Notable Items for Fourth Quarter and Fiscal Year 2022

• Record full year net income of $250.2 million and diluted earnings per share of $3.20
• Record quarterly net income of $68.9 million and diluted earnings per share of $0.88, which included a $0.05 per share reduction stemming from merger-related expenses
• Net interest margin of 3.64%, an increase of 17 basis points from the linked quarter
• Fourth quarter loan production of $402.5 million and full year production of $2.20 billion
• Nonperforming assets to period-end assets ratio of 0.07%
• Expect to close the merger with Umpqua Holdings after close of business on February 28, 2023, subject to the satisfaction of closing conditions
• Regular cash dividend declared of $0.30 per share

TACOMA, Wash, Jan. 24, 2023 /PRNewswire/ -- Columbia Banking System, Inc. (NASDAQ: COLB) ("Columbia", "we" or "us"), the parent company of Columbia Bank (the "Bank"), announced record earnings for the fourth quarter of $68.9 million and diluted earnings per share of $0.88. Clint Stein, President and Chief Executive Officer said today upon the release of Columbia's earnings, "Words cannot describe how proud I am of what our team accomplished in 2022. Their determination and commitment to our stakeholders resulted in record performance for the quarter and year while preparing for our transformative merger with Umpqua Holdings." He continued, "Record annual and quarterly revenue and earnings reflect the continued energy, commitment and discipline of our bankers on our frontline and in our back office as they continue to concentrate on doing what is best for our customers and communities over the long term."

Balance Sheet

Total assets at December 31, 2022 were $20.27 billion, a decrease of $139.5 million from the linked quarter. Loans were $11.61 billion, down $81.3 million from September 30, 2022, mainly attributable to loan payments partially offset by loan originations of $402.5 million. Debt securities in total were $6.62 billion, a decrease of $156.2 million from $6.78 billion at September 30, 2022 substantially driven by maturities and repayments partially offset by fair value movement related to the available-for-sale portfolio. Total deposits at December 31, 2022 were $16.71 billion, a decrease of $1.23 billion from September 30, 2022. The deposit mix remained consistent from September 30, 2022 with 50% noninterest-bearing and 50% interest-bearing.

Chris Merrywell, Columbia's Executive Vice President and Chief Operating Officer, stated, "While loans declined slightly during the quarter from normal seasonality, loan growth for the year was strong and the overall loan portfolio yield rose as we selectively considered the long-term impact of deals in our pipeline." He continued, "We continue to focus on the whole client relationship including loans, deposits and investments."

Income Statement

Net Interest Income

Net interest income for the fourth quarter of 2022 was $166.7 million, an increase of $4.2 million from the linked quarter and an increase of $21.2 million from the prior-year period. The increase from the linked quarter was primarily due to higher loan interest income as a result of increased average rates partially offset by lower interest income from securities due to decreased average balances. In addition, there was higher interest expense due to increased average balances and higher rates of FHLB advances and increased deposit interest expense driven by higher average rates. The increase in net interest income from the prior-year period was mainly due to higher interest income from loans partially offset by higher deposit interest expense due to higher average rates, increased average balances of FHLB advances and lower interest income from securities. For additional information regarding net interest income, see the "Net Interest Margin" section and the "Average Balances and Rates" tables.

Provision for Credit Losses

Columbia recorded a $2.4 million provision for credit losses for the fourth quarter of 2022 compared to a $5.3 million provision for the linked quarter and an $11.1 million provision for the comparable quarter in 2021. The provision for credit losses was mainly due to a less favorable economic forecast.

Noninterest Income

Noninterest income was $23.3 million for the fourth quarter of 2022, a decrease of $3.3 million from the linked quarter and a decrease of $909 thousand from the fourth quarter of 2021. The linked quarter decrease was primarily due to a $3.7 million gain from the sale-leaseback of owned real estate recorded in the prior period partially offset by current quarter bank owned life insurance gains of $354 thousand. The decrease in noninterest income during the fourth quarter of 2022 compared to the same quarter in 2021 was mainly due to lower loan revenue, principally a result of lower mortgage banking revenue and loan-related fees. This was partially offset by higher financial services revenue and increased deposit account and treasury management fees.

Noninterest Expense

Total noninterest expense for the fourth quarter of 2022 was $100.5 million, a decrease of $941 thousand compared to the third quarter of 2022. Total merger-related expenses for the quarter were $4.9 million, which compares to the linked quarter of $3.2 million. The largest contributor to the decrease in noninterest expense was related to lower net loan expenses and lower compensation and employee benefits driven by decreased incentive expense. This was partially offset by increased merger-related data processing and legal expenses incurred during the quarter. Compared to the fourth quarter of 2021, noninterest expense decreased $2.1 million, mostly attributable to a decrease in merger-related compensation and employee benefit expenses related to our fourth quarter 2021 acquisition of Bank of Commerce Holdings. Decreased merger-related expenses also contributed to the decrease from the prior-year period.

The provision for credit losses on unfunded loan commitments, a component of other noninterest expense, for the periods indicated are as follows:

Net Interest Margin

Columbia's net interest margin (tax equivalent) for the fourth quarter of 2022 was 3.64%, an increase of 17 basis points from the linked quarter and an increase of 59 basis points from the prior-year period. The increase in the net interest margin (tax equivalent) compared to the linked quarter and prior-year period was predominantly driven by higher average loan rates and a stronger earning assets mix. This was partially offset by a shift in the funding mix from deposits to higher-costing FHLB advances. The average cost of total deposits for the quarter was 18 basis points compared to 10 basis points for the linked quarter. The increase was predominantly related to higher rates associated with public funds deposits and money market accounts. For additional information regarding net interest margin, see the "Average Balances and Rates" tables.

Columbia's operating net interest margin (tax equivalent)¹ was 3.67% for the fourth quarter of 2022, an increase of 17 basis points from the linked quarter and an increase of 59 basis points from the prior-year period. The increase in the operating net interest margin for the fourth quarter of 2022 compared to the linked quarter and the prior-year period were both due to higher average loan rates and a stronger earning assets mix partially offset by a higher-costing funding mix as noted above.

Aaron James Deer, Columbia's Executive Vice President and Chief Financial Officer, said, "Our margin benefited from the continued impact of rising rates on the loan portfolio, which was partly offset by the impact of the shift in funding mix from deposits to higher-costing borrowings." He continued, "Our cost of funds is still among the lowest in the industry on the strength of our low-cost, relationship-focused deposit base."

Asset Quality

Nonperforming assets to total assets were 0.07% at December 31, 2022 and September 30, 2022. Total nonperforming assets decreased $44 thousand from the linked quarter, primarily due to decreases in commercial business, commercial real estate and other consumer nonaccrual loans, nearly offset by increases in agriculture and one-to-four family residential real estate nonaccrual loans.

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

Nonperforming assets to total loans were 0.12% at December 31, 2022 and September 30, 2022.

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

The allowance for credit losses to period-end loans was 1.36% at December 31, 2022 compared to 1.32% at September 30, 2022. Excluding PPP loans, the allowance for credit losses to period-end loans² was 1.37% at December 31, 2022 compared to 1.33% at September 30, 2022.

Organizational Update

Umpqua Merger

On January 9, 2023, we announced that we had received approval of the Federal Deposit Insurance Corporation ("FDIC") related to the merger with Umpqua Holdings Corporation, the final outstanding regulatory approval necessary to complete the transaction, and the deal is expected to close after close of business on February 28, 2023 with a core-system conversion anticipated soon thereafter. "The dedication and perseverance of each and every one of our associates over the past 15 months as they worked to build on the existing relationships while simultaneously supporting and executing merger integration planning efforts has been outstanding," said Clint Stein. He continued, "Every single associate has contributed, and I could not be more confident in what we will accomplish as we work to serve all of our clients and communities as a premier western regional bank."

Warm Hearts

The 2022 "Warm Hearts Winter Drive" to end homelessness raised $278 thousand in the fourth quarter, bringing our eight-year drive total to $2.1 million. Funds raised this year benefited nearly 70 shelters across the Columbia Bank footprint. "The commitment and passion of our associates and clients to help families struggling with homelessness during the difficult winter months is inspiring," said David Moore Devine, Chief Marketing and Experience Officer. He continued, "It has been especially gratifying to see our associates' care, focus and dedication to supporting the drive and their communities notwithstanding responsibilities associated with the merger and other activities."

Cash Dividend Announcement

Columbia will pay a regular cash dividend of $0.30 per common share on February 21, 2023 to shareholders of record as of the close of business on February 6, 2023.

Conference Call Information

Columbia's management will discuss the fourth quarter and full-year 2022 financial results on a conference call scheduled for Tuesday, January 24, 2023 at 11:00 a.m. Pacific Time (2:00 p.m. ET). Interested parties may register for the call to receive dial-in details and their own unique PIN using the following link:

https://register.vevent.com/register/BIb1b0b02fb69840d9bf7c2798adcdc01a

Alternatively, the webcast can be joined by using the following link:

https://edge.media-server.com/mmc/p/sgycoxq4

A replay of the webcast will be accessible beginning Wednesday, January 25, 2023 using the link below:

https://edge.media-server.com/mmc/p/sgycoxq4

About Columbia

Headquartered in Tacoma, Washington, Columbia Banking System, Inc. (NASDAQ: COLB) is the holding company of Columbia Bank, a Washington state-chartered full-service commercial bank with offices in Washington, Oregon, California, Idaho, Utah, and Arizona. The bank has been named one of Puget Sound Business Journal's "Washington's Best Workplaces," more than 10 times. Columbia was named on the Forbes 2022 list of "America's Best Banks" marking 11 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 (the "SEC"), available at the SEC's website at www.sec.gov and the Company's website at www.columbiabank.com, including the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of our annual reports on Form 10-K and quarterly reports on Form 10-Q (as applicable), factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following:

• national and global economic conditions could be less favorable than expected or could have a more direct and pronounced effect on us than expected and adversely affect our ability to continue internal growth and maintain the quality of our earning assets;
• the markets where we operate and make loans could face challenges;
• the risks presented by the economy, which could adversely affect credit quality, collateral values, including real estate collateral, investment values, liquidity and loan originations and loan portfolio delinquency rates;
• continued increases in inflation, and the risk that information may differ, possibly materially, from expectations, and actions taken by the Board of Governors of the Federal Reserve System in response to inflation and their potential impact on economic conditions including the possibility of a recession or economic downturn;
• risks related to the proposed merger with Umpqua including, among others, (i) failure to complete the merger with Umpqua or unexpected delays related to the merger or either party's inability to satisfy other closing conditions required to complete the merger, (ii) certain restrictions during the pendency of the proposed transaction with Umpqua that may impact the parties' ability to pursue certain business opportunities or strategic transactions, (iii) diversion of management's attention from ongoing business operations and opportunities, (iv) cost savings and any revenue synergies from the merger may not be fully realized or may take longer than anticipated to be realized, (v) the integration of each party's management, personnel and operations will not be successfully achieved or may be materially delayed or will be more costly or difficult than expected, (vi) deposit attrition, customer or employee loss and/or revenue loss as a result of the proposed merger, and (vii) expenses related to the proposed merger being greater than expected;
• the efficiencies and enhanced financial and operating performance we expect to realize from investments in personnel, acquisitions and infrastructure may not be realized;
• the ability to successfully integrate future acquired entities;
• interest rate changes could significantly reduce net interest income and negatively affect asset yields and funding sources;
• the effect of the discontinuation or replacement of LIBOR;
• results of operations following strategic expansion, including the impact of acquired loans on our earnings, could differ from expectations;
• changes in the scope and cost of FDIC insurance and other coverages;
• changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies could materially affect our financial statements and how we report those results, and expectations and preliminary analysis relating to how such changes will affect our financial results could prove incorrect;
• changes in laws and regulations affecting our businesses, including changes in the enforcement and interpretation of such laws and regulations by applicable governmental and regulatory agencies;
• increased competition among financial institutions and nontraditional providers of financial services;
• continued consolidation in the financial services industry resulting in the creation of larger financial institutions that have greater resources could change the competitive landscape;
• the goodwill we have recorded in connection with acquisitions could become impaired, which may have an adverse impact on our earnings and capital;
• our ability to identify and address cyber-security risks, including security breaches, "denial of service attacks," "hacking" and identity theft;
• any material failure or interruption of our information and communications systems;
• inability to keep pace with technological changes;
• our ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk and regulatory and compliance risk;
• failure to maintain effective internal control over financial reporting or disclosure controls and procedures;
• the effect of geopolitical instability, including wars, conflicts and terrorist attacks, including the impacts of Russia's invasion of Ukraine;
• our profitability measures could be adversely affected if we are unable to effectively manage our capital;
• the risks from climate change and its potential to disrupt our business and adversely impact the operations and creditworthiness of our customers;
• natural disasters, including earthquakes, tsunamis, flooding, fires and other unexpected events;
• the effect of COVID-19 and other infectious illness outbreaks that may arise in the future, which has created significant impacts and uncertainties in U.S. and global markets;
• changes in governmental policy and regulation, including measures taken in response to economic, business, political and social conditions, including with regard to COVID-19; and
• the effects of any damage to our reputation resulting from developments related to any of the items identified above.

Additional factors that could cause results to differ materially from those described above can be found in Columbia's Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the SEC and available on Columbia's website, www.columbiabank.com, under the heading "Financial Information" and in other documents Columbia files with the SEC, and in Umpqua's Annual Report on Form 10-K for the year ended December 31, 2021, which is on file with the SEC and available on Umpqua's investor relations website, www.umpquabank.com, under the heading "Financials," and in other documents Umpqua files with the SEC.

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. Neither Columbia nor Umpqua assumes any obligation to update forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements were made or to reflect the occurrence of unanticipated events except as required by federal securities laws.