COLUMBIA BANKING SYSTEM INC
For the period ended Jun 30, 2024. Filed Aug 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Aug 6, 2024
COLB$30.48+0.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-07.
0000887343-24-000183
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-08-06.
0000887343-24-000245
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 196 previous paragraphs and 194 current paragraphs.
111 unchanged; 73 reworded; 10 added; 12 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 22 previous and 24 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
•Non-interest expense was $279.2 million for the three months ended June 30, 2024, as compared to $287.5 million for the three months ended March 31, 2024. The decrease is mainly due to a decrease in salaries and employee benefits, largely driven by a $7.7 million reversal of a compensation-related accrual, as well as decreases in the majority of the non-interest expense categories as a result of recent expense reduction initiatives and lower other expense items compared to expense items in the first quarter of 2024, partially offset by restructuring expenses.
Current report
•Total deposits were $41.5 billion as of June 30, 2024, a decrease of $83.7 million, as compared to December 31, 2023. The decrease was driven by customer deposits due in part to seasonally anticipated customer tax payments, offset by targeted deposit campaigns run by our branch network.
Current report
For the six months ended June 30, 2024, the Company had net income of $244.2 million, compared to net income of $119.3 million for the same period in the prior year. The increase in net income is mainly attributable to decreases in non-interest expense and provision for credit losses, partially offset by a decrease in net interest income. The $104.6 million decrease in non-interest expense is primarily due to a decrease in merger and restructuring expenses, as the bulk of the merger expenses associated with the Merger were recognized in 2023. The decrease of $72.6 million in provision for credit losses was impacted by the initial provision of $88.4 million for historical Columbia non-PCD loans that was recorded in the first quarter of 2023. The decrease of $7.9 million in net interest income was due to higher rates on interest-bearing liabilities, partially offset by higher average yields on interest-earning assets and a larger average balance sheet for the six months ended June 30, 2024.
Current report
Net interest income for the three months ended June 30, 2024 was $427.4 million, an increase of $4.1 million compared to the three months ended March 31, 2024. The increase was driven by an $11.3 million increase in interest income, largely driven by higher income earned on loans and investment securities, including accretion income, and lower borrowing costs. This was partially offset by $8.9 million in higher deposit costs. Targeted pricing actions limited the increase in Columbia's cost of interest-bearing deposits between periods.
Current report
For the six months ended June 30, 2024, net charge-offs were $74.4 million, as compared to $44.7 million for the six months ended June 30, 2023. As an annualized percentage of average outstanding loans and leases, net charge-offs for the six months ended June 30, 2024 were 0.40%, as compared to 0.27% for the six months ended June 30, 2023. Net charge-offs in the FinPac portfolio were $48.5 million for the six months ended June 30, 2024, as compared to $42.0 million for the six months ended June 30, 2023. Net charge-offs were $25.9 million for the Bank for the six months ended June 30, 2024, and activity was impacted by a single commercial credit.
Current report
Salaries and employee benefits decreased during the three months ended June 30, 2024, as compared to the three months ended March 31, 2024, due primarily to a $7.7 million reversal of a compensation-related accrual.
Current report
The following table provides detail on the geographic distribution of our commercial real estate portfolio as of June 30, 2024 :
Current report
Commercial Loans and Leases
Current report
(1)Non-accrual and 90+ days past due loans include government guarantees of $36.8 million and $27.9 million, respectively, as of June 30, 2024. As of December 31, 2023, non-accrual and 90+ days past due loans include government guarantees of and $19.3 million and $12.3 million, respectively.
Current report
(1) Includes $88.4 million initial provision related to non-PCD loans acquired during the first quarter of 2023.
Removed paragraphs (12)
Previous report
•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.
Previous report
•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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
Commercial Loans
Previous report
(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.
Reworded paragraphs (73)
Previous wording
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.
Current wording
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, 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.
Previous wording
•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;
Current wording
•the possibility that the anticipated benefits of the Merger 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;
Previous wording
The following is a discussion of our results for the three months ended March 31, 2024, as compared to the applicable prior periods.
Current wording
The following is a discussion of our results for the three and six months ended June 30, 2024, as compared to the applicable prior periods.
Previous wording
•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.
Current wording
•Earnings per diluted common share was $0.57 for the three months ended June 30, 2024, as compared to $0.59 for the three months ended March 31, 2024. The decrease for the three months ended June 30, 2024, as compared to the prior period, was primarily driven by a $14.7 million increase in the provision for credit losses, as well as a decrease in non-interest income driven by quarterly fluctuations in fair value adjustments and MSR hedging activity. This unfavorable change was partially offset by a decrease in non-interest expense, largely due to a decrease in salaries and benefits as well as decreases in the majority of the non-interest expense categories as a result of ongoing strategic actions taken to reduce our non-interest expense run rate. Net interest income increased due to higher income earned on loans and investment securities, including accretion income, and lower borrowing costs, offset partially by increased deposit expense.
Previous wording
•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.
Current wording
•Net interest margin, on a tax-equivalent basis, was 3.56% for the three months ended June 30, 2024, as compared to 3.52% for the three months ended March 31, 2024. The increase for the three months ended June 30, 2024 was driven by higher yields on loans and investment securities, including the benefit of accretion income, which offset a modest increase in the cost of interest-bearing deposits.
Previous wording
•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.
Current wording
•Non-interest income was $44.7 million for the three months ended June 30, 2024, as compared to $50.4 million for the three months ended March 31, 2024. The decline was driven by fluctuations in fair value adjustments and MSR hedging activity, which collectively resulted in a net fair value loss of $9.7 million in the second quarter compared to a net fair value loss of $3.9 million in the first quarter.
Previous wording
•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.
Current wording
•Earnings per diluted common share was $1.17 for the six months ended June 30, 2024, as compared to $0.65 for the six months ended June 30, 2023. The increase for the six months ended June 30, 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 expenses related to the Merger.
Previous wording
•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.
Current wording
•Net interest margin, on a tax-equivalent basis, was 3.54% for the six months ended June 30, 2024, as compared to 3.99% for the six months ended June 30, 2023. The decrease for the six months ended June 30, 2024 compared to the prior year period was due to higher funding costs that reflect deposit repricing and a shift in product mix. Net interest income decreased to $850.8 million for the six months ended June 30, 2024, compared to $858.7 million for the six months ended June 30, 2023, due to higher rates on interest-bearing liabilities, partially offset by higher average yields on interest-earning assets and higher average balances due to the Merger.
Previous wording
•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.
Current wording
•Non-interest income was $95.1 million for the six months ended June 30, 2024, as compared to $94.4 million for the six months ended June 30, 2023. The change was fairly flat but included increases in most categories, largely due to the impact of six months as a combined company compared to only four months as a combined company for the prior year period. These increases were partially offset by fluctuations in fair value adjustments and MSR hedging activity, which collectively resulted in a net fair value loss of $13.6 million for the six months ended June 30, 2024 compared to a net fair value loss of $8.2 million for the six months ended June 30, 2023.
Previous wording
•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.
Current wording
•Non-interest expense was $566.8 million for the six months ended June 30, 2024, as compared to $671.4 million for the six months ended June 30, 2023. The decrease for the six months ended June 30, 2024 reflects a decrease in merger and restructuring expenses of $126.4 million, partially offset by an increase in amortization of intangible assets added in connection with the Merger. The expense impact of the six months as a combined company for the six months ended June 30, 2024, compared to only four months as a combined company for the prior year period, was largely offset by merger-related cost savings realized throughout 2023.
Previous wording
•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.
Current wording
•Total loans and leases were $37.7 billion as of June 30, 2024, an increase of $268.0 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 by commercial line utilization and construction project activity in the period.
Previous wording
•Total consolidated assets were $52.2 billion as of March 31, 2024 and December 31, 2023.
Current wording
•Total consolidated assets were $52.0 billion as of June 30, 2024 compared to $52.2 billion as of December 31, 2023.
Previous wording
•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.
Current wording
•Non-performing assets increased to $155.9 million, or 0.30% of total assets, as of June 30, 2024, compared to $113.9 million, or 0.22% of total assets, as of December 31, 2023. Non-performing loans and leases were $153.1 million, or 0.41% of total loans and leases, as of June 30, 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 by the expiration of certain COVID-related designations within the residential mortgage portfolio.
Previous wording
•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.
Current wording
•The allowance for credit losses was $438.6 million as of June 30, 2024, a decrease of $25.5 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 in the first quarter of 2024 of our CECL calculation for non-homogeneous commercial loans and leases and residential development loans.
Previous wording
•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.
Current wording
•The Company had a provision for credit losses of $31.8 million and $49.0 million for the three and six months ended June 30, 2024, respectively. This compares to a provision for credit losses of $17.1 million for the three months ended March 31, 2024, and $121.6 million for the six months ended June 30, 2023. The increase for the three months ended June 30, 2024 compared to the prior quarter was mainly due to reserve release during the three months ended March 31, 2024 associated with the recalibration of our CECL calculation. The six months ended June 30, 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 in the first quarter of 2024, contributed to the change when compared to the same period in the current year.
Previous wording
•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.
Current wording
•Total cash and cash equivalents were $2.1 billion as of June 30, 2024, a decrease of $93.7 million from 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 balance sheet flexibility, fund growth in lending and investment portfolios, and deleverage non-deposit liabilities as economic conditions permit.
Previous wording
•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.
Current wording
•Including secured off-balance sheet lines of credit, total available liquidity was $19.1 billion as of June 30, 2024, representing 37% of total assets, 46% of total deposits, and 140% of uninsured deposits.
Previous wording
•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%.
Current wording
•The Company's total risk-based capital ratio was 12.2% and its common equity tier 1 ("CET1") capital ratio was 10.0% as of June 30, 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%.
Previous wording
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.
Current wording
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 six months ended June 30, 2024.
Previous wording
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.
Current wording
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 six months ended June 2023 may not be directly comparable to prior or future reported periods.
Previous wording
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.
Current wording
The Company had net income of $120.1 million for the three months ended June 30, 2024, compared to net income of $124.1 million for the three months ended March 31, 2024. The decrease in net income is mainly attributable to an increase in provision for credit losses and a decrease in non-interest income, partially offset by a decrease in non-interest expense and an increase in net interest income. The increase of $14.7 million in provision for credit losses reflects the recalibration of our CECL calculation that took place during the three months ended March 31, 2024, providing a benefit to the first quarter of 2024's provision for credit losses, as well as credit migration trends and changes in the economic forecasts used in credit models. The decrease of $5.7 million in non-interest income was primarily driven by quarterly fluctuations in fair value adjustments and MSR hedging activity. The increase of $4.1 million in net interest income reflects higher income earned on loans and investment securities, including accretion income, and lower borrowing costs. The decrease of $8.3 million in non-interest expense is mainly due to a decrease in salaries and employee benefits, largely driven by a reversal of a compensation-related accrual, as well as decreases in the majority of the non-interest expense categories as a result of recent expense reduction initiatives. This favorable change was partially offset by an increase in merger and restructuring expense, which included $12.0 million in restructuring expenses during the three months ended June 30, 2024. The Company conducted an enterprise-wide evaluation of our operations during the first quarter of 2024, which resulted in consolidated positions and simplified reporting and organizational structures, with changes expected to be carried out through the third quarter of 2024 to achieve a core expense run rate for the fourth quarter of 2024 of $965 million to $985 million annualized. As of June 30, 2024, 91% of identified cost savings have been realized. The expected core expense run rate excludes CDI amortization, merger and restructuring expense, exit and disposal costs, and the FDIC special assessment.
Previous wording
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.
Current wording
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. Return on average tangible common shareholders' 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.
Previous wording
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.
Current wording
The net interest margin (net interest income as a percentage of average interest-earning assets) on a fully tax-equivalent basis was 3.56% for the three months ended June 30, 2024, as compared to 3.52% for the three months ended March 31, 2024. The expansion was driven by higher yields on loans and investment securities, including the benefit of accretion income, which offset a modest increase in the cost of interest-bearing deposits. The yield on loans and leases for the three months ended June 30, 2024 increased by 7 basis points compared to the three months ended March 31, 2024.
Previous wording
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.
Current wording
The cost of interest-bearing liabilities for the three months ended June 30, 2024 increased by 6 basis points compared to the three months ended March 31, 2024, due to rising cost of funds on deposits 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 for the full quarter ended June 30, 2024.
Previous wording
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.
Current wording
Net interest income for the six months ended June 30, 2024 was $850.8 million, a decrease of $7.9 million compared to the six months ended June 30, 2023. The decrease is due to higher rates on interest-bearing liabilities, partially offset by higher average yields on interest-earning assets and a larger average balance sheet for the six months ended June 30, 2024 compared to the prior year period as a result of the Merger.
Previous wording
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.
Current wording
The net interest margin on a fully tax-equivalent basis was 3.54% for the six months ended June 30, 2024, as compared to 3.99% for the six months ended June 30, 2023. The decrease for the six months ended June 30, 2024 compared to the prior year period was due to higher funding costs that reflect deposit repricing, and a shift in product mix.
Previous wording
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.
Current wording
The yield on loans and leases for the six months ended June 30, 2024 increased by 40 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.
Previous wording
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.
Current wording
The cost of interest-bearing liabilities increased by 109 basis points for the six months ended June 30, 2024, as compared to the same period in 2023, due to a higher mix of higher-cost time deposits, 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.
Previous wording
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.
Current wording
Between March 2022 and July 2023, the Federal Reserve raised the target range for the federal funds rate by 5.25%. 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. Further, the impact of balance sheet composition changes and the higher interest rate environment has shifted the interest rate sensitivity position of the balance sheet to a liability sensitive position as of June 30, 2024 from an asset sensitive position at the onset of the rising rate environment.
Previous wording
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.
Current wording
The Company had a $31.8 million provision for credit losses for the three months ended June 30, 2024, as compared to a $17.1 million provision for the three months ended March 31, 2024. As an annualized percentage of average outstanding loans and leases, the provision for credit losses recorded for the three months ended June 30, 2024 was 0.34%, as compared to 0.18% for the three months ended March 31, 2024. The change in provision for credit losses reflects credit migration trends and changes in the economic forecasts used in credit models. Further, during the first quarter of 2024, 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, which benefited the provision for credit losses.
Previous wording
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.
Current wording
For the three months ended June 30, 2024, net charge-offs were $30.4 million, as compared to $44.0 million for the three months ended March 31, 2024. As an annualized percentage of average outstanding loans and leases, net charge-offs for the three months ended June 30, 2024 were 0.32%, as compared to 0.47% for the three months ended March 31, 2024. Net charge-offs in the FinPac portfolio were $24.7 million in the second quarter, a slight increase from the first quarter, and net charge-offs were $5.7 million for the Bank.
Previous wording
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.
Current wording
The Company had a $49.0 million provision for credit losses for the six months ended June 30, 2024, as compared to $121.6 million for the six months ended June 30, 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 six months ended June 30, 2024 was 0.26%, as compared to 0.73% for the six months ended June 30, 2023. During the first quarter of 2024, 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.
Previous wording
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.
Current wording
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 $23.2 million as of June 30, 2024 have a related allowance for credit losses of $20.4 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.
Previous wording
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.
Current wording
Other income for the three months ended June 30, 2024, as compared to the three months ended March 31, 2024, 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 $10.1 million as compared to loss of $2.4 million for the prior quarter. These fair value adjustments are inversely influenced by the change in longer- term interest rates. The increase in service charges on deposits, which include treasury management fee income, card-based fees, and financial services and trust revenue, reflect the Company’s focus on generating growth in sustainable core fee income that results from needs-based solutions for new and existing customers.
Previous wording
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.
Current wording
Other income for the six months ended June 30, 2024 decreased, as compared to the six months ended June 30, 2023, primarily due to interest rate fluctuations resulting in a loss on the fair value of certain loans held for investment of $12.5 million in the current period as compared to a gain of $2.5 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 $3.9 million, as well as the Company’s focus on generating growth in core product income by supporting the needs of our customers.
Previous wording
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.
Current wording
Merger and restructuring expense increased during the three months ended June 30, 2024, as compared to the three months ended March 31, 2024, primarily due to restructuring expense of $12.0 million during the quarter, which was primarily severance payments. During the first quarter of 2024, the Company conducted a comprehensive evaluation of our operations, resulting in streamlined roles and simplified reporting and organizational structures. These actions contributed to expense reductions in the second quarter.
Previous wording
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.
Current wording
Intangible amortization increased during the six months ended June 30, 2024, compared to the six months ended June 30, 2023, primarily due to the current year including six months of amortization associated with the core deposit intangible asset added as a result of the Merger, compared to only four months of amortization during the six months ended June 30, 2023.
Previous wording
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.
Current wording
Merger and restructuring expense decreased during the six months ended June 30, 2024, as compared to the six months ended June 30, 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. The decrease in Merger expenses was partially offset by $12.0 million in restructuring expenses during the six months ended June 30, 2024.
Previous wording
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.
Current wording
The Company's effective tax rate for the three and six months ended June 30, 2024 was 25.4% and 26.0% respectively, as compared to 26.6% and 25.5% for the three months ended March 31, 2024, and June 30, 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.
Previous wording
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.
Current wording
Investment debt securities available for sale were $8.5 billion as of June 30, 2024, compared to $8.8 billion as of December 31, 2023. The decrease was primarily due to paydowns, calls, and maturities of $237.6 million, as well as a decrease of $162.2 million in fair value of investment securities available for sale, due to higher rates during the period.
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