COLUMBIA BANKING SYSTEM INC

Previous 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;

Current wording

•the possibility that the anticipated benefits of the Merger are not realized when expected, 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 and six months ended June 30, 2024, as compared to the applicable prior periods.

Current wording

The following is a discussion of our results for the three and nine months ended September 30, 2024, as compared to the applicable prior periods.

Previous 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.

Current wording

•Earnings per diluted common share was $0.70 for the three months ended September 30, 2024, as compared to $0.57 for the three months ended June 30, 2024. The increase for the three months ended September 30, 2024, as compared to the prior period, was primarily driven by an increase in non-interest income due to quarterly fluctuations in fair value adjustments and MSR hedging activity and a favorable change in non-interest expense due to the prior quarter including $12.0 million in restructuring expenses. Net interest income increased due to higher income earned on loans.

Previous 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.

Current wording

•Non-interest income was $66.2 million for the three months ended September 30, 2024, as compared to $44.7 million for the three months ended June 30, 2024. The increase was driven by fluctuations in fair value adjustments and MSR hedging activity due to rate changes, which collectively resulted in a net fair value gain of $6.6 million in the third quarter compared to a net fair value loss of $9.7 million in the second quarter.

Previous 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.

Current wording

•Earnings per diluted common share was $1.87 for the nine months ended September 30, 2024, as compared to $1.33 for the nine months ended September 30, 2023. The increase for the nine months ended September 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. These favorable changes were partially offset by a decrease in net interest income due to higher rates on interest-bearing liabilities, partially offset by higher average yields on interest-earning assets.

Previous 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.

Current wording

•Net interest margin, on a tax-equivalent basis, was 3.55% for the nine months ended September 30, 2024, as compared to 3.96% for the nine months ended September 30, 2023. The decrease for the nine months ended September 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 $58.5 million for the nine months ended September 30, 2024, compared to the nine months ended September 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 $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.

Current wording

•Non-interest income was $161.2 million for the nine months ended September 30, 2024, as compared to $138.4 million for the nine months ended September 30, 2023. The increase was partially due to fluctuations in fair value adjustments and MSR hedging activity, which collectively resulted in a favorable change due to a net fair value loss of $7.0 million for the nine months ended September 30, 2024, compared to a net fair value loss of $23.2 million for the nine months ended September 30, 2023. In addition, there were increases in most categories, largely due to the impact of nine months as a combined company compared to only seven months as a combined company for the prior year period, as well as increasing fee-generating product traction with our customer base.

Previous 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.

Current wording

•Non-interest expense was $838.1 million for the nine months ended September 30, 2024, as compared to $975.5 million for the nine months ended September 30, 2023. The decrease for the nine months ended September 30, 2024 reflects a decrease in merger and restructuring expenses of $143.0 million and a decrease in salaries and employee benefits, partially offset by an increase in amortization of intangible assets added in connection with the Merger, largely due to the impact of nine months as a combined company in the current period, compared to only seven months as a combined company for the prior year period.

Previous 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.

Current wording

•Total loans and leases were $37.5 billion as of September 30, 2024, an increase of $61.1 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, partially offset by a decrease in residential balances. The increase was driven by commercial line utilization and new originations, partially offset by loan payoffs. Balances were also impacted by a decline in transactional real estate loans, which trended lower as we organically remix the portfolio into relationship-driven commercial loans.

Previous wording

•Total consolidated assets were $52.0 billion as of June 30, 2024 compared to $52.2 billion as of December 31, 2023.

Current wording

•Total consolidated assets were $51.9 billion as of September 30, 2024, compared to $52.2 billion as of December 31, 2023.

Previous 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.

Current wording

•Non-performing assets increased to $167.6 million, or 0.32% of total assets, as of September 30, 2024, compared to $113.9 million, or 0.22% of total assets, as of December 31, 2023. Non-performing loans and leases were $165.2 million, or 0.44% of total loans and leases, as of September 30, 2024, compared to $112.9 million, or 0.30% of total loans and leases, as of December 31, 2023. As of September 30, 2024, non-performing loans included $65.8 million in government guarantees.

Previous 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.

Current wording

•The allowance for credit losses was $438.3 million as of September 30, 2024, a decrease of $25.8 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 $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.

Current wording

•The Company had a provision for credit losses of $28.8 million and $77.7 million for the three and nine months ended September 30, 2024, respectively. This compares to a provision for credit losses of $31.8 million for the three months ended June 30, 2024 and $158.3 million for the nine months ended September 30, 2023. The decrease for the three months ended September 30, 2024 compared to the prior quarter was mainly due to credit migration trends and changes in the economic forecasts used in credit models. The nine months ended September 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 $2.1 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.

Current wording

•Total cash and cash equivalents were $2.1 billion as of September 30, 2024, a decrease of $51.5 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 the balance sheet by decreasing debt and non-deposit liabilities as economic conditions permit.

Previous 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.

Current wording

•Including secured off-balance sheet lines of credit, total available liquidity was $19.4 billion as of September 30, 2024, representing 37% of total assets, 47% of total deposits, and 138% of estimated uninsured deposits.

Previous 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%.

Current wording

•The Company's total risk-based capital ratio was 12.5% and its common equity tier 1 ("CET1") capital ratio was 10.3% as of September 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 six months ended June 30, 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 nine months ended September 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 six months ended June 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 nine months ended September 30, 2023 may not be directly comparable to prior or future reported periods.

Previous 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.

Current wording

The Company had net income of $146.2 million for the three months ended September 30, 2024, compared to net income of $120.1 million for the three months ended June 30, 2024. The increase in net income was mainly attributable to increases in non-interest income and net interest income as well as decreases in non-interest expense and provision for credit losses, partially offset by an increase in provision for income taxes. The increase of $21.5 million in non-interest income was primarily driven by quarterly fluctuations in fair value adjustments and MSR hedging activity driven by changes in interest rates. The increase of $2.8 million in net interest income reflects higher income earned on loans, which occurred despite a reduction in purchase accounting accretion income, and relatively stable funding costs prior to the late-quarter decline in the federal funds rate. The decrease of $7.9 million in non-interest expense was mainly due to a decrease in merger and restructuring expense driven by $12.0 million in restructuring expenses during the three months ended June 30, 2024. The restructuring expense was due to 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 carried out primarily in the second quarter. The decrease of $3.1 million in provision for credit losses reflects credit migration trends and changes in the economic forecasts used in credit models.

Previous wording

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 wording

For the nine months ended September 30, 2024, the Company had net income of $390.4 million, compared to net income of $255.2 million for the same period in the prior year. The increase in net income was mainly attributable to decreases in non-interest expense and provision for credit losses, partially offset by a decrease in net interest income. The $137.4 million decrease in non-interest expense was 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 $80.6 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 $58.5 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 nine months ended September 30, 2024. The Company paid off $250.0 million in BTFP borrowings during the third quarter to continue to rebalance our funding sources in support of our liquidity management program and lower the cost of liabilities. During the first quarter of 2024, the Company conducted an enterprise-wide evaluation of our operations, which resulted in consolidated positions and simplified reporting and organizational structures. As of September 30, 2024, the Company realized $82 million in annualized cost savings, or $70 million net of planned reinvestment associated with recent operational initiatives, which support our expectations for an annualized Q4 2024 core expense run rate of $965 million to $985 million. The expected core expense run rate excludes CDI amortization, merger and restructuring expense, exit and disposal costs, and the FDIC special assessment.

Previous wording

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 wording

Net interest income for the three months ended September 30, 2024 was $430.2 million, an increase of $2.8 million compared to the three months ended June 30, 2024. The increase was driven by a $3.4 million increase in interest income, largely driven by higher income earned on loans due to higher average rates, which occurred despite a reduction in accretion income, and relatively stable funding costs prior to the reduction in the federal funds rate that occurred in the latter part of September.

Previous 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.

Current wording

Net interest income for the nine months ended September 30, 2024 was $1.3 billion, a decrease of $58.5 million compared to the nine months ended September 30, 2023. The decrease 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 nine months ended September 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 3.54% 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.

Current wording

The net interest margin on a fully tax-equivalent basis was 3.55% for the nine months ended September 30, 2024, as compared to 3.96% for the nine months ended September 30, 2023. The decrease for the nine months ended September 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 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.

Current wording

The yield on loans and leases for the nine months ended September 30, 2024 and September 30, 2023 was 6.18% and 5.88%, respectively, an increase of 30 basis points, 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 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.

Current wording

The cost of interest-bearing liabilities was 3.28% for the nine months ended September 30, 2024, compared to 2.38% for the nine months ended September 30, 2023, an increase of 90 basis points, due to a higher mix of higher-cost time deposits and term borrowing balances, 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

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.

Current wording

The Federal Reserve lowered the target range for the federal funds rate by 0.50% in September 2024 and is expected to continue rate cuts into 2025 and 2026. However, 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. After the Federal Reserve ceased increasing the federal funds rate, we experienced an increase in our funding costs that outpaced the increase in our earning asset yields, as our deposits continued to reprice higher and our funding base experienced a shift toward higher-cost sources, as Federal Reserve actions reduced available liquidity within the banking industry. As a result, our net interest margin contracted during the latter half of 2023 due to the impact of higher funding costs and minimal change to the average yield on earning assets. Our net interest margin began to stabilize in the 3.5% to 3.6% range beginning in February 2024 following a comprehensive review related to how we evaluate and approve deposit pricing. Further, the impact of balance sheet composition changes and the higher interest rate environment shifted the interest rate sensitivity position of the balance sheet to a liability sensitive position as of September 30, 2024 from an asset sensitive position at the onset of the rising rate environment.

Previous wording

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:

Current wording

The following tables present 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:

Previous 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.

Current wording

The Company had a $28.8 million provision for credit losses for the three months ended September 30, 2024, as compared to a $31.8 million provision for the three months ended June 30, 2024. As an annualized percentage of average outstanding loans and leases, the provision for credit losses recorded for the three months ended September 30, 2024 was 0.30%, as compared to 0.34% for the three months ended June 30, 2024. The change in provision for credit losses reflects credit migration trends and changes in the economic forecasts used in credit models.

Previous 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.

Current wording

For the three months ended September 30, 2024, net charge-offs were $29.1 million, as compared to $30.4 million for the three months ended June 30, 2024. As an annualized percentage of average outstanding loans and leases, net charge-offs for the three months ended September 30, 2024 were 0.31%, as compared to 0.32% for the three months ended June 30, 2024. Net charge-offs in the FinPac portfolio were $20.0 million for the three months ended September 30, 2024, a $4.7 million decrease from the three months ended June 30, 2024, which is reflective of lower delinquencies in the transportation sector of the portfolio, which resulted in lower charge-off activity.

Previous 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.

Current wording

The Company had a $77.7 million provision for credit losses for the nine months ended September 30, 2024, as compared to $158.3 million for the nine months ended September 30, 2023. The decrease was 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 nine months ended September 30, 2024 was 0.28%, as compared to 0.61% for the nine months ended September 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

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 wording

For the nine months ended September 30, 2024, net charge-offs were $103.6 million, as compared to $67.9 million for the nine months ended September 30, 2023. As an annualized percentage of average outstanding loans and leases, net charge-offs for the nine months ended September 30, 2024 were 0.37%, as compared to 0.26% for the nine months ended September 30, 2023. Net charge-offs in the FinPac portfolio were $68.5 million for the nine months ended September 30, 2024, as compared to $64.1 million for the nine months ended September 30, 2023. Net charge-offs were $35.1 million for the Bank for the nine months ended September 30, 2024.

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 $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.

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 $23.3 million as of September 30, 2024 have a related allowance for credit losses of $19.6 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 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.

Current wording

Other income for the three months ended September 30, 2024, as compared to the three months ended June 30, 2024, increased primarily due to interest rate fluctuations resulting in the current quarter including a gain on the fair value of certain loans held for investment of $9.4 million, as compared to loss of $10.1 million for the prior quarter. These fair value adjustments are inversely influenced by the change in longer-term interest rates.

Previous 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.

Current wording

Other income for the nine months ended September 30, 2024 increased, as compared to the nine months ended September 30, 2023, primarily due to interest rate fluctuations resulting in a loss on the fair value of certain loans held for investment of $3.1 million in the current period as compared to a loss of $16.7 million in the prior year period. Further, our business growth strategy incorporates a collaborative team approach to deliver needs-based solutions to our customers, which deepens relationships and provides growth in sustainable fee income to the Bank. Trends in the current period as compared to the prior year period reflect a growing contribution from treasury management and card fees, financial services and trust revenue, and international banking fees. The increase was partially offset by the impact of rate fluctuations on swap derivatives with a loss in the current period compared to a gain in the prior year period, resulting in an unfavorable change of $5.4 million.

Previous wording

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 wording

Salaries and employee benefits increased during the three months ended September 30, 2024, as compared to the three months ended June 30, 2024, due primarily to the prior period including a $7.7 million reversal of a compensation-related accrual, which did not repeat in the current period, partially offset by a decrease in the current quarter related to salaries and wages largely due to staff reductions that occurred predominantly over the second quarter.

Previous 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.

Current wording

Merger and restructuring expense decreased during the three months ended September 30, 2024, as compared to the three months ended June 30, 2024, mainly due to the prior quarter including restructuring expense of $12.0 million, which was primarily severance payments. During the first quarter of 2024, the Company conducted a comprehensive evaluation of our operations, resulting in streamlined roles, simplified reporting, and organizational structures. These actions contributed to expense reductions.

Previous 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.

Current wording

Intangible amortization increased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, primarily due to the current year including nine months of amortization associated with the core deposit intangible asset added as a result of the Merger, compared to only seven months of amortization during the nine months ended September 30, 2023.

Previous 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.

Current wording

Merger and restructuring expense decreased during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, with the largest drivers of the decrease being lower legal and professional fees and premises and equipment expense 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 nine months ended September 30, 2024.

Previous 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.

Current wording

The Company's effective tax rate for the three months ended September 30, 2024 was 25.5%, as compared to 25.4% for the three months ended June 30, 2024, and 25.8% for both the nine months ended September 30, 2024 and 2023. 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 $8.5 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.

Current wording

Investment debt securities available for sale were $8.7 billion as of September 30, 2024, compared to $8.8 billion as of December 31, 2023. The decrease was primarily due to paydowns, calls, and maturities of $385.4 million, partially offset by an increase of $139.5 million in fair value of investment securities available for sale, due to lower rates during the period.