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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
FORM 10-Q

☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the quarterly period ended:
March 31, 2024
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
for the transition period from                                        to                                       .
 
Commission File Number: 000-20288 
 
COLUMBIA BANKING SYSTEM, INC. 
(Exact Name of Registrant as Specified in Its Charter)
Washington91-1422237 
(State or Other Jurisdiction(I.R.S. Employer Identification Number)
of Incorporation or Organization) 
 
1301 A Street 
Tacoma, Washington 98402-2156 
(Address of Principal Executive Offices)(Zip Code) 
 
(253) 305-1900 
(Registrant's Telephone Number, Including Area Code) 

Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASSTRADING SYMBOLNAME OF EXCHANGE
Common Stock, No Par ValueCOLBThe Nasdaq Stock Market LLC

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 that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒   Yes   ☐   No 
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒   Yes   ☐   No 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
☒   Large accelerated filer   ☐   Accelerated filer   ☐   Non-accelerated filer  
 ☐   Smaller reporting company  ☐  Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐   Yes   ☒   No 

Indicate the number of shares outstanding for each of the issuer's classes of common stock, as of the latest practical date:
Common stock, no par value: 209,378,282 shares outstanding as of April 30, 2024.

COLUMBIA BANKING SYSTEM, INC. 
FORM 10-Q 
Table of Contents 
 
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2
GLOSSARY OF DEFINED TERMS
ACLAllowance for Credit Losses
ACLLLAllowance for Credit Losses on Loans and Leases
ASUAccounting Standards Update
BankUmpqua Bank
Basel IIIBasel Capital Framework (third accord)
BOLIBank Owned Life Insurance
BTFPBank Term Funding Program
CECLCurrent Expected Credit Losses
ColumbiaColumbia Banking System, Inc.
CompanyColumbia Banking System, Inc. and its Subsidiaries
CVACredit Valuation Adjustments
DCFDiscounted Cash Flow
FASBFinancial Accounting Standards Board
FDICFederal Deposit Insurance Corporation
Federal ReserveBoard of Governors of the Federal Reserve System
FHLBFederal Home Loan Bank of Des Moines
FinPacFinancial Pacific Leasing, Inc.
FOMCFederal Open Market Committee
FRBFederal Reserve Bank
GAAPGenerally Accepted Accounting Principles
GDPGross Domestic Product
GNMAGovernment National Mortgage Association
HELOCHome Equity Line of Credit
LGDLoss Given Default
Merger
Umpqua Holdings Corporation merged with and into Columbia, with Columbia as the surviving corporation.
Merger DateFebruary 28, 2023
MSRMortgage Servicing Rights
NOLNet Operating Loss
NMNot Meaningful
PCDPurchased with Credit Deterioration
PDProbability of Default
RUCReserve for Unfunded Commitments
SBASmall Business Administration
SECSecurities and Exchange Commission
SOFRSecured Overnight Financing Rate
UHCUmpqua Holdings Corporation

3
PART I.    FINANCIAL INFORMATION

Item 1.     Financial Statements (unaudited) 

COLUMBIA BANKING SYSTEM, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED BALANCE SHEETS 
(UNAUDITED)
(in thousands, except shares)March 31, 2024December 31, 2023
ASSETS  
Cash and due from banks (restricted cash of $1,447 and $4,200)
$440,215 $498,496 
Interest-bearing cash and temporary investments (restricted cash of $4,050 and $900)
1,760,902 1,664,038 
Total cash and cash equivalents2,201,117 2,162,534 
Investment securities  
Equity and other, at fair value77,203 76,995 
Available for sale, at fair value8,616,545 8,829,870 
Held to maturity, at amortized cost2,247 2,300 
Loans held for sale47,201 30,715 
Loans and leases (at fair value: $267,806 and $275,140)
37,642,413 37,441,951 
Allowance for credit losses on loans and leases(414,344)(440,871)
Net loans and leases37,228,069 37,001,080 
Restricted equity securities116,274 179,274 
Premises and equipment, net336,869 338,970 
Operating lease right-of-use assets113,833 115,811 
Goodwill 1,029,234 1,029,234 
Other intangible assets, net571,588 603,679 
Residential mortgage servicing rights, at fair value110,444 109,243 
Bank-owned life insurance682,293 680,948 
Deferred tax asset, net356,031 347,203 
Other assets735,058 665,740 
Total assets$52,224,006 $52,173,596 
LIABILITIES AND SHAREHOLDERS' EQUITY  
Deposits  
Non-interest-bearing$13,808,554 $14,256,452 
Interest-bearing27,897,606 27,350,568 
Total deposits41,706,160 41,607,020 
Securities sold under agreements to repurchase213,573 252,119 
Borrowings3,900,000 3,950,000 
Junior subordinated debentures, at fair value309,544 316,440 
Junior and other subordinated debentures, at amortized cost107,838 107,895 
Operating lease liabilities129,240 130,576 
Other liabilities900,406 814,512 
Total liabilities47,266,761 47,178,562 
COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS' EQUITY  
Preferred Stock, no par value, shares authorized: 2,000,000, issued and outstanding: 0
— — 
Common stock, no par value, shares authorized: 520,000,000 in 2024 and 2023; issued and outstanding: 209,370,395 in 2024 and 208,584,667 in 2023
5,802,322 5,802,747 
Accumulated deficit(418,946)(467,571)
Accumulated other comprehensive loss(426,131)(340,142)
Total shareholders' equity4,957,245 4,995,034 
Total liabilities and shareholders' equity$52,224,006 $52,173,596 

See accompanying notes to condensed consolidated financial statements.
4
COLUMBIA BANKING SYSTEM, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 
(UNAUDITED) 
Three Months Ended
 (in thousands, except per share amounts)March 31, 2024March 31, 2023
INTEREST INCOME  
Interest and fees on loans and leases$575,044 $413,525 
Interest and dividends on investment securities:  
Taxable75,017 39,729 
Exempt from federal income tax6,904 3,397 
Dividends3,707 719 
Interest on temporary investments and interest-bearing deposits23,553 18,581 
Total interest income684,225 475,951 
INTEREST EXPENSE  
Interest on deposits198,435 63,613 
Interest on securities sold under agreement to repurchase and federal funds purchased1,266 406 
Interest on borrowings51,275 28,764 
Interest on junior and other subordinated debentures9,887 8,470 
Total interest expense260,863 101,253 
Net interest income423,362 374,698 
 PROVISION FOR CREDIT LOSSES 17,136 105,539 
Net interest income after provision for credit losses406,226 269,159 
NON-INTEREST INCOME  
Service charges on deposits16,064 14,312 
Card-based fees13,183 11,561 
Financial services and trust revenue4,464 1,297 
Residential mortgage banking revenue, net4,634 7,816 
Gain on sale of debt securities, net12 — 
(Loss) gain on equity securities, net(1,565)2,416 
Gain on loan and lease sales, net221 940 
Bank-owned life insurance income4,639 2,790 
Other income 8,705 13,603 
Total non-interest income50,357 54,735 
NON-INTEREST EXPENSE  
Salaries and employee benefits154,538 136,092 
Occupancy and equipment, net45,291 41,700 
Communications3,782 3,026 
Marketing1,936 1,059 
Services13,422 12,843 
FDIC assessments14,460 6,113 
Intangible amortization32,091 12,660 
Merger-related expenses4,478 115,898 
Other expenses17,518 13,427 
Total non-interest expense287,516 342,818 
Income (loss) before provision for income taxes169,067 (18,924)
Provision (benefit) for income taxes44,987 (4,886)
Net income (loss)$124,080 $(14,038)
Earnings (loss) per common share:  
Basic$0.60 ($0.09)
Diluted$0.59 ($0.09)
Weighted average number of common shares outstanding:  
Basic208,260 156,383 
Diluted208,956 156,383 

See accompanying notes to condensed consolidated financial statements.
5
COLUMBIA BANKING SYSTEM, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)  
Three Months Ended
 (in thousands)March 31, 2024March 31, 2023
Net income (loss)$124,080 $(14,038)
Available for sale securities:  
Unrealized (losses) gains arising during the period(122,662)145,438 
Income tax benefit (expense) related to unrealized (losses) gains31,893 (37,827)
   Reclassification adjustment for net realized gains in earnings(12)— 
Income tax expense related to realized gains3 — 
Net change in unrealized (losses) gains for available for sale securities(90,778)107,611 
Junior subordinated debentures, at fair value:
Unrealized gains arising during the period6,453 25,812 
Income tax expense related to unrealized gains(1,678)(6,711)
Net change in unrealized gains for junior subordinated debentures, at fair value4,775 19,101 
Pension plan liability adjustment:
Amortization of unrecognized net actuarial loss included in net periodic pension cost19 24 
Income tax expense related to unrecognized actuarial loss(5)(6)
Net change in pension plan liability adjustment14 18 
Other comprehensive (loss) income, net of tax(85,989)126,730 
Comprehensive income $38,091 $112,692 

See accompanying notes to condensed consolidated financial statements.
6
COLUMBIA BANKING SYSTEM, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY  
(UNAUDITED)   
Common StockRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive Income (Loss) 
 (in thousands, except shares)
Shares
AmountTotal
Balance at January 1, 2023129,320,962 $3,450,493 $(543,803)$(426,864)$2,479,826 
Net loss  (14,038) (14,038)
Other comprehensive income, net of tax  126,730 126,730 
Stock issued in connection with the Merger78,863,112 2,337,632 2,337,632 
Stock-based compensation 5,644   5,644 
Stock repurchased and retired(215,229)(5,216)  (5,216)
Issuances of common stock under stock plans 460,399 —   — 
Cash dividends on common stock ($0.35 per share)
  (45,855) (45,855)
Balance at March 31, 2023208,429,244 $5,788,553 $(603,696)$(300,134)$4,884,723 
Net income  133,377  133,377 
Other comprehensive loss, net of tax   (118,628)(118,628)
Stock issued in connection with the Merger1,646 1,646 
Stock-based compensation 3,335   3,335 
Stock repurchased and retired(32,727)(742)  (742)
Issuances of common stock under stock plans117,122 —   — 
Cash dividends on common stock ($0.36 per share)
  (75,523) (75,523)
Balance at June 30, 2023208,513,639 $5,792,792 $(545,842)$(418,762)$4,828,188 
Net income  135,845  135,845 
Other comprehensive loss, net of tax   (261,667)(261,667)
Stock-based compensation 4,338   4,338 
Stock repurchased and retired(7,072)(148)  (148)
Issuances of common stock under stock plans10,472 —   — 
Issuances of common stock under the employee stock purchase plan58,440 1,185 1,185 
Cash dividends on common stock ($0.36 per share)
  (75,579) (75,579)
Balance at September 30, 2023208,575,479 $5,798,167 $(485,576)$(680,429)$4,632,162 
Net income93,531 93,531 
Other comprehensive income, net of tax340,287 340,287 
Stock-based compensation4,756 4,756 
Stock repurchased and retired(8,807)(176)(176)
Issuances of common stock under stock plans17,995 — — 
Cash dividends on common stock ($0.36 per share)
(75,526)(75,526)
Balance at December 31, 2023208,584,667 $5,802,747 $(467,571)$(340,142)$4,995,034 
 
Net income  124,080  124,080 
Other comprehensive loss, net of tax   (85,989)(85,989)
Stock-based compensation 4,422   4,422 
Stock repurchased and retired(240,329)(4,847)  (4,847)
Issuances of common stock under stock plans1,026,057 —   — 
Cash dividends on common stock ($0.36 per share)
  (75,455) (75,455)
Balance at March 31, 2024209,370,395 $5,802,322 $(418,946)$(426,131)$4,957,245 

See accompanying notes to condensed consolidated financial statements.

7

COLUMBIA BANKING SYSTEM, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED) 
Three Months Ended
 (in thousands)March 31, 2024March 31, 2023
CASH FLOWS FROM OPERATING ACTIVITIES:  
Net income (loss)
$124,080 $(14,038)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
  
Accretion of investment discounts, net
(17,693)(7,668)
Gain on sale of investment securities, net
(12)— 
Provision for credit losses
17,136 105,539 
Change in cash surrender value of bank-owned life insurance(4,672)(491)
Depreciation, amortization and accretion39,962 19,043 
Gain on sale of premises and equipment
(183)(305)
Additions to residential mortgage servicing rights carried at fair value(1,237)(1,601)
Change in fair value of residential mortgage servicing rights carried at fair value36 7,818 
Stock-based compensation4,422 5,644 
Net (increase) decrease in equity and other investments
(1,773)131 
Loss (gain) on equity securities, net
1,565 (2,416)
Gain on sale of loans and leases, net
(1,605)(2,996)
Change in fair value of loans held for sale (189)(82)
Origination of loans held for sale(86,903)(131,726)
Proceeds from sales of loans held for sale71,990 155,574 
Change in other assets and liabilities:  
Net increase in other assets
(38,767)(51,404)
Net increase (decrease) in other liabilities
79,351 (119,989)
Net cash provided by (used in) operating activities
185,508 (38,967)
CASH FLOWS FROM INVESTING ACTIVITIES:  
Purchases of investment securities available for sale(2,130)(919,233)
Proceeds from investment securities available for sale110,458 1,243,601 
Purchases of restricted equity securities(11,250)(188,066)
Redemption of restricted equity securities74,250 90,695 
Net change in loans and leases(263,625)(59,389)
Proceeds from sales of loans and leases18,980 20,502 
Change in premises and equipment(5,899)(3,486)
Proceeds from bank-owned life insurance death benefits1,160 2,028 
Cash received in the Merger— 274,587 
Other381 74 
Net cash (used in) provided by investing activities
(77,675)461,313 
CASH FLOWS FROM FINANCING ACTIVITIES:  
Net increase (decrease) in deposit liabilities
99,140 (672,737)
Net decrease in federal funds purchased
— (14,000)
Net decrease in securities sold under agreements to repurchase
(38,546)(107,747)
   Proceeds from borrowings3,900,000 5,945,000 
Repayment of borrowings(3,950,000)(3,181,522)
Dividends paid on common stock(74,997)(45,582)
Repurchase and retirement of common stock(4,847)(5,216)
Net cash (used in) provided by financing activities
(69,250)1,918,196 
Net increase in cash and cash equivalents
38,583 2,340,542 
Cash and cash equivalents, beginning of period2,162,534 1,294,643 
Cash and cash equivalents, end of period$2,201,117 $3,635,185 
8
COLUMBIA BANKING SYSTEM, INC. AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 
(UNAUDITED) (Continued)
Three Months Ended
 (in thousands)March 31, 2024March 31, 2023
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Cash paid during the period for:  
Interest$278,634 $83,836 
Income taxes566 11,407 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Changes in unrealized gains and losses on investment securities available for sale, net of taxes(90,778)107,611 
Changes in unrealized gains and losses on junior subordinated debentures carried at fair value, net of taxes4,775 19,101 
Acquisitions:
Assets acquired$— $19,226,816 
Liabilities assumed— (17,919,326)
Net assets acquired$— $1,307,490 


See accompanying notes to condensed consolidated financial statements.
 
9
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1 – Summary of Significant Accounting Policies 

The accounting and financial reporting policies of Columbia Banking System, Inc. conform to accounting principles generally accepted in the United States of America and with prevailing practices within the banking and securities industries. All references in this report to "Columbia," "we," "our," or "us" or similar references mean the Company and its subsidiaries, including the wholly-owned banking subsidiary Umpqua Bank (the "Bank"). FinPac is a commercial equipment leasing company and a wholly-owned subsidiary of the Bank. The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and the Bank's wholly-owned subsidiaries. All inter-company balances and transactions have been eliminated. The condensed consolidated financial statements have not been audited. A more detailed description of the Company's accounting policies is included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

In preparing these condensed consolidated financial statements, the Company has evaluated events and transactions subsequent to March 31, 2024, for potential recognition or disclosure. In management's opinion, all accounting adjustments necessary to accurately reflect the financial position and results of operations on the accompanying financial statements have been made. These adjustments include normal and recurring accruals considered necessary for a fair and accurate presentation. The results for interim periods are not necessarily indicative of results for the full year or any other interim period.

Basis of Financial Statement Presentation-On February 28, 2023, UHC merged with and into Columbia, with Columbia continuing as the surviving legal corporation. Promptly following the Merger, Columbia’s wholly-owned bank subsidiary, Columbia State Bank, merged with and into UHC’s wholly-owned bank subsidiary, Umpqua Bank, with Umpqua Bank as the surviving bank. Upon completion of the Merger, the combined company became Columbia Banking System, Inc., a financial holding company that wholly owns the Bank.

The Merger was accounted for as a reverse merger using the acquisition method of accounting; therefore, UHC was deemed the acquirer for financial reporting purposes, even though Columbia was the legal acquirer. The Merger was effectively an all-stock transaction and has been accounted for as a business combination. Columbia's financial results for any periods ended prior to February 28, 2023, the Merger Date, reflect UHC results only on a standalone basis. Accordingly, Columbia's reported financial results for the three months ended March 31, 2023, reflect only UHC financial results through the closing of the Merger and may not be directly comparable to the prior or future reported periods. Under the reverse acquisition method of accounting, the assets and liabilities of Columbia were recorded at their respective fair values as of February 28, 2023 ("historical Columbia"). Refer to Note 2 - Business Combination for additional information on this acquisition.

Application of new accounting guidance

In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The amendments in this ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The amendments also update the disclosures for equity securities subject to contractual restrictions. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company adopted the guidance on January 1, 2024, using a prospective methodology, and it did not have a material impact on the Company's consolidated financial statements.

10
In March 2023, the FASB issued ASU No. 2023-02, Investments - Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method (a consensus of the Emerging Issues Task Force). The amendments in this ASU permit companies to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received using the proportional amortization method if certain conditions are met. Under the proportional amortization method, an entity amortizes the initial cost of the investment in proportion to the income tax credits and other income tax benefits received and recognizes the net amortization and income tax credits and other income tax benefits in the statement of operations as a component of income tax expense (benefit). The amendments also require that a reporting entity disclose certain information in annual and interim reporting periods that enable investors to understand the investments that generate income tax credits and other income tax benefits from a tax credit program. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. The Company adopted the guidance on January 1, 2024, and it did not have a material impact on the Company’s consolidated financial statements. Refer to Note 13 - Income Taxes for additional information.

Recent accounting pronouncements

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements. The amendments in this ASU modify the disclosure or presentation requirements of a variety of topics in the codification. The amendments align the requirements in the codification with the SEC’s regulations. Each amendment is effective on the date on which the SEC removes the related disclosure requirement from Regulation S-X or Regulation S-K, as applicable. For all entities within the scope of the affected codification subtopics, if, by June 30, 2027, the SEC has not removed the applicable requirement from Regulation S-X or Regulation S-K, the pending content of the associated amendment will be removed from the codification and will not become effective for any entities. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280). The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 280. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments are intended to provide more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The ASU requires annual disclosure of the rate reconciliation of specific categories as well as additional information related to the reconciliation of certain items that meet a quantitative threshold and further disaggregation of income taxes paid. The amendments in this ASU are effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.

In March 2024, the FASB issued ASU No. 2024-01, Compensation - Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards. The amendments improve GAAP by adding an illustrative example to demonstrate how an entity should apply the scope guidance in paragraph 718-10-15-3 to determine whether profits interest and similar awards should be accounted for in accordance with Topic 718, Compensation—Stock Compensation. The effective date is for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of this ASU on the Company's consolidated financial statements.

Note 2 – Business Combination
 
On February 28, 2023, the Company completed the Merger and UHC merged with and into Columbia, with Columbia continuing as the surviving legal corporation. Promptly following the Merger, Columbia’s wholly-owned bank subsidiary, Columbia State Bank, merged with and into UHC’s wholly-owned bank subsidiary, Umpqua Bank, with Umpqua Bank surviving the merger. Refer to Note 1 - Summary of Significant Accounting Policies under the Basis of Financial Statement Presentation for more information pertaining to the completed Merger.

11
The Merger was accounted for as a reverse merger using the acquisition method of accounting; therefore, UHC was deemed the acquirer for financial reporting purposes, even though Columbia was the legal acquirer. The Merger was effectively an all-stock transaction and has been accounted for as a business combination.

As of December 31, 2023, the Company finalized its valuation of all assets acquired and liabilities assumed in connection with the Merger. The Company recorded approximately $1.0 billion of goodwill and $710.2 million of other intangible assets. Goodwill represents the excess of the purchase price over the fair value of the assets acquired, net of fair value of liabilities assumed. Goodwill is not deductible for tax purposes.

During the three months ended March 31, 2024 there were $4.5 million in merger-related expenses, compared to $115.9 million during the three months ended March 31, 2023. Additional merger-related expenses will be expensed in future periods as incurred.

The following table presents unaudited pro forma information as if the Merger had occurred on January 1, 2022, which was the beginning of the last full fiscal year completed prior to the date of the Merger. The pro forma adjustments give effect to any change in interest income due to the accretion of the discount (premium) associated with the fair value adjustments to acquired loans and leases, any change in interest expense due to estimated premium amortization/discount accretion associated with the fair value adjustment to acquired interest-bearing deposits and long-term debt and the amortization of the core deposit intangible that would have resulted had the deposits been acquired as of January 1, 2022. The pro forma information is not indicative of what would have occurred had the Merger occurred as of the beginning of the year prior to the Merger Date. The pro forma amounts below do not reflect the Company's expectations as of the date of the pro forma information of further operating cost savings and other business synergies expected to be achieved, including revenue growth as a result of the Merger. As a result, actual amounts differed from the unaudited pro forma information presented.

Unaudited Pro Forma for the
Three Months Ended
(in thousands)March 31, 2023
Net interest income$526,260 
Non-interest income$88,572 
Net income (1)
$217,135 
(1) The 2023 pro forma net income was adjusted to exclude $143.9 million of merger-related costs, inclusive of historical Columbia merger-related costs, incurred in 2023, as these costs were included in the 2022 pro forma net income.

Note 3 – Investment Securities 
 
The following tables present the amortized cost, unrealized gains, unrealized losses, and approximate fair values of debt securities as of the dates presented:
March 31, 2024
 (in thousands) Amortized CostUnrealized GainsUnrealized LossesFair Value
Available for sale:    
U.S. Treasury and agencies$1,552,240 $1,132 $(85,979)$1,467,393 
Obligations of states and political subdivisions1,068,290 8,788 (25,149)1,051,929 
Mortgage-backed securities and collateralized mortgage obligations
6,551,596 2,386 (456,759)6,097,223 
Total available for sale securities$9,172,126 $12,306 $(567,887)$8,616,545 
Held to maturity:    
Mortgage-backed securities and collateralized mortgage obligations
$2,247 $692 $— $2,939 
Total held to maturity securities$2,247 $692 $— $2,939 

12

December 31, 2023
 (in thousands) 
Amortized CostUnrealized GainsUnrealized LossesFair Value
Available for sale:    
U.S. Treasury and agencies$1,551,074 $6,192 $(78,874)$1,478,392 
Obligations of states and political subdivisions1,073,264 20,451 (21,610)1,072,105 
Mortgage-backed securities and collateralized mortgage obligations
6,638,439 28,558 (387,624)6,279,373 
Total available for sale securities$9,262,777 $55,201 $(488,108)$8,829,870 
Held to maturity:    
Mortgage-backed securities and collateralized mortgage obligations
$2,300 $725 $— $3,025 
Total held to maturity securities$2,300 $725 $— $3,025 

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 $33.1 million and $34.1 million as of March 31, 2024 and December 31, 2023, respectively, and is included in other assets on the Condensed Consolidated Balance Sheets.

The following tables present debt securities that were in an unrealized loss position as of the dates presented, based on the length of time individual securities have been in an unrealized loss position.

March 31, 2024
Less than 12 Months12 Months or LongerTotal
  (in thousands) 
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale:      
U.S. Treasury and agencies$338,230 $(3,305)$816,265 $(82,674)$1,154,495 $(85,979)
Obligations of states and political subdivisions
297,204 (2,464)182,355 (22,685)479,559 (25,149)
Mortgage-backed securities and collateralized mortgage obligations
3,860,007 (51,572)1,756,986 (405,187)5,616,993 (456,759)
Total temporarily impaired securities$4,495,441 $(57,341)$2,755,606 $(510,546)$7,251,047 $(567,887)


December 31, 2023
Less than 12 Months12 Months or LongerTotal
  (in thousands)
Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Available for sale:      
U.S. Treasury and agencies$99,898 $(1,074)$822,245 $(77,800)$922,143 $(78,874)
Obligations of states and political subdivisions
103,256 (580)169,231 (21,030)272,487 (21,610)
Mortgage-backed securities and collateralized mortgage obligations
1,089,640 (10,355)1,817,768 (377,269)2,907,408 (387,624)
Total temporarily impaired securities$1,292,794 $(12,009)$2,809,244 $(476,099)$4,102,038 $(488,108)

The number of individual debt securities in an unrealized loss position in the tables above increased to 1,085 as of March 31, 2024, as compared to 600 at December 31, 2023. These unrealized losses on the debt securities held by the Company were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities and are not due to the underlying credit of the issuers. Management monitors the published credit ratings of the issuers of the debt securities for material rating or outlook changes. As the decline in fair value of the debt securities is attributable to changes in interest rates or widening market spreads and not credit quality, these investments do not have an ACL as of March 31, 2024.

13
The following table presents the contractual maturities of debt securities as of March 31, 2024:  

Available For SaleHeld To Maturity
  (in thousands) 
Amortized CostFair ValueAmortized CostFair Value
Due within one year$141,688 $139,856 $— $— 
Due after one year through five years2,259,829 2,213,929 2 2 
Due after five years through ten years2,187,571 2,103,386 3 64 
Due after ten years4,583,038 4,159,374 2,242 2,873 
Total debt securities$9,172,126 $8,616,545 $2,247 $2,939 

The following table presents, as of March 31, 2024, investment securities which were pledged to secure borrowings, public deposits, and repurchase agreements as permitted or required by law: 
 (in thousands)Amortized CostFair Value
To state and local governments to secure public deposits$1,800,912 $1,638,230 
To secure repurchase agreements326,111 297,673 
Other securities pledged 3,407,623 3,139,037 
Total pledged securities$5,534,646 $5,074,940 

Note 4 – Loans and Leases  
 
The following table presents the major types of loans and leases, net of deferred fees and costs, as of the dates presented: 
(in thousands)March 31, 2024December 31, 2023
Commercial real estate  
Non-owner occupied term, net$6,557,768 $6,482,940 
Owner occupied term, net5,231,676 5,195,605 
Multifamily, net5,828,960 5,704,734 
Construction & development, net1,728,652 1,747,302 
Residential development, net284,117 323,899 
Commercial
Term, net5,544,450 5,536,765 
Lines of credit & other, net2,491,557 2,430,127 
Leases & equipment finance, net1,706,759 1,729,512 
Residential
Mortgage, net6,128,884 6,157,166 
Home equity loans & lines, net1,950,421 1,938,166 
Consumer & other, net189,169 195,735 
Total loans and leases, net of deferred fees and costs$37,642,413 $37,441,951 
 
The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. Interest accrued on loans totaled $157.8 million and $154.9 million as of March 31, 2024 and December 31, 2023, respectively, and is included in other assets on the Condensed Consolidated Balance Sheets. As of March 31, 2024, loans totaling $21.1 billion were pledged to secure borrowings and available lines of credit.

Originated loans are reported at the principal amount outstanding, net of unearned interest and deferred fees and costs, and any partial charge-offs recorded. Purchased loans are recorded at fair value at the date of purchase. As of March 31, 2024 and December 31, 2023, the net deferred fees and costs were $69.8 million and $71.8 million, respectively.

14
Total loans and leases also include discounts on acquired loans of $522.7 million and $552.5 million as of March 31, 2024 and December 31, 2023, respectively. The outstanding contractual unpaid principal balance of PCD loans, excluding acquisition accounting adjustments, was $316.1 million and $331.9 million as of March 31, 2024 and December 31, 2023, respectively. The carrying balance of PCD loans was $288.8 million and $300.2 million as of March 31, 2024 and December 31, 2023, respectively.

The Bank, through its commercial equipment leasing subsidiary, FinPac, is a provider of commercial equipment leasing and financing. Direct finance leases are included within the leases and equipment finance segment within the loans and leases, net line item. These direct financing leases typically have terms of three to five years. Interest income recognized on these leases was $4.9 million for the three months ended March 31, 2024, as compared to $4.7 million for the three months ended March 31, 2023.

Note 5 – Allowance for Credit Losses

Allowance for Credit Losses Methodology

The ACL represents management's estimate of lifetime credit losses for assets within its scope, specifically loans and leases and unfunded commitments. To calculate the ACL, management uses models to estimate the PD and LGD for loans utilizing inputs that include forecasted future economic conditions and that are dependent upon specific macroeconomic variables relevant to each of the Bank's loan and lease portfolios. Moody's Analytics, a third party, provided the historical and forward-looking macroeconomic data utilized in the models used to calculate the ACL.

In calculating ACL, the Bank considered the financial and economic environment at the time of assessment and economic scenarios that differed in the levels of severity and sensitivity to the ACL results. At each measurement date, the Bank selects the scenario that reflects its view of future economic conditions and is determined to be the most probable outcome.

All forecasts are updated for each variable where applicable and incorporated as relevant into the ACL calculation. Actual credit loss results and the timing thereof will differ from the estimate of credit losses, either in a strong economy or a recession, as the portfolio will change through time due to growth, risk mitigation actions and other factors. In addition, the scenarios used will differ and change through time as economic conditions change. Economic scenarios might not capture deterioration or improvement in the economy timely enough for the Bank to be able to adequately address the impact to the ACL.

Select macroeconomic variables are projected over the forecast period, and they could have a material impact in determining the ACL. As the length of the forecast period increases, information about the future becomes less readily available and projections are inherently less certain.

The following is a discussion of the changes in the factors that influenced management's current estimate of expected credit losses. The changes in the ACL estimate during the three months ended March 31, 2024 reflect changes in the economic assumptions and recalibration of the non-homogeneous commercial and residential development loan model. Due to the dynamic economic environment, the Bank opted to use Moody's Analytics' February 2024 baseline economic forecast for estimating the ACL as of March 31, 2024.

In the baseline scenario selected, the probability that the economy will perform better than this baseline is equal to the probability that it will perform worse and included the following factors:

•U.S. real GDP average annualized growth of 2.3% in 2024, 1.6% in 2025, 2.0% in 2026, and 2.2% in 2027;
•U.S. unemployment rate average of 3.9% in 2024, 4.1% in 2025, 4.0% in 2026, and 4.0% in 2027; and
•The forecasted average federal funds rate is expected to be 4.9% in 2024, 4.0% in 2025, 3.2% in 2026 and 2.9% in 2027.

The Bank uses an additional scenario that differs in terms of severity, both favorable and unfavorable, to assess the sensitivity in the ACL results and to inform qualitative adjustments. The economic factors are consistent between scenarios. The Bank selected the Moody's Analytics' February 2024 S2 scenario for this analysis. In the scenario selected, there is a 75% probability that the economy will perform better, broadly speaking, and a 25% probability that it will perform worse; and the scenario includes the following factors:

•Despite the early January agreement on top-line spending, the risk of a federal government shutdown stays elevated, causing consumer and business confidence to decline.
15
•The combination of the risk of a federal shutdown, rising political tensions, still-elevated inflation, still-elevated
interest rates, and reduced credit availability causes the economy to fall into a mild recession starting in the second quarter of 2024. The decline lasts for three quarters and the peak-to-trough decline is 1%. The unemployment rate rises to a peak of 6.5% in the first quarter of 2025;
•The stock market falls by 22% from the second quarter of 2024 through the fourth quarter of 2024;
•Declines in European economies hurt U.S. exports and also corporate earnings from European subsidiaries;
•U.S. real GDP average annualized growth of 1.3% in 2024, 0.8% in 2025, 2.8% in 2026, and 2.7% in 2027;
•U.S. unemployment rate average of 5.7% in 2024, 5.8% in 2025, 4.1% in 2026, and 4.0% in 2027; and
•The forecasted average federal funds rate is expected to be 4.6% in 2024, 2.4% in 2025, 2.1% in 2026 and 2.9% in 2027.

The results using the comparison scenario as well as changes to the macroeconomic variables subsequent to selected economic forecast scenarios for sensitivity analysis were reviewed by management and were considered when evaluating the qualitative factor adjustments.

The ACL is measured on a collective (pool) basis when similar characteristics exist. The Company has selected models at the portfolio level using a risk-based approach, with larger, more complex portfolios having more complex models. Except as noted below, the macroeconomic variables that are inputs to the models are reasonable and supportable over the life of the loans in that they reasonably project the key economic variables in the near term and then converge to a long-run equilibrium trend. These models produce reasonable and supportable estimates of loss over the life of the loans as the projected credit losses will also converge to a steady state in line with the variables applied.

During the first quarter of 2024, the Bank recalibrated and updated the CECL calculation for non-homogeneous commercial loans and leases and residential development loans. While fundamental modeling methodologies remain unchanged, the updates included the addition of historical acquired portfolio data and a change in macroeconomic variables utilized to estimate PD. The overall approximate impact of the model updates during the first quarter of 2024 was a $30.5 million decrease in modeled expected credit losses on loans and leases.

The Company measures the ACL using the following methods:

Commercial Real Estate: Non-owner occupied commercial real estate, multifamily, and commercial construction loans are analyzed using a model that uses four primary property variables: net operating income, property value, property type, and location. For PD estimation, the model simulates potential future paths of net operating income given commercial real estate market factors determined from macroeconomic and regional commercial real estate forecasts. Using the resulting expected debt service coverage ratios, together with predicted loan-to-values and other variables, the model estimates PD from the range of conditional possibilities. In addition, the model estimates maturity PD capturing refinance default risk to produce a total PD for the loan. The model estimates LGD, inclusive of principal loss and liquidation expenses, empirically using predicted loan-to-value as well as certain market and other factors. The LGD calculation also includes a separate maturity risk component. The primary economic drivers in the model are GDP growth, U.S. unemployment rate, and 10-Year Treasury yield. These economic drivers are translated into a forecast, provided by Moody's Analytics' REIS, of real estate metrics, such as rental rates, vacancies, and cap rates. The model produces PD and LGD on a quarter-by-quarter basis for the life of loan.

The owner occupied commercial real-estate portfolio utilizes a top-down macroeconomic model using linear regression. This model produces portfolio level quarterly net charge-off rates for 10 years and carries forward the last quarter's expected loss percentage projection to remaining periods. The primary economic drivers for this model are commercial real estate price index and a five-state average unemployment rate.

Commercial: Non-homogeneous commercial loans and leases and residential development loans are analyzed in a multi-step process. An initial PD is estimated using a model driven by an obligor's selected financial statement ratios, together with cycle-adjusting information based on the obligor's state and industry. An initial LGD is derived separately based on collateral type using collateral value and a haircut to reflect the loss in liquidation. Another model then applies an auto-regression technique to the initial PD and LGD metrics to estimate the PD and LGD curves according to the macroeconomic scenario over a one-year reasonable and supportable forecast. The primary economic drivers in the model are GDP growth and commercial real estate price index. This model utilizes output reversion methodology, which, after one year, reverts on a straight-line basis over two years to long-term PD estimated using financial statement ratios of each obligor.

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The model for the homogeneous lease and equipment finance agreement portfolio uses lease and equipment finance agreement information, such as origination and performance, as well as macroeconomic variables to calculate PD and LGD values. The PD calculation is based on survival analysis while LGD is calculated using a two-step regression. The model calculates LGD using an estimate of the probability that a defaulted lease or equipment finance agreement will have a loss, and an estimate of the loss amount. The primary economic drivers for the model are GDP, U.S. unemployment rate, and a home price growth index. The model produces PD and LGD curves at the lease or equipment finance agreement level for each month in the forecast horizon.

Residential: The models for residential real estate and HELOCs utilize loan level variables, such as origination and performance, as well as macroeconomic variables to calculate PD and LGD. The U.S. unemployment rate and home price growth rate indexes are primary economic drivers in both the residential real estate and HELOC models. In addition, the prime rate is also a primary driver in the HELOC model. The models focus on establishing an empirical relationship between default probabilities and a set of loan-level, borrower, and macroeconomic credit risk drivers. The LGD calculation for residential real estate is based on an estimate of the probability that a defaulted loan will have a loss, and then an estimate of the loss amount. HELOCs utilize the same model using residential real estate LGD values to assign loans to cohorts based on FICO scores and loan age. The model produces PD and LGD curves at the loan level for each quarter in the forecast horizon.

Consumer: Historical net charge-off information as well as economic assumptions are used to project loss rates for the Consumer segment.

All loans and leases that have not been modeled receive a loss rate via an extrapolated rate methodology. The loans and leases receiving an extrapolated rate include certain loans acquired through the Merger, newly originated loans and leases, and loans and leases without the granularity of data necessary to be modeled. Based on the vintage year, credit classification, and reporting category of the modeled loans and leases, a loss factor is calculated and applied to the non-modeled loans and leases. The results are evaluated qualitatively to ensure reasonability and compliance with CECL.

Along with the quantitative factors produced by the above models, management also considers prepayment speeds and qualitative factors when determining the ACL. The Company uses a prepayment model that forecasts the constant prepayment rates based on institution specific data for the commercial real estate, commercial and industrial, and consumer portfolios and a forward curve approach that changes with macro-economic input variables for the residential and leases portfolios. Below are the nine qualitative factors considered where applicable:

•Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.
•Changes in national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.
•Changes in the nature and volume of the portfolio and in the terms of loans and leases.
•Changes in the experience, ability, and depth of lending management and other relevant staff.
•Changes in the volume and severity of past due loans and leases, the volume of non-accrual loans and leases, and the volume and severity of adversely classified or graded loans and leases.
•Changes in the quality of the Bank's credit review system.
•Changes in the value of the underlying collateral for collateral-dependent loans and leases.
•The existence and effect of any concentrations of credit, and changes in the level of such concentrations.
•The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Bank's existing portfolio.

The Company evaluated each qualitative factor as of March 31, 2024 and concluded that a material adjustment to the amounts indicated by the models was not necessary as the models adequately reflected the significant changes in credit conditions and overall portfolio risk.

Loss factors from the models, prepayment speeds, and qualitative factors are input into the Company's CECL accounting application, which aggregates the information. The Company then uses two methods to calculate the current expected credit loss: 1) the DCF method, which is used for all loans except lines of credit and 2) the non-DCF method, which is used for lines of credit due to the difficulty of calculating an effective interest rate when lines have yet to be drawn on. The DCF method utilizes the effective interest rate of individual assets to discount the expected credit losses adjusted for prepayments. The difference in the net present value and the amortized cost of the asset will result in the required allowance. The non-DCF method uses the exposure at default, along with the expected credit losses adjusted for prepayments to calculate the required allowance.

17
The following tables summarize activity related to the ACL by portfolio segment for the periods indicated:
Three Months Ended March 31, 2024
(in thousands)Commercial Real EstateCommercialResidentialConsumer & OtherTotal
Allowance for credit losses on loans and leases
Balance, beginning of period$125,888 $244,821 $62,004 $8,158 $440,871 
Provision (recapture) for credit losses for loans and leases 20,191 436 (3,674)523 17,476 
Charge-offs(161)(47,232)(490)(1,870)(49,753)
Recoveries358 4,732 170 490 5,750 
Net recoveries (charge-offs)197 (42,500)(320)(1,380)(44,003)
Balance, end of period$146,276 $202,757 $58,010 $7,301 $414,344 
Reserve for unfunded commitments
Balance, beginning of period$11,170 $7,841 $2,940 $1,257 $23,208 
Provision (recapture) for credit losses on unfunded commitments1,858 (1,951)(183)(64)(340)
Balance, end of period13,028 5,890 2,757 1,193 22,868 
Total allowance for credit losses$159,304 $208,647 $60,767 $8,494 $437,212 

Three Months Ended March 31, 2023
(in thousands)Commercial Real EstateCommercialResidentialConsumer & OtherTotal
Allowance for credit losses on loans and leases
Balance, beginning of period$77,813 $167,135 $50,329 $5,858 $301,135 
Initial ACL on PCD loans acquired during the period8,736 17,204 454 98 26,492 
Provision for credit losses for loans and leases (1)
24,483 70,997 9,955 1,063 106,498 
Charge-offs— (19,248)(248)(773)(20,269)
Recoveries58 3,058 123 369 3,608 
Net recoveries (charge-offs)58 (16,190)(125)(404)(16,661)
Balance, end of period$111,090 $239,146 $60,613 $6,615 $417,464 
Reserve for unfunded commitments
Balance, beginning of period$7,207 $3,049 $3,196 $769 $14,221 
Initial ACL recorded for unfunded commitments acquired during the period2,257 3,066 268 176 5,767 
(Recapture) provision for credit losses on unfunded commitments(1,059)266 (144)(22)(959)
Balance, end of period8,405 6,381 3,320 923 19,029 
Total allowance for credit losses$119,495 $245,527 $63,933 $7,538 $436,493 
(1) Includes $88.4 million initial provision related to non-PCD loans acquired during the first quarter of 2023.

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Asset Quality and Non-Performing Loans and Leases

The Bank manages asset quality and controls credit risk through diversification of the loan and lease portfolio and the application of policies designed to promote sound underwriting and loan and lease monitoring practices. The Bank's Credit Quality Administration department is charged with monitoring asset quality, establishing credit policies and procedures, and enforcing the consistent application of these policies and procedures across the Bank. Reviews of non-performing, past due loans and leases and larger credits, designed to identify potential charges to the allowance for credit losses, and to determine the adequacy of the allowance, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers, the value of the applicable collateral, loan and lease loss experience, estimated loan and lease losses, growth in the loan and lease portfolio, prevailing economic conditions, and other factors.

Loans and Leases Past Due and Non-Accrual Loans and Leases

Typically, loans in a non-accrual status will not have an allowance for credit loss as they will be written down to their net realizable value or charged-off. However, the net realizable value for homogeneous leases and equipment finance agreements is determined by the LGD calculated by the CECL model and therefore leases and equipment finance agreements on non-accrual will have an allowance for credit losses until they become 181 days past due, at which time they are charged-off. The Company recognized no interest income on non-accrual loans and leases during the three months ended March 31, 2024 and 2023.

The following tables present the carrying value of the loans and leases past due, by loan and lease class, as of the dates presented:
March 31, 2024
(in thousands)Greater than 30 to 59 Days Past Due60 to 89 Days Past Due
 90 Days or More and Accruing (2)
Total Past Due
Non-Accrual (2)
Current and OtherTotal Loans and Leases
Commercial real estate
Non-owner occupied term, net$2,237 $517 $253 $3,007 $5,382 $6,549,379 $6,557,768 
Owner occupied term, net2,275 245 — 2,520 34,354 5,194,802 5,231,676 
Multifamily, net— — — — — 5,828,960 5,828,960 
Construction & development, net— — — — — 1,728,652 1,728,652 
Residential development, net— — — — — 284,117 284,117 
Commercial
Term, net4,946 1,493 832 7,271 26,032 5,511,147 5,544,450 
Lines of credit & other, net37,219 1,736 1,966 40,921 2,335 2,448,301 2,491,557 
Leases & equipment finance, net26,837 8,551 7,935 43,323 30,593 1,632,843 1,706,759 
Residential
Mortgage, net (1)
14,452 — 30,040 44,492 — 6,084,392 6,128,884 
Home equity loans & lines, net5,746 2,411 3,439 11,596 — 1,938,825 1,950,421 
Consumer & other, net788 220 437 1,445 — 187,724 189,169 
Total, net of deferred fees and costs$94,500 $15,173 $44,902 $154,575 $98,696 $37,389,142 $37,642,413 
(1) Includes government guaranteed mortgage loans that the Bank has the right but not the obligation to repurchase that are past due 90 days or more, totaling $1.6 million as of March 31, 2024.
(2) Includes government guaranteed portion of $11.7 million and $31.3 million for 90 days or greater and non-accrual loans, respectively.

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December 31, 2023
(in thousands)Greater than 30 to 59 Days Past Due60 to 89 Days Past Due
90 Days or More and Accruing(2)
Total Past Due
Non-Accrual(2)
Current and OtherTotal Loans and Leases
Commercial real estate
Non-owner occupied term, net$1,270 $3,312 $437 $5,019 $4,359 $6,473,562 $6,482,940 
Owner occupied term, net3,078 2,191 433 5,702 24,330 5,165,573 5,195,605 
Multifamily, net— — — — — 5,704,734 5,704,734 
Construction & development, net— — — — — 1,747,302 1,747,302 
Residential development, net— — — — — 323,899 323,899 
Commercial
Term, net6,341 2,101 202 8,644 14,519 5,513,602 5,536,765 
Lines of credit & other, net1,647 1,137 66 2,850 2,760 2,424,517 2,430,127 
Leases & equipment finance, net22,217 24,178 7,965 54,360 28,403 1,646,749 1,729,512 
Residential
Mortgage, net (1)
282 9,410 26,331 36,023 — 6,121,143 6,157,166 
Home equity loans & lines, net4,401 2,373 3,782 10,556 — 1,927,610 1,938,166 
Consumer & other, net778 519 326 1,623 — 194,112 195,735 
Total, net of deferred fees and costs$40,014 $45,221 $39,542 $124,777 $74,371 $37,242,803 $37,441,951 
(1) Includes government guaranteed mortgage loans the Bank has the right but not the obligation to repurchase that are past due 90 days or more, totaling $1.0 million at December 31, 2023.
(2) Includes government guaranteed portion of $12.3 million and $19.3 million for 90 days or greater and non-accrual loans, respectively.

The following table summarizes the amortized cost of non-accrual loans for which there was no related ACL as of March 31, 2024 and December 31, 2023:
(in thousands)March 31, 2024December 31, 2023
Commercial real estate  
Non-owner occupied term, net$37 $52 
Owner occupied term, net1,492 1,352 
Commercial
Term, net3,137 3,497 
Total non-accrual loans with no related ACL$4,666 $4,901 

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Collateral-Dependent Loans and Leases

Loans are classified as collateral-dependent when it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due, and repayment is expected to be provided substantially through the operation or sale of the collateral. There have been no significant changes in the level of collateralization from the prior periods. The following table summarizes the amortized cost basis of the collateral-dependent loans and leases by the type of collateral securing the assets as of March 31, 2024:
(in thousands)Residential Real EstateCommercial Real Estate General Business AssetsOtherTotal
Commercial real estate
  Non-owner occupied term, net$— $5,290 $— $— $5,290 
  Owner occupied term, net— 31,710 — — 31,710 
Commercial
   Term, net— — 16,952 4,265 21,217 
   Line of credit & other, net— 1,453 250 — 1,703 
   Leases & equipment finance, net— — 30,593 — 30,593 
Residential
   Mortgage, net56,920 — — — 56,920 
   Home equity loans & lines, net2,518 — — — 2,518 
Total, net of deferred fees and costs$59,438 $38,453 $47,795 $4,265 $149,951 

Loan and Lease Modifications Made to Borrowers Experiencing Financial Difficulty

Occasionally, the Company offers modifications of loans or leases to borrowers experiencing financial difficulty by providing term extensions, interest rate reductions, principal or interest forgiveness, an other-than-insignificant payment delay, or any combination of these modifications. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: term extension, principal forgiveness, an other-than-insignificant payment delay, or an interest rate reduction. The ACL on modified loans or leases is measured using the same credit loss estimation methods used to determine the ACL for all other loans and leases held for investment. These methods incorporate the post-modification loan or lease terms, as well as defaults and charge-offs associated with historical modified loans and leases.

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The following tables present the amortized cost basis of loans and leases that were both experiencing financial difficulty and modified during the three months ended March 31, 2024 and 2023, by class and type of modification. The percentage of the amortized cost basis of loans and leases that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
Three Months Ended March 31, 2024
(in thousands)Term ExtensionOther -Than-Insignificant Payment DelayTotal% of total class of financing receivable
Commercial real estate
  Non-owner occupied term, net$— $17,630 $17,630 0.27 %
  Owner occupied term, net— 534 534 0.01 %
Commercial
  Term, net478 — 478 0.01 %
  Lines of credit & other, net6,695 144 6,839 0.27 %
  Leases & equipment finance, net785 — 785 0.05 %
Residential
  Mortgage, net1,012 7,624 8,636 0.14 %
Total loans and leases experiencing financial difficulty$8,970 $25,932 $34,902 0.09 %
Three Months Ended March 31, 2023
(in thousands)Term ExtensionOther -Than-Insignificant Payment DelayCombination - Interest Rate Reduction and Term ExtensionCombination - Term Extension and Principal ForgivenessCombination - Principal forgiveness and other than insignificant payment delayTotal% of total class of financing receivable
Commercial
Lines of credit & other, net$1,355 $— $— $— $— $1,355 0.06 %
Leases & equipment finance, net— 429 — — — 429 0.02 %
Residential
Mortgage, net— — — 1,938 8,987 10,925 0.18 %
Home equity loans & lines, net— — 207 — — 207 0.01 %
Total loans and leases experiencing financial difficulty$1,355 $429 $207 $1,938 $8,987 $12,916 0.03 %
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Three Months Ended March 31, 2024
Loan TypeFinancial Effect
Commercial real estate
Non-owner occupied term, net
Deferred $4.0 million of principal and interest payments
Owner occupied term, net
Deferred $51,000 of principal and interest payments
Commercial
Term, net
Weighted average term extension of 3 months to the life of the loans
Lines of credit & other, net
Weighted average term extension of 6 months to the life of the loans
Leases & equipment finance, net
Weighted average term extension of 7 months to the life of the loans and leases
Residential
Mortgage, net
Weighted average term extension of 13.5 years to the life of the loans and deferred $534,000 of principal and interest payments
 Lines of credit & other, net
Deferred $63,000 of principal and interest payments
Three Months Ended March 31, 2023
Loan TypeFinancial Effect
Commercial
Lines of credit & other, net
Weighted average term extension of 10 months to the life of the loans
Leases & equipment finance, net
Delayed payment for 9 months
Residential
Home equity loans & lines, net
Weighted average term extension of 7.1 years to the life of the loan and decreased the weighted average interest rate by 3.24%.
Mortgage, net
Weighted average of 13.3 years to the life of the loan and deferred $499,000 of principal payments at the maturity of the loan.

The Company closely monitors the performance of loans and leases that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Loans and leases are considered to be in payment default at 90 or more days past due. The following table presents the performance of such loans and leases that have been modified for the three months ended March 31, 2024:
Three Months Ended March 31, 2024
Loan TypeCurrentGreater than 30 to 59 Days Past Due60 to 89 Days Past Due90 Days or Greater Past DueNon-accrualTotal
(in thousands)
Commercial real estate
Non-owner occupied term, net$17,630 $— $— $— $— $17,630 
Owner occupied term, net— — — — 534 534 
Commercial
Term, net478 — — — — 478 
Lines of credit & other, net6,695 — — — 144 6,839 
Leases & equipment finance, net687 98 — — — 785 
Residential
Mortgage, net8,636 — — — — 8,636 
Total loans and leases experiencing financial difficulty$34,126 $98 $— $— $678 $34,902 

For the three months ended March 31, 2023, all modified loans and leases were current and there were no loan or lease modifications made to borrowers experiencing financial difficulty that subsequently defaulted.
23
Credit Quality Indicators

Management regularly reviews loans and leases in the portfolio to assess credit quality indicators and to determine appropriate loan classification and grading. In addition, the Company's board of directors reviews and approves the credit quality indicators each year. The Bank differentiates its lending portfolios into homogeneous and non-homogeneous loans and leases. Homogeneous loans and leases are initially risk rated on a single risk rating scale based on the past due status of the loan or lease. Homogeneous loans and leases that have risk-based modifications or forbearances enter into an alternative elevated risk rating scale that freezes the elevated risk rating and requires six consecutive months of scheduled payments without delinquency before the loan or lease can return to the delinquency-based risk rating scale. Homogeneous loans and leases with other defined risk factors such as confirmed bankruptcy, business closure, death of a guarantor or fraud will be set to a floor substandard rating.

The Bank's risk rating methodology for its non-homogeneous loans and leases uses a dual risk rating approach to assess the credit risk. This approach uses two scales to provide a comprehensive assessment of credit default risk and recovery risk. The probability of default scale measures a borrower's credit default risk using risk ratings ranging from 1 to 16, where a higher rating represents higher risk. For non-homogeneous loans and leases, PD ratings of 1 through 9 are "pass" grades, while PD ratings of 10 and 11 are "watch" grades. PD ratings of 12-16 correspond to the regulatory-defined categories of special mention (12), substandard (13-14), doubtful (15), and loss (16). The loss given default scale measures the amount of loss that may not be recovered in the event of a default, using six alphabetic ratings from A-F, where a higher rating represents higher risk. The LGD scale quantifies recovery risk associated with an event of default and predicts the amount of loss that would be incurred on a loan or lease if a borrower were to experience a major default and includes variables that may be external to the borrower, such as industry, geographic location, and credit cycle stage. It could also include variables specific to the loan or lease, including collateral valuation, covenant structure and debt type. The product of the borrower's PD and a loan or lease LGD is the loan or lease expected loss, expressed as a percentage. This provides a common language of credit risk across different loans.

The PD scale estimates the likelihood that a borrower will experience a major default on any of its debt obligations within a specified time period. Examples of major defaults include payments 90 days or more past due, non-accrual classification, bankruptcy filing, or a full or partial charge-off of a loan or lease. As such, the PD scale represents the credit quality indicator for non-homogeneous loans and leases.

The credit quality indicator rating categories follow regulatory classification and can be generally described by the following groupings for loans and leases:

Pass/Watch—A pass loan or lease is a loan or lease with a credit risk level acceptable to the Bank for extending credit and maintaining normal credit monitoring. A watch loan or lease is considered pass rated but has a heightened level of unacceptable default risk due to an emerging risk element or declining performance trend. Watch ratings are expected to be temporary, with issues resolved or manifested to the extent that a higher or lower risk rating would be appropriate within a short period of time.

Special Mention—A special mention loan or lease has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution's credit position at some future date. These borrowers have an elevated probability of default but not to the point of a substandard classification.

Substandard—A substandard loan or lease is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans and leases classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful—Loans or leases classified as doubtful have all the weaknesses inherent in those classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.

Loss—Loans or leases classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.
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The following tables represent the amortized costs basis of the loans and leases by credit classification and vintage year by loan and lease class of financing receivable as of the dates presented:
(in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving to Non-Revolving Loans Amortized Cost
March 31, 202420242023202220212020PriorTotal
Commercial real estate:
Non-owner occupied term, net
Credit quality indicator:
Pass/Watch$46,778 $593,569 $1,319,246 $1,181,377 $661,282 $2,554,339 $51,836 $— $6,408,427 
Special mention— — 1,684 3,810 1,329 23,789 — — 30,612 
Substandard17,630 30,159 2,227 61 — 68,636 — — 118,713 
Loss— — — — — 16 — — 16 
Total non-owner occupied term, net$64,408 $623,728 $1,323,157 $1,185,248 $662,611 $2,646,780 $51,836 $— $6,557,768 
Current YTD period:
Gross charge-offs— — — — — 70 — — 70 
Owner occupied term, net
Credit quality indicator:
Pass/Watch$128,470 $520,659 $1,080,381 $955,675 $438,732 $1,857,268 $70,743 $56 $5,051,984 
Special mention264 1,308 5,834 7,600 5,776 32,124 1,929 — 54,835 
Substandard534 5,883 8,584 47,894 17,339 43,038 — — 123,272 
Doubtful— — — 189 — 29 — — 218 
Loss— — 963 — 404 — — — 1,367 
Total owner occupied term, net$129,268 $527,850 $1,095,762 $1,011,358 $462,251 $1,932,459 $72,672 $56 $5,231,676 
Current YTD period:
Gross charge-offs— — — — — 91 — — 91 
Multifamily, net
Credit quality indicator:
Pass/Watch$12,410 $278,014 $2,006,317 $1,739,778 $413,265 $1,311,940 $55,219 $228 $5,817,171 
Special mention— — — 1,272 940 6,429 — — 8,641 
Substandard— — — — — 3,148 — — 3,148 
Total multifamily, net$12,410 $278,014 $2,006,317 $1,741,050 $414,205 $1,321,517 $55,219 $228 $5,828,960 
Current YTD period:
Gross charge-offs— — — — — — — — — 
Construction & development, net
Credit quality indicator:
Pass/Watch$26,736 $319,263 $756,839 $442,504 $109,752 $26,211 $37,679 $— $1,718,984 
Special mention— — 1,464 8,204 — — — — 9,668 
Total construction & development, net$26,736 $319,263 $758,303 $450,708 $109,752 $26,211 $37,679 $— $1,728,652 
Current YTD period:
Gross charge-offs— — — — — — — — — 
Residential development, net
Credit quality indicator:
Pass/Watch$11,183 $88,861 $43,447 $14,947 $66 $1,151 $114,943 $9,519 $284,117 
Total residential development, net$11,183 $88,861 $43,447 $14,947 $66 $1,151 $114,943 $9,519 $284,117 
Current YTD period:
Gross charge-offs— — — — — — — — — 
Total commercial real estate$244,005 $1,837,716 $5,226,986 $4,403,311 $1,648,885 $5,928,118 $332,349 $9,803 $19,631,173 
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(in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving to Non-Revolving Loans Amortized Cost
March 31, 202420242023202220212020PriorTotal
Commercial:
Term, net
Credit quality indicator:
Pass/Watch$142,479 $850,557 $1,179,718 $917,082 $406,535 $792,210 $1,121,858 $1,186 $5,411,625 
Special mention302 — 12,795 8,811 1,193 20,323 — — 43,424 
Substandard— 6,119 18,959 28,547 3,505 12,979 9,053 — 79,162 
Doubtful— — 54 4,836 1,625 729 — — 7,244 
Loss— — — 335 648 2,012 — — 2,995 
Total term, net$142,781 $856,676 $1,211,526 $959,611 $413,506 $828,253 $1,130,911 $1,186 $5,544,450 
Current YTD period:
Gross charge-offs— — 185 30 143 527 820 — 1,705 
Lines of credit & other, net
Credit quality indicator:
Pass/Watch$11,658 $100,991 $80,012 $49,341 $12,614 $25,815 $2,012,335 $12,559 $2,305,325 
Special mention— 712 1,489 397 — 91 33,055 732 36,476 
Substandard846 42,575 3,653 32 — 481 97,234 4,743 149,564 
Loss— — 191 — — 1 — — 192 
Total lines of credit & other, net$12,504 $144,278 $85,345 $49,770 $12,614 $26,388 $2,142,624 $18,034 $2,491,557 
Current YTD period:
Gross charge-offs— 85 163 — 4 140 17,399 574 18,365 
Leases & equipment finance, net
Credit quality indicator:
Pass/Watch$181,850 $606,855 $446,654 $171,616 $75,045 $80,587 $— $— $1,562,607 
Special mention111 47,131 16,026 5,717 1,581 981 — — 71,547 
Substandard832 4,399 10,865 4,483 1,243 1,535 — — 23,357 
Doubtful20 10,174 22,743 9,057 2,490 1,372 — — 45,856 
Loss— 897 1,772 497 128 98 — — 3,392 
Total leases & equipment finance, net$182,813 $669,456 $498,060 $191,370 $80,487 $84,573 $— $— $1,706,759 
Current YTD period:
Gross charge-offs— 3,780 14,362 5,938 1,865 1,217 — — 27,162 
Total commercial$338,098 $1,670,410 $1,794,931 $1,200,751 $506,607 $939,214 $3,273,535 $19,220 $9,742,766 
Residential:
Mortgage, net
Credit quality indicator:
Pass/Watch$6,689 $254,228 $1,845,613 $2,317,192 $515,012 $1,147,222 $— $— $6,085,956 
Special mention— 1,657 1,270 5,024 1,050 5,451 — — 14,452 
Substandard— 2,094 2,958 3,604 987 9,201 — — 18,844 
Loss— 1,031 2,803 3,880 134 1,784 — — 9,632 
Total mortgage, net$6,689 $259,010 $1,852,644 $2,329,700 $517,183 $1,163,658 $— $— $6,128,884 
Current YTD period:
Gross charge-offs— — — — — 368 — — 368 
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(in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving to Non-Revolving Loans Amortized Cost
March 31, 202420242023202220212020PriorTotal
Home equity loans & lines, net
Credit quality indicator:
Pass/Watch$14 $896 $2,647 $1,749 $645 $47,880 $1,879,151 $5,842 $1,938,824 
Special mention— 28 253 28 — 964 6,845 38 8,156 
Substandard— — — 175 — 376 475 71 1,097 
Loss— — 200 — 101 430 1,219 394 2,344 
Total home equity loans & lines, net$14 $924 $3,100 $1,952 $746 $49,650 $1,887,690 $6,345 $1,950,421 
Current YTD period:
Gross charge-offs— — — — — 49 73 — 122 
Total residential$6,703 $259,934 $1,855,744 $2,331,652 $517,929 $1,213,308 $1,887,690 $6,345 $8,079,305 
Consumer & other, net:
Credit quality indicator:
Pass/Watch$16,391 $24,413 $13,490 $6,444 $4,458 $7,490 $114,815 $221 $187,722 
Special mention— 133 4 19 8 147 613 85 1,009 
Substandard— 13 38 — — 107 240 30 428 
Loss— — — — — 7 3 — 10 
Total consumer & other, net$16,391 $24,559 $13,532 $6,463 $4,466 $7,751 $115,671 $336 $189,169 
Current YTD period:
Gross charge-offs— 922 52 5 — 76 619 196 1,870 
Grand total$605,197 $3,792,619 $8,891,193 $7,942,177 $2,677,887 $8,088,391 $5,609,245 $35,704 $37,642,413 


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(in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving to Non-Revolving Loans Amortized Cost
December 31, 202320232022202120202019PriorTotal
Commercial real estate:
Non-owner occupied term, net
Credit quality indicator:
Pass/Watch$582,178 $1,307,143 $1,182,485 $615,021 $764,821 $1,832,231 $41,194 $— $6,325,073 
Special mention— 317 3,478 1,337 2,480 16,352 — — 23,964 
Substandard32,461 749 — 1,090 35,214 64,304 — — 133,818 
Loss— — — — — 85 — — 85 
Total non-owner occupied term, net$614,639 $1,308,209 $1,185,963 $617,448 $802,515 $1,912,972 $41,194 $— $6,482,940 
Prior Year End period:
Gross charge-offs— — — — — — — — — 
Owner occupied term, net
Credit quality indicator:
Pass/Watch$532,482 $1,067,388 $972,130 $448,569 $581,616 $1,351,172 $67,063 $— $5,020,420 
Special mention1,575 5,950 6,175 4,945 14,610 15,513 1,932 — 50,700 
Substandard4,034 7,707 48,281 17,275 10,513 35,216 — — 123,026 
Doubtful— — — — — 90 — — 90 
Loss— 963 — 404 — 2 — — 1,369 
Total owner occupied term, net$538,091 $1,082,008 $1,026,586 $471,193 $606,739 $1,401,993 $68,995 $— $5,195,605 
Prior Year End period:
Gross charge-offs— 16 — — — 787 — — 803 
Multifamily, net
Credit quality indicator:
Pass/Watch$272,084 $1,982,075 $1,660,492 $400,280 $590,379 $745,705 $51,480 $— $5,702,495 
Special mention— — 1,278 — 961 — — — 2,239 
Total multifamily, net$272,084 $1,982,075 $1,661,770 $400,280 $591,340 $745,705 $51,480 $— $5,704,734 
Prior Year End period:
Gross charge-offs— — — — — — — — — 
Construction & development, net
Credit quality indicator:
Pass/Watch$248,623 $716,207 $530,305 $186,680 $21,990 $10,738 $31,289 $— $1,745,832 
Special mention— 1,470 — — — — — — 1,470 
Total construction & development, net$248,623 $717,677 $530,305 $186,680 $21,990 $10,738 $31,289 $— $1,747,302 
Prior Year End period:
Gross charge-offs— — — — — — — — — 
Residential development, net
Credit quality indicator:
Pass/Watch$90,241 $86,078 $22,271 $— $— $1,329 $116,490 $6,149 $322,558 
Special mention— — — — — — 1,341 — 1,341 
Total residential development, net$90,241 $86,078 $22,271 $— $— $1,329 $117,831 $6,149 $323,899 
Prior Year End period:
Gross charge-offs— — — — — — — — — 
Total commercial real estate$1,763,678 $5,176,047 $4,426,895 $1,675,601 $2,022,584 $4,072,737 $310,789 $6,149 $19,454,480 
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(in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving to Non-Revolving Loans Amortized Cost
December 31, 202320232022202120202019PriorTotal
Commercial:
Term, net
Credit quality indicator:
Pass/Watch$835,662 $1,215,539 $933,970 $391,735 $271,974 $560,595 $1,097,630 $50,874 $5,357,979 
Special mention23,250 14,875 29,128 109 3,340 16,476 — — 87,178 
Substandard2,911 13,862 13,981 3,068 7,385 7,859 31,399 4,139 84,604 
Doubtful— 1,329 335 796 197 699 — — 3,356 
Loss— 415 — 648 51 2,534 — — 3,648 
Total term, net$861,823 $1,246,020 $977,414 $396,356 $282,947 $588,163 $1,129,029 $55,013 $5,536,765 
Prior Year End period:
Gross charge-offs3,000 1,418 — 415 389 886 44 808 6,960 
Lines of credit & other, net
Credit quality indicator:
Pass/Watch$105,360 $105,791 $58,441 $12,266 $10,927 $16,108 $1,922,115 $5,676 $2,236,684 
Special mention476 635 394 — — 80 61,927 403 63,915 
Substandard7,807 4,161 — — — 593 83,304 32,509 128,374 
Doubtful— — — — — — 48 211 259 
Loss— 693 200 — 1 1 — — 895 
Total lines of credit & other, net$113,643 $111,280 $59,035 $12,266 $10,928 $16,782 $2,067,394 $38,799 $2,430,127 
Prior Year End period:
Gross charge-offs30 168 — 47 144 45 1,058 1,809 3,301 
Leases & equipment finance, net
Credit quality indicator:
Pass/Watch$682,866 $501,867 $200,499 $92,402 $61,065 $33,908 $— $— $1,572,607 
Special mention46,806 15,962 6,182 1,688 7,224 77 — — 77,939 
Substandard7,094 15,274 6,704 2,163 1,246 1,161 — — 33,642 
Doubtful5,833 22,566 9,036 3,161 1,700 208 — — 42,504 
Loss395 1,485 581 292 58 9 — — 2,820 
Total leases & equipment finance, net$742,994 $557,154 $223,002 $99,706 $71,293 $35,363 $— $— $1,729,512 
Prior Year End period:
Gross charge-offs2,324 47,116 31,569 9,111 6,394 3,087 — — 99,601 
Total commercial$1,718,460 $1,914,454 $1,259,451 $508,328 $365,168 $640,308 $3,196,423 $93,812 $9,696,404 
Residential:
Mortgage, net
Credit quality indicator:
Pass/Watch$221,207 $1,845,395 $2,355,420 $521,177 $443,152 $735,801 $— $— $6,122,152 
Special mention1,125 916 1,737 651 1,156 4,109 — — 9,694 
Substandard1,851 2,617 2,826 787 1,759 8,746 — — 18,586 
Loss159 2,724 970 851 220 1,810 — — 6,734 
Total mortgage, net$224,342 $1,851,652 $2,360,953 $523,466 $446,287 $750,466 $— $— $6,157,166 
Prior Year End period:
Gross charge-offs— — — — — 6 — — 6 
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(in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans Amortized Cost BasisRevolving to Non-Revolving Loans Amortized Cost
December 31, 202320232022202120202019PriorTotal
Home equity loans & lines, net
Credit quality indicator:
Pass/Watch$562 $1,242 $1,056 $100 $896 $35,677 $1,870,270 $17,807 $1,927,610 
Special mention— — — — 114 378 5,052 1,230 6,774 
Substandard— — — — 137 190 1,278 174 1,779 
Loss14 — — — — 85 1,286 618 2,003 
Total home equity loans & lines, net$576 $1,242 $1,056 $100 $1,147 $36,330 $1,877,886 $19,829 $1,938,166 
Prior Year End period:
Gross charge-offs— — 12 29 — 52 448 — 541 
Total residential$224,918 $1,852,894 $2,362,009 $523,566 $447,434 $786,796 $1,877,886 $19,829 $8,095,332 
Consumer & other, net:
Credit quality indicator:
Pass/Watch$39,977 $14,919 $7,132 $4,953 $3,441 $5,022 $118,125 $543 $194,112 
Special mention138 52 5 13 52 122 779 135 1,296 
Substandard— — — — 3 1 251 63 318 
Loss— — — — — 7 2 — 9 
Total consumer & other, net$40,115 $14,971 $7,137 $4,966 $3,496 $5,152 $119,157 $741 $195,735 
Prior Year End period:
Gross charge-offs3,313 132 23 20 29 288 1,485 472 5,762 
Grand total$3,747,171 $8,958,366 $8,055,492 $2,712,461 $2,838,682 $5,504,993 $5,504,255 $120,531 $37,441,951 

Note 6 – Goodwill and Other Intangible Assets
Columbia had $1.0 billion in goodwill as of March 31, 2024 and December 31, 2023, which represents the excess of the total acquisition price paid over the fair value of the assets acquired, net of fair value of liabilities assumed in connection with the Merger. Goodwill is not amortized but is evaluated for potential impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company performed its annual impairment assessment as of October 31, 2023. No events or circumstances since the annual impairment test were noted that would indicate it was more likely than not that a goodwill impairment exists.

Core deposit intangible assets values were determined based on the present value of the expected cost savings attributable to the core deposit funding relative to an alternative source of funding. The intangible assets are being amortized on an accelerated basis over a period of 10 years. No impairment losses have been recognized in the periods presented.

The following table summarizes other intangible assets as of the dates presented:
(in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
As of March 31, 2024
$764,791 $(193,203)$571,588 
As of December 31, 2023
$764,791 $(161,112)$603,679 

Amortization expense recognized on intangible assets was $32.1 million and $12.7 million for the three months ended March 31, 2024 and 2023, respectively.

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The table below presents the forecasted amortization expense for intangible assets as of March 31, 2024:
(in thousands)
YearExpected Amortization
Remainder of 2024
$87,340 
2025105,458 
202692,545 
202779,632 
202866,719 
Thereafter139,894 
Total intangible assets$571,588 

Note 7 – Residential Mortgage Servicing Rights

The Company measures its MSR asset at fair value with changes in fair value reported in residential mortgage banking revenue, net. The following table presents the changes in the Company's residential MSR for the periods indicated: 
Three Months Ended
 (in thousands) March 31, 2024March 31, 2023
Balance, beginning of period$109,243 $185,017 
Additions for new MSR capitalized1,237 1,601 
Changes in fair value:  
Changes due to collection/realization of expected cash flows over time(3,153)(4,881)
Changes due to valuation inputs or assumptions (1)
3,117 (2,937)
Balance, end of period$110,444 $178,800 
(1) The change in valuation inputs and assumptions principally reflect changes in discount rates and prepayment speeds, which are primarily affected by changes in interest rates.

Information related to the serviced loan portfolio as of the dates presented is as follows: 
(dollars in thousands)March 31, 2024December 31, 2023
Balance of loans serviced for others$8,081,039 $8,175,664 
MSR as a percentage of serviced loans1.37 %1.34 %
 
The amount of contractually specified servicing fees, late fees, and ancillary fees earned, which is recorded in residential mortgage banking revenue, was $6.0 million for the three months ended March 31, 2024, as compared to $9.4 million for the three months ended March 31, 2023.

Note 8 – Borrowings

The Company had FHLB advances and FRB borrowings outstanding as of March 31, 2024 with carrying values of $3.9 billion, compared to $4.0 billion at December 31, 2023.

The Bank's FHLB advances were $2.4 billion as of March 31, 2024, as compared to $3.8 billion at December 31, 2023. The FHLB advances have fixed interest rates ranging from 5.10% to 5.25% and mature in 2024 through 2025. The FHLB requires the Bank to maintain a required level of investment in FHLB and sufficient collateral to qualify for secured advances. The Bank has pledged as collateral for these secured advances all FHLB stock, all funds on deposit with the FHLB, investment and commercial real estate portfolios, accounts, general intangibles, equipment, and other property in which a security interest can be granted by the Bank to the FHLB.

As of March 31, 2024, the Bank had FRB BTFP borrowings of $1.6 billion, as compared to $200.0 million at December 31, 2023. The Bank's FRB BTFP borrowings have interest rates ranging from 4.76% to 4.93% and mature within one year of March 31, 2024. The Bank has pledged investment securities as collateral for these borrowings. The ability to take new advances under this program ended in March 2024.

31
Note 9 – Commitments and Contingencies 
 
Financial Instruments with Off-Balance-Sheet Risk — The Company's financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of the Bank's business and involve elements of credit, liquidity, and interest rate risk.
 
The following table presents a summary of the Bank's commitments and contingent liabilities:  
 (in thousands)
March 31, 2024
Commitments to extend credit$11,203,778 
Forward sales commitments$68,244 
Commitments to originate residential mortgage loans held for sale$40,745 
Standby letters of credit$196,748 
 
The Bank is a party to financial instruments with off-balance sheet credit risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. These instruments involve elements of credit and interest-rate risk similar to the risk involved in on-balance sheet items. The contract or notional amounts of these instruments reflect the extent of the Bank's involvement in particular classes of financial instruments. 
 
The Bank's exposure to credit loss in the event of non-performance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. 

There were no financial guarantees in connection with standby letters of credit that the Bank was required to perform on during the three months ended March 31, 2024 and 2023. As of March 31, 2024, approximately $181.8 million of standby letters of credit expire within one year, and $14.9 million expire thereafter.

Residential mortgage loans sold into the secondary market are sold with limited recourse against the Company, meaning that the Company may be obligated to repurchase or otherwise reimburse the investor for incurred losses on any loans that suffer an early payment default, are not underwritten in accordance with investor guidelines or are determined to have pre-closing borrower misrepresentations.

Legal Proceedings and Regulatory Matters—The Company is subject to litigation in court and arbitral proceedings, as well as proceedings, investigations, examinations, and other actions brought or considered by governmental and self-regulatory agencies. The Company is party to various pending and threatened claims and legal proceedings arising in the normal course of business activities, some of which involve claims for substantial or uncertain amounts.

In September 2023, 34 related entities (the “iCap Entities”) that maintained their primary deposit accounts with the Bank filed jointly-administered Chapter 11 bankruptcies in the United States Bankruptcy Court for the Eastern District of Washington. The Bank was served with a request for production of account records and produced such records through counsel. Concurrently, in pleadings filed in the Bankruptcy Court for the Eastern District of Washington on behalf of investors who claimed losses of approximately $250.0 million, the Bank was identified as a party against which claims may be brought in connection with the iCap Entities’ alleged operation of Ponzi schemes prior to the bankruptcy proceedings described above. The potential claims against the Bank and the amount of any alleged damages have not been identified. To the extent suits or actions are commenced, the Bank intends to vigorously defend any and all claims.

32
In August 2020, a class action complaint was filed in the United States District Court (ND Cal) alleging aiding and abetting claims against the Bank associated with the failure of two commercial real estate investment companies, Professional Financial Investors, Inc. and Professional Investors Security Fund, Inc., allegedly effected through a Ponzi scheme. Both companies maintained their primary deposit account relationship with the Bank’s Novato, Marin County, California branch office, acquired by the Bank from Circle Bank. The Bank's motion to dismiss was denied in January 2021, and its motion for summary judgment was denied in December 2022, and at the same time the District Court certified the plaintiffs’ proposed class. Two other related cases were filed in 2023: one case alleges similar claims by two investors and was filed in May 2023 in Marin County Superior Court; and another case was filed in June 2023 in the United States District Court (ND Cal) alleging claims by ten investors with different investments than the class members. Plaintiffs in the two District Court cases allege damages resulting from the scheme of between $386.2 million and $429.8 million, which includes prejudgment interest and does not account for prior bankruptcy recoveries of approximately $110.0 million to date. The Superior Court case does not yet have a clear estimate of damages. Trial in the District Court cases is currently scheduled to begin September 9, 2024. Filing of these cases follows an SEC non-public investigation of Professional Financial Investors, Inc. and Professional Investors Security Fund, Inc. that commenced on May 28, 2020. The Bank intends to defend these matters vigorously and believes that it has meritorious defenses.

As previously disclosed, in 2023, the Bank was informed by one of its technology service providers (the "Vendor") that a widely reported security incident involving MOVEit, a filesharing software used globally by government agencies, enterprise corporations, and financial institutions, resulted in the unauthorized acquisition by a third party of the names and social security numbers or tax identification numbers of certain of the Bank’s consumer and small business customers (the "Vendor Incident").

Other than the information described above, no account information for accounts at the Bank was compromised as a result of the Vendor Incident, and no information from the Bank’s commercial customers was involved in the Vendor Incident. On June 22, 2023, the Bank sent an email to potentially affected consumer and small business customers informing them of the Vendor Incident. Between August 11, 2023, and August 15, 2023, the Vendor, on behalf of the Bank, initiated formal notice via U.S. Mail to the 429,252 Bank customers whose information was involved in the Vendor Incident. The Bank and the Vendor also notified applicable federal and state regulators regarding the Vendor Incident.

Beginning on August 18, 2023, some of the individuals who were notified of the Vendor Incident filed lawsuits against the Bank seeking monetary recovery and other relief on behalf of themselves and one or more putative classes of other individuals similarly situated. Two such cases have been filed in federal court (the United States District Court for the Western District of Washington), one of which was later voluntarily dismissed without prejudice. Five such cases have been filed in state court in Washington (the Washington Superior Court for Pierce County) and one case in state court in California (the California Superior Court for Contra Costa County). The state court cases have been removed to federal court by the Bank. On October 4, 2023, the United States Judicial Panel on Multidistrict Litigation, in view of the large number of lawsuits arising out of the MOVEit data incident in federal courts across the United States, initiated a multidistrict litigation (“MDL”) for these cases to allow such cases to be transferred to one court for pre-trial proceedings. The MDL is titled In Re: MOVEit Customer Data Security Breach Litigation, MDL No. 3083 and is pending in the United States District Court for the District of Massachusetts as MDL No. 1:23-md-03083-ADB-PGL. All seven cases against the Bank have been transferred to the MDL as of January 29, 2024. The cases collectively allege claims for negligence, negligence per se, breach of contract, breach of implied contract, breach of third-party beneficiary contract, breach of fiduciary duty, invasion of privacy, breach of the covenant of good faith and fair dealing, unjust enrichment and violation of certain statutes, namely the Washington Consumer Protection Act, the California Consumer Legal Remedies Act, the California Consumer Privacy Act, and the California Unfair Competition Law. The Bank has also received claims by or on behalf of individuals in connection with the Vendor Incident. Such claims have the potential to give rise to additional litigation. The Bank has engaged defense counsel and intends to vigorously defend against these suits and any similar or related suits or claims. The Bank has notified relevant insurance carriers and business counterparties and continues to reserve all of its relevant rights to indemnity, defense, contribution, and other relief in connection with these matters.

At least quarterly, liabilities and contingencies are assessed in connection with all outstanding or new legal matters, utilizing the most recent information available. If it is determined that a loss from a matter is probable and that the amount of the loss can be reasonably estimated, an accrual for the loss is established. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments in the specific legal matter. It is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Actual losses may be in excess of any established accrual or the range of reasonably possible loss. Management's estimate will change from time to time. For matters where a loss is not
probable, or the amount of the loss cannot be estimated, no accrual is established. The Company has $6.9 million accrued related to legal matters as of March 31, 2024.
33

The resolution and the outcome of legal claims are unpredictable, exacerbated by factors including the following: damages sought are unsubstantiated or indeterminate; it is unclear whether a case brought as a class action will be allowed to proceed on that basis; discovery or motion practice is not complete; the proceeding is not yet in its final stages; the matters present legal uncertainties; there are significant facts in dispute; there are a large number of parties, including multiple defendants; or there is a wide range of potential results. Any estimate or determination relating to the future resolution of legal and regulatory matters is uncertain and involves significant judgment. The Company is usually unable to determine whether a favorable or unfavorable outcome is remote, reasonably likely or probable, or to estimate the amount or range of a probable or reasonably likely loss until relatively late in the process.

Although there can be no assurance as to the ultimate outcome of a specific legal matter, the Company believes it has meritorious defenses to the claims asserted against us in our currently outstanding legal matters, and the Company intends to continue to vigorously defend ourselves. The Company will consider settlement of legal matters when, in management's judgment, it is in the best interests of the Company and its shareholders.

Based on information currently available, advice of counsel, available insurance coverage, and established reserves, the Company believes that the eventual outcome of the actions against us will not have a material adverse effect on the Company's consolidated financial statements. However, it is possible that the ultimate resolution of a matter, if unfavorable, may be material to the Company's results of operations for any particular reporting period.

Concentrations of Credit Risk— The Bank grants real estate mortgage, real estate construction, commercial, agricultural and installment loans and leases to customers in Oregon, Washington, California, Idaho, Nevada, Arizona, Colorado, and Utah. In management's judgment, a concentration exists in real estate-related loans, which represented approximately 75% of the Bank's loan and lease portfolio for March 31, 2024 and December 31, 2023. Commercial real estate concentrations are managed to ensure geographic and business diversity, primarily in our footprint. As of March 31, 2024 and December 31, 2023, the multifamily portfolio, including construction, and the office portfolio represented approximately 19% and 8% of the total loan portfolio, respectively. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, material increases in interest rates, changes in tax policies, tightening credit or refinancing markets, or a decline in real estate values in the Bank's primary market areas in particular, could have an adverse impact on the repayment of these loans. Personal and business incomes, proceeds from the sale of real property, or proceeds from refinancing represent the primary sources of repayment for a majority of these loans. 
 
The Bank recognizes the credit risks inherent in dealing with other depository institutions. Accordingly, to prevent excessive exposure to any single correspondent, the Bank has established general standards for selecting correspondent banks as well as internal limits for allowable exposure to any single correspondent. In addition, the Bank has an investment policy that sets forth limitations that apply to all investments with respect to credit rating and concentrations with an issuer.

Note 10 – Derivatives 
 
The Bank may use derivatives to hedge the risk of changes in the fair values of interest rate lock commitments, residential mortgage loans held for sale, and MSRs. None of the Company's derivatives are designated as hedging instruments. Rather, they are accounted for as free-standing derivatives, or economic hedges, with changes in the fair value of the derivatives reported in income. The Company utilizes forward interest rate contracts in its derivative risk management strategy. 

The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to broker-dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage interest rate lock commitments. Credit risk associated with forward contracts is limited to the replacement cost of those forward contracts in a gain position. There were no counterparty default losses on forward contracts in the three months ended March 31, 2024 and 2023. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with broker-dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying or receiving a fee to or from the broker-dealer equal to the increase or decrease in the market value of the forward contract. As of March 31, 2024 and December 31, 2023, the Bank had commitments to originate mortgage loans held for sale totaling $40.7 million and $20.6 million, respectively, and forward sales commitments of $68.2 million and $39.5 million, respectively, which are used to hedge both on-balance sheet and off-balance sheet exposures. 

34
The Bank purchases interest rate futures and forward settling mortgage-backed securities to hedge the interest rate risk of MSRs. As of March 31, 2024, the Bank had $156.0 million notional of interest rate futures contracts and $17.0 million of mortgage-backed securities related to this program. As of December 31, 2023, the Bank had $150.0 million notional of interest rate futures contracts and $36.0 million of mortgage-backed securities related to this program.

The Bank executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting the interest rate swaps that the Bank executes with a third party, such that the Bank minimizes its net risk exposure. As of March 31, 2024, the Bank had interest rate swap assets with a $4.5 billion notional amount and interest swap rate liabilities with a $4.7 billion notional amount related to this program. As of December 31, 2023, the Bank had interest rate swap assets and interest rate swap liabilities, both with a notional amount of $4.7 billion related to this program.

The Bank has collateral posting requirements for initial margins with its clearing members and clearing houses and has been required to post collateral against its obligations under these agreements of $85.6 million and $88.3 million as of March 31, 2024 and December 31, 2023, respectively.

The Bank's clearable interest rate swap derivatives are cleared through the Chicago Mercantile Exchange and London Clearing House. These clearing houses characterize the variation margin payments, for certain derivative contracts that are referred to as settled-to-market, as settlements of the derivative's mark-to-market exposure and not collateral. The Company accounts for the variation margin as an adjustment to cash collateral, as well as a corresponding adjustment to the derivative asset and liability. As of March 31, 2024 and December 31, 2023, the variation margin netting adjustments for centrally cleared interest rate swaps consisted of derivative asset adjustments of $200.3 million and $166.3 million, respectively.

The Bank also has solely executed swaps indexed to Term SOFR, which are not clearable. These swaps are executed on a bilateral basis with a counterparty bank. There is no initial margin posted for bilateral swaps, but cash collateral equivalent to variation margin is exchanged to cover the mark-to-market exposure on a daily basis.

The Bank also executes foreign currency hedges as a service for customers. These foreign currency hedges are then offset with hedges with other third-party banks to limit the Bank's risk exposure.

The Bank's derivative assets are included in other assets on the Condensed Consolidated Balance Sheets, while the derivative liabilities are included in other liabilities on the Condensed Consolidated Balance Sheets. The following table summarizes the types of derivatives, separately by assets and liabilities, and the fair values of such derivatives as of the dates presented:  
(in thousands)Asset DerivativesLiability Derivatives
Derivatives not designated as hedging instrumentMarch 31, 2024December 31, 2023March 31, 2024December 31, 2023
Interest rate lock commitments$16 $— $— $137 
Interest rate futures— 3,745 1,134 — 
Interest rate forward sales commitments74 9 188 535 
Interest rate swaps114,347 33,874 310,985 260,064 
Foreign currency derivatives326 457 182 355 
Total derivative assets and liabilities$114,763 $38,085 $312,489 $261,091 

The gains and losses on the Company's mortgage banking derivatives are included in mortgage banking revenue. The gains and losses on the Company's interest rate swaps and foreign currency derivatives are included in other income. The following table summarizes the types of derivatives and the gains (losses) recorded during the periods indicated:  
(in thousands)Three Months Ended
Derivatives not designated as hedging instrumentMarch 31, 2024March 31, 2023
Interest rate lock commitments$153 $105 
Interest rate futures(4,271)2,650 
Interest rate forward sales commitments46 (1,003)
Interest rate swaps1,197 (3,543)
Foreign currency derivatives42 30 
Total derivative losses$(2,833)$(1,761)

35
The Company is party to interest rate swap contracts that are subject to enforceable master netting arrangements or similar agreements. Under these agreements, the Company may have the right to net settle multiple contracts with the same counterparty.

The following table shows the gross interest rate swaps in the Condensed Consolidated Balance Sheets and the respective collateral received or pledged in the form of cash or other financial instruments. The collateral amounts are limited to the outstanding balances of the related asset or liability. Therefore, instances of over collateralization are not shown.

Gross Amounts Not Offset in the Statement of Financial Position
Gross Amounts of Recognized Assets/LiabilitiesGross Amounts Offset in the Condensed Consolidated Balance SheetsNet Amounts of Assets/Liabilities presented in the Condensed Consolidated Balance SheetsFinancial InstrumentsCollateral Received/PostedNet Amount
March 31, 2024
Derivative Assets
Interest rate swaps$114,347 $— $114,347 $9,623 $98,026 $6,698 
Derivative Liabilities
Interest rate swaps$310,985 $— $310,985 $9,623 $— $301,362 
 
Note 11 – Earnings Per Common Share 
 
The following is a computation of basic and diluted earnings (loss) per common share for the periods indicated: 
Three Months Ended
 (in thousands, except per share data)March 31, 2024March 31, 2023
Net income (loss)$124,080 $(14,038)
  
Weighted average number of common shares outstanding - basic
208,260 156,383 
Effect of potentially dilutive common shares (1)
696 — 
Weighted average number of common shares outstanding - diluted
208,956 156,383 
Earnings (loss) per common share:  
Basic
$0.60 $(0.09)
Diluted
$0.59 $(0.09)
(1) Represents the effect of the assumed vesting of non-participating restricted shares based on the treasury stock method.

The following table represents the weighted average outstanding restricted shares that were not included in the computation of diluted earnings per share because their effect would be anti-dilutive for the periods indicated:
Three Months Ended
(in thousands)March 31, 2024March 31, 2023
Restricted stock awards and units601783

36
Note 12 – Fair Value Measurement
 
The following table presents estimated fair values of the Company's financial instruments as of the dates presented, whether or not recognized or recorded at fair value on a recurring basis in the Condensed Consolidated Balance Sheets:  
March 31, 2024December 31, 2023
 (in thousands)LevelCarrying ValueFair ValueCarrying ValueFair Value
Financial assets:    
Cash and cash equivalents1$2,201,117 $2,201,117 $2,162,534 $2,162,534 
Equity and other investment securities1,277,203 77,203 76,995 76,995 
Investment securities available for sale1,28,616,545 8,616,545 8,829,870 8,829,870 
Investment securities held to maturity32,247 2,939 2,300 3,025 
Loans held for sale247,201 47,201 30,715 30,715 
Loans and leases, net
2,337,228,069 35,740,658 37,001,080 35,810,989 
Restricted equity securities1116,274 116,274 179,274 179,274 
Residential mortgage servicing rights3110,444 110,444 109,243 109,243 
Bank-owned life insurance1682,293 682,293 680,948 680,948 
Derivatives2,3114,763 114,763 38,085 38,085 
Financial liabilities:    
Demand, money market, and savings deposits1$35,366,323 $35,366,323 $35,379,451 $35,379,451 
Time deposits26,339,837 6,314,381 6,227,569 6,201,519 
Securities sold under agreements to repurchase2213,573 213,573 252,119 252,119 
Borrowings23,900,000 3,893,589 3,950,000 3,950,037 
Junior subordinated debentures, at fair value3309,544 309,544 316,440 316,440 
Junior and other subordinated debentures, at amortized cost3107,838 98,867 107,895 97,695 
Derivatives2,3312,489 312,489 261,091 261,091 

37
Fair Value of Assets and Liabilities Measured on a Recurring Basis 

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of the periods presented: 
(in thousands) 
March 31, 2024
DescriptionTotalLevel 1Level 2Level 3
Financial assets:
Equity and other investment securities    
Investments in mutual funds and other securities$62,497 $44,038 $18,459 $— 
Equity securities held in rabbi trusts14,706 14,706 — — 
Investment securities available for sale    
U.S. Treasury and agencies1,467,393 372,865 1,094,528 — 
Obligations of states and political subdivisions1,051,929 — 1,051,929 — 
Mortgage-backed securities and collateralized mortgage obligations6,097,223 — 6,097,223 — 
Loans held for sale, at fair value47,201 — 47,201 — 
Loans and leases, at fair value267,806 — 267,806 — 
Residential mortgage servicing rights, at fair value110,444 — — 110,444 
Derivatives    
Interest rate lock commitments16 — — 16 
Interest rate forward sales commitments74 — 74 — 
Interest rate swaps114,347 — 114,347 — 
Foreign currency derivatives326 — 326 — 
Total assets measured at fair value$9,233,962 $431,609 $8,691,893 $110,460 
Financial liabilities:
Junior subordinated debentures, at fair value$309,544 $— $— $309,544 
Derivatives    
Interest rate futures1,134 — 1,134 — 
Interest rate forward sales commitments188 — 188 — 
Interest rate swaps310,985 — 310,985 — 
Foreign currency derivatives182 — 182 — 
Total liabilities measured at fair value$622,033 $— $312,489 $309,544 
38
(in thousands) December 31, 2023
DescriptionTotalLevel 1Level 2Level 3
Financial assets:
Equity and other investment securities    
Investments in mutual funds and other securities$63,298 $44,839 $18,459 $— 
Equity securities held in rabbi trusts
13,697 13,697 — — 
Investment securities available for sale
U.S. Treasury and agencies1,478,392 373,664 1,104,728 — 
Obligations of states and political subdivisions1,072,105 — 1,072,105 — 
Mortgage-backed securities and collateralized mortgage obligations6,279,373 — 6,279,373 — 
Loans held for sale, at fair value30,715 — 30,715 — 
Loans and leases, at fair value275,140 — 275,140 — 
Residential mortgage servicing rights, at fair value109,243 — — 109,243 
Derivatives    
Interest rate futures3,745 — 3,745 — 
Interest rate forward sales commitments9 — 9 — 
Interest rate swaps33,874 — 33,874 — 
Foreign currency derivatives457 — 457 — 
Total assets measured at fair value$9,360,048 $432,200 $8,818,605 $109,243 
Financial liabilities:
Junior subordinated debentures, at fair value$316,440 $— $— $316,440 
Derivatives    
Interest rate lock commitments137 — — 137 
Interest rate forward sales commitments535 — 535 — 
Interest rate swaps260,064 — 260,064 — 
Foreign currency derivatives355 — 355 — 
Total liabilities measured at fair value$577,531 $— $260,954 $316,577 

The following methods were used to estimate the fair value of each class of financial instrument that is carried at fair value in the tables above: 
 
Securities— Fair values for investment securities are based on quoted market prices when available or through the use of alternative approaches, such as matrix or model pricing, or broker indicative bids, when market quotes are not readily accessible or available. Management periodically reviews the pricing information received from the third-party pricing service and compares it to a secondary pricing service, evaluating significant price variances between services to determine an appropriate estimate of fair value to report.
 
Loans Held for Sale— Fair value for residential mortgage loans originated as held for sale is determined based on quoted secondary market prices for similar loans, including the implicit fair value of embedded servicing rights. For loans not originated as held for sale, these loans are accounted for at lower of cost or market, with the fair value estimated based on the expected sales price.

Loans and leases— Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, including commercial, real estate and consumer loans. Each loan category is further segregated by fixed and adjustable-rate loans. The fair value of loans is calculated by discounting expected cash flows at rates at which similar loans are currently being made. These amounts are discounted further by embedded probable losses expected to be realized in the portfolio. For loans originated as held for sale and transferred into loans held for investment, the fair value is determined based on quoted secondary market prices for similar loans.

39
Residential Mortgage Servicing Rights— The fair value of MSR is estimated using a DCF model. Assumptions used include market discount rates, anticipated prepayment speeds, delinquency and foreclosure rates, and ancillary fee income net of servicing costs. This model is periodically validated by an independent model validation group. The model assumptions and the MSR fair value estimates are also compared to observable trades of similar portfolios as well as to MSR broker valuations and industry surveys, as available. Management believes the significant inputs utilized are indicative of those that would be used by market participants.
 
Junior Subordinated Debentures— The fair value of junior subordinated debentures is estimated using an income approach valuation technique. The significant unobservable input utilized in the estimation of fair value of these instruments is the credit risk adjusted spread. The credit risk adjusted spread represents the non-performance risk of the liability, contemplating the inherent risk of the obligation. The Company periodically utilizes a valuation firm to determine or validate the reasonableness of inputs and factors that are used to determine the fair value. The ending carrying (fair) value of the junior subordinated debentures measured at fair value represents the estimated amount that would be paid to transfer these liabilities in an orderly transaction among market participants. Due to credit concerns in the capital markets and inactivity in the trust preferred markets that have limited the observability of market spreads, the Company has classified this as a Level 3 fair value measurement.
 
Derivative Instruments— The fair value of the interest rate lock commitments, interest rate futures, and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. The pull-through rate assumptions are considered Level 3 valuation inputs and are significant to the interest rate lock commitment valuation; as such, the interest rate lock commitment derivatives are classified as Level 3. The fair value of the interest rate swaps is determined using a DCF technique incorporating credit valuation adjustments to reflect non-performance risk in the measurement of fair value. Although the Bank has determined that the majority of the inputs used to value its interest rate swap derivatives fall within Level 2 of the fair value hierarchy, the CVA associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of March 31, 2024, the Bank has assessed the significance of the impact of the CVA on the overall valuation of its interest rate swap positions and has determined that the CVA are not significant to the overall valuation of its interest rate swap derivatives. As a result, the Bank has classified its interest rate swap and futures derivative valuations in Level 2 of the fair value hierarchy.
 
Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3) 
 
The following table provides a description of the valuation technique, significant unobservable inputs, and qualitative information about the unobservable inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a recurring basis as of March 31, 2024: 
Financial InstrumentFair Value
(in thousands)		Valuation TechniqueUnobservable InputRange of InputsWeighted Average
Assets:
Residential mortgage servicing rights$110,444 Discounted cash flowConstant prepayment rate
6.07% - 27.52%
6.74%
  Discount rate
9.50% - 16.08%
10.24%
  
Interest rate lock commitments, net$16 Internal pricing modelPull-through rate
64.27% - 100.00%
85.71%
Liabilities:  
Junior subordinated debentures$309,544 Discounted cash flowCredit spread
2.11% - 6.13%
3.79%

Generally, increases in the constant prepayment rate or the discount rate utilized in the fair value measurement of the residential mortgage servicing rights will result in a decrease in fair value. Conversely, decreases in the constant prepayment rate or the discount rate will result in an increase in fair value.

An increase in the pull-through rate utilized in the fair value measurement of the interest rate lock commitment derivative will result in an increase in the fair value measurement. Conversely, a decrease in the pull-through rate will result in a decrease in the fair value measurement.

40
Management believes that the credit risk adjusted spread utilized in the fair value measurement of the junior subordinated debentures carried at fair value is indicative of the non-performance risk premium a willing market participant would require under current market conditions, which is an inactive market. Generally, an increase in the credit spread will result in a decrease in the estimated fair value. Conversely, a decrease in the credit spread will result in an increase in the estimated fair value.

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the periods indicated: 
Three Months EndedThree Months Ended
March 31, 2024March 31, 2023
(in thousands)Residential mortgage servicing rightsInterest rate lock commitments, netJunior subordinated debentures, at fair valueResidential mortgage servicing rightsInterest rate lock commitments, netJunior subordinated debentures, at fair value
Beginning balance$109,243 $(137)$(316,440)$185,017 $32 $(323,639)
Change included in earnings(36)(16)(7,583)(7,818)(32)(6,679)
Change in fair values included in comprehensive income/loss— — 6,453 — — 25,812 
Purchases and issuances1,237 47 — 1,601 338 — 
Sales and settlements— 122 8,026 — (201)6,785 
Ending balance$110,444 $16 $(309,544)$178,800 $137 $(297,721)
Change in unrealized gains or losses for the period included in earnings for assets and liabilities held at end of period$3,117 $16 $(7,583)$(2,937)$137 $(6,679)
Change in unrealized gains or losses for the period included in other comprehensive income for assets and liabilities held at end of period$— $— $6,453 $— $— $25,812 

Changes in residential mortgage servicing rights carried at fair value are recorded in residential mortgage banking revenue within non-interest income. Gains (losses) on interest rate lock commitments carried at fair value are recorded in residential mortgage banking revenue within non-interest income.

The contractual interest expense on the junior subordinated debentures is recorded on an accrual basis as interest on junior subordinated debentures within interest expense. Settlements related to the junior subordinated debentures represent the payment of accrued interest that is embedded in the fair value of these liabilities. The change in fair value of junior subordinated debentures is attributable to the change in the instrument specific credit risk; accordingly, unrealized gains on fair value of junior subordinated debentures of $6.5 million for the three months ended March 31, 2024, were recorded net of tax as other comprehensive gains of $4.8 million. Comparatively, unrealized gains on fair value of junior subordinated debentures of $25.8 million were recorded net of tax as other comprehensive gains of $19.1 million for the three months ended March 31, 2023. The change recorded for three months ended March 31, 2024 was due to an increase in the credit spread and spot curve, partially offset by an increase in the implied forward curve.
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Fair Value of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis 

From time to time, certain assets are measured at fair value on a nonrecurring basis. These adjustments to fair value generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment, typically on collateral-dependent loans. The following tables present information about the Company's assets and liabilities measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting period. The amounts disclosed below represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported upon. 
March 31, 2024
 (in thousands) 
TotalLevel 1Level 2Level 3
Loans and leases$1,059 $— $— $1,059 
Total assets measured at fair value on a nonrecurring basis$1,059 $— $— $1,059 

December 31, 2023
 (in thousands) 
TotalLevel 1Level 2Level 3
Loans and leases$5,036 $— $— $5,036 
Total assets measured at fair value on a nonrecurring basis$5,036 $— $— $5,036 

The following table presents the losses resulting from nonrecurring fair value adjustments for the periods indicated:  

Three Months Ended
  (in thousands) 
March 31, 2024March 31, 2023
Loans and leases$28,174 $18,734 
Total losses from nonrecurring measurements$28,174 $18,734 

The following provides a description of the valuation technique and inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a nonrecurring basis. Unobservable inputs and qualitative information about the unobservable inputs are not presented as the fair value is determined by third-party information for loans and leases.

The loans and leases amounts above represent collateral-dependent loans and leases that have been adjusted to fair value. When a loan or non-homogeneous lease is identified as collateral-dependent, the Bank measures the impairment using the current fair value of the collateral, less estimated selling costs. Depending on the characteristics of a loan or lease, the fair value of collateral is generally estimated by obtaining external appraisals, but in some cases the value of the collateral may be estimated as having little to no value. When a homogeneous lease or equipment finance agreement becomes 181 days past due, it is determined that the collateral has little to no value. If it is determined that the value of the collateral-dependent loan or lease is less than its recorded investment, the Bank recognizes this impairment and adjusts the carrying value of the loan or lease to fair value, less costs to sell, through the ACL. The loss represents charge-offs on collateral-dependent loans and leases for fair value adjustments based on the fair value of collateral.

Fair Value Option
The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale and loans held for investment accounted for under the fair value option as of the dates presented:
March 31, 2024December 31, 2023
(in thousands)Fair Value Aggregate Unpaid Principal BalanceFair Value Less Aggregate Unpaid Principal BalanceFair ValueAggregate Unpaid Principal BalanceFair Value Less Aggregate Unpaid Principal Balance
  Loans held for sale$47,201 $45,926 $1,275 $30,715 $29,629 $1,086 
  Loans $267,806 $315,435 $(47,629)$275,140 $320,397 $(45,257)

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The Bank elected to measure certain residential mortgage loans held for sale under the fair value option, with interest income on these loans held for sale reported in interest and fees on loans and leases on the Condensed Consolidated Statements of Operations. This reduces certain timing differences and better matches changes in the value of these assets with changes in the value of derivatives used as economic hedges for these assets. Residential mortgage loans held for sale accounted for under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are reported as a component of residential mortgage banking revenue. For the three months ended March 31, 2024, the Company recorded a net increase in fair value of $189,000. For the three months ended March 31, 2023, the Company recorded a net increase in fair value of $81,000.

Management's intent to sell certain residential mortgage loans classified as held for sale may change over time due to factors including changes in overall market liquidity or changes in characteristics specific to certain loans held for sale. Consequently, these loans may be reclassified as loans held for investment and maintained in the Bank's loan portfolio. In the event that loans currently classified as held for sale are reclassified as loans held for investment, the loans will continue to be measured at fair value. Gains and losses from changes in fair value for these loans are reported in earnings as a component of other income and interest income on these loans are reported in interest and fees on loans and leases on the Condensed Consolidated Statements of Operations. For the three months ended March 31, 2024, the Company recorded a net decrease in fair value of $2.4 million, as compared to a net increase in fair value of $9.5 million for the three months ended March 31, 2023, respectively.

The Company selected the fair value measurement option for certain junior subordinated debentures originally issued by UHC prior to the Merger (the Umpqua Statutory Trusts) and for junior subordinated debentures acquired by UHC from Sterling Financial Corporation prior to the Merger, with changes in fair value recognized as a component of other comprehensive income. The remaining junior subordinated debentures were acquired through business combinations and were measured at fair value at the time of acquisition and subsequently measured at amortized cost.

Note 13 – Income Taxes

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as in the majority of states. The Company believes it is more likely than not that it will be able to fully realize the benefit of its federal and state NOL and tax carryforwards and has not provided a valuation allowance against its deferred tax assets.

As of March 31, 2024, the Company had a net deferred tax asset of $356.0 million, which includes $2.0 million of federal and state NOL carry-forwards, expiring in tax years 2030-2032.

The Company recorded income tax expense of $45.0 million and benefit of $4.9 million for the three months ended March 31, 2024 and 2023, respectively, representing effective tax rates of 26.6% and 25.8%, respectively. The effective tax rates differed from the statutory rate principally because of state taxes, non-deductible FDIC assessments, and income on tax-exempt investment securities.

Investment Tax Credits

The Company's tax credit investments promote qualified affordable housing projects, some of which also support the Company’s regulatory compliance with the Community Reinvestment Act. The Company’s investments in these entities generate a return primarily through the realization of federal income tax credits and other tax benefits, such as tax deductions from operating losses of the investments, over specified time periods. These tax credits and deductions are recognized as a reduction to income tax expense.

The Company records the investments in affordable housing partnerships of $205.6 million and $210.9 million as of March 31, 2024 and December 31, 2023, respectively, as a component of other assets on the Condensed Consolidated Balance Sheets and uses the proportional amortization method to account for the investments. The Company's unfunded capital commitments to these investments were $104.9 million and $114.1 million as of March 31, 2024 and December 31, 2023, respectively, which are recorded as a component of other liabilities on the Condensed Consolidated Balance Sheets. Amortization related to these investments is recorded as a component of the provision for income taxes on the Condensed Consolidated Statements of Operations.

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Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations 

Forward-Looking Statements 
 
This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These statements may include statements that expressly or implicitly predict future results, performance or events. Statements other than statements of historical fact are forward-looking statements. You can find many of these statements by looking for words such as "anticipates," "expects," "believes," "estimates," "intends," and "forecast," and words or phrases of similar meaning.

We make forward-looking statements including, but not limited to, statements made about the combined company’s prospects and results following the merger with Umpqua Holdings Corporation and the merger of Columbia State Bank into Umpqua Bank (collectively, the “Mergers”), completed in the first quarter of 2023; derivatives and hedging; the results and performance of models and economic assumptions used in our calculation of the ACL; projected sources of funds and the Company's liquidity position and deposit level and types; our securities portfolio; loan sales; adequacy of our ACL, including the reserve for unfunded commitments; provision for credit losses; non-performing loans and future losses; our commercial real estate portfolio, its collectability and subsequent charge-offs; resolution of non-accrual loans; mortgage volumes and the impact of rate changes; the economic environment; inflation and interest rates generally; litigation; dividends; junior subordinated debentures; fair values of certain assets and liabilities, including MSR values and sensitivity analyses; tax rates; deposit pricing; and the effect of accounting pronouncements and changes in accounting methodology.

Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. Risks and uncertainties include those set forth in our filings with the Securities and Exchange Commission and the following factors that, among others, could cause actual results to differ materially from the anticipated results expressed or implied by forward-looking statements: 

•changes in general economic, political, or industry conditions, and in conditions impacting the banking industry specifically;
•deterioration in economic conditions that could result in increased loan and lease losses, especially those risks associated with concentrations in real estate related loans;
•uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve or the effects of any declines in housing and commercial real estate prices, high or increasing unemployment rates, continued inflation, or any recession or slowdown in economic growth particularly in the western United States;
•volatility and disruptions in global capital and credit markets;
•the impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;
•changes in interest rates that could significantly reduce net interest income and negatively affect asset yields and valuations and funding sources, including impacts on prepayment speeds;
•competitive pressures among financial institutions and nontraditional providers of financial services, including on product pricing and services;
•continued consolidation in the financial services industry resulting in the creation of larger financial institutions that have greater resources;
•our ability to successfully, including on time and on budget, implement and sustain information technology product and system enhancements and operational initiatives;
•our ability to attract new deposits and loans and leases;
•our ability to retain deposits;
•our ability to achieve the efficiencies and enhanced financial and operating performance we expect to realize from investments in personnel, acquisitions, and infrastructure;
•the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital;
•demand for financial services in our market areas;
•stability, cost, and continued availability of borrowings and other funding sources, such as brokered and public deposits;
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•changes in legal or regulatory requirements or the results of regulatory examinations that could increase expenses or restrict growth;
•changes in the scope and cost of FDIC insurance and other coverage;
•our ability to manage climate change concerns, related regulations, and potential impacts on the creditworthiness of our customers;
•our ability to recruit and retain key management and staff;
•our ability to raise capital or incur debt on reasonable terms;
•regulatory limits on the Bank's ability to pay dividends to the Company that could impact the timing and amount of dividends to shareholders;
•financial services reform and the impact of legislation and implementing regulations on our business operations, including our compliance costs, interest expense, and revenue;
•a breach or failure of our operational or security systems, or those of our third-party vendors, including as a result of cyber-attacks;
•success, impact, and timing of our business strategies, including market acceptance of any new products or services;
•the outcome of legal proceedings;
•our ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk and regulatory and compliance risk;
•the possibility that the anticipated benefits of the Mergers are not realized when expected or at all, including as a result of the impact of, or problems arising from, the integration of the two companies or as a result of the strength of the economy and competitive factors in the areas where we do business;
•potential adverse reactions or changes to business or employee relationships, including those resulting from the integration of the two companies and banks;
•the possibility that the anticipated benefits from ongoing initiatives to improve operational performance are not realized in the amounts or when expected if at all;
•economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that exceeds current consensus estimates;
•the effect of geopolitical instability, including wars, conflicts, and terrorist attacks;
•natural disasters, including earthquakes, tsunamis, flooding, fires, pandemics, and other similarly unexpected events outside of our control;
•our ability to effectively manage problem credits;
•our ability to successfully negotiate with landlords or reconfigure facilities; and
•the effects of any damage to our reputation resulting from developments related to any of the items identified above.

There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under federal securities laws. Readers should consider any forward-looking statements in light of this explanation, and we caution readers about relying on forward-looking statements.
  
General 

Columbia Banking System, Inc. (referred to in this Quarterly Report on Form 10-Q as “we,” “our,” “the Company” and “Columbia”) is a registered financial holding company, which wholly owns the Bank. Columbia completed its previously-announced merger with Umpqua Holdings Corporation on February 28, 2023.

Through the Bank, we provide a broad range of banking, private banking, mortgage and other financial services to corporate, institutional, small business, and individual customers. FinPac, a commercial equipment leasing company, is a subsidiary of the Bank. Along with its subsidiaries, the Company is subject to the regulations of state and federal agencies and undergoes regular examinations by these regulatory agencies. 

The majority of the Bank’s loans and deposits are within its service areas in Oregon, Washington, California, Idaho, Nevada, Arizona, Colorado, and Utah. Umpqua Bank is an Oregon state-chartered commercial bank, the deposits of which are insured in whole or in part by the FDIC.
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Executive Overview 

The following is a discussion of our results for the three months ended March 31, 2024, as compared to the applicable prior periods.

Financial Performance

Comparison of current quarter to prior quarter
 
•Earnings per diluted common share was $0.59 for the three months ended March 31, 2024, as compared to $0.45 for the three months ended December 31, 2023. The increase for the three months ended March 31, 2024, as compared to the prior period, was primarily driven by a $37.8 million decrease in the provision for credit losses, as well as a decrease in non-interest expense largely due to the prior quarter including $32.9 million for the FDIC special assessment. This favorable change was partially offset by a decrease in non-interest income, driven by quarterly fluctuations in fair value adjustments, and net interest income. Net interest income decreased due to higher deposit costs relative to the fourth quarter and lower income earned on investment securities given slower prepayment activity.
 
•Net interest margin, on a tax-equivalent basis, was 3.52% for the three months ended March 31, 2024, as compared to 3.78% for the three months ended December 31, 2023. The decrease for the three months ended March 31, 2024 was due to the effect of deposit repricing and balance mix shift during the quarter.

•Non-interest income was $50.4 million for the three months ended March 31, 2024, as compared to $65.5 million for the three months ended December 31, 2023. The decline was driven by quarterly fluctuations in fair value adjustments and MSR hedging activity, which collectively resulted in a net fair value loss of $3.9 million in the first quarter compared to a net fair value gain of $12.7 million in the fourth quarter.

•Non-interest expense was $287.5 million for the three months ended March 31, 2024, as compared to $337.2 million for the three months ended December 31, 2023. The decrease was due to the fourth quarter's larger FDIC special assessment and lower discretionary spending.

Comparison of current year-to-date to prior year period

•Earnings per diluted common share was $0.59 for the three months ended March 31, 2024, as compared to $(0.09) for the three months ended March 31, 2023. The increase for the three months ended March 31, 2024, as compared to the prior year period, was primarily driven by a decrease in the provision for credit losses, due to the initial provision for historical Columbia non-PCD loans that was recorded in the first quarter of 2023. Non-interest expense also decreased, primarily due to lower merger-related expenses, and net interest income increased, primarily due to a full quarter operating as a combined company compared to only one month as a combined company for the prior year period.
 
•Net interest margin, on a tax-equivalent basis, was 3.52% for the three months ended March 31, 2024, as compared to 4.08% for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 compared to the prior year period was due to higher funding costs, deposit repricing, and a shift in product mix. Net interest income increased to $423.4 million for the three months ended March 31, 2024, compared to $374.7 million for the three months ended March 31, 2023, partly reflecting a larger average balance sheet for the three months ended March 31, 2024 compared to the prior year period, as a result of the full quarter as a combined company compared to only one month as a combined company for the prior year period, in addition to higher average yields on interest-earning assets.

•Non-interest income was $50.4 million for the three months ended March 31, 2024, as compared to $54.7 million for the three months ended March 31, 2023. The decrease was driven by quarterly fluctuations in fair value adjustments and MSR hedging activity, which collectively resulted in a net fair value loss of $3.9 million for the three months ended March 31, 2024 compared to a net fair value gain of $8.1 million for the three months ended March 31, 2023. This decline was partially offset by small increases in other categories, which were impacted by the full quarter as a combined company compared to only one month as a combined company for the prior year period.

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•Non-interest expense was $287.5 million for the three months ended March 31, 2024, as compared to $342.8 million for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 reflects a decrease in merger-related expenses of $111.4 million, partially offset by increases in amortization of intangible assets added in connection with the Merger and salaries and employee benefits, which were impacted by the full quarter as a combined company compared to only one month as a combined company for the prior year period.

Comparison of current period end to prior year end

•Total loans and leases were $37.6 billion as of March 31, 2024, an increase of $200.5 million, as compared to December 31, 2023. The increase in total loans and leases was primarily in the commercial real estate and commercial loan balances and was driven primarily by commercial line utilization and construction project activity in the quarter. Higher commercial real estate term balances reflect projects that transitioned from construction to permanent financing.
 
•Total deposits were $41.7 billion as of March 31, 2024, an increase of $99.1 million, as compared to December 31, 2023. The increase was due to growth in money market accounts, time deposits, and interest-bearing demand deposits, partially offset by a decline in non-interest-bearing demand deposits.
 
•Total consolidated assets were $52.2 billion as of March 31, 2024 and December 31, 2023.

Credit Quality

•Non-performing assets increased to $143.8 million, or 0.28% of total assets, as of March 31, 2024, compared to $113.9 million, or 0.22% of total assets, as of December 31, 2023. Non-performing loans and leases were $142.0 million, or 0.38% of total loans and leases, as of March 31, 2024, compared to $112.9 million, or 0.30% of total loans and leases, as of December 31, 2023. The increase in non-performing assets during the quarter was driven primarily by migration in our SBA portfolio and an owner-occupied commercial real estate property.

•The allowance for credit losses was $437.2 million as of March 31, 2024, a decrease of $26.9 million compared to December 31, 2023. The decrease in the allowance for credit losses was due to changes in the economic assumptions used in credit models and a recalibration of our CECL calculation for non-homogeneous commercial loans and leases and residential development loans.

•The Company had a provision for credit losses of $17.1 million for the three months ended March 31, 2024. This compares to a provision for credit losses of $54.9 million for the three months ended December 31, 2023, and $105.5 million for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 compared to the prior quarter was mainly due to changes in the economic assumptions and recalibration of our CECL calculation for non-homogeneous commercial loans and leases and residential development loans. The three months ended March 31, 2023 included an $88.4 million initial provision for historical Columbia non-PCD loans related to the Merger. This initial provision, as well as changes in the economic assumptions used in credit models and a recalibration of our CECL calculation, as noted above, which contributed to the change when compared to the same period in the current year.

Liquidity

•Total cash and cash equivalents were $2.2 billion as of March 31, 2024 and December 31, 2023. The Company manages its cash position as part of management's strategy to maintain a high-quality liquid asset position to support growth of deposit balances, fund growth in lending and investment portfolios, and deleverage non-deposit liabilities as economic conditions permit.

•Including secured off-balance sheet lines of credit, total available liquidity was $18.6 billion as of March 31, 2024, representing 36% of total assets, 45% of total deposits, and 138% of uninsured deposits.

Capital and Growth Initiatives

•The Company's total risk-based capital ratio was 12.0% and its common equity tier 1 ("CET1") capital ratio was 9.8% as of March 31, 2024. As of December 31, 2023, the Company's total risk-based capital ratio was 11.9% and its CET1 capital ratio was 9.6%.

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•Columbia paid a quarterly cash dividend of $0.36 per common share to shareholders on March 11, 2024.

Critical Accounting Estimates 

Our critical accounting estimates are described in detail in the Critical Accounting Estimates section of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024. The condensed consolidated financial statements are prepared in conformity with GAAP and follow general practices within the financial services industry, in which the Company operates. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Management believes that the estimates for ACL, business combinations, and goodwill are important to the portrayal of the Company's financial condition and results of operations and require difficult, subjective, or complex judgments. There have been no material changes in the methodology of these estimates during the three months ended March 31, 2024.

Results of Operations

Columbia's financial results for any periods ended prior to February 28, 2023, the Merger Date, reflect UHC results only on a standalone basis. Accordingly, Columbia's reported financial results for the first quarter of 2023 reflect only UHC financial results through the closing of the Merger. As a result of these two factors, Columbia's financial results for the first quarter of 2023 may not be directly comparable to prior or future reported periods.

Comparison of current quarter to prior quarter

The Company had net income of $124.1 million for the three months ended March 31, 2024, compared to net income of $93.5 million for the three months ended December 31, 2023. The increase in net income is mainly attributable to a decrease in non-interest expense and a decrease in provision for credit losses, partially offset by decreases in net interest income and non-interest income. The decrease of $49.7 million in non-interest expense is mainly due to a decrease in FDIC assessments, as a result of the FDIC special assessment of $32.9 million in the fourth quarter of 2023, as well as decreases in all categories as a result of lower discretionary spending and other expense items compared to expense items in the fourth quarter. The Company conducted an enterprise-wide evaluation of our operations during the first quarter of 2024, which resulted in consolidated positions, simplified reporting, and organizational structures. The changes are expected to be carried out in the second and third quarters of 2024 to achieve a core expense run rate for the fourth quarter of 2024 of $965 million to $985 million annualized. The expected core expense run rate excludes CDI amortization, merger-related expenses, exit and disposal costs, and the FDIC special assessment.

The decrease of $37.8 million in provision for credit losses reflects changes in the economic assumptions used in credit models and a recalibration of our CECL calculation for non-homogeneous commercial loans and leases and residential development loans. The decrease of $30.3 million in net interest income is due to higher interest expense driven by higher average rates and balances in interest-bearing liabilities, in addition to a decrease in interest income, largely driven by lower income earned on investment securities given slower prepayment activity. The Company is actively managing and selectively reducing deposit offered rates. The decrease of $15.2 million in non-interest income was primarily driven by quarterly fluctuations in fair value adjustments and MSR hedging activity.

Comparison of current year-to-date to prior year period

For the three months ended March 31, 2024, the Company had net income of $124.1 million, compared to net loss of $14.0 million for the same period in the prior year. The increase in net income is mainly attributable to an increase in net interest income, a decrease in provision for credit losses, and a decrease in non-interest expense. The increase of $48.7 million in net interest income was due to higher loan interest income from increasing rates and higher average loan and lease balances, as well as the impact of purchase accounting accretion and amortization. These increases were partially offset by higher funding costs.

The decrease of $88.4 million in provision for credit losses was driven primarily by the initial provision for historical Columbia non-PCD loans that was recorded in the first quarter of 2023. The decrease of $55.3 million in non-interest expense was due to a decrease in merger-related expenses of $111.4 million, partially offset by increases in amortization of intangible assets of $19.4 million and salaries and employee benefits of $18.5 million, which were impacted by the full quarter as a combined company for the current period compared to only one month as a combined company for the prior year period.
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The following table presents the return on average assets (GAAP), average common shareholders' equity (GAAP), and average tangible common shareholders' equity (non-GAAP) for the periods indicated. For each period presented, the table includes the calculated ratios based on reported net income. To the extent return on average common shareholders' equity is used to compare our performance with other financial institutions that do not have merger and acquisition-related intangible assets, we believe it is beneficial to also consider the return on average tangible common shareholders' equity. This measure is useful for evaluating the performance of a business as it calculates the return available to common shareholders without the impact of intangible assets and their related amortization. Tangible common equity is also used as part of our incentive compensation program for our executive officers. The return on average tangible common shareholders' equity is calculated by dividing net income by average shareholders' common equity less average goodwill and other intangible assets, net (excluding MSR). The return on average tangible common shareholders' equity is considered a non-GAAP financial measure and should be viewed in conjunction with the return on average common shareholders' equity. 

Return on Average Assets, Common Shareholders' Equity and Tangible Common Shareholders' Equity

 
Three Months Ended
 (dollars in thousands) March 31, 2024December 31, 2023March 31, 2023
Return on average assets0.96 %0.72 %(0.14)%
Return on average common shareholders' equity10.01 %7.90 %(1.70)%
Return on average tangible common shareholders' equity14.82 %12.19 %(2.09)%
Calculation of average common tangible shareholders' equity:  
Average common shareholders' equity$4,985,875 $4,695,736 $3,349,761 
Less: average goodwill and other intangible assets, net $1,619,134 $1,652,282 $623,042 
Average tangible common shareholders' equity$3,366,741 $3,043,454 $2,726,719 

Additionally, management believes tangible common equity and the tangible common equity ratio are meaningful measures of capital adequacy. Columbia believes the exclusion of certain intangible assets in the computation of tangible common equity and the tangible common equity ratio provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the operating results and capital of the Company. Tangible common equity is calculated as total shareholders' equity less goodwill and other intangible assets, net (excluding MSR). In addition, tangible assets are total assets less goodwill and other intangible assets, net (excluding MSR). The tangible common equity ratio is calculated as tangible common shareholders' equity divided by tangible assets. Tangible common equity and the tangible common equity ratio are considered non-GAAP financial measures and should be viewed in conjunction with total shareholders' equity and the total shareholders' equity ratio. 

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The following table provides a reconciliation of ending shareholders' equity (GAAP) to ending tangible common equity (non-GAAP), and ending assets (GAAP) to ending tangible assets (non-GAAP) as of the dates presented: 
 (dollars in thousands) 
March 31, 2024December 31, 2023
Total shareholders' equity$4,957,245 $4,995,034 
Subtract:  
Goodwill1,029,234 1,029,234 
Other intangible assets, net571,588 603,679 
Tangible common shareholders' equity$3,356,423 $3,362,121 
Total assets$52,224,006 $52,173,596 
Subtract:
Goodwill1,029,234 1,029,234 
Other intangible assets, net571,588 603,679 
Tangible assets$50,623,184 $50,540,683 
Total shareholders' equity to total assets ratio9.49 %9.57 %
Tangible common equity ratio6.63 %6.65 %
 
Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not reviewed or audited. Although we believe these non-GAAP financial measures are frequently used by stakeholders in the evaluation of a company, they have limitations as analytical tools, and should not be considered in isolation or as a substitute for analyses of results as reported under GAAP.

Net Interest Income 

Comparison of current quarter to prior quarter

Net interest income for the three months ended March 31, 2024 was $423.4 million, a decrease of $30.3 million compared to the three months ended December 31, 2023. The decrease was driven by a $22.9 million increase in interest expense due to higher average rates and balances in interest-bearing liabilities, in addition to a $7.4 million decrease in interest income, largely driven by lower income earned on investment securities given slower prepayment activity.

The net interest margin (net interest income as a percentage of average interest-earning assets) on a fully tax-equivalent basis was 3.52% for the three months ended March 31, 2024, as compared to 3.78% for the three months ended December 31, 2023. The contraction in net interest margin was driven by higher average deposit costs, which increased at an accelerated pace through the fourth quarter and into January before stabilizing in the latter part of the first quarter. The yield on loans and leases for the three months ended March 31, 2024 remained flat compared to the three months ended December 31, 2023.

The cost of interest-bearing liabilities for the three months ended March 31, 2024 increased by 23 basis points compared to the three months ended December 31, 2023, due to rising rates and product mix shift to higher cost money market and time deposits. This was partially offset by a lower cost for borrowings, as the Company was able to utilize the more favorable rates associated with the FRB BTFP.

Comparison of current year-to-date to prior year period
 
Net interest income for the three months ended March 31, 2024 was $423.4 million, an increase of $48.7 million compared to the three months ended March 31, 2023. The increase reflects a larger average balance sheet for the three months ended March 31, 2024 compared to the prior year period as a result of the Merger, in addition to higher average yields on interest-earning assets, partially offset by higher rates on interest-bearing liabilities.

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The net interest margin on a fully tax-equivalent basis was 3.52% for the three months ended March 31, 2024, as compared to 4.08% for the three months ended March 31, 2023. The decrease for the three months ended March 31, 2024 compared to the prior year period was due to higher funding costs, deposit repricing, and a shift in product mix.

The yield on loans and leases for the three months ended March 31, 2024 increased by 58 basis points as compared to the same period in 2023, primarily attributable to the rising interest rate environment and purchase accounting accretion and amortization related to the Merger.

The cost of interest-bearing liabilities increased by 143 basis points for the three months ended March 31, 2024, as compared to the same period in 2023, due to a higher mix of higher-cost time deposits and term borrowings, as well as rising interest rates. Our net interest income is affected by changes in the amount and mix of interest-earning assets and interest-bearing liabilities, as well as changes in the yields earned on interest-earning assets and rates paid on deposits and borrowed funds.

The Federal Reserve increased the target range for the federal funds rate by 5.25% between March 2022 and July 2023, which marked the most recent increase to the federal funds rate. During that period, our net interest margin expanded as our asset sensitive balance sheet became increasingly profitable due to active rate increases by the Federal Reserve and the lagged impact to deposit pricing. Since the Federal Reserve ceased increasing the federal funds rate, we have experienced an increase in our funding costs that outpaces the increase in our earning asset yields as our deposits have continued to reprice higher and our funding base has experienced a shift toward higher-cost sources as Federal Reserve actions have reduced available liquidity within the banking industry. As a result, our net interest margin has contracted since July 2023 due to the impact of higher funding costs and minimal change to the average yield on earning assets.




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The following table presents condensed average balance sheet information, together with interest income and yields on average interest-earning assets, and interest expense and rates paid on average interest-bearing liabilities for periods presented:
Three Months Ended
 March 31, 2024December 31, 2023March 31, 2023
 (dollars in thousands)Average BalanceInterest Income or ExpenseAverage Yields or RatesAverage BalanceInterest Income or ExpenseAverage Yields or RatesAverage BalanceInterest Income or ExpenseAverage Yields or Rates
INTEREST-EARNING ASSETS:   
Loans held for sale$30,550 $525 6.88 %$48,868 $649 5.31 %$54,008 $799 5.92 %
Loans and leases (1)
37,597,101 574,519 6.13 %37,333,310 577,092 6.13 %29,998,630 412,726 5.55 %
Taxable securities8,081,003 78,724 3.90 %7,903,053 82,872 4.19 %4,960,966 40,448 3.26 %
Non-taxable securities (2)
851,342 7,886 3.71 %809,551 8,073 3.99 %437,020 4,068 3.72 %
Temporary investments and interest-bearing cash1,720,791 23,553 5.51 %1,743,447 24,055 5.47 %1,605,081 18,581 4.69 %
Total interest-earning assets (1), (2)
48,280,787 $685,207 5.69 %47,838,229 $692,741 5.75 %37,055,705 $476,622 5.19 %
Goodwill and other intangible assets1,619,134 1,652,282 623,042 
Other assets2,184,052 2,341,845 1,747,228 
Total assets$52,083,973 $51,832,356 $39,425,975 
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits$8,035,339 $51,378 2.57 %$7,617,427 $44,861 2.34 %$4,759,251 $9,815 0.84 %
Money market deposits10,612,073 72,497 2.75 %10,276,894 61,055 2.36 %8,845,784 32,238 1.48 %
Savings deposits2,688,360 715 0.11 %2,880,622 698 0.10 %2,686,388 556 0.08 %
Time deposits6,406,807 73,845 4.64 %5,847,400 64,045 4.35 %3,205,128 21,004 2.66 %
Total interest-bearing deposits27,742,579 198,435 2.88 %26,622,343 170,659 2.54 %19,496,551 63,613 1.32 %
Repurchase agreements and federal funds purchased231,667 1,266 2.20 %245,989 1,226 1.98 %281,032 406 0.59 %
Borrowings3,920,879 51,275 5.26 %3,918,261 56,066 5.68 %2,352,715 28,764 4.96 %
Junior and other subordinated debentures423,528 9,887 9.39 %440,007 10,060 9.07 %417,966 8,470 8.22 %
Total interest-bearing liabilities32,318,653 $260,863 3.25 %31,226,600 $238,011 3.02 %22,548,264 $101,253 1.82 %
Non-interest-bearing deposits13,841,582 14,899,001 12,755,080 
Other liabilities937,863 1,011,019 772,870 
Total liabilities47,098,098 47,136,620 36,076,214 
Common equity4,985,875 4,695,736 3,349,761 
Total liabilities and shareholders' equity$52,083,973 $51,832,356 $39,425,975 
NET INTEREST INCOME (2)
$424,344 $454,730 $375,369 
NET INTEREST SPREAD (2)
2.44 %2.73 %3.37 %
NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN (1), (2)
3.52 %3.78 %4.08 %
(1)Non-accrual loans and leases are included in the average balance.
(2)Tax-exempt investment security income has been adjusted to a tax-equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $982,000 for the three months ended March 31, 2024, as compared to approximately $1.1 million for the three months ended December 31, 2023 and approximately $671,000 for the three months ended March 31, 2023.
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The following table sets forth a summary of the changes in tax equivalent net interest income due to changes in average asset and liability balances (volume) and changes in average rates (rate) for the periods presented. Changes in tax equivalent interest income and expense, which are not attributable specifically to either volume or rate, are allocated proportionately between both variances.

Three Months EndedThree Months Ended
 
March 31, 2024 compared to December 31, 2023
March 31, 2024 compared to March 31, 2023
 Increase (decrease) in interest income and expense due to changes inIncrease (decrease) in interest income and expense due to changes in
  (in thousands)
VolumeRateTotalVolumeRateTotal
INTEREST-EARNING ASSETS:   
Loans held for sale$(285)$161 $(124)$(386)$112 $(274)
Loans and leases(1,734)(839)(2,573)114,724 47,069 161,793 
Taxable securities1,842 (5,990)(4,148)29,223 9,053 38,276 
Non-taxable securities (1)
408 (595)(187)3,837 (19)3,818 
Temporary investments and interest-bearing cash(540)38 (502)1,465 3,507 4,972 
Total interest-earning assets (1)
(309)(7,225)(7,534)148,863 59,722 208,585 
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits2,299 4,218 6,517 9,817 31,746 41,563 
Money market deposits1,881 9,561 11,442 7,352 32,907 40,259 
Savings deposits(53)70 17 — 159 159 
Time deposits5,770 4,030 9,800 30,281 22,560 52,841 
Repurchase agreements and federal funds purchased(89)129 40 (85)945 860 
Borrowings31 (4,822)(4,791)20,629 1,882 22,511 
Junior and other subordinated debentures(453)280 (173)120 1,297 1,417 
Total interest-bearing liabilities9,386 13,466 22,852 68,114 91,496 159,610 
Net (decrease) increase in net interest income (1)
$(9,695)$(20,691)$(30,386)$80,749 $(31,774)$48,975 
(1) Tax-exempt investment security income has been adjusted to a tax-equivalent basis at a 21% tax rate.
Provision for Credit Losses 
 
Comparison of current quarter to prior quarter

The Company had a $17.1 million provision for credit losses for the three months ended March 31, 2024, as compared to a $54.9 million provision for the three months ended December 31, 2023. As an annualized percentage of average outstanding loans and leases, the provision for credit losses recorded for the three months ended March 31, 2024 was 0.18%, as compared to 0.58% for the three months ended December 31, 2023. The change in provision for credit losses reflects changes in the economic assumptions and recalibration of our CECL calculation for non-homogeneous commercial loans and leases and residential development loans. During the first quarter, we recalibrated the commercial CECL model to be more reflective of the post-Merger loan portfolio after a full year operating as a combined organization. We believe the recalibrated model is more reflective of the quality of our underwriting and borrower profiles.

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For the three months ended March 31, 2024, net charge-offs were $44.0 million, as compared to $28.9 million for the three months ended December 31, 2023. As an annualized percentage of average outstanding loans and leases, net charge-offs for the three months ended March 31, 2024 were 0.47%, as compared to 0.31% for the three months ended December 31, 2023. Net charge-offs in the FinPac portfolio were $23.8 million in the first quarter, largely unchanged from the fourth quarter, and net charge-offs were up $14.4 million in the commercial portfolio from the prior quarter, with the increase centered in a single commercial credit.

Comparison of current year-to-date to prior year period

The Company had a $17.1 million provision for credit losses for the three months ended March 31, 2024, as compared to $105.5 million for the three months ended March 31, 2023. The decrease is primarily driven by the $88.4 million initial provision for historical Columbia non-PCD loans that was recorded in the first quarter of 2023. As an annualized percentage of average outstanding loans and leases, the provision for credit losses recorded for the three months ended March 31, 2024 was 0.18%, as compared to 1.43% for the three months ended March 31, 2023. 

For the three months ended March 31, 2024, net charge-offs were $44.0 million, as compared to $16.7 million for the three months ended March 31, 2023. As an annualized percentage of average outstanding loans and leases, net charge-offs for the three months ended March 31, 2024 were 0.47%, as compared to 0.23% for the three months ended March 31, 2023. Net charge-offs in the FinPac portfolio were $23.8 million for the three months ended March 31, 2024, as compared to $16.4 million the three months ended March 31, 2023, largely in the trucking and transportation portfolio. Net charge-offs were up $18.9 million in the commercial portfolio from the three months ended March 31, 2023, with the increase centered in a single commercial credit.

Typically, loans in a non-accrual status will not have an allowance for credit loss as they will be written down to their net realizable value or charged-off. However, the net realizable value for homogeneous leases and equipment finance agreements are determined by the loss given default calculated by the CECL model, and therefore homogeneous leases and equipment finance agreements on non-accrual will have an allowance for credit loss amount until they become 181 days past due, at which time they are charged-off. The non-accrual leases and equipment finance agreements of $30.6 million as of March 31, 2024 have a related allowance for credit losses of $26.8 million, with the remaining loans written-down to the estimated fair value of the collateral, less estimated costs to sell, and are expected to be resolved with no additional material loss, absent further decline in market prices. 

Non-Interest Income 
 
The following table presents the key components of non-interest income and the related dollar and percentage change from period to period:
Three Months EndedThree Months Ended
(in thousands)March 31, 2024December 31, 2023Change AmountChange PercentMarch 31, 2023Change AmountChange Percent
Service charges on deposits$16,064 $17,349 $(1,285)(7)%$14,312 $1,752 12 %
Card-based fees13,183 14,593 (1,410)(10)%11,561 1,622 14 %
Financial services and trust revenue4,464 3,011 1,453 48 %1,297 3,167 244 %
Residential mortgage banking revenue, net4,634 4,212 422 10 %7,816 (3,182)(41)%
Gain on sale of debt securities, net12 9 3 33 %— 12 nm
(Loss) gain on equity securities, net (1,565)2,636 (4,201)(159)%2,416 (3,981)(165)%
Gain on loan and lease sales, net221 1,161 (940)(81)%940 (719)(76)%
Bank-owned life insurance income4,639 4,331 308 7 %2,790 1,849 66 %
Other income8,705 18,231 (9,526)(52)%13,603 (4,898)(36)%
Total non-interest income$50,357 $65,533 $(15,176)(23)%$54,735 $(4,378)(8)%
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Comparison of current quarter to prior quarter

Other income for the three months ended March 31, 2024, as compared to the three months ended December 31, 2023, decreased primarily due to interest rate fluctuations resulting in the current quarter including a loss on the fair value of certain loans held for investment of $2.4 million as compared to a gain of $19.4 million for the prior quarter, partially offset by a favorable change of $9.2 million in swap derivatives due to a gain in the current quarter compared to a loss in the prior quarter. These fair value adjustments, including the fair value loss on equity securities, are inversely influenced by the change in longer- term interest rates.

Comparison of current year-to-date to prior year period

Other income for the three months ended March 31, 2024 decreased as compared to the three months ended March 31, 2023, primarily due to interest rate fluctuations resulting in a loss on the fair value of certain loans held for investment of $2.4 million in the current period as compared to a gain of $9.5 million in the prior year period. The decrease was partially offset by the impact of rate fluctuations on swap derivatives with a gain in the current period compared to a loss in the prior year period, resulting in a favorable change of $4.7 million.

Non-Interest Expense 
 
The following table presents the key elements of non-interest expense and the related dollar and percentage change from period to period:
Three Months EndedThree Months Ended
 (in thousands)March 31, 2024December 31, 2023Change AmountChange PercentMarch 31, 2023Change AmountChange Percent
Salaries and employee benefits$154,538 $157,572 $(3,034)(2)%$136,092 $18,446 14 %
Occupancy and equipment, net45,291 48,160 (2,869)(6)%41,700 3,591 9 %
Communications3,782 4,280 (498)(12)%3,026 756 25 %
Marketing1,936 5,517 (3,581)(65)%1,059 877 83 %
Services13,422 16,363 (2,941)(18)%12,843 579 5 %
FDIC assessments14,460 42,510 (28,050)(66)%6,113 8,347 137 %
Intangible amortization32,091 33,204 (1,113)(3)%12,660 19,431 153 %
Merger-related expenses4,478 7,174 (2,696)(38)%115,898 (111,420)(96)%
Other expenses17,518 22,396 (4,878)(22)%13,427 4,091 30 %
Total non-interest expense$287,516 $337,176 $(49,660)(15)%$342,818 $(55,302)(16)%

Comparison of current quarter to prior quarter

FDIC assessments decreased during the three months ended March 31, 2024, as compared to the three months ended December 31, 2023, due primarily to the fourth quarter of 2023 including $32.9 million in expense related to the FDIC special assessment to replenish the Deposit Insurance Fund following bank closures in 2023, partially offset by an additional $4.8 million in FDIC special assessment expense in the three months ended March 31, 2024.
The remaining categories of non-interest expense decreased during the three months ended March 31, 2024, as compared to the three months ended December 31, 2023, due primarily to the renewed focus on expense discipline and lower discretionary spending in order to support improved operating performance. During the first quarter of 2024, the Company conducted a comprehensive evaluation of our operations, resulting in streamlined roles, simplified reporting, and organizational restructuring. The Company anticipates severance and restructuring charges in the second and third quarters of 2024.
Comparison of current year-to-date to prior year period
Salaries and employee benefits increased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to the current year including a full quarter of salaries and wages as a combined company, compared to only one month as a combined company for the same period in the prior year.

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FDIC assessments increased during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, due primarily to the $4.8 million in expense related to the FDIC special assessment to replenish the Deposit Insurance Fund following bank closures in 2023.
Intangible amortization increased during the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to the current year including a full quarter of amortization associated with the core deposit intangible asset added as a result of the Merger, compared to one month of amortization during the first quarter of 2023.

Merger-related expenses decreased during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, with the largest drivers of the decrease being lower legal and professional fees and personnel expenses related to the Merger. Columbia closed the Merger and completed the core systems conversion during the first quarter of 2023.

Income Taxes 

The Company's effective tax rate for the three months ended March 31, 2024 was 26.6%, as compared to 26.4% and 25.8% for the three months ended December 31, 2023, and March 31, 2023, respectively. The effective tax rates differed from the statutory rate principally because of state taxes, non-deductible FDIC assessments, and income on tax-exempt investment securities.

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FINANCIAL CONDITION 
 
Investment Securities 
 
Investment debt securities available for sale were $8.6 billion as of March 31, 2024, compared to $8.8 billion as of December 31, 2023. The decrease was primarily due to a decrease of $122.7 million in fair value of investment securities available for sale, due to higher rates during the quarter, as well as sales and paydowns of $110.5 million.

The following tables present the par value, amortized cost, unrealized gains, unrealized losses and approximate fair values of debt securities as available for sale and held to maturity investment debt securities portfolio by major type as of the dates presented: 
March 31, 2024
 (dollars in thousands) Current ParAmortized CostUnrealized GainsUnrealized LossesFair Value% of Portfolio
Available for sale:    
U.S. Treasury and agencies$1,546,374 $1,552,240 $1,132 $(85,979)$1,467,393 17 %
Obligations of states and political subdivisions1,129,803 1,068,290 8,788 (25,149)1,051,929 12 %
Mortgage-backed securities and collateralized mortgage obligations
7,000,856 6,551,596 2,386 (456,759)6,097,223 71 %
Total available for sale securities$9,677,033 $9,172,126 $12,306 $(567,887)$8,616,545 100 %
Held to maturity:
Mortgage-backed securities and collateralized mortgage obligations
$3,483 $2,247 $692 $— $2,939 100 %
Total held to maturity securities$3,483 $2,247 $692 $— $2,939 100 %


December 31, 2023
(dollars in thousands) 
Current ParAmortized CostUnrealized GainsUnrealized LossesFair Value% of Portfolio
Available for sale:    
U.S. Treasury and agencies$1,546,374 $1,551,074 $6,192 $(78,874)$1,478,392 17 %
Obligations of states and political subdivisions1,135,345 1,073,264 20,451 (21,610)1,072,105 12 %
Mortgage-backed securities and collateralized mortgage obligations
7,103,633 6,638,439 28,558 (387,624)6,279,373 71 %
Total available for sale securities$9,785,352 $9,262,777 $55,201 $(488,108)$8,829,870 100 %
Held to maturity:
Mortgage-backed securities and collateralized mortgage obligations
$3,564 $2,300 $725 $— $3,025 100 %
Total held to maturity securities$3,564 $2,300 $725 $— $3,025 100 %

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We review investment securities on an ongoing basis for the presence of impairment, taking into consideration current market conditions, fair value in relationship to cost, extent and nature of the change in fair value, issuer rating changes and trends, whether we intend to sell a security or if it is likely that we will be required to sell the security before recovery of our amortized cost basis of the investment, which may be maturity, and other factors.   
 
As of March 31, 2024, the available for sale investment portfolio had a net unrealized loss of $555.6 million, which reflects gross unrealized losses of $567.9 million and gross unrealized gains of $12.3 million. Gross unrealized losses consisted primarily of unrealized losses on mortgage-backed securities and collateralized mortgage obligations of $456.8 million. The unrealized losses were attributable to changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities and are not attributable to changes in credit quality. In the opinion of management, no ACL was considered necessary on these debt securities as of March 31, 2024.

Loans and Leases
 
Total loans and leases outstanding as of March 31, 2024 were $37.6 billion, an increase of $200.5 million as compared to December 31, 2023. The increase is primarily attributable to organic loan growth of $269.4 million, centered in commercial real estate and commercial portfolios. The increase in organic loan growth was partially offset by charge-offs of $49.8 million, due mainly to the FinPac portfolio as well as an increase due to a single credit in the commercial portfolio. The loan to deposit ratio was 90% as of March 31, 2024 and December 31, 2023.

The following table presents the concentration distribution of the loan and lease portfolio, net of deferred fees and costs, as of the dates presented:

March 31, 2024December 31, 2023
  (dollars in thousands)
Amount%Amount%
Commercial real estate    
Non-owner occupied term, net$6,557,768 17 %$6,482,940 17 %
Owner occupied term, net5,231,676 14 %5,195,605 14 %
Multifamily, net5,828,960 15 %5,704,734 15 %
Construction & development, net1,728,652 5 %1,747,302 5 %
Residential development, net284,117 1 %323,899 1 %
Commercial  
Term, net5,544,450 15 %5,536,765 15 %
Lines of credit & other, net2,491,557 6 %2,430,127 6 %
Leases & equipment finance, net1,706,759 5 %1,729,512 5 %
Residential  
Mortgage, net6,128,884 16 %6,157,166 16 %
Home equity loans & lines, net1,950,421 5 %1,938,166 5 %
Consumer & other, net189,169 1 %195,735 1 %
Total, net of deferred fees and costs$37,642,413 100 %$37,441,951 100 %
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Commercial Real Estate and Commercial Loans

Commercial real estate and commercial loans are the largest classifications within earning assets, representing 41% and 20%, respectively, of average earning assets for both the three month periods ended March 31, 2024 and December 31, 2023. The increase in commercial real estate and commercial loan balances between March 31, 2024 and December 31, 2023 was driven by commercial line utilization and construction project activity in the quarter. Higher commercial real estate term balances reflect projects that transitioned from construction to permanent financing.

Delinquency and non-accrual loan movements during the quarter reflect an anticipated move toward a normalized credit environment following a phase of exceptional high credit quality. The increase in non-performing assets during the quarter was driven primarily by deterioration in our SBA portfolio and an owner-occupied commercial real estate property. Non-performing assets during the quarter include $43.0 million in government guarantees on the commercial real estate, commercial, and residential portfolios.

Commercial Real Estate Loans

The commercial real estate portfolio includes loans to developers and institutional sponsors supporting income-producing or for-sale commercial real estate properties. We seek to mitigate our risk on these loans by requiring collateral values that exceed the loan amount and underwriting the loan with projected cash flow in excess of the debt service requirement.

As of March 31, 2024, commercial real estate loans held in our loan portfolio were $19.6 billion, an increase of $176.7 million compared to December 31, 2023. Commercial real estate concentrations are managed with a goal of optimizing geographic and business diversity, primarily in our footprint.

Loans secured by office properties represent approximately 8% of our total loan portfolio at March 31, 2024, with a breakout of 59% non-owner occupied, 39% owner occupied, and 2% construction loans. Excluding floating rate loans, which have already repriced to prevailing rates, only 8% of our office portfolio reprices through 2025. Office properties located in suburban markets secure the majority of our office portfolio as only 6% of non-owner occupied loans are located in downtown core business districts.

Loans secured by multifamily properties, including construction, represent approximately 19% of the total loan portfolio. These assets continue to perform well due to demand for rental properties in our geographic footprint. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, material increases in interest rates, changes in tax policies, tightening credit or refinancing markets, or a decline in real estate values in the Bank's primary geographic footprint in particular, could have an adverse impact on the repayment of these loans.

The following table provides detail on commercial real estate loans by property type:
March 31, 2024December 31, 2023
(in thousands)Outstanding
Non-accrual (1)
Outstanding
Non-accrual (1)
Commercial real estate loans by property type:
Multifamily$7,142,745 $— $6,978,498 $— 
Office2,984,462 13,335 2,980,240 13,335 
Industrial2,867,985 4,262 2,812,295 2,053 
Retail2,080,244 1,594 2,083,960 3,715 
Special Purpose1,346,008 13,902 1,348,343 4,566 
Hotel/Motel749,190 2,443 755,132 2,622 
Other2,460,539 4,200 2,496,012 2,398 
Total commercial real estate loans$19,631,173 $39,736 $19,454,480 $28,689 
(1) Commercial real estate non-accrual loans are inclusive of government guarantees of $12.2 million and $7.7 million as of March 31, 2024 and December 31, 2023, respectively.
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Commercial Loans

Commercial loans are made to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or other projects. We focus on borrowers doing business within our geographic markets. Commercial loans are generally underwritten individually and secured with the assets of the company and/or the personal guarantee of the business owners. Lease and equipment financing products are designed to address the diverse financing needs of small to large companies, primarily for the acquisition of equipment. As of March 31, 2024, commercial loans held in our loan portfolio were $9.7 billion, an increase of $46.4 million compared to December 31, 2023, which is mainly attributable to credit line utilization during the period.

The leases and equipment finance portfolio represents approximately 18% of the commercial portfolio and 5% of the total loan portfolio. The leasing portfolio has non-performing leases and charge-offs centered in the trucking and transportation portion of the portfolio. Net charge-offs in the FinPac lease portfolio were $23.8 million in the first quarter, largely unchanged from the fourth quarter, and net charge-offs were up $14.4 million in the commercial portfolio from the prior quarter, with the increase centered in a single commercial credit. Delinquency and non-accrual loan movements in the transportation and trucking portfolio over the year were anticipated and a slow recovery is expected for this portfolio.

The following table provides detail on commercial loans and leases by industry type:
March 31, 2024December 31, 2023
(in thousands)Outstanding
Non-accrual (1)
Outstanding
Non-accrual (1)
Commercial loans by industry type:
Agriculture$830,961 $1,862 $829,555 $2,167 
Contractors726,030 5,727 733,531 6,143 
Dentist714,797 995 715,348 886 
Finance/Insurance752,322 17 754,115 3 
Gaming541,646 — 532,698 — 
Healthcare330,450 2,039 312,788 2,062 
Manufacturing753,827 2,980 736,298 2,636 
Professional425,984 2,702 445,455 3,113 
Public Admin646,544 — 649,895 7 
Rental and Leasing710,946 208 692,101 165 
Retail229,961 8,594 225,223 1,276 
Support Services418,851 1,856 411,565 1,047 
Transportation/Warehousing839,227 20,918 852,735 21,951 
Wholesale612,568 5,021 673,349 396 
Other1,208,652 6,041 1,131,748 3,830 
Total commercial portfolio$9,742,766 $58,960 $9,696,404 $45,682 
(1) Commercial non-accrual loans are inclusive of government guarantees of $19.2 million and $11.7 million as of March 31, 2024 and December 31, 2023, respectively.

Residential Real Estate Loans

Residential real estate loans represent mortgage loans and lines of credit to consumers for the purchase or refinance of a residence. As of March 31, 2024, residential real estate loans held in our loan portfolio were $8.1 billion, a decrease of $16.0 million as compared to December 31, 2023.

Consumer Loans

Consumer loans, including secured and unsecured personal loans, home equity and personal lines of credit, and motor vehicle loans, decreased $6.6 million to $189.2 million as of March 31, 2024, as compared to December 31, 2023.
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Asset Quality and Non-Performing Assets 

The following table summarizes our non-performing assets, the ACL and asset quality ratios as of the dates presented:
(dollars in thousands)
March 31, 2024December 31, 2023
Loans and leases on non-accrual status
Commercial real estate, net$39,736 $28,689 
Commercial, net58,960 45,682 
Total loans and leases on non-accrual status98,696 74,371 
Loans and leases past due 90 days or more and accruing
Commercial real estate, net253 870 
Commercial, net10,733 8,232 
Residential, net (1)
31,916 29,102 
Consumer & other, net437 326 
Total loans and leases past due 90 days or more and accruing (1)
43,339 38,530 
Total non-performing loans and leases (2)
142,035 112,901 
Other real estate owned1,762 1,036 
Total non-performing assets$143,797 $113,937 
ACLLL$414,344 $440,871 
Reserve for unfunded commitments22,868 23,208 
ACL$437,212 $464,079 
Asset quality ratios:  
Non-performing assets to total assets (1) (2)
0.28 %0.22 %
Non-performing loans and leases to total loans and leases (1) (2)
0.38 %0.30 %
Non-accrual loans and leases to total loans and leases (2)
0.26 %0.20 %
ACLLL to total loans and leases1.10 %1.18 %
ACL to total loans and leases1.16 %1.24 %
ACL to non-accrual loans and leases443 %624 %
ACL to total non-performing loans and leases308 %411 %
(1)Excludes government guaranteed GNMA mortgage loans that Columbia has the right but not the obligation to repurchase that are past due 90 days or more totaling $1.6 million as of March 31, 2024 and $1.0 million at December 31, 2023.
(2)Includes government guaranteed portion of $11.7 million and $31.3 million for 90 days or greater and non-accrual loans, respectively, as of March 31, 2024. Includes government guaranteed portion of $12.3 million and $19.3 million for 90 days or greater and non-accrual loans, respectively, as of December 31, 2023.
 
As of March 31, 2024 and December 31, 2023, there were approximately $34.9 million or 0.09% of total loans, modified due to borrowers experiencing financial difficulties.

A decline in the economic conditions and other factors could adversely impact individual borrowers or the loan portfolio in general. Accordingly, there can be no assurance that loans will not become 90 days or more past due, placed on non-accrual status, restructured, or transferred to other real estate owned in the future. As of March 31, 2024, there was an increase in non-performing loans representative of a more normalized credit environment, driven by a migration in our SBA portfolio and an owner-occupied commercial real estate property.

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Allowance for Credit Losses
 
The ACL totaled $437.2 million as of March 31, 2024, a decrease of $26.9 million from December 31, 2023. The following table shows the activity in the ACL for the periods indicated:
Three Months Ended
(dollars in thousands)
March 31, 2024December 31, 2023
Allowance for credit losses on loans and leases
Balance, beginning of period$440,871 $416,560 
Provision for credit losses on loans and leases17,476 53,183 
Charge-offs
Commercial real estate, net(161)(629)
Commercial, net(47,232)(31,949)
Residential, net(490)(89)
Consumer & other, net(1,870)(1,841)
Total charge-offs(49,753)(34,508)
Recoveries
Commercial real estate, net358 35 
Commercial, net4,732 4,414 
Residential, net170 781 
Consumer & other, net490 406 
Total recoveries5,750 5,636 
Net recoveries (charge-offs)
Commercial real estate, net197 (594)
Commercial, net(42,500)(27,535)
Residential, net(320)692 
Consumer & other, net(1,380)(1,435)
Total net charge-offs(44,003)(28,872)
Balance, end of period$414,344 $440,871 
Reserve for unfunded commitments
Balance, beginning of period$23,208 $21,482 
(Recapture) provision for credit losses on unfunded commitments(340)1,726 
Balance, end of period22,868 23,208 
Total allowance for credit losses$437,212 $464,079 
As a percentage of average loans and leases (annualized):
Net charge-offs0.47 %0.31 %
Provision for credit losses
0.18 %0.58 %
Recoveries as a percentage of charge-offs11.56 %16.33 %

The provision for credit losses includes the provision for loan and lease losses and the provision for unfunded commitments. The change in the three months ended March 31, 2024, as compared to the three months ended December 31, 2023, reflects changes in the economic assumptions and recalibration of our CECL calculation for non-homogeneous commercial loans and leases and residential development loans. Net charge-offs in the FinPac portfolio were $23.8 million in the first quarter, largely unchanged from the fourth quarter, and net charge-offs were up $14.4 million in the commercial portfolio from the prior quarter, with the increase centered in a single commercial credit.

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The following table sets forth the allocation of the allowance for credit losses on loans and leases and percent of loans in each category to total loans and leases as of the dates presented: 
March 31, 2024December 31, 2023
 (dollars in thousands)Amount% loans to total loansAmount% loans to total loans
Commercial real estate$146,276 52 %$125,888 52 %
Commercial202,757 26 %244,821 26 %
Residential58,010 21 %62,004 21 %
Consumer & other7,301 1 %8,158 1 %
Allowance for credit losses on loans and leases$414,344  $440,871  

The following table shows the change in the allowance for credit losses from December 31, 2023 to March 31, 2024:
(dollars in thousands)December 31, 2023
Q1 2024 net recoveries
(charge-offs)
Reserve buildMarch 31, 2024% of loan and leases outstanding
Commercial real estate$137,058 $197 $22,049 $159,304 0.81 %
Commercial252,662 (42,500)(1,515)208,647 2.14 %
Residential64,944 (320)(3,857)60,767 0.75 %
Consumer & Other9,415 (1,380)459 8,494 4.49 %
Total allowance for credit losses$464,079 $(44,003)$17,136 $437,212 1.16 %
% of loans and leases outstanding1.24 %1.16 %

To calculate the ACL, the CECL models use a forecast of future economic conditions and are dependent upon specific macroeconomic variables that are relevant to each of the Bank's loan and lease portfolios. For the first quarter of 2024, the Bank used Moody's Analytics' February 2024 baseline economic forecast, which shows a worsening economic situation from the forecast used in the prior quarter. Refer to Note 5 - Allowance for Credit Losses for further information on key components of the forecast. The models for calculating the ACL are sensitive to changes to economic variables, which could result in volatility as these assumptions change over time.

We believe that the ACL as of March 31, 2024 is sufficient to absorb losses inherent in the loan and lease portfolio and in credit commitments outstanding as of that date based on the information available. If the economic conditions decline, the Bank may need additional provisions for credit losses in future periods.

Residential Mortgage Servicing Rights 
 
The following table presents the changes in our residential MSR portfolio for the periods indicated:

Three Months Ended
  (in thousands)
March 31, 2024December 31, 2023
Balance, beginning of period$109,243 $117,640 
Additions for new MSR capitalized1,237 920 
Sale of MSR assets— 149 
Changes in fair value:
Changes due to collection/realization of expected cash flows over time(3,153)(3,215)
Changes due to valuation inputs or assumptions (1)
3,117 (6,251)
Balance, end of period$110,444 $109,243 
(1)The changes in valuation inputs and assumptions principally reflect changes in discount rates and prepayment speeds, which are primarily affected by changes in interest rates.

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The following table presents information related to our residential serviced loan portfolio as of the dates presented: 
(dollars in thousands)March 31, 2024December 31, 2023
Balance of loans serviced for others$8,081,039 $8,175,664 
MSR as a percentage of serviced loans1.37 %1.34 %

Residential MSR are adjusted to fair value quarterly with the change recorded in residential mortgage banking revenue on the Condensed Consolidated Statements of Operations. The value of servicing rights can fluctuate based on changes in interest rates and other factors. Generally, as interest rates decline and borrowers are able to take advantage of a refinance incentive, prepayments increase, and the total value of existing servicing rights declines as expectations of future servicing fee collections decline. Historically, the fair value of our residential MSR will increase as market rates for mortgage loans rise and decrease if market rates fall.

Goodwill and Other Intangible Assets

As of March 31, 2024 and December 31, 2023, the Company had $1.0 billion in goodwill, which was recorded as a result of the Merger. Goodwill is recorded in connection with business combinations and represents the excess of the purchase price over the estimated fair value of the net assets acquired.

As of March 31, 2024, we had other intangible assets of $571.6 million, as compared to $603.7 million at December 31, 2023. As part of a business acquisition, the fair value of identifiable intangible assets such as core deposits, which includes all deposits except certificates of deposit, was recognized at the Merger Date. Intangible assets with definite useful lives are amortized to their estimated residual values over their respective estimated useful lives. The core deposit intangible assets recorded are amortized on an accelerated basis over a period of 10 years using the sum-of-the-years-digits method. Intangible assets are evaluated for impairment if events and circumstances indicate a possible impairment. No impairment losses have been recognized in the periods presented.

Deposits 

Total deposits were $41.7 billion as of March 31, 2024, an increase of $99.1 million as compared to December 31, 2023. The increase was due to growth in money market, time deposits, and interest-bearing demand accounts, partially offset by a decline in non-interest-bearing demand deposits. The interest-bearing deposit mix increased mainly due to a migration from non-interest-bearing to interest-bearing accounts as customers seek higher rates in the current interest rate environment.
 
The following table presents the deposit balances by category as of the dates presented: 
March 31, 2024December 31, 2023
 (dollars in thousands)Amount%Amount%
Non-interest-bearing demand$13,808,554 34 %$14,256,452 34 %
Interest-bearing demand8,095,211 19 %8,044,432 19 %
Money market10,822,498 26 %10,324,454 25 %
Savings2,640,060 6 %2,754,113 7 %
Time, greater than $250,0001,179,498 3 %1,034,094 2 %
Time, $250,000 or less5,160,339 12 %5,193,475 13 %
Total deposits$41,706,160 100 %$41,607,020 100 %
 
The Company's total core deposits, which are deposits less time deposits greater than $250,000 and all brokered deposits, were $37.4 billion as of March 31, 2024 and December 31, 2023. The Company's brokered deposits totaled $3.1 billion as of March 31, 2024 and December 31, 2023.
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The FDIC generally insures up to $250,000 per depositor for each account ownership category, as defined by the FDIC. Depositors may qualify for coverage of accounts over $250,000 if they have funds in different ownership categories and all applicable FDIC requirements are met. All deposits that an account owner has in the same ownership category at the same bank are added together and insured up to the standard insurance amount. As of March 31, 2024 and December 31, 2023, approximately $28.2 billion and $28.1 billion, respectively, of the Bank’s deposits were estimated to be insured. Uninsured deposits are an estimated amount based on the methodologies and assumptions used for the Bank's regulatory requirements. Uninsured deposits were $13.5 billion as of March 31, 2024 and December 31, 2023. As of March 31, 2024, total available liquidity was $18.6 billion, or 138% of uninsured deposits.

Borrowings 
 
As of March 31, 2024, the Bank had outstanding securities sold under agreements to repurchase of $213.6 million, a decrease of $38.5 million from December 31, 2023. The Bank had outstanding borrowings consisting of advances from the FHLB and FRB of $3.9 billion as of March 31, 2024 and $4.0 billion as of December 31, 2023. The decrease compared to the fourth quarter of 2023 was primarily due to repayment of higher priced borrowings as well as general liquidity management. FHLB advances have fixed rates ranging from 5.1% to 5.25% with the majority set to mature before the end of the first quarter of 2025. Advances from the FHLB are secured by investment securities and loans secured by real estate. The FRB borrowings have interest rates ranging from 4.76% to 4.93% and mature within one year of March 31, 2024, although the Company has the ability to repay balances prior to maturity without penalty. The FRB borrowings are secured by investment securities.

Junior and Other Subordinated Debentures 
 
We had junior and other subordinated debentures with carrying values of $417.4 million and $424.3 million as of March 31, 2024 and December 31, 2023, respectively. The decrease is mainly due to a decrease of $6.5 million in fair value for the junior subordinated debentures elected to be carried at fair value. The change in fair value was due to an increase in the credit spread and spot curve, partially offset by an increase in the implied forward curve. As of March 31, 2024, substantially all of the junior subordinated debentures had interest rates that are adjustable on a quarterly basis based on a spread over three-month term SOFR. 

Liquidity and Cash Flow 
 
The principal objective of our liquidity management program is to maintain the Bank's ability to meet the day-to-day cash flow requirements of our customers who either wish to withdraw funds or to draw upon credit facilities to meet their cash needs. The Bank's liquidity strategy includes maintaining sufficient on-balance sheet liquidity to support growth of deposit balances, fund growth in lending and investment portfolios, and deleverage non-deposit liabilities as economic conditions permit. As a result, the Company believes that it has sufficient cash and access to borrowings to effectively manage through the current economic conditions, as well as meet its working capital and other needs. The Company will continue to prudently evaluate and maintain liquidity sources, including the ability to fund future loan growth and manage our borrowing sources.

We monitor the sources and uses of funds daily to maintain an acceptable liquidity position. One source of funds includes public deposits. Individual state laws require banks to collateralize public deposits, typically as a percentage of their public deposit balance in excess of FDIC insurance. Public deposits represented 7% of total deposits at March 31, 2024 and December 31, 2023. The amount of collateral required varies by state and may also vary by institution within each state, depending on the individual state's risk assessment of depository institutions. Changes in the pledging requirements for uninsured public deposits may require pledging additional collateral to secure these deposits, drawing on other sources of funds to finance the purchase of assets that would be available to be pledged to satisfy a pledging requirement, or could lead to the withdrawal of certain public deposits from the Bank.

The Company’s diversified deposit base provides a sizeable source of relatively stable and low-cost funding, while reducing the Company’s reliance on the wholesale markets. Total deposits were $41.7 billion as of March 31, 2024, compared with $41.6 billion at December 31, 2023. The Bank also has liquidity from excess bond collateral of $3.7 billion.

In addition to liquidity from core deposits and the repayments and maturities of loans and investment securities, the Bank can sell securities under agreements to repurchase, issue brokered certificates of deposit, or utilize off-balance sheet funding sources.
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The Bank maintains a substantial level of total available liquidity in the form of off-balance sheet funding sources. These liquidity sources include capacity to borrow from uncommitted lines of credit, advances from the FHLB, and the Federal Reserve Bank’s Discount Window. Availability of the uncommitted lines of credit is subject to federal funds balances available for loan and continued borrower eligibility. These lines are intended to support short-term liquidity needs, and the agreements may restrict consecutive day usage.

The following table presents total off-balance sheet liquidity as of the date presented:
March 31, 2024
(dollars in thousands)Gross AvailabilityUtilizationNet Availability
FHLB lines$11,965,443 $2,369,833 $9,595,610 
Federal Reserve Discount Window2,819,767 — 2,819,767 
Federal Reserve Term Funding Program (1)
1,550,000 1,550,000 — 
Uncommitted lines of credit600,000 — 600,000 
Total off-balance sheet liquidity$16,935,210 $3,919,833 $13,015,377 
(1) The Federal Reserve’s Bank Term Funding Program was discontinued for new borrowings in March 2024. We present associated balances as of March 31, 2024.

The following table presents total available liquidity as of the date presented:
(dollars in thousands)
March 31, 2024
Total off-balance sheet liquidity$13,015,377 
Cash and cash equivalents, less reserve requirements1,897,925 
Excess bond collateral3,719,196 
Total available liquidity$18,632,498 
 
The Company is a separate entity from the Bank and must provide for its own liquidity. Substantially all of the Company's revenues are obtained from dividends declared and paid by the Bank. There were $90.0 million of dividends paid by the Bank to the Company in the three months ended March 31, 2024. There are statutory and regulatory provisions that limit the ability of the Bank to pay dividends to the Company. FDIC and Oregon Division of Financial Regulation approval is required for quarterly dividends from the Bank to the Company.

Although we expect the Bank's and the Company's liquidity positions to remain satisfactory during 2024, it is possible that our deposit balances may not be maintained at previous levels due to pricing pressure or customers' behavior in the current economic environment. In addition, in order to generate deposit growth, our pricing may need to be adjusted in a manner that results in increased interest expense on deposits. We may utilize borrowings or other funding sources, which are generally more costly than deposit funding, to support our liquidity levels.

Commitments and Other Contractual Obligations- The Company participates in many different contractual arrangements which may or may not be recorded on its balance sheet, under which the Company has an obligation to pay certain amounts, provide credit or liquidity enhancements or provide market risk support. Our material contractual obligations are primarily for time deposits and borrowings. As of March 31, 2024, time deposits totaled $6.3 billion, of which $6.1 billion mature in a year or less. Total borrowings as of March 31, 2024 were $3.9 billion all of which mature within one year. These arrangements also include off-balance sheet commitments to extend credit, letters of credit and various forms of guarantees. As of March 31, 2024, our loan commitments were $11.2 billion. A portion of the commitments will eventually result in funded loans and increase our profitability through net interest income when drawn and unused commitment fees prior to being drawn. Refer to Note 9 - Commitments and Contingencies for further information. Financing commitments, letters of credit and deferred purchase commitments are presented at contractual amounts and do not necessarily reflect future cash outflows as many are expected to expire unused or partially used.
  
Off-balance-Sheet Arrangements 
 
Information regarding Off-Balance-Sheet Arrangements is included in Note 9 of the Notes to Condensed Consolidated Financial Statements.
  
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Concentrations of Credit Risk 

Information regarding Concentrations of Credit Risk is included in Note 9 of the Notes to Condensed Consolidated Financial Statements.

Capital Resources 
 
Shareholders' equity as of March 31, 2024 was $5.0 billion, down slightly from December 31, 2023. The decrease of $37.8 million in shareholders' equity during the three months ended March 31, 2024 was principally due to other comprehensive losses of $86.0 million and cash dividends paid of $75.5 million, partially offset by net income of $124.1 million during the period.

The Company's dividend policy considers, among other things, earnings, regulatory capital levels, the overall payout ratio and expected asset growth to determine the amount of dividends declared, if any, on a quarterly basis. There is no assurance that future cash dividends on common shares will be declared or increased. We cannot predict the extent of the economic decline that could result in inadequate earnings, regulatory restrictions and limitations, changes to our capital requirements, or a decision to increase capital by retention of earnings, that may result in the inability to pay dividends at previous levels, or at all.

On February 9, 2024, Columbia declared a cash dividend in the amount of $0.36 per common share based on fourth quarter 2023 performance, which was paid on March 11, 2024.

The following table presents cash dividends declared and dividend payout ratios (dividends declared per common share divided by basic earnings per common share) for the periods indicated:
 Three Months Ended
 March 31, 2024December 31, 2023March 31, 2023
Dividend declared per common share
$0.36 $0.36 $0.35 
Dividend payout ratio60 %80 %nm

The Company is committed to managing capital to maintain strong protection for depositors and creditors and for maximum shareholder benefit. The Company also manages its capital to exceed regulatory capital requirements for banking organizations. The regulatory capital requirements effective for the Company follow Basel III, with the Company being subject to calculating its capital adequacy as a percentage of risk-weighted assets under the standardized approach.

In 2020, the federal bank regulatory authorities finalized a rule to provide banking organizations that implemented CECL in 2020 the option to delay the estimated impact on regulatory capital by up to two years, with a three-year transition period to phase out the cumulative benefit to regulatory capital provided during the two-year delay. The Company elected this capital relief to delay the estimated regulatory capital impact of adopting CECL, relative to the incurred loss methodology's effect on regulatory capital. Currently, the Company is phasing out the cumulative adjustment as calculated at the end of 2021, by adjusting it by 75% in 2022, 50% through 2023, and 25% in 2024, culminating with a fully phased in regulatory capital calculation beginning in 2025. All regulatory ratios exceeded regulatory “well-capitalized” requirements.

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The following table shows the Company's consolidated and the Bank's capital adequacy ratios compared to the regulatory minimum capital ratio and the regulatory minimum capital ratio needed to qualify as a "well-capitalized" institution, as calculated under regulatory guidelines of the Basel III at the dates presented: 
 

ActualFor Capital Adequacy purposesTo be Well Capitalized
   (dollars in thousands) 
AmountRatioAmountRatioAmountRatio
March 31, 2024      
Total Capital (to Risk Weighted Assets)    
Consolidated$4,816,063 11.95 %$3,224,001 8.00 %$4,030,002 10.00 %
Umpqua Bank$4,696,990 11.66 %$3,223,525 8.00 %$4,029,406 10.00 %
Tier I Capital (to Risk Weighted Assets)     
Consolidated$3,937,327 9.77 %$2,418,001 6.00 %$3,224,001 8.00 %
Umpqua Bank$4,289,253 10.64 %$2,417,644 6.00 %$3,223,525 8.00 %
Tier I Common (to Risk Weighted Assets)
Consolidated$3,937,327 9.77 %$1,813,501 4.50 %$2,619,501 6.50 %
Umpqua Bank$4,289,253 10.64 %$1,813,233 4.50 %$2,619,114 6.50 %
Tier I Capital (to Average Assets)      
Consolidated$3,937,327 7.72 %$2,040,334 4.00 %$2,550,418 5.00 %
Umpqua Bank$4,289,253 8.41 %$2,040,978 4.00 %$2,551,223 5.00 %
December 31, 2023      
Total Capital (to Risk Weighted Assets)   
Consolidated$4,770,335 11.86 %$3,218,301 8.00 %$4,022,876 10.00 %
Umpqua Bank$4,653,920 11.57 %$3,217,821 8.00 %$4,022,276 10.00 %
Tier I Capital (to Risk Weighted Assets)     
Consolidated$3,876,985 9.64 %$2,413,726 6.00 %$3,218,301 8.00 %
Umpqua Bank$4,231,569 10.52 %$2,413,366 6.00 %$3,217,821 8.00 %
Tier I Common (to Risk Weighted Assets)
Consolidated$3,876,985 9.64 %$1,810,294 4.50 %$2,614,869 6.50 %
Umpqua Bank$4,231,569 10.52 %$1,810,024 4.50 %$2,614,479 6.50 %
Tier I Capital (to Average Assets)      
Consolidated$3,876,985 7.60 %$2,040,344 4.00 %$2,550,431 5.00 %
Umpqua Bank$4,231,569 8.30 %$2,040,489 4.00 %$2,550,611 5.00 %
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Item 3.    Quantitative and Qualitative Disclosures about Market Risk 
 
Our assessment of market risk as of March 31, 2024 indicates there are no material changes in the qualitative disclosures from those in our Annual Report on Form 10-K for the year ended December 31, 2023.

Interest Rate Simulation Impact on Net Interest Income

For the scenarios shown, the interest rate simulation assumes a parallel and sustained shift in market interest rates over a twelve-month period and no change in the composition or size of the balance sheet.

The scenarios are as of the dates presented:
March 31, 2024December 31, 2023
Year 1Year 2 Year 1Year 2
Up 300 basis points(0.4)%(2.5)%(2.1)%(1.9)%
Up 200 basis points(0.3)%(1.5)%(1.4)%(1.1)%
Up 100 basis points(0.1)%(0.7)%(0.7)%(0.5)%
Down 100 basis points— %0.4 %0.5 %0.1 %
Down 200 basis points0.1 %0.3 %1.1 %(0.2)%
Down 300 basis points0.3 %0.1 %1.6 %(0.8)%

An interest rate simulation model is used to estimate the sensitivity of net interest income to changes in market interest rates. This model has inherent limitations, and these results are based on a given set of rate changes and assumptions at one point in time. Our primary analysis assumes a static balance sheet, both in terms of the total size and mix of our balance sheet, meaning cash flows from the maturity or repricing of assets and liabilities are redeployed in the same instrument at modeled rates. We employ estimates based upon a number of assumptions for each scenario, including changes in the size or mix of the balance sheet, new volume rates for new balances, the rate of prepayments, and the correlation of pricing to changes in the interest rate environment. For example, for interest-bearing deposit balances, we utilize a repricing "beta" assumption, which is an estimate for the change in interest-bearing deposit costs given a change in the short-term market interest rate.

The simulation model does not take into account any future actions management could undertake to mitigate the impact of interest rate changes or the impact a change in interest rates may have on our credit risk profile, loan prepayment estimates and spread relationships, which can change regularly. Actions we could undertake include, but are not limited to, growing or contracting the balance sheet, changing the composition of the balance sheet, or changing our pricing strategies for loans or deposits.

Simulation results indicate limited exposure to interest rate risk in either increasing or decreasing rate environments. Our sensitivity changed from the year end 2023 results, with the magnitude of exposure to rising rate environments showing significant improvement in the first year of the forecast. The change in sensitivity is mainly due to the execution of fixed rate FHLB advances with maturities of ten to twelve months. The deposit mix shift with reductions in non-interest-bearing and savings accounts combined with increases in money market and time deposit accounts also contributed. In addition, decreases in fixed rate and increases in floating rate and adjustable loans also impacted the sensitivity.

The short-term interest rate environment is primarily a function of the monetary policy of the Federal Reserve Board. The Federal Reserve’s focus has gradually shifted toward attaining a specified level of the federal funds rate to achieve the long-run goals of price stability and sustainable economic growth. The federal funds rate is the basis for overnight funding and drives the short end of the yield curve. Longer maturities are influenced by the market’s expectations for economic growth and inflation but can also be influenced by Federal Reserve purchases and sales and expectations of monetary policy going forward.

Starting in March 2022, in response to persistent inflation, the FOMC raised the target range for the federal funds rate from 0.00% - 0.25% to 5.25% - 5.50% at March 31, 2024. Based on the FOMC Members’ median expectations for the fed funds target rate, the fed funds rate is near its expected high, with projections declining in 2024. Increases in the federal funds rate and the unwinding of the Federal Reserve’s balance sheet could cause overall interest rates to rise, which may negatively impact the U.S. real estate markets and affect deposit growth and pricing. In addition, deflationary pressures, while possibly lowering our operating costs, could have a significant negative effect on our borrowers, especially our business borrowers, and the values of collateral securing loans, which could negatively affect our financial performance.

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Economic Value of Equity

Another interest rate sensitivity measure we utilize is the quantification of economic value changes for all financial assets and liabilities, given an increase or decrease in market interest rates. This approach provides a longer-term view of interest rate risk, capturing all future expected cash flows. Assets and liabilities with option characteristics are measured based on different interest rate path valuations using statistical rate simulation techniques. The projections are by their nature forward-looking and therefore inherently uncertain and include various assumptions regarding cash flows and discount rates. The table below illustrates the effects of various instantaneous rate changes on the fair values of financial assets and liabilities compared to the corresponding carrying values and fair values as of the dates presented:
March 31, 2024December 31, 2023
Up 300 basis points(19.4)%(21.9)%
Up 200 basis points(13.3)%(14.6)%
Up 100 basis points(6.9)%(7.1)%
Down 100 basis points6.9 %6.8 %
Down 200 basis points13.4 %12.0 %
Down 300 basis points18.1 %15.1 %

Our economic value of equity analysis indicates a liability sensitive profile in increasing interest rate scenarios. This suggests a sudden or sustained increase in market interest rates would result in a decrease in our estimated economic value of equity, as the decrease in value of our interest-earning assets exceeds the economic value change of interest-bearing liabilities. In declining interest rate scenarios, our economic value of equity increases. This occurs as the increase in value of interest-earning assets exceeds the decline in economic value of interest-bearing liabilities, including the core deposit intangible. As of March 31, 2024, our estimated economic value of equity (fair value of financial assets and liabilities) was above our book value of equity primarily due to the economic value of the core deposit intangible.

Item 4.    Controls and Procedures 
 
Our management, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting Officer, has concluded that our disclosure controls and procedures are effective in timely alerting them to information relating to us that is required to be included in our periodic filings with the SEC. The disclosure controls and procedures were last evaluated by management as of March 31, 2024.

No change in internal control over financial reporting occurred during the quarter ended March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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Part II.     OTHER INFORMATION 

Item 1.    Legal Proceedings 

The information required by this item is set forth in Part I, Item 1 under Note 9 Commitments and Contingencies—Legal Proceedings and Regulatory Matters, and incorporated herein by reference.
 
Item 1A.    Risk Factors 
 
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed under "Part I—Item 1A—Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023. These factors could materially and adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Quarterly Report on Form 10-Q. There have been no material changes from the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds  
 
(a)Not applicable  
 
(b)Not applicable 

(c)The following table provides information about repurchases of common stock by the Company during the quarter ended March 31, 2024: 
Period
Total number of Common Shares Purchased (1)
Average Price Paid per Common Share
Total Number of Shares Purchased as Part of Publicly Announced Plan (2)
Maximum Number of Shares that May be Purchased at Period End under the Plan (2)
01/01/24 - 01/31/24
39,420 $26.67 — — 
02/01/24 - 02/29/24
149,576 $18.70 — — 
03/01/24 - 03/31/24
51,333 $19.45 — — 
Total for quarter240,329 $20.17 —  
 
(1)Common shares repurchased by the Company during the quarter consist of cancellation of 240,329 shares to be issued upon vesting of restricted stock units and awards to pay withholding taxes.

(2)The Company does not currently have a share repurchase authorization from its Board of Directors.

Item 3.    Defaults upon Senior Securities
 
Not applicable 

Item 4.    Mine Safety Disclosures 

Not applicable 

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Item 5.    Other Information

Rule 10b5-1 or Non-Rule 10b5-1 Trading Arrangements

During the first quarter of 2024 none of our directors or officers adopted or terminated a trading plan intended to satisfy Rule 10b5-1 or any "non-Rule 10b5-1 trading arrangement," as defined in Item 408 of Regulation S-K.

Certain of our officers and directors have made, and may from time to time make, elections to (i) have shares withheld to cover withholding taxes or (ii) have dividends from Columbia common stock reinvested into Columbia common stock, (iii) have a portion of their 401(k) account contributions used to purchase Columbia common stock, or (iv) participate in the employee stock purchase plan, which may be intended to satisfy the affirmative defense conditions of Rule 10b5-1 under the Exchange Act or may constitute non-Rule 10b5-1 trading arrangements (as defined in Item 408(c) of Regulation S-K). 

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Item 6.    Exhibits  
 
Exhibit #DescriptionLocation
3.1
Incorporated by reference to Exhibit 3.1 to Form 10-Q filed May 9, 2023
3.2
Incorporated by reference to Exhibit 3.4 to Form 8-K filed March 1, 2023
4.1
Incorporated by reference to Exhibit 4.3 of the Company’s S-3 Registration Statement (File No. 333-156350) filed December 19, 2008
4.2The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company.
10.1**Incorporated by reference to Exhibit 10.71 to Form 10-K filed February 27, 2024
10.2**Filed herewith
31.1
31.2
31.3
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101.INSInline XBRL Instance Document – The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, formatted in Inline XBRL (included in Exhibit 101)
** Management contract or compensatory plan or arrangement
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SIGNATURES 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 
COLUMBIA BANKING SYSTEM, INC.
(Registrant) 
DatedMay 7, 2024
/s/ Clint E. Stein                              
 Clint E. Stein
President and Chief Executive Officer  
DatedMay 7, 2024/s/ Ronald L. Farnsworth
 Ronald L. Farnsworth  
Chief Financial Officer and Principal Financial Officer
DatedMay 7, 2024/s/ Lisa M. White
 
Lisa M. White                                    
Corporate Controller and Principal Accounting Officer

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