UMPQUA HOLDINGS CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Forward-looking statements


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

We make forward-looking statements about the proposed transaction between us and
Columbia Banking System, Inc.; LIBOR; derivatives and hedging; the results and
performance of models and economic forecasts used in our calculation of the ACL;
projected sources of funds and the Company's liquidity position; 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; performance of troubled debt restructurings; 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; litigation; dividends; junior subordinated debentures; fair values
of certain assets and liabilities, including MSR values and sensitivity
analyses; tax rates; deposit pricing; and the effect of accounting
pronouncements and changes in accounting methodology.

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

•changes in general economic, political, or industry conditions; the magnitude
and duration of the COVID-19 pandemic and its impact on the global economy and
financial market conditions and Umpqua's business, results of operations, and
financial condition;

•deterioration of economic conditions which could lead to an increase in losses on loans and leases, in particular the risks associated with concentrations of loans linked to real estate;


•uncertainty in U.S. fiscal and monetary policy, including the interest rate
policies of the Federal Reserve or the effects of any declines in housing and
commercial real estate prices, high or increasing unemployment rates, inflation,
or any slowdown in economic growth particularly in the western United States;

•volatility and disruptions in global capital and credit markets;

•changes in interest rates;

•transition from LIBOR to other indices including SOFR;

•competitive pressures, including on the prices of products and services;


•our ability to successfully, including on time and on budget, implement and
sustain information technology product and system enhancements and operational
initiatives;

•our ability to attract new deposits, loans and leases;

•our ability to retain deposits, particularly during store consolidations and pending Mergers;

•the demand for financial services in our market areas;

•the stability, cost and continued availability of borrowings and other sources of funding, such as broker and public deposits;

•changes in legal or regulatory requirements or the results of regulatory reviews that may increase expenditures or limit growth;

•our ability to manage concerns related to climate change and associated regulations;

• our ability to recruit and retain key officers and employees;

•our ability to raise capital or incur debt on reasonable terms;

•regulatory limits on the Bank’s ability to pay dividends to the Company which could affect the timing and amount of dividends to shareholders;

• financial services reform and the impact of implementing legislation and regulations on our business operations, including our compliance costs, interest expense and revenues;

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•a breach or failure of our operational or security systems, or those of our
third-party vendors, including as a result of cyber-attacks;

• the success, impact and timing of Umpqua’s business strategies, including market acceptance of any new product or service;

•the occurrence of any event, change or other circumstance that may give rise to the right of one or both parties to terminate the Merger Agreement;

•the outcome of legal proceedings;

• delays in completing the proposed transaction with Columbia;


•the failure to obtain necessary regulatory approvals (and the risk that such
approvals may result in the imposition of conditions that could adversely affect
the combined company or the expected benefits of the proposed transaction) to
complete the Mergers or the Bank Merger;

•failure to meet any of the other conditions of the proposed transaction with Columbia in a timely manner or at all;


•the possibility that the anticipated benefits of the proposed transaction with
Columbia 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 Umpqua and Columbia do business;

• certain restrictions during the term of the contemplated transaction with
Colombia that may impact the parties’ ability to pursue certain business opportunities or strategic transactions;

•the possibility that the contemplated transaction with Colombia may be more costly to perform than anticipated, including due to unforeseen factors or events;

• diversion of management’s attention from ongoing business operations and opportunities during the term of the mergers;

•any adverse reactions or changes in commercial or social relations, including those resulting from the completion of the transaction and the integration of the two companies and banks;


•economic forecast variables that are either materially worse or better than end
of quarter projections and deterioration in the economy that exceeds current
consensus estimates;

•our ability to effectively manage problem loans; and

•our ability to successfully negotiate with owners or reconfigure facilities.



There are many factors that could cause actual results to differ materially from
those contemplated by these forward-looking statements. Forward-looking
statements are made as of the date of this Form 10-Q. We do not intend to update
these forward-looking statements. Readers should consider any forward-looking
statements in light of this explanation, and we caution readers about relying on
forward-looking statements.

General

The Company is an Oregon corporation and the financial holding company of the
Bank. The Bank is the largest bank with headquarters in the Pacific Northwest
and is considered one of the most innovative banks in the United States,
recognized for its company culture and customer experience strategy. The Bank
provides a broad range of banking, private banking, mortgage and other financial
services to corporate, institutional, and individual customers. FinPac, a
commercial equipment leasing company, is a Bank subsidiary. Along with its
subsidiaries, the Company is subject to the regulations of state and federal
agencies and undergoes regular examinations by these regulatory agencies.

On October 12, 2021, we announced that we and Columbia, the parent company of
Columbia State Bank, entered into a definitive agreement under which the
companies will join together in an all-stock combination. Once the transaction
is completed, the combined organization will be a leading West Coast franchise
with more than $50 billion in assets. On September 17, 2022, we and Columbia
entered into a Letter of Agreement with the Department of Justice, which
stipulates that in order to obtain regulatory approvals necessary to complete
the transaction, ten Columbia State Bank branches will need to be divested. On
October 25, 2022, Columbia received regulatory approval from the Board of
Governors of the Federal Reserve System to complete the proposed merger with
Umpqua. The transaction is expected to close following the satisfaction of
customary closing conditions, including receipt of remaining regulatory
approvals.

Item 303 of Regulation S-K allows registrants to compare the results of the most
recently completed quarter to the results of either the immediately preceding
quarter or the corresponding quarter of the preceding year. Umpqua has elected
to compare our results for the three months ended September 30, 2022 and
June 30, 2022, where applicable, throughout this Management's Discussion and
Analysis.
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Executive Overview

The following is a discussion of our results for the three and nine months ended
September 30, 2022compared to applicable prior periods.

Financial performance

Comparison of the current quarter with the previous quarter


•Earnings per diluted common share was $0.39 for the three months ended
September 30, 2022, as compared to $0.36 for the three months ended June 30,
2022. The increase for the three months ended September 30, 2022, as compared to
the prior period, was primarily driven by an increase in net interest income due
to the rising interest rate environment. The increase was partially offset by a
decrease in non-interest income due to a decline in residential mortgage banking
revenue and a decrease in the fair value of certain loans held for investment,
with both items also reflective of the rising rate environment.

•Net interest margin, on a tax equivalent basis, was 3.88% for the three months
ended September 30, 2022, as compared to 3.41% for the three months ended
June 30, 2022. The increase for the three months ended September 30, 2022, was
due to a higher mix of loans as a percentage of earning assets as well as an
increase in individual category earning asset yields given upward interest rate
movements.

•Residential mortgage banking revenue was $17.3 million for the three months
ended September 30, 2022, as compared to $30.5 million for the three months
ended June 30, 2022. The variance for the three months ended September 30, 2022,
as compared to prior period, was primarily attributable to lower revenue from
the origination and sale of residential mortgages given lower volumes and a loss
on the MSR hedge initiated during the period, which offset the change in fair
value of MSR assets during the period. For-sale mortgage closed loan volume
decreased by 31% for the three months ended September 30, 2022, as compared to
the three months ended June 30, 2022. The gain on sale margin increased to 2.65%
for the three months ended September 30, 2022, as compared to 2.62% for the
three months ended June 30, 2022.

Comparison of the current year’s total with the period of the previous year


•Earnings per diluted common share was $1.17 for the nine months ended
September 30, 2022, as compared to earnings per diluted common share of $1.51
for the nine months ended September 30, 2021. The decrease for the nine months
ended September 30, 2022, as compared to the prior period, was primarily driven
by a decrease in non-interest income due to a decline in residential mortgage
banking revenue and a decrease in the fair value of certain loans held for
investment, as well as an increase in the provision for credit losses. The
decrease was partially offset by an increase in net interest income due to the
rising interest rate environment.

•Net interest margin, on a tax equivalent basis, was 3.48% for the nine months
ended September 30, 2022, as compared to 3.20% for the nine months ended
September 30, 2021. The increase in net interest margin for the nine months
ended September 30, 2022, primarily resulted from the rising rate environment
and a higher level of loans and securities as a percentage of earning assets.

•Residential mortgage banking revenue was $108.7 million for the nine months
ended September 30, 2022, as compared to $143.6 million for the nine months
ended September 30, 2021. The variance for the nine months ended September 30,
2022, as compared to prior periods, was primarily attributable to lower revenue
from the origination and sale of residential mortgages given lower volumes and
gain on sale margins. The decrease was partially offset by a net write-up of the
MSR asset that significantly offset the loss on the MSR hedge, that was put in
place in mid-August 2022. For-sale mortgage closed loan volume decreased by 58%
for the nine months ended September 30, 2022, as compared to the nine months
ended September 30, 2021. For the nine months ended September 30, 2022, the gain
on sale margin decreased to 2.62%, as compared to 3.46% for the nine months
ended September 30, 2021. The lower gain on sale margin for the nine months
ended September 30, 2022 as compared to the prior period reflects the adverse
impact from rising rates on the pipeline and competitive pricing pressures.
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Comparison of current period to prior year end period

•Total loans and leases were $25.5 billion as of September 30, 2022, an increase
of $3.0 billion, as compared to December 31, 2021. The increase in total loans
is primarily due to an increase in the commercial real estate balances of $1.5
billion, primarily within multifamily lending, and an increase in residential
real estate balances of $1.3 billion.

•Total deposits were $26.8 billion as of September 30, 2022, an increase of
$222.4 million, compared to December 31, 2021. The increase was due to growth in
demand deposits and savings deposits, offset partially by decreases in time
deposits.

•Total consolidated assets were $31.5 billion and $30.6 billion as of
September 30, 2022 and December 31, 2021, with the increase due to growth in
loans, offset by decreases in cash and cash equivalents and available for sale
securities.

Credit Quality

•Non-performing assets decreased to $50.8 million, or 0.16% of total assets, as
of September 30, 2022, compared to $53.1 million, or 0.17% of total assets, as
of December 31, 2021. Non-performing loans and leases were $50.8 million, or
0.20% of total loans and leases, as of September 30, 2022, compared to $51.2
million, or 0.23% of total loans and leases, as of December 31, 2021.

•The allowance for credit losses was $294.9 million as of September 30, 2022, an
increase of $33.7 million compared to December 31, 2021. The increase in the
allowance for credit losses is due to the growth of the loan portfolio, as well
as changes in the economic forecasts used in the credit models.

•The Company had a provision for credit losses of $27.6 million and $51.1
million for the three and nine months ended September 30, 2022, respectively.
This compares to a provision for credit losses of $18.7 million for the three
months ended June 30, 2022. For the nine months ended September 30, 2021, there
was a recapture of provision for credit losses of $41.9 million. The provision
for credit losses in the current periods was due to allowance requirements for
new loan generation, loan mix changes, and changes to the economic forecasts
used in credit models.

Liquidity

•Total cash and cash equivalents was $1.6 billion as of September 30, 2022, a
decrease of $1.2 billion from December 31, 2021. The decrease in cash and cash
equivalents is due to an increase in loan production, which outpaced deposit
generation for the period.

Capital and growth initiatives


•In October 2021, Umpqua and Columbia announced their entering into the Merger
Agreement under which the two companies will combine in an all-stock
transaction. On September 17,2022, a Letter of Agreement was entered into with
the Department of Justice, which stipulates that in order to obtain regulatory
approvals necessary to complete the transaction, ten Columbia State Bank
branches will need to be divested. On October 25, 2022, Columbia received
regulatory approval from the Board of Governors of the Federal Reserve System to
complete the proposed merger with Umpqua. The transaction is expected to close
following the satisfaction of customary closing conditions, including receipt of
remaining regulatory approvals.

•The Company's total risk-based capital ratio was 13.2% and its Tier 1 common to
risk-based assets ratio was 10.6% as of September 30, 2022. As of December 31,
2021, the Company's total risk-based capital ratio was 14.3% and its Tier 1
common to risk-based assets ratio was 11.6%.

•The Company paid quarterly cash dividends of $0.21 per common share to
shareholders on August 15, 2022. In addition, the Company declared a quarterly
cash dividend of $0.21 per common share on October 3, 2022, paid on October 28,
2022, to shareholders of record as of October 14, 2022.

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Critical Accounting Estimates

Our critical accounting estimates are described in detail in the Critical
Accounting Estimates section of the Form 10-K for the year ended December 31,
2021, filed with the SEC on February 25, 2022. 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 ACL estimate is important to the portrayal of the Company's financial
condition and results of operations and requires difficult, subjective or
complex judgments. There have been no material changes in the ACL estimate
methodology during the nine months ended September 30, 2022.

                             Results of Operations

The Company has two segments: Core Banking and Mortgage Banking, which aligns with how we manage the profitability of the Company and also provides greater transparency into the financial contribution of mortgage banking activities.


The Core Banking segment includes all lines of business, except Mortgage
Banking, including commercial, retail, private banking, as well as the
operations, technology, and administrative functions of the Bank and Holding
Company. The Mortgage Banking segment includes the revenue earned from the
production and sale of residential real estate loans, the servicing income from
our serviced loan portfolio, the quarterly changes in the MSR asset, the
quarterly changes in the MSR hedge, and the specific expenses that are related
to mortgage banking activities including variable commission expenses. Revenue
and related expenses related to residential real estate loans held for
investment are included in the Core Banking segment as portfolio loans are
primarily originated through the Bank's retail consumer (store) and wealth
channels. Management periodically updates the allocation methods and assumptions
within the current segment structure

Comparison of the current quarter with the previous quarter


The Core Banking segment had net income of $86.3 million for the three months
ended September 30, 2022, compared to net income of $72.5 million for the three
months ended June 30, 2022. The increase in net income is mainly attributable to
an increase in net interest income, partially offset by a decrease in
non-interest income and an increase in provision for credit losses. The increase
in net interest income is reflective of the favorable impact of higher interest
rates during the quarter, as well as the increase in average loans and leases
during the quarter. The decrease in non-interest income was due to a fair value
loss of $24.9 million for the third quarter of 2022, driven by an increase in
long-term interest rates and their effect on fair value adjustments related to
investment securities, swap derivatives, and loans carried at fair value. This
compares to a fair value loss of $9.9 million for the three months ended
June 30, 2022.

The Mortgage Banking segment had a net loss of $2.2 million for the three months
ended September 30, 2022, compared to net income of $6.1 million for the three
months ended June 30, 2022. The decrease in net income for the three months
ended September 30, 2022 for the Mortgage Banking segment, compared to the three
months ended June 30, 2022, is attributable to a decrease in non-interest income
due to lower revenue from the origination and sale of residential mortgages as
closed loan volume for-sale declined by 31%. The non-interest income decline was
also driven by a loss on the MSR hedge, which was put in place during the
quarter to reduce net income volatility related to changes in fair value of MSR
assets due to valuation inputs or assumptions.

Comparison of the current year’s total with the period of the previous year


For the nine months ended September 30, 2022, the Core Banking segment had net
income of $221.7 million, a decrease of $76.1 million, as compared to the same
period in the prior year, mainly attributable to an increase in the provision
for credit losses, a decrease in non-interest income and an increase in
non-interest expense, partially offset by an increase in net interest income.
The change in the provision is due to allowance requirements for new loan
generation, loan mix changes, and changes to the economic forecasts used in
credit models. The decrease in non-interest income was due to a fair value loss
of $51.5 million for the nine months ended September 30, 2022, driven by an
increase in long-term interest rates and their effect on fair value adjustments
related to investment securities, swap derivatives, and loans carried at fair
value. This compares to a fair value gain of $13.4 million for the nine months
ended September 30, 2021. The increase in net interest income is reflective of
the increase in loans and leases and the favorable impact of higher interest
rates during the period.

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The Mortgage Banking segment had net income of $32.1 million for the nine months
ended September 30, 2022, compared to net income of $34.2 million during the
same period of the prior year. The decrease was primarily due to lower revenue
from the origination and sale of residential mortgages given lower volumes and
gain on sale margins, and a loss on the MSR hedge that was put in place during
the third quarter of 2022 to reduce net income volatility related to changes in
fair value of MSR assets due to valuation inputs or assumptions. These changes
were offset by a net write-up of the MSR asset during the nine months ended
September 30, 2022, compared to a net write-down during the same period of the
prior year, and a decrease in non-interest expense, which is due to decreased
incentives as originations have slowed due to rising interest rates.

The following table presents the return on average assets, average common
shareholders' equity and average tangible common shareholders' equity for the
three months ended September 30, 2022 and June 30, 2022, respectively, as well
as the nine months ended September 30, 2022 and 2021. 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. The return
on average tangible common shareholders' equity is calculated by dividing net
income by average shareholders' common equity less average goodwill and other
intangible assets, net (excluding MSR). The return on average tangible common
shareholders' equity is considered a non-GAAP financial measure and should be
viewed in conjunction with the return on average common shareholders' equity.

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

                                                        Three Months Ended                                        Nine Months Ended
 (dollars in thousands)                      September 30, 2022         June 30, 2022               September 30, 2022         September 30, 2021
Return on average assets                                 1.09  %               1.04  %                          1.11  %                    1.48  %
Return on average common shareholders'
equity                                                  12.99  %              12.20  %                         12.94  %                   16.47  %
Return on average tangible common
shareholders' equity                                    13.02  %              12.23  %                         12.98  %                   16.55  %
Calculation of average common tangible
shareholders' equity:
Average common shareholders' equity         $       2,567,266          $  2,584,836                $       2,621,725          $       2,694,968
Less: average goodwill and other intangible
assets, net                                             6,343                 7,379                            7,369                     12,922
Average tangible common shareholders'
equity                                      $       2,560,923          $  2,577,457                $       2,614,356          $       2,682,046



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

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The following table provides a reconciliation of ending shareholders' equity
(GAAP) to ending tangible common equity (non-GAAP), and ending assets (GAAP) to
ending tangible assets (non-GAAP) as of September 30, 2022 and December 31,
2021:
 (dollars in thousands)                                             September 30, 2022          December 31, 2021
Total shareholders' equity                                         $        2,417,514          $       2,749,270
Subtract:

Other intangible assets, net                                                    5,764                      8,840
Tangible common shareholders' equity                               $        2,411,750          $       2,740,430
Total assets                                                       $       31,471,960          $      30,640,936
Subtract:

Other intangible assets, net                                                    5,764                      8,840
Tangible assets                                                    $       31,466,196          $      30,632,096
Total shareholders' equity to total assets ratio                                 7.68  %                    8.97  %
Tangible common equity ratio                                                     7.66  %                    8.95  %



Non-GAAP financial measures have inherent limitations, are not required to be
uniformly applied, and are not reviewed or audited. Although we believe these
non-GAAP financial measures are frequently used by stakeholders in the
evaluation of a company, they have limitations as analytical tools, and should
not be considered in isolation or as a substitute for analyses of results as
reported under GAAP.

Net Interest Income

Comparison of the current quarter with the previous quarter


Net interest income for the three months ended September 30, 2022 was $287.6
million, an increase of $39.4 million compared to the three months ended
June 30, 2022. The increase was driven by a $44.2 million increase in the total
interest and fees on loans and leases, due to assets repricing higher in the
rising rate environment and growth in the loan portfolio, offset by an increase
of $7.8 million in interest expense due to the increase in long-term rates in
the quarter compared to the prior period.

The net interest margin (net interest income as a percentage of average
interest-earning assets) on a fully tax equivalent basis was 3.88% for the three
months ended September 30, 2022, as compared to 3.41% for the three months ended
June 30, 2022. The increase in net interest margin primarily resulted from an
increase in the average yields on interest-earning assets, due to a higher mix
of loans as a percentage of earning assets as well as an increase in individual
category earning asset yields given upward interest rate movements.

The yield on borrowings and leases for the three months ended September 30, 2022
increased by 47 basis points compared to the quarter ended June 30, 2022primarily due to the impact of rising interest rates on increased yields on variable and adjustable rate loans.

The cost of interest-bearing liabilities for the three months ended
September 30, 2022 increased by 19 basis points compared to the quarter ended June 30, 2022mainly due to rising interest rates.

Comparison of the current year’s total with the period of the previous year

Net interest income for the nine months ended September 30, 2022 has been $764.5 millionan augmentation of $78.3 million compared to the nine months ended
September 30, 2021. The increase for the nine months ended September 30, 2022
mainly due to higher interest income on loans resulting from higher rates and higher average loan and lease balances.


The net interest margin on a fully tax equivalent basis was 3.48% for the nine
months ended September 30, 2022, as compared to 3.20% for the nine months ended
September 30, 2021. The increase in net interest margin for the nine months
ended September 30, 2022, primarily resulted from an increase in the average
yields on interest-earning assets, due to a higher mix of loans as a percentage
of earning assets.

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The yield on loans and leases for the nine months ended September 30, 2022,
increased by 5 basis points as compared to the same period in 2021, primarily
attributable to the rising interest rate environment, which favorably impacted
the repricing of floating and adjustable rate loans and the coupon rate on new
loan generation.

The cost of interest-bearing liabilities decreased by 2 basis points for the
nine months ended September 30, 2022, as compared to the same period in 2021,
due to a higher mix of lower-cost deposits during the current period. Our net
interest income is affected by changes in the amount and mix of interest-earning
assets and interest-bearing liabilities, as well as changes in the yields earned
on interest-earning assets and rates paid on deposits and borrowed funds.

The 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 the
three months ended September 30, 2022 and June 30, 2022, as well as the nine
months ended September 30, 2022 and 2021, respectively:
                                                                                                           Three Months Ended
                                                                          September 30, 2022                                                   June 30, 2022
                                                                                  Interest             Average                                       Interest             Average
                                                                                 Income or            Yields or                                     Income or            Yields or
 (dollars in thousands)                                Average Balance            Expense               Rates             Average Balance            Expense               Rates
INTEREST-EARNING ASSETS:
Loans held for sale                                  $        173,397          $     2,205                5.09  %       $        264,320          $     2,742                4.15  %
Loans and leases (1)                                       24,886,203              276,625                4.41  %             23,550,796              231,932                3.94  %
Taxable securities                                          3,271,185               18,261                2.23  %              3,410,091               17,340                2.03  %
Non-taxable securities (2)                                    212,847                1,651                3.10  %                220,327                1,721                3.13  %
Temporary investments and interest-bearing cash               893,471                5,115                2.27  %              1,663,454                2,919                0.70  %
Total interest-earning assets                              29,437,103          $   303,857                4.10  %             29,108,988          $   256,654                3.53  %
Other assets                                                1,231,074                                                          1,247,915
Total assets                                         $     30,668,177                                                   $     30,356,903
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits                     $      3,829,688          $     1,705                0.18  %       $      3,896,553          $       610                0.06  %
Money market deposits                                       7,550,791                5,817                0.31  %              7,366,987                1,717                0.09  %
Savings deposits                                            2,468,187                  250                0.04  %              2,426,124                  199                0.03  %
Time deposits                                               1,501,724                1,318                0.35  %              1,618,394                1,489                0.37  %
Total interest-bearing deposits                            15,350,390                9,090                0.23  %             15,308,058                4,015                0.11  %
Repurchase agreements and federal funds purchased             509,559                  545                0.42  %                512,641                   66                0.05  %
Borrowings                                                     90,475                  798                3.50  %                  6,273                   50                3.21  %
Junior subordinated debentures                                409,151                5,491                5.33  %                393,964                4,001                4.07  %
Total interest-bearing liabilities                         16,359,575          $    15,924                0.39  %             16,220,936          $     8,132                0.20  %
Non-interest-bearing deposits                              11,250,764                                                         11,086,376
Other liabilities                                             490,572                                                            464,755
Total liabilities                                          28,100,911                                                         27,772,067
Common equity                                               2,567,266                                                          2,584,836
Total liabilities and shareholders' equity           $     30,668,177                                                   $     30,356,903
NET INTEREST INCOME                                                            $   287,933                                                        $   248,522
NET INTEREST SPREAD                                                                                       3.71  %                                                            3.33  %
NET INTEREST INCOME TO EARNING ASSETS OR NET
INTEREST MARGIN (1), (2)                                                                                  3.88  %                                                            3.41  %

(1) Unaccrued loans and leases are included in the average balance. (2) Tax-exempt income has been adjusted to tax equivalent at the rate of 21%. The amount of this adjustment was an addition to recognized revenue of approximately $329,000 for the three months ended September 30, 2022against approximately $352,000 for the three months ended June 30, 2022.

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Contents

                                                                                                  Nine Months Ended
                                                                September 30, 2022                                                September 30, 2021
                                                                       Interest             Average                                       Interest             Average
                                                                      Income or            Yields or                                     Income or            Yields or
(dollars in thousands)                       Average Balance           Expense               Rates             Average Balance            Expense               Rates
INTEREST-EARNING ASSETS:
Loans held for sale                         $      240,928          $     7,209                3.99  %       $        545,237          $    12,242                2.99  %
Loans and leases (1)                            23,676,201              720,699                4.06  %             21,866,569              656,772                4.01  %
Taxable securities                               3,445,386               54,412                2.11  %              3,199,653               45,049                1.88  %
Non-taxable securities (2)                         222,375                5,098                3.06  %                248,617                5,627                3.02  %
Temporary investments and interest bearing
cash                                             1,718,832                9,387                0.73  %              2,850,639                2,635                0.12  %
Total interest-earning assets                   29,303,722          $   796,805                3.62  %             28,710,715          $   722,325                3.36  %
Other assets                                     1,237,305                                                          1,348,054
Total assets                                $   30,541,027                                                   $     30,058,769
INTEREST-BEARING LIABILITIES:
Interest-bearing demand deposits            $    3,846,202          $     2,813                0.10  %       $      3,359,865          $     1,341                0.05  %
Money market deposits                            7,519,200                8,942                0.16  %              7,593,320                4,516                0.08  %
Savings deposits                                 2,433,651                  654                0.04  %              2,152,667                  523                0.03  %
Time deposits                                    1,623,742                4,612                0.38  %              2,336,261               16,414                0.94  %
Total interest-bearing deposits                 15,422,795               17,021                0.15  %             15,442,113               22,794                0.20  %
Repurchase agreements and federal funds
purchased                                          502,998                  674                0.18  %                444,919                  232                0.07  %
Borrowings                                          34,662                  897                3.46  %                259,890                2,787                1.43  %
Junior subordinated debentures                     394,803               12,641                4.28  %                363,122                9,108                3.35  %
Total interest-bearing liabilities              16,355,258          $    31,233                0.26  %             16,510,044          $    34,921                0.28  %
Non-interest-bearing deposits                   11,115,618                                                         10,484,104
Other liabilities                                  448,426                                                            369,653
Total liabilities                               27,919,302                                                         27,363,801
Common equity                                    2,621,725                                                          2,694,968
Total liabilities and shareholders' equity  $   30,541,027                                                   $     30,058,769
NET INTEREST INCOME                                                 $   765,572                                                        $   687,404
NET INTEREST SPREAD                                                                            3.36  %                                                            3.08  %
NET INTEREST INCOME TO EARNING ASSETS OR
NET INTEREST MARGIN (1), (2)                                                                   3.48  %                                                  

3.20%

(1) Unaccrued loans and leases are included in the average balance. (2) Tax-exempt income has been adjusted to tax equivalent at the rate of 21%. The amount of this adjustment was an addition to recognized revenue of approximately
$1.0 million for the nine months ended September 30, 2022against approximately $1.1 million for the same period in 2021.

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The following tables set forth a summary of the changes in tax equivalent net
interest income due to changes in average asset and liability balances (volume)
and changes in average rates (rate) for the three months ended September 30,
2022 as compared to three months ended June 30, 2022, as well as the nine months
ended September 30, 2022 and 2021, respectively. Changes in tax equivalent
interest income and expense, which are not attributable specifically to either
volume or rate, are allocated proportionately between both variances.
                                                                            

Three months completed

September 30, 2022 compared to June 30, 2022

Increase (decrease) in interest income and

                                                                             expense due to changes in
 (in thousands)                                                     Volume              Rate              Total
INTEREST-EARNING ASSETS:
Loans held for sale                                              $   (1,070)         $    533          $   (537)
Loans and leases                                                     14,318            30,375            44,693
Taxable securities                                                     (724)            1,645               921
Non-taxable securities (1)                                              (58)              (12)              (70)
Temporary investments and interest-bearing cash                      (1,859)            4,055             2,196
Total interest-earning assets (1)                                    10,607            36,596            47,203
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits                                        (10)            1,105             1,095
Money market deposits                                                    45             4,055             4,100
Savings deposits                                                          4                47                51
Time deposits                                                           (96)              (75)             (171)
Repurchase agreements and federal funds purchased                       342               137               479
Borrowings                                                              743                 5               748
Junior subordinated debentures                                          166             1,324             1,490
Total interest-bearing liabilities                                    1,194             6,598             7,792
Net increase in net interest income (1)                          $    9,413 

$29,998 $39,411
(1) Tax-exempt income has been adjusted to tax equivalent at a tax rate of 21%.

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Contents

Nine month period ended

                                                                 September 

30 2022 compared to September 30, 2021

                                                                 Increase 

(decrease) in interest income and expense

                                                                                 due to changes in
 (in thousands)                                                      Volume              Rate              Total
INTEREST-EARNING ASSETS:
Loans held for sale                                              $    (8,242)         $  3,209          $ (5,033)
Loans and leases                                                      56,160             7,767            63,927
Taxable securities                                                     3,624             5,739             9,363
Non-taxable securities (1)                                              (600)               71              (529)
Temporary investments and interest-bearing cash                       (1,431)            8,183             6,752
Total interest-earning assets (1)                                     49,511            24,969            74,480
INTEREST-BEARING LIABILITIES:
Interest bearing demand deposits                                         218             1,254             1,472
Money market deposits                                                    (45)            4,471             4,426
Savings deposits                                                          72                59               131
Time deposits                                                         (3,996)           (7,806)          (11,802)
Repurchase agreements and federal funds purchased                        372                70               442
Borrowings                                                            (3,713)            1,823            (1,890)
Junior subordinated debentures                                           847             2,686             3,533
Total interest-bearing liabilities                                    (6,245)            2,557            (3,688)
Net increase (decrease) in net interest income (1)               $    

55,756 $22,412 $78,168
(1) Tax-exempt income has been adjusted to tax equivalent at a tax rate of 21%.





Provision for Credit Losses

Comparison of the current quarter with the previous quarter


The Company had a $27.6 million provision for credit losses for the three months
ended September 30, 2022, as compared to a $18.7 million provision for credit
losses for the three months ended June 30, 2022.

The September 30, 2022 provision reflects allowance requirements for new loan
generation and loan mix changes, and changes between economic forecasts used in
credit models. As an annualized percentage of average outstanding loans and
leases, the provision for credit losses recorded for the three months ended
September 30, 2022 was 0.44%, as compared to 0.32% for the three months ended
June 30, 2022.

For the three months ended September 30, 2022the net allocations were $6.6 millioncompared to $6.2 million for the three months ended June 30, 2022. As an annualized percentage of average outstanding loans and leases, net write-offs for the three months ended September 30, 2022 were 0.11%, compared to 0.11% for the quarter ended June 30, 2022.

Comparison of the current year’s total with the period of the previous year


The Company had a $51.1 million provision for credit losses for the nine months
ended September 30, 2022, as compared to a recapture of provision for credit
losses of $41.9 million for the nine months ended September 30, 2021. The change
in the provision reflects allowance requirements for new loan generation and
loan mix changes, and changes between economic forecasts used in credit models.
As an annualized percentage of average outstanding loans and leases, the
provision (recapture) for credit losses recorded for the nine months ended
September 30, 2022 was 0.29%, compared to (0.26)% for the nine months ended
September 30, 2021.

For the nine months ended September 30, 2022, net charge-offs were $18.4
million, as compared to $37.5 million for the nine months ended September 30,
2021. As an annualized percentage of average outstanding loans and leases, net
charge-offs for the nine months ended September 30, 2022 were 0.10%, as compared
to 0.23% for the nine months ended September 30, 2021. The majority of net
charge-offs relate to leases and equipment finance loans, included within the
commercial loan portfolio.
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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 $14.6 million as of September 30, 2022 have a
related allowance for credit losses of $12.5 million, with the remaining loans
written-down to the estimated fair value of the collateral, less estimated costs
to sell, and are expected to be resolved with no additional material loss,
absent further decline in market prices.

Non-interest income


The following table presents the key components of non-interest income for the
three months ended September 30, 2022, compared to the three months ended
June 30, 2022, as well as the comparison of the nine months ended September 30,
2022 and 2021:
                                                 Three Months Ended                                                              Nine Months Ended
                         September 30,                                                                                  September 30,       September 30,                                  Change
(in thousands)               2022              June 30, 2022                 Change Amount         Change Percent           2022                2021   
          Change Amount            Percent
Service charges on
deposits                 $   12,632          $       12,011                $          621                    5  %       $   36,226          $   30,898          $        5,328                  17  %
Card-based fees               9,115                  10,530                        (1,415)                 (13) %           28,353              26,759                   1,594                   6  %
Brokerage revenue                27                      27                             -                    -  %               65               5,081                  (5,016)                (99) %
Residential mortgage
banking revenue, net         17,341                  30,544                       (13,203)                 (43) %          108,671             143,626                 (34,955)                (24) %
Gain on sale of debt
securities, net                   -                       -                             -                      nm                2                   4                      (2)                (50) %
Loss on equity
securities, net              (2,647)                 (2,075)                         (572)                  28  %           (7,383)             (1,045)                 (6,338)                    nm
Gain on loan and lease
sales, net                    1,525                   1,303                           222                   17  %            5,165              10,899                  (5,734)                (53) %

Bank owned life
insurance income              2,023                   2,110                           (87)                  (4) %            6,220               6,201                      19                   -  %
Other (losses) income       (10,571)                    785                       (11,356)                     nm          (12,670)             51,157                 (63,827)               (125) %
Total non-interest
income                   $   29,445          $       55,235                $      (25,790)                 (47) %       $  164,649          $  273,580          $     (108,931)                (40) %


Comparison of the current quarter with the previous quarter


Residential mortgage banking revenue, which is the primary source of income for
the Mortgage Banking segment, decreased as compared to three months ended
June 30, 2022. The variance for the three months ended September 30, 2022, as
compared to the three months ended June 30, 2022, was driven by rising long-term
interest rates and attributable to lower origination and sales revenue,
favorable changes in the fair value of the MSR asset, and a loss on the MSR
hedge that was put in place during the quarter. The gain on the fair value of
the MSR asset due to valuation inputs or assumptions was $16.4 million, which
was offset by the MSR hedge loss of $14.1 million, for the three months ended
September 30, 2022, compared to a fair value gain due to valuation inputs of
$10.9 million for the three months ended June 30, 2022. Revenue related to the
origination and sale of residential mortgages decreased by $4.6 million for the
three months ended September 30, 2022, as compared to the three months ended
June 30, 2022.

For-sale mortgage closed loan volume for the three months ended September 30,
2022, decreased 31%, as compared to the three months ended June 30, 2022.
However, the gain on sale margin increased to 2.65% for the three months ended
September 30, 2022, as compared to 2.62% for the three months ended June 30,
2022.

Other (losses) income for the three months ended September 30, 2022 decreased by
$11.4 million, as compared to the three months ended June 30, 2022, primarily
due to an increase in fair value loss on certain loans held for investment to
$26.4 million from $15.2 million, which reduced other income by $11.2 million. A
$3.1 million decline in the gain on swap derivatives was partially offset by a
$1.7 million increase in customer swap fee revenue, as compared to the prior
quarter.

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

Service charges on deposits increased over the nine months ended
September 30, 2021mainly due to higher customer activity.

Brokerage revenue decreased for the nine months ended September 30, 2022compared to the same period of the previous year, due to the sale of Umpqua Investments, Inc. in April 2021.


The decrease in gain on loan and lease sales income for the nine months ended
September 30, 2022, as compared to prior period, was driven by a decrease in SBA
loan sales during the period.

For the nine months ended September 30, 2022, the decrease in other (losses)
income was primarily attributable to a loss on the fair value on certain loans
held for investment of $62.7 million, as compared to a gain of $5.7 million for
the nine months ended September 30, 2021. Additionally, a one-time gain on the
sale of Umpqua Investments, Inc. of $4.4 million was recorded for the nine
months ended September 30, 2021. This was partially offset by a $9.9 million
increase in the gain on swap derivatives and a $5.0 million increase in customer
swap fee revenue, as compared to the prior period.

Residential mortgage banking revenue, which is the primary source of income for
the Mortgage Banking segment, decreased as compared to the nine months ended
September 30, 2021. The variance for the nine months ended September 30, 2022,
as compared to prior periods, was driven by rising long-term interest rates and
attributable to lower revenue from the origination and sale of residential
mortgages, favorable changes in the fair value of the MSR asset, and a loss
taken on the MSR hedge that was put in place during the third quarter of 2022.
The gain on the fair value of the MSR asset due to valuation inputs and
assumptions was $67.5 million, which was partially offset by the MSR hedge loss
of $14.1 million, for the nine months ended September 30, 2022, compared to a
fair value loss of the MSR asset due to valuation inputs of $4.3 million for the
nine months ended September 30, 2021. Revenue related to origination and sale of
residential mortgages decreased by $91.7 million for the nine months ended
September 30, 2022, as compared to the nine months ended September 30, 2021.

For the nine months ended September 30, 2022the volume of closed mortgages for sale decreased by 58% compared to the nine months ended September 30, 2021. Additionally, the gain on sales margin decreased to 2.62% for the nine months ended September 30, 2022compared to 3.46% for the nine months ended
September 30, 2021.


Origination volume is generally linked to the level of interest rates. When
rates fall, origination volume would be expected to be elevated relative to
historical levels. When rates rise, origination volume would be expected to
decline. The MSR asset value is also sensitive to interest rates, and generally
falls with lower rates and rises with higher rates, resulting in fair value
losses and gains, respectively, due to changes in valuation inputs or
assumptions, where applicable. In August 2022, a MSR hedge was put in place as
we work to minimize the interest rate risk of mortgage servicing rights and
reduce net income volatility related to changes in fair value of MSR assets due
to valuation inputs or assumptions.

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The following table presents our residential mortgage banking revenue for the
three months ended September 30, 2022 and June 30, 2022, as well as the nine
months ended September 30, 2022 and 2021:
                                                            Three Months Ended                                     Nine Months Ended
                                                   September 30,
(in thousands)                                         2022             June 30, 2022                September 30, 2022         September 30, 2021
Origination and sale                               $   10,515          $      15,101                $          42,460          $         134,165
Servicing                                               9,529                  9,505                           28,174                     27,379
Change in fair value of MSR asset:
Changes due to collection/realization of expected
cash flows over time                                   (4,978)                (4,961)                         (15,286)                   (13,592)
Changes in valuation inputs or assumptions (1)         16,403                 10,899                           67,451                     (4,326)
  MSR hedge loss                                      (14,128)                     -                          (14,128)                         -

Net income from residential mortgages $17,341 $

   30,544                $         108,671          $         143,626

Loans Held for Sale Production Statistics:
Closed loan volume for-sale                        $  396,979          $     576,532                $       1,622,633          $       3,875,836
Gain on sale margin                                      2.65  %                2.62  %                          2.62  %                    3.46  %


(1)The changes in valuation inputs and assumptions principally reflect changes
in discount rates and prepayment speeds, which are primarily affected by changes
in interest rates.

Non-Interest Expense

The following table presents the key elements of non-interest expense for the
three months ended September 30, 2022 and June 30, 2022, as well as the nine
months ended September 30, 2022 and 2021.
                                                   Three Months Ended                                                              Nine Months Ended
                           September 30,                                                                                  September 30,       September 30,                                  Change
 (in thousands)                2022              June 30, 2022                 Change Amount         Change Percent           2022                2021              Change Amount            Percent
Salaries and employee
benefits                   $  109,164          $      110,942                $       (1,778)                  (2) %       $  333,244          $  363,343          $      (30,099)                 (8) %
Occupancy and equipment,
net                            35,042                  34,559                           483                    1  %          104,430             103,236                   1,194                   1  %
Communications                  2,542                   2,585                           (43)                  (2) %            7,881               8,633                    (752)                 (9) %
Marketing                       1,505                   1,649                          (144)                  (9) %            5,552               5,077                     475                   9  %
Services                       13,355                  14,402                        (1,047)                  (7) %           39,094              36,279                   2,815                   8  %
FDIC assessments                3,007                   2,954                            53                    2  %           10,477               6,342                   4,135                  65  %

Intangible amortization         1,025                   1,026                            (1)                   -  %            3,076               3,390                    (314)                 (9) %
Merger related expenses           769                   2,672                        (1,903)                 (71) %            5,719                   -                   5,719                     nm
Other expenses                 11,555                   8,785                         2,770                   32  %           30,495              34,445                  (3,950)                (11) %
Total non-interest expense $  177,964          $      179,574                $       (1,610)                  (1) %       $  539,968          $  560,745          $      (20,777)                 (4) %
nm = Not meaningful


Comparison of the current quarter with the previous quarter


Merger related expenses, related to the proposed merger with Columbia decreased
$1.9 million during the three months ended September 30, 2022 as compared to the
three months ended June 30, 2022, due to reduced consulting and legal costs
incurred.

Other expenses for the three months ended September 30, 2022 increased compared to the quarter ended June 30, 2022trained by $1.4 million in exit and disposal costs, a $923,000 increase over the previous quarter.

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

Salaries and employee benefits decreased for the nine months ended September 30,
2022, compared to the nine months ended September 30, 2021, primarily due to a
decrease in mortgage banking production related incentive pay during the period,
due to increasing rates suppressing demand for mortgage products.

Merger-related expenses, related to the proposed merger with Colombiawere $5.7 million for the nine months ended September 30, 2022compared to no such expense for the nine months ended September 30, 2021.


Other expenses decreased, as compared to prior periods, due to a decrease in
exit and disposal costs of $4.9 million for the nine months ended September 30,
2022. The prior elevated levels of exit and disposal costs was due to store
consolidations and back-office lease exits as part of Umpqua's Next Gen 2.0
strategy.
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                              FINANCIAL CONDITION

Cash and Cash Equivalents

Cash and cash equivalents were $1.6 billion as of September 30, 2022, compared
to $2.8 billion as of December 31, 2021. The decrease of interest-bearing cash
and temporary investments reflects strong loan portfolio growth of $3.0 billion,
offset by increases in borrowings of $750.0 million and deposits of $222.4
million, respectively, in the period.

Investment security


Investment debt securities available for sale were $3.1 billion as of
September 30, 2022, compared to $3.9 billion at December 31, 2021. The decrease
was due to a decrease of $575.8 million in fair value of investment securities
available for sale, due to the increase in rates during the period, as well as
sales and paydowns of $328.7 million, offset partially by purchases of $175.7
million of investment securities.

The following tables present the portfolio of available-for-sale and held-to-maturity investment debt securities by major category as at September 30, 2022 and
December 31, 2021:

Marketable securities available for sale

                                                           September 30, 2022                           December 31, 2021
 (dollars in thousands)                              Fair Value                %                  Fair Value                  %
U.S. Treasury and agencies                         $    830,813                  26  %       $         918,053                  24  %
Obligations of states and political subdivisions        269,904                   9  %                 330,784                   8  %
Mortgage-backed securities and collateralized
mortgage obligations                                  2,035,674                  65  %               2,621,598                  68  %

Total available for sale securities                $  3,136,391                 100  %       $       3,870,435                 100  %


                                                                        

Marketable securities held to maturity

                                                           September 30, 2022                          December 31, 2021
 (dollars in thousands)                            Amortized Cost             %               Amortized Cost                %

Mortgage-backed securities and collateralized
mortgage obligations                               $     2,547                 100  %       $          2,744                 100  %

Total held to maturity securities                  $     2,547                 100  %       $          2,744                 100  %



We continuously review investment securities for the presence of impairment, considering current market conditions, fair value to cost, magnitude and nature of change in fair value , changes and trends in the issuer’s rating, whether we intend to sell a security or whether it is likely that we will have to sell the security before recovering our amortized cost of the investment, which may be l maturity, and other factors.


Gross unrealized losses in the available for sale investment portfolio were
$569.8 million as of September 30, 2022. This consisted primarily of unrealized
losses on mortgage-backed securities and collateralized mortgage obligations of
$430.4 million. The unrealized losses were attributable to changes in market
interest rates or the widening of market spreads subsequent to the initial
purchase of these securities and are not attributable to changes in credit
quality. In the opinion of management, no ACL was considered necessary on these
debt securities as of September 30, 2022.

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Loans and Leases

Total loans and leases outstanding as of September 30, 2022 were $25.5 billion,
an increase of $3.0 billion as compared to December 31, 2021. The increase is
attributable to new loan and lease originations, with the majority being in
multifamily and residential mortgage loans. The loan to deposit ratio as of
September 30, 2022 is 95%, as compared to 85% as of December 31, 2021.

The following table presents the concentration distribution of the loan and
lease portfolio, net of deferred fees and costs, as of September 30, 2022 and
December 31, 2021:
                                                      September 30, 2022                              December 31, 2021
 (dollars in thousands)                           Amount                     %                    Amount                    %
Commercial real estate
Non-owner occupied term, net               $        3,846,426                  15  %       $       3,786,887                  17  %
Owner occupied term, net                            2,549,761                  10  %               2,332,422                  10  %
Multifamily, net                                    5,090,661                  20  %               4,051,202                  18  %
Construction & development, net                     1,036,931                   4  %                 890,338                   4  %
Residential development, net                          205,935                   1  %                 206,990                   1  %

Commercial

Term, net                                           3,003,424                  12  %               3,008,473                  13  %
Lines of credit & other, net                          914,507                   4  %                 910,733                   4  %
Leases & equipment finance, net                     1,669,817                   6  %               1,467,676                   7  %

Residential

Mortgage, net                                       5,470,624                  21  %               4,517,266                  20  %
Home equity loans & lines, net                      1,565,094                   6  %               1,197,170                   5  %
Consumer & other, net                                 154,771                   1  %                 184,023                   1  %
Total, net of deferred fees and costs      $       25,507,951                 100  %       $      22,553,180                 100  %



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Asset Quality and Non-Performing Assets

The following table summarizes our non-performing assets, TDR loans, ACL and asset quality ratios at September 30, 2022 and December 31, 2021:

        (dollars in thousands)                                     September 30, 2022         December 31, 2021
Loans and leases on non-accrual status
       Commercial real estate, net                                $           5,403          $          5,767
       Commercial, net                                                       18,652                    13,098
       Residential, net                                                           -                         -
       Consumer & other, net                                                      -                         -
       Total loans and leases on non-accrual status                          24,055                    18,865

Loans and leases 90 days or more past due and accrued

       Commercial real estate, net                                                1                         1
       Commercial, net                                                        5,143                     4,160
       Residential, net (1)                                                  21,411                    27,981
       Consumer & other, net                                                    152                       194

Total loans and leases past due 90 days or more and

       accruing (1)                                                          26,707                    32,336
Total non-performing loans and leases                                        50,762                    51,201
Other real estate owned                                                           -                     1,868
Total non-performing assets                                       $          50,762          $         53,069
Restructured loans (2)                                            $           7,076          $          6,694
Allowance for credit losses on loans and leases                   $         283,065          $        248,412
Reserve for unfunded commitments                                             11,853                    12,767
Allowance for credit losses                                       $         294,918          $        261,179
Asset quality ratios:
       Non-performing assets to total assets                                   0.16  %                   0.17  %
       Non-performing loans and leases to total loans and leases               0.20  %                   0.23  %
       Allowance for credit losses on loans and leases to total
       loans and leases                                                        1.11  %                   1.10  %
       Allowance for credit losses to total loans and leases                   1.16  %                   1.16  %
       Allowance for credit losses to total non-performing loans
       and leases                                                               581  %                    510  %


(1)Excludes government guaranteed GNMA mortgage loans that Umpqua has the right
but not the obligation to repurchase that are past due 90 days or more totaling
$1.0 million at September 30, 2022.
(2)Represents accruing TDR loans performing according to their restructured
terms.

A decline in the economic conditions and other factors could adversely impact
individual borrowers or the loan portfolio in general. Accordingly, there can be
no assurance that loans will not become 90 days or more past due, placed on
non-accrual status, restructured or transferred to other real estate owned in
the future.

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Allowance for Credit Losses

The ACL totaled $294.9 million at September 30, 2022, an increase of
$33.7 million from December 31, 2021. The following table shows the activity in
the ACL for the three months ended September 30, 2022 and June 30, 2022, as well
as the nine months ended September 30, 2022 and 2021:
                                                              Three Months Ended                              Nine Months Ended
                                                     September 30,                                    September 30,       September 30,
(dollars in thousands)                                   2022             June 30, 2022                   2022                2021
Allowance for credit losses on loans and leases
Balance, beginning of period                         $  261,111          $     248,564                $  248,412          $  328,401

Allowance (recovery) for credit losses on loans and leases

                                                   28,542                 18,787                    53,025             (33,381)

Landfills

          Commercial real estate, net                         -                     (8)                       (8)             (1,086)
          Commercial, net                                (9,459)                (9,035)                  (26,352)            (44,228)
          Residential, net                                   (4)                     -                      (171)                (70)
          Consumer & other, net                            (929)                  (836)                   (2,650)             (2,983)
          Total charge-offs                             (10,392)                (9,879)                  (29,181)            (48,367)

Collections

          Commercial real estate, net                       123                     73                       221                 589
          Commercial, net                                 2,842                  2,934                     8,321               8,118
          Residential, net                                  249                    216                       638                 598
          Consumer & other, net                             590                    416                     1,629               1,602
          Total recoveries                                3,804                  3,639                    10,809              10,907

Net recoveries (debits)

          Commercial real estate, net                       123                     65                       213                (497)
          Commercial, net                                (6,617)                (6,101)                  (18,031)            (36,110)
          Residential, net                                  245                    216                       467                 528
          Consumer & other, net                            (339)                  (420)                   (1,021)             (1,381)
Total net charge-offs                                    (6,588)                (6,240)                  (18,372)            (37,460)
Balance, end of period                               $  283,065          $     261,111                $  283,065          $  257,560
Reserve for unfunded commitments
Balance, beginning of period                         $   12,823          $      12,918                $   12,767          $   20,286

(Recapture) allowance for credit losses on unfunded commitments

                                                (970)                   (95)                     (914)             (8,534)
Balance, end of period                                   11,853                 12,823                    11,853              11,752
Total allowance for credit losses                    $  294,918          $     273,934                $  294,918          $  269,312
As a percentage of average loans and leases
(annualized):
Net charge-offs                                            0.11  %                0.11  %                   0.10  %             0.23  %
Provision (recapture) for credit losses                    0.44  %                0.32  %                   0.29  %            (0.26) %
Recoveries as a percentage of charge-offs                 36.61  %               36.84  %                  37.04  %            22.55  %



The provision for credit losses includes the provision (recapture) for loan and
lease losses and the (recapture) provision for unfunded commitments. The
increase in the provision is due to organic loan growth as well as updates to
the economic forecasts used in credit models.

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The following table sets forth the allocation of the allowance for credit losses
on loans and leases and percent of loans in each category to total loans and
leases as of September 30, 2022 and December 31, 2021:
                                                   September 30, 2022                         December 31, 2021
                                                                 % Loans to                                % Loans to
 (dollars in thousands)                       Amount             total loans            Amount             total loans
Commercial real estate                     $   85,543                    50  %       $   99,075                    50  %
Commercial                                    151,600                    22  %          117,573                    24  %
Residential                                    41,138                    27  %           29,068                    25  %
Consumer & other                                4,784                     1  %            2,696                     1  %

Allowance for credit losses on loans and
leases                                     $  283,065                                $  248,412


The following table shows the evolution of the provision for credit losses
June 30, 2022 at September 30, 2022:

                                                                 Q3 2022 net
                                                                (charge-offs)                 Reserve              September 30,       % of Loan and leases
(dollars in thousands)                 June 30, 2022              recoveries              build/(release)              2022                outstanding
Commercial real estate                $      96,334          $             123          $          (5,557)         $   90,900                       0.71  %
Commercial                                  133,687                     (6,617)                    27,341             154,411                       2.76  %
Residential                                  39,321                        245                      4,611              44,177                       0.63  %
Consumer & Other                              4,592                       (339)                     1,177               5,430                       3.51  %
Total allowance for credit
losses                                $     273,934          $          (6,588)         $          27,572          $  294,918                       1.16  %
% of loans and leases
outstanding                                    1.12  %                                                                   1.16  %



To calculate the ACL, the CECL models use a forecast of future economic
conditions and are dependent upon specific macroeconomic variables that are
relevant to each of the Bank's loan and lease portfolios. For the third quarter
of 2022, the Bank used Moody's Analytics' August consensus economic forecast,
which shows a worsening economic situation from the forecast used in the prior
quarter. Key components include U.S. real GDP average annualized growth of 1.7%
in 2022, decreasing to 1.3% in 2023, 1.7% in 2024, and 1.9% in 2025, and an
average unemployment rate of 3.6% in 2022, 3.9% in 2023, 4.0% in 2024, and 3.9%
in 2025. The forecasted average federal funds rate is expected to be 3.2% in Q4
2022, 3.3% in 2023, 2.8% in 2024, and 2.6% in 2025. The models for calculating
the ACL are sensitive to changes in these and other economic variables, which
could result in volatility as these assumptions change over time.

We believe that the ACL as of September 30, 2022 is sufficient to absorb losses
inherent in the loan and lease portfolio and in credit commitments outstanding
as of that date based on the information available. If the economic conditions
decline, the Bank may need additional provisions for credit losses in future
periods.

Residential Mortgage Service Fees


The following table presents the changes in our residential MSR portfolio for
the three months ended September 30, 2022 and June 30, 2022, as well as the nine
months ended September 30, 2022 and 2021:
                                                            Three Months Ended                               Nine Months Ended
                                                   September 30,                                     September 30,       September 30,
 (in thousands)                                        2022              June 30, 2022                   2022                2021
Balance, beginning of period                       $  179,558          $      165,807                $  123,615          $   92,907
Additions for new MSR capitalized                       5,194                   7,813                    20,397              30,845

Changes in fair value:
Changes due to collection/realization of expected
cash flows over time                                   (4,978)                 (4,961)                  (15,286)            (13,592)
Changes due to valuation inputs or assumptions (1)     16,403                  10,899                    67,451              (4,326)
Balance, end of period                             $  196,177          $      179,558                $  196,177          $  105,834


(1)The changes in valuation inputs and assumptions principally reflect changes
in discount rates and prepayment speeds, which are primarily affected by changes
in interest rates.

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Table of Contents Information about our serviced residential loan portfolio
September 30, 2022 and December 31, 2021 was as follows: (dollars in thousands)

                   September 30, 2022       December 31, 2021
Balance of loans serviced for others    $       12,997,911       $      12,755,671
MSR as a percentage of serviced loans                 1.51  %               

0.97%




Residential MSR are adjusted to fair value quarterly with the change recorded in
residential mortgage banking revenue. The value of servicing rights can
fluctuate based on changes in interest rates and other factors. Generally, as
interest rates decline and borrowers are able to take advantage of a refinance
incentive, prepayments increase, and the total value of existing servicing
rights declines as expectations of future servicing fee collections decline.
Historically, the fair value of our residential MSR will increase as market
rates for mortgage loans rise and decrease if market rates fall. Mortgage rates
increased during the period and are expected to continue to rise, which has
caused prepayment speeds to slow.

Due to changes to inputs in the valuation model including changes in discount
rates and prepayment speeds, the fair value of the MSR asset increased by $16.4
million and $67.5 million for the three and nine months ended September 30,
2022, as compared to an increase of $10.9 million for the three months ended
June 30, 2022 and a decrease of $4.3 million for the nine months ended
September 30, 2021. The fair value of the MSR asset decreased by $5.0 million
and $15.3 million, due to the passage of time, including the impact of regularly
scheduled repayments, paydowns and payoffs during the three and nine months
ended September 30, 2022, as compared to a decrease of $5.0 million for the
three months ended June 30, 2022 and $13.6 million for the nine months ended
September 30, 2021.

Deposits

Total deposits were $26.8 billion at September 30, 2022, an increase of $222.4
million, as compared to December 31, 2021. The increase is mainly attributable
to growth in non-interest and interest bearing demand and savings accounts,
partially offset by decreases in time and money market deposits.

The following table presents the deposit balances by category at
September 30, 2022 and December 31, 2021:

                                    September 30, 2022                 December 31, 2021
 (dollars in thousands)              Amount              %             Amount              %
Non-interest bearing demand   $       11,246,358        42  %    $      11,023,724        41  %
Interest bearing demand                3,903,746        15  %            3,774,937        14  %
Money market                           7,601,506        28  %            7,611,718        29  %
Savings                                2,455,917         9  %            2,375,723         9  %
Time, greater than $250,000              410,199         2  %              480,432         2  %
Time, $250,000 or less                 1,199,381         4  %            1,328,151         5  %
Total deposits                $       26,817,107       100  %    $      26,594,685       100  %



The Company's total core deposits, which are deposits less time deposits greater
than $250,000 and all brokered deposits, were $26.3 billion at September 30,
2022, compared to $26.0 billion at December 31, 2021. The Company's brokered
deposits totaled $114.4 million at September 30, 2022, compared to $149.9
million at December 31, 2021.

Loans


At September 30, 2022, the Bank had outstanding securities sold under agreements
to repurchase of $383.6 million, a decrease of $108.7 million from December 31,
2021. The Bank had outstanding borrowings consisting of advances from the FHLB
of $756.2 million at September 30, 2022 and $6.3 million at December 31, 2021.
The increase was due to $750.0 million in short-term advances, which have fixed
rates ranging from 3.31% to 3.80% and are set to mature before the end of 2022.
The remaining advance has a fixed interest rate of 7.10% and matures in 2030.
Advances from the FHLB are secured by investment securities and loans secured by
real estate.
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Junior Subordinated Debentures

We had junior subordinated debentures with carrying values of $413.6 million and
$381.1 million at September 30, 2022 and December 31, 2021, respectively. The
increase is mainly due to the $31.8 million change in fair value for the junior
subordinated debentures elected to be carried at fair value, which is due to an
increase in the implied forward curve resulting in increased cash flows,
partially offset by an increase in the discount rate. As of September 30, 2022,
substantially all of the junior subordinated debentures had interest rates that
are adjustable on a quarterly basis based on a spread over three-month
LIBOR. These instruments mature after June 2023, and we anticipate they will be
covered under pending federal legislation that will allow us to replace the
LIBOR index with SOFR under a safe-harbor provision.

Liquidity and cash flow


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

We monitor the sources and uses of funds on a daily basis to maintain an
acceptable liquidity position. One source of funds includes public deposits.
Individual state laws require banks to collateralize public deposits, typically
as a percentage of their public deposit balance in excess of FDIC
insurance. Public deposits represented 6% and 5% of total deposits at
September 30, 2022 and December 31, 2021, respectively. The amount of collateral
required varies by state and may also vary by institution within each state,
depending on the individual state's risk assessment of depository institutions.
Changes in the pledging requirements for uninsured public deposits may require
pledging additional collateral to secure these deposits, drawing on other
sources of funds to finance the purchase of assets that would be available to be
pledged to satisfy a pledging requirement, or could lead to the withdrawal of
certain public deposits from the Bank. In addition to liquidity from core
deposits and the repayments and maturities of loans and investment securities,
the Bank can utilize established uncommitted federal funds lines of credit, sell
securities under agreements to repurchase, borrow on a secured basis from the
FHLB or issue brokered certificates of deposit.

The Bank had available lines of credit with the FHLB totaling $9.3 billion at
September 30, 2022, subject to certain collateral requirements, namely the
amount of pledged loans and investment securities. The Bank had available lines
of credit with the Federal Reserve totaling $1.2 billion, subject to certain
collateral requirements, namely the amount of certain pledged loans. The Bank
had uncommitted federal funds line of credit agreements with additional
financial institutions totaling $460.0 million at September 30, 2022.
Availability of these lines is subject to federal funds balances available for
loan and continued borrower eligibility. These lines are intended to support
short-term liquidity needs, and the agreements may restrict consecutive day
usage.

The Company is a separate entity from the Bank and must provide for its own
liquidity. Substantially all of the Company's revenues are obtained from
dividends declared and paid by the Bank. There were $144.0 million of dividends
paid by the Bank to the Company in the nine months ended September 30, 2022.
There are statutory and regulatory provisions that limit the ability of the Bank
to pay dividends to the Company. FDIC and Oregon Division of Financial
Regulation approval is required for quarterly dividends from Umpqua Bank to the
Company.

As disclosed in the Condensed Consolidated Statements of Cash Flows, net cash
provided by operating activities was $904.7 million during the nine months ended
September 30, 2022, with the difference between cash provided by operating
activities and net income consisting primarily of proceeds from the sale of
loans held for sale of $1.8 billion, the increase in other liabilities of $248.4
million, and the decrease in other assets of $203.8 million, offset by
originations of loans held for sale of $1.6 billion. This compares to net cash
provided by operating activities of $541.5 million during the nine months ended
September 30, 2021, with the difference between cash provided by operating
activities and net income consisting primarily of proceeds from the sale of
loans held for sale of $4.1 billion, and the decrease in other assets of $161.1
million, offset by originations of loans held for sale of $3.9 billion, the gain
on sale of loans of $124.8 million, and the recapture of provision for loan and
lease losses of $41.9 million.

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Net cash of $2.8 billion used in investing activities during the nine months
ended September 30, 2022, consisted principally of net change in loans of $3.1
billion, purchases of available for sale investment securities of $175.7 million
and purchases of restricted equity securities of $164.3 million offset by
proceeds from available for sale investment securities of $328.7 million,
redemption of restricted equity securities of $134.3 million and the proceeds
from sales of loans and leases of $111.6 million. This compares to net cash of
$764.9 million used in investing activities during the nine months ended
September 30, 2021, consisted principally of purchases of available for sale
investment securities of $1.5 billion, and net loan originations of $85.5
million, offset by proceeds from available for sale investment securities of
$578.2 million and the proceeds from sales of loans and leases of $182.6
million.

Net cash of $723.0 million provided by financing activities during the nine
months ended September 30, 2022, primarily consisted of $750.0 million proceeds
from borrowings and $222.4 million net increase in deposit liabilities,
partially offset by $136.7 million of dividends paid on common stock and the net
decrease in securities sold under agreements to repurchase of $108.7 million.
This compares to net cash of $1.4 billion provided by financing activities
during the nine months ended September 30, 2021, primarily consisted of $2.3
billion net increase in deposits and the net increase in securities sold under
agreements to repurchase of $92.4 million, offset by $765.0 million repayment of
borrowings, $138.2 million of dividends paid on common stock, and the repurchase
and retirement of common stock of $80.7 million.

Although we expect the Bank's and the Company's liquidity positions to remain
satisfactory during 2022, it is possible that our deposit balances may not be
maintained at previous levels due to pricing pressure or customers' behavior in
the current economic environment. In addition, in order to generate deposit
growth, our pricing may need to be adjusted in a manner that results in
increased interest expense on deposits. We may utilize borrowings or other
funding sources, which are generally more costly than deposit funding, to
support our liquidity levels.

Off-balance sheet arrangements

Information regarding off-balance sheet arrangements is included in Note 6 of the Notes to the Condensed Consolidated Financial Statements.

Credit risk concentrations

Information regarding credit risk concentrations is included in note 6 of the notes to the condensed consolidated financial statements.

Capital resources


Shareholders' equity at September 30, 2022 was $2.4 billion. The decrease in
shareholders' equity during the nine months ended September 30, 2022 was
principally due to the other comprehensive loss, net of tax, of $451.3 million
and cash dividends paid of $137.4 million offset by net income of $253.8 million
during the period.

The Company's dividend policy considers, among other things, earnings,
regulatory capital levels, the overall payout ratio and expected asset growth to
determine the amount of dividends declared, if any, on a quarterly basis. There
is no assurance that future cash dividends on common shares will be declared or
increased. We cannot predict the extent of the economic decline that could
result in inadequate earnings, regulatory restrictions and limitations, changes
to our capital requirements, or a decision to increase capital by retention of
earnings, that may result in the inability to pay dividends at previous levels,
or at all. Umpqua agreed to refrain from paying quarterly cash dividends in
excess of the then-current level ($0.21 per share) at the time we entered into
the Merger Agreement.

On July 20, 2022, the Company declared a cash dividend in the amount of $0.21
per common share based on second quarter 2022 performance, which was paid on
August 15, 2022. The Company also declared a quarterly cash dividend, based on
third quarter 2022 performance, of $0.21 per common share, paid on October 28,
2022, to shareholders of record as of October 14, 2022.

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The following table presents cash dividends declared and dividend payout ratios
(dividends declared per common share divided by basic earnings per common share)
for the three months ended September 30, 2022 and June 30, 2022, and the nine
months ended September 30, 2022 and September 30, 2021:
                                                        Three Months Ended                      Nine Months Ended
                                             September 30, 2022         June 30, 2022               September 30, 2022          September 30, 2021
Dividend declared per common share          $           0.21           $       0.21                $           0.63            $           0.63
Dividend payout ratio                                     54   %                 58  %                           54    %                     42    %



In July 2021, the Company announced that its Board of Directors approved a share
repurchase program, which authorized the Company to repurchase up to $400
million of common stock from time to time in open market transactions,
accelerated share repurchases, or in privately negotiated transactions as
permitted under applicable rules and regulations. As of September 30, 2022, the
Company repurchased a total of $78.2 million in shares under the program. During
the nine months ended September 30, 2022, no shares were repurchased under the
program and the program expired July 31, 2022.

The Company halted repurchases, based on the announced merger with Columbia and
in accordance with the Merger Agreement. The timing and amount of future
repurchases would depend upon the market price for our common stock, securities
laws restricting repurchases, asset growth, earnings, our capital plan, and bank
or bank holding company regulatory approvals. In addition, our stock plans
provide that award holders may pay for the exercise price and tax withholdings
in part or entirely by tendering previously held shares.


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Table of contents The following table presents the consolidated capital adequacy ratios of the Company and the Bank in relation to the minimum regulatory capital ratio and the minimum regulatory capital ratio necessary to qualify as a “well capitalized” institution. », as calculated according to the regulatory guidelines of Basel III to
September 30, 2022 and December 31, 2021:


                                              Actual                          For Capital Adequacy purposes                  To be Well Capitalized
  (dollars in thousands)           Amount                Ratio                 Amount                Ratio                Amount                 Ratio
September 30, 2022
Total Capital (to Risk Weighted Assets)
Consolidated                   $ 3,589,092                 13.18  %       $   2,177,922                 8.00  %       $  2,722,403                 10.00  %
Umpqua Bank                    $ 3,374,328                 12.40  %       $   2,177,601                 8.00  %       $  2,722,002                 10.00  %
Tier I Capital (to Risk Weighted Assets)
Consolidated                   $ 2,895,554                 10.64  %       $   1,633,442                 6.00  %       $  2,177,922                  8.00  %
Umpqua Bank                    $ 3,131,788                 11.51  %       $   1,633,201                 6.00  %       $  2,177,601                  8.00  %
Tier I Common (to Risk Weighted Assets)
Consolidated                   $ 2,895,554                 10.64  %       $   1,225,081                 4.50  %       $  1,769,562                  6.50  %
Umpqua Bank                    $ 3,131,788                 11.51  %       $   1,224,901                 4.50  %       $  1,769,301                  6.50  %
Tier I Capital (to Average
Assets)
Consolidated                   $ 2,895,554                  9.35  %       $   1,238,774                 4.00  %       $  1,548,467                  5.00  %
Umpqua Bank                    $ 3,131,788                 10.11  %       $   1,239,024                 4.00  %       $  1,548,780                  5.00  %
December 31, 2021
Total Capital (to Risk Weighted Assets)
Consolidated                   $ 3,429,047                 14.26  %       $   1,923,934                 8.00  %       $  2,404,917                 10.00  %
Umpqua Bank                    $ 3,085,848                 12.83  %       $   1,924,015                 8.00  %       $  2,405,019                 10.00  %
Tier I Capital (to Risk Weighted Assets)
Consolidated                   $ 2,785,794                 11.58  %       $   1,442,950                 6.00  %       $  1,923,934                  8.00  %
Umpqua Bank                    $ 2,893,593                 12.03  %       $   1,443,011                 6.00  %       $  1,924,015                  8.00  %
Tier I Common (to Risk Weighted Assets)
Consolidated                   $ 2,785,794                 11.58  %       $   1,082,213                 4.50  %       $  1,563,196                  6.50  %
Umpqua Bank                    $ 2,893,593                 12.03  %       $   1,082,258                 4.50  %       $  1,563,262                  6.50  %
Tier I Capital (to Average
Assets)
Consolidated                   $ 2,785,794                  9.01  %       $   1,236,265                 4.00  %       $  1,545,331                  5.00  %
Umpqua Bank                    $ 2,893,593                  9.36  %       $   1,236,518                 4.00  %       $  1,545,648                  5.00  %



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

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