 2022, primarily due to **$115.9 million** in merger-related expenses, increased salaries and employee benefits, and higher intangible amortization following the merger Non-Interest Expense (in thousands) | Metric | Q1 2023 (in thousands) | Q4 2022 (in thousands) | Q1 2022 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Total Non-Interest Expense | $342,818 | $194,982 | $182,430 | | Merger-related expenses | $115,898 | $11,637 | $2,278 | | Salaries and employee benefits | $136,092 | $107,982 | $113,138 | | Intangible amortization | $12,660 | $1,019 | $1,025 | - The increase in salaries and employee benefits and intangible amortization was primarily due to the larger employee base and core deposit intangible added as a result of the merger[344](index=344&type=chunk)[345](index=345&type=chunk)[347](index=347&type=chunk)[348](index=348&type=chunk) [Income Taxes](index=66&type=section&id=Income%20Taxes) The company's consolidated effective tax rate for the three months ended March 31, 2023, was **25.8%**, consistent with the prior quarter and slightly higher than the prior year period, primarily reflecting state taxes and income from tax-exempt investment securities Consolidated Effective Tax Rate | Metric | Q1 2023 | Q4 2022 | Q1 2022 | | :-------------------------- | :------ | :------ | :------ | | Consolidated Effective Tax Rate | 25.8% | 26.2% | 25.0% | - The effective tax rate differed from the statutory rate principally because of state taxes and income on tax-exempt investment securities[336](index=336&type=chunk) [Financial Condition](index=67&type=section&id=Financial%20Condition) The company's financial condition as of March 31, 2023, reflects significant growth driven by the UHC merger, with substantial increases in cash, investment securities, loans, and deposits, while asset quality metrics show an increase in non-performing assets, liquidity remains strong, and capital ratios exceed regulatory requirements [Cash and Cash Equivalents](index=67&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents significantly increased to **$3.6 billion** as of March 31, 2023, from **$1.3 billion** at December 31, 2022, primarily reflecting a strategic decision to increase on-balance sheet liquidity, funded by short-term borrowings Cash and Cash Equivalents (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Cash and Cash Equivalents | $3,635,185 | $1,294,643 | $2,340,542 | 180.8% | - The increase was mainly due to a strategic decision to increase on-balance sheet liquidity, funded by short-term borrowings[279](index=279&type=chunk)[368](index=368&type=chunk) [Investment Securities](index=67&type=section&id=Investment%20Securities) Investment debt securities available for sale increased to **$9.2 billion** as of March 31, 2023, from **$3.2 billion** at December 31, 2022, primarily due to **$6.2 billion** in securities acquired through the merger, with a net unrealized loss of **$396.7 million** mainly from mortgage-backed securities Investment Debt Securities Available for Sale (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Investment Debt Securities Available for Sale | $9,249,600 | $3,196,166 | $6,053,434 | 189.4% | - The increase was due to the addition of **$6.2 billion** in securities acquired through the merger[352](index=352&type=chunk) - The available-for-sale investment portfolio had a net unrealized loss of **$396.7 million** as of March 31, 2023, primarily from mortgage-backed securities, attributed to changes in market interest rates or spreads, not credit quality[372](index=372&type=chunk) - A portion of the historical Columbia securities portfolio (**$1.2 billion** sold, **$919.2 million** purchased) was restructured post-merger to reduce adverse impact in a declining interest rate environment[352](index=352&type=chunk) [Loans and Leases](index=68&type=section&id=Loans%20and%20Leases) Total loans and leases outstanding increased to **$37.1 billion** as of March 31, 2023, from **$26.2 billion** at December 31, 2022, primarily due to the **$10.9 billion** in loans acquired through the merger, with the loan-to-deposit ratio decreasing to **89%** from **97%** Total Loans and Leases Outstanding (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Loans and Leases Outstanding | $37,091,280 | $26,155,981 | $10,935,299 | 41.8% | - The increase is attributable to the addition of **$10.9 billion** in loans acquired through the merger[353](index=353&type=chunk) Loan to Deposit Ratio | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | Loan to Deposit Ratio | 89% | 97% | [Asset Quality and Non-Performing Assets](index=69&type=section&id=Asset%20Quality%20and%20Non-Performing%20Assets) Non-performing assets increased to **$76.0 million** (**0.14%** of total assets) as of March 31, 2023, from **$58.8 million** (**0.18%** of total assets) at December 31, 2022, with non-performing loans and leases also rising to **$75.6 million** (**0.20%** of total loans and leases), primarily reflecting assets acquired through the merger Non-Performing Assets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------------ | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Non-Performing Assets | $76,037 | $58,843 | $17,194 | 29.2% | | Non-performing assets to total assets | 0.14% | 0.18% | -0.04% | -22.2% | | Total Non-Performing Loans and Leases | $75,628 | $58,640 | $16,988 | 28.9% | | Non-performing loans and leases to total loans and leases | 0.20% | 0.22% | -0.02% | -9.1% | - The increases in non-performing assets and loans primarily reflect assets acquired as a result of the merger[266](index=266&type=chunk) - Loans modified due to borrowers experiencing financial difficulties totaled approximately **$12.9 million** (**0.03%** of total loans) as of March 31, 2023[358](index=358&type=chunk) [Allowance for Credit Losses](index=70&type=section&id=Allowance%20for%20Credit%20Losses) The Allowance for Credit Losses (ACL) increased to **$436.5 million** as of March 31, 2023, from **$315.4 million** at December 31, 2022, driven by an **$88.4 million** initial provision for non-PCD loans from the merger and updates to economic forecasts projecting a worsening economic situation Allowance for Credit Losses (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Allowance for Credit Losses | $436,493 | $315,356 | $121,137 | 38.4% | | Provision for credit losses (3 months ended) | $105,539 | $32,900 | $72,639 | 220.8% | | Net charge-offs (3 months ended) | $(16,661) | $(12,510) | $(4,151) | 33.2% | - The increase in provision is due to an **$88.4 million** initial provision for historical Columbia non-PCD loans and updates to economic forecasts, which show a worsening economic situation[364](index=364&type=chunk)[384](index=384&type=chunk) ACL Allocation by Loan Type (March 31, 2023, in thousands) | ACL Allocation by Loan Type (March 31, 2023) | Amount (in thousands) | % loans to total loans | | :------------------------------------------- | :-------------------- | :--------------------- | | Commercial real estate | $111,090 | 50% | | Commercial | $239,146 | 27% | | Residential | $60,613 | 22% | | Consumer & other | $6,615 | 1% | [Residential Mortgage Servicing Rights](index=72&type=section&id=Residential%20Mortgage%20Servicing%20Rights) Residential Mortgage Servicing Rights (MSR) decreased slightly to **$178.8 million** as of March 31, 2023, from **$185.0 million** at December 31, 2022, due to the collection/realization of expected cash flows and changes in valuation inputs, partially offset by new MSR capitalized Residential Mortgage Servicing Rights (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | MSR Balance, End of Period | $178,800 | $185,017 | $(6,217) | -3.4% | | Changes due to collection/realization of expected cash flows over time | $(4,881) | $(4,986) | $105 | -2.1% | | Changes due to valuation inputs or assumptions | $(2,937) | $(9,914) | $6,977 | -70.4% | MSR as a Percentage of Serviced Loans | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------- | :------------- | :---------------- | | MSR as a percentage of serviced loans | 1.38% | 1.42% | [Goodwill and Other Intangible Assets](index=72&type=section&id=Goodwill%20and%20Other%20Intangible%20Assets) The company recorded **$1.03 billion** in goodwill and **$702.3 million** in other intangible assets as of March 31, 2023, both significantly increased from December 31, 2022, due to the UHC merger, with other intangible assets primarily core deposit intangibles amortized over 10 years Goodwill and Other Intangible Assets (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | | Goodwill | $1,030,142 | $0 | $1,030,142 | | Other Intangible Assets | $702,315 | $4,745 | $697,570 | - The significant increase in both goodwill and other intangible assets is a **direct result of the UHC merger**[387](index=387&type=chunk)[388](index=388&type=chunk) - Core deposit intangible assets are amortized on an accelerated basis over a period of **10 years**[388](index=388&type=chunk) [Deposits](index=73&type=section&id=Deposits) Total deposits increased to **$41.6 billion** at March 31, 2023, from **$27.1 billion** at December 31, 2022, primarily due to **$15.2 billion** in deposits acquired through the merger, with uninsured deposits also rising to **$14.8 billion**, but total available liquidity of **$17.9 billion** represents **121%** of uninsured deposits Deposits (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Deposits | $41,586,347 | $27,065,612 | $14,520,735 | 53.6% | | Uninsured Deposits | $14,800,000 | $10,600,000 | $4,200,000 | 39.6% | - The increase in deposits is attributable to the addition of **$15.2 billion** in deposits related to the merger, partially offset by declining existing customer balances[265](index=265&type=chunk)[390](index=390&type=chunk) - Total available liquidity of **$17.9 billion** at March 31, 2023, represented **121% of uninsured deposits**[392](index=392&type=chunk) [Borrowings](index=73&type=section&id=Borrowings) Total borrowings significantly increased to **$6.0 billion** at March 31, 2023, from **$906.2 million** at December 31, 2022, mainly due to **$5.9 billion** in FHLB advances, including **$2.3 billion** from the merger and an additional **$2.8 billion** in net short-term advances to fund liquidity Borrowings Outstanding (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Total Borrowings Outstanding | $5,950,000 | $906,175 | $5,043,825 | 556.6% | | FHLB Advances | $5,900,000 | $906,200 | $4,993,800 | 551.1% | - The increase in FHLB advances was due to **$2.3 billion** from the merger and an additional **$2.8 billion** in net short-term advances to fund liquidity[393](index=393&type=chunk) - FHLB advances have fixed rates ranging from **4.97% to 5.38%** and are set to mature before the end of 2023[393](index=393&type=chunk) [Junior and Other Subordinated Debentures](index=73&type=section&id=Junior%20and%20Other%20Subordinated%20Debentures) Junior and other subordinated debentures decreased to **$405.8 million** at March 31, 2023, from **$411.5 million** at December 31, 2022, primarily due to a **$25.8 million** decrease in the fair value of debentures, offset by **$20.3 million** in subordinated debt added through the merger Junior and Other Subordinated Debentures (Carrying Value, in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :------------------------------------------ | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Junior and Other Subordinated Debentures (Carrying Value) | $405,787 | $411,452 | $(5,665) | -1.4% | - The decrease was mainly due to a **$25.8 million** decline in fair value for debentures carried at fair value (due to increased discount rate/credit spread), partially offset by **$20.3 million** in subordinated debt added from the merger[409](index=409&type=chunk) - Substantially all debentures have adjustable interest rates based on a spread over three-month LIBOR, which will transition to forward Term SOFR plus a tenor spread adjustment after June 2023[409](index=409&type=chunk) [Liquidity and Cash Flow](index=74&type=section&id=Liquidity%20and%20Cash%20Flow) The company maintains a strong liquidity position, with **$17.9 billion** in total available liquidity as of March 31, 2023, including substantial lines of credit from the FHLB (**$5.5 billion**), Federal Reserve (**$1.3 billion**), and FRB Bank Term Funding Program (**$2.3 billion**), in addition to a diversified deposit base - Total available liquidity was **$17.9 billion** as of March 31, 2023, representing **33% of total assets**, **43% of total deposits**, and **121% of uninsured deposits**[279](index=279&type=chunk)[379](index=379&type=chunk) - Key liquidity sources include a diversified deposit base, repayments/maturities of loans and investment securities, and established lines of credit[379](index=379&type=chunk) Available Lines of Credit (March 31, 2023, in billions) | Available Lines of Credit (March 31, 2023) | Amount (in billions) | | :----------------------------------------- | :------------------- | | FHLB | **$5.5** | | Federal Reserve | **$1.3** | | FRB Bank Term Funding Program | **$2.3** | | Uncommitted federal funds lines | **$0.6** | - The company's liquidity is also supported by dividends from the Bank (**$48.0 million** in Q1 2023) and a **$50.0 million** short-term credit facility[411](index=411&type=chunk) [Capital Resources](index=75&type=section&id=Capital%20Resources) Shareholders' equity increased to **$4.9 billion** at March 31, 2023, primarily due to a **$2.3 billion** increase in common stock from the merger, and the company maintains capital ratios exceeding regulatory 'well-capitalized' requirements, with a total risk-based capital ratio of **10.9%** and a CET1 capital ratio of **8.9%** Shareholders' Equity (in thousands) | Metric | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | Change (in thousands) | Change (%) | | :-------------------------- | :---------------------------- | :----------------------------- | :-------------------- | :--------- | | Shareholders' Equity | $4,884,723 | $2,479,826 | $2,404,897 | 96.9% | - The increase in shareholders' equity was principally due to a **$2.3 billion** increase in common stock as a result of the merger[414](index=414&type=chunk) Consolidated Regulatory Capital Ratios (March 31, 2023) | Consolidated Regulatory Capital Ratios (March 31, 2023) | Actual | Regulatory Minimum | Well Capitalized | | :---------------------------------------------------- | :----- | :----------------- | :--------------- | | Total Capital (to Risk Weighted Assets) | 10.90% | 8.00% | 10.00% | | Tier I Capital (to Risk Weighted Assets) | 8.87% | 6.00% | 8.00% | | Tier I Common (to Risk Weighted Assets) | 8.87% | 4.50% | 6.50% | | Tier I Capital (to Average Assets) | 9.47% | 4.00% | 5.00% | - The company elected CECL capital relief, delaying the estimated impact on regulatory capital, and is phasing out the cumulative adjustment through 2024[402](index=402&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=76&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section discusses the company's market risk, particularly interest rate risk, noting a decreased asset sensitivity post-merger, with simulations showing more limited exposure to rate changes, and the economic value of equity indicating a liability-sensitive profile, while the company actively manages the transition from LIBOR [Interest Rate Simulation Impact on Net Interest Income](index=77&type=section&id=Interest%20Rate%20Simulation%20Impact%20on%20Net%20Interest%20Income) The company's interest rate simulation indicates decreased asset sensitivity compared to prior periods, showing more limited exposure to interest rate risk in both increasing and decreasing rate environments, with a **300 basis point upward shift** resulting in a **(0.6)%** change in net interest income in Year 1 - Asset sensitivity decreased from prior periods, indicating more limited exposure to interest rate risk in both increasing and decreasing rate environments[418](index=418&type=chunk) Interest Rate Shift Impact on Net Interest Income | Interest Rate Shift | Q1 2023 Year 1 | Q1 2023 Year 2 | | :------------------ | :------------- | :------------- | | Up 300 basis points | (0.6)% | 0.3% | | Up 200 basis points | (0.4)% | 0.3% | | Up 100 basis points | (0.2)% | 0.2% | | Down 100 basis points | (1.0)% | (2.7)% | | Down 200 basis points | (2.0)% | (5.7)% | | Down 300 basis points | (3.3)% | (9.5)% | - The change is mainly due to the decline in deposits, corresponding increase in short-term funding, and an increase in the mix of fixed-rate assets (restructuring ~**12%** of the securities portfolio)[418](index=418&type=chunk) [Economic Value of Equity](index=78&type=section&id=Economic%20Value%20of%20Equity) The economic value of equity analysis indicates a liability-sensitive profile in increasing interest rate scenarios, meaning a sudden or sustained increase in rates would decrease the estimated economic value of equity, while conversely increasing in declining interest rate scenarios, and as of March 31, 2023, the estimated economic value of equity was above book value - The economic value of equity analysis indicates a **liability-sensitive profile** in increasing interest rate scenarios, leading to a decrease in estimated economic value of equity[420](index=420&type=chunk) Economic Value of Equity Sensitivity | Interest Rate Shift | Q1 2023 | | :------------------ | :------ | | Up 300 basis points | (19.7)% | | Up 200 basis points | (13.3)% | | Up 100 basis points | (6.6)% | | Down 100 basis points | 4.4% | | Down 200 basis points | 7.7% | | Down 300 basis points | 9.6% | - As of March 31, 2023, the estimated economic value of equity was above book value, primarily due to an increase in the economic value of the core deposit intangible[420](index=420&type=chunk) [LIBOR Transition](index=78&type=section&id=LIBOR%20Transition) The company has an enterprise-wide program to manage the transition from LIBOR, which will be discontinued on June 30, 2023, with its exposures primarily in adjustable/variable-rate loans, loan-related derivatives, and junior subordinated debentures, all on track to transition to new reference rates like Term SOFR - The company holds financial instruments impacted by the discontinuance of LIBOR on **June 30, 2023**[421](index=421&type=chunk) - LIBOR exposures are primarily in adjustable/variable-rate loans, loan-related derivatives, and junior subordinated debentures[421](index=421&type=chunk) - The company has an enterprise-wide transition program, and outstanding junior subordinated debentures will transition to forward Term SOFR plus a statutorily prescribed tenor spread adjustment[421](index=421&type=chunk)[422](index=422&type=chunk) [Item 4. Controls and Procedures](index=78&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO, CFO, and Principal Accounting Officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting occurring during the quarter - Management concluded that disclosure controls and procedures were **effective** as of March 31, 2023[423](index=423&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2023[424](index=424&type=chunk) [Part II. OTHER INFORMATION](index=79&type=section&id=Part%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=79&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 9 of the Notes to Condensed Consolidated Financial Statements - Information required by this item is set forth in Part I, Item 1 under Note 9 Commitments and Contingencies—Legal Proceedings and Regulatory Matters[434](index=434&type=chunk) [Item 1A. Risk Factors](index=79&type=section&id=Item%201A.%20Risk%20Factors) The company refers to the risk factors discussed in its Annual Report on Form 10-K for the year ended December 31, 2022, stating that there have been no material changes to these factors, which could materially and adversely affect the business, financial condition, and results of operations - Readers should carefully consider the risk factors discussed in the Annual Report on Form 10-K for the year ended December 31, 2022[435](index=435&type=chunk) - There have been **no material changes** from the risk factors described in the Form 10-K[435](index=435&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the quarter ended March 31, 2023, the company repurchased **211,075** common shares at an average price of **$29.33** per share for the cancellation of shares to be issued upon vesting of restricted stock units and awards to pay withholding taxes, with no current share repurchase authorization from the Board of Directors Common Share Repurchases | Period | Total Number of Common Shares Purchased | Average Price Paid Per Common Share | | :---------------- | :------------------------------------ | :---------------------------------- | | 01/01/23 - 01/31/23 | 204 | $28.13 | | 02/01/23 - 02/28/23 | — | — | | 03/01/23 - 03/31/23 | 210,871 | $29.33 | | **Total for quarter** | **211,075** | **$29.33** | - Common shares were repurchased for the cancellation of shares to be issued upon vesting of restricted stock units and awards to pay withholding taxes[442](index=442&type=chunk) - The company does not currently have a share repurchase authorization from its Board of Directors[427](index=427&type=chunk) [Item 3. Defaults Upon Senior Securities](index=79&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item states that it is not applicable, indicating no defaults upon senior securities - This item is not applicable[437](index=437&type=chunk) [Item 4. Mine Safety Disclosures](index=79&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item states that it is not applicable, indicating no mine safety disclosures - This item is not applicable[437](index=437&type=chunk) [Item 5. Other Information](index=79&type=section&id=Item%205.%20Other%20Information) This item states that it is not applicable, indicating no other information to disclose - This item is not applicable[443](index=443&type=chunk) [Item 6. Exhibits](index=80&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including merger agreements, articles of incorporation, bylaws, specimen stock certificates, letter agreements, and certifications, with many exhibits incorporated by reference from previous SEC filings - The exhibit list includes merger agreements, corporate governance documents, executive letter agreements, deferred compensation plans, and certifications (CEO, CFO, Principal Accounting Officer)[444](index=444&type=chunk) - Many exhibits are incorporated by reference from prior Form 8-K and S-3 filings[438](index=438&type=chunk)[446](index=446&type=chunk) [SIGNATURES](index=82&type=section&id=SIGNATURES) This section contains the signatures of the registrant's authorized officers, including the President and Chief Executive Officer, Executive Vice President/Chief Financial Officer, and Executive Vice President/Corporate Controller and Principal Accounting Officer, certifying the report on May 9, 2023 - The report is signed by Clint E. Stein (President and CEO), Ronald L. Farnsworth (EVP/CFO), and Lisa M. White (EVP/Corporate Controller and Principal Accounting Officer)[448](index=448&type=chunk)[449](index=449&type=chunk) - The report was dated May 9, 2023[441](index=441&type=chunk)