# EDGAR Filing Document

**Accession Number:** 0001077771
**File Stem:** 0001077771-23-000012
**Filing Date:** 2023-2
**Character Count:** 620300
**Document Hash:** 239ed3179a97cff7390c0ca18c57baca
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001077771-23-000012.hdr.sgml**: 20230224

**ACCESSION NUMBER**: 0001077771-23-000012

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 157

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230224

**DATE AS OF CHANGE**: 20230224

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** UMPQUA HOLDINGS CORP
- **CENTRAL INDEX KEY:** 0001077771
- **STANDARD INDUSTRIAL CLASSIFICATION:** SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035]
- **IRS NUMBER:** 931261319
- **STATE OF INCORPORATION:** OR
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-34624
- **FILM NUMBER:** 23667958

**BUSINESS ADDRESS:**
- **STREET 1:** ONE SW COLUMBIA STREET
- **STREET 2:** SUITE 1200
- **CITY:** PORTLAND
- **STATE:** OR
- **ZIP:** 97204
- **BUSINESS PHONE:** 503-727-4100

**MAIL ADDRESS:**
- **STREET 1:** ONE SW COLUMBIA STREET
- **STREET 2:** SUITE 1200
- **CITY:** PORTLAND
- **STATE:** OR
- **ZIP:** 97204

?xml version="1.0" ? umpq-20221231

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-K** 

---

| | | |
|:---|:---|:---|
| ☒ | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** | **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| | For the fiscal year ended: | December 31, 2022 |

---

**OR**

---

| | |
|:---|:---|
| ☐ | **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
| | for the transition period from to . |

---

Commission file number: **001-34624** 

**Umpqua Holdings Corporation** 

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Oregon** | **93-1261319** |
| (State or other jurisdiction | (I.R.S. Employer Identification No.) |
| of incorporation or organization) | of incorporation or organization) |

---

**5885 Meadows Road, Suite 400** 

**Lake Oswego, Oregon 97035** 

(Address of Principal Executive Offices)(Zip Code)

**(503) 727-4100** 

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| <u>TITLE OF EACH CLASS</u> | <u>TRADING SYMBOL</u> | <u>NAME OF EXCHANGE</u> |
| **Common Stock** | **UMPQ** | **The Nasdaq Global Select Market** |

---

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. &nbsp;&nbsp;&nbsp;&nbsp; Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. &nbsp;&nbsp;&nbsp;&nbsp; Yes ☐ No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.&nbsp;&nbsp;&nbsp;&nbsp;Yes ☒&nbsp;&nbsp;&nbsp;&nbsp;No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).&nbsp;&nbsp;&nbsp;&nbsp;Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | ☒ | Accelerated filer | ☐ |
| Non-accelerated filer  | ☐ | Smaller reporting company | ☐ |
| | | Emerging growth company | ☐ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statement of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). &nbsp;&nbsp;&nbsp;&nbsp;Yes ☐ No ☒

The aggregate market value of the voting common stock held by non-affiliates of the registrant as of June 30, 2022, based on the closing price on that date of $16.77 per share, and 137,740,176 shares held was $2,309,902,752.

The registrant had outstanding 217,054,807 shares of common stock as of January 31, 2023.

**DOCUMENTS INCORPORATED BY REFERENCE**

None

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**UMPQUA HOLDINGS CORPORATION** 

**FORM 10-K CROSS REFERENCE INDEX**

---

| | | |
|:---|:---|:---|
| **<u>[GLOSSARY](#i4e8ac2707a6d44908312b6c1bbd97512_10)</u>** | | <u>[3](#i4e8ac2707a6d44908312b6c1bbd97512_10)</u> |
| **<u>[PART I](#i4e8ac2707a6d44908312b6c1bbd97512_13)</u>** | **<u>[PART I](#i4e8ac2707a6d44908312b6c1bbd97512_13)</u>** | <u>[6](#i4e8ac2707a6d44908312b6c1bbd97512_13)</u> |
| | **<u>[ITEM 1. BUSINESS](#i4e8ac2707a6d44908312b6c1bbd97512_16)</u>** | <u>[6](#i4e8ac2707a6d44908312b6c1bbd97512_16)</u> |
| | **<u>[ITEM 1A. RISK FACTORS](#i4e8ac2707a6d44908312b6c1bbd97512_34)</u>** | <u>[20](#i4e8ac2707a6d44908312b6c1bbd97512_34)</u> |
| | **<u>[ITEM 1B. UNRESOLVED STAFF COMMENTS](#i4e8ac2707a6d44908312b6c1bbd97512_37)</u>** | <u>[33](#i4e8ac2707a6d44908312b6c1bbd97512_37)</u> |
| | **<u>[ITEM 2. PROPERTIES](#i4e8ac2707a6d44908312b6c1bbd97512_40)</u>** | <u>[33](#i4e8ac2707a6d44908312b6c1bbd97512_40)</u> |
| | **<u>[ITEM 3. LEGAL PROCEEDINGS](#i4e8ac2707a6d44908312b6c1bbd97512_43)</u>** | <u>[33](#i4e8ac2707a6d44908312b6c1bbd97512_43)</u> |
| | **<u>[ITEM 4. MINE SAFETY DISCLOSURES](#i4e8ac2707a6d44908312b6c1bbd97512_46)</u>** | <u>[33](#i4e8ac2707a6d44908312b6c1bbd97512_46)</u> |
| **<u>[PART II](#i4e8ac2707a6d44908312b6c1bbd97512_49)</u>** | **<u>[PART II](#i4e8ac2707a6d44908312b6c1bbd97512_49)</u>** | <u>[34](#i4e8ac2707a6d44908312b6c1bbd97512_49)</u> |
| | **<u>[ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](#i4e8ac2707a6d44908312b6c1bbd97512_52)</u>** | <u>[34](#i4e8ac2707a6d44908312b6c1bbd97512_52)</u> |
| | **<u>[ITEM 6.](#i4e8ac2707a6d44908312b6c1bbd97512_55)[R](#i4e8ac2707a6d44908312b6c1bbd97512_55)ESERVED</u>** | <u>[35](#i4e8ac2707a6d44908312b6c1bbd97512_55)</u> |
| | **<u>[ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](#i4e8ac2707a6d44908312b6c1bbd97512_61)</u>** | <u>[36](#i4e8ac2707a6d44908312b6c1bbd97512_61)</u> |
| | **<u>[ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](#i4e8ac2707a6d44908312b6c1bbd97512_136)</u>** | <u>[57](#i4e8ac2707a6d44908312b6c1bbd97512_136)</u> |
| | **<u>[ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](#i4e8ac2707a6d44908312b6c1bbd97512_139)</u>** | <u>[63](#i4e8ac2707a6d44908312b6c1bbd97512_139)</u> |
| | **<u>[ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](#i4e8ac2707a6d44908312b6c1bbd97512_265)</u>** | <u>[129](#i4e8ac2707a6d44908312b6c1bbd97512_265)</u> |
| | **<u>[ITEM 9A. CONTROLS AND PROCEDURES](#i4e8ac2707a6d44908312b6c1bbd97512_268)</u>** | <u>[129](#i4e8ac2707a6d44908312b6c1bbd97512_268)</u> |
| | **<u>[ITEM 9B. OTHER INFORMATION](#i4e8ac2707a6d44908312b6c1bbd97512_271)</u>** | <u>[130](#i4e8ac2707a6d44908312b6c1bbd97512_271)</u> |
| | **<u>[ITEM 9C](#i4e8ac2707a6d44908312b6c1bbd97512_274)[. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](#i4e8ac2707a6d44908312b6c1bbd97512_274)</u>** | <u>[130](#i4e8ac2707a6d44908312b6c1bbd97512_274)</u> |
| **<u>[PART III](#i4e8ac2707a6d44908312b6c1bbd97512_277)</u>** | **<u>[PART III](#i4e8ac2707a6d44908312b6c1bbd97512_277)</u>** | <u>[131](#i4e8ac2707a6d44908312b6c1bbd97512_277)</u> |
| | **<u>[ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](#i4e8ac2707a6d44908312b6c1bbd97512_280)</u>** | <u>[131](#i4e8ac2707a6d44908312b6c1bbd97512_280)</u> |
| | **<u>[ITEM 11. EXECUTIVE COMPENSATION](#i4e8ac2707a6d44908312b6c1bbd97512_286)</u>** | <u>[135](#i4e8ac2707a6d44908312b6c1bbd97512_286)</u> |
| | **<u>[ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](#i4e8ac2707a6d44908312b6c1bbd97512_292)</u>** | <u>[155](#i4e8ac2707a6d44908312b6c1bbd97512_292)</u> |
| | **<u>[ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](#i4e8ac2707a6d44908312b6c1bbd97512_295)</u>** | <u>[157](#i4e8ac2707a6d44908312b6c1bbd97512_295)</u> |
| | **<u>[ITEM 14. PRINCIPAL ACCOUNT](#i4e8ac2707a6d44908312b6c1bbd97512_301)[ANT](#i4e8ac2707a6d44908312b6c1bbd97512_301)[FEES AND SERVICES](#i4e8ac2707a6d44908312b6c1bbd97512_301)</u>** | <u>[158](#i4e8ac2707a6d44908312b6c1bbd97512_301)</u> |
| **<u>[PART IV](#i4e8ac2707a6d44908312b6c1bbd97512_304)</u>** | **<u>[PART IV](#i4e8ac2707a6d44908312b6c1bbd97512_304)</u>** | <u>[160](#i4e8ac2707a6d44908312b6c1bbd97512_304)</u> |
| | **<u>[ITEM 15. EXHIBITS](#i4e8ac2707a6d44908312b6c1bbd97512_307)[AND](#i4e8ac2707a6d44908312b6c1bbd97512_307)[FINANCIAL STATEMENT SCHEDULES](#i4e8ac2707a6d44908312b6c1bbd97512_307)</u>** | <u>[160](#i4e8ac2707a6d44908312b6c1bbd97512_307)</u> |
| | **<u>[ITEM 16. FORM 10-K SUMMARY](#i4e8ac2707a6d44908312b6c1bbd97512_310)</u>** | <u>[160](#i4e8ac2707a6d44908312b6c1bbd97512_310)</u> |
| **<u>[EXHIBIT INDEX](#i4e8ac2707a6d44908312b6c1bbd97512_313)</u>** | **<u>[EXHIBIT INDEX](#i4e8ac2707a6d44908312b6c1bbd97512_313)</u>** | <u>[161](#i4e8ac2707a6d44908312b6c1bbd97512_313)</u> |
| **<u>[SIGNATURES](#i4e8ac2707a6d44908312b6c1bbd97512_316)</u>** | **<u>[SIGNATURES](#i4e8ac2707a6d44908312b6c1bbd97512_316)</u>** | <u>[163](#i4e8ac2707a6d44908312b6c1bbd97512_316)</u> |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The acronyms, abbreviations, and terms listed below are used in various sections of this Form 10-K, including "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements and Supplementary Data."

---

| | |
|:---|:---|
| **GLOSSARY OF DEFINED TERMS** | **GLOSSARY OF DEFINED TERMS** |
| 2013 Plan | The Company's 2013 Incentive Plan |
| ACL | Allowance for credit losses |
| ACLLL | Allowance for credit losses on loans and leases |
| ALCO | Asset/Liability Management Committee |
| ARRC | Alternative Reference Rates Committee |
| ASC | Accounting Standards Codification |
| ASC Topic 326 | Accounting Standards Codification section also known as Current Expected Credit Losses |
| ASU | Accounting Standards Update |
| ATM | Automated teller machine |
| Bank | Umpqua Bank |
| Bank Merger | The proposed merger of Columbia State Bank, a Washington state-chartered bank and a wholly owned subsidiary of Columbia, with the Bank, with the Bank as the surviving bank |
| Basel III | Basel capital framework (third accord) |
| BIPOC | Black, Indigenous, and People of Color |
| Board | The Company's Board of Directors |
| BOLI | Bank owned life insurance |
| CARES Act | Coronavirus Aid, Relief and Economic Security Act |
| CD&A | Compensation Discussion and Analysis |
| CDL | Collateral-dependent loans |
| CECL | Current Expected Credit Losses (ASU 2016-13, ASC Topic 326) |
| CET1 | Common Equity Tier 1 |
| CFPB | Consumer Financial Protection Bureau |
| Columbia | Columbia Banking System, Inc. |
| Company | Umpqua Holdings Corporation and its subsidiaries |
| COVID-19 | Coronavirus Disease 2019 |
| CRA | Community Reinvestment Act of 1977 |
| CVA | Credit valuation adjustments |
| DCBS | Oregon Department of Consumer and Business Services Division of Financial Regulation |
| DCF | Discounted cash flow |
| DCP | Deferred compensation plan |
| DFAST | Dodd-Frank Act capital stress testing |
| Dodd-Frank Act | Dodd-Frank Wall Street Reform and Consumer Protection Act |
| DTA | Deferred tax assets |
| ERISA | Employment Retirement Income Security Act of 1974 |
| ESG | Environmental, Social, and Governance |
| FASB | Financial Accounting Standards Board |
| FDIC | Federal Deposit Insurance Corporation |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | |
|:---|:---|
| **GLOSSARY OF DEFINED TERMS (CONTINUED)** | **GLOSSARY OF DEFINED TERMS (CONTINUED)** |
| FDICIA | Federal Deposit Insurance Corporation Improvement Act of 1991 |
| Federal Reserve | Board of Governors of the Federal Reserve System |
| FHLB | Federal Home Loan Bank |
| FinPac | Financial Pacific Leasing, Inc. |
| Fintech | Financial technology |
| FRB | Federal Reserve Bank |
| GAAP | Generally accepted accounting principles |
| GDP | Gross Domestic Product |
| GLB Act | Gramm-Leach-Bliley Act of 1999 |
| GNMA | Government National Mortgage Association |
| HELOC | Home equity line of credit |
| HUD | United States Department of Housing and Urban Development |
| ICE | Intercontinental Exchange |
| LGD | Loss given default |
| LIBOR | London Inter-Bank Offered Rate |
| LTI | Long-term incentives |
| Mergers | Merger Sub will merge with and into Umpqua, with Umpqua as the surviving entity, and immediately following such merger, Umpqua will merge with and into Columbia, with Columbia as the surviving corporation. |
| Merger Agreement | Agreement dated as of October 11, 2021, by and among Umpqua, Columbia, and Merger Sub |
| Merger Sub | Cascade Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Columbia |
| MSR | Mortgage servicing rights |
| NEO | Named Executive Officer |
| NOL | Net operating loss |
| OCC | Office of the Comptroller of the Currency |
| OEPS | Operating earnings per share |
| PD | Probability of default |
| PGE | Portland General Electric Company |
| PSA | Performance share awards |
| Riegle-Neal Act | Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 |
| ROATCE | Return on average tangible common equity |
| ROU | Right-of-use |
| RSA | Restricted stock awards |
| RSU | Restricted stock units |
| RUC | Reserve for unfunded commitments |
| SBA | Small Business Administration |
| SEC | Securities and Exchange Commission |
| SOFR | Secured Overnight Financing Rate |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | |
|:---|:---|
| **GLOSSARY OF DEFINED TERMS (CONTINUED)** | **GLOSSARY OF DEFINED TERMS (CONTINUED)** |
| SRP | Supplemental retirement plan |
| SRP/DCP | Umpqua Holdings Corporation Supplemental Retirement & Deferred Compensation Plan |
| STI | Short-term incentives |
| TDR | Troubled debt restructured |
| TSR | Total shareholder return |
| Trusts | 23 trusts wholly-owned by the Company |
| USD | United States dollar |
| USDA | United States Department of Agriculture |
| Umpqua | Umpqua Holdings Corporation and its subsidiaries |
| Umpqua 401(k) Plan | Umpqua Bank 401(k) and Profit Sharing Plan |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**PART I**

**ITEM 1. BUSINESS.** 

In this Annual Report on Form 10-K, we refer to Umpqua Holdings Corporation as the "Company," "Umpqua," "we," "us," "our," or similar references.

This Annual Report on Form 10-K contains 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 benefits of the proposed transaction with Columbia; the plans, objectives, expectations, and intentions of Umpqua and Columbia; the expected timing of completion of the proposed transaction with Columbia; Next Gen 2.0 initiatives including store consolidations, new products and services, technology initiatives, operational improvements, and facilities rationalizations; 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 restructuring; our commercial real estate portfolio, its collectability and subsequent charge-offs; resolution of non-accrual loans; mortgage volumes and the impact of rate changes; planned changes in our home lending division; the economic environment; litigation; dividends; junior subordinated debentures; fair values of certain assets and liabilities, including mortgage servicing rights 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 that could cause results to differ from forward-looking statements we make are set forth in our filings with the SEC and include, without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in general economic, political, or industry conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• deterioration in economic conditions that could result in increased loan and lease losses, especially those risks associated with concentrations in real estate related loans;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• volatility and disruptions in global capital and credit markets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• movements in interest rates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• transition of LIBOR to other indexes including SOFR;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• competitive pressures, including on product pricing and services;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to attract new deposits and loans and leases;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to retain deposits, especially during store consolidations, the pendency of the Mergers and integration and conversion activities related to the Mergers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• demand for financial services in our market areas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• stability, cost, and continued availability of borrowings and other funding sources, such as brokered and public deposits;

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• changes in legal or regulatory requirements or the results of regulatory examinations that could increase expenses or restrict growth;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to recruit and retain key management and staff;

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• regulatory limits on the Bank's ability to pay dividends to the Company and that could impact the timing and amount of dividends to shareholders;

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

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• competition, including from financial technology companies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• success, impact, and timing of Umpqua's business strategies, including market acceptance of any new products or services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the nature, extent, timing, and results of governmental actions, examinations, reviews, reforms, regulations, and interpretations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the occurrence of any event, change, or other circumstances that could give rise to the right of one or both of the parties to terminate the Merger Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the outcome of legal proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• delays in completing the proposed transaction with Columbia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the failure to satisfy any of the conditions to the proposed transaction with Columbia on a timely basis or at all;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• certain restrictions during the pendency of the proposed transaction that may impact the parties' ability to pursue certain business opportunities or strategic transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the possibility that the transaction with Columbia may be more expensive to complete than anticipated, including as a result of unexpected factors or events;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• diversion of management's attention from ongoing business operations and opportunities during the pendency of the Mergers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• potential adverse reactions or changes to business or employee relationships, including those resulting from the announcement or completion of the transaction and the integration of the two companies and banks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to effectively manage problem credits; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• our ability to successfully negotiate with landlords 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-K. 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

For a more detailed discussion of some of the risk factors, see the section entitled "Risk Factors" below. We do not intend to update any factors, except as required by SEC rules, or to publicly announce revisions to any of our forward-looking statements. Any forward-looking statement speaks only as of the date that such statement was made. You should consider any forward-looking statements in light of this explanation, and we caution you about relying on forward-looking statements.

**SEC Filings**

We electronically file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy and information statements and other information with the SEC. You may obtain these reports and statements, and any amendments, from the SEC's website at <u>www.sec.gov</u>. You may obtain copies of these reports, and any amendments, through the investor relations section of our website at <u>www.umpquabank.com</u>. These reports are available through our website as soon as reasonably practicable after they are filed electronically with the SEC.

**Introduction**

Umpqua Holdings Corporation, an Oregon corporation, is a bank holding company currently designated as a financial holding company of Umpqua Bank. The Bank's wholly-owned subsidiary, Financial Pacific Leasing, Inc., is a commercial equipment leasing company.

Umpqua Bank is the largest bank with headquarters in the Northwest and is considered one of the most innovative banks in the United States, recognized nationally and internationally for its unique company culture and customer experience strategy. The Bank provides a broad range of banking and other financial services to corporate, institutional, and individual customers.

**Business Strategy**

Umpqua Bank's primary objective is to become the leading community-oriented financial services organization throughout the Western United States. We intend to increase market share, grow our assets, and increase profitability and total shareholder return by differentiating ourselves from competitors.

On October 12, 2021, we announced that we entered into a definitive agreement with Columbia Banking System, Inc., the parent company of Columbia State Bank, under which the companies will join together in an all-stock combination. Under the terms of the Merger Agreement, Umpqua shareholders will receive 0.5958 of a share of Columbia stock for each Umpqua share they own. The transaction is expected to close after the close of business on February 28, 2023, subject to satisfaction of closing conditions. Upon completion of the Mergers, Umpqua shareholders will own approximately 62% and Columbia shareholders will own approximately 38% of the combined company, and the combined organization will be a leading franchise in the Western United States with more than $50 billion in assets. We believe the combination accelerates our strategic objectives, which are outlined below.

*Deliver on Corporate Strategic Objectives*. The Company's corporate strategic objectives branded as "Umpqua Next Gen" were designed to modernize the Company, diversify and increase revenue, optimize processes, and improve efficiency. Umpqua Next Gen builds on our customer-centric approach to banking, allowing us to differentiate ourselves in the marketplace and create a competitive advantage. The three pillars of Umpqua Next Gen include: Balanced Growth, Human Digital, and Operational Excellence. In late 2020, Umpqua launched "Next Gen 2.0" to build on the success achieved through the original Next Gen plan announced in late 2017, and we expect our pending combination with Columbia to further expand these objectives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Through Our Balanced Growth Initiatives, We Focus on Banking Full Customer Relationships.* The Company has invested in broader product suites to meet the needs of customers across the spectrum of our business lines. We believe that Umpqua has the products and associate expertise necessary to support current and prospective customers, and we expect our pending combination with Columbia to further enhance these capabilities post-closing. We believe Umpqua can bring the highest value to customers when internal lines of business work collaboratively to serve customers and exceed expectations. Umpqua's value proposition is to combine the product offerings of many larger competitors but deliver with a highly focused, customer-centric approach. The importance of Balanced Growth initiatives has been embedded in modernizing our internal referral and goal-driven incentive plans at Umpqua to reward collaborative behavior and growth across product categories.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Use A Human Digital Banking Approach to Retain and Expand Customer Base.* As customer preferences and behaviors evolve with technological adoption, our strategy remains consistent: deliver an extraordinary experience across all customer touchpoints. As a result, we have developed our Human Digital banking approach, which uses technology to empower deeper, even more meaningful relationships with our customers across all lines of business. We believe this favorably distinguishes Umpqua from its competitors and positions the Company well to adapt quickly as customer use of physical and digital channels evolves. Our innovative strategy remains a differentiator in this Human Digital approach as the combination of digital banking services, through platforms like Umpqua Go-To® and commercial focused applications, enhances our ability to attract a broader range of customers and expand our value proposition across all channels.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Become A More Efficient and Effective Company Through Operational Excellence Programs*. The objectives of the Operational Excellence programs are to reduce redundancies, simplify processes, and ultimately bring associates closer to the customer. Umpqua redesigned several key processes, including our commercial loan delivery and our deposit origination processes, since the beginning of Umpqua Next Gen. In addition to combining similar functions throughout the Company, we also simplified our supplier and vendor relationships by consolidating spend to key strategic partners.

*Establish Strong Brand Awareness.* We devote considerable resources to developing the "Umpqua Bank" brand through design strategy, marketing, and delivery through our customer-facing channels, as well as through active public relations, social media, and community-based events and initiatives. Umpqua's goal is to connect with our customers and communities in fresh and engaging ways. The unique look and feel of our stores and interactive displays help demonstrate our commitment to being an innovative, customer-friendly provider of financial products and services, and our active community engagement and investments stand out with commercial customers. Our brand activation approach is based on actions, not just advertising, and builds strong consumer awareness of our products and services.

*Prudently Manage Capital.* An important part of our strategy is to continue to manage capital prudently and to employ excess capital in a thoughtful and opportunistic manner that improves long-term shareholder returns. We accomplish this through organic growth and a top quartile dividend payout ratio for regional banks. We also pursue combinations with strategic partners, as our pending transaction with Columbia highlights. The combined company will deepen our foothold in the Northwest and California as it creates a leading franchise in the Western United States post-closing. We expect transaction-related synergies to drive growth in loans, deposits, and fee-based products and services as anticipated cost-savings contribute to a more profitable profile that supports capital flexibility at the combined company.

*Growth Culture.* We believe strongly that by investing in the professional growth of our associates and supporting the economic growth of our communities, we will create more opportunity to provide our products and services and to create deeper customer relationships across bank divisions. Although a successful marketing program will attract customers to visit, well-trained and experienced associates are critical to solving customer needs with the right products and services.

**Products and Services**

We offer an array of financial products, delivered through traditional and digital channels, to meet the banking needs of our market area and target customers. To ensure the ongoing viability of our product offerings, we regularly examine the desirability and profitability of existing and potential new products. Our customers can access our products through online banking; mobile banking applications, including our Umpqua Go-To® app; and Umpquabank.com.

*Commercial Loans and Leases and Commercial Real Estate Loans.* We offer specialized loans for corporate and commercial customers, including accounts receivable and inventory financing, multifamily loans, equipment loans, commercial equipment leases, international trade finance, real estate construction loans and permanent financing, and Small Business Administration program financing as well as capital markets.

*Treasury Management.* As Umpqua focuses on banking the full customer relationship and meeting the needs of customers of all sizes, we offer treasury management and payments solutions to our customers through our Global Payments & Deposits group. These products include ACH, wires, positive pay, remote deposit capture, integrated payments, integrated receivables, lockbox, cash vault, Real-Time Payments via The Clearinghouse, commercial card, and foreign exchange related products. We also offer merchant services in coordination with a strategic partner, Worldpay.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*Deposit Products.* We offer deposit products, including non-interest bearing checking accounts, analyzed business accounts, interest bearing checking and savings accounts, money market accounts, insured cash sweep and other investment sweep solutions, and certificates of deposit. Interest-bearing accounts earn interest at rates established by management based on competitive market factors and management's desire to increase certain types or maturities of deposit liabilities. Our approach is to provide a streamlined customer experience that meets the customer's needs across all channels. This approach is designed to add value for the customer, increase products per household, and generate related fee income.

*Wealth Management.* Through Umpqua's Private Bank, we serve high net worth individuals and families and select non-profits and professional services firms, providing deposit, lending, and financial planning solutions. The Private Bank is designed to expand on Umpqua's existing high-touch customer experience and works collaboratively with other internal departments to offer a comprehensive, integrated approach designed to meet clients' financial needs.

*Residential Real Estate Loans.* Real estate loans are available for the construction, purchase, and refinancing of residential owner-occupied and rental properties. Borrowers can choose from a variety of fixed and adjustable rate options and terms. We sell many of the residential real estate loans that we originate into the secondary market. Servicing is retained on the majority of these loans.

*Consumer Loans.* We provide loans to individual borrowers for a variety of purposes, including secured and unsecured personal loans, home equity and personal lines of credit and motor vehicle loans.

**Market Area and Competition**

The geographic markets we serve are highly competitive for deposits, loans, and leases. We compete with traditional banking institutions, as well as non-bank financial service providers, such as credit unions, mortgage companies, Fintechs and online based financial service providers. In our primary market areas of Oregon, Washington, California, Idaho, and Nevada, major national banks generally hold top market share positions. Competition also includes small community banks that operate in a concentrated area within our footprint and other regional banks that focus on commercial and retail banking. In 2021, we expanded our market area by adding loan production offices in Denver, Colorado and Phoenix, Arizona.

As the industry becomes increasingly oriented toward technology-driven delivery systems, permitting transactions to be conducted on mobile devices and computers, non-bank institutions are able to attract customers and provide lending and other financial services even without offices located in our primary service area. Some insurance companies and brokerage firms compete for deposits by offering rates that are higher than the weighted average market price and may be inappropriate for the Bank in relation to its asset and liability management objectives.

Credit unions present a significant competitive challenge for our banking services and products. As credit unions currently enjoy an exemption from income tax, they are able to offer higher deposit rates and lower loan rates than banks can on a comparable basis. Credit unions are also not currently subject to certain regulatory constraints, such as the Community Reinvestment Act, which, among other things, requires us to implement procedures to make and monitor loans throughout the communities we serve. Adhering to such regulatory requirements raises the costs associated with our lending activities and reduces potential operating profits. Accordingly, we seek to compete by focusing on building customer relationships, providing superior service, and offering a wide variety of commercial banking products.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following tables present the Bank's market share percentage for total deposits as of June 30, 2022 in each county where we have operations. The table also indicates the ranking by deposit size in each market. All information in the table was obtained from S&P Global, which compiles deposit data published by the Federal Deposit Insurance Corporation as of June 30, 2022 and updates the information for any bank mergers and acquisitions completed subsequent to the reporting date.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Oregon** | **Oregon** | **Oregon** | **Oregon** | **Washington** | **Washington** | **Washington** | **Washington** |
| **County** | **Market Share** | **Market Rank** | **Number of Stores** | **County** | **Market Share** | **Market Rank** | **Number of Stores** |
| Baker | 29% | 2 | 1 | Asotin | 14% | 5 | 1 |
| Benton | 9% | 6 | 2 | Benton | 5% | 8 | 2 |
| Clackamas | 3% | 7 | 3 | Clallam | 5% | 7 | 2 |
| Columbia | 16% | 3 | 1 | Clark | 13% | 3 | 8 |
| Coos | 39% | 1 | 5 | Douglas | 9% | 5 | 1 |
| Curry | 45% | 1 | 2 | Franklin | 12% | 4 | 1 |
| Deschutes | 8% | 7 | 4 | Grant | 6% | 8 | 1 |
| Douglas | 73% | 1 | 8 | Grays Harbor | 7% | 4 | 1 |
| Jackson | 16% | 2 | 6 | King | 2% | 11 | 18 |
| Josephine | 16% | 2 | 2 | Kittitas | 14% | 4 | 2 |
| Klamath | 31% | 1 | 3 | Klickitat | 35% | 1 | 2 |
| Lane | 16% | 2 | 6 | Lewis | 12% | 2 | 1 |
| Lincoln | 7% | 7 | 1 | Okanogan | 13% | 3 | 2 |
| Linn | 16% | 4 | 3 | Pierce | 3% | 8 | 7 |
| Malheur | 18% | 2 | 1 | Skamania | 60% | 1 | 1 |
| Marion | 6% | 6 | 3 | Snohomish | 1% | 21 | 1 |
| Multnomah | 4% | 7 | 10 | Spokane | 8% | 6 | 6 |
| Polk | 8% | 5 | 1 | Thurston | 3% | 12 | 2 |
| Tillamook | 26% | 2 | 1 | Walla Walla | 3% | 7 | 1 |
| Umatilla | 5% | 6 | 2 | Whatcom | 3% | 11 | 3 |
| Union | 19% | 3 | 1 | Whitman | 6% | 7 | 1 |
| Wallowa | 23% | 3 | 1 |  |  |  |  |
| Washington | 6% | 5 | 6 |  |  |  |  |
| Yamhill | 2% | 8 | 1 |  |  |  |  |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **California** | **California** | **California** | **California** | **Idaho** | **Idaho** | **Idaho** | **Idaho** |
| **County** | **Market Share** | **Market Rank** | **Number of Stores** | **County** | **Market Share** | **Market Rank** | **Number of Stores** |
| Butte | 2% | 11 | 1 | Ada | 1% | 18 | 2 |
| Calaveras | 27% | 2 | 3 | Benewah | 18% | 3 | 1 |
| Colusa | 31% | 1 | 2 | Idaho | 42% | 1 | 1 |
| Contra Costa | —% | 17 | 3 | Kootenai | 2% | 9 | 2 |
| El Dorado | 6% | 6 | 3 | Latah | 23% | 2 | 1 |
| Glenn | 26% | 2 | 2 | Nez Perce | 17% | 3 | 1 |
| Humboldt | 23% | 1 | 5 | Valley | 26% | 3 | 2 |
| Lake | 22% | 2 | 2 |  |  |  |  |
| Los Angeles | —% | 67 | 1 | **Nevada** | **Nevada** | **Nevada** | **Nevada** |
| Marin | 1% | 11 | 2 | Washoe | 4% | 7 | 3 |
| Mendocino | 4% | 6 | 1 |  |  |  |  |
| Napa | 8% | 5 | 3 |  |  |  |  |
| Orange | —% | 31 | 1 |  |  |  |  |
| Placer | 5% | 5 | 4 |  |  |  |  |
| Sacramento | 1% | 15 | 4 |  |  |  |  |
| San Diego | —% | 44 | 1 |  |  |  |  |
| San Francisco | —% | 26 | 1 |  |  |  |  |
| San Luis Obispo | 1% | 14 | 1 |  |  |  |  |
| Santa Clara | —% | 32 | 1 |  |  |  |  |
| Shasta | 2% | 10 | 1 |  |  |  |  |
| Solano | 3% | 8 | 2 |  |  |  |  |
| Sonoma | 3% | 11 | 5 |  |  |  |  |
| Stanislaus | —% | 15 | 1 |  |  |  |  |
| Sutter | 8% | 6 | 1 |  |  |  |  |
| Tehama | 15% | 3 | 2 |  |  |  |  |
| Tuolumne | 11% | 4 | 1 |  |  |  |  |
| Yolo | 2% | 7 | 1 |  |  |  |  |
| Yuba | 21% | 3 | 2 |  |  |  |  |

---

**Environmental, Social, and Governance**

We take pride in being a proactive partner in building stronger, more resilient, and inclusive economies. This approach is embedded in the fabric of our corporate values and culture and drives us to think very intentionally about the communities we serve. In 2022, the organization continued to track our corporate responsibility performance against ESG standards of the Global Reporting Initiative and the Sustainability Accounting Standards Board.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Our annual ESG Report is available on the Impact section of our website but is not incorporated by reference into this document. The report provides additional detail about our evolving ESG work as it relates to the breadth of our stakeholders. The following is a brief overview:

**Associates**

*We create an environment where our associates have the chance to grow, connect and do meaningful work together.* Our people are the key to our success. In return, we strive to ensure their work experience allows them to use their skills and passions to make a difference while growing their careers and being recognized and appreciated for their diverse talents, backgrounds and perspectives.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We aim to foster a culture of diversity, equity, and inclusion—not just where we work, but also with our customers and in our communities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We support our associates with a portfolio of programs that address their well-being, from physical and financial health to community connections and workplace recognition.

**Customers** 

*We're committed to helping individuals, families and businesses thrive*. At Umpqua, banking enables genuine human connection. We see technology as a vital tool to better serve our customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We have prioritized financial health – for our customers and communities – and continue to find ways to provide access to financial information and solutions that matter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• To better understand our customers and their needs, we surveyed more than 1,200 businesses nationwide to gauge their perspective and plans as the United States transitions into a late-stage pandemic economy. We launched our 2022 Umpqua Bank Business Barometer Report with insights from these small and middle market business leaders throughout the country.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We continued to invest in community lending efforts to promote access to homeownership for first-time homebuyers through responsible lending practices and education programs.

**Communities** 

*We strive to help level the economic playing field.* Our approach to community investment focuses on increasing the economic vitality of our communities—particularly in places where systemic challenges hinder access to financial expertise, gainful employment, and building intergenerational wealth.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In 2022, we agreed upon an $8.1 billion Community Benefits Plan with the National Community Reinvestment Coalition and Columbia Bank that builds on our commitment to advance economic opportunity for individuals and support small business formation in historically underserved communities throughout the combined bank's footprint.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Umpqua Bank's Connect Volunteer Network™ continues to be one of the nation's leading volunteer programs, providing all associates with up to 40 hours of paid time-off each year committed to a wide range of community needs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Through the Umpqua Bank Charitable Foundation, we are committed to providing grant funding to the counties in which we have a physical banking presence. We support our associates by offering a matching program that doubles their gifts, including an increased giving match in support of organizations aligned with Umpqua Bank's Associate Resource Groups. We contributed funds for capacity building support to Local Initiatives Support Corporation in an effort to expand homeownership for communities of color on the West Coast.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Umpqua has the operational capacity to meet the needs of Individual Development Accounts providers and savers, enabling low-income families to save towards a targeted goal and purpose.

**Planet**

*We focus on smart business operations that benefit both the environment and the company*. As a financial institution, Umpqua acknowledges the economic, societal, and ecological impacts of climate change to our business and to our customers. It's our responsibility to advance smart, responsible practices that lessen our impact and contribute to the company's business goals. By taking steps to shrink the size of our operating footprint—minimizing the resources we consume and the waste we create—we can help both our communities and our bottom line.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Umpqua's steps to align operational processes with our commitment to reduce our impact on the environment is stronger than ever.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We maintain an Environmental Commitment Statement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Through the ESG report, we publicly report our Green House Gas Inventory as well as our energy, water and business travel usage.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Stakeholder Engagement**

*We solicit input from our stakeholders through a variety of mechanisms.* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Customers may provide feedback to any Umpqua Bank associate, through our customer resource center and through outreach from our customer insights team.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Associates may provide feedback through periodic engagement surveys, executive listening sessions, and all-hands and division calls.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Communities may reach out anytime or talk directly with footprint-based Community Development Officers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We maintain regular contact with government entities and regulatory bodies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Investors may contact our Director of Investor Relations via our Investor Relations webpage (www.umpquabank.com/investor-relations/). In addition, we reach out to our significant investors on a regular basis.

**Human Capital**

At Umpqua, we are inspired by a shared purpose – to build economic vitality together for the greater good. We bring together the power of the collective talents, skills and expertise of our dedicated associates to realize our purpose, and to deliver on our commitment to our customers and our communities. We believe in helping businesses and families thrive, and equally, in helping our associates thrive.

The ability to attract, retain, develop, and engage a talented and diverse workforce is critical to executing our business strategy. We strive to deliver an employment experience anchored in a healthy and vibrant culture that appreciates and respects all associates. Our culture is anchored in our values: Customer-obsessed, Caring, Inspired to Learn, Results-oriented, Ethical, and Entrepreneurial.

*Demographics.* As of December 31, 2022, we employed approximately 3,500 employees, the majority of which were full-time associates. Our workforce is comprised of customer-facing associates across our various business lines, including our retail stores, our commercial business units, and our home lending business, as well as professionals in various support functions that enable the business, such as technology, finance, risk, audit, and human resources. Our teams are primarily in five western states.

Our workforce decreased by 5% during 2022, which was driven primarily by natural attrition, and a shift in our home lending business strategy. Turnover rate, as calculated in our payroll system, in 2022 was 28%.

*Employee Health and Well-being.* 

We have embraced a go-forward hybrid work model for many functions and roles, where associates work remotely some days and on-site on others. This model is supported by technology teaming solutions and allows our associates to have the flexibility to work remotely while also enjoying the benefits of in-person collaboration on a regular basis.

We offer competitive medical, dental, vision, life, short and long-term disability, and accident insurance, in addition to paid time off for vacation, sick time, and volunteerism. These programs are available to associates working 20 hours per week or more and are assessed regularly against market benchmarks.

*Compensation.* We attract and reward our associates by providing market competitive compensation and benefit practices. Our compensation approach is designed to pay for performance and reward associate contributions. Each position has an established compensation range and associates have the opportunity to earn at the high end of their respective range for top performance. Our salary structure is informed by market data, and recognizing that the compensation environment is dynamic, we review and adjust our pay ranges regularly. This includes an ongoing practice of analyzing pay equity. In addition, many positions have incentive plans to encourage achievement of various corporate, business unit, and individual goals.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

On a regular basis, we conduct an associate engagement survey to gain insights into associate sentiment about various aspects of the associate experience. This feedback is used to assess the effectiveness of our people practices and prioritize enhancements to our programs.

*Talent Development.* We believe in the growth of our associates as individuals and as professionals. Our talent development programs provide our associates with the skills and experiences that allow them to thrive, supporting achievement of their personal career goals. We provide a best-in-class online learning catalog that is on-demand for all associates, in addition to role specific training for many roles. Our leadership development programs build key leadership capabilities, and support development of our internal leadership talent pipeline. We have available new manager programs, tuition reimbursement, banking school participation, coaching and mentoring programs. Additionally, we have a robust annual talent review and succession planning program that that is key to our overall talent management practice. This results in targeted development approaches, identification of emerging talent, and a healthy succession talent bench.

*Diversity, Equity, and Inclusion.* Umpqua Bank is committed to ensuring a culture of inclusion – where differences are respected, appreciated, and embraced. We strive to build teams that reflect the diversity of the clients and communities we serve. We have in place a multi-year comprehensive diversity, equity, and inclusion strategic plan, and continue to execute on key priorities within the plan. Additionally, we have continued to expand programs that support an inclusive work environment, such as our Associate Resource Groups, which are open to all associates. We currently have five resource groups: Pride, Women, Military, BIPOC, and People with Disabilities. Our Diversity Council is comprised of individuals from across the organization, who advance our diversity and inclusion initiatives.

An illustration of our commitment at the most senior level is in the diverse make-up of our eleven-member Board—chaired by a woman and including four women and three people of color.

**Information about our Executive Officers**

Information regarding our executive officers is contained in Item 11 below.

**Government Policies**

The operations of the Company and our subsidiaries are affected by state and federal legislative and regulatory changes and by policies of various regulatory authorities, including, domestic monetary policies of the Board of Governors of the Federal Reserve System, United States fiscal policy, and capital adequacy and liquidity constraints imposed by federal and state regulatory agencies.

**Supervision and Regulation**

*General.* We are extensively regulated under federal and state law. These laws and regulations are generally intended to protect depositors and customers, not shareholders. To the extent that the following information describes statutory or regulatory provisions, it is qualified in its entirety by reference to the particular statute or regulation. Any change in applicable laws or regulations may have a material effect on our business and prospects. We cannot accurately predict the nature or the extent of the effects on our business and earnings that fiscal or monetary policies, or new federal or state legislation or regulation may have in the future. Umpqua is subject to the disclosure and other requirements of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and rules promulgated thereunder and administered by the Securities and Exchange Commission. As a listed company on the Nasdaq Global Select Market, Umpqua is subject to Nasdaq rules for listed companies.

The Federal Reserve and the FDIC have adopted non-capital safety and soundness standards for financial institutions. These standards cover internal controls, information and internal audit systems, loan documentation, credit underwriting, interest rate exposure, asset growth, compensation, fees and benefits, and standards for asset quality, earnings and stock valuation. An institution that fails to meet these standards must develop a plan acceptable to the agency, specifying the steps that it will take to meet the standards. Failure to submit or implement such a plan may subject the institution to regulatory sanctions.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*Holding Company Regulation.* We are a bank holding company registered as a financial holding company under the GLB Act, and we are subject to the supervision of, and regulation by the Federal Reserve. As a bank holding company, we are examined by and file reports with the Federal Reserve. The Federal Reserve expects a bank holding company to serve as a source of financial and managerial strength to its subsidiary bank and, under appropriate circumstances, to commit resources to support the subsidiary bank.

Financial holding companies are bank holding companies that satisfy certain criteria and are permitted to engage in activities that traditional bank holding companies are not. The qualifications and permitted activities of financial holdings companies are described below under "Regulation of the Financial Services Industry*.*"

*Federal and State Bank Regulation.* Umpqua Bank, as an Oregon state-chartered bank with deposits insured by the FDIC, is primarily subject to the supervision and regulation of the DCBS, the FDIC, and the CFPB. In addition, we are subject to regulation by the financial institution oversight authorities in the states of Arizona, California, Colorado, Idaho, Nevada, and Washington. Our primary state regulator regularly examines the Bank or participates in joint examinations with the FDIC; these agencies may prohibit the Bank from engaging in what they believe constitute unsafe or unsound banking practices.

*Community Reinvestment Act and Fair Lending Laws.* The Bank has a responsibility under the CRA, as implemented by FDIC regulations, to help meet the credit needs of its communities, including low and moderate-income neighborhoods. The CRA does not establish specific lending requirements or programs for financial institutions, nor does it limit an institution's discretion to develop the types of products and services that it believes are best suited to its particular community, consistent with the CRA. The FDIC assesses Umpqua Bank's record of compliance with the CRA through periodic examinations. We will continue to evaluate the impact of any changes to the regulations implementing CRA. As of the most recent CRA examination, the Bank's CRA rating was "Satisfactory".

In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit discrimination in lending practices on the basis of characteristics specified in those statutes. Umpqua Bank's failure to comply with these statutes could result in enforcement actions.

*Transactions with Affiliates and Insiders.* Banks are subject to restrictions imposed by the Federal Reserve Act on extensions of credit to executive officers, directors, principal shareholders or any related interest of such persons. Extensions of credit must be made on substantially the same terms, including interest rates and collateral, and follow credit underwriting procedures that are not less stringent than those prevailing at the time for comparable transactions with persons not affiliated with the bank, and must not involve more than the normal risk of repayment or present other unfavorable features. Banks are also subject to lending limits and restrictions on overdrafts to such persons. A violation of these restrictions may result in the assessment of civil monetary penalties on the affected bank or any officer, director, employee, agent or other person participating in the conduct of the affairs of that bank, the imposition of a cease and desist order, and other regulatory sanctions.

The Federal Reserve Act and related Regulation W limit the amount of certain loan and investment transactions between the Bank and its affiliates, require certain levels of collateral for such loans, and limit the amount of advances to third parties that may be collateralized by the securities of Umpqua or its subsidiaries. Regulation W requires that certain transactions between the Bank and its affiliates be on terms substantially the same, or at least as favorable to the Bank, as those prevailing at the time for comparable transactions with or involving nonaffiliated companies or, in the absence of comparable transactions, on terms and under circumstances, including credit standards, that in good faith would be offered to or would apply to nonaffiliated companies. Umpqua has adopted an Affiliate Transactions Policy and has entered into various affiliate agreements designed to comply with Regulation W.

*Privacy.* Federal and state laws designed to protect individual privacy limit the ability of banks and other financial institutions to disclose non-public information about consumers to affiliated companies and non-affiliated third parties, and impose other obligations on personal information collected by us. These rules require disclosure of privacy policies to clients and, in some circumstances, allow consumers to prevent disclosure of certain personal information to affiliates or non-affiliated third parties by means of opt-out or opt-in authorizations. Pursuant to the GLB Act and certain state laws, companies are required to notify clients of security breaches resulting in unauthorized access to their personal information. In connection with the regulations governing the privacy of consumer financial information, the federal banking agencies have also adopted guidelines for establishing information security standards and programs to protect such information.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

States are also increasingly proposing or enacting legislation that relates to data privacy and data protection such as the California Consumer Privacy Act and the California Privacy Rights Act. We expect this trend of state-level activity in these areas to continue and are continually monitoring developments in the states in which our customers are located.

*Federal Deposit Insurance.* Substantially all deposits with Umpqua Bank are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and are subject to deposit insurance assessments to maintain the Deposit Insurance Fund. The standard maximum federal deposit insurance amount is $250,000 per qualified account.

The FDIC may terminate the deposit insurance of any insured depository institution if it determines that the institution has engaged in or is engaging in unsafe or unsound banking practices, is in an unsafe or unsound condition or has violated any applicable law, regulation or order or any condition imposed in writing by, or pursuant to, any written agreement with the FDIC. The termination of deposit insurance for the Bank would have a material adverse effect on our financial condition and results of operations.

*Dividends*. Under the Oregon Bank Act and FDICIA, the Bank is subject to restrictions on the payment of cash dividends to its parent company and may be required to receive prior approval in certain circumstances. In addition, state and federal regulatory authorities are authorized to prohibit banks and holding companies from paying dividends that would constitute an unsafe or unsound banking practice. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve's view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company's capital needs, asset quality, and overall financial condition.

The Bank currently has an accumulated deficit and is required to seek FDIC and DCBS approval for quarterly dividends from Umpqua Bank to the Company.

*Capital Adequacy.* The federal and state bank regulatory agencies use capital adequacy guidelines in their examination and regulation of holding companies and banks. If capital falls below the minimum levels established by these guidelines, a holding company or a bank may be denied approval to acquire or establish additional banks or non-bank businesses or to open new facilities.

The FDIC and Federal Reserve have adopted risk-based capital guidelines for holding companies and banks. The risk-based capital guidelines are designed to make regulatory capital requirements more sensitive to differences in risk profile among holding companies and banks, to account for off-balance sheet exposure and to minimize disincentives for holding liquid assets. Assets and off-balance sheet items are assigned to broad risk categories, each with appropriate weightings. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off-balance sheet items. The capital adequacy guidelines limit the degree to which a holding company or bank may leverage its equity capital.

The Company and the Bank are each required to comply with applicable capital adequacy standards established by the Federal Reserve. The Basel III final rules, among other things, (i) implemented increased capital levels for the Company and the Bank, (ii) introduced a new capital measure called CET1 and related regulatory capital ratio of CET1 to risk-weighted assets, (iii) specified that Tier 1 capital consists of CET1 and "Additional Tier 1 capital" instruments meeting certain revised requirements, (iv) mandated that most deductions/adjustments to regulatory capital measures be made to CET1 and not to the other components of capital, and (v) expanded the scope of the deductions from and adjustments to capital as compared to existing regulations. Under Basel III, for most banking organizations the most common form of Additional Tier 1 capital is non-cumulative perpetual preferred stock and the most common form of Tier 2 capital is subordinated notes and a portion of the allowance for credit losses, in each case, subject to Basel III specific requirements.

Pursuant to Basel III, the minimum capital ratios are as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 4.5% CET1 to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 6.0% Tier 1 capital (that is, CET1 plus Additional Tier 1 capital) to risk-weighted assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 8.0% Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• 4% Tier 1 capital to average consolidated assets as reported on regulatory financial statements (known as the "leverage ratio").

Basel III also introduced a new "capital conservation buffer", composed entirely of CET1, on top of the minimum risk-weighted asset ratios. The capital conservation buffer is designed to absorb losses during periods of economic stress.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Banking institutions with a ratio of CET1 to risk-weighted assets, Tier 1 to risk-weighted assets or total capital to risk-weighted assets above the minimum but below the capital conservation buffer will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall and the institution's "eligible retained income" (that is, four quarter trailing net income, net of distributions and tax effects not reflected in net income).

The Company and the Bank are required to maintain an additional capital conservation buffer of 2.5% of CET1, effectively resulting in minimum ratios of (i) CET1 to risk-weighted assets of at least 7%, (ii) Tier 1 capital to risk-weighted assets of at least 8.5%, and (iii) total capital to risk-weighted assets of at least 10.5%.

Basel III provides for a number of deductions from and adjustments to CET1. These include, for example, the requirement that deferred tax assets arising from temporary differences that could not be realized through net operating loss carrybacks and significant investments in non-consolidated financial entities be deducted from CET1 to the extent that any one such category exceeds 10% of CET1 or all such items, in the aggregate, exceed 15% of CET1.

Basel III provides a standardized approach for risk weightings that, depending on the nature of the assets, generally range from 0% for U.S. government and agency securities, to 1,250% for certain trading securitization exposures, resulting in higher risk weights for a variety of asset classes than previous regulations.

Under Basel III, the effects of certain accumulated other comprehensive items are not excluded; however, the Company and the Bank have made a one-time permanent election to continue to exclude these items in order to avoid significant variations in the level of capital depending upon the impact of interest rate fluctuations on the fair value of the Company's securities portfolio.

Failure to meet minimum capital requirements could subject a bank to a variety of enforcement actions. An institution's failure to exceed the capital conservation buffer with common equity Tier 1 capital would result in limitations on an institution's ability to make capital distributions and discretionary bonus payments. FDICIA requires federal banking regulators to take "prompt corrective action" with respect to a capital-deficient institution, including requiring a capital restoration plan and restricting certain growth activities of the institution. Umpqua could be required to guarantee any such capital restoration plan required of the Bank if the Bank became undercapitalized. Pursuant to FDICIA, regulations were adopted defining five capital levels: well capitalized, adequately capitalized, undercapitalized, severely undercapitalized and critically undercapitalized. Under the regulations, the Bank is considered "well capitalized" as of December 31, 2022.

The OCC, the FRB, and the FDIC issued a final rule intended to simplify aspects of the regulatory capital rules for banking organizations, such as Umpqua, that are not advanced approaches banking organizations. These rules became effective for the Company on April 1, 2020 and provide for simplified capital requirements relating to the threshold deductions for mortgage servicing assets, deferred tax assets arising from temporary differences that a banking organization could not realize through net operating loss carry backs, and investments in the capital of unconsolidated financial institutions, as well as the inclusion of minority interests in regulatory capital.

In December 2017, the Basel Committee published standards that it described as the finalization of the Basel III post-crisis regulatory reforms. The standards are commonly referred to as "Basel IV." Among other things, these standards revise the Basel Committee's standardized approach for credit risk (including by recalibrating risk weights and introducing new capital requirements for certain "unconditionally cancellable commitments," such as home equity lines of credit) and provides a new standardized approach for operational risk capital. Under the Basel framework, these standards were effective on January 1, 2023, with an aggregate output floor phasing in through January 1, 2028. In July 2020, the Basel Committee finalized further revisions to the framework for credit valuation adjustment risk, which are intended to align that framework with the market risk framework. Under the current U.S. capital rules, operational risk capital requirements and a capital floor apply only to advanced approach institutions. The impact of Basel IV on the Company and the Bank will depend on the manner in which it is implemented by the federal bank regulators.

*Effects of Government Monetary Policy.* Our earnings and growth are affected not only by general economic conditions, but also by the fiscal and monetary policies of the federal government, particularly the Federal Reserve. The Federal Reserve implements national monetary policy for such purposes as curbing inflation and combating recession, through its open market operations in U.S. Government securities, control of the discount rate applicable to borrowings from the Federal Reserve, and establishment of reserve requirements against certain deposits. These activities influence growth of bank loans, investments and deposits, and also affect interest rates charged on loans or paid on deposits. The nature and impact of future changes in monetary policies and their impact on us cannot be predicted with certainty.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*Regulation of the Financial Services Industry.* Federal laws and regulations governing banking and financial services underwent significant changes in recent years and we believe will continue to undergo significant changes in the future. From time to time, legislation is introduced in the United States Congress that contains proposals for altering the structure, regulation, and competitive relationships of financial institutions. If enacted into law, these proposals could increase or decrease the cost of doing business, limit or expand permissible activities, or affect the competitive balance among banks, savings associations, and other financial institutions. Whether or in what form any such legislation may be adopted or the extent to which our business might be affected thereby cannot be predicted.

The GLB Act defines a form of holding company, known as a financial holding company, that is permitted to acquire subsidiaries that are engaged in banking, securities underwriting and dealing, and insurance underwriting. To qualify as a financial holding company, the bank holding company must be deemed to be well-capitalized and well-managed, as defined by the Federal Reserve. In addition, each subsidiary bank of a bank holding company must also be well-capitalized and well-managed and be rated at least "satisfactory" under the CRA. A bank holding company that does not qualify, or has not chosen, to become a financial holding company must limit its activities to traditional banking activities and those non-banking activities the Federal Reserve has deemed to be permissible because they are closely related to the business of banking.

The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 permits interstate banking and branching, which allows banks to expand nationwide through acquisition, consolidation or merger. Under this law, an adequately capitalized bank holding company may acquire banks in any state or merge banks across state lines if permitted by state law. Further, banks may establish and operate branches in any state subject to the restrictions of applicable state law. Under Oregon law, an out-of-state bank or bank holding company may merge with or acquire an Oregon state chartered bank or bank holding company upon receipt of approval from the Director of the DCBS. The Bank has the ability to open additional de novo branches in the states of Oregon, California, Washington, Idaho, and Nevada.

*Anti-Terrorism Legislation.* The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act prohibits banks from providing correspondent accounts directly to foreign shell banks, as well as imposes due diligence requirements on banks opening and holding accounts for foreign financial institutions or wealthy foreign individuals. Banks are also required to have effective compliance processes in place relating to anti-money laundering compliance, as well as compliance with the Bank Secrecy Act.

*The Dodd-Frank Act.* The Dodd-Frank Act was a sweeping overhaul of financial industry regulation. The Dodd-Frank Act created the Financial Stability Oversight Council and permanently raised the FDIC deposit insurance coverage to $250,000. In addition, the Dodd-Frank Act added additional requirements on Banks and their regulators, including additional interchange fee limits, mortgage limit requirements, and say-on-pay executive compensation requirements.

The Dodd-Frank Act eliminated interstate branching restrictions that were implemented as part of the Riegle-Neal Act, and removed many restrictions on de novo interstate branching by national and state-chartered banks. The FDIC and the OCC have authority to approve applications by insured state non-member banks and national banks, respectively, to establish de novo branches in states other than the bank's home state if the law of the state in which the branch is to be located would permit establishment of the branch, if the bank were a state bank chartered by such State.

*Stress Testing and Capital Planning.* Initially, Umpqua was subject to annual Dodd-Frank Act capital stress testing requirements of the Federal Reserve and the FDIC. As part of the DFAST process, Umpqua was required to submit the results of the company-run stress tests to the FDIC, and Umpqua disclosed certain results from stress testing exercises. However, the Economic Growth, Regulatory Relief, and Consumer Protection Act, modified provisions of the Dodd-Frank Act allows Umpqua to internally monitor and stress test its capital consistent with the safety and soundness expectations of its regulators.

*CFPB Regulation and Supervision*. The CFPB has authority to examine Umpqua for compliance with a broad range of federal consumer financial laws and regulations, including the laws and regulations that relate to credit card, deposit, mortgage and other consumer financial products and services the Bank offers. The CFPB is authorized to issue regulations and take enforcement actions to prevent and remedy acts and practices relating to consumer financial products and services that it deems to be unfair, deceptive or abusive. The agency also has authority to impose new disclosure requirements for any consumer financial product or service. In addition, the CFPB's regulations require lenders to conduct a reasonable and good faith determination at or before consummation of a residential mortgage loan that the borrower will have a reasonable ability to repay the loan.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

In December 2021, the CFPB published a report providing data on banks' overdraft and non-sufficient funds fee revenues as well as observations regarding consumer protection issues relating to participation in such programs. The CFPB has indicated that it intends to pursue enforcement actions against banking organizations, and their executives, that oversee overdraft practices that are deemed to be unlawful.

*Incentive Compensation.* In 2010, federal banking regulators issued final joint agency guidance on Sound Incentive Compensation Policies. This guidance applies to executive and non-executive incentive plans administered by the Bank. The guidance notes that incentive compensation programs must (i) provide employees incentives that appropriately balance risk and reward, (ii) be compatible with effective controls and risk management and (iii) be supported by strong corporate governance, including oversight by the Board. The FDIC reviews, as part of its regular examination process, the Bank's incentive compensation programs.

In addition, the Dodd-Frank Act requires the federal bank regulatory agencies and the SEC to establish joint regulations or guidelines prohibiting incentive based payment arrangements at specified regulated entities having at least $1 billion in total assets, such as the Company and the Bank, that encourage inappropriate risks by providing an executive officer, employee, director or principal stockholder with excessive compensation, fees, or benefits that could lead to material financial loss to the entity. In addition, these regulators must establish regulations or guidelines requiring enhanced disclosure of incentive based compensation arrangements to regulators.

The proposed general qualitative requirements include (i) prohibiting incentive arrangements that encourage inappropriate risks by providing excessive compensation; (ii) prohibiting incentive arrangements that encourage inappropriate risks that could lead to a material financial loss; (iii) establishing requirements for performance measures to appropriately balance risk and reward; (iv) requiring board of director oversight of incentive arrangements; and (v) mandating appropriate record-keeping.

In 2022, the SEC adopted final rules that require disclosure of the relationship between the actual compensation paid to executives and financial performance.

The Federal Reserve reviews, as part of the regular, risk-focused examination process, the incentive compensation arrangements of the Company and other banking organizations. The findings of the supervisory initiatives are included in reports of examination and any deficiencies will be incorporated into the Company's supervisory ratings, which can affect the Company's ability to make acquisitions and take other actions.

Additional legislative and regulatory action may be proposed and could include requirements that could significantly impact our business practices. The impact of these legislative and regulatory initiatives on us, the economy, and the U.S. consumer will depend upon a wide variety of factors some of which are yet to be identified.

**ITEM 1A. RISK FACTORS.** 

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed below. These factors could adversely affect our business, financial condition, liquidity, results of operations and capital position, and the value of, and return on, an investment in the Company. These factors could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. An investment in the Company involves risk, including the possibility that the value of the investment could fall substantially and that dividends on the investment could be reduced or eliminated.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Risks Related to the Proposed Mergers and the Bank Merger**

***Combining Umpqua and Columbia may be more difficult, costly or time consuming than expected and the anticipated benefits and cost savings of the merger may not be realized.***

Umpqua and Columbia have operated and, until the completion of the Mergers and the Bank Merger, will continue to operate independently. The success of the proposed transaction, will depend, in part, on the ability to realize the anticipated cost savings from combining the businesses of Umpqua and Columbia. To realize the anticipated benefits and cost savings, Columbia and Umpqua must successfully integrate and combine their businesses in a manner that permits growth opportunities and does not materially disrupt the existing customer relations nor result in decreased revenues due to loss of customers. It is possible that the integration process could result in the loss of key employees, the disruption of either company's ongoing businesses or inconsistencies in standards, controls, procedures, and policies that adversely affect the combined company's ability to maintain relationships with clients, customers, depositors, and employees or to achieve the anticipated benefits and cost savings. If Umpqua experiences difficulties with the integration process, the anticipated benefits may not be realized fully or at all or may take longer to realize than expected. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on Umpqua during this transition period and for an undetermined period after completion of the Mergers and the Bank Merger on the combined company. In addition, the actual cost savings could be less than anticipated.

***Termination of the Merger Agreement could negatively impact Umpqua.***

If the Merger Agreement is terminated, there may be adverse consequences. For example, Umpqua's businesses may have been impacted adversely by the failure to pursue other beneficial opportunities due to the focus of management on the Mergers, without realizing any of the anticipated benefits of completing the Mergers. Also, Umpqua has devoted significant internal resources to the pursuit of the Mergers and the expected benefit of those resource allocations would be lost if the Mergers are not completed. Additionally, if the Merger Agreement is terminated, the market price of Umpqua's common stock could decline to the extent that the current market prices reflect a market assumption that the merger will be completed. If the Merger Agreement is terminated under certain circumstances, Umpqua may be required to pay to Columbia a termination fee of $145.0 million.

***Umpqua will be subject to business uncertainties and contractual restrictions while the Merger is pending that could adversely affect our business and operations.***

Uncertainty about the effect of the Mergers on employees, customers, and other persons Umpqua has a business relationship with may have an adverse effect on Umpqua's business, operations, and stock price. These uncertainties may impair Umpqua's ability to attract, retain and motivate key personnel until the Mergers are completed, and could cause customers and others that deal with Umpqua to seek to change existing business relationships. Retention of certain employees by Umpqua may be challenging while the Mergers are pending, as certain employees may experience uncertainty about their future roles. These retention challenges could require Umpqua to incur additional expenses to retain key employees. If key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with Umpqua, Umpqua's business could be harmed. In addition, subject to certain exceptions, Umpqua has agreed to operate its business in the ordinary course prior to closing the Mergers and to refrain from taking certain actions. These restrictions may prevent Umpqua from pursuing attractive business opportunities that may arise prior to the completion of the Mergers. Umpqua may delay or abandon projects and other business decisions could be deferred during the pendency of the Mergers.

***Umpqua will incur substantial costs related to the Mergers.***

Umpqua has incurred and expects to incur a number of significant non-recurring costs associated with the Mergers. These costs include legal, financial advisory, accounting, consulting, and other advisory fees, severance/employee benefit-related costs, public company filing fees and other regulatory fees, financial and other printing costs, and other related costs. Some of these costs are payable regardless of whether the Mergers are completed. We may incur additional costs to maintain employee morale and retain key employees during the pendency of the Mergers. There can be no assurances that the expected benefits and efficiencies related to the integration of the businesses will be realized to offset these transaction costs over time.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***The Merger Agreement limits Umpqua's ability to pursue acquisition proposals.***

The merger agreement prohibits Umpqua from soliciting, initiating, knowingly encouraging, or knowingly facilitating certain third-party acquisition proposals. These provisions, which could result in a $145.0 million termination fee payable under certain circumstances, might discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of Umpqua from considering or proposing such an acquisition.

**COVID-19 RISK**

***The COVID-19 pandemic has impacted our business, and the ultimate impact will depend on future developments, which are highly uncertain and cannot be predicted.***

The COVID-19 pandemic has negatively impacted the economy, changed customer behaviors, disrupted supply chains, lowered equity market valuations, created significant volatility and disruption in financial markets, and increased unemployment levels. The pandemic could impact the demand for our products and services, which could adversely affect our revenue and result in the recognition of credit losses in our loan portfolios and increases in our allowance for credit losses, particularly if businesses close, unemployment levels rise, or regional economic conditions worsen. Our business operations may also be disrupted if significant portions of our workforce are unable to work effectively, including because of illness, quarantines, government actions, or other restrictions in connection with the pandemic.

Future governmental actions may require additional types of customer-related responses that could negatively impact our financial results. We could be required to take capital actions in response to the COVID-19 pandemic, including reducing dividends and eliminating stock repurchases. The extent to which the COVID-19 pandemic continues to impact our business, results of operations, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic; actions taken by governmental authorities and other third parties in response to the pandemic; the effect on our customers, counterparties, employees and third party service providers; and the effect on economies and markets. To the extent that the COVID-19 pandemic continues, it may also have the effect of heightening many of the other risks.

**CREDIT RISK**

***The majority of our assets are loans, which if not repaid would result in losses to the Bank.***

The Bank and its operating subsidiary are subject to credit risk, which is the risk of losing principal or interest due to borrowers' failure to repay loans or leases in accordance with their terms. Underwriting and documentation controls cannot mitigate all credit risk. A downturn in the economy or the real estate market in our market areas or a rapid increase in interest rates could have a negative effect on collateral values and borrowers' ability to repay. To the extent loans are not paid timely by borrowers, the loans are placed on non-accrual status, thereby reducing interest income. Further, under these circumstances, an additional provision for loan and lease losses or unfunded commitments may be required. Risk of borrower default may arise from events or circumstances that are difficult to detect or foresee.

We maintain an allowance for credit losses on loans and leases, which is a reserve established through a provision for credit losses charged to expense, that represents management's best estimate of current expected credit losses over the life of the loan or lease within the existing portfolio of loans and leases. The allowance for credit losses on loans and leases, in the judgment of management, is necessary to reserve for current expected credit losses and risks in the loan and lease portfolio. The level of the allowance for credit losses on loans and leases is an estimate that reflects management's consideration of relevant available information, including historical credit loss experience, current conditions, and reasonable and supportable forecasts. The determination of the appropriate level of the allowance for credit losses on loans and leases inherently involves a high degree of subjectivity and requires us to make significant estimates of current expected credit risks using existing qualitative and quantitative information, all of which may undergo material changes. Changes in economic conditions affecting borrowers, new information regarding existing loans and leases, identification of additional problem loans and leases, and other factors, both within and outside of our control, may require an increase in the allowance for credit losses on loans and leases.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

In addition, bank regulatory agencies periodically review our allowance for credit losses on loans and leases and may require an increase in the provision for credit losses or the recognition of additional loan charge offs, based on judgments different than those of management. An increase in the allowance for credit losses on loans and leases would result in a decrease in net income, and possibly risk-based capital, and could have a material adverse effect on our financial condition and results of operations.

***We are subject to lending concentration risks.*** 

As of December 31, 2022, approximately 72% of our loan portfolio consisted of commercial and industrial, real estate construction, commercial real estate loans, and lease financing. Commercial loans are generally viewed as having more inherent risk of default than residential mortgage loans or other consumer loans. Also, the commercial loan balance per borrower is typically larger than that for residential mortgage loans and other consumer loans, implying higher potential losses on an individual loan basis. Because our loan portfolio contains a number of commercial loans with balances over $20 million, the deterioration of one or a few of these loans could cause a significant increase in nonaccrual loans, which could have a material adverse effect on our financial condition and results of operations.

***Deterioration in the real estate market or other segments of our loan portfolio would lead to additional losses, which could have a material adverse effect on our business, financial condition and results of operations.***

As of December 31, 2022, approximately 78% of our total loan portfolio is secured by real estate, the majority of which is commercial real estate located in the five Western states in our footprint. Our success depends in part on economic conditions in the western United States and adverse changes in markets where our real estate collateral is located could adversely affect our business. Increases in delinquency rates or declines in real estate market values would require increased net charge-offs and increases in the allowance for credit losses on loans and leases, which could have a material adverse effect on our business, financial condition and results of operations and prospects.

***The CECL accounting for the ACL may create volatility in our provision for credit losses and could have a material impact on our financial condition or results of operations.***

Under the CECL model, we are required to present loans and leases, as well as certain other financial assets, carried at amortized cost at the net amount expected to be collected. The measurement of expected credit losses is to be based on information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. This measurement takes place at the time the financial asset is first added to the balance sheet and periodically thereafter. The CECL model creates more volatility in the level of our allowance for credit losses on loans and leases. We expect to incur ongoing costs in maintaining the additional CECL models and methodology along with acquiring forecasts used within the models, and that the methodology will result in increased costs. The CECL process involves significant management judgment in determining the overall adequacy of the ACL. Management considers various qualitative factors including changes within the portfolio, changes to Bank policies and processes, as well as external factors, which may result in qualitative overlays to the model results.

**MARKET AND INTEREST RATE RISK**

***Difficult or volatile market conditions or weak economic conditions may adversely affect our business.***

Our business and financial performance are vulnerable to weak economic conditions, primarily in the United States and especially in the western United States. Additionally, financial markets may be adversely affected by United States fiscal policy and events such as a government shutdown; the current or anticipated impact of military conflict, including escalating military tension between Russia and Ukraine; pandemics, terrorism or other geopolitical events. A deterioration in economic conditions in our primary market areas could result in the following consequences, any of which could materially and adversely affect our business: increased loan delinquencies; problem assets and foreclosures; significant write-downs of asset values; volatile financial markets; lower demand for our products and services; reduced low cost or noninterest bearing deposits; intangible asset impairment; and collateral for loans made by us, especially real estate, may decline in value, in turn reducing customers' borrowing power, and reducing the value of assets and collateral associated with our existing loans. Additional issues surrounding weakening economic conditions and volatile markets that could adversely impact us include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Increased regulation of our industry, and resulting increased costs associated with regulatory compliance and potential limits on our ability to pursue business opportunities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Our ability to assess the creditworthiness of our customers may be impaired if the models and approaches we use to select, manage, and underwrite our customers become less predictive of future performance.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The process we use to estimate current expected credit losses in our loan portfolio requires difficult, subjective, and complex judgments, including forecasts of economic conditions and how these economic predictions might impair the ability of our borrowers to repay their loans, which may no longer be capable of accurate estimation and may, in turn, impact its reliability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Downward pressure on our stock price.

***A rapid change in interest rates, or maintenance of rates at historically high or low levels for an extended period, could make it difficult to improve or maintain our current interest income spread and could result in reduced earnings.***

Our earnings are largely derived from net interest income, which is interest income and fees earned on loans and investments, less interest paid on deposits and other borrowings. Interest rates are highly sensitive to many factors that are beyond the control of our management, including general economic conditions and the policies of various governmental and regulatory authorities. The actions of the Federal Reserve influence the rates of interest that we charge on loans and pay on borrowings and interest-bearing deposits. We cannot predict the nature or timing of future changes in monetary, tax and other policies or the effects that they may have on our activities and financial results.

As interest rates change, net interest income is affected. With fixed rate assets (such as fixed rate loans and most investment securities) and liabilities (such as certificates of deposit), the effect on net interest income depends on the cash flows associated with the maturity of the asset or liability. Asset/liability management policies may not be successfully implemented and from time to time our risk position is not balanced. An unanticipated rapid decrease or increase in interest rates could have an adverse effect on the spreads between the interest rates earned on assets and the rates of interest paid on liabilities, and therefore on the level of net interest income. For instance, any rapid decrease in interest rates in the future could result in interest income decreasing faster than interest expense because of variable rate loans repricing and fixed rate loans and longer-term investments accelerating prepayment. Low rates for an extended period of time result in reduced returns from the investment and loan portfolios. Higher interest rates generally reduce loan demand and may result in slower loan growth than previously experienced.

The Federal Reserve raised benchmark interest rates throughout 2022 and may continue to raise interest rates in response to economic conditions, particularly inflationary pressures. Increases in interest rates, to combat inflation or otherwise, may result in a change in the mix of noninterest and interest-bearing accounts, and may have otherwise have unpredictable effects. For example, increases in interest rates may result in increases in the number of delinquencies, bankruptcies or defaults by clients and more nonperforming assets and net charge-offs, decreases in deposit levels, decreases to the demand for interest rate-based products and services, including loans, and changes to the level of off-balance sheet market-based investments preferred by our clients, each of which may reduce our interest rate spread. Lower rates would continue to constrain our interest rate spread.

***Interest rate volatility and credit risk adjusted rate spreads may impact our financial assets and liabilities measured at fair value.***

Our investment portfolio consists of mortgage backed securities and collateralized mortgage obligations, the nature of these securities is such that changes in market interest rates impact the value of the assets. In addition, the MSR are measured at fair value and changes in the interest rates may also impact their value. The widening of the credit risk adjusted rate spreads on potential new issuances of junior subordinated debentures above our contractual spreads and reductions in three-month LIBOR rates have contributed to the cumulative positive fair value adjustment in our junior subordinated debentures carried at fair value. Tightening of these credit risk adjusted rate spreads and interest rate volatility may result in recognizing negative fair value adjustments in the future.

It is possible the Company may accelerate redemption of the existing junior subordinated debentures to support regulatory total capital levels. This could result in adjustments to the fair value of these instruments including the acceleration of accumulated losses on junior subordinated debentures carried at fair value.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***We rely on the soundness of other financial institutions and government sponsored enterprises.***

Financial services institutions and government sponsored enterprises are interrelated as a result of trading, clearing, processing, lending, counterparty, guarantor and other relationships. We have exposure to many different industries and counterparties in financial services, including brokers and dealers, commercial banks, bankers banks, correspondent banks, investment banks, mutual and hedge funds, institutions involved in the mortgage business and others. Transactions with these entities expose us to risk in the event of default of our counterparty, including due to their failure or financial difficulty. Our ability to engage in funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions, including if there is a default by, or rumors about, one or more financial services institutions. Our credit risk could also be impacted when the collateral we hold cannot be realized or is liquidated at prices not sufficient to recover the full amount of the financial instrument exposure due to us.

***We may be impacted by the retirement of LIBOR as a reference rate.***

In November 2020, the ICE Benchmark Administration, the LIBOR administrator, announced its intention to continue publishing most tenors of U.S. dollar LIBOR until June 30, 2023. In March 2022, the LIBOR Act was enacted, providing a uniform approach for replacing LIBOR as a reference interest rate in contracts and in so-called "tough legacy" contracts. Tough legacy contracts are contracts that do not include effective fallback provisions, for example, because they have no provisions for a replacement benchmark. Under the LIBOR Act, references to the most common tenors of LIBOR in these contracts will be replaced automatically to reference a SOFR-based benchmark interest rate identified in Federal Reserve regulations. In December 2022, the Federal Reserve issued final regulations identifying benchmark replacements, based on SOFR, for various types of contracts subject to the LIBOR Act. We may be adversely impacted by the changes involving LIBOR and other benchmark rates as a result of our business activities and our underlying operations, and interest rates on our loans, derivatives and other financial instruments tied to LIBOR rates, as well as the revenue and expenses associated with those financial instruments, may be adversely affected.

The Company holds financial instruments that will be impacted by the discontinuance of LIBOR, primarily certain loans, derivatives, and junior subordinated debentures that use LIBOR as the benchmark rate. These financial instruments will transition to new reference rates. This transition is progressing and will continue to occur over time as many of these arrangements do not have an alternative rate referenced in their contracts. Our existing LIBOR exposures are limited primarily to three instruments—adjustable and variable-rate loans, loan-related derivatives, and junior subordinated debentures. We have prepared for the cessation of USD LIBOR by taking steps to avoid new exposures and reduce our remaining exposures. We have actively originated new variable and adjustable-rate loans using SOFR, forward-looking term SOFR and other non-LIBOR indexes. We have substantially completed amendments to all loans maturing after June 30, 2023, to include robust LIBOR index replacement provisions.

We have organized an internal transition program to identify system, operational, and contractual impacts, assess our risks, manage the transition, facilitate communication with our customers, and monitor the program progress. The LIBOR retirement is a significant shift in the industry. A transition away from LIBOR could impact our pricing and interest rate risk models, our loan product structures, our hedging strategies, and communication with our customers.

The market transition away from LIBOR could:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adversely affect the interest rates paid or received on our floating rate obligations, loans, derivatives and other financial instruments tied to LIBOR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• adversely affect the value of our financial instruments tied to LIBOR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• result in additional regulatory scrutiny of our preparedness for the transition away from LIBOR and increased compliance and operational costs related to the transition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• result in disputes, litigation or other actions with counterparties regarding the interpretation and enforceability of fallback or replacement index language in LIBOR-based instruments and securities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• cause customer confusion and negatively impact our relationships with borrowers; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• require the transition to or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on an alternative benchmark.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**LIQUIDITY RISK**

***Deposits are a critical source of funds for our continued growth and profitability.***

Our business strategy calls for continued growth. Our ability to continue to grow depends primarily on our ability to successfully attract deposits to fund loan growth. Core deposits are a low cost and generally stable source of funding and a significant source of funds for our lending activities. Our inability to retain or attract such funds could adversely affect our liquidity. If we are forced to seek other sources of funds, such as additional brokered deposits or borrowings from the FHLB, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our deposits, which would adversely impact our net income, and such sources of funding may be more volatile and unavailable to us.

***Conditions in the financial markets may limit our access to additional funding to meet our liquidity needs.***

Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale or pledging as collateral of loans and other assets due to market conditions could have a substantial negative effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. An adverse regulatory action against us could detrimentally impact our access to liquidity sources. Our ability to borrow could also be impaired by factors that are nonspecific to us, such as severe disruption of the financial markets or negative news and expectations about the prospects for the financial services industry as a whole as evidenced by turmoil in the domestic and worldwide credit markets.

***Our wholesale funding sources may prove insufficient to support our future growth or an unexpected reduction in deposits.***

We must maintain sufficient funds to respond to the needs of depositors and borrowers. As a part of our liquidity management, we use a number of funding sources in addition to core deposit growth and repayments and maturities of loans and investments. If we grow more rapidly than any increase in our deposit balances, we are likely to become more dependent on these sources, which include brokered deposits, FHLB advances, proceeds from the sale of loans and liquidity resources at the holding company. Our financial flexibility will be severely constrained if we are unable to maintain our access to funding or if adequate financing is not available to accommodate future growth at acceptable interest rates. If we are required to rely more heavily on more expensive funding sources to support future growth, our revenues may not increase proportionately to cover our costs, and our profitability would be adversely affected.

**MORTGAGE BANKING RISK**

***Changes in interest rates could reduce the value of mortgage servicing rights.***

We acquire MSR when we keep servicing rights after we sell originated residential mortgage loans. We sell the majority of our originated residential mortgage loans with servicing retained. We measure MSR at fair value. Fair value is the present value of estimated future net servicing income, calculated based on a number of variables, including assumptions about the likelihood of prepayment by borrowers. Changes in interest rates can affect prepayment assumptions and consequently MSR fair value. When interest rates fall, borrowers are usually more likely to prepay their mortgage loans by refinancing them at a lower rate. As the likelihood of prepayment increases, MSR fair value can decrease, which reduces earnings in the period in which the decrease occurs.

A low interest rate environment increases our exposure to prepayment risk in our mortgage portfolio and the mortgage-backed securities in our investment portfolio. Increased prepayments, refinancing or other factors that impact loan balances could reduce expected revenue associated with mortgage assets and could also lead to a reduction in the value of our mortgage servicing rights, which could have a negative impact on our financial results. We may choose to hedge the interest rate sensitivity of the MSR fair value. Hedges may not perform in line with our modeled projections.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Our mortgage banking revenue can fluctuate significantly.***

We earn revenue from fees received for originating, selling and servicing mortgage loans. Generally, if interest rates rise, the demand for mortgage loans tends to fall, reducing the revenue we receive from originations and sales of mortgage loans. At the same time, mortgage banking revenue can increase through increases in fair value of MSR. When interest rates decline, originations tend to increase and the value of MSR tends to decline, also with some offsetting revenue effect. The negative effect on revenue from a decrease in the fair value of residential MSR is immediate, but any offsetting revenue benefit from more originations and the MSR relating to new loans accrues over time. It is also possible that even if interest rates were to fall, mortgage originations may also fall or any increase in mortgage originations may not be enough to offset the decrease in the MSR value caused by the lower rates.

***We depend upon programs administered by Fannie Mae, Freddie Mac and Ginnie Mae.***

Our ability to generate revenues in our home lending group depends on programs administered by government-sponsored entities that play an important role in the residential mortgage industry. During 2022, 49% of mortgage loans were originated for sale to, or through programs sponsored by Fannie Mae, Freddie Mac or Ginnie Mae. We service loans on behalf of Fannie Mae and Freddie Mac, as well as loans that have been securitized pursuant to securitization programs sponsored by Fannie Mae, Freddie Mac and Ginnie Mae. A majority of our mortgage servicing rights and loans serviced through subservicing agreements relate to these servicing activities. These entities establish the base service fee to compensate us for servicing loans as well as the assessment of fines and penalties that may be imposed upon us for failing to meet servicing standards. Our status as a Fannie Mae, Freddie Mac and Ginnie Mae approved seller and servicer is subject to compliance with guidelines and failure to meet such guidelines could result in the unilateral termination of our status as an approved seller or servicer. Changes in the existing government-sponsored mortgage programs or servicing eligibility standards through legislation or otherwise, or our failure to maintain a relationship with each of Fannie Mae, Freddie Mac and Ginnie Mae, could materially and adversely affect our business, financial position, results of operations and cash flows through negative impact on the pricing of mortgage related assets in the secondary market, higher mortgage rates to borrowers, or lower mortgage origination volumes and margins.

**LEGAL, REGULATORY AND COMPLIANCE RISK**

***We are subject to extensive government regulation and supervision.***

Umpqua and its subsidiaries, primarily Umpqua Bank, are subject to extensive federal and state regulation and supervision including by the FDIC, DCBS, Federal Reserve, CFPB, and the SEC, the primary focus of which is to protect customers, depositors, the deposit insurance fund and the safety and soundness of the banking system as a whole, and not shareholders. The quantity and scope of applicable federal and state regulations may place banks at a competitive disadvantage compared to less regulated competitors such as Fintech companies, finance companies, credit unions, mortgage banking companies and leasing companies. These laws and regulations apply to almost every aspect of our business, and affect our lending practices and procedures, capital structure, investment activities, deposit gathering activities, our services and products, risk management practices, dividend policy and growth, including through acquisitions.

Legislation and regulation with respect to our industry has increased in recent years, and we expect that supervision and regulation will continue to expand in scope and complexity. Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies, including changes in interpretation or implementation of statutes, regulations or policies, could affect us in substantial and unpredictable ways, and could subject us to additional costs, restrict our growth, limit the services and products we may offer or limit the pricing of banking services and products. In addition, establishing systems and processes to achieve compliance with laws and regulation increases our costs and could limit our ability to pursue business opportunities.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

If we receive less than satisfactory results on regulatory examinations, we could be subject to damage to our reputation, significant fines and penalties, requirements to increase compliance and risk management activities and related costs and restriction on acquisitions, new locations, new lines of business, or continued growth. Future changes in federal and state banking and brokerage regulations could adversely affect our operating results and ability to continue to compete effectively. For example, the Dodd-Frank Act and related regulations subject us to additional restrictions, oversight and reporting obligations, which have significantly increased costs. And over the last several years, state and federal regulators have focused on enhanced risk management practices, compliance with the Bank Secrecy Act and anti-money laundering laws, data integrity and security, use of service providers, and fair lending and other consumer protection issues, which has increased our need to build additional processes and infrastructure. Government agencies charged with adopting and interpreting laws, rules and regulations, may do so in an unforeseen manner, including in ways that potentially expand the reach of the laws, rules or regulations more than initially contemplated or currently anticipated. We cannot predict the substance or impact of pending or future legislation or regulation, or the application thereof. Compliance with such current and potential regulation and scrutiny could significantly increase our costs, impede the efficiency of our internal business processes, require us to increase our regulatory capital and limit our ability to pursue business opportunities in an efficient manner. Our success depends on our ability to maintain compliance with both existing and new laws and regulations.

***We are required to comply with stringent capital requirements.***

We are required to maintain a common equity Tier 1 capital ratio of 4.5%, a Tier 1 capital ratio of 6%, a total capital ratio of 8%, and a leverage ratio of 4%. In addition, we must maintain an additional capital conservation buffer of 2.5% of total risk weighted assets or be subject to limitations on dividends and other capital distributions, as well as limiting discretionary bonus payments to executive officers. The capital rules may require us to raise more common capital or other capital that qualifies as Tier 1 capital. Maintaining higher levels of capital may reduce our profitability and otherwise adversely affect our business, financial condition, or results of operations. The application of more stringent capital requirements could, among other things, result in lower returns on invested capital and result in regulatory actions if we were to be unable to comply with such requirements.

***We may be required to raise additional capital in the future, but that capital may not be available when it is needed, or it may only be available on unacceptable terms, which could adversely affect our financial condition and results of operations.***

We are required by federal and state regulatory authorities to maintain adequate levels of capital to support our operations. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we may not be able to raise additional capital, if needed, on terms acceptable to us. If we cannot raise additional capital when needed, our ability to further expand our operations and pursue our growth strategy could be materially impaired. We and the Bank are currently well capitalized under applicable regulatory guidelines. However, our business could be negatively affected if we or the Bank failed to remain well capitalized. For example, because Umpqua Bank is well capitalized, and we otherwise qualify as a financial holding company, we are permitted to engage in a broader range of activities than are permitted to a bank holding company. Loss of financial holding company status could require that we cease these broader activities. The banking regulators are authorized (and sometimes required) to impose a wide range of requirements, conditions, and restrictions on banks, thrifts, and bank holding companies that fail to maintain adequate capital levels.

***We have risk related to legal proceedings.***

We are involved in judicial, regulatory, and arbitration proceedings concerning matters arising from our business activities and fiduciary responsibilities. We establish reserves for legal claims when payments associated with the claims become probable and the costs can be reasonably estimated. We may incur costs for a legal matter even if we have not established a reserve, and the actual costs of resolving a legal matter may substantially exceed any established reserves for the matter. Our insurance may not cover all claims that may be asserted against us. Any claim asserted against us, regardless of merit or eventual outcome, could harm our reputation. The ultimate resolution of a pending or future legal proceeding, depending on the remedy sought and granted, could materially adversely affect our results of operations and financial condition.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***As a bank holding company that conducts substantially all of our operations through the Bank, our ability to pay dividends, repurchase our shares or to repay our indebtedness depends upon liquid assets held by the holding company and the results of operations of our subsidiaries.***

The Company is a separate and distinct legal entity from our subsidiaries and it receives substantially all of its revenue from dividends paid from the Bank. There are legal limitations on the extent to which the Bank may extend credit, pay dividends or otherwise supply funds to, or engage in transactions with, us. Our inability to receive dividends from the Bank could adversely affect our business, financial condition, results of operations and prospects.

Our net income depends primarily upon the Bank's net interest income, which is the income that remains after deducting from total income generated by earning assets the expense attributable to the acquisition of the funds required to support earning assets (primarily interest paid on deposits). The amount of interest income is dependent on many factors including the volume of earning assets, the general level of interest rates, the dynamics of changes in interest rates and the levels of nonperforming loans. All of those factors affect the Bank's ability to pay dividends to the Company.

Various statutory provisions restrict the amount of dividends the Bank can pay to us without regulatory approval. The Bank may not pay cash dividends if that payment could reduce the amount of its capital below that necessary to meet the "adequately capitalized" level in accordance with regulatory capital requirements. It is also possible that, depending upon the financial condition of the Bank and other factors, regulatory authorities could conclude that payment of dividends or other payments, including payments to us, is an unsafe or unsound practice and impose restrictions or prohibit such payments.

Under Oregon law, the Bank may not pay dividends in excess of unreserved retained earnings, deducting there from, to the extent not already charged against earnings or reflected in a reserve, the following: (1) all bad debts, which are debts on which interest is past due and unpaid for at least six months, unless the debt is fully secured and in the process of collection; (2) all other assets charged-off as required by Oregon bank regulators or a state or federal examiner; and (3) all accrued expenses, interest and taxes of the institution. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve's view that a bank holding company should pay cash dividends only to the extent that its net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company's capital needs, asset quality and overall financial condition.

We are currently required to seek prior regulatory approval for dividends from the Bank to Umpqua and from Umpqua to shareholders. Our regulators have broad discretion whether to approve (or to not object to) dividends and when they will respond to our requests.

**TECHNOLOGY RISK**

***We face significant cyber, data and information security risk.***

Cyber attacks and other data security risks and breaches include computer viruses, malicious or destructive code, denial of service or information attacks, hacking, ransomware, social engineering attacks targeting our associates and customers, improper access by associates or vendors, malware intrusion and data corruption attempts, and identity theft that could result in the disclosure or destruction of confidential or proprietary information.

Cyberattack techniques can be very sophisticated and difficult to prevent and promptly detect, change regularly, and can originate from a wide variety of sources including third parties who are or may be involved in organized crime or linked to terrorist organizations or hostile foreign governments. Cyber security risk management programs are expensive to maintain and as cyber threats continue to grow and evolve we may be required to expend significant additional resources to continue to modify or enhance protective measures or to investigate and remediate information security vulnerabilities or incidents. Although we have programs in place related to business continuity, disaster recovery and information and cyber security to maintain the confidentiality, integrity, and availability of our systems, business applications and customer information, we may not timely detect disruptions and disruptions may still give rise to interruptions in service to customers and loss or liability to us, including loss of customer data.

Cyber risks increase as we continue to develop and grow our mobile and other internet-based product offerings and expand our internal usage of web-based products and applications.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause serious negative consequences that could adversely impact its results of operations, liquidity and financial condition, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• loss of customers and business opportunities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• costs associated with maintaining business relationships after an attack or breach;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• significant business disruption to our operations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• misappropriation, exposure, or destruction of our confidential information, intellectual property, funds, or those of our customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• damage to computers or systems;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• violation of applicable privacy and other laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• litigation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• regulatory fines, penalties or intervention;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• loss of confidence in our security measures;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• reimbursement or other compensatory costs; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• additional compliance costs.

Our cybersecurity insurance may not provide sufficient coverage in the event of a breach or may not be available in the future on acceptable terms.

***Cybersecurity and data privacy are areas of heightened legislative and regulatory focus.***

As cybersecurity and data privacy risks for banking organizations and the broader financial system have significantly increased in recent years, cybersecurity and data privacy issues have become the subject of increasing legislative and regulatory focus. The federal bank regulatory agencies have proposed enhanced cyber risk management standards, focusing on cyber risk governance and management, management of internal and external dependencies, and incident response, cyber resilience and situational awareness. Several states have proposed or adopted cybersecurity legislation and regulations, which require, among other things, notification to affected individuals when there has been a security breach of their personal data. We receive, maintain and store non-public personal information of our customers and counterparties, including, but not limited to, personally identifiable information and personal financial information. The sharing, use, disclosure and protection of this information are governed by federal and state law. Both personally identifiable information and personal financial information is increasingly subject to legislation and regulation, the intent of which is to protect the privacy of personal information that is collected and handled. For example, we are subject to the recently enacted California Consumer Privacy Act and California Privacy Rights Act. We may become subject to new legislation or regulation concerning cybersecurity or the privacy of personally identifiable information and personal financial information or of any other information we may store or maintain. We could be adversely affected if new legislation or regulations are adopted or if existing legislation or regulations are modified such that we are required to alter our systems or require changes to our business practices or privacy policies. If cybersecurity, data privacy, data protection, data transfer or data retention laws are implemented, interpreted or applied in a manner inconsistent with our current practices, we may be subject to fines, litigation or regulatory enforcement actions or ordered to change its business practices, policies or systems in a manner that adversely impacts our operating results.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***The failure to understand and adapt to continual technological changes could negatively impact our business.***

The financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services by depository institutions and fintech companies. Technological changes are often designed to eliminate banks as intermediaries which could result in the loss of income and customer deposits. New technology-driven products and services are often introduced and adopted, including innovative ways that customers can make payments, access products and manage accounts. We could be required to make substantial capital expenditures to modify or adapt existing products and services or develop new products and services. We may not be successful in introducing new products and services or those new products may not achieve market acceptance. We could lose business, be forced to price products and services on less advantageous terms to retain or attract clients, or be subject to cost increases if we do not effectively develop and implement new technology. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in operations. In addition, advances in technology such as digital, mobile, telephone, text, and online banking; e-commerce; and self-service automatic teller machines and other equipment, as well as changing customer preferences to access our products and services through digital channels, could decrease the value of our store network and other assets. We may close or sell certain stores and restructure or reduce our remaining stores and work force. These actions could lead to losses on assets, expense to reconfigure stores and loss of customers in certain markets. As a result, our business, financial condition or results of operations may be adversely affected.

***We may not be able to successfully implement current or future information technology system enhancements and operational initiatives.***

We are investing significant resources in information technology system enhancements and operational initiative to provide functionality, new and enhanced products and services, more efficient internal operations, meet regulatory requirements and streamline our customer experience. We may not be able to successfully implement and integrate such system enhancements and related operational initiatives or do so within budgets and on time. We may incur significant training, licensing, maintenance, consulting and amortization expenses during and after implementation, and may not realize the anticipated long-term benefits.

***Our business is highly reliant on technology and our ability to manage the operational risks associated with technology.***

Our business involves storing, transmitting, retrieving and processing sensitive consumer and business customer data. We depend on internal systems and outsourced technology to support these data storage and processing operations in a secure manner. Despite our efforts to ensure the security and integrity of our systems, we may not be able to anticipate, detect or recognize threats to our systems or to implement effective preventive measures against all cyber security breaches. A cyber security breach or cyberattack could persist for a long time before being detected and could result in theft of sensitive data or disruption of our transaction processing systems. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations. Our customers and other third parties may use personal mobile devices or computing devices that are outside of its network environment and are subject to their own cybersecurity risks to access our network, products and services.

***We depend on our ability to manage the operational risks associated with technology to avoid losses and reputational damage.***

Our business involves storing and processing sensitive consumer and business customer data. We depend on internal systems and outsourced technology to support these data storage and processing operations. Despite our efforts to ensure the security and integrity of our systems, we may not be able to anticipate, detect or recognize threats to our systems or to implement effective preventive measures against all cyber security breaches. A cyber security breach or cyberattack could persist for a long time before being detected and could result in theft of sensitive data or disruption of our transaction processing systems. Our inability to use or access these information systems at critical points in time could unfavorably impact the timeliness and efficiency of our business operations.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**OPERATIONAL RISK**

***Our business is highly reliant on third party vendors (and their vendors) and our ability to manage the operational risks associated with outsourcing those services.***

We rely on third parties to provide services that are integral to our operations, including the storage and processing of sensitive consumer and business customer data, as well as our sales efforts. We cannot be sure that we will be able to maintain these relationships on favorable terms. In addition, some of our data processing services are provided by companies associated with our competitors. The loss of these vendor relationships could disrupt the services we provide to our customers and cause us to incur significant expense in connection with replacing these services.

***Our non-interest income includes revenues related to overdraft and non-sufficient funds fees and may be subject to increased scrutiny.***

Recently, there has been a heightened interest in bank overdraft protection programs and other fees earned by banks. In response to increased interest and scrutiny, and in anticipation of enhanced supervision and enforcement of overdraft protection practices in the future, certain banking organizations have begun to modify their overdraft protection programs, including discontinuation of charging their customers overdraft transaction fees. Competitive pressures from our peers, as well as any new rules or supervisory guidance or more aggressive examination and enforcement policies in respect of banks' overdraft protection practices, could cause Umpqua to change our practices in ways that may have a negative impact on our revenue and earnings, which could have an adverse effect on our financial condition and results of operations.

***Damage to our brand and reputation could significantly harm our business and prospects.***

Our brand and reputation are important assets. Our relationship with many of our customers is predicated upon our reputation as a high-quality provider of financial services that adheres to the highest standards of ethics, service quality and regulatory compliance. We believe that our brand has been, and continues to be, well received in our industry, with current and potential customers, investors and employees. Our ability to attract and retain customers, investors and employees depends upon external perceptions of us. Damage to our reputation among existing and potential customers, investors and employees could cause significant harm to our business and prospects and may arise from numerous sources, including litigation or regulatory actions, failing to deliver minimum standards of service and quality, lending practices, inadequate protection of customer information, sales and marketing efforts, compliance failures, unethical behavior and the misconduct of employees. Adverse developments with respect to our industry may also, by association, negatively impact our reputation or result in greater regulatory or legislative scrutiny or litigation against us.

***We and our customers are susceptible to fraud.***

Financial institutions are inherently exposed to fraud risk. A fraud can be perpetrated by a customer, associate, vendor or member of the general public. We are most subject to fraud risk with the origination of loans, ACH and wire transactions, ATM transactions and checking transactions. Fraud risk within digital channels is challenging to detect and prevent and we are expanding our business more deeply into these channels. We rely on financial and other data from customers when we accept them as new customers and when they conduct transactions, which information could be fraudulent and expose us to losses that negatively impact our net income especially when delivered through digital channels. Our operational controls to prevent and detect such fraud may be ineffective in preventing new methods of fraud. If our customers experience fraud, theft or a cyber attack on their systems that results in loss of funds held at the Bank, they will often look to the Bank to make them whole regardless of fault, which can increase our costs to defend threatened litigation and result in loss of customer relationships.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**STRATEGIC AND OTHER BUSINESS RISKS**

***The financial services industry is highly competitive.***

We face pricing competition for loans and deposits. We also face competition with respect to customer convenience, product lines, accessibility of service and service capabilities. Our most direct competition comes from other banks, brokerages, mortgage companies and savings institutions, but more recently has also come from fintech companies that rely on technology to provide financial services. We also face competition from credit unions, government-sponsored enterprises, mutual fund companies, insurance companies and other non-bank businesses. The significant competition in attracting and retaining deposits and making loans, as well as providing other financial services throughout our market area may impact future earnings and growth. Our success depends, in part, on the ability to adapt products and services to evolving industry standards. There is increasing pressure to provide products and services at lower prices, which can reduce net interest income and non-interest income from fee-based products and services.

***Climate change and related legislative and regulatory initiatives may materially adversely affect the Company's business and results of operations.***

The effects of climate change continue to create concern for the state of the global environment. The impacts of climate change, such as extreme weather conditions, natural disasters and rising sea levels, could impact our operations as well as those of our customers and our third party vendors. Increased regulation related to climate change could have an adverse effect on our business and our customers. Our efforts to take these risks into account in making lending and other decisions, including by increasing our business with climate-friendly companies, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.

**ITEM 1B. UNRESOLVED STAFF COMMENTS.**

None.

**ITEM 2. PROPERTIES.**

The principal executive office of Umpqua Holdings Corporation is a leased corporate office space in Lake Oswego, Oregon. The Bank's main office, located in Roseburg, Oregon, is owned. At December 31, 2022, the Bank conducted commercial and retail banking activities at 232 locations, including 203 store locations, in Oregon, Washington, California, Idaho and Nevada. Our 232 locations include 96 owned and 136 leased locations. As of December 31, 2022, the Bank also operated 22 facilities for the purpose of administrative and other functions, such as back-office support, of which two are owned and 20 are leased. The Company has reduced and will continue to evaluate its facilities, as the Company continues to adapt to a more remote or hybrid workforce.

**ITEM 3. LEGAL PROCEEDINGS.** 

The information required by this item is set forth in Part II, Item 8 under Note 17 Commitments and Contingencies—Legal Proceedings and Regulatory Matters, and incorporated herein by reference.

**ITEM 4. MINE SAFETY DISCLOSURES.**

Not applicable

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**PART II**

**ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.**

(a)Our common stock is traded on the Nasdaq Global Select Market under the symbol "UMPQ." As of December 31, 2022, our common stock was held by 4,028 shareholders of record, a number that does not include beneficial owners who hold shares in "street name," or shareholders from previously acquired companies that have not exchanged their stock. At December 31, 2022, a total of 1.2 million shares of unvested restricted stock units were outstanding.

During 2022, Umpqua's Board approved a cash dividend of $0.21 per common share for each quarter. These dividends were made pursuant to our existing dividend policy and in consideration of, among other things, earnings, regulatory capital levels, the overall payout ratio, and expected asset growth. 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 January 11, 2023, the Company declared a cash dividend in the amount of $0.21 per common share, which was paid on February 6, 2023.

The payment of future cash dividends is at the discretion of our Board and subject to a number of factors, including results of operations, general business conditions, growth, financial condition, and other factors deemed relevant by the Board. Further, our ability to pay future cash dividends is subject to certain regulatory requirements and restrictions discussed in the *Supervision and Regulation* section in Item 1 above.

We have a dividend reinvestment plan through our transfer agent that permits shareholder participants to purchase shares at the then-current market price in lieu of the receipt of cash dividends. Shares issued in connection with the dividend reinvestment plan are purchased in open market transactions.

(b)Not applicable.

(c)The following table provides information about repurchases of common stock by the Company during the quarter ended December 31, 2022:

---

| | | | | |
|:---|:---|:---|:---|:---|
| Period | Total number of Common Shares Purchased <sup>(1)</sup> | Average Price<br>Paid per Common Share | Total Number of Shares Purchased as Part of Publicly Announced Plan <sup>(2)</sup> | Maximum Dollar Value of Shares that May be Purchased at Period End under the Plan |
| 10/01/22 - 10/31/22 | 227 | $18.30 |  | $— |
| 11/01/22 - 11/30/22 | 414 | $20.08 |  | $— |
| 12/01/22 - 12/31/22 |  | $— |  | $— |
| Total for quarter | 641 | $20.14 |  |  |

---

<sup>(1)</sup> Common shares repurchased by the Company during the quarter consist of cancellation of 641 shares to be issued upon vesting of restricted stock awards to pay withholding taxes. During the three months ended December 31, 2022, no shares were repurchased pursuant to the Company's publicly announced corporate stock repurchase plan described in (2) below.

<sup>(2)</sup> On July 21, 2021, the Company 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 December 31, 2022, the Company repurchased $78.2 million in shares under the program. Under the repurchase plan, the Company repurchased no shares during 2022 and 4.0 million shares in 2021, and 331,000 shares were repurchased in 2020 under the previous share repurchase plan. The Company halted repurchases with the announcement of the merger with Columbia and as required under the Merger Agreement, and the share repurchase program expired on July 31, 2022.

Restricted shares cancelled to pay withholding taxes totaled 202,000 and 149,000 shares during the years ended December 31, 2022 and 2021, respectively.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Information relating to compensation plans under which the Company's equity securities are authorized for issuance is set forth in "Part III—Item 12" of this Report.

***Stock Performance Graph***

The following chart, which is furnished as part of our annual report to shareholders and not filed, compares the yearly percentage changes in the cumulative shareholder return on our common stock during the five fiscal years ended December 31, 2022, with (i) the NASDAQ Composite Index, (ii) the Standard and Poor's 500 Index and (iii) the NASDAQ Bank Index. This comparison assumes $100.00 was invested on December 31, 2017, in our common stock and the comparison indices, and assumes the reinvestment of all cash dividends prior to any tax effect and retention of all stock dividends. Price information from December 31, 2017 to December 31, 2022, was obtained by using the closing prices as of the last trading day of each year.

![umpq-20221231_g1.jpg](umpq-20221231_g1.jpg)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Period Ending** | **Period Ending** | **Period Ending** | **Period Ending** | **Period Ending** | **Period Ending** |
| | **12/31/2017** | **12/31/2018** | **12/31/2019** | **12/31/2020** | **12/31/2021** | **12/31/2022** |
| Umpqua Holdings Corporation | $100.00 | $76.68 | $85.67 | $72.79 | $92.50 | $85.82 |
| NASDAQ Composite Index | $100.00 | $95.38 | $130.47 | $186.69 | $226.63 | $151.61 |
| S&P 500 Index | $100.00 | $92.97 | $121.19 | $140.49 | $178.27 | $143.61 |
| NASDAQ Bank Index | $100.00 | $81.65 | $99.50 | $88.95 | $124.25 | $101.44 |

---

**ITEM 6. RESERVED**

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**FORWARD LOOKING STATEMENTS AND RISK FACTORS** 

See the discussion of forward-looking statements and risk factors in Part I Item 1 and Item 1A of this report.

The following discussion and analysis of our financial condition and results of operations constitutes management's review of the factors that affected our financial and operating performance for the years ended December 31, 2022 and 2021. This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this report. For a discussion of the year ended December 31, 2020, including a comparison to the year ended December 31, 2021, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, on Registrant's Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022.

**EXECUTIVE OVERVIEW**

***Financial Performance***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Earnings per diluted common share were $1.55 for the year ended December 31, 2022, compared to $1.91 for the year ended December 31, 2021. The decrease for the year ended December 31, 2022, as compared to the prior period, was driven by an increase in the provision for credit losses. Higher net interest income and lower non-interest expense offset a decrease in non-interest income due to a decline in residential mortgage banking revenue and a fair value loss, captured in other income, related to certain loans held for investment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Net interest income was $1.1 billion for the year ended December 31, 2022, compared to $919.6 million for the year ended December 31, 2021. The increase compared to the prior year was primarily due to an increase in interest income due to the rising interest rate environment and higher average loan balances, with the impact partially offset by an increase in interest expense due to the increased cost of interest on deposits and other interest-bearing liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Net interest margin, on a tax equivalent basis, was 3.62% for the year ended December 31, 2022, compared to 3.18% for the year ended December 31, 2021. The increase is primarily a result of the rising rate environment and a higher level of average loans as a percentage of earning assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Non-interest income was $199.5 million for the year ended December 31, 2022, compared to $356.3 million for the year ended December 31, 2021. The decline was due primarily to the $80.0 million decrease in residential mortgage banking revenue, as discussed below, and an increase in fair value loss on certain loans held for investment of $61.5 million as compared to the prior period.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Residential mortgage banking revenue was $106.9 million for the year ended December 31, 2022, compared to $186.8 million for year ended December 31, 2021. The decrease 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, though the favorable income impact was partially reduced by the loss on the MSR hedge that was put in place in mid-August 2022. For-sale mortgage closed loan volume decreased by 61% in 2022, as compared to 2021. In addition, the gain on sale margin decreased to 2.54%, for the year ended December 31, 2022, as compared to 3.32% for the year ended December 31, 2021. Mortgages remain an important product for the Bank and for our customers and we remain committed to serving our communities; however, due to the current and projected market conditions, the Company is downsizing the scale of mortgage operations and expects a smaller impact on the financial statements in the future.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-interest expense was $735.0 million for the year ended December 31, 2022, compared to $760.5 million for the year ended December 31, 2021. The decrease was driven by a reduction in salaries and employee benefits of $39.6 million, due to a decrease in mortgage banking production related incentive pay.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total gross loans and leases were $26.2 billion as of December 31, 2022, an increase of $3.6 billion, or 16%, compared to December 31, 2021. The increase is primarily due to an increase in commercial real estate balances of $1.8 billion, mostly within multifamily lending, and an increase in residential real estate balances of $1.6 billion.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Total deposits were $27.1 billion as of December 31, 2022, an increase of $470.9 million, or 2%, from December 31, 2021. This increase was due primarily to the growth in time and interest bearing demand deposits of $901.6 million and $305.5 million, respectively, as a result of the rising interest rate environment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Total consolidated assets were $31.8 billion as of December 31, 2022, compared to $30.6 billion at December 31, 2021. The increase was due predominantly to an increase in loans and leases during the period, offset by decreases in cash and cash equivalents and available for sale securities.

***Credit Quality***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* Non-performing assets increased to $58.8 million, or 0.18% of total assets, as of December 31, 2022, compared to $53.1 million, or 0.17% of total assets, as of December 31, 2021. Non-performing loans were $58.6 million, or 0.22% of total loans and leases, as of December 31, 2022, compared to $51.2 million, or 0.23% of total loans and leases, as of December 31, 2021.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* The allowance for credit losses was $315.4 million, as of December 31, 2022, an increase of $54.2 million, as compared to December 31, 2021. The increase is due to the growth of the loan portfolio, as well as deterioration in the economic forecasts used in the credit models.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* The Company had a provision for credit losses of $84.0 million for the year ended December 31, 2022, compared to a recapture of the provision for credit losses of $42.7 million in the prior period. The provision for credit losses in the current period was due to allowance requirements for new loan generation, loan mix changes, and changes to the economic forecasts used in credit models. As a percentage of average outstanding loans and leases, the provision for credit losses for the year ended December 31, 2022 was 0.35%, as compared to (0.19)% for the prior year.

***Liquidity***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Total cash and cash equivalents was $1.3 billion as of December 31, 2022, a decrease of $1.5 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***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• In October 2021, Umpqua and Columbia announced their 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 need to be divested. In January 2023, Columbia completed the divestiture of three of the ten branches to satisfy regulatory requirements. 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 last remaining regulatory approval was received from the FDIC on January 9, 2023, conditioned upon completing the branch divestitures, which we expect to occur on February 24, 2023. The transaction is expected to close after the close of business on February 28, 2023, subject to satisfaction of closing conditions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Company's total risk based capital was 13.7% and its Tier 1 common to risk weighted assets ratio was 11.0% as of December 31, 2022. As of December 31, 2021, the Company's total risk based ratio was 14.3% and its Tier 1 common to risk weighted assets ratio was 11.6%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*•* The Company declared cash dividends of $0.84 per common share during the year ended December 31, 2022.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**CRITICAL ACCOUNTING ESTIMATES**

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. The estimate that is particularly susceptible to significant change is the determination of the ACL.

The 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 the following estimate is both important to the portrayal of the Company's financial condition and results of operations and requires difficult, subjective or complex judgments and, therefore, management considers the following to be a critical accounting estimate.

*Allowance for Credit Losses* 

The Bank has established an Allowance for Credit Losses Committee, which is responsible for, among other things, regularly reviewing the ACL methodology, including allowance levels, and ensuring that it is designed and applied in accordance with generally accepted accounting principles. The Company's Audit and Compliance Committee provides board oversight of the ACL process and reviews the ACL methodology on a quarterly basis.

CECL is not prescriptive in the methodology used to determine the expected credit loss estimate. Therefore, management has flexibility in selecting the methodology. However, the expected credit losses must be estimated over a financial asset's contractual term, adjusted for prepayments, utilizing quantitative and qualitative factors.

The Company utilizes complex models to obtain reasonable and supportable forecasts of future economic conditions dependent upon specific macroeconomic variables related to each of the Company's loan and lease portfolios. Loans and leases deemed to be collateral dependent, or loans deemed to be reasonably expected to become troubled debt restructured or are troubled debt restructured, are individually evaluated for loss based on the value of the underlying collateral or a discounted cash flow analysis.

The adequacy of the ACL is monitored on a regular basis and is based on management's evaluation of numerous factors, including: the CECL model outputs; quality of the current loan portfolio; the trend in the loan portfolio's risk ratings; current economic conditions; loan concentrations; loan growth rates; past-due and non-performing trends; evaluation of specific loss estimates for all significant problem loans; historical charge-off and recovery experience; and other pertinent information. As of December 31, 2022, the Bank used Moody's Analytics November consensus scenario to estimate the ACL. To assess the sensitivity in the ACL results and, when necessary, to inform qualitative adjustments, the Bank used a second scenario, Moody's Analytics November S2 scenario, that differs in terms of severity within the variables, both favorable and unfavorable. For additional information related to the Company's ACL, see Note 5 in the *Notes to Consolidated Financial Statements* in Item 8 of this report.

Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ACL, could change significantly. It is difficult to estimate how potential changes in any one economic factor or input might affect the overall allowance because a wide variety of factors and inputs are considered in estimating the allowance and changes in those factors and inputs considered may not occur at the same rate and may not be consistent across all product types. Additionally, changes in factors and inputs may be directionally inconsistent, such that improvement in one factor may offset deterioration in others. Management believes that the ACL was adequate as of December 31, 2022.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**RECENT ACCOUNTING PRONOUNCEMENTS** 

Information regarding Recent Accounting Pronouncements is included in Note 1 of the *Notes to Consolidated Financial Statements* in Item 8 below*.*

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**<u>RESULTS OF OPERATIONS</u>**

The Company reports two segments: Core Banking and Mortgage Banking, which aligns with how we manage the profitability of the Company and 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 associated 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 private banking channels. Management periodically updates the allocation methods and assumptions within the current segment structure. Refer to the segment information footnote for additional detail of the segments' financial statements.

The Core Banking segment had net income of $317.5 million for the year ended December 31, 2022, compared to a net income of $372.0 million for the year ended December 31, 2021. This decrease is due to an increase in provision for credit losses and a decrease in non-interest income, partially offset by an increase in net interest income and a decrease in non-interest expense. 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 mainly due to a net fair value loss of $49.3 million for the year ended December 31, 2022, compared to a net fair value gain of $9.9 million for the same period in the prior year. The change in fair value, which is recorded in other income, was driven by an increase in long-term interest rates and their effect on fair value adjustments related to equity securities, swap derivatives, and loans carried at fair value. The increase in net interest income, which reflects higher interest income that was partially offset by higher interest expense, is a result of higher interest rates and average balances during the period, as well as a higher mix of average loans as a percentage of earning assets.

The Mortgage Banking segment had net income of $19.2 million for the year ended December 31, 2022, compared to net income of $48.3 million for the year ended December 31, 2021. 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 it was partially offset by a corresponding decrease in non-interest expense due to decreased incentives as originations have slowed due to rising interest rates. The variance was also impacted by a net increase in the fair value of the MSR asset for the year ended December 31, 2022, compared to a net decrease for the year ended December 31, 2021, though the favorable income impact was partially reduced by the 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. Origination revenue decreased from $157.8 million for the year ended December 31, 2021, to $46.7 million in the current period. The gain on sale margin decreased from 3.32% as of December 31, 2021, to 2.54% in the current period. Mortgages remain an important product for the bank and for our customers and we remain committed to serving our communities; however, due to the current and projected market conditions, the Company is downsizing the scale of mortgage operations and expects a smaller impact on the financial statements in the future.

The following table presents the returns on average assets, average common shareholders' equity, and average tangible common shareholders' equity for the years ended December 31, 2022, 2021, and 2020. For each of the periods presented, the table includes the calculated ratios based on reported net income (loss). Our return on average common shareholders' equity in 2020 were negatively impacted as the result of capital required to support goodwill. To the extent this performance metric is used to compare our historical performance with other financial institutions that did 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 (loss) by average shareholders' common equity less average goodwill and intangible assets, net (excluding MSRs). 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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

For the Years Ended December 31, 2022, 2021, and 2020

---

| | | | |
|:---|:---|:---|:---|
| (dollars in thousands) | **2022** | **2021** | **2020** |
| Return on average assets | 1.09% | 1.39% | (5.22)% |
| Return on average common shareholders' equity | 13.07% | 15.56% | (51.08)% |
| Return on average tangible common shareholders' equity | 13.11% | 15.63% | (60.34)% |
| **Calculation of average common tangible shareholders' equity:** |  |  |  |
| Average common shareholders' equity | $2575577 | $2700711 | $2982458 |
| Less: average goodwill and other intangible assets, net | 6847 | 12057 | 457550 |
| Average tangible common shareholders' equity | $2568730 | $2688654 | $2524908 |

---

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 the tangible common equity ratio provides a meaningful base for period-to-period and company-to-company comparisons, which management believes will assist investors in analyzing the operating results and capital of the Company. Tangible common equity is calculated as total shareholders' equity less goodwill and other intangible assets, net (excluding MSRs). In addition, tangible assets are total assets less goodwill and other intangible assets, net (excluding MSRs). 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.

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 December 31, 2022, and 2021:

---

| | | |
|:---|:---|:---|
| (dollars in thousands) | **December 31, 2022** | **December 31, 2021** |
| Total shareholders' equity | $2479826 | $2749270 |
| Subtract: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other intangible assets, net | 4745 | 8840 |
| Tangible common shareholders' equity | $2475081 | $2740430 |
| Total assets | $31848639 | $30640936 |
| Subtract: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Other intangible assets, net | 4745 | 8840 |
| Tangible assets | $31843894 | $30632096 |
| Total shareholders' equity to total assets ratio | 7.79% | 8.97% |
| Tangible common equity ratio | 7.77% | 8.95% |

---

Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not 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** 

Net interest income for 2022 increased by $150.4 million or 16% compared to the same period in 2021, due primarily to higher loan interest income from increasing rates and higher average loan and lease balances. This increase was partially offset by an increase in the cost of interest-bearing liabilities, which includes an increase of $21.0 million in deposit interest expense for 2022 as compared to 2021, due to rising interest rates, the addition of brokered deposits, and customer account movements.

The net interest margin (net interest income as a percentage of average interest-earning assets) on a fully tax equivalent basis was 3.62% for 2022, an increase of 44 basis points compared to 2021. This increase resulted from an increase in the average yields on interest-earning assets, due to higher interest rates and a higher mix of loans as a percentage of earning assets.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The yield on loans and leases for 2022 increased by 30 basis points as compared to 2021, primarily attributable to the rise in interest rates, 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 increased 21 basis points for 2022, as compared to 2021, due primarily to rising interest rates driving up interest expense by $35.6 million. 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 Company continues to be "asset-sensitive."

The following table presents condensed average balance sheet information, together with interest income and yields on average interest-earning assets, and interest expense and rates paid on average interest-bearing liabilities for the years ended December 31, 2022, 2021, and 2020:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** | **2020** | **2020** | **2020** |
| (dollars in thousands) | **Average Balance** | **Interest Income or Expense** | **Average Yields or Rates** | **Average Balance** | **Interest Income or Expense** | **Average Yields or Rates** | **Average Balance** | **Interest Income or Expense** | **Average Yields or Rates** |
| **INTEREST-EARNING ASSETS:** |  |  |  |  |  |  |  |  |  |
| Loans held for sale | $208141 | $8812 | 4.23% | $500070 | $15149 | 3.03% | $588058 | $20509 | 3.49% |
| Loans and leases <sup>(1)</sup> | 24225518 | 1041446 | 4.29% | 21925108 | 875366 | 3.99% | 22082359 | 930930 | 4.22% |
| Taxable securities | 3343721 | 72702 | 2.17% | 3321142 | 61717 | 1.86% | 2796581 | 50354 | 1.80% |
| Non-taxable securities <sup>(2)</sup> | 216943 | 6669 | 3.07% | 248256 | 7458 | 3.00% | 240054 | 7500 | 3.12% |
| Temporary investments and interest-bearing cash | 1561808 | 19706 | 1.26% | 2936273 | 3864 | 0.13% | 1637440 | 4739 | 0.29% |
| &nbsp;&nbsp;Total interest earning assets <sup>(1), (2)</sup> | 29556131 | 1149335 | 3.88% | 28930849 | 963554 | 3.33% | 27344492 | 1014032 | 3.71% |
| Other assets | 1261265 |  |  | 1336523 |  |  | 1867241 |  |  |
| &nbsp;&nbsp;&nbsp;Total assets | $30817396 |  |  | $30267372 |  |  | $29211733 |  |  |
| **INTEREST-BEARING LIABILITIES:** |  |  |  |  |  |  |  |  |  |
| Interest-bearing demand deposits | $3886390 | $8185 | 0.21% | $3462035 | $1865 | 0.05% | $2754417 | $5712 | 0.21% |
| Money market deposits | 7552666 | 26415 | 0.35% | 7624707 | 5964 | 0.08% | 7193470 | 19811 | 0.28% |
| Savings deposits | 2411448 | 880 | 0.04% | 2200608 | 729 | 0.03% | 1697353 | 801 | 0.05% |
| Time deposits | 1743988 | 12715 | 0.73% | 2217464 | 18593 | 0.84% | 3882684 | 73876 | 1.90% |
| &nbsp;&nbsp;&nbsp;Total interest-bearing deposits | 15594492 | 48195 | 0.31% | 15504814 | 27151 | 0.18% | 15527924 | 100200 | 0.65% |
| Repurchase agreements and federal funds purchased | 465600 | 997 | 0.21% | 454994 | 280 | 0.06% | 370091 | 766 | 0.21% |
| Borrowings | 226665 | 8920 | 3.94% | 195985 | 2838 | 1.45% | 1014240 | 13921 | 1.37% |
| Junior subordinated debentures | 399568 | 19889 | 4.98% | 369259 | 12127 | 3.28% | 325633 | 15221 | 4.67% |
| &nbsp;&nbsp;&nbsp;Total interest-bearing liabilities | 16686325 | 78001 | 0.47% | 16525052 | 42396 | 0.26% | 17237888 | 130108 | 0.75% |
| Non-interest-bearing deposits | 11053921 |  |  | 10669531 |  |  | 8576436 |  |  |
| Other liabilities | 501573 |  |  | 372078 |  |  | 414951 |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities | 28241819 |  |  | 27566661 |  |  | 26229275 |  |  |
| Common equity | 2575577 |  |  | 2700711 |  |  | 2982458 |  |  |
| &nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $30817396 |  |  | $30267372 |  |  | $29211733 |  |  |
| **NET INTEREST INCOME** <sup>(2)</sup> |  | $1071334 |  |  | $921158 |  |  | $883924 |  |
| **NET INTEREST SPREAD** |  |  | 3.41% |  |  | 3.07% |  |  | 2.96% |
| **NET INTEREST INCOME TO EARNING ASSETS OR NET INTEREST MARGIN** <sup>(1), (2)</sup> |  |  | 3.62% |  |  | 3.18% |  |  | 3.23% |

---

<sup>(1)</sup> Non-accrual loans and leases are included in the average balance.

(2)Tax-exempt income has been adjusted to a tax equivalent basis at a 21% tax rate. The amount of such adjustment was an addition to recorded income of approximately $1.3 million, $1.5 million, and $1.4 million for the years ended December 31, 2022, 2021, and 2020, respectively.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table sets forth a summary of the changes in tax equivalent net interest income due to changes in average asset and liability balances (volume) and changes in average rates (rate) for 2022 compared to 2021, as well as between 2021 and 2020. Changes in tax equivalent interest income and expense, which are not attributable specifically to either volume or rate, are allocated proportionately between both variances.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2022 compared to 2021** | **2022 compared to 2021** | **2022 compared to 2021** | **2021 compared to 2020** | **2021 compared to 2020** | **2021 compared to 2020** |
| | **Increase (decrease) in interest income and expense due to changes in** | **Increase (decrease) in interest income and expense due to changes in** | **Increase (decrease) in interest income and expense due to changes in** | **Increase (decrease) in interest income and expense due to changes in** | **Increase (decrease) in interest income and expense due to changes in** | **Increase (decrease) in interest income and expense due to changes in** |
| (in thousands) | **Volume** | **Rate** | **Total** | **Volume** | **Rate** | **Total** |
| **Interest-earning assets:** |  |  |  |  |  |  |
| Loans held for sale | $(10935) | $4598 | $(6337) | $(2854) | $(2506) | $(5360) |
| Loans and leases | 97290 | 68790 | 166080 | (6587) | (48977) | (55564) |
| Taxable securities | 422 | 10563 | 10985 | 9683 | 1680 | 11363 |
| Non-taxable securities <sup>(1)</sup> | (959) | 170 | (789) | 251 | (293) | (42) |
| Temporary investments and interest bearing deposits | (2612) | 18454 | 15842 | 2544 | (3419) | (875) |
| Total interest-earning assets <sup>(1)</sup> | 83206 | 102575 | 185781 | 3037 | (53515) | (50478) |
| **Interest-bearing liabilities:** |  |  |  |  |  |  |
| Interest bearing demand | 255 | 6065 | 6320 | 1188 | (5035) | (3847) |
| Money market | (57) | 20508 | 20451 | 1122 | (14969) | (13847) |
| Savings | 73 | 78 | 151 | 202 | (274) | (72) |
| Time deposits | (3648) | (2230) | (5878) | (23993) | (31290) | (55283) |
| Repurchase agreements and federal funds | 348 | 369 | 717 | 146 | (632) | (486) |
| Borrowings | 508 | 5574 | 6082 | (11810) | 727 | (11083) |
| Junior subordinated debentures | 1066 | 6696 | 7762 | 1851 | (4945) | (3094) |
| Total interest-bearing liabilities | (1455) | 37060 | 35605 | (31294) | (56418) | (87712) |
| Net increase in net interest income <sup>(1)</sup> | $84661 | $65515 | $150176 | $34331 | $2903 | $37234 |

---

<sup>(1)</sup> Tax exempt income has been adjusted to a tax equivalent basis at a 21% tax rate.

**PROVISION FOR CREDIT LOSSES**

The Company had a $84.0 million provision for credit losses for 2022, as compared to a $42.7 million recapture of provision for credit losses for 2021. The change in the provision reflects allowance requirements for new loan generation, loan mix changes, and changes between economic forecasts used in credit models. As a percentage of average outstanding loans and leases, the provision (recapture) for credit losses recorded for 2022 was 0.35%, as compared to (0.19)% for the prior period.

Net-charge offs were $30.9 million for 2022, or 0.13% of average loans and leases, compared to net charge-offs of $44.9 million, or 0.20% of average loans and leases, for 2021. The majority of net charge-offs relate to leases and equipment finance loans, included within the commercial loan portfolio.

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 $20.4 million as of December 31, 2022 have a related allowance for credit losses of $17.5 million, with the remaining loans written down to their 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**NON-INTEREST INCOME**

The following table presents the key components of non-interest income for years ended December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2022 compared to 2021** | **2022 compared to 2021** | **2022 compared to 2021** | **2022 compared to 2021** |
| (dollars in thousands) | **2022** | **2021** | **Change Amount** | **Change Percent** |
| Service charges on deposits | $48365 | $42086 | $6279 | 15% |
| Card-based fees | 37370 | 36114 | 1256 | 3% |
| Brokerage revenue | 90 | 5112 | (5022) | (98)% |
| Residential mortgage banking revenue, net | 106859 | 186811 | (79952) | (43)% |
| Gain on sale of debt securities, net | 2 | 8 | (6) | (75)% |
| Loss on equity securities, net | (7099) | (1511) | (5588) | 370% |
| Gain on loan and lease sales, net | 6696 | 15715 | (9019) | (57)% |
| BOLI income | 8253 | 8302 | (49) | (1)% |
| Other (losses) income | (1008) | 63681 | (64689) | (102)% |
| Total non-interest income | $199528 | $356318 | $(156790) | (44)% |

---

Brokerage revenue decreased for the year ended December 31, 2022 as compared to prior periods, due to the sale of Umpqua Investments, Inc. in April 2021.

The gain on loan and lease sales in 2022 decreased compared to 2021 due to a decrease in SBA loan sales during the period.

Other (losses) income in 2022 compared to 2021 decreased primarily due to a fair value loss on certain loans held for investment of $58.5 million in 2022, as compared to a fair value gain of $3.0 million in 2021.

Residential mortgage banking revenue, which is the primary source of income for the Mortgage Banking segment, decreased for the year ended December 31, 2022. The variance was driven by rising long-term interest rates and attributed to lower revenue from the origination and sale of residential mortgages, favorable changes in the fair value of the MSR asset, and a loss on the MSR hedge that was put in place during the third quarter of 2022. Revenue related to the origination and sale of residential mortgages decreased by $111.1 million, as compared to the prior period. This was partially offset by a net fair value gain of $22.8 million related to the MSR asset, partially offset by a MSR hedge loss of $14.5 million, for the year ended December 31, 2022, compared to a net loss on fair value of $7.8 million for the same period in 2021. The MSR hedge was put in place in August 2022.

For-sale mortgage closed loan volume decreased 61% as compared to the prior period, and the gain on sale margin decreased to 2.54% in 2022, compared to 3.32% in 2021. Mortgage banking trends in 2022 as compared to the prior period were impacted by higher mortgage rates and their effect on refinance demand, home purchase activity, and the locked pipeline. Direct expense related to the origination of for-sale mortgage loans as a percentage of loan production was 2.46% for the year ended December 31, 2022, compared to 2.00% for the year ended December 31, 2021.

Origination volume for mortgage loans is generally linked to the level of mortgage interest rates. When rates fall, origination volumes are expected to be elevated relative to historical levels. If rates rise, origination volumes 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.

In 2022, the Company made a number of structural changes within the mortgage banking segment, intended to reduce expenses, limit the impact of MSR changes to the income statement and moderate portfolio mortgage growth. Management notes that although mortgages remain an important product for the bank and for our customers, the Company is downsizing the scale of mortgage operations and expects a smaller impact on the financial statements in the future.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table presents our residential mortgage banking revenues for the years ended December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (dollars in thousands) | **2022** | **2021** |
| Origination and sale | $46712 | $157789 |
| Servicing | 37358 | 36836 |
| Change in fair value of MSR asset: |  |  |
| &nbsp;&nbsp;&nbsp;Changes due to collection/realization of expected cash flows over time | (20272) | (18903) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in valuation inputs or assumptions <sup>(1)</sup> | 57537 | 11089 |
| MSR hedge loss | (14476) |  |
| Residential mortgage banking revenue, net | $106859 | $186811 |
| **<u>Loans Held for Sale Production Statistics:</u>** |  |  |
| &nbsp;&nbsp;Closed loan volume for-sale | $1839466 | $4747104 |
| &nbsp;&nbsp;Gain on sale margin | 2.54% | 3.32% |

---

<sup>(1)</sup> 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 years ended December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2022 compared to 2021** | **2022 compared to 2021** | **2022 compared to 2021** | **2022 compared to 2021** |
| (dollars in thousands) | **2022** | **2021** | **Change Amount** | **Change Percent** |
| Salaries and employee benefits | $441226 | $480820 | $(39594) | (8)% |
| Occupancy and equipment, net | 138451 | 137546 | 905 | 1% |
| Communications | 10429 | 11564 | (1135) | (10)% |
| Marketing | 6540 | 7381 | (841) | (11)% |
| Services | 51323 | 48800 | 2523 | 5% |
| FDIC assessments | 13964 | 9238 | 4726 | 51% |
| Intangible amortization | 4095 | 4520 | (425) | (9)% |
| Merger related expenses | 17356 | 15183 | 2173 | 14% |
| Other expenses | 51566 | 45404 | 6162 | 14% |
| Total non-interest expense | 734950 | 760456 | (25506) | (3)% |

---

Salaries and employee benefits decreased for 2022, compared to 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 are directly related to the pending merger with Columbia, which is set to close February 28, 2023.

Other non-interest expense increased for 2022, compared to 2021, primarily due to an increase in state and local taxes of $5.9 million due to a one-time adjustment as well as other miscellaneous fluctuations in other expense, partially offset by a $6.0 million decrease in exit and disposal costs in 2022, compared to 2021. The prior elevated levels of exit and disposal costs were due to store consolidations and back-office lease exits as part of Umpqua's Next Gen 2.0 strategy.

**INCOME TAXES**

Our consolidated effective tax rate as a percentage of pre-tax income for 2022 was 25.3%, compared to 24.7% for 2021. The 2022 effective tax rate differed from the federal statutory rate of 21% principally because of state taxes, income on tax-exempt investment securities, and tax credits and benefits arising from low-income housing investments.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**<u>FINANCIAL CONDITION</u>**

**CASH AND CASH EQUIVALENTS** 

Cash and cash equivalents were $1.3 billion at December 31, 2022, compared to $2.8 billion at December 31, 2021. The decrease of interest bearing cash and temporary investments reflects strong loan portfolio growth of $3.6 billion, which was partially funded by increases in borrowings of $900.0 million and deposits of $470.9 million, respectively, in the period.

**INVESTMENT SECURITIES** 

The composition of our investment securities portfolio reflects management's investment strategy of maintaining an appropriate level of liquidity while providing a relatively stable source of interest income. The investment securities portfolio provides a vehicle for the investment of available funds, a source of liquidity (by pledging as collateral or through repurchase agreements) and collateral for certain public funds deposits.

Equity and other securities consist primarily of investments in fixed income mutual funds to support our CRA initiatives and securities invested in rabbi trusts for the benefit of certain current or former executives and employees as required by the underlying agreements. Equity and other securities were $73.0 million at December 31, 2022, compared to $81.2 million at December 31, 2021. This decrease is primarily due to losses on equity securities of $7.1 million during the year due to changes in fair value.

Investment debt securities available for sale were $3.2 billion as of December 31, 2022, compared to $3.9 billion at December 31, 2021. The decrease is due to a drop in the fair value of investment securities available for sale of $548.2 million and investment securities sales and paydowns of $396.1 million, partially offset by purchases of investment securities of $276.8 million.

The following table presents information regarding the amortized cost, fair value, average yield and maturity structure of the investment portfolio at December 31, 2022:

---

| | | | |
|:---|:---|:---|:---|
| (dollars in thousands) | **Amortized Cost** | **Fair Value** | **Average Yield** <sup>(1)</sup> |
| **U.S. treasury and agencies** |  |  |  |
| &nbsp;&nbsp;&nbsp;One year or less | $29978 | $29003 | 0.35% |
| &nbsp;&nbsp;&nbsp;One to five years | 551392 | 507557 | 2.07% |
| &nbsp;&nbsp;&nbsp;Five to ten years | 433515 | 382088 | 2.11% |
| &nbsp;&nbsp;&nbsp;&nbsp;Over ten years | 20647 | 17526 | 2.60% |
| Total U.S. treasury and agencies | 1035532 | 936174 | 2.04% |
| **Obligations of states and political subdivisions** |  |  |  |
| &nbsp;&nbsp;&nbsp;One year or less | 10114 | 10088 | 3.34% |
| &nbsp;&nbsp;&nbsp;One to five years | 140139 | 137886 | 3.32% |
| &nbsp;&nbsp;&nbsp;Five to ten years | 133617 | 111498 | 2.32% |
| &nbsp;&nbsp;&nbsp;Over ten years | 13740 | 10328 | 2.39% |
| Total obligations of states and political subdivisions | 297610 | 269800 | 2.88% |
| **Other Securities** |  |  |  |
| Mortgage-backed securities and collateralized mortgage obligations | 2407615 | 1993389 | 1.75% |
| Total debt securities | $3740757 | $3199363 | 1.93% |

---

<sup>(1)</sup> Weighted average yields are stated on a federal tax-equivalent basis of 21%. Weighted average yields for available for sale investments have been calculated on an amortized cost basis.

The mortgage-related securities in the table above include both pooled mortgage-backed issues and high-quality collateralized mortgage obligation structures, with an average duration of 6.0 years. These mortgage-related securities provide yield spread to U.S. Treasury or agency securities; however, the cash flows arising from them can be volatile due to refinancing of the underlying mortgage loans.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

We review investment securities on an ongoing basis for the presence of impairment, taking into consideration current market conditions, fair value in relationship to cost, extent and nature of the change in fair value, issuer rating changes and trends, whether we intend to sell a security or if it is more likely than not that we will be required to sell the security before recovery of our amortized cost basis of the investment, which may be maturity, and other factors.

Gross unrealized losses in the available for sale investment portfolio was $542.3 million at December 31, 2022. This consisted primarily of unrealized losses on mortgage-backed securities and collateralized mortgage obligations of $415.0 million. The unrealized losses were primarily 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 December 31, 2022.

**RESTRICTED EQUITY SECURITIES**

Restricted equity securities were $47.1 million and $10.9 million at December 31, 2022 and 2021, respectively, the majority of which represents the Bank's investment in the Federal Home Loan Bank. The increase is attributable to the purchase of FHLB stock during the period due to increased FHLB borrowing activity during the period. FHLB stock is carried at par and does not have a readily determinable fair value. Ownership of FHLB stock is restricted to the FHLB and member institutions, and can only be purchased and redeemed at par. At December 31, 2022, the Bank's minimum required investment in FHLB stock was $46.9 million.

**LOANS AND LEASES**

Total loans and leases outstanding at December 31, 2022 increased $3.6 billion compared to December 31, 2021. This increase was principally attributable to net new loan and lease originations of $3.7 billion, with the majority of the increase in multifamily and residential mortgage loans. The increase was partially offset by the sale of loans totaling $142.3 million and charge-offs of $45.0 million. The loan to deposit ratio as of December 31, 2022 is 97%, as compared to 85% for the year ended December 31, 2021, which reflects the strong loan growth that occurred during 2022.

The following table presents the concentration distribution of our loan and lease portfolio by major type as of December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| (dollars in thousands) | **Amount** | **Percentage** | **Amount** | **Percentage** |
| Commercial real estate |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-owner occupied term, net | $3894840 | 15% | $3786887 | 17% |
| &nbsp;&nbsp;&nbsp;Owner occupied term, net | 2567761 | 10% | 2332422 | 10% |
| &nbsp;&nbsp;&nbsp;Multifamily, net | 5285791 | 20% | 4051202 | 18% |
| &nbsp;&nbsp;&nbsp;Construction & development, net | 1077346 | 4% | 890338 | 4% |
| &nbsp;&nbsp;&nbsp;Residential development, net | 200838 | 1% | 206990 | 1% |
| Commercial |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Term, net | 3029547 | 12% | 3008473 | 13% |
| &nbsp;&nbsp;&nbsp;Lines of credit & other, net | 960054 | 4% | 910733 | 4% |
| &nbsp;&nbsp;&nbsp;Leases & equipment finance, net | 1706172 | 6% | 1467676 | 7% |
| Residential |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage, net | 5647035 | 21% | 4517266 | 20% |
| &nbsp;&nbsp;&nbsp;Home equity loans & lines, net | 1631965 | 6% | 1197170 | 5% |
| Consumer & other, net | 154632 | 1% | 184023 | 1% |
| &nbsp;&nbsp;&nbsp;Total, net of deferred fees and costs | $26155981 | 100% | $22553180 | 100% |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table presents the maturity distribution of our loan portfolios and the rate sensitivity of these loans to changes in interest rates as of December 31, 2022:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **By Maturity** | **By Maturity** | **By Maturity** | **By Maturity** | **By Maturity** | **Loans Over One Year by Rate Sensitivity** | **Loans Over One Year by Rate Sensitivity** |
| (in thousands) | **One Year or Less** | **One Through Five Years** | **Five Through 15 Years** | **Over 15 Years** | **Total** | **Fixed Rate** | **Floating/Adjustable Rate** |
| Commercial real estate, net | $1003874 | $2641863 | $5056185 | $4324654 | $13026576 | $1790337 | $10232365 |
| Commercial, net | $1999349 | $2779618 | $780733 | $136073 | $5695773 | $2394992 | $1301432 |
| Residential, net | $5316 | $8740 | $921883 | $6343061 | $7279000 | $3227537 | $4046147 |
| Consumer & other, net | $11699 | $120786 | $21443 | $704 | $154632 | $44165 | $98768 |

---

**ASSET QUALITY AND NON-PERFORMING ASSETS**

The following table summarizes our non-performing assets and restructured loans, as of December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (dollars in thousands) | **December 31, 2022** | **December 31, 2021** |
| Loans and leases on non-accrual status |  |  |
| &nbsp;&nbsp;&nbsp;Commercial real estate, net | $5011 | $5767 |
| &nbsp;&nbsp;&nbsp;Commercial, net | 25691 | 13098 |
| &nbsp;&nbsp;&nbsp;Residential, net |  |  |
| &nbsp;&nbsp;&nbsp;Consumer & other, net |  |  |
| Total loans and leases on non-accrual status | 30702 | 18865 |
| Loans and leases past due 90 days or more and accruing |  |  |
| &nbsp;&nbsp;&nbsp;Commercial real estate, net | 1 | 1 |
| &nbsp;&nbsp;&nbsp;Commercial, net | 7909 | 4160 |
| &nbsp;&nbsp;Residential, net <sup>(1)</sup> | 19894 | 27981 |
| &nbsp;&nbsp;&nbsp;Consumer & other, net | 134 | 194 |
| Total loans and leases past due 90 days or more and accruing <sup>(1)</sup> | 27938 | 32336 |
| Total non-performing loans and leases | 58640 | 51201 |
| Other real estate owned | 203 | 1868 |
| Total non-performing assets  | $58843 | $53069 |
| Restructured loans <sup>(2)</sup> | $6767 | $6694 |
| Allowance for credit losses on loans and leases | $301135 | $248412 |
| Reserve for unfunded commitments | 14221 | 12767 |
| Allowance for credit losses | $315356 | $261179 |
| Asset quality ratios: |  |  |
| &nbsp;&nbsp;&nbsp;Non-performing assets to total assets | 0.18% | 0.17% |
| &nbsp;&nbsp;&nbsp;Non-performing loans and leases to total loans and leases | 0.22% | 0.23% |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses on loan and lease losses to total loans and leases | 1.15% | 1.10% |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses to total loans and leases | 1.21% | 1.16% |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses to total non-performing loans and leases | 538% | 510% |

---

<sup>(1)</sup> 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 $6.6 million at December 31, 2022.

<sup>(2)</sup> Represents accruing TDR loans performing according to their restructured terms.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

At December 31, 2022 and 2021, loans of $6.8 million and $6.7 million, respectively, were classified as accruing restructured loans. The restructurings were granted in response to borrower financial difficulty, and generally provide for a modification of loan repayment 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ALLOWANCE FOR CREDIT LOSSES**

The ACL totaled $315.4 million at December 31, 2022, an increase of $54.2 million from the $261.2 million at December 31, 2021. The following table shows the activity in the ACL for the years ended December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (dollars in thousands) | **2022** | **2021** |
| **Allowance for credit losses on loans and leases** |  |  |
| Balance, beginning of period | $248412 | $328401 |
| Provision (recapture) for credit losses on loans and leases | 83605 | (35132) |
| Loans charged-off: |  |  |
| &nbsp;&nbsp;&nbsp;Commercial real estate, net | (136) | (1144) |
| &nbsp;&nbsp;&nbsp;Commercial, net | (41073) | (54425) |
| &nbsp;&nbsp;&nbsp;Residential, net | (224) | (70) |
| &nbsp;&nbsp;&nbsp;Consumer & other, net | (3556) | (3658) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total loans charged-off | (44989) | (59297) |
| Recoveries: |  |  |
| &nbsp;&nbsp;&nbsp;Commercial real estate, net | 384 | 645 |
| &nbsp;&nbsp;&nbsp;Commercial, net | 11029 | 10703 |
| &nbsp;&nbsp;&nbsp;Residential, net | 662 | 924 |
| &nbsp;&nbsp;&nbsp;Consumer & other, net | 2032 | 2168 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total recoveries | 14107 | 14440 |
| Net (charge-offs) recoveries: |  |  |
| &nbsp;&nbsp;&nbsp;Commercial real estate, net | 248 | (499) |
| &nbsp;&nbsp;&nbsp;Commercial, net | (30044) | (43722) |
| &nbsp;&nbsp;&nbsp;Residential, net | 438 | 854 |
| &nbsp;&nbsp;&nbsp;Consumer & other, net | (1524) | (1490) |
| &nbsp;&nbsp;&nbsp;&nbsp;Total net charge-offs | (30882) | (44857) |
| Balance, end of period | $301135 | $248412 |
| **Reserve for unfunded commitments** |  |  |
| Balance, beginning of period | $12767 | $20286 |
| Provision (recapture) for credit losses on unfunded commitments | 1454 | (7519) |
| Balance, end of period | 14221 | 12767 |
| **Total allowance for credit losses** | $315356 | $261179 |
| As a percentage of average loans and leases (annualized): |  |  |
| Net charge-offs | 0.13% | 0.20% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial real estate, net | —% | —% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Commercial, net | 0.56% | 0.73% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Residential, net | (0.01)% | (0.02)% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consumer & other, net | 0.90% | 0.82% |
| Provision (recapture) for credit losses | 0.35% | (0.19)% |
| Recoveries as a percentage of charge-offs | 31.36% | 24.35% |

---

The provision (recapture) for credit losses includes the provision (recapture) for credit losses on loans and leases and the provision (recapture) 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table sets forth the allocation of the allowance for credit losses on loans and leases and percent of loans and leases in each category to total loans and leases, net of deferred fees, as of December 31 for each of the last two years:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| (dollars in thousands) | **Amount** | **%** | **Amount** | **%** |
| Commercial real estate, net | $77813 | 50% | $99075 | 50% |
| Commercial, net | 167135 | 22% | 117573 | 24% |
| Residential, net | 50329 | 27% | 29068 | 25% |
| Consumer & other, net | 5858 | 1% | 2696 | 1% |
| Allowance for credit losses on loans and leases | $301135 |  | $248412 |  |

---

The following table shows the change in the allowance for credit losses from December 31, 2021 to December 31, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (dollars in thousands) | **December 31, 2021** | **2022 net (charge-offs) recoveries** | **Reserve (release) build** | **December 31, 2022** | **% of loans and leases, net outstanding** |
| Commercial real estate | $107536 | $248 | $(22764) | $85020 | 0.65% |
| Commercial | 119601 | (30044) | 80627 | 170184 | 2.99% |
| Residential | 31025 | 438 | 22062 | 53525 | 0.74% |
| Consumer | 3017 | (1524) | 5134 | 6627 | 4.29% |
| Total allowance for credit losses | $261179 | $(30882) | $85059 | $315356 | 1.21% |
| % of loans and leases, net outstanding | 1.16% |  |  | 1.21% |  |

---

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. The forward-looking assumptions revert to historical data when they reach the point where future assumptions are no longer estimated. As of December 31, 2022, the Bank used Moody's Analytics November consensus economic forecast to estimate the ACL. Key macroeconomic variables within this forecast include U.S. real GDP, U.S. unemployment rate, and Federal Reserve Fed Funds rate. The key components include U.S. real GDP average annualized growth of 0.4% in 2023, increasing to 1.4% in 2024, 2.0% in 2025, and 2.0% in 2026, and an average U.S. unemployment rate of 4.3% in 2023, 4.5% in 2024, 4.2% in 2025, and 3.9% in 2026. The forecasted average federal funds rate is expected to be 4.9% in 2023, 4.0% in 2024, 2.9% in 2025, and 2.5% in 2026. 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 allowance for credit losses as of December 31, 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**RESIDENTIAL MORTGAGE SERVICING RIGHTS**

The following table presents the key elements of our residential mortgage servicing rights asset as of December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (dollars in thousands) | **2022** | **2021** | **2020** |
| Balance, beginning of period | $123615 | $92907 | $115010 |
| Additions for new MSR capitalized | 24137 | 38522 | 51000 |
| Changes in fair value: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to collection/realization of expected cash flows over time | (20272) | (18903) | (19680) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to valuation inputs or assumptions <sup>(1)</sup> | 57537 | 11089 | (53423) |
| Balance, end of period | $185017 | $123615 | $92907 |

---

<sup>(1)</sup> 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.

Information related to our serviced loan portfolio as of December 31, 2022 and 2021 were as follows:

---

| | | |
|:---|:---|:---|
| (dollars in thousands) | **December 31, 2022** | **December 31, 2021** |
| Balance of loans serviced for others | $13020189 | $12755671 |
| MSR as a percentage of serviced loans | 1.42% | 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, prepayment speeds, and other inputs, the fair value of the MSR asset increased by $57.5 million for the year ended December 31, 2022, as compared to an increase of $11.1 million for the year ended December 31, 2021. The fair value of the MSR asset decreased by $20.3 million due to the passage of time, including the impact of regularly scheduled repayments, paydowns, and payoffs, as compared to a decrease of $18.9 million in 2021.

**DEPOSITS**

Total deposits were $27.1 billion at December 31, 2022, an increase of $470.9 million, or 2%, compared to year-end 2021. The increase is mainly attributable to growth in time and other interest bearing deposits accounts, which reflects an increase in brokered deposits and customer account movements.

The following table presents the deposit balances by major category as of December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| (dollars in thousands) | **Amount** | **%** | **Amount** | **%** |
| Non-interest bearing demand | $10288849 | 38% | $11023724 | 41% |
| Interest bearing demand | 4080469 | 15% | 3774937 | 14% |
| Money market | 7721011 | 29% | 7611718 | 29% |
| Savings | 2265052 | 8% | 2375723 | 9% |
| Time, greater than $250,000 | 582838 | 2% | 480432 | 2% |
| Time, $250,000 or less | 2127393 | 8% | 1328151 | 5% |
| Total deposits | $27065612 | 100% | $26594685 | 100% |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table presents the scheduled maturities of uninsured time deposits greater than $250,000 as of December 31, 2022:

---

| | |
|:---|:---|
| (in thousands) | **Amount** |
| Three months or less | $69266 |
| Over three months through six months | 51936 |
| Over six months through twelve months | 319826 |
| Over twelve months | 141810 |
| Uninsured deposits, greater than $250,000 | $582838 |

---

Uninsured deposits at December 31, 2022, totaled $10.6 billion, which is an estimated amount based on the methodologies and assumptions used for the Bank's regulatory requirements. The Company's total core deposits, which are deposits less time deposits greater than $250,000 and all brokered deposits, were $25.6 billion at December 31, 2022, compared to $26.0 billion at December 31, 2021. The Company's total brokered deposits were $866.9 million or 3% of total deposits at December 31, 2022, compared to $149.9 million or 1% of total deposits at December 31, 2021.

**BORROWINGS**

At December 31, 2022, the Bank had outstanding securities sold under agreements to repurchase of $308.8 million, a decrease of $183.5 million from December 31, 2021. At December 31, 2022, the Bank had no outstanding federal funds purchased balances. The Bank had outstanding borrowings of $906.2 million at December 31, 2022, consisting of advances from the FHLB, which increased $899.8 million since December 31, 2021. The increase was due to $900.0 million in short-term advances, which have fixed rates ranging from 4.54% to 4.87% and are set to mature in the first quarter of 2023. 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.

**JUNIOR SUBORDINATED DEBENTURES** 

We had junior subordinated debentures with carrying values of $411.5 million and $381.1 million at December 31, 2022 and 2021, respectively. The increase is mainly due to the $28.8 million change in the fair value for the junior subordinated debentures elected to be carried at fair value, which is due mostly to the implied forward curve shifting higher and a decrease in the credit spread, partially offset by the spot curve shifting higher. As of December 31, 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 SOURCES OF FUNDS**

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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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 represent 7% and 5% of total deposits at December 31, 2022 and 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. At December 31, 2022, the Bank has $2.3 billion in time deposits scheduled to mature within the next 12 months, which we anticipate the majority of personal time deposits will renew or transfer to other deposit products of the Bank at prevailing rates, although no assurance can be given in this regard. 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 $7.1 billion at December 31, 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 December 31, 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 $192.0 million of dividends paid by the Bank to the Company in 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. Due to the Company's announcement of its pending merger with Columbia, Umpqua is restricted from paying quarterly cash dividends in excess of the current level and from repurchasing shares of Company common stock.

Although we expect the Bank's and the Company's liquidity positions to remain satisfactory during 2023, 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.

**CONCENTRATIONS OF CREDIT RISK**

Information regarding Concentrations of Credit Risk is included in Notes 2, 4, and 17 of the *Notes to Consolidated Financial Statements* in Item 8 below*.*

**CAPITAL RESOURCES** 

Shareholders' equity at December 31, 2022 and 2021 was $2.5 billion and $2.7 billion, respectively. The fluctuation in shareholders' equity during the year ended December 31, 2022 was principally due to the other comprehensive loss, net of tax of $428.6 million and cash dividends paid of $183.2 million, offset by net income of $336.8 million for the year ended December 31, 2022.

The Federal Reserve Board has in place guidelines for risk-based capital requirements applicable to U.S. banks and bank/financial holding companies. These risk-based capital guidelines take into consideration risk factors, as defined by regulation, associated with various categories of assets, both on and off-balance sheet. Refer to the discussion of the capital adequacy requirements in *Supervision and Regulatio*n in *Item 1* of this 10-K.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Under the Basel III guidelines, capital strength is measured in three tiers, which are used in conjunction with risk-adjusted assets to determine the risk-based capital ratios. The guidelines require an 8% total risk-based capital ratio, of which 6% must be Tier 1 capital and 4.5% must be CET1. Our CET1 capital primarily includes shareholders' equity less certain deductions for goodwill and other intangibles, net of taxes, net unrealized gains (losses) on AFS securities, net of tax, net unrealized gains (losses) related to fair value of liabilities, net of tax, and certain deferred tax assets that arise from tax loss and credit carry-forwards, and totaled $2.9 billion at December 31, 2022. Tier 1 capital is primarily comprised of common equity Tier 1 capital, less certain additional deductions applied during the phase-in period, totaled $2.9 billion at December 31, 2022. Tier 2 capital components include all, or a portion of, the allowance for credit losses in excess of Tier 1 statutory limits and combined trust preferred security debt issuances. The total of Tier 1 capital plus Tier 2 capital components is referred to as Total Risk-Based Capital, and was $3.7 billion at December 31, 2022. The percentage ratios, as calculated under the guidelines, were 11.02%, 11.02% and 13.71% for CET1, Tier 1 and Total Risk-Based Capital, respectively, at December 31, 2022. The CET1, Tier 1 and Total Risk-Based Capital ratios at December 31, 2021 were 11.58%, 11.58% and 14.26%, respectively.

A minimum leverage ratio is required in addition to the risk-based capital standards and is defined as period-end shareholders' equity, less accumulated other comprehensive income, goodwill and deposit-based intangibles, divided by average assets as adjusted for goodwill and other intangible assets. Although a minimum leverage ratio of 4% is required for the highest-rated financial holding companies that are not undertaking significant expansion programs, the Federal Reserve Board may require a financial holding company to maintain a leverage ratio greater than 4% if it is experiencing or anticipating significant growth or is operating with less than well-diversified risks in the opinion of the Federal Reserve Board. The Federal Reserve Board uses the leverage and risk-based capital ratios to assess capital adequacy of banks and financial holding companies. Our consolidated leverage ratios at December 31, 2022 and 2021 were 9.14% and 9.01%, respectively.

Basel III also requires all banking organizations to maintain a 2.50% capital conservation buffer above the minimum risk-based capital requirements to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. The common equity Tier 1, Tier 1, and total capital ratio minimums inclusive of the capital conservation buffer were 7.00%, 8.50%, and 10.50%. At December 31, 2022, the Company and Bank were in compliance with the capital conservation buffer requirements.

As of December 31, 2022, the most recent notification from the FDIC categorized the Bank as "well-capitalized" under the regulatory framework for prompt corrective action. There are no conditions or events since that notification that management believes have changed the Bank's regulatory capital category.

Along with enactment of the CARES Act, the federal bank regulatory authorities issued an interim final rule to provide banking organizations that are required to implement CECL before the end of 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 and delayed the estimated regulatory capital impact of adopting CECL, relative to the incurred loss methodology's effect on regulatory capital.

During the year ended December 31, 2022, the Company made no capital contributions to the Bank. At December 31, 2022, all four of the capital ratios of the Bank exceeded the minimum ratios required by federal regulation. Management monitors these ratios on a regular basis to ensure that the Bank remains within regulatory guidelines.

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, which may result in the inability to pay dividends at previous levels, or at all.

During 2022, Umpqua's Board approved dividends of $0.21 per common share for all quarters. These dividends were made pursuant to our existing dividend policy and in consideration of, among other things, earnings, regulatory capital levels, the overall payout ratio, and expected asset growth. 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The payment of future cash dividends is at the discretion of our Board and subject to a number of factors, including results of operations, general business conditions, growth, financial condition, and other factors deemed relevant by the Board. Further, our ability to pay future cash dividends is subject to certain regulatory requirements and restrictions discussed in the *Supervision and Regulation* section in Item 1 above.

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 years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| | **2022** | **2021** | **2020** |
| Dividend declared per common share | $0.84 | $0.84 | $0.63 |
| Dividend payout ratio | 54% | 44% | (9%) |

---

In July 2021, the Company announced that its Board approved a new share repurchase program, which authorizes the Company to repurchase up to $400 million of common stock over the next twelve months from time to time in open market transactions, accelerated share repurchases, or in privately negotiated transactions as permitted under applicable rules and regulations. The program expired July 31, 2022. As of December 31, 2022, the Company repurchased a total of $78.2 million in shares under the program. The Company did not repurchase any shares during 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 will 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK** 

Market risk management is an integral part of our risk culture. Our Enterprise Risk Management group is an independent risk management function that partners with the line of business to identify, measure, and monitor market risks throughout the company. It ensures transparency of significant market risks, monitoring compliance with Board established risk appetite limits and escalates limit exceptions to appropriate executive management and the Board. The various business units are responsible for identification, acceptance and ownership of the risks and for ensuring that market risk exposures are well-managed and prudent. Market risk is monitored through various measures, such as simulations, and through routine stress testing, sensitivity, and scenario analysis.

Market risk is the risk that movements in market risk factors, including interest rates, credit spreads and volatilities will reduce our income and the value of our portfolios. These factors influence prospective yields, values, or prices associated with the instrument. Our market risk arises primarily from credit risk and interest rate risk inherent in our investment, lending, and financing activities.

To manage our credit risk, we rely on various controls, including our underwriting standards and loan policies, internal loan monitoring, and periodic credit reviews, as well as our allowance for credit losses methodology. Additionally, the Company's Enterprise Risk and Credit and Audit and Compliance Committees provide board oversight over the Company's loan portfolio risk management functions, the Company's Finance and Capital Committee provides board oversight over the Company's investment portfolio and hedging risk management functions, and the Bank's Audit and Compliance Committee provides board oversight of the ACL process and reviews and approves the ACL methodology.

Interest rate risk is the potential for loss resulting from adverse changes in the level of interest rates on the Company's net interest income. The absolute level and volatility of interest rates can have a significant impact on our profitability. The objective of interest rate risk management is to identify and manage the sensitivity of net interest income to changing interest rates to achieve our overall financial objectives. We manage exposure to fluctuations in interest rates through actions that are established by the Asset/Liability Management Committee. The ALCO meets monthly and has responsibility for developing asset/liability management policy, formulating and implementing strategies to improve balance sheet positioning and earnings, and reviewing interest rate sensitivity. The Company's Finance and Capital Committee provides oversight of the asset/liability management process, reviews the results of the interest rate risk analyses prepared for the ALCO, and approves the asset/liability policy on an annual basis.

We measure our interest rate risk position on a monthly basis. The primary tools we use to measure our interest rate risk is simulation analysis and economic value of equity (fair value of financial instruments) modeling. The results of these analyses are reviewed by ALCO monthly and the Finance and Capital Committee quarterly. If hypothetical changes to interest rates cause changes to our simulated net interest income simulation or economic value of equity modeling outside of our pre-established internal limits, we may adjust the asset and liability size or mix in an effort to bring our interest rate risk exposure within our established limits.

***LIBOR Transition***

On March 5, 2021, the Financial Conduct Authority (the authority that regulates LIBOR) announced the future cessation and loss of representativeness for all LIBOR benchmark settings. While non-USD and several less frequently referenced USD LIBOR settings ceased publication immediately after December 31, 2021, commonly referenced USD LIBOR settings, encompassing all of Umpqua's LIBOR exposure, will cease publication immediately after June 30, 2023. U.S. regulators continue to encourage banks to transition away from LIBOR as soon as practicable and also communicated that banks should not enter into new transactions referencing LIBOR after December 31, 2021. The ARRC is a group of private-market participants convened by the Federal Reserve Board and the New York Fed to help ensure a successful transition from USD LIBOR to a more robust reference rate. The ARRC recommended alternative is SOFR, including forward-looking term rates based on SOFR, as alternative reference rate options.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The Company holds financial instruments that will be impacted by the discontinuance of LIBOR, primarily certain loans, derivatives, and junior subordinated debentures that use LIBOR as the benchmark rate. These financial instruments will transition to new reference rates. This transition is progressing and will continue to occur over time as many of these arrangements do not have an alternative rate referenced in their contracts.

The Company established an enterprise-wide transition program with program deliverables including business strategy, product design and pricing strategy, instrument contract remediation, and systems and processes. These deliverables are mostly complete as we approach the final transition of June 30, 2023. Our existing LIBOR exposures are limited primarily to three instruments—adjustable and variable-rate loans, loan-related derivatives, and junior subordinated debentures.

As of December 31, 2022, LIBOR-indexed adjustable and variable-rate loans comprise approximately 14% of our loan and lease portfolio. Consistent with U.S. banking regulators direction, we ceased entering into new contracts that use USD LIBOR as a reference rate after December 31, 2021.

Our outstanding junior subordinated debentures mature after June 30, 2023 and are indexed to USD LIBOR. They are covered under federal legislation, and the Federal Reserve's regulations implementing that legislation, that will allow us to replace the LIBOR index with forward term SOFR, plus the statutorily prescribed tenor spread adjustment.

We have prepared for the cessation of USD LIBOR by taking steps to avoid new exposures and reduce our remaining exposures. We have actively originated new variable and adjustable-rate loans using SOFR, forward-looking term SOFR and other non-LIBOR indexes. We have substantially completed amendments to all loans maturing after June 30, 2023, to include robust LIBOR index replacement provisions. We have completed transition on certain loan portfolio segments, and are on track to complete remaining transition work, including providing our customers with information about the cessation of USD LIBOR and how it will affect their contracts with us.

***Net Interest Income Simulation***

Interest rate sensitivity is a function of the repricing characteristics of our interest earning assets and interest bearing liabilities. These repricing characteristics are the time frames within which the interest bearing assets and liabilities are subject to change in interest rates either at replacement, repricing, or maturity during the life of the instruments. Interest rate sensitivity management focuses on the maturity structure of assets and liabilities and their repricing characteristics during periods of changes in market interest rates.

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Our simulation beta estimates are generally consistent with actual betas utilized in the last rising rate cycle. The following table shows the beta realized in the last rising rate market cycle.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Deposit Repricing Betas During the Last Rising-Rate Cycle**<sup>(1)</sup> | **Deposit Repricing Betas During the Last Rising-Rate Cycle**<sup>(1)</sup> | **Deposit Repricing Betas During the Last Rising-Rate Cycle**<sup>(1)</sup> | **Deposit Repricing Betas During the Last Rising-Rate Cycle**<sup>(1)</sup> | **Deposit Repricing Betas During the Last Rising-Rate Cycle**<sup>(1)</sup> |
|  |  | Cost of Umpqua Deposits | Cost of Umpqua Deposits | Avg Non-Interest Bearing Deposits as % of Total |
|  | Effective Fed Funds Target Rate (Daily Avg.) | Interest-Bearing | Total | Avg Non-Interest Bearing Deposits as % of Total |
| Q3 2019 | 2.20% | 1.19% | 0.82% | 31.0% |
| Q2 2019 | 2.40% | 1.16% | 0.81% | 30.3% |
| Q3 2015 | 0.14% | 0.24% | 0.17% | 29.5% |
| Variance: Peak (Peak value less Q3 2015) | +2.26% | +0.95% | +0.65% |  |
| Umpqua Beta (based on peak Umpqua deposit rate)<sup>(1)</sup> |  | 42% | 29% |  |

---

<sup>(1)</sup> Deposit repricing betas are calculated between Q3 2015 and Q3 2019. We use Q3 2019 as our end point despite a 50-basis point reduction in the fed funds target rate (reflected by a 20-basis point reduction in the daily average of the effective funds rate) during the quarter as it represents our peak deposit costs during the last rising rate cycle and it captures the repricing lag effect.

Loan repricing characteristics are a significant component of interest rate sensitivity. Variable and adjustable-rate loans may or may not contain a rate floor – which impacts the sensitivity of the instrument based on repricing timing and the magnitude of the change in interest rate. The following tables show certain pricing characteristics including rate type, maturity and floor detail of the loan portfolio at December 31, 2022:

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;**Loan Repricing Detail**<sup>(1),(2)</sup> | &nbsp;&nbsp;**Loan Repricing Detail**<sup>(1),(2)</sup> | &nbsp;&nbsp;**Loan Repricing Detail**<sup>(1),(2)</sup> | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** | **Loan Maturities at December 31, 2022** |
| (in millions) | Q4 2022 | % |  |  | <=6 | 7 to 12 | 13 to 24 | 25 to 36 | 37 to 59 | 60+ |  |  |
| Fixed | $8981 | 34% | (in millions) | (in millions) | Mos | Mos | Mos | Mos | Mos | Mos | Total | Total |
| Prime | 1801 | 7% | Fixed | Fixed | 1441 | 113 | 336 | 542 | 1243 | 5306 | $| 8981 |
| 1 Month | 6143 | 24% | Floating | Floating | 710 | 603 | 904 | 418 | 1220 | 4089 | 7944 | 7944 |
| Floating | 7944 | 31% | Adjustable | Adjustable | 24 | 34 | 92 | 219 | 444 | 8383 | 9196 | 9196 |
|  |  |  | Total | Total | 2175 | 750 | 1332 | 1179 | 2907 | 17778 | $| 26121 |
| Prime | 302 | 1% |  |  |  |  |  |  |  |  |  |  |
| 6 month | 5593 | 21% |  |  |  |  |  |  |  |  |  |  |
| 1 Year | 1226 | 5% | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> | **Floors: Floating and Adjustable Rate Loans at December 31, 2022**<sup>(3),(4)</sup> |
| 3 Year | 160 | 1% | (in millions) | No Floor | No Floor | At Floor | At Floor | Above Floor | Above Floor | Total | Total | Total |
| 5 Year | 1265 | 5% | Floating | $5024 | $5024 | $1 | $1 | $2919 | $2919 | $7944 | $7944 | $7944 |
| 10 Year | 650 | 2% | Adjustable | 1211 | 1211 | 82 | 82 | 7903 | 7903 | 9196 | 9196 | 9196 |
| Adjustable | 9196 | 35% | Total | $6235 | $6235 | $83 | $83 | $10822 | $10822 | $17140 | $17140 | $17140 |
|  |  |  | % of Total | 37% | 37% | 0% | 0% | 63% | 63% | 100% | 100% | 100% |
| Total | $26121 | 100% |  |  |  |  |  |  |  |  |  |  |

---

<sup>(1)</sup> Index rates are mapped to the closest material index.

<sup>(2)</sup> Loan balances reported here are customer principal book balances, and exclude items such as deferred fees and costs.

<sup>(3)</sup> Loans were grouped into three buckets: (1) No Floor: no contractual floor on the loan; (2) At Floor: current rate = floor; (3) Above Floor: current rate exceeds floor. The amount above the floor was based on the current margin plus the current index assuming the loan repriced on December 31, 2022. The adjustable loans may not reprice until well into the future, depending on the timing and size of interest rate changes.

<sup>(4)</sup> We no longer disclose the required upward interest rate changes necessary to move loans off their floors as this category has declined to only $83 million as of December 31, 2022, and the impact to net interest income when they reprice off their existing floors is relatively de minimis.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Changes that could vary significantly from our assumptions include loan and deposit growth or contraction, changes in the mix of our earning assets or funding sources, and future asset/liability management decisions, all of which may have significant effects on our net interest income. Also, some of the assumptions made in the simulation model may not materialize and unanticipated events and circumstances may occur. In addition, the simulation model does not take into account any future actions management could undertake to mitigate the impact of interest rate changes or the impact a change in interest rates may have on our credit risk profile, loan prepayment estimates and spread relationships, which can change regularly. Actions we could undertake include, but are not limited to, growing or contracting the balance sheet, changing the composition of the balance sheet, or changing our pricing strategies for loans or deposits.

The estimated impact on our net interest income over a time horizon of one year as of December 31, 2022, 2021, and 2020 are indicated in the table below. For the scenarios shown, the interest rate simulation assumes a parallel and sustained shift in market interest rates ratably over a twelve-month period and no change in the composition or size of the balance sheet. For example, the "up 200 basis points" scenario is based on a theoretical increase in market rates of 16.7 basis points per month for twelve months applied to the balance sheet of December 31 for each respective year.

***Interest Rate Simulation Impact on Net Interest Income***

---

| | | | |
|:---|:---|:---|:---|
| As of December 31, | **2022** | **2021** | **2020** |
| Up 300 basis points | 1.7% | 9.7% | 9.7% |
| Up 200 basis points | 1.1% | 6.3% | 6.5% |
| Up 100 basis points | 0.6% | 3.0% | 3.2% |
| Down 100 basis points | (2.4)% | (1.2)% | (1.8)% |
| Down 200 basis points | (5.1)% | (2.4)% | (2.9)% |
| Down 300 basis points | (7.8)% | (3.1)% | (3.3)% |

---

Asset sensitivity indicates that in a rising interest rate environment the Company's net interest income would increase and in a decreasing interest rate environment the Company's net interest income would decrease. Liability sensitivity indicates that in a rising interest rate environment a Company's net interest income would decrease and in a decreasing interest rate environment the Company's net interest income would increase. For all years presented, we were "asset-sensitive" meaning we expect our net interest income to increase as market rates increase and to decrease as market rates decrease. The relative level of asset sensitivity as of December 31, 2022, has changed from the prior year primarily due to the impact of increasing interest rates resulting from Federal Reserve monetary policy and programs to address inflationary pressure. As rates have increased, asset sensitivity in an increasing rate environment has decreased and the sensitivity in a decreasing rate environment has increased. A shifting mix of earning assets from cash to longer duration investments and loans coupled with an increasing mix of higher beta funding sources has caused muted sensitivity in rate up scenarios. In rates down scenarios the same exposures leading to the significant actual net interest margin expansion in 2022 creates additional sensitivity exposure to falling rate scenarios.

It should be noted that prior to 2022, although net interest income simulation results are presented for down rate scenarios, most market rates would have reached zero before declining the full 100 basis points, and our simulation parameters floor rates at zero and assume they do not go negative.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Interest rate sensitivity in the first year of the net interest income simulation for increasing interest rate scenarios is negatively impacted by the cost of non-maturity deposits repricing immediately while interest earnings assets (primarily the loan and leases held for investment portfolio) reprice at a slower rate based upon the instrument repricing characteristics. As a result, interest sensitivity in increasing interest rates scenarios improves in subsequent years as these assets reprice. Conversely, in a declining interest scenario, net interest income is negatively impacted by assets re-pricing lower while deposits remain at or near their floors. Management also prepares and reviews the long-term trends of the net interest income simulation to measure and monitor risk. This analysis assumes the same rate shift over the first year of the scenario as described above and holding steady thereafter. The estimated impact on our net interest income over the first and second-year time horizons as it relates to our balance sheet as of December 31, 2022 is indicated in the table below.

***Interest Rate Simulation Impact on Net Interest Income***

---

| | | |
|:---|:---|:---|
| As of December 31, 2022 | **Year 1** | **Year 2** |
| Up 300 basis points | 1.7% | 6.1% |
| Up 200 basis points | 1.1% | 4.2% |
| Up 100 basis points | 0.6% | 2.2% |
| Down 100 basis points | (2.4)% | (6.0)% |
| Down 200 basis points | (5.1)% | (12.9)% |
| Down 300 basis points | (7.8)% | (19.7)% |

---

In general, we view the net interest income model results as more relevant to the Company's current operating profile (a going concern), and we primarily manage our balance sheet based on this information.

***Economic Value of Equity***

Another interest rate sensitivity measure we utilize is the quantification of economic value changes for all financial assets and liabilities, given an increase or decrease in market interest rates. This approach provides a longer-term view of interest rate risk, capturing all future expected cash flows. Assets and liabilities with option characteristics are measured based on different interest rate path valuations using statistical rate simulation techniques. The projections are by their nature forward-looking and therefore inherently uncertain and include various assumptions regarding cash flows and discount rates.

The table below illustrates the effects of various instantaneous market interest rate changes on the fair values of financial assets and liabilities compared to the corresponding carrying values and fair values:

***Interest Rate Simulation Impact on Fair Value of Financial Assets and Liabilities***

---

| | | |
|:---|:---|:---|
| As of December 31, | **2022** | **2021** |
| Up 300 basis points | (14.0)% | 0.3% |
| Up 200 basis points | (9.4)% | 1.6% |
| Up 100 basis points | (4.4)% | 1.9% |
| Down 100 basis points | 0.9% | (5.3)% |
| Down 200 basis points | 0.1% | 0.4% |
| Down 300 basis points | (2.5)% | 1.9% |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

As of December 31, 2022, our economic value of equity analysis indicates a liability sensitive profile in increasing interest rate scenarios. This suggests a sudden or sustained increase in market interest rates would result in a decrease in our estimated economic value of equity, as the decrease in value of our interest earning assets exceeds the economic value change of interest-bearing liabilities. In declining interest rate scenarios, our economic value of equity increases, but only slightly before shifting the sensitivity profile between a down 200 and 300 basis point scenario. This occurs as the increase in value of interest earning assets exceeds the decline in economic value of interest bearing liabilities, including the core deposit intangible. In increasing interest rate scenarios, our overall sensitivity to changes in market interest rates shifted and increased from the prior year, primarily due to the relative level of market interest rates and the shifting value of fundings sources given mix changes during the year being more than offset by the economic value losses on loans and securities given extended duration trends of those interest earning assets. As of December 31, 2022, our estimated economic value of equity (fair value of financial assets and liabilities) was above our book value of equity primarily due to an increase in the economic value core deposit intangible.

**IMPACT OF INFLATION AND CHANGING PRICES**

A financial institution's asset and liability structure is substantially different from that of an industrial firm in that primarily all assets and liabilities of a bank are monetary in nature, with relatively little investment in fixed assets or inventories. Inflation has an important impact on the growth of total assets and the resulting need to increase equity capital at higher than normal rates in order to maintain appropriate capital ratios. We believe that the impact of inflation on financial results depends on management's ability to react to changes in interest rates and, by such reaction, reduce the inflationary impact on performance. We have an asset/liability management program which attempts to manage interest rate sensitivity. In addition, periodic reviews of banking services and products are conducted to adjust pricing in view of current and expected costs.

Our financial statements included in Item 8 below have been prepared in accordance with accounting principles generally accepted in the United States, which requires us to measure financial position and operating results principally in terms of historic dollars. Changes in the relative value of money due to inflation or recession are generally not considered. The primary effect of inflation on our results of operations is through increased operating costs, such as compensation, occupancy, and business development expenses. In management's opinion, changes in interest rates affect the financial condition of a financial institution to a far greater degree than changes in the rate of inflation. Although interest rates are influenced by changes in the inflation rate, they do not necessarily change at the same rate or in the same magnitude as the inflation rate. Interest rates are highly sensitive to many factors that are beyond our control, including U.S. fiscal and monetary policy and general national and global economic conditions.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**

---

| | |
|:---|:---|
| INDEX TO CONSOLIDATED FINANCIAL STATEMENTS | INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |
|  | Page |
| <u>[Report of Deloitte & Touche LLP, Independent Registered Public Accounting Firm](#i4e8ac2707a6d44908312b6c1bbd97512_142)</u> (PCAOB ID No. 34) | <u>[64](#i4e8ac2707a6d44908312b6c1bbd97512_142)</u> |
| <u>[Consolidated Balance Sheets](#i4e8ac2707a6d44908312b6c1bbd97512_145)</u> | <u>[67](#i4e8ac2707a6d44908312b6c1bbd97512_145)</u> |
| <u>[Consolidated Statements of Operations](#i4e8ac2707a6d44908312b6c1bbd97512_148)</u> | <u>[68](#i4e8ac2707a6d44908312b6c1bbd97512_148)</u> |
| <u>[Consolidated Statements of Comprehensive Income](#i4e8ac2707a6d44908312b6c1bbd97512_151)</u> | <u>[69](#i4e8ac2707a6d44908312b6c1bbd97512_151)</u> |
| <u>[Consolidated Statements of Changes in Shareholders' Equity](#i4e8ac2707a6d44908312b6c1bbd97512_154)</u> | <u>[70](#i4e8ac2707a6d44908312b6c1bbd97512_154)</u> |
| <u>[Consolidated Statements of Cash Flow](#i4e8ac2707a6d44908312b6c1bbd97512_157)</u> | <u>[71](#i4e8ac2707a6d44908312b6c1bbd97512_157)</u> |
| <u>[Notes to Consolidated Financial Statements](#i4e8ac2707a6d44908312b6c1bbd97512_160)</u> | <u>[73](#i4e8ac2707a6d44908312b6c1bbd97512_160)</u> |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Shareholders and the Board of Directors of Umpqua Holdings Corporation

**Opinions on the Financial Statements and Internal Control over Financial Reporting**

We have audited the accompanying consolidated balance sheets of Umpqua Holdings Corporation and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, changes in shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the "financial statements"). We also have audited the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control — Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because management's assessment and our audit were conducted to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act (FDICIA), management's assessment and our audit of the Company's internal control over financial reporting included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in *Internal Control — Integrated Framework (2013)* issued by COSO.

**Basis for Opinions**

The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Definition and Limitations of Internal Control over Financial Reporting**

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

**Allowance for Credit Losses on Loans and Leases— Refer to Notes 1 and 5 to the financial statements**

*Critical Audit Matter Description*

The Company's estimate of current expected credit losses for loans and leases is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts, and management judgement is required to determine which loss estimation methods are appropriate for their circumstances. For the year ended December 31, 2022 the Company recorded a provision for credit losses for loans and leases of $83.6 million and the allowance for credit losses on loans and leases (ACLLL) was $301.1 million as of December 31, 2022.

The Company utilizes models, some of which are complex, to obtain reasonable and supportable forecasts of credit losses for loans and leases. These models use inputs that include forecasted future economic conditions and that are dependent upon specific macroeconomic variables relevant to each of the Company's loan and lease portfolios. Along with the quantitative factors produced by the models, management also considers qualitative factors when determining the ACLLL.

Given the significance of the ACLLL, the complexity of the models, and the management judgements required for the selection of appropriate models, forecasting economic conditions, and determining qualitative adjustments, performing audit procedures to evaluate the ACLLL requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our credit specialists.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*How the Critical Audit Matter Was Addressed in the Audit*

Our audit procedures related to the ACLLL included the following, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We tested the effectiveness of controls over the selection of forecasted economic assumptions used in the models, model maintenance, data transfers in to and out of the models, and overall model results.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We involved credit specialists to assist us in evaluating the reasonableness and conceptual soundness of the methodologies applied in the credit loss estimation models.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We tested the completeness and accuracy of data used in the models.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated the reasonableness of the economic scenario selected by management for use in the models.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• We evaluated the reasonableness of the qualitative adjustments, or absence thereof, within the ACLLL estimate.

/s/ Deloitte & Touche LLP

Portland, Oregon

February 24, 2023

We have served as the Company's auditor since 2018.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES** 

CONSOLIDATED BALANCE SHEETS

December 31, 2022 and 2021

---

| | | |
|:---|:---|:---|
| (in thousands, except shares) | **December 31, 2022** | **December 31, 2021** |
| **ASSETS** |  |  |
| Cash and due from banks | $327313 | $222015 |
| Interest bearing cash and temporary investments | 967330 | 2539606 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total cash and cash equivalents | 1294643 | 2761621 |
| Investment securities |  |  |
| &nbsp;&nbsp;&nbsp;Equity and other, at fair value | 72959 | 81214 |
| &nbsp;&nbsp;&nbsp;Available for sale, at fair value | 3196166 | 3870435 |
| &nbsp;&nbsp;&nbsp;Held to maturity, at amortized cost | 2476 | 2744 |
| Loans held for sale, at fair value | 71647 | 353105 |
| Loans and leases (at fair value: $285,581 and $345,634) | 26155981 | 22553180 |
| Allowance for credit losses on loans and leases | (301135) | (248412) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net loans and leases | 25854846 | 22304768 |
| Restricted equity securities | 47144 | 10916 |
| Premises and equipment, net | 176016 | 171125 |
| Operating lease right-of-use assets | 78598 | 82366 |
| Other intangible assets, net | 4745 | 8840 |
| Residential mortgage servicing rights, at fair value | 185017 | 123615 |
| Bank owned life insurance | 331759 | 327745 |
| Deferred tax asset, net | 132823 |  |
| Other assets | 399800 | 542442 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $31848639 | $30640936 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| Deposits |  |  |
| &nbsp;&nbsp;&nbsp;Non-interest bearing | $10288849 | $11023724 |
| &nbsp;&nbsp;&nbsp;Interest bearing | 16776763 | 15570961 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total deposits | 27065612 | 26594685 |
| Securities sold under agreements to repurchase | 308769 | 492247 |
| Borrowings | 906175 | 6329 |
| Junior subordinated debentures, at fair value | 323639 | 293081 |
| Junior subordinated debentures, at amortized cost | 87813 | 88041 |
| Operating lease liabilities | 91694 | 95427 |
| Deferred tax liability, net |  | 4353 |
| Other liabilities | 585111 | 317503 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 29368813 | 27891666 |
| **COMMITMENTS AND CONTINGENCIES (NOTE 17)** |  |  |
| **SHAREHOLDERS' EQUITY** |  |  |
| Common stock, no par value, shares authorized: 400,000,000 in 2022 and 2021; issued and outstanding: 217,054,317 in 2022 and 216,625,506 in 2021 | 3450493 | 3444849 |
| Accumulated deficit | (543803) | (697338) |
| Accumulated other comprehensive (loss) income | (426864) | 1759 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total shareholders' equity | 2479826 | 2749270 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and shareholders' equity | $31848639 | $30640936 |

---

See notes to consolidated financial statements

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES** 

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 2022, 2021, and 2020

---

| | | | |
|:---|:---|:---|:---|
| (in thousands, except per share amounts) | **2022** | **2021** | **2020** |
| **INTEREST INCOME** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest and fees on loans and leases | $1050258 | $890515 | $951439 |
| &nbsp;&nbsp;&nbsp;Interest and dividends on investment securities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Taxable | 72264 | 60399 | 47739 |
| &nbsp;&nbsp;&nbsp;&nbsp;Exempt from federal income tax | 5351 | 5947 | 6095 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends | 438 | 1318 | 2615 |
|  Interest on temporary investments and interest bearing deposits | 19706 | 3864 | 4739 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest income | 1148017 | 962043 | 1012627 |
| **INTEREST EXPENSE** |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest on deposits | 48195 | 27151 | 100200 |
| &nbsp;&nbsp;&nbsp;Interest on securities sold under agreement to repurchase and federal funds purchased | 997 | 280 | 766 |
| &nbsp;&nbsp;&nbsp;Interest on borrowings | 8920 | 2838 | 13921 |
| &nbsp;&nbsp;&nbsp;Interest on junior subordinated debentures | 19889 | 12127 | 15221 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total interest expense | 78001 | 42396 | 130108 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income | 1070016 | 919647 | 882519 |
| **PROVISION (RECAPTURE) FOR CREDIT LOSSES** | 84016 | (42651) | 204861 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net interest income after provision (recapture) for credit losses | 986000 | 962298 | 677658 |
| **NON-INTEREST INCOME** |  |  |  |
| &nbsp;&nbsp;&nbsp;Service charges on deposits | 48365 | 42086 | 40838 |
| &nbsp;&nbsp;&nbsp;Card-based fees | 37370 | 36114 | 28190 |
| &nbsp;&nbsp;&nbsp;Brokerage revenue | 90 | 5112 | 15599 |
| &nbsp;&nbsp;&nbsp;Residential mortgage banking revenue, net | 106859 | 186811 | 270822 |
| &nbsp;&nbsp;&nbsp;Gain on sale of debt securities, net | 2 | 8 | 190 |
| &nbsp;&nbsp;&nbsp;(Loss) gain on equity securities, net | (7099) | (1511) | 769 |
| &nbsp;&nbsp;&nbsp;Gain on loan and lease sales, net | 6696 | 15715 | 6707 |
| &nbsp;&nbsp;&nbsp;BOLI income | 8253 | 8302 | 8399 |
| &nbsp;&nbsp;&nbsp;Other (losses) income | (1008) | 63681 | 40495 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest income | 199528 | 356318 | 412009 |
| **NON-INTEREST EXPENSE** |  |  |  |
| &nbsp;&nbsp;&nbsp;Salaries and employee benefits | 441226 | 480820 | 479247 |
| &nbsp;&nbsp;&nbsp;Occupancy and equipment, net | 138451 | 137546 | 151650 |
| &nbsp;&nbsp;&nbsp;Communications | 10429 | 11564 | 11843 |
| &nbsp;&nbsp;&nbsp;Marketing | 6540 | 7381 | 8313 |
| &nbsp;&nbsp;&nbsp;Services | 51323 | 48800 | 46640 |
| &nbsp;&nbsp;&nbsp;FDIC assessments | 13964 | 9238 | 12516 |
| &nbsp;&nbsp;&nbsp;Intangible amortization | 4095 | 4520 | 4986 |
| &nbsp;&nbsp;&nbsp;Merger related expenses | 17356 | 15183 |  |
| &nbsp;&nbsp;&nbsp;Goodwill impairment |  |  | 1784936 |
| &nbsp;&nbsp;&nbsp;Other expenses | 51566 | 45404 | 45956 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total non-interest expense | 734950 | 760456 | 2546087 |
| &nbsp;&nbsp;&nbsp;Income (loss) before provision for income taxes | 450578 | 558160 | (1456420) |
| &nbsp;&nbsp;&nbsp;Provision for income taxes | 113826 | 137860 | 67000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) | $336752 | $420300 | $(1523420) |
| **Earnings (loss) per common share:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $1.55 | $1.92 | $(6.92) |
| &nbsp;&nbsp;&nbsp;Diluted | $1.55 | $1.91 | $(6.92) |
| **Weighted average number of common shares outstanding:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | 216980 | 219032 | 220218 |
| &nbsp;&nbsp;&nbsp;Diluted | 217403 | 219581 | 220218 |

---

See notes to consolidated financial statements

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES** 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2022, 2021, and 2020

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| Net income (loss) | $336752 | $420300 | $(1523420) |
| Available for sale securities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Unrealized (losses) gains arising during the period | (548193) | (124970) | 106814 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit (expense) related to unrealized (losses) gains | 140995 | 32142 | (27473) |
| &nbsp;&nbsp;&nbsp;Reclassification adjustment for net realized gains in earnings | (2) | (8) | (190) |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax expense related to realized gains | 1 | 2 | 49 |
| &nbsp;&nbsp;&nbsp;Net change in unrealized (losses) gains for available for sale securities | (407199) | (92834) | 79200 |
| Junior subordinated debentures, at fair value: |  |  |  |
| &nbsp;&nbsp;&nbsp;Unrealized (losses) gains arising during the period | (28842) | (37899) | 18842 |
| &nbsp;&nbsp;&nbsp;&nbsp;Income tax benefit (expense) related to unrealized (losses) gains | 7418 | 9747 | (4846) |
| &nbsp;&nbsp;&nbsp;Net change in unrealized (losses) gains for junior subordinated debentures, at fair value | (21424) | (28152) | 13996 |
| Other comprehensive (loss) income, net of tax | (428623) | (120986) | 93196 |
| Comprehensive (loss) income | $(91871) | $299314 | $(1430224) |

---

See notes to consolidated financial statements

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES** 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Years Ended December 31, 2022, 2021, and 2020

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Common Stock** | **Common Stock** | **Retained Earnings (Accumulated Deficit)** | **Accumulated Other<br>Comprehensive Income (Loss)** | |
| (in thousands, except shares) | **Shares** | **Amount** | **Retained Earnings (Accumulated Deficit)** | **Accumulated Other<br>Comprehensive Income (Loss)** | **Total** |
| **Balance at January 1, 2020** | 220229282 | $3514000 | $770366 | $29549 | $4313915 |
| Net loss |  |  | (1523420) |  | (1523420) |
| Other comprehensive income, net of tax |  |  |  | 93196 | 93196 |
| Stock-based compensation |  | 9254 |  |  | 9254 |
| Stock repurchased and retired | (494009) | (8655) |  |  | (8655) |
| Issuances of common stock under stock plans | 491062 |  |  |  |  |
| Cash dividends on common stock ($0.63 per share) |  |  | (139532) |  | (139532) |
| Cumulative effect adjustment <sup>(1)</sup> |  |  | (40181) |  | (40181) |
| **Balance at December 31, 2020** | 220226335 | $3514599 | $(932767) | $122745 | $2704577 |
| Net income |  |  | 420300 |  | 420300 |
| Other comprehensive loss, net of tax |  |  |  | (120986) | (120986) |
| Stock-based compensation |  | 10906 |  |  | 10906 |
| Stock repurchased and retired | (4158387) | (80690) |  |  | (80690) |
| Issuances of common stock under stock plans | 557558 | 34 |  |  | 34 |
| Cash dividends on common stock ($0.84 per share) |  |  | (184871) |  | (184871) |
| **Balance at December 31, 2021** | 216625506 | $3444849 | $(697338) | $1759 | $2749270 |
| Net income |  |  | 336752 |  | 336752 |
| Other comprehensive loss, net of tax |  |  |  | (428623) | (428623) |
| Stock-based compensation |  | 9753 |  |  | 9753 |
| Stock repurchased and retired | (202048) | (4163) |  |  | (4163) |
| Issuances of common stock under stock plans | 630859 | 54 |  |  | 54 |
| Cash dividends on common stock ($0.84 per share) |  |  | (183217) |  | (183217) |
| **Balance at December 31, 2022** | 217054317 | $3450493 | $(543803) | $(426864) | $2479826 |

---

 <sup>(1)</sup> The cumulative effect adjustment relates to the implementation of new accounting guidance on January 1, 2020, for the allowance for credit losses.

See notes to consolidated financial statements

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES** 

CONSOLIDATED STATEMENTS OF CASH FLOW

For the Years Ended December 31, 2022, 2021, and 2020

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |
| Net income (loss) | $336752 | $420300 | $(1523420) |
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Deferred income tax expense (benefit) | 14383 | 40805 | (62943) |
| &nbsp;&nbsp;&nbsp;Amortization of investment premiums, net | 6601 | 14404 | 27069 |
| &nbsp;&nbsp;&nbsp;Gain on sales of investment securities, net | (2) | (8) | (190) |
| &nbsp;&nbsp;&nbsp;Provision (recapture) for credit losses | 84016 | (42651) | 204861 |
| &nbsp;&nbsp;&nbsp;Change in cash surrender value of bank owned life insurance | (8353) | (8402) | (8500) |
| &nbsp;&nbsp;&nbsp;Depreciation, amortization and accretion | 28305 | 31498 | 37474 |
| &nbsp;&nbsp;&nbsp;Gain on sale of premises and equipment | (2747) | (574) | (2284) |
| &nbsp;&nbsp;&nbsp;Gain on store divestiture |  |  | (9650) |
| &nbsp;&nbsp;&nbsp;Goodwill impairment |  |  | 1784936 |
| &nbsp;&nbsp;&nbsp;Additions to residential mortgage servicing rights carried at fair value | (24137) | (38522) | (51000) |
| &nbsp;&nbsp;&nbsp;Change in fair value residential mortgage servicing rights carried at fair value | (37265) | 7814 | 73103 |
| &nbsp;&nbsp;&nbsp;Stock-based compensation | 9753 | 10906 | 9254 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net decrease (increase) in equity and other investments | 1156 | 352 | (2143) |
| &nbsp;&nbsp;&nbsp;Loss (gain) on equity securities, net | 7099 | 1511 | (769) |
| &nbsp;&nbsp;&nbsp;Loss (gain) on sale of loans and leases, net | 1953 | (145723) | (289212) |
| &nbsp;&nbsp;&nbsp;Change in fair value of loans held for sale | 10670 | 21427 | (16776) |
| &nbsp;&nbsp;&nbsp;Origination of loans held for sale | (1839466) | (4747104) | (6666500) |
| &nbsp;&nbsp;&nbsp;Proceeds from sales of loans held for sale | 2076548 | 4952918 | 6791133 |
| &nbsp;&nbsp;&nbsp;Change in other assets and liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net decrease (increase) in other assets | 169540 | 153148 | (209822) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net increase (decrease) in other liabilities | 230223 | (9376) | 9153 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 1065029 | 662723 | 93774 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |
| Purchases of investment securities available for sale | (276812) | (1838923) | (867675) |
| Proceeds from investment securities available for sale | 396100 | 761249 | 828752 |
| Purchases of restricted equity securities | (180543) | (53) | (20021) |
| Redemption of restricted equity securities | 144315 | 30803 | 24818 |
| Net change in loans and leases | (3744493) | (735422) | (862125) |
| Proceeds from sales of loans and leases | 148978 | 246667 | 111855 |
| Change in premises and equipment | (27086) | (15478) | (11986) |
| Proceeds from bank owned life insurance death benefits | 4339 | 4127 | 5641 |
| Net cash received from sale of Umpqua Investments, Inc. |  | 10781 |  |
| Net cash paid in store divestiture |  |  | (171440) |
| Other | 2110 | 1974 | 2070 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash used in investing activities | $(3533092) | $(1534275) | $(960111) |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| **UMPQUA HOLDINGS CORPORATION AND SUBSIDIARIES** <br>CONSOLIDATED STATEMENTS OF CASH FLOW (Continued)<br>For the Years Ended December 31, 2022, 2021, and 2020 | | | |
| (in thousands) | **2022** | **2021** | **2020** |
| CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |
| Net increase in deposit liabilities | $470945 | $1972519 | $2341319 |
| Net (decrease) increase in securities sold under agreements to repurchase | (183478) | 116863 | 64076 |
| Proceeds from borrowings | 1650000 |  | 600000 |
| Repayment of borrowings | (750000) | (765000) | (735000) |
| Net proceeds from issuance of common stock | 54 | 34 |  |
| Dividends paid on common stock | (182273) | (183734) | (184978) |
| Repurchase and retirement of common stock | (4163) | (80690) | (8655) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by financing activities | 1001085 | 1059992 | 2076762 |
| Net (decrease) increase in cash and cash equivalents | (1466978) | 188440 | 1210425 |
| Cash and cash equivalents, beginning of period | 2761621 | 2573181 | 1362756 |
| Cash and cash equivalents, end of period | $1294643 | $2761621 | $2573181 |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |  |  |  |
| Cash paid during the period for: |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest | $71209 | $42820 | $136018 |
| &nbsp;&nbsp;&nbsp;Income taxes | $71804 | $105119 | $130228 |
| SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES: |  |  |  |
| Change in unrealized gains and losses on investment securities available for sale, net of taxes | $(407199) | $(92834) | $79200 |
| Change in unrealized gains and losses on junior subordinated debentures carried at fair value, net of taxes | $(21424) | $(28152) | $13996 |
| Cumulative effect adjustment to retained earnings | $— | $— | $40181 |
| Transfer of loans to loans held for sale | $— | $— | $78146 |
| Transfer of loans held for sale to loans | $25057 | $315887 | $— |
| Change in GNMA mortgage loans recognized due to repurchase option | $6618 | $— | $(4337) |

---

See notes to consolidated financial statements

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**Note 1 – Significant Accounting Policies** 

***Nature of Operations*-**Umpqua Holdings Corporation is a financial holding company with headquarters in Lake Oswego, Oregon, that is engaged primarily in the business of commercial and retail banking. The Company provides a broad range of banking and other financial services to corporate, institutional and individual customers through its wholly-owned banking subsidiary Umpqua Bank. The Bank has a wholly-owned subsidiary, Financial Pacific Leasing, Inc., a commercial equipment leasing company.

The Company and its subsidiaries are subject to regulation by certain federal and state agencies and undergo periodic examination by these regulatory agencies.

***Basis of Financial Statement Presentation*-**The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and with prevailing practices within the banking and securities industries. In preparing such financial statements, management is required to make certain estimates and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the balance sheet and the reported amounts of revenues and expenses for the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, the valuation of mortgage servicing rights, and the fair value of junior subordinated debentures.

***Consolidation*-**The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, and the Bank's wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. As of December 31, 2022, the Company had 23 wholly-owned trusts that were formed to issue trust preferred securities and related common securities of the Trusts. The Company has not consolidated the accounts of the Trusts in its consolidated financial statements as they are considered to be variable interest entities for which the Company is not a primary beneficiary. As a result, the junior subordinated debentures issued by the Company to the Trusts are reflected on the Company's consolidated balance sheet as junior subordinated debentures.

***Subsequent events*-**The Company has evaluated events and transactions through the date that the consolidated financial statements were issued for potential recognition or disclosure.

***Business Combinations***-The Company applies the acquisition method of accounting for business combinations. Under the acquisition method, the acquiring entity recognizes the assets acquired and liabilities assumed at their acquisition date fair values. Management utilizes prevailing valuation techniques appropriate for the asset or liability being measured in determining these fair values. This method often involves estimates based on third party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value if the fair value can be determined during the measurement period. Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred. Fair values are subject to refinement over the measurement period, not to exceed one year after the closing date.

***Cash and Cash Equivalents*-**Cash and cash equivalents include cash and due from banks and temporary investments which are interest bearing balances due from other banks. Cash and cash equivalents generally have a maturity of 90 days or less at the time of purchase.

***Equity and Other Securities*-**Equity and other securities are carried at fair value with realized and unrealized gains or losses recorded in non-interest income.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Investment Securities Available for Sale-***Debt securities are classified as available for sale if the Company intends and has the ability to hold those securities for an indefinite period of time, but not necessarily to maturity. Any decision to sell a debt security classified as available for sale would be based on various factors, including significant movements in interest rates, changes in the maturity mix of assets and liabilities, liquidity needs, regulatory capital considerations, and other similar factors. Premiums and discounts are amortized or accreted over the life of the related investment security as an adjustment to yield using the effective interest method. Dividend and interest income are recognized when earned.

Securities available for sale are carried at fair value. Realized gains or losses, determined on the basis of the cost of specific securities sold, are included in earnings. Unrealized holding gains or losses are included in other comprehensive income as a separate component of shareholders' equity, net of tax. When the fair value of an available-for-sale debt security falls below the amortized cost basis, it is evaluated to determine if any of the decline in value is attributable to credit loss. Decreases in fair value attributable to credit loss would be recorded directly to earnings with a corresponding allowance for credit losses, limited by the amount that the fair value is less than the amortized cost basis. If the credit quality subsequently improves, the allowance would be reversed up to a maximum of the previously recorded credit losses. If the Company intends to sell an impaired available-for-sale debt security, or if it is more likely than not that the Company will be required to sell the security prior to recovering the amortized cost basis, the entire fair value adjustment would be immediately recognized in earnings with no corresponding allowance for credit losses.

***Loans Held for Sale*-**The Company has elected to account for residential mortgage loans held for sale at fair value. Fair value is determined based on quoted secondary market prices for similar loans, including the implicit fair value of embedded servicing rights. The change in fair value of loans held for sale is primarily driven by changes in interest rates subsequent to loan funding, resulting in revaluation adjustments to the recorded fair value. The inputs used in the fair value measurements are considered Level 2 inputs. The use of the fair value option allows the change in the fair value of loans to more effectively offset the change in the fair value of derivative instruments that are used as economic hedges to loans held for sale. Loan origination fees and direct origination costs are recognized immediately in net income. Interest income on loans held for sale is included in interest income and recognized when earned. Loans held for sale are placed on nonaccrual in a manner consistent with loans held for investment. The Company recognizes the gain or loss on the sale of loans when the sales criteria for derecognition are met.

***Allowance for Credit Losses-*** The Company adopted ASC Topic 326 on January 1, 2020, replacing the previous incurred loss model for measuring credit losses, which encompassed allowances for current known and inherent losses within the portfolio. Instead, ASC Topic 326 requires an expected loss model, which encompasses allowances for losses expected to be incurred over the life of the portfolio. The CECL model requires the measurement of all expected credit losses for financial assets measured at amortized cost and certain off-balance-sheet credit exposures based on historical experience, current conditions, and reasonable and supportable forecasts. In connection with the adoption of CECL in 2020, we revised certain accounting policies and implemented certain accounting policy elections. The revised accounting policies are described below.

The allowance for credit losses on loans and leases is the combination of the allowance for loan and lease losses and the reserve for unfunded loan commitments. Loans are charged-off against the allowance when deemed uncollectible by management. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Fluctuations in the allowance are reported in our income statement as a component of credit loss expense.

The Bank has established an Allowance for Credit Loss Committee, which is responsible for, among other things, regularly reviewing the ACL methodology, including allowance levels and ensuring that it is designed and applied in accordance with generally accepted accounting principles. The Bank's Audit and Compliance Committee provides board oversight of the ACL process and reviews the ACL methodology on a quarterly basis. CECL is not prescriptive in the methodology used to determine the expected credit loss estimate. Instead, management has flexibility in selecting the methodology. The expected credit losses must be estimated over a financial asset's contractual term, adjusted for prepayments utilizing quantitative and qualitative factors. There are also specific considerations for Purchased Credit-Deteriorated, Troubled Debt Restructured, and Collateral Dependent Loans.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The estimate of current expected credit losses is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is the starting point for estimating expected credit losses. Adjustments are made to historical loss experience to reflect differences in asset-specific risk characteristics, such as underwriting standards, portfolio mix or asset terms, and differences in economic conditions – both current conditions and reasonable and supportable forecasts. When the Company is not able to make or obtain reasonable and supportable forecasts for the entire life of the financial asset, it has estimated expected credit losses for the remaining life using an approach that reverts to historical credit loss information for the longer-term portion of the asset's life. The allowance related to the extrapolated population is based on loan segment, PD credit classification, and vintage year of the modeled loans and leases. A loss factor is calculated and applied to the non-modeled loans and leases.

The Company utilizes complex models to obtain reasonable and supportable forecasts. Most of the models calculate two predictive metrics: the probability of default and loss given default. The PD measures the probability that a loan will default within a given time horizon and primarily measures the adequacy of the debtor's cash flow as the primary source of repayment of the loan or lease. The LGD is the expected loss which would be realized presuming a default has occurred and primarily measures the value of the collateral or other secondary source of repayment related to the collateral. Acquired and newly originated loans and leases that have not been modeled receive a loss rate via an extrapolated rate methodology.

Management believes that the ACL was adequate as of December 31, 2022. There is, however, no assurance that future loan losses will not exceed the levels provided for in the ACL and could possibly result in additional charges to the provision for credit losses.

***Acquired Loans and Leases***-Loans and leases purchased without more-than-insignificant credit deterioration, are recorded at their fair value at the acquisition date. However, loans and leases purchased with more-than-insignificant credit deterioration will be recorded with their applicable allowance for credit loss to determine the amortized cost basis.

***Originated Loans and Leases***-Loans are stated at the amount of unpaid principal, net of unearned income and any deferred fees or costs. All discounts and premiums are recognized over the contractual life of the loan as yield adjustments. Leases are recorded at the amount of minimum future lease payments receivable and estimated residual value of the leased equipment, net of unearned income and any deferred fees. Initial direct costs related to lease originations are deferred as part of the investment in direct financing leases and amortized over their term using the effective interest method. Unearned lease income is amortized over the term using the effective interest method.

***Income Recognition on Non-Accrual Loans*-**Loans are classified as non-accrual if the collection of principal and interest is doubtful. Generally, this occurs when a commercial or commercial real estate loan is past due beyond its maturity, principal payment, or interest payment due date by 90 days or more, unless such loans are well-secured and in the process of collection. Loans that are less than 90 days past due may also be classified as non-accrual if repayment in full of principal and/or interest is in doubt.

Generally, when a loan is classified as non-accrual, all uncollected accrued interest is reversed from interest income and the accrual of interest income is terminated. In addition, any cash payments subsequently received are applied as a reduction of principal outstanding. In cases where the future collectability of the principal balance in full is expected, interest income may be recognized on a cash basis. A loan may be restored to accrual status when the borrower's financial condition improves so that full collection of future contractual payments is considered likely. For those loans placed on non-accrual status due to payment delinquency, return to accrual status will typically not occur until the borrower demonstrates repayment ability over a period of not less than six months.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Collateral Dependent Loans and Troubled Debt Restructuring*-**A loan or lease is considered collateral dependent when repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower is experiencing financial difficulty. The Company's classification of CDLs includes: non-homogeneous non-accrual loans and leases; non-homogeneous loans determined by individual credit review; homogeneous non-accrual leases and equipment finance agreements; and homogeneous real estate secured loans that have been charged down to net realizable value or the government guaranteed balance. Except for homogeneous leases and equipment finance agreements, the expected credit losses for CDLs will be measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable, less the amortized cost basis of the financial asset. The Company may also use the loan's observable market price, if available. If the value of the CDL is determined to be less than the recorded amount of the loan, a charge-off will be taken. To determine the expected credit loss for homogeneous leases or equipment finance agreements, the LGD calculated by the CECL model will be utilized. When a homogeneous lease or equipment finance agreement becomes 181 days past due, it is fully charged-off.

Loans are reported as TDR loans when, due to borrower financial difficulties, the Bank grants a more than insignificant concession it would not otherwise be willing to offer for a loan. Once a loan has been classified as a TDR, it continues in the classification until it has paid in full or it has demonstrated six months of payment performance and was determined to have been modified at market rate terms. TDRs, including reasonably expected TDRs, are individually recognized and measured for expected credit loss in one of two ways: when a TDR meets the definition of a CDL, it is measured using the fair value of the underlying collateral, adjusted for costs to sell when applicable; otherwise, a discounted cash flow analysis is utilized to measure the expected credit loss for a TDR. The expected cash flow for a TDR is discounted based on the pre-modification rate and the expected remaining life.

***Reserve for Unfunded Commitments*-**A reserve for unfunded commitments is maintained at a level that, in the opinion of management, is adequate to absorb expected losses associated with the Bank's commitment to lend funds under existing agreements, such as letters or lines of credit. The RUC calculation utilizes the allowance for credit loss on loans and leases rates, probability of default risk ratings, and utilization rates based on the economic expectations over the contractual life of the commitment. The reserve is based on estimates and ultimate losses may vary from the current estimates. These estimates are evaluated on a regular basis and adjustments are reported in earnings in the periods in which they become known. Draws on unfunded commitments that are considered uncollectible at the time funds are advanced are charged to the allowance for credit losses on loans and leases. Provisions for unfunded commitment losses are added to the reserve for unfunded commitments, which is included in the Other Liabilities section of the consolidated balance sheets.

***Loan and Lease Fees and Direct Loan Origination Costs*-**Origination and commitment fees and direct loan origination costs for loans and leases held for investment are deferred and recognized as an adjustment to the yield over the life of the loans and leases. The recognition of these net deferred fees is accelerated at loan payoff, if earlier than the estimated life of the loan.

***Restricted Equity Securities*-**Restricted equity securities consists mostly of the Bank's investment in Federal Home Loan Bank of Des Moines stock that is carried at par value, which reasonably approximates its fair value.

As a member of the FHLB system, the Bank is required to maintain a minimum level of investment in FHLB stock based on a specific percentage of total assets, with additional stock requirements based on use of FHLB products. The Bank may request redemption at par value of any stock in excess of the minimum required investment. Stock redemptions are at the discretion of the FHLB.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Premises and Equipment*-**Premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is provided over the estimated useful life of equipment, generally three to ten years, on a straight-line or accelerated basis. Depreciation is provided over the estimated useful life of premises, up to 39 years, on a straight-line or accelerated basis. Generally, leasehold improvements are amortized or accreted over the life of the related lease, or the life of the related asset, whichever is shorter. Expenditures for major renovations and betterments of the Company's premises and equipment are capitalized. The Company purchases, as well as internally develops and customizes, certain software to enhance or perform internal business functions. Software development costs incurred in the preliminary project stages are charged to non-interest expense. Costs associated with designing software configuration, installation, coding programs and testing systems are capitalized and amortized using the straight-line method over three to seven years. Implementation costs incurred for software that is part of a hosting arrangement are capitalized in other assets and amortized on a straight-line basis over the life of the contract. In addition to annual impairment reviews, management reviews long-lived assets anytime a change in circumstance indicates the carrying amount of these assets may not be recoverable.

***Operating Leases*-**The Company leases store locations, corporate office space, and equipment under non-cancelable leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The leases contain various provisions for increases in rental rates, based either on changes in the published Consumer Price Index or a predetermined escalation schedule. Substantially all of the leases provide the Company with one or more options to renew, with renewal terms that can extend the lease term from one to ten years or more. The exercise of lease renewal options is at management's sole discretion. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company rents or subleases certain real estate to third parties. The Company's sublease portfolio consists of operating leases of mainly former store locations or excess space in store or corporate facilities. In addition to annual impairment reviews, management reviews right of use assets anytime a change in circumstances indicates the carrying amount of these assets may not be recoverable.

***Intangible Assets* -** Intangible assets with definite useful lives are amortized to their estimated residual values over their respective estimated useful lives, and also reviewed for impairment. Amortization of intangible assets is included in non-interest expense.

***Residential Mortgage Servicing Rights (MSR)*-**The Company determines its classes of servicing assets based on the asset type being serviced along with the methods used to manage the risk inherent in the servicing assets, which includes the market inputs used to value servicing assets. Fair value adjustments encompass market-driven valuation changes and the runoff in value that occurs from the passage of time, which are separately disclosed. Under the fair value method, the MSR is carried in the balance sheet at fair value and the changes in fair value are reported in earnings under the caption residential mortgage banking revenue, net in the period in which the change occurs.

The expected life of the loans underlying the MSR can vary from management's estimates due to prepayments by borrowers, especially when rates change significantly. Prepayments outside of management's estimates would impact the recorded value of the residential MSR. The value of the MSR is also dependent upon the discount rate used in the model, which management reviews on an ongoing basis. A significant increase in the discount rate would reduce the value of the MSR.

***GNMA Loan Sales-***The Company originates government guaranteed loans which are sold to Government National Mortgage Association. Pursuant to GNMA servicing guidelines, the Company has the unilateral right to repurchase certain delinquent loans (loans past due 90 days or more) sold to GNMA, if the loans meet defined delinquent loan criteria. As a result of this unilateral right, once the delinquency criteria have been met, and regardless of whether the repurchase option has been exercised, the Company accounts for the loans as if they had been repurchased. The Company recognizes these loans within loans and leases, net and also recognizes a corresponding liability that is recorded in other liabilities. If the loan is repurchased, the liability is settled and the loan remains.

***SBA/USDA Loans Sales, Servicing, and Commercial Servicing Asset*-**The Bank, on a limited basis, sells or transfers loans, including the guaranteed portion of SBA and USDA loans (with servicing retained) for cash proceeds. The Bank records a servicing asset when it sells a loan and retains the servicing rights. The servicing asset is recorded at fair value upon sale, and the fair value is estimated by discounting estimated net future cash flows from servicing using discount rates that approximate current market rates and using estimated prepayment rates. Subsequent to initial recognition, the servicing rights are carried at the lower of amortized cost or fair value, and are amortized in proportion to, and over the period of, the estimated net servicing income.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Revenue Recognition*-**The Company's revenue within the contracts with customers guidance are presented within non-interest income and include service charges on deposits, card-based fees, and brokerage revenue. These revenues are recognized when obligations under the terms of a contract with customers are satisfied. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. When the amount of consideration is variable, the Company will only recognize revenue to the extent that it is probable that the cumulative amount recognized will not be subject to a significant reversal in the future. Substantially all of the Company's contracts with customers have expected durations of one year or less and payments are typically due when or as the services are rendered or shortly thereafter. When third parties are involved in providing services to customers, the Company recognizes revenue on a gross basis when it has control over those services being provided to the customer; otherwise, revenue is recognized for the net amount of any fee or commission.

Revenue is segregated based on the nature of product and services offered as part of contractual arrangements. Revenue from contracts with customers is broadly segregated as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Service charges on deposits* consists primarily of fees earned from deposit customers for account maintenance and transaction-based and overdraft services. Account maintenance fees consist primarily of account fees and analyzed account fees charged on deposit accounts on a monthly basis. The performance obligation is satisfied, and the fees are recognized on a monthly basis as the service period is completed. Transaction-based fees on deposit accounts are charged to deposit customers for specific services provided to the customer, such as non-sufficient funds fees, overdraft fees, and wire fees. The performance obligation is completed as the transaction occurs and the fees are recognized at the time each specific service is provided to the customer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Card-based fees* are comprised of debit and credit card income, ATM fees, and merchant services income. Debit and credit card income is primarily comprised of interchange fees earned when our customers' debit and credit cards are processed through card payment networks. The performance obligation is satisfied, and the fees are earned when the cost of the transaction is charged to the cardholders' debit or credit card. Certain expenses and rebates directly related to the credit and debit card interchange contract are recorded on a net basis with the interchange income.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Merchant fee income represents fees earned by the Bank for card payment services provided to its merchant customers, which are outsourced by the Bank to a third party. Income is earned based on a revenue sharing agreement with the third party based on the dollar volume and number of transactions processed on a monthly basis.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Brokerage revenue* consists of brokerage revenue relates to third party revenue share agreements for commissions on brokerage services. Prior to the sale of Umpqua Investments, Inc. in 2021, advisory asset management fees were variable, since they were based on the underlying portfolio value, which is subject to market conditions and asset flows. Advisory asset management fees were recognized quarterly and were based on the portfolio values at the end of each quarter. Brokerage accounts were charged commissions at the time of a transaction and the commission schedule was based upon the type of security and quantity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Other non-interest income* includes a variety of other revenue streams including residential mortgage banking, net revenue, security gains and losses, loan sales gain and losses, BOLI income revenue, swap revenue and miscellaneous consumer fees. These revenue streams are not in scope of revenue from contracts with customers guidance. Revenue is recognized when, or as, the performance obligation is satisfied. Inherent variability in the transaction price is not recognized until the uncertainty affecting the variability is resolved.

***Income Taxes*-**Income taxes are accounted for using the asset and liability method. Under this method, a deferred tax asset or liability is determined based on the enacted tax rates which will be in effect when the differences between the financial statement carrying amounts and tax basis of existing assets and liabilities are expected to be reported in the Company's income tax returns. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established to reduce the net carrying amount of deferred tax assets if it is determined to be more likely than not, that all or some portion of the potential deferred tax asset will not be realized.

Deferred tax assets are recognized subject to management's judgment that realization is "more likely than not." Uncertain tax positions that meet the more likely than not recognition threshold are measured to determine the amount of benefit to recognize. An uncertain tax position is measured at the amount of benefit that management believes has a greater than 50% likelihood of realization upon settlement.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the DTA will or will not be realized. The Company's ultimate realization of the DTA is dependent upon the generation of future taxable income during the periods in which temporary differences become deductible. Management considers the nature and amount of historical and projected future taxable income, the scheduled reversal of deferred tax assets and liabilities, and available tax planning strategies in making this assessment. The amount of deferred taxes recognized could be impacted by changes to any of these variables.

The Company earns Investment Tax Credits on certain equipment leases and uses the deferral method to account for these tax credits. Under this method, the Investment Tax Credits are recognized as a reduction of depreciation expense over the life of the asset.

***Derivatives*-**The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to broker/dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage loan commitments. The commitments to originate mortgage loans held for sale and the related forward delivery contracts are considered derivatives. The Bank also executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are hedged by simultaneously entering into an offsetting interest rate swap that the Bank executes with a third party, such that the Bank minimizes its net risk exposure. The Bank also uses certain derivative financial instruments to offset changes in value of its MSR. These derivatives consist primarily of interest rate futures and forward settling mortgage-backed securities. The Company considers all free-standing derivatives as economic hedges and recognizes these derivatives as either assets or liabilities in the balance sheet, and requires measurement of those instruments at fair value through adjustments to current earnings. None of the Company's derivatives are designated as hedging instruments.

The fair value of the derivative residential mortgage loan commitments is estimated using the net present value of expected future cash flows. Assumptions used include pull-through rate assumption based on historical information, current mortgage interest rates, the stage of completion of the underlying application and underwriting process, direct origination costs yet to be incurred, the time remaining until the expiration of the derivative loan commitment, and the expected net future cash flows related to the associated servicing of the loan.

***Operating Segments***-Public enterprises are required to report certain information about their operating segments in its financial statements. They are also required to report certain enterprise-wide information about the Company's products and services, its activities in different geographic areas, and its reliance on major customers. The basis for determining the Company's operating segments is the manner in which management operates the business. The Company reports two segments: Core Banking and Mortgage Banking.

***Stock-Based Compensation*-**The Company recognizes expense in the income statement for the grant-date fair value of restricted stock units issued to employees over the employees' requisite service period (generally the vesting period). An estimate of expected forfeitures is included in the calculation of stock-based compensation expense over the vesting period, and actual forfeitures are recognized when they occur. The fair value of the restricted stock units is based on the Company's share price on the grant date. Unvested restricted stock units participate with common stock in any dividends declared but are only paid on the shares that ultimately vest. Restricted stock units generally vest ratably over three years and are recognized as compensation expense over that same period of time.

Certain restricted stock units (performance share units) are subject to performance-based and market-based vesting criteria in addition to a requisite service period and cliff vest based on those conditions at the end of three years. At the time of vesting, the vested shares are entitled to receive cumulative dividends declared and paid during the three years. Compensation expense is recognized over the service period to the extent restricted stock units are expected to vest. The fair value of the performance-based restricted stock unit grants is estimated as of the grant date using a Monte Carlo simulation pricing model.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Earnings (Loss) per Common Share***-Basic earnings (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted earnings (loss) per common share is computed in a similar manner, except that first the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares were issued using the treasury stock method. For all periods presented, unvested restricted stock units are potentially dilutive instruments issued by the Company. Undistributed losses are not allocated to the nonvested stock-based payment awards as the holders are not contractually obligated to share in the losses of the Company.

***Fair Value Measurements***-Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There is a three-level hierarchy for disclosure of assets and liabilities measured or disclosed at fair value. The classification of assets and liabilities within the hierarchy is based on whether the inputs to the valuation methodology used for measurement are observable or unobservable. Observable inputs reflect market-derived or market-based information obtained from independent sources, while unobservable inputs reflect estimates about market data. In general, fair values determined by Level 1 inputs utilize quoted prices for identical assets or liabilities traded in active markets that the Company has the ability to access. Fair values determined by Level 2 inputs utilize inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

***Recently Issued Accounting Pronouncements***

In March 2020, the FASB issued ASU No. 2020-04, *Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting*. This ASU was issued to provide temporary optional guidance to ease the potential burden in accounting for reference rate reform. The guidance provides optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference London Inter-Bank Offered Rate or another reference rate expected to be discontinued. The last expedient is a one-time election to sell or transfer debt securities classified as held to maturity.

In January 2021, the FASB issued ASU No. 2021-01, *Reference Rate Reform (Topic 848): Scope*. The amendments in this Update are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments clarify certain optional expedients and exceptions in Topic 848 for contract modifications apply to derivatives that are affected by the discounting transition. In December 2022, the FASB issued ASU No. 2022-06, *Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848.* The amendment defers the sunset date of Topic 848 from December 31, 2022 to December 31, 2024. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

The Company has established an enterprise-wide LIBOR transition program which includes business strategy, product design and pricing strategy, instrument contract remediation, and systems and processes. The Company continues to use the expedients in this guidance to manage through the LIBOR transition, specifically for our loan portfolio.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): *Accounting for Contract Assets and Contract Liabilities from Contracts with Customers*. The amendments in this ASU improve comparability for both the recognition and measurement of acquired revenue contracts with customers at the date of and after a business combination. The ASU specifies for all acquired revenue contracts regardless of their timing of payment (1) the circumstances in which the acquirer should recognize contract assets and contract liabilities that are acquired in a business combination and (2) how to measure those contract assets and contract liabilities. The amendments improve comparability after the business combination by providing consistent recognition and measurement guidance for revenue contracts with customers acquired in a business combination and revenue contracts with customers not acquired in a business combination. The ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted. The guidance is applicable and the Company will apply the amendments prospectively to business combinations occurring on or after the effective date. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

In March 2022, the FASB issued ASU No. 2022-02, *Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures*. The ASU addresses areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced the CECL model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted CECL and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. As the Company has adopted CECL, ASU No. 2022-02 will be effective for fiscal years beginning after December 15, 2022, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.

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

**Note 2 – Cash and Cash Equivalents**

The Company had restricted cash included in cash and due from banks on the balance sheet of $5.8 million and $3.6 million as of December 31, 2022 and 2021, respectively, relating mostly to collateral required on interest rate swaps as discussed in Note 19. At December 31, 2022 and 2021, there was $4.7 million and $400,000, respectively, in restricted cash included in interest bearing cash and temporary investments on the balance sheet, relating to collateral requirements for derivatives for mortgage banking activities.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 3 – Investment Securities** 

The following tables present the amortized cost, unrealized gains, unrealized losses and approximate fair values of debt securities at December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| (in thousands) | **Amortized Cost** | **Unrealized Gains** | **Unrealized Losses** | **Fair Value** |
| **Available for sale:** |  |  |  |  |
| U.S. Treasury and agencies | $1035532 | $— | $(99358) | $936174 |
| Obligations of states and political subdivisions | 297610 | 231 | (28041) | 269800 |
| Mortgage-backed securities and collateralized mortgage obligations | 2405139 | 3 | (414950) | 1990192 |
| Total available for sale securities | $3738281 | $234 | $(542349) | $3196166 |
| **Held to maturity:** |  |  |  |  |
| Mortgage-backed securities and collateralized mortgage obligations | $2476 | $721 | $— | $3197 |
| Total held to maturity securities | $2476 | $721 | $— | $3197 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| (in thousands) | **Amortized Cost** | **Unrealized Gains** | **Unrealized Losses** | **Fair Value** |
| **Available for sale:** |  |  |  |  |
| U.S. Treasury and agencies | $894969 | $27279 | $(4195) | $918053 |
| Obligations of states and political subdivisions | 320338 | 11734 | (1288) | 330784 |
| Mortgage-backed securities and collateralized mortgage obligations | 2649048 | 19093 | (46543) | 2621598 |
| Total available for sale securities | $3864355 | $58106 | $(52026) | $3870435 |
| **Held to maturity:** |  |  |  |  |
| Mortgage-backed securities and collateralized mortgage obligations | $2744 | $770 | $— | $3514 |
| Total held to maturity securities | $2744 | $770 | $— | $3514 |

---

The Company elected to exclude accrued interest receivable from the amortized cost basis of debt securities disclosed throughout this note. Interest accrued on investment securities totaled $10.6 million and $10.4 million as of December 31, 2022 and 2021, respectively, and is included in *Other Assets*.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Debt securities that were in an unrealized loss position as of December 31, 2022 and 2021 are presented in the following tables, based on the length of time individual securities have been in an unrealized loss position.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| | **Less than 12 Months** | **Less than 12 Months** | **12 Months or Longer** | **12 Months or Longer** | **Total** | **Total** |
| (in thousands) | **Fair Value** | **Unrealized Losses** | **Fair Value** | **Unrealized Losses** | **Fair Value** | **Unrealized Losses** |
| **Available for sale:** |  |  |  |  |  |  |
| U.S. Treasury and agencies | $734473 | $71967 | $201701 | $27391 | $936174 | $99358 |
| Obligations of states and political subdivisions | 160078 | 10037 | 60381 | 18004 | 220459 | 28041 |
| Mortgage-backed securities and collateralized mortgage obligations | 592032 | 61813 | 1398061 | 353137 | 1990093 | 414950 |
| Total temporarily impaired securities | $1486583 | $143817 | $1660143 | $398532 | $3146726 | $542349 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| | **Less than 12 Months** | **Less than 12 Months** | **12 Months or Longer** | **12 Months or Longer** | **Total** | **Total** |
| (in thousands) | **Fair Value** | **Unrealized Losses** | **Fair Value** | **Unrealized Losses** | **Fair Value** | **Unrealized Losses** |
| **Available for sale:** |  |  |  |  |  |  |
| U.S. Treasury and agencies | $197529 | $2749 | $28378 | $1446 | $225907 | $4195 |
| Obligations of states and political subdivisions | 75200 | 1153 | 2162 | 135 | 77362 | 1288 |
| Mortgage-backed securities and collateralized mortgage obligations | 1777288 | 40579 | 129943 | 5964 | 1907231 | 46543 |
| Total temporarily impaired securities | $2050017 | $44481 | $160483 | $7545 | $2210500 | $52026 |

---

The number of individual debt securities in an unrealized loss position in the tables above increased to 473 at December 31, 2022, as compared to 94 at December 31, 2021. These unrealized losses on the debt securities held by the Company were caused by changes in market interest rates or the widening of market spreads subsequent to the initial purchase of these securities and are not due to the underlying credit of the issuers. Management monitors the published credit ratings of the issuers of the debt securities for material rating or outlook changes. Substantially all of the Company's obligations of states and political subdivisions are general obligation issuances. All of the available for sale mortgage-backed securities and collateralized mortgage obligations portfolio in an unrealized loss position at December 31, 2022 are issued or guaranteed by government sponsored enterprises. Because the decline in fair value of the debt securities is attributable to changes in interest rates or widening market spreads and not credit quality, these investments do not have an allowance for credit losses at December 31, 2022.

The following table presents the contractual maturities of debt securities at December 31, 2022:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Available For Sale** | **Available For Sale** | **Held To Maturity** | **Held To Maturity** |
| (in thousands) | **Amortized Cost** | **Fair Value** | **Amortized Cost** | **Fair Value** |
| Due within one year | $33471 | $32480 | $— | $— |
| Due after one year through five years | 445988 | 418027 | 4 | 4 |
| Due after five years through ten years | 924518 | 824988 | 3 | 3 |
| Due after ten years | 2334304 | 1920671 | 2469 | 3190 |
| Total securities | $3738281 | $3196166 | $2476 | $3197 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table presents, as of December 31, 2022, investment securities which were pledged to secure borrowings, public deposits, and repurchase agreements as permitted or required by law:

---

| | | |
|:---|:---|:---|
| (in thousands) | **Amortized Cost** | **Fair Value** |
| To state and local governments to secure public deposits | $337437 | $293818 |
| To secure repurchase agreements | 523653 | 456922 |
| Other securities pledged | 245684 | 221303 |
| Total pledged securities | $1106774 | $972043 |

---

**Note 4 – Loans and Leases** 

The following table presents the major types of loans and leases, net of deferred fees and costs, as of December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| Commercial real estate |  |  |
| &nbsp;&nbsp;&nbsp;Non-owner occupied term, net | $3894840 | $3786887 |
| &nbsp;&nbsp;&nbsp;Owner occupied term, net | 2567761 | 2332422 |
| &nbsp;&nbsp;&nbsp;Multifamily, net | 5285791 | 4051202 |
| &nbsp;&nbsp;&nbsp;Construction & development, net | 1077346 | 890338 |
| &nbsp;&nbsp;&nbsp;Residential development, net | 200838 | 206990 |
| Commercial |  |  |
| &nbsp;&nbsp;&nbsp;Term, net | 3029547 | 3008473 |
| &nbsp;&nbsp;&nbsp;Lines of credit & other, net | 960054 | 910733 |
| &nbsp;&nbsp;&nbsp;Leases & equipment finance, net | 1706172 | 1467676 |
| Residential |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage, net | 5647035 | 4517266 |
| &nbsp;&nbsp;&nbsp;Home equity loans & lines, net | 1631965 | 1197170 |
| Consumer & other, net | 154632 | 184023 |
| Total loans and leases, net of deferred fees and costs | $26155981 | $22553180 |

---

As of December 31, 2022 and 2021, the net deferred costs were $84.7 million and $57.5 million, respectively. Total loans and leases also include discounts on acquired loans of $6.1 million and $9.8 million as of December 31, 2022 and 2021, respectively. As of December 31, 2022, loans totaling $14.0 billion were pledged to secure borrowings and available lines of credit. The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. Interest accrued on loans totaled $86.8 million and $60.1 million as of December 31, 2022 and December 31, 2021, respectively, and is included in *Other Assets*.

The Bank, through its commercial equipment leasing subsidiary, FinPac, is a provider of commercial equipment leasing and financing. Direct finance leases are included within the lease and equipment finance segment within the loans and leases, net line item. These direct financing leases typically have terms of three to five years. Interest income recognized on these leases was $18.8 million and $23.1 million at December 31, 2022 and 2021, respectively.

Residual values on leases are established at the time equipment is leased based on an estimate of the value of the leased equipment when the Company expects to dispose of the equipment, typically at the termination of the lease. An annual evaluation is also performed each fiscal year by an independent valuation specialist and equipment residuals are confirmed or adjusted in conjunction with such evaluation.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table presents the net investment in direct financing leases as of December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| Minimum lease payments receivable | $316823 | $298980 |
| Estimated guaranteed and unguaranteed residual values | 98175 | 84773 |
| Initial direct costs - net of accumulated amortization | 6033 | 6058 |
| Unearned income | (41571) | (41264) |
| Net investment in direct financing leases | $379460 | $348547 |

---

The following table presents the scheduled minimum lease payments receivable as of December 31, 2022:

---

| | |
|:---|:---|
| (in thousands) |  |
| **Year** | **Amount** |
| 2023 | $106510 |
| 2024 | 80882 |
| 2025 | 56830 |
| 2026 | 36495 |
| 2027 | 19702 |
| Thereafter | 16404 |
| Total minimum lease payments receivable | $316823 |

---

In the course of managing the loan and lease portfolio, at certain times, management may decide to sell loans and leases. The following table summarizes the carrying value of loans and leases sold by major loan type during the years ended December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **2022** | **2021** |
| Commercial real estate |  |  |
| &nbsp;&nbsp;&nbsp;Non-owner occupied term, net | $52293 | $48923 |
| &nbsp;&nbsp;&nbsp;Owner occupied term, net | 35193 | 37449 |
| &nbsp;&nbsp;&nbsp;Multifamily, net |  | 13165 |
| Commercial |  |  |
| &nbsp;&nbsp;&nbsp;Term, net | 53303 | 65781 |
| Residential |  |  |
| &nbsp;&nbsp;&nbsp;Mortgage, net | 1493 | 1835 |
| Consumer & other, net |  | 63799 |
| Total loans and leases sold, net | $142282 | $230952 |

---

For the years ended December 31, 2022 and 2021, the above loan sales include $105.3 million and $150.1 million, respectively, of SBA loan sales.

**Note 5 – Allowance for Credit Losses**

***Allowance for Credit Losses Methodology***

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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

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

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

The following is a discussion of the changes in the factors that influenced management's current estimate of expected credit losses. The changes in the ACL estimate for all portfolio segments, during the year ended December 31, 2022, were primarily related to changes in the economic assumptions. The Bank opted to use Moody's Analytics' November consensus economic forecast for estimating the ACL as of December 31, 2022. This scenario is based on Moody's Analytics' review of a variety of surveys of baseline forecasts of the U.S. economy. These surveys vary in date of latest vintage, number of updates per year, list of variables forecast, duration of forecast, frequency of data (quarterly or annual), and the number of respondents. In the preparation of the Moody's Analytics consensus forecast, the focus is on the next three to five years, since that is the most typical duration in the surveyed results. Moody's Analytics' approach is to give greater consideration to the most recently produced forecasts, since they will include the most up-to-date historical information, and to those variables for which the number of surveyed responses is largest.

In the consensus scenario selected, the scenario is designed to incorporate the central tendency of a range of baseline forecasts produced by various institutions. Since the result is itself a baseline, by definition the probability that the economy will perform better than this consensus is equal to the probability that it will perform worse and included the following factors:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• U.S. real GDP average annualized growth of 0.4% in 2023, 1.4% in 2024, 2.0% in 2025, and 2.0% in 2026;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• U.S. unemployment rate average of 4.3% in 2023, 4.5% in 2024, 4.2% in 2025, and 3.9% in 2026;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The average federal funds rate is expected to be 4.9% in 2023, 4.0% in 2024, 2.9% in 2025, and 2.5% in 2026.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The economy falls into a recession in the first quarter of 2023;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Russian invasion of Ukraine persists longer than anticipated. Supply-chain issues worsen, increasing shortages of affected goods, also keeping inflation elevated;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• New cases, hospitalizations and deaths from COVID-19 start to rise again, slowing growth in spending on air travel, retail, and hotels;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• U.S. real GDP average annualized growth of (0.8)% in 2023, 1.4% in 2024, 3.6% in 2025, and 3.3% in 2026;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• U.S. unemployment rate average of 5.7% in 2023, 5.4% in 2024, 3.9% in 2025, and 4.1% in 2026;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The average federal funds rate is expected to be 4.5% in 2023, 2.7% in 2024, 2.2% in 2025, and 2.5% in 2026.

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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

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

The owner-occupied commercial real-estate portfolio utilizes a top-down macroeconomic model using linear regression. This model produces portfolio level quarterly net charge-off rates for 10 years and carries forward the last quarter's expected loss percentage projection to remaining periods. The primary economic drivers for this model are the 7-year A vs Aa corporate bond spread and S&P 500 corporate after-tax profits.

**Commercial:** Non-homogeneous commercial loans and leases and residential development loans are analyzed in a multi-step process. An initial PD is estimated using a model driven by an obligor's selected financial statement ratios, together with cycle-adjusting information based on the obligor's state and industry. An initial LGD is derived separately based on collateral type using collateral value and a haircut to reflect the loss in liquidation. Another model then applies an auto-regression technique to the initial PD and LGD metrics to estimate the PD and LGD curves according to the macroeconomic scenario over a one-year reasonable and supportable forecast. The primary economic drivers in the model are the S&P 500 Stock Price Index, S&P 500 Market Volatility Index, U.S. unemployment rate, as well as appropriate yield curves and credit spreads. This model utilizes output reversion methodology, which, after one year, reverts on a straight-line basis over two years to long-term PD estimated using financial statement ratios of each obligor.

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

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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

All loans and leases that have not been modeled receive a loss rate via an extrapolated rate methodology. The loans and leases receiving an extrapolated rate are typically newly originated loans and leases or loans and leases without the granularity of data necessary to be modeled. Based on the vintage year, credit classification, and reporting category of the modeled loans and leases, a loss factor is calculated and applied to the non-modeled loans and leases.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in national, regional, and local economic and business conditions and developments that affect the collectability of the portfolio, including the condition of various market segments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the nature and volume of the portfolio and in the terms of loans and leases.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the experience, ability, and depth of lending management and other relevant staff.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the volume and severity of past due loans and leases, the volume of non-accrual loans and leases, and the volume and severity of adversely classified or graded loans and leases.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the quality of the Bank's credit review system.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Changes in the value of the underlying collateral for collateral-dependent loans and leases.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The existence and effect of any concentrations of credit, and changes in the level of such concentrations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the Bank's existing portfolio.

The Company evaluated each qualitative factor as of December 31, 2022 and concluded no material adjustment to the amounts indicated by the models was necessary as the models adequately reflected the significant changes in credit conditions and overall portfolio risk.

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following tables summarize activity related to the allowance for credit losses by portfolio segment as of December 31, 2022 and 2021:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| (in thousands) | **Commercial Real Estate** | **Commercial** | **Residential** | **Consumer & Other** | **Total** |
| **Allowance for credit losses on loans and leases** |  |  |  |  |  |
| Balance, beginning of period | $99075 | $117573 | $29068 | $2696 | $248412 |
| (Recapture) provision for credit losses for loans and leases | (21510) | 79606 | 20823 | 4686 | 83605 |
| Charge-offs | (136) | (41073) | (224) | (3556) | (44989) |
| Recoveries | 384 | 11029 | 662 | 2032 | 14107 |
| Net recoveries (charge-offs) | 248 | (30044) | 438 | (1524) | (30882) |
| Balance, end of period | $77813 | $167135 | $50329 | $5858 | $301135 |
| **Reserve for unfunded commitments** |  |  |  |  |  |
| Balance, beginning of period | $8461 | $2028 | $1957 | $321 | $12767 |
| (Recapture) provision for credit losses on unfunded commitments | (1254) | 1021 | 1239 | 448 | 1454 |
| Balance, end of period | 7207 | 3049 | 3196 | 769 | 14221 |
| **Total allowance for credit losses** | $85020 | $170184 | $53525 | $6627 | $315356 |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| (in thousands) | **Commercial Real Estate** | **Commercial** | **Residential** | **Consumer & Other** | **Total** |
| **Allowance for credit losses on loans and leases** |  |  |  |  |  |
| Balance, beginning of period | $141710 | $150864 | $27964 | $7863 | $328401 |
| (Recapture) provision for credit losses for loans and leases | (42136) | 10431 | 250 | (3677) | (35132) |
| Charge-offs | (1144) | (54425) | (70) | (3658) | (59297) |
| Recoveries | 645 | 10703 | 924 | 2168 | 14440 |
| Net (charge-offs) recoveries | (499) | (43722) | 854 | (1490) | (44857) |
| Balance, end of period | $99075 | $117573 | $29068 | $2696 | $248412 |
| **Reserve for unfunded commitments** |  |  |  |  |  |
| Balance, beginning of period | $15360 | $2190 | $1661 | $1075 | $20286 |
| (Recapture) provision for credit losses on unfunded commitments  | (6899) | (162) | 296 | (754) | (7519) |
| Balance, end of period | 8461 | 2028 | 1957 | 321 | 12767 |
| **Total allowance for credit losses** | $107536 | $119601 | $31025 | $3017 | $261179 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Asset Quality and Non-Performing Loans and Leases***

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

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

Typically, loans in a non-accrual status will not have an allowance for credit loss as they will be written down to their net realizable value or charged-off. However, the net realizable value for homogeneous leases and equipment finance agreements is determined by the LGD calculated by the CECL model and therefore leases and equipment finance agreements on non-accrual will have an allowance for credit losses until they become 181 days past due, at which time they are charged-off. The Company recognized no interest income on non-accrual loans and leases during the year ended December 31, 2022.

The following tables present the carrying value of the loans and leases past due, by loan and lease class, as of December 31, 2022 and 2021:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| (in thousands) | **Greater than 30 to 59 Days Past Due** | **60 to 89 Days Past Due** | **Greater than 90 Days and Accruing** | **Total Past Due** | **Non-Accrual** <sup>(1)</sup> | **Current**  | **Total Loans and Leases** |
| Commercial real estate |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-owner occupied term, net | $811 | $538 | $— | $1349 | $2963 | $3890528 | $3894840 |
| &nbsp;&nbsp;&nbsp;Owner occupied term, net | 168 | 50 | 1 | 219 | 2048 | 2565494 | 2567761 |
| &nbsp;&nbsp;&nbsp;Multifamily, net |  |  |  |  |  | 5285791 | 5285791 |
| &nbsp;&nbsp;&nbsp;Construction & development, net |  |  |  |  |  | 1077346 | 1077346 |
| &nbsp;&nbsp;&nbsp;Residential development, net |  |  |  |  |  | 200838 | 200838 |
| Commercial |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Term, net | 1241 | 1489 | 19 | 2749 | 5303 | 3021495 | 3029547 |
| &nbsp;&nbsp;&nbsp;Lines of credit & other, net | 514 | 419 | 4 | 937 |  | 959117 | 960054 |
| &nbsp;&nbsp;&nbsp;Leases & equipment finance, net | 19929 | 23288 | 7886 | 51103 | 20388 | 1634681 | 1706172 |
| Residential |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Mortgage, net <sup>(2)</sup> | 847 | 10619 | 24943 | 36409 |  | 5610626 | 5647035 |
| &nbsp;&nbsp;&nbsp;Home equity loans & lines, net | 2808 | 1526 | 1569 | 5903 |  | 1626062 | 1631965 |
| Consumer & other, net | 446 | 200 | 134 | 780 |  | 153852 | 154632 |
| Total, net of deferred fees and costs | $26764 | $38129 | $34556 | $99449 | $30702 | $26025830 | $26155981 |

---

<sup>(1)</sup> Loans and leases on non-accrual with an amortized cost basis of $30.7 million had a related allowance for credit losses of $17.5 million at December 31, 2022.

<sup>(2)</sup> Includes government guaranteed mortgage loans that Umpqua has the right but not the obligation to repurchase that are past due 90 days or more, totaling $6.6 million at December 31, 2022.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| (in thousands) | **Greater than 30 to 59 Days Past Due** | **60 to 89 Days Past Due** | **Greater than 90 Days and Accruing** | **Total Past Due** | **Non-Accrual** <sup>(1)</sup> | **Current**  | **Total Loans and Leases** |
| Commercial real estate |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-owner occupied term, net | $388 | $1138 | $— | $1526 | $3384 | $3781977 | $3786887 |
| &nbsp;&nbsp;&nbsp;Owner occupied term, net | 101 | 65 | 1 | 167 | 2383 | 2329872 | 2332422 |
| &nbsp;&nbsp;&nbsp;Multifamily, net |  |  |  |  |  | 4051202 | 4051202 |
| &nbsp;&nbsp;&nbsp;Construction & development, net |  |  |  |  |  | 890338 | 890338 |
| &nbsp;&nbsp;&nbsp;Residential development, net |  |  |  |  |  | 206990 | 206990 |
| Commercial |  |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Term, net | 4627 | 2345 | 4 | 6976 | 4225 | 2997272 | 3008473 |
| &nbsp;&nbsp;&nbsp;Lines of credit & other, net | 300 | 2 | 357 | 659 |  | 910074 | 910733 |
| &nbsp;&nbsp;&nbsp;Leases & equipment finance, net | 6806 | 8951 | 3799 | 19556 | 8873 | 1439247 | 1467676 |
| Residential |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Mortgage, net | 802 | 3668 | 27249 | 31719 |  | 4485547 | 4517266 |
| &nbsp;&nbsp;&nbsp;Home equity loans & lines, net | 1214 | 491 | 732 | 2437 |  | 1194733 | 1197170 |
| Consumer & other, net | 396 | 386 | 194 | 976 |  | 183047 | 184023 |
| Total, net of deferred fees and costs | $14634 | $17046 | $32336 | $64016 | $18865 | $22470299 | $22553180 |

---

<sup>(1)</sup> Loans and leases on non-accrual with an amortized cost basis of $18.9 million had a related allowance for credit losses of $7.5 million at December 31, 2021.

***Collateral Dependent Loans and Leases***

Loans are classified as collateral dependent when it is probable that the Bank will be unable to collect the scheduled payments of principal and interest when due, and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes the amortized cost basis of the collateral dependent loans and leases by the type of collateral securing the assets as of December 31, 2022. There have been no significant changes in the level of collateralization from the prior periods.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Residential Real Estate** | **Commercial Real Estate** | **General Business Assets** | **Other** | **Total** |
| Commercial real estate |  |  |  |  |  |
| &nbsp;&nbsp;Non-owner occupied term, net | $— | $2878 | $— | $— | $2878 |
| &nbsp;&nbsp;Owner occupied term, net |  | 1752 |  | 104 | 1856 |
| Commercial |  |  |  |  |  |
| &nbsp;&nbsp;Term, net | 2447 | 353 | 2506 |  | 5306 |
| &nbsp;&nbsp;Line of credit & other, net |  |  |  |  |  |
| &nbsp;&nbsp;Leases & equipment finance, net |  |  | 20402 |  | 20402 |
| Residential |  |  |  |  |  |
| &nbsp;&nbsp;Mortgage, net | 41341 |  |  |  | 41341 |
| &nbsp;&nbsp;Home equity loans & lines, net | 3171 |  |  |  | 3171 |
| Total, net of deferred fees and costs | $46959 | $4983 | $22908 | $104 | $74954 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Troubled Debt Restructuring***

At December 31, 2022 and 2021, troubled debt restructured loans of $6.8 million and $6.7 million, respectively, were classified as accruing TDR loans. The TDRs were granted in response to borrower financial difficulties, and generally provide for a temporary modification of loan repayment terms. In order for a new TDR loan to be considered for accrual status, the loan's collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or demonstrate the ability to make payments from a verified source of cash flow.

There were no available commitments for troubled debt restructuring outstanding as of December 31, 2022 and 2021.

The following tables present TDR loans by accrual versus non-accrual status and by portfolio segment as of December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| (in thousands) | **Accrual Status** | **Non-Accrual Status** | **Total Modification** | **# of Contracts** |
| Commercial real estate, net | $279 | $23 | $302 | 3 |
| Commercial, net | 188 |  | 188 | 1 |
| Residential, net | 6291 |  | 6291 | 40 |
| Consumer & other, net | 9 |  | 9 | 2 |
| Total, net of deferred fees and costs | $6767 | $23 | $6790 | 46 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| (in thousands) | **Accrual Status** | **Non-Accrual Status** | **Total Modification** | **# of Contracts** |
| Commercial real estate, net | $1031 | $59 | $1090 | 5 |
| Residential, net | 5641 |  | 5641 | 35 |
| Consumer & other, net | 22 |  | 22 | 3 |
| Total, net of deferred fees and costs | $6694 | $59 | $6753 | 43 |

---

The following table presents loans that were determined to be TDRs during the years ended December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **2022** | **2021** |
| Commercial real estate, net | $278 | $— |
| Commercial, net | 188 |  |
| Residential, net | 6046 | 6711 |
| Consumer & other, net |  | 36 |
| Total, net of deferred fees and costs | $6512 | $6747 |

---

For the periods presented in the table above, the outstanding recorded investment was the same pre and post modification and all modifications were combination modifications.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Credit Quality Indicators***

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

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

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

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

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

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

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

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

**Loss—**Loans or leases classified as loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following tables represent the amortized costs basis of the loans and leases by credit classification and vintage year by loan and lease class of financing receivable as of December 31, 2022 and 2021:

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** |  |
| **December 31, 2022** | **2022** | **2021** | **2020** | **2019** | **2018** | **Prior** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** | **Total** |
| **Commercial real estate:** |  |  |  |  |  |  |  |  |  |
| **Non-owner occupied term, net** | **Non-owner occupied term, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $726865 | $746833 | $389476 | $590571 | $404905 | $968254 | $4327 | $4442 | $3835673 |
| Special mention | 1185 |  | 1482 | 4597 | 4002 | 4603 |  |  | 15869 |
| Substandard | 452 |  |  | 311 | 34393 | 8129 |  |  | 43285 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  | 13 |  |  | 13 |
| **Total non-owner occupied term, net** | $728502 | $746833 | $390958 | $595479 | $443300 | $980999 | $4327 | $4442 | $3894840 |
| **Owner occupied term, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $660479 | $544011 | $183996 | $307944 | $211539 | $585740 | $4552 | $117 | $2498378 |
| Special mention | 2091 | 20328 | 239 | 3279 | 9527 | 19562 |  |  | 55026 |
| Substandard |  |  | 404 | 660 | 1356 | 11833 |  |  | 14253 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  | 104 |  |  | 104 |
| **Total owner occupied term, net** | $662570 | $564339 | $184639 | $311883 | $222422 | $617239 | $4552 | $117 | $2567761 |
| **Multifamily, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $1944714 | $1556986 | $364306 | $618523 | $219260 | $496628 | $82467 | $2907 | $5285791 |
| Special mention |  |  |  |  |  |  |  |  |  |
| Substandard |  |  |  |  |  |  |  |  |  |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total multifamily, net** | $1944714 | $1556986 | $364306 | $618523 | $219260 | $496628 | $82467 | $2907 | $5285791 |
| **Construction & development, net** | **Construction & development, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $248437 | $505680 | $205577 | $83808 | $— | $18183 | $2393 | $— | $1064078 |
| Special mention |  | 13268 |  |  |  |  |  |  | 13268 |
| Substandard |  |  |  |  |  |  |  |  |  |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total construction & development, net** | $248437 | $518948 | $205577 | $83808 | $— | $18183 | $2393 | $— | $1077346 |
| **Residential development, net** | **Residential development, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $38662 | $20609 | $417 | $— | $— | $— | $141150 | $— | $200838 |
| Special mention |  |  |  |  |  |  |  |  |  |
| Substandard |  |  |  |  |  |  |  |  |  |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total residential development, net** | $38662 | $20609 | $417 | $— | $— | $— | $141150 | $— | $200838 |
| **Total commercial real estate** | $3622885 | $3407715 | $1145897 | $1609693 | $884982 | $2113049 | $234889 | $7466 | $13026576 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** |  |
| **December 31, 2022** | **2022** | **2021** | **2020** | **2019** | **2018** | **Prior** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** | **Total** |
| **Commercial:** |  |  |  |  |  |  |  |  |  |
| **Term, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $792764 | $643930 | $174188 | $156068 | $130309 | $278695 | $744193 | $44033 | $2964180 |
| Special mention |  | 1138 | 3 | 100 | 1488 | 935 |  | 411 | 4075 |
| Substandard | 16424 | 1403 | 1362 | 1358 | 10619 | 2211 | 27240 |  | 60617 |
| Doubtful |  |  | 675 |  |  |  |  |  | 675 |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total term, net** | $809188 | $646471 | $176228 | $157526 | $142416 | $281841 | $771433 | $44444 | $3029547 |
| **Lines of credit & other, net** | **Lines of credit & other, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $57715 | $6271 | $4660 | $13304 | $8653 | $1257 | $813110 | $36573 | $941543 |
| Special mention |  |  |  |  |  |  | 5833 | 1933 | 7766 |
| Substandard |  | 314 |  |  |  | 1102 | 6031 | 3294 | 10741 |
| Doubtful |  |  |  |  |  |  |  | 1 | 1 |
| Loss |  |  |  |  |  |  | 3 |  | 3 |
| **Total lines of credit & other, net** | $57715 | $6585 | $4660 | $13304 | $8653 | $2359 | $824977 | $41801 | $960054 |
| **Leases & equipment finance, net** | **Leases & equipment finance, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $812537 | $362612 | $190507 | $149667 | $62292 | $40328 | $— | $— | $1617943 |
| Special mention | 9840 | 8403 | 2902 | 2423 | 665 | 182 |  |  | 24415 |
| Substandard | 11531 | 8165 | 3452 | 2697 | 1477 | 177 |  |  | 27499 |
| Doubtful | 11822 | 13034 | 4326 | 3419 | 1211 | 197 |  |  | 34009 |
| Loss | 1243 | 505 | 275 | 236 | 28 | 19 |  |  | 2306 |
| **Total leases & equipment finance, net** | $846973 | $392719 | $201462 | $158442 | $65673 | $40903 | $— | $— | $1706172 |
| **Total commercial** | $1713876 | $1045775 | $382350 | $329272 | $216742 | $325103 | $1596410 | $86245 | $5695773 |
| **Residential:** |  |  |  |  |  |  |  |  |  |
| **Mortgage, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $1465067 | $2389861 | $485576 | $471416 | $143611 | $661715 | $— | $— | $5617246 |
| Special mention | 307 | 1351 | 1203 | 2365 | 752 | 5487 |  |  | 11465 |
| Substandard |  | 1664 | 1041 | 2693 | 2015 | 9907 |  |  | 17320 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  | 561 |  | 193 | 193 | 57 |  |  | 1004 |
| **Total mortgage, net** | $1465374 | $2393437 | $487820 | $476667 | $146571 | $677166 | $— | $— | $5647035 |
| **Home equity loans & lines, net** | **Home equity loans & lines, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $1117 | $630 | $— | $— | $16 | $7320 | $1584200 | $32778 | $1626061 |
| Special mention |  |  |  |  |  | 79 | 3208 | 1047 | 4334 |
| Substandard |  |  |  |  |  | 53 | 557 | 154 | 764 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  | 357 | 449 | 806 |
| **Total home equity loans & lines, net** | $1117 | $630 | $— | $— | $16 | $7452 | $1588322 | $34428 | $1631965 |
| **Total residential** | $1466491 | $2394067 | $487820 | $476667 | $146587 | $684618 | $1588322 | $34428 | $7279000 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** |  |
| **December 31, 2022** | **2022** | **2021** | **2020** | **2019** | **2018** | **Prior** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** | **Total** |
| **Consumer & other, net:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $22959 | $7990 | $6701 | $6232 | $2626 | $4436 | $102465 | $442 | $153851 |
| Special mention | 6 |  | 27 | 14 | 42 | 66 | 371 | 122 | 648 |
| Substandard |  | 9 | 1 | 9 |  | 32 | 47 | 25 | 123 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  | 7 | 3 |  | 10 |
| **Total consumer & other, net** | $22965 | $7999 | $6729 | $6255 | $2668 | $4541 | $102886 | $589 | $154632 |
| **Grand total** | $6826217 | $6855556 | $2022796 | $2421887 | $1250979 | $3127311 | $3522507 | $128728 | $26155981 |

---

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** |  |
| **December 31, 2021** | **2021** | **2020** | **2019** | **2018** | **2017** | **Prior** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** | **Total** |
| **Commercial real estate:** |  |  |  |  |  |  |  |  |  |
| **Non-owner occupied term, net** | **Non-owner occupied term, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $901230 | $434875 | $618879 | $431098 | $308872 | $942501 | $1313 | $3679 | $3642447 |
| Special mention |  | 1311 | 1411 | 12252 | 844 | 38268 |  |  | 54086 |
| Substandard | 19270 | 2214 | 2605 | 53312 | 2990 | 9641 |  |  | 90032 |
| Doubtful |  |  |  |  |  | 78 |  |  | 78 |
| Loss |  |  |  |  |  | 244 |  |  | 244 |
| **Total non-owner occupied term, net** | $920500 | $438400 | $622895 | $496662 | $312706 | $990732 | $1313 | $3679 | $3786887 |
| **Owner occupied term, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $594677 | $237814 | $369483 | $245707 | $227201 | $601934 | $5017 | $737 | $2282570 |
| Special mention |  |  | 7445 | 10739 | 4936 | 12219 |  |  | 35339 |
| Substandard |  | 897 | 674 | 1815 |  | 10697 |  |  | 14083 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  | 430 |  |  | 430 |
| **Total owner occupied term, net** | $594677 | $238711 | $377602 | $258261 | $232137 | $625280 | $5017 | $737 | $2332422 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** |  |
| **December 31, 2021** | **2021** | **2020** | **2019** | **2018** | **2017** | **Prior** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** | **Total** |
| **Multifamily, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $1700221 | $380506 | $748207 | $346192 | $334688 | $510385 | $26475 | $2931 | $4049605 |
| Special mention |  |  |  |  |  | 1597 |  |  | 1597 |
| Substandard |  |  |  |  |  |  |  |  |  |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total multifamily, net** | $1700221 | $380506 | $748207 | $346192 | $334688 | $511982 | $26475 | $2931 | $4051202 |
| **Construction & development, net** | **Construction & development, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $264489 | $310207 | $237435 | $48911 | $18375 | $136 | $2382 | $— | $881935 |
| Special mention |  |  |  |  |  |  |  |  |  |
| Substandard |  |  |  | 8403 |  |  |  |  | 8403 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total construction & development, net** | $264489 | $310207 | $237435 | $57314 | $18375 | $136 | $2382 | $— | $890338 |
| **Residential development, net** | **Residential development, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $28744 | $15623 | $— | $— | $— | $— | $156587 | $6036 | $206990 |
| Special mention |  |  |  |  |  |  |  |  |  |
| Substandard |  |  |  |  |  |  |  |  |  |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  |  |  |  |  |
| **Total residential development, net** | $28744 | $15623 | $— | $— | $— | $— | $156587 | $6036 | $206990 |
| **Total commercial real estate** | $3508631 | $1383447 | $1986139 | $1158429 | $897906 | $2128130 | $191774 | $13383 | $11267839 |
| **Commercial:** |  |  |  |  |  |  |  |  |  |
| **Term, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $1102310 | $306969 | $200352 | $179217 | $206405 | $215105 | $699230 | $14075 | $2923663 |
| Special mention |  | 4454 | 97 | 28971 | 587 | 825 | 27909 | 1501 | 64344 |
| Substandard | 1217 | 9827 |  | 1095 | 2648 | 1264 |  | 3189 | 19240 |
| Doubtful |  |  |  |  | 809 |  |  |  | 809 |
| Loss |  |  |  | 417 |  |  |  |  | 417 |
| **Total term, net** | $1103527 | $321250 | $200449 | $209700 | $210449 | $217194 | $727139 | $18765 | $3008473 |
| **Lines of credit & other, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $31836 | $9170 | $16529 | $10945 | $334 | $1605 | $812207 | $8498 | $891124 |
| Special mention |  |  |  |  |  |  | 8830 | 752 | 9582 |
| Substandard | 714 | 414 |  |  |  | 1118 | 3238 | 4540 | 10024 |
| Doubtful |  |  |  |  |  |  | 1 |  | 1 |
| Loss |  |  |  |  |  |  | 1 | 1 | 2 |
| **Total lines of credit & other, net** | $32550 | $9584 | $16529 | $10945 | $334 | $2723 | $824277 | $13791 | $910733 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (in thousands) | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Term Loans Amortized Cost Basis by Origination Year** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** |  |
| **December 31, 2021** | **2021** | **2020** | **2019** | **2018** | **2017** | **Prior** | **Revolving Loans Amortized Cost Basis** | **Revolving to Non-Revolving Loans Amortized Cost** | **Total** |
| **Leases & equipment finance, net** | **Leases & equipment finance, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $599301 | $325379 | $282101 | $138627 | $43950 | $38965 | $— | $— | $1428323 |
| Special mention | 2512 | 1965 | 1782 | 1690 | 572 | 130 |  |  | 8651 |
| Substandard | 4280 | 7333 | 2682 | 1448 | 578 | 160 |  |  | 16481 |
| Doubtful | 3781 | 3232 | 3238 | 1343 | 663 | 636 |  |  | 12893 |
| Loss | 614 | 258 | 187 | 84 | 179 | 6 |  |  | 1328 |
| **Total leases & equipment finance, net** | $610488 | $338167 | $289990 | $143192 | $45942 | $39897 | $— | $— | $1467676 |
| **Total commercial** | $1746565 | $669001 | $506968 | $363837 | $256725 | $259814 | $1551416 | $32556 | $5386882 |
| **Residential:** |  |  |  |  |  |  |  |  |  |
| **Mortgage, net** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $2252704 | $606671 | $585923 | $190673 | $209990 | $639585 | $— | $— | $4485546 |
| Special mention | 372 |  | 555 | 81 | 632 | 2830 |  |  | 4470 |
| Substandard |  | 1379 | 4430 | 1147 | 3098 | 15692 |  |  | 25746 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  | 907 |  |  | 597 |  |  | 1504 |
| **Total mortgage, net** | $2253076 | $608050 | $591815 | $191901 | $213720 | $658704 | $— | $— | $4517266 |
| **Home equity loans & lines, net** | **Home equity loans & lines, net** |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $972 | $— | $— | $18 | $— | $10973 | $1151063 | $31708 | $1194734 |
| Special mention |  |  |  |  |  | 102 | 1355 | 248 | 1705 |
| Substandard |  |  |  |  |  | 96 | 280 | 213 | 589 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  | 36 | 42 | 64 | 142 |
| **Total home equity loans & lines, net** | $972 | $— | $— | $18 | $— | $11207 | $1152740 | $32233 | $1197170 |
| **Total residential** | $2254048 | $608050 | $591815 | $191919 | $213720 | $669911 | $1152740 | $32233 | $5714436 |
| **Consumer & other, net:** |  |  |  |  |  |  |  |  |  |
| &nbsp;&nbsp;Credit quality indicator: |  |  |  |  |  |  |  |  |  |
| Pass/Watch | $15375 | $10955 | $12167 | $5395 | $3983 | $5070 | $128264 | $1835 | $183044 |
| Special mention |  | 23 | 41 | 1 | 113 | 113 | 391 | 101 | 783 |
| Substandard |  | 3 | 15 |  | 17 | 25 | 55 | 71 | 186 |
| Doubtful |  |  |  |  |  |  |  |  |  |
| Loss |  |  |  |  |  | 7 | 3 |  | 10 |
| **Total consumer & other, net** | $15375 | $10981 | $12223 | $5396 | $4113 | $5215 | $128713 | $2007 | $184023 |
| **Grand total** | $7524619 | $2671479 | $3097145 | $1719581 | $1372464 | $3063070 | $3024643 | $80179 | $22553180 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 6–Premises and Equipment**

The following table presents the major components of premises and equipment at December 31, 2022 and 2021:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** | **Estimated useful life** |
| Land | $33031 | $33031 |  |
| Buildings and improvements | 203519 | 201652 | 7 - 39 years |
| Furniture, fixtures and equipment | 142209 | 139966 | 4 - 20 years |
| Software | 105355 | 109279 | 3 - 7 years |
| Construction in progress and other | 16878 | 12230 |  |
| Total premises and equipment | 500992 | 496158 |  |
| Less: Accumulated depreciation and amortization | (324976) | (325033) |  |
| Premises and equipment, net | $176016 | $171125 |  |

---

Depreciation expense totaled $22.9 million, $25.7 million, and $32.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

**Note 7 – Leases**

The Company leases store locations, corporate office space, and equipment under non-cancelable operating leases. The following table presents the balance sheet information related to leases as of December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| **Leases** | **December 31, 2022** | **December 31, 2021** |
| Operating lease right-of-use assets | $78598 | $82366 |
| Operating lease liabilities | $91694 | $95427 |

---

The following table presents the weighted-average operating lease term and weighted-average discount rate as of December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2021** |
| Weighted-average remaining lease term (years) | 5.7 | 5.5 |
| Weighted-average discount rate | 2.86% | 2.86% |

---

The following table presents the components of lease expense for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) |  |  |  |
| **Lease Costs** | **2022** | **2021** | **2020** |
| Operating lease costs | $30383 | $29694 | $32862 |
| Short-term lease costs | 421 | 609 | 472 |
| Variable lease costs | 26 | 22 | (11) |
| Sublease income | (2504) | (2626) | (2106) |
| Net lease costs | $28326 | $27699 | $31217 |

---

The Company performs impairment assessments for ROU assets when events or changes in circumstances indicate that their carrying values may not be recoverable. For the years ended December 31, 2022 and 2021, there were $1.8 million and $6.9 million, respectively, in ROU asset impairments recorded in other expenses. The impairments were due to accelerated depreciation for leases which the Company chose to exit due to consolidations of back-office space and stores.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table presents the supplemental cash flow information related to leases for the year ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) |  |  |  |
| **Cash Flows** | **2022** | **2021** | **2020** |
| Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Operating cash flows from operating leases | $30420 | $31697 | $32639 |
| Right of use assets obtained in exchange for new operating lease liabilities | $24954 | $15033 | $21746 |

---

The following table presents the maturities of lease liabilities as of December 31, 2022:

---

| | |
|:---|:---|
| (in thousands) |  |
| **Year** | **Operating Leases** |
| &nbsp;&nbsp;2023 | $26952 |
| &nbsp;&nbsp;2024 | 22643 |
| &nbsp;&nbsp;2025 | 17060 |
| &nbsp;&nbsp;2026 | 11656 |
| &nbsp;&nbsp;2027 | 6198 |
| &nbsp;&nbsp;&nbsp;Thereafter | 15161 |
| &nbsp;&nbsp;&nbsp;Total lease payments | 99670 |
| &nbsp;&nbsp;&nbsp;Less: imputed interest | (7976) |
| &nbsp;&nbsp;&nbsp;Present value of lease liabilities | $91694 |

---

**Note 8 – Residential Mortgage Servicing Rights** 

The Company measures its MSR asset at fair value with changes in fair value reported in residential mortgage banking revenue, net. The following table presents the changes in the Company's residential MSR for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| Balance, beginning of period | $123615 | $92907 | $115010 |
| Additions for new MSR capitalized | 24137 | 38522 | 51000 |
| Changes in fair value: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to collection/realization of expected cash flows over time | (20272) | (18903) | (19680) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to valuation inputs or assumptions <sup>(1)</sup> | 57537 | 11089 | (53423) |
| Balance, end of period | $185017 | $123615 | $92907 |

---

<sup>(1)</sup> 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.

Information related to the serviced loan portfolio as of December 31, 2022, 2021, and 2020 is as follows:

---

| | | | |
|:---|:---|:---|:---|
| (dollars in thousands) | **December 31, 2022** | **December 31, 2021** | **December 31, 2020** |
| Balance of loans serviced for others | $13020189 | $12755671 | $13026720 |
| MSR as a percentage of serviced loans | 1.42% | 0.97% | 0.71% |

---

The amount of contractually specified servicing fees, late fees and ancillary fees earned, recorded in residential mortgage banking revenue, were $37.4 million, $36.8 million, and $35.7 million for the years ended December 31, 2022, 2021, and 2020, respectively.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Key assumptions used in measuring the fair value of MSR as of December 31, 2022, 2021, and 2020 were as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2021** | **December 31, 2020** |
| Constant prepayment rate | 6.39% | 12.75% | 18.48% |
| Discount rate | 10.06% | 9.57% | 9.72% |
| Weighted average life (years) | 8.7 | 5.9 | 4.9 |

---

A sensitivity analysis of the current fair value to changes in discount and prepayment speed assumptions as of December 31, 2022 and 2021 is as follows:

---

| | | |
|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2021** |
| **Constant prepayment rate** | | |
| Effect on fair value of a 10% adverse change | $(4870) | $(6442) |
| Effect on fair value of a 20% adverse change | $(9518) | $(12092) |
| **Discount rate** |  |  |
| Effect on fair value of a 100 basis point adverse change | $(8229) | $(4643) |
| Effect on fair value of a 200 basis point adverse change | $(15807) | $(8942) |

---

The sensitivity analysis presents the hypothetical effect on fair value of the MSR, due to the change in assumptions. The effect of such hypothetical change in assumptions generally cannot be extrapolated because the relationship of the change in an assumption to the change in fair value is not linear. Additionally, in the analysis, the impact of an adverse change in one assumption is calculated independent of any impact on other assumptions. In reality, changes in one assumption may change another assumption.

**Note 9 - Other Assets**

Other assets consisted of the following at December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| Low-income housing tax credit investments | $143719 | $135745 |
| Accrued interest receivable | 97863 | 70537 |
| Prepaid expenses | 43204 | 34375 |
| Income taxes receivable | 23265 | 36951 |
| Derivative assets | 15444 | 177423 |
| Investment in unconsolidated trust subsidiaries | 13962 | 13962 |
| Insurance premium receivable | 10551 | 9736 |
| Commercial servicing asset | 8506 | 7931 |
| Other real estate owned | 203 | 1868 |
| Other | 43083 | 53914 |
| Total other assets | $399800 | $542442 |

---

The Company invests in limited partnerships that operate qualified affordable housing projects to receive tax benefits in the form of tax deductions from operating losses and tax credits. The Company accounts for the investments using the proportional amortization method; amortization of the investment in qualified affordable housing projects is recorded in the provision for income taxes together with the tax credits and benefits received. As of December 31, 2022, 2021, and 2020, the Company recognized $12.0 million, $10.0 million, and $7.0 million, respectively, of proportional amortization as a component of income tax expense and recognized $14.6 million, $12.3 million, and $8.4 million, respectively, in affordable housing tax credits and other tax benefits during the years. The Company's remaining capital commitments to these partnerships at December 31, 2022 and 2021 were approximately $81.6 million and $84.5 million, respectively, and are included in *Other Liabilities*.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 10 – Income Taxes** 

The following table presents the components of income tax provision for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| Current Expense: |  |  |  |
| &nbsp;&nbsp;Federal | $70982 | $71969 | $96575 |
| &nbsp;&nbsp;State | 28461 | 25086 | 33368 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current tax expense | $99443 | $97055 | $129943 |
| Deferred tax expense (benefit): |  |  |  |
| &nbsp;&nbsp;Federal | $11636 | $32099 | $(46556) |
| &nbsp;&nbsp;State | 2747 | 8706 | (16387) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total deferred tax expense (benefit) | 14383 | 40805 | (62943) |
| Total | $113826 | $137860 | $67000 |

---

The following table presents a reconciliation of income taxes computed at the Federal statutory rate to the actual effective rate for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| | **2022** | **2021** | **2020** |
| Statutory Federal income tax rate | 21.0% | 21.0% | 21.0% |
| State tax, net of Federal benefit | 5.8% | 5.6% | (1.0)% |
| Tax-exempt income | (1.5)% | (0.9)% | 0.3% |
| Impairment of goodwill | —% | —% | (25.0)% |
| Other | —% | (1.0)% | 0.1% |
| Effective income tax rate | 25.3% | 24.7% | (4.6)% |

---

The following table reflects the effects of temporary differences that give rise to the components of the net deferred tax asset (liability) as of December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| **Deferred tax assets:** |  |  |
| &nbsp;&nbsp;&nbsp;Unrealized losses on investment securities, net | $140227 | $— |
| &nbsp;&nbsp;&nbsp;Allowance for credit losses | 79312 | 65182 |
| &nbsp;&nbsp;&nbsp;Operating lease liabilities | 23603 | 24556 |
| &nbsp;&nbsp;&nbsp;Accrued severance and deferred compensation | 16523 | 17343 |
| &nbsp;&nbsp;&nbsp;Accrued bonuses | 11539 | 12898 |
| &nbsp;&nbsp;&nbsp;Other | 28564 | 25700 |
| &nbsp;&nbsp;Total gross deferred tax assets | 299768 | 145679 |
| **Deferred tax liabilities:** |  |  |
| &nbsp;&nbsp;&nbsp;Residential mortgage servicing rights | 49681 | 33837 |
| &nbsp;&nbsp;&nbsp;Direct financing leases | 41120 | 33164 |
| &nbsp;&nbsp;&nbsp;Deferred loan fees and costs | 25676 | 22036 |
| &nbsp;&nbsp;&nbsp;Operating lease right-of-use asset | 20235 | 21195 |
| &nbsp;&nbsp;&nbsp;Fair market value adjustment on junior subordinated debentures | 15081 | 22501 |
| &nbsp;&nbsp;&nbsp;Other | 15152 | 17299 |
| &nbsp;&nbsp;Total gross deferred tax liabilities | 166945 | 150032 |
| Net deferred tax asset (liability) | $132823 | $(4353) |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

As of December 31, 2022 and 2021, the Company's gross deferred tax assets included $689,000 and $809,000, respectively, of state NOL carryforwards expiring in tax years 2029-2031. For the year ended December 31, 2022, the Company has determined there is sufficient positive evidence to conclude that it is more likely than not that the benefit from certain state NOL carryforwards will be realized. The Company has determined that no valuation allowance for the deferred tax assets is required as management believes it is more likely than not that future taxable income will be sufficient to realize the remaining gross deferred tax assets of $299.8 million and $145.7 million at December 31, 2022 and 2021, respectively.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, as well as the majority of states. The

Company no longer files income tax returns in Canada. The Company is no longer subject to U.S. and Canadian income tax examinations for years before 2019, and is no longer subject to state income tax examinations for years prior to 2018.

The Company periodically reviews its income tax positions based on tax laws and regulations and financial reporting considerations, and records adjustments as appropriate. This review takes into consideration the status of current taxing authorities' examinations of the Company's tax returns, recent positions taken by the taxing authorities on similar transactions, if any, and the overall tax environment.

The Company had no gross unrecognized tax benefits as of December 31, 2022 and 2021. Interest on unrecognized tax benefits is reported by the Company as a component of tax expense. During 2021, a settlement was entered into with the state of California for the 2012 and 2013 tax years resulting in the reversal of $2.2 million of gross unrecognized tax benefits. The 2021 gross unrecognized tax benefits also include a $2.2 million reversal related to the closure of prior tax years due to the lapse of statutes of limitations.

Detailed below is a reconciliation of the Company's gross unrecognized tax benefits for the year ended December 31, 2021:

---

| | |
|:---|:---|
| (in thousands) | **2021** |
| Balance, beginning of period | $4317 |
| Settlement | (2158) |
| Lapse of statute of limitations | (2159) |
| Balance, end of period | $— |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 11 – Interest Bearing Deposits** 

The following table presents the major types of interest bearing deposits at December 31, 2022 and 2021:

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| Interest bearing demand | $4080469 | $3774937 |
| Money market | 7721011 | 7611718 |
| Savings | 2265052 | 2375723 |
| Time, greater than $250,000 | 582838 | 480432 |
| Time, $250,000 or less | 2127393 | 1328151 |
| Total interest bearing deposits | $16776763 | $15570961 |

---

The following table presents the scheduled maturities of all time deposits as of December 31, 2022:

---

| | |
|:---|:---|
| (in thousands) |  |
| **Year** | **Amount** |
| 2023 | $2280364 |
| 2024 | 350521 |
| 2025 | 30155 |
| 2026 | 30954 |
| 2027 | 15154 |
| Thereafter | 3083 |
| Total time deposits | $2710231 |

---

 

**Note 12 – Securities Sold Under Agreements to Repurchase**

The following table presents information regarding securities sold under agreements to repurchase at December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| (dollars in thousands) | **Repurchase Amount** | **Weighted Average Interest Rate** | **Carrying Value of Underlying Assets** | **Market Value of Underlying Assets** |
| December 31, 2022 | $308769 | 0.19% | $456922 | $456922 |
| December 31, 2021 | $492247 | 0.04% | $625543 | $625543 |

---

The securities underlying agreements to repurchase entered into by the Bank are for the same securities originally sold, with a one-day maturity. In all cases, the Bank maintains control over the securities. Securities sold under agreements to repurchase averaged approximately $451.6 million, $455.0 million, and $370.0 million for the years ended December 31, 2022, 2021, and 2020, respectively. The maximum amount outstanding at any month end for the years ended December 31, 2022, 2021, and 2020, was $532.4 million, $537.6 million, and $398.4 million, respectively. Investment securities are pledged as collateral in an amount equal to or greater than the repurchase agreements.

**Note 13 – Federal Funds Purchased** 

At December 31, 2022 and 2021, the Company had no outstanding federal funds purchased balances. The Bank had available lines of credit with the FHLB totaling $7.1 billion at December 31, 2022, subject to certain collateral requirements. 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 at December 31, 2022. The Bank had uncommitted federal funds line of credit agreements with additional financial institutions totaling $460.0 million at December 31, 2022. At December 31, 2022, the lines of credit had interest rates ranging from 4.5% to 5.7%. Availability of the lines is subject to federal funds balances available for loan and continued borrower eligibility and are reviewed and renewed periodically throughout the year. These lines are intended to support short-term liquidity needs, and the agreements may restrict consecutive day usage.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 14 – Borrowings**

The Bank had outstanding secured advances from the FHLB at December 31, 2022 and 2021 with carrying values of $906.2 million and $6.3 million, respectively.

The following table summarizes the future contractual maturities of borrowed funds as of December 31, 2022:

---

| | |
|:---|:---|
| (in thousands) |  |
| **Year** | **Amount** |
| 2023 | $900000 |
| 2024 |  |
| 2025 |  |
| 2026 |  |
| 2027 |  |
| Thereafter | 5000 |
| Total borrowed funds<sup>(1)</sup> | $905000 |

---

<sup>(1)</sup> Amount shows contractual borrowings, excluding acquisition accounting adjustments.

The maximum amount outstanding from the FHLB under term advances at a month end during 2022 and 2021 was $905.0 million and $645.0 million, respectively. The average balance outstanding during 2022 and 2021 was $225.4 million and $194.6 million, respectively. The average contractual interest rate on the borrowings was 4.7% in 2022 and 7.1% in 2021. The FHLB requires the Bank to maintain a required level of investment in FHLB and sufficient collateral to qualify for secured advances. The Bank has pledged as collateral for these secured advances all FHLB stock, all funds on deposit with the FHLB, investment and commercial real estate portfolios, accounts, general intangibles, equipment and other property in which a security interest can be granted by the Bank to the FHLB.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 15 – Junior Subordinated Debentures** 

Following is information about the Company's wholly owned Trusts as of December 31, 2022:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (dollars in thousands) |  |  |  |  |  |  |
| **Trust Name** | **Issue Date** | **Issued Amount** | **Carrying Value** <sup>(1)</sup> | **Rate** <sup>(2)</sup> | **Effective Rate** <sup>(3)</sup> | **Maturity Date** |
| **AT FAIR VALUE:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Umpqua Statutory Trust II | October 2002 | $20619 | $19730 | Floating rate, LIBOR plus 3.35%, adjusted quarterly | 8.11% | October 2032 |
| &nbsp;&nbsp;&nbsp;Umpqua Statutory Trust III | October 2002 | 30928 | 29732 | Floating rate, LIBOR plus 3.45%, adjusted quarterly | 8.38% | November 2032 |
| &nbsp;&nbsp;&nbsp;Umpqua Statutory Trust IV | December 2003 | 10310 | 9483 | Floating rate, LIBOR plus 2.85%, adjusted quarterly | 7.53% | January 2034 |
| &nbsp;&nbsp;&nbsp;Umpqua Statutory Trust V | December 2003 | 10310 | 9326 | Floating rate, LIBOR plus 2.85%, adjusted quarterly | 8.39% | March 2034 |
| &nbsp;&nbsp;&nbsp;Umpqua Master Trust I | August 2007 | 41238 | 31282 | Floating rate, LIBOR plus 1.35%, adjusted quarterly | 8.07% | September 2037 |
| &nbsp;&nbsp;&nbsp;Umpqua Master Trust IB | September 2007 | 20619 | 18109 | Floating rate, LIBOR plus 2.75%, adjusted quarterly | 8.56% | December 2037 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Trust III | April 2003 | 14433 | 13743 | Floating rate, LIBOR plus 3.25%, adjusted quarterly | 8.08% | April 2033 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Trust IV | May 2003 | 10310 | 9660 | Floating rate, LIBOR plus 3.15%, adjusted quarterly | 8.28% | May 2033 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Statutory Trust V | May 2003 | 20619 | 19322 | Floating rate, LIBOR plus 3.25%, adjusted quarterly | 8.51% | June 2033 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Trust VI | June 2003 | 10310 | 9582 | Floating rate, LIBOR plus 3.20%, adjusted quarterly | 8.57% | September 2033 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Trust VII | June 2006 | 56702 | 44512 | Floating rate, LIBOR plus 1.53%, adjusted quarterly | 8.02% | June 2036 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Trust VIII | September 2006 | 51547 | 40666 | Floating rate, LIBOR plus 1.63%, adjusted quarterly | 8.11% | December 2036 |
| &nbsp;&nbsp;&nbsp;Sterling Capital Trust IX | July 2007 | 46392 | 35945 | Floating rate, LIBOR plus 1.40%, adjusted quarterly | 6.64% | October 2037 |
| &nbsp;&nbsp;&nbsp;Lynnwood Financial Statutory Trust I | March 2003 | 9279 | 8620 | Floating rate, LIBOR plus 3.15%, adjusted quarterly | 8.48% | March 2033 |
| &nbsp;&nbsp;&nbsp;Lynnwood Financial Statutory Trust II | June 2005 | 10310 | 8411 | Floating rate, LIBOR plus 1.80%, adjusted quarterly | 8.05% | June 2035 |
| &nbsp;&nbsp;&nbsp;Klamath First Capital Trust I | July 2001 | 15464 | 15516 | Floating rate, LIBOR plus 3.75%, adjusted semiannually | 7.07% | July 2031 |
| Total junior subordinated debentures at fair value | Total junior subordinated debentures at fair value | 379390 | 323639 |  |  |  |
| **AT AMORTIZED COST:** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Humboldt Bancorp Statutory Trust II | December 2001 | 10310 | 10788 | Floating rate, LIBOR plus 3.60%, adjusted quarterly | 7.47% | December 2031 |
| &nbsp;&nbsp;&nbsp;Humboldt Bancorp Statutory Trust III | September 2003 | 27836 | 29172 | Floating rate, LIBOR plus 2.95%, adjusted quarterly | 6.89% | September 2033 |
| &nbsp;&nbsp;&nbsp;CIB Capital Trust | November 2002 | 10310 | 10737 | Floating rate, LIBOR plus 3.45%, adjusted quarterly | 7.37% | November 2032 |
| &nbsp;&nbsp;&nbsp;Western Sierra Statutory Trust I | July 2001 | 6186 | 6186 | Floating rate, LIBOR plus 3.58%, adjusted quarterly | 7.99% | July 2031 |
| &nbsp;&nbsp;&nbsp;Western Sierra Statutory Trust II | December 2001 | 10310 | 10310 | Floating rate, LIBOR plus 3.60%, adjusted quarterly | 8.34% | December 2031 |
| &nbsp;&nbsp;&nbsp;Western Sierra Statutory Trust III | September 2003 | 10310 | 10310 | Floating rate, LIBOR plus 2.90%, adjusted quarterly | 6.98% | October 2033 |
| &nbsp;&nbsp;&nbsp;Western Sierra Statutory Trust IV | September 2003 | 10310 | 10310 | Floating rate, LIBOR plus 2.90%, adjusted quarterly | 6.98% | September 2033 |
| Total junior subordinated debentures at amortized cost | Total junior subordinated debentures at amortized cost | 85572 | 87813 |  |  |  |
| Total junior subordinated debentures |  | $464962 | $411452 |  |  |  |

---

<sup>(1)</sup> Includes acquisition accounting adjustments, net of accumulated amortization, for junior subordinated debentures assumed in connection with previous mergers as well as fair value adjustments related to trusts recorded at fair value.

<sup>(2)</sup> Contractual interest rate of junior subordinated debentures.

<sup>(3)</sup> Effective interest rate based upon the carrying value as of December 31, 2022.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The Trusts are reflected as junior subordinated debentures, either at fair value or at amortized cost. The common stock issued by the Trusts is recorded in other assets and totaled $14.0 million at both December 31, 2022 and 2021. As of December 31, 2022, all of the junior subordinated debentures were redeemable at par, at their applicable quarterly or semiannual interest payment dates.

The Company selected the fair value measurement option for junior subordinated debentures originally issued by the Company (the Umpqua Statutory Trusts) and for junior subordinated debentures acquired from Sterling Financial Corporation. Based on an increase in the implied forward curve and a decrease in the credit spread, offset by the spot curve shifting higher, the fair value of the junior subordinated debentures increased during the year. A loss of $28.8 million for the year ended December 31, 2022, as compared to the loss of $37.9 million for the year ended December 31, 2021, was recorded in other comprehensive income.

**Note 16 – Employee Benefit Plans**

*Employee Savings Plan*-Substantially all of the Company's employees are eligible to participate in the Umpqua 401(k) Plan, a defined contribution and profit sharing plan sponsored by the Company. Employees may elect to have a portion of their salary contributed to the plan in conformity with Section 401(k) of the Internal Revenue Code. At the discretion of the Company's Board of Directors, the Company may elect to make matching and/or profit sharing contributions to the Umpqua 401(k) Plan based on profits of the Bank. The Company's contributions charged to expense including the match and profit sharing amounted to $10.6 million, $10.9 million, and $11.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

*Supplemental Retirement/Deferred Compensation Plans*-The Company has established the Umpqua Holdings Corporation Supplemental Retirement & Deferred Compensation Plan, a nonqualified deferred compensation plan to help supplement the retirement income of certain highly compensated executives selected by resolution of the Board. The SRP/DCP has two components, a supplemental retirement plan and a deferred compensation plan. The Company may make discretionary contributions to the SRP. The SRP balances at December 31, 2022 and 2021 were $568,000 and $577,000, respectively, and are recorded in other liabilities. Under the DCP, eligible officers may elect to defer up to 50% of their salary into a plan account. The DCP balance was $9.7 million and $10.5 million at December 31, 2022 and 2021, respectively. In addition, the Company has established a supplemental retirement plan for the former Executive Chairman of the Board of Directors. The balance for this plan was $8.7 million as of December 31, 2022 and 2021.

*Acquired Plans*- In connection with prior acquisitions, the Bank assumed liability for certain salary continuation, supplemental retirement, and deferred compensation plans for key employees, retired employees and directors of acquired institutions. Subsequent to the effective date of these acquisitions, no additional contributions were made to these plans. These plans are unfunded and provide for the payment of a specified amount on a monthly basis for a specified period (generally 10 to 20 years) after retirement. In the event of a participant employee's death prior to or during retirement, the Bank, in certain cases, is obligated to pay to the designated beneficiary the benefits set forth under the plans. At December 31, 2022 and 2021, liabilities recorded for the estimated present value of future plan benefits totaled $25.6 million and $27.8 million, respectively, and are recorded in other liabilities. For the years ended December 31, 2022, 2021, and 2020, expense recorded for these benefits totaled $1.5 million, $2.2 million, and $3.6 million, respectively.

*Rabbi Trusts-*The Bank has established, for the SRP/DCP plan noted above, and sponsors, for some deferred compensation plans assumed in connection with prior mergers, irrevocable trusts commonly referred to as rabbi trusts. The trust assets (generally trading assets) are consolidated in the Company's balance sheets and the associated liability (which equals the related asset balances) is included in other liabilities. The asset and liability balances related to these trusts as of December 31, 2022 and 2021 were $11.4 million and $12.5 million, respectively.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*Bank-Owned Life Insurance*-The Bank has purchased, or acquired through mergers, life insurance policies in connection with the implementation of certain executive supplemental income, salary continuation and deferred compensation retirement plans. These policies provide protection against the adverse financial effects that could result from the death of a key employee and provide tax-exempt income to offset expenses associated with the plans. It is the Bank's intent to hold these policies as a long-term investment. However, there will be an income tax impact if the Bank chooses to surrender certain policies. Although the lives of individual current or former management-level employees are insured, the Bank is the owner and sole or partial beneficiary. At December 31, 2022 and 2021, the cash surrender value of these policies was $331.8 million and $327.7 million, respectively. At December 31, 2022 and 2021, the Bank also had liabilities for post-retirement benefits payable to other partial beneficiaries under some of these life insurance policies of $4.0 million. The Bank is exposed to credit risk to the extent an insurance company is unable to fulfill its financial obligations under a policy. In order to mitigate this risk, the Bank uses a variety of insurance companies and regularly monitors their financial condition.

**Note 17 – Commitments and Contingencies** 

*Financial Instruments with Off-Balance-Sheet Risk* — The Company's financial statements do not reflect various commitments and contingent liabilities that arise in the normal course of the Bank's business and involve elements of credit, liquidity, and interest rate risk.

The following table presents a summary of the Bank's commitments and contingent liabilities:

---

| | |
|:---|:---|
| (in thousands) | **December 31, 2022** |
| Commitments to extend credit | $8067690 |
| Forward sales commitments | $104000 |
| Commitments to originate residential mortgage loans held for sale | $56066 |
| Standby letters of credit | $125097 |

---

The Bank is a party to financial instruments with off-balance-sheet credit risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit, standby letters of credit and financial guarantees. Those instruments involve elements of credit and interest-rate risk similar to the risk involved in on-balance sheet items. The contract or notional amounts of those instruments reflect the extent of the Bank's involvement in particular classes of financial instruments.

The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, and financial guarantees written, is represented by the contractual notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any covenant or condition established in the applicable contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. While most standby letters of credit are not utilized, a significant portion of such utilization is on an immediate payment basis. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if it is deemed necessary by the Bank upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral varies but may include cash, accounts receivable, inventory, premises and equipment and income-producing commercial properties.

Standby letters of credit and written financial guarantees are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements, including international trade finance, commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank holds cash, marketable securities, or real estate as collateral supporting those commitments for which collateral is deemed necessary. There were no financial guarantees in connection with standby letters of credit that the Bank was required to perform on for the years ended December 31, 2022 and 2021. At December 31, 2022, approximately $114.2 million of standby letters of credit expire within one year, and $10.8 million expire thereafter. During the years ended December 31, 2022 and 2021, the Bank recorded approximately $1.9 million and $1.7 million, respectively, in fees associated with standby letters of credit.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Residential mortgage loans sold into the secondary market are sold with limited recourse against the Company, meaning that the Company may be obligated to repurchase or otherwise reimburse the investor for incurred losses on any loans that suffer an early payment default, are not underwritten in accordance with investor guidelines or are determined to have pre-closing borrower misrepresentations. As of December 31, 2022, the Company had a residential mortgage loan repurchase reserve liability of $200,000. For loans sold to GNMA, the Bank has a unilateral right but not the obligation to repurchase loans that are past due 90 days or more. As of December 31, 2022, the Bank has a recorded liability of $6.6 million for the loans subject to this repurchase right.

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

On September 29, 2022, the United States District Court for the Northern District of California heard oral arguments on the Bank's motion for summary judgment in the civil class action lawsuit, *Camenisch et al v. Umpqua Bank*. On December 16, 2022, the Court denied the Bank's motion for summary judgment, and granted the Plaintiffs' motion for class certification. The Bank filed a Petition for Permission to Appeal the Court's December 16<sup>th</sup> Order on December 30, 2022. Plaintiffs filed an answer in opposition to the Petition for Permission to Appeal on January 9, 2023, and Umpqua filed a motion for leave to file a reply on January 17, 2023. The *Camenisch* case was filed on August 21, 2020, on behalf of a class of investor-victims of decedent Kenneth J. Casey and a Ponzi scheme he effectuated through his companies Professional Financial Investors, Inc. or Professional Investors Security Fund, Inc. Plaintiffs claim that the companies banked with the Bank and, therefore, the Bank allegedly knew that Mr. Casey was defrauding investors. Plaintiffs' claims against the Bank include aiding and abetting fraud and aiding and abetting breach of fiduciary duty. The cases follow an SEC non-public investigation into this matter on May 28, 2020.

At least quarterly, we assess liabilities and contingencies in connection with all outstanding or new legal matters, utilizing the most recent information available. If we determine that a loss from a matter is probable and the amount of the loss can be reasonably estimated, we establish an accrual for the loss. Once established, each accrual is adjusted as appropriate to reflect any subsequent developments in the specific legal matter. It is inherently difficult to determine whether any loss is probable or even possible. It is also inherently difficult to estimate the amount of any loss and there may be matters for which a loss is probable or reasonably possible but not currently estimable. Actual losses may be in excess of any established accrual or the range of reasonably possible loss. Management's estimate will change from time to time. For matters where a loss is not probable, or the amount of the loss cannot be estimated, no accrual is established. The Company has $3.7 million accrued related to legal matters as of December 31, 2022.

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

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

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*Commitments*—On October 12, 2021, Umpqua and Columbia announced that their boards of directors unanimously approved a Merger Agreement under which the two companies will combine in an all-stock transaction. Under the terms of the Merger Agreement, Umpqua shareholders will receive 0.5958 of a share of Columbia stock for each Umpqua share they own. Upon completion of the transaction, Umpqua shareholders will own approximately 62% and Columbia shareholders will own approximately 38% of the combined company. On January 9, 2023, Umpqua and Columbia announced that the FDIC approved the previously announced combination of the two companies. The FDIC approval was the final outstanding regulatory approval necessary to complete the combination. The merger is expected to be completed after close of business on February 28, 2023, subject to the satisfaction or waiver of the remaining closing conditions set forth in the Merger Agreement governing the transaction. Refer to the subsequent event footnote for additional information.

*Concentrations of Credit Risk*— The Bank grants real estate mortgage, real estate construction, commercial, agricultural and installment loans and leases to customers throughout Oregon, Washington, California, Idaho, Nevada, Arizona, and Colorado. In management's judgment, a concentration exists in real estate-related loans, which represented approximately 78% and 76% of the Bank's loan and lease portfolio for December 31, 2022 and 2021, respectively. Commercial real estate concentrations are managed to ensure geographic and business diversity, primarily in our footprint. Although management believes such concentrations have no more than the normal risk of collectability, a substantial decline in the economy in general, material increases in interest rates, changes in tax policies, tightening credit or refinancing markets, or a decline in real estate values in the Bank's primary market areas in particular, could have an adverse impact on the repayment of these loans. Personal and business incomes, proceeds from the sale of real property, or proceeds from refinancing represent the primary sources of repayment for a majority of these loans.

The Bank recognizes the credit risks inherent in dealing with other depository institutions. Accordingly, to prevent excessive exposure to any single correspondent, the Bank has established general standards for selecting correspondent banks as well as internal limits for allowable exposure to any single correspondent. In addition, the Bank has an investment policy that sets forth limitations that apply to all investments with respect to credit rating and concentrations with an issuer.

**Note 18 – Derivatives** 

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

The Bank enters into forward delivery contracts to sell residential mortgage loans or mortgage-backed securities to broker-dealers at specific prices and dates in order to hedge the interest rate risk in its portfolio of mortgage loans held for sale and its residential mortgage interest rate lock commitments. Credit risk associated with forward contracts is limited to the replacement cost of those forward contracts in a gain position. There were no counterparty default losses on forward contracts in 2022, 2021, and 2020. Market risk with respect to forward contracts arises principally from changes in the value of contractual positions due to changes in interest rates. The Bank limits its exposure to market risk by monitoring differences between commitments to customers and forward contracts with broker-dealers. In the event the Company has forward delivery contract commitments in excess of available mortgage loans, the Company completes the transaction by either paying or receiving a fee to or from the broker-dealer equal to the increase or decrease in the market value of the forward contract. At December 31, 2022, the Bank had commitments to originate mortgage loans held for sale totaling $56.1 million and forward sales commitments of $104.0 million, which are used to hedge both on-balance sheet and off-balance sheet exposures.

In August 2022, the Bank began purchasing interest rate futures and forward settling mortgage-backed securities to hedge the interest rate risk of MSRs. As of December 31, 2022, the Bank had $152.0 million notional of interest rate futures contracts and $10.0 million of mortgage-backed securities related to this program. The Bank had cash collateral posting requirements for margins with its futures and mortgage-back securities counterparties and was required to post collateral against its obligations under these agreements of $3.8 million as of December 31, 2022.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The Bank executes interest rate swaps with commercial banking customers to facilitate their respective risk management strategies. Those interest rate swaps are simultaneously hedged by offsetting the interest rate swaps that the Bank executes with a third party, such that the Bank minimizes its net risk exposure. As of December 31, 2022, the Bank had 922 interest rate swaps with an aggregate notional amount of $7.3 billion related to this program. As of December 31, 2021, the Bank had 936 interest rate swaps with an aggregate notional amount of $7.0 billion related to this program.

As of December 31, 2022 and 2021, the termination value of interest rate swaps in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $270.0 million and $8.7 million, respectively. As of December 31, 2022 and 2021, the Bank has collateral posting requirements for initial margins with its clearing members and clearing houses and has been required to post collateral against its obligations under these agreements of $89.5 million and $92.6 million, respectively. In 2021, the Bank began to collateralize the majority of its initial margin with U.S. Treasury securities.

The Bank's clearable interest rate swap derivatives are cleared through the Chicago Mercantile Exchange and London Clearing House. These clearing houses characterize the variation margin payments, for certain derivative contracts that are referred to as settled-to-market, as settlements of the derivative's mark-to-market exposure and not collateral. The Company accounts for the variation margin as an adjustment to cash collateral, as well as a corresponding adjustment to the derivative asset and liability. As of December 31, 2022 and 2021, the variation margin adjustments consisted of a positive adjustment of $209.5 million and a negative adjustment of $172.9 million, respectively.

Since the end of 2021, the Bank has solely executed swaps indexed to Term SOFR, which is not clearable. As such, at December 31, 2022, there were 71 customer swaps in our portfolio that were each offset via a swap executed on a bilateral basis with a counterparty bank. There is no initial margin posted for bilateral swaps, but cash collateral equivalent to variation margin is exchanged to cover the mark-to-market exposure on a daily basis. As of December 31, 2022, we held a total of $51.9 million of counterparty bank cash as collateral on these bilateral positions.

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

The Bank's derivative assets are included in other assets, while the derivative liabilities are included in other liabilities on the consolidated balance sheet. The following table summarizes the types of derivatives, separately by assets and liabilities, and the fair values of such derivatives as of December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| (in thousands) | **Asset Derivatives** | **Asset Derivatives** | **Liability Derivatives** | **Liability Derivatives** |
| **Derivatives not designated as hedging instrument** | **December 31, 2022** | **December 31, 2021** | **December 31, 2022** | **December 31, 2021** |
| Interest rate lock commitments | $50 | $4641 | $18 | $— |
| Interest rate futures |  |  | 392 |  |
| Interest rate forward sales commitments | 512 | 615 | 601 | 699 |
| Interest rate swaps | 14657 | 171827 | 270009 | 8671 |
| Foreign currency derivatives | 225 | 340 | 185 | 305 |
| Total derivative assets and liabilities | $15444 | $177423 | $271205 | $9675 |

---

The gains and losses on the Company's mortgage banking derivatives are included in mortgage banking revenue. The gains and losses on the Company's interest rate swaps and foreign currency derivatives are included in other income. The following table summarizes the types of derivatives and the gains (losses) recorded during the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) |  |  |  |
| **Derivatives not designated as hedging instrument** | **2022** | **2021** | **2020** |
| Interest rate lock commitments | $(4609) | $(23503) | $21088 |
| Interest rate futures | (14476) |  |  |
| Interest rate forward sales commitments | 47689 | 17608 | (61403) |
| Interest rate swaps | 16249 | 8395 | (9409) |
| Foreign currency derivatives | 126 | 2856 | 2424 |
| Total derivative gains (losses) | $44979 | $5356 | $(47300) |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 19 – Stock Compensation and Share Repurchase Plan**

*Stock-Based Compensation* 

The compensation cost related to restricted stock in Company stock granted to employees and included in salaries and employee benefits was $9.3 million, $9.5 million and $8.1 million for the years ended December 31, 2022, 2021, and 2020, respectively. The total income tax benefit recognized related to stock-based compensation was $2.4 million, $2.4 million and $2.1 million for the years ended December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022, there was $12.4 million of total unrecognized compensation cost related to nonvested restricted stock units which is expected to be recognized over a weighted-average period of 1.78 years, assuming expected performance conditions are met for certain units.

The Company grants restricted stock periodically for the benefit of employees and directors. Restricted shares generally vest over three years, subject to time or time plus performance vesting conditions. The following table summarizes information about nonvested restricted share activity for the years ended December 31, 2022, 2021, and 2020:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2021** | **2021** | **2020** | **2020** |
| (shares in thousands) | **Restricted<br>Shares Outstanding** | **Weighted Average <br>Grant Date <br>Fair Value** | **Restricted Shares Outstanding** | **Weighted Average <br>Grant Date <br>Fair Value** | **Restricted<br>Shares Outstanding** | **Weighted Average <br>Grant Date <br>Fair Value** |
| Balance, beginning of period | 1385 | $17.53 | 1342 | $17.02 | 1183 | $18.94 |
| Granted | 514 | $21.32 | 631 | $18.41 | 766 | $15.09 |
| Vested/released | (626) | $17.53 | (555) | $17.17 | (491) | $18.49 |
| Forfeited/expired | (48) | $19.00 | (33) | $17.54 | (116) | $17.91 |
| Balance, end of period | 1225 | $19.06 | 1385 | $17.53 | 1342 | $17.02 |

---

The total fair value of restricted shares vested and released was $11.0 million, $9.5 million, and $9.1 million, for the years ended December 31, 2022, 2021, and 2020, respectively.

For the years ended December 31, 2022, 2021, and 2020, the Company received income tax benefits of $3.3 million, $2.4 million, and $2.1 million, respectively, related to the vesting of restricted shares. The tax deficiency or benefit is recorded as income tax expense or benefit in the period the shares are vested.

*Share Repurchase Plan*

In 2021, the Company 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. The Company halted repurchases under the program with the announcement of the proposed merger with Columbia and as required under the Merger Agreement, and the share repurchase program expired on July 31, 2022. As of December 31, 2022, the Company had repurchased a total of $78.2 million in shares under the program. During the year ended December 31, 2022, there were no shares repurchased under approved share repurchase plans as compared to 4.0 million and 331,000 of shares repurchased in the years ended December 31, 2021 and 2020, respectively.

The Company also has restricted stock plans which provide for the payment of withholding taxes by tendering previously owned or recently vested shares. Restricted shares cancelled to pay withholding taxes totaled 202,000, 149,000, and 163,000 shares during the years ended December 31, 2022, 2021, and 2020, respectively.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 20 – Regulatory Capital**

The Company is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company's operations and financial statements. Under capital adequacy guidelines, the Company must meet specific capital guidelines that involve quantitative measures of the Company's assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The Company's capital amounts and classifications are also subject to qualitative judgments by the regulators about risk components, asset risk weighting, and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company to maintain minimum amounts and ratios (set forth in the table below) of total capital, Tier 1 capital and Tier 1 common to risk-weighted assets (as defined in the regulations), and of Tier 1 capital to average assets (as defined in the regulations). Basel III also requires banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. The capital conservation buffer is fully phased-in at 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7%, 8.5%, and 10.5%. Management believes, as of December 31, 2022, that the Company meets all capital adequacy requirements to which it is subject.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following table shows the Company's consolidated and the Bank's capital adequacy ratios compared to the regulatory minimum capital ratio and the regulatory minimum capital ratio needed to qualify as a "well-capitalized" institution, as calculated under regulatory guidelines of Basel III at December 31, 2022 and 2021:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **Actual** | **Actual** | **For Capital Adequacy Purposes** | **For Capital Adequacy Purposes** | **To be Well Capitalized** | **To be Well Capitalized** |
| (dollars in thousands) | **Amount** | **Ratio** | **Amount** | **Ratio** | **Amount** | **Ratio** |
| **December 31, 2022** |  |  |  |  |  |  |
| Total Capital (to Risk Weighted Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $3651382 | 13.71% | $2130565 | 8.00% | $2663207 | 10.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $3440574 | 12.92% | $2130240 | 8.00% | $2662799 | 10.00% |
| Tier 1 Capital (to Risk Weighted Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $2934708 | 11.02% | $1597924 | 6.00% | $2130565 | 8.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $3174899 | 11.92% | $1597680 | 6.00% | $2130240 | 8.00% |
| Tier 1 Common (to Risk Weighted Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $2934708 | 11.02% | $1198443 | 4.50% | $1731084 | 6.50% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $3174899 | 11.92% | $1198260 | 4.50% | $1730820 | 6.50% |
| Tier 1 Capital (to Average Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $2934708 | 9.14% | $1283669 | 4.00% | $1604586 | 5.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $3174899 | 9.89% | $1283610 | 4.00% | $1604513 | 5.00% |
| **December 31, 2021** |  |  |  |  |  |  |
| Total Capital (to Risk Weighted Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $3429047 | 14.26% | $1923934 | 8.00% | $2404917 | 10.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $3085848 | 12.83% | $1924015 | 8.00% | $2405019 | 10.00% |
| Tier 1 Capital (to Risk Weighted Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $2785794 | 11.58% | $1442950 | 6.00% | $1923934 | 8.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $2893593 | 12.03% | $1443011 | 6.00% | $1924015 | 8.00% |
| Tier 1 Common (to Risk Weighted Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $2785794 | 11.58% | $1082213 | 4.50% | $1563196 | 6.50% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $2893593 | 12.03% | $1082258 | 4.50% | $1563262 | 6.50% |
| Tier 1 Capital (to Average Assets) |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consolidated | $2785794 | 9.01% | $1236265 | 4.00% | $1545331 | 5.00% |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Umpqua Bank | $2893593 | 9.36% | $1236518 | 4.00% | $1545648 | 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.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 21 – Fair Value Measurement** 

The following table presents estimated fair values of the Company's financial instruments as of December 31, 2022 and 2021, whether or not recognized or recorded at fair value in the *Consolidated Balance Sheets*:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** |
| (in thousands) | **Level** | **Carrying Value** | **Fair Value** | **Carrying Value** | **Fair Value** |
| **Financial assets:** |  |  |  |  |  |
| Cash and cash equivalents | 1 | $1294643 | $1294643 | $2761621 | $2761621 |
| Equity and other investment securities | 12 | 72959 | 72959 | 81214 | 81214 |
| Investment securities available for sale | 12 | 3196166 | 3196166 | 3870435 | 3870435 |
| Investment securities held to maturity | 3 | 2476 | 3197 | 2744 | 3514 |
| Loans held for sale | 2 | 71647 | 71647 | 353105 | 353105 |
| Loans and leases, net  | 23 | 25854846 | 24399370 | 22304768 | 22356321 |
| Restricted equity securities | 1 | 47144 | 47144 | 10916 | 10916 |
| Residential mortgage servicing rights | 3 | 185017 | 185017 | 123615 | 123615 |
| Bank owned life insurance | 1 | 331759 | 331759 | 327745 | 327745 |
| Derivatives | 23 | 15444 | 15444 | 177423 | 177423 |
| **Financial liabilities:** |  |  |  |  |  |
| Deposits | 12 | $27065612 | $27022916 | $26594685 | $26593521 |
| Securities sold under agreements to repurchase | 2 | 308769 | 308769 | 492247 | 492247 |
| Borrowings | 2 | 906175 | 905591 | 6329 | 7073 |
| Junior subordinated debentures, at fair value | 3 | 323639 | 323639 | 293081 | 293081 |
| Junior subordinated debentures, at amortized cost | 3 | 87813 | 80922 | 88041 | 75199 |
| Derivatives | 23 | 271205 | 271205 | 9675 | 9675 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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

The following tables present information about the Company's assets and liabilities measured at fair value on a recurring basis as of December 31, 2022 and 2021:

---

| | | | | |
|:---|:---|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** |
| **Description** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| **Financial assets:** |  |  |  |  |
| Equity and other investment securities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Investments in mutual funds and other securities | $61593 | $44256 | $17337 | $— |
| &nbsp;&nbsp;&nbsp;Equity securities held in rabbi trusts | 11366 | 11366 |  |  |
| Investment securities available for sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Treasury and agencies | 936174 | 225853 | 710321 |  |
| &nbsp;&nbsp;&nbsp;Obligations of states and political subdivisions | 269800 |  | 269800 |  |
| &nbsp;&nbsp;&nbsp;Mortgage-backed securities and collateralized mortgage obligations | 1990192 |  | 1990192 |  |
| Loans held for sale, at fair value | 71647 |  | 71647 |  |
| Loans and leases, at fair value | 285581 |  | 285581 |  |
| Residential mortgage servicing rights, at fair value | 185017 |  |  | 185017 |
| Derivatives |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest rate lock commitments | 50 |  |  | 50 |
| &nbsp;&nbsp;&nbsp;Interest rate forward sales commitments | 512 |  | 512 |  |
| &nbsp;&nbsp;&nbsp;Interest rate swaps | 14657 |  | 14657 |  |
| &nbsp;&nbsp;&nbsp;Foreign currency derivatives | 225 |  | 225 |  |
| Total assets measured at fair value | $3826814 | $281475 | $3360272 | $185067 |
| **Financial liabilities:** |  |  |  |  |
| Junior subordinated debentures, at fair value | $323639 | $— | $— | $323639 |
| Derivatives |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest rate lock commitments | 18 |  |  | 18 |
| &nbsp;&nbsp;&nbsp;Interest rate futures | 392 |  | 392 |  |
| &nbsp;&nbsp;&nbsp;Interest rate forward sales commitments | 601 |  | 601 |  |
| &nbsp;&nbsp;&nbsp;Interest rate swaps | 270009 |  | 270009 |  |
| &nbsp;&nbsp;&nbsp;Foreign currency derivatives | 185 |  | 185 |  |
| Total liabilities measured at fair value | $594844 | $— | $271187 | $323657 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | | |
|:---|:---|:---|:---|:---|
| (in thousands) | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| **Description** | **Total** | **Level 1** | **Level 2** | **Level 3** |
| **Financial assets:** |  |  |  |  |
| Equity and other investment securities |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Investments in mutual funds and other securities | $68692 | $51355 | $17337 | $— |
| &nbsp;&nbsp;&nbsp;Equity securities held in rabbi trusts | 12522 | 12522 |  |  |
| Investment securities available for sale |  |  |  |  |
| &nbsp;&nbsp;&nbsp;U.S. Treasury and agencies | 918053 | 89038 | 829015 |  |
| &nbsp;&nbsp;&nbsp;Obligations of states and political subdivisions | 330784 |  | 330784 |  |
| &nbsp;&nbsp;Mortgage-backed securities and collateralized mortgage obligations | 2621598 |  | 2621598 |  |
| Loans held for sale, at fair value | 353105 |  | 353105 |  |
| Loans and leases, at fair value | 345634 |  | 345634 |  |
| Residential mortgage servicing rights, at fair value | 123615 |  |  | 123615 |
| Derivatives |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest rate lock commitments | 4641 |  |  | 4641 |
| &nbsp;&nbsp;&nbsp;Interest rate forward sales commitments | 615 |  | 615 |  |
| &nbsp;&nbsp;&nbsp;Interest rate swaps | 171827 |  | 171827 |  |
| &nbsp;&nbsp;&nbsp;Foreign currency derivatives | 340 |  | 340 |  |
| Total assets measured at fair value | $4951426 | $152915 | $4670255 | $128256 |
| **Financial liabilities:** |  |  |  |  |
| Junior subordinated debentures, at fair value | $293081 | $— | $— | $293081 |
| Derivatives |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Interest rate forward sales commitments | 699 |  | 699 |  |
| &nbsp;&nbsp;&nbsp;Interest rate swaps | 8671 |  | 8671 |  |
| &nbsp;&nbsp;&nbsp;Foreign currency derivatives | 305 |  | 305 |  |
| Total liabilities measured at fair value | $302756 | $— | $9675 | $293081 |

---

The following methods were used to estimate the fair value of each class of financial instrument that is carried at fair value in the tables above:

*Securities*— Fair values for investment securities are based on quoted market prices when available or through the use of alternative approaches, such as matrix or model pricing, or broker indicative bids, when market quotes are not readily accessible or available. Management periodically reviews the pricing information received from the third-party pricing service and compares it to a secondary pricing service, evaluating significant price variances between services to determine an appropriate estimate of fair value to report.

*Loans Held for Sale*— Fair value for residential mortgage loans originated as held for sale is determined based on quoted secondary market prices for similar loans, including the implicit fair value of embedded servicing rights.

*Loans and leases*— Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type, including commercial, real estate and consumer loans. Each loan category is further segregated by fixed and adjustable rate loans. The fair value of loans is calculated by discounting expected cash flows at rates at which similar loans are currently being made. These amounts are discounted further by embedded probable losses expected to be realized in the portfolio. For loans originated as held for sale and transferred into loans held for investment, the fair value is determined based on quoted secondary market prices for similar loans. As of December 31, 2022, there were $285.6 million in residential mortgage loans recorded at fair value as they were previously transferred from held for sale to loans held for investment.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

*Residential Mortgage Servicing Rights*— The fair value of MSR is estimated using a DCF model. Assumptions used include market discount rates, anticipated prepayment speeds, delinquency and foreclosure rates, and ancillary fee income net of servicing costs. This model is periodically validated by an independent model validation group. The model assumptions and the MSR fair value estimates are also compared to observable trades of similar portfolios as well as to MSR broker valuations and industry surveys, as available. Management believes the significant inputs utilized are indicative of those that would be used by market participants.

*Junior Subordinated Debentures*— The fair value of junior subordinated debentures is estimated using an income approach valuation technique. The significant unobservable input utilized in the estimation of fair value of these instruments is the credit risk adjusted spread. The credit risk adjusted spread represents the nonperformance risk of the liability, contemplating the inherent risk of the obligation. The Company periodically utilizes a valuation firm to determine or validate the reasonableness of inputs and factors that are used to determine the fair value. The ending carrying (fair) value of the junior subordinated debentures measured at fair value represents the estimated amount that would be paid to transfer these liabilities in an orderly transaction amongst market participants. Due to credit concerns in the capital markets and inactivity in the trust preferred markets that have limited the observability of market spreads, the Company has classified this as a Level 3 fair value measurement.

*Derivative Instruments*— The fair value of the interest rate lock commitments, interest rate futures, and forward sales commitments are estimated using quoted or published market prices for similar instruments, adjusted for factors such as pull-through rate assumptions based on historical information, where appropriate. The pull-through rate assumptions are considered Level 3 valuation inputs and are significant to the interest rate lock commitment valuation; as such, the interest rate lock commitment derivatives are classified as Level 3. The fair value of the interest rate swaps is determined using a DCF technique incorporating credit valuation adjustments to reflect nonperformance risk in the measurement of fair value. Although the Bank has determined that the majority of the inputs used to value its interest rate swap derivatives fall within Level 2 of the fair value hierarchy, the CVA associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2022, the Bank has assessed the significance of the impact of the CVA on the overall valuation of its interest rate swap positions and has determined that the CVA are not significant to the overall valuation of its interest rate swap derivatives. As a result, the Bank has classified its interest rate swap and futures derivative valuations in Level 2 of the fair value hierarchy.

***Assets and Liabilities Measured at Fair Value Using Significant Unobservable Inputs (Level 3)***

The following table provides a description of the valuation technique, significant unobservable inputs, and qualitative information about the unobservable inputs for the Company's assets and liabilities classified as Level 3 and measured at fair value on a recurring basis at December 31, 2022:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Financial Instrument** | **Fair Value <br>(in thousands)** | **Valuation Technique** | **Unobservable Input** | **Range of Inputs** | **Weighted Average** |
| **Assets:** | | | | | |
| Residential mortgage servicing rights | $185017 | Discounted cash flow |  |  |  |
|  |  |  | Constant prepayment rate | 4.72% - 20.16% | 6.39% |
|  |  |  | Discount rate | 9.50% - 15.96% | 10.06% |
| Interest rate lock commitments, net | $32 | Internal pricing model |  |  |  |
|  |  |  | Pull-through rate | 12.55% - 100.00% | 89.53% |
| **Liabilities:** |  |  |  |  |  |
| Junior subordinated debentures | $323639 | Discounted cash flow |  |  |  |
|  |  |  | Credit spread | 1.83% - 3.74% | 3.01% |

---

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

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

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

The following table provides a reconciliation of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) on a recurring basis during the years ended December 31, 2022 and 2021.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2022** | **2021** | **2021** | **2021** |
| (in thousands) | **Residential mortgage servicing rights** | **Interest rate lock commitments, net** | **Junior subordinated debentures, at fair value** | **Residential mortgage servicing rights** | **Interest rate lock commitments, net** | **Junior subordinated debentures, at fair value** |
| Beginning balance | $123615 | $4641 | $(293081) | $92907 | $28144 | $(255217) |
| Change included in earnings | 37265 | (7342) | (15715) | (7814) | 79 | (9434) |
| Change in fair values included in comprehensive income/loss |  |  | (28842) |  |  | (37899) |
| Purchases and issuances | 24137 | 10103 |  | 38522 | 76940 |  |
| Sales and settlements |  | (7370) | 13999 |  | (100522) | 9469 |
| Ending balance | $185017 | $32 | $(323639) | $123615 | $4641 | $(293081) |
| Change in unrealized gains or losses for the period included in earnings for assets and liabilities held at end of period | $57537 | $32 | $(15715) | $11089 | $4641 | $(9434) |
| Change in unrealized gains or losses for the period included in other comprehensive income for assets and liabilities held at end of period | $— | $— | $(28842) | $— | $— | $(37899) |

---

Changes in residential mortgage servicing rights carried at fair value are recorded in residential mortgage banking revenue within non-interest income. Gains (losses) on interest rate lock commitments carried at fair value are recorded in residential mortgage banking revenue within non-interest income. The contractual interest expense on the junior subordinated debentures is recorded on an accrual basis as interest on junior subordinated debentures within interest expense. Settlements related to the junior subordinated debentures represent the payment of accrued interest that is embedded in the fair value of these liabilities.

The change in fair value of junior subordinated debentures is attributable to the change in the instrument specific credit risk; accordingly, the unrealized loss on fair value of junior subordinated debentures of $28.8 million, for the year ended December 31, 2022, is recorded net of tax as other comprehensive loss of $21.4 million. Comparatively, the unrealized loss of $37.9 million was recorded net of tax as other comprehensive loss of $28.2 million for the year ended December 31, 2021. The loss recorded for the year ended December 31, 2022 was due primarily to an increase in the implied forward curve and a decrease in the credit spread, offset by the spot curve shifting higher, which resulted in an increase in the liability.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Fair Value of Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis*** 

From time to time, certain assets are measured at fair value on a nonrecurring basis. These adjustments to fair value generally result from the application of lower-of-cost-or-market accounting or write-downs of individual assets due to impairment, typically on collateral dependent loans. The following table presents information about the Company's assets and liabilities measured at fair value on a nonrecurring basis for which a nonrecurring change in fair value has been recorded during the reporting period. The amounts disclosed below represent the fair values at the time the nonrecurring fair value measurements were made, and not necessarily the fair value as of the dates reported upon.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2022** | **2022** | **2022** | **2022** |
| (in thousands) | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Loans and leases | $3216 | $— | $— | $3216 |
| Total assets measured at fair value on a nonrecurring basis | $3216 | $— | $— | $3216 |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2021** | **2021** | **2021** | **2021** |
| (in thousands) | **Total** | **Level 1** | **Level 2** | **Level 3** |
| Loans and leases | $4129 | $— | $— | $4129 |
| Total assets measured at fair value on a nonrecurring basis | $4129 | $— | $— | $4129 |

---

The following table presents the losses resulting from nonrecurring fair value adjustments for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| Loans and leases | $39422 | $53182 | $74297 |
| Goodwill impairment |  |  | 1784936 |
| Total losses from nonrecurring measurements | $39422 | $53182 | $1859233 |

---

Goodwill was evaluated for impairment as of March 31, 2020, resulting in an impairment charge of $1.8 billion for the year ended December 31, 2020.

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

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

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Fair Value Option***

The following table presents the difference between the aggregate fair value and the aggregate unpaid principal balance of loans held for sale and loans held for investment accounted for under the fair value option as of December 31, 2022 and 2021:

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2022** | **December 31, 2022** | **December 31, 2021** | **December 31, 2021** | **December 31, 2021** |
| (in thousands) | **Fair Value** | **Aggregate Unpaid Principal Balance** | **Fair Value Less Aggregate Unpaid Principal Balance** | **Fair Value** | **Aggregate Unpaid Principal Balance** | **Fair Value Less Aggregate Unpaid Principal Balance** |
| Loans held for sale | $71647 | $70219 | $1428 | $353105 | $341008 | $12097 |
| Loans | $285581 | $333469 | $(47888) | $345634 | $335058 | $10576 |

---

Residential mortgage loans held for sale accounted for under the fair value option are measured initially at fair value with subsequent changes in fair value recognized in earnings. Gains and losses from such changes in fair value are reported as a component of residential mortgage banking revenue. For the years ended December 31, 2022, 2021, and 2020, the Company recorded a net decrease in fair value of $10.7 million, a net decrease of $13.2 million, and a net increase of $16.8 million, respectively, representing the change in fair value reflected in earnings.

Certain residential mortgage loans were initially originated for sale and measured at fair value; after origination, the loans were transferred to loans held for investment. Gains and losses from changes in fair value for these loans are reported in earnings as a component of other income. For the years ended December 31, 2022 and 2021, the Company recorded a net decrease in fair value of $58.5 million and a net increase of $3.0 million, respectively.

The Company selected the fair value measurement option for certain junior subordinated debentures. The remaining junior subordinated debentures were acquired through previous business combinations and were measured at fair value at the time of acquisition and subsequently measured at amortized cost.

**Note 22 – Earnings (Loss) Per Common Share** 

The following is a computation of basic and diluted earnings (loss) per common share for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands, except per share data) | **2022** | **2021** | **2020** |
| &nbsp;&nbsp;&nbsp;Net income (loss) | $336752 | $420300 | $(1523420) |
| &nbsp;&nbsp;&nbsp;Weighted average number of common shares outstanding - basic | 216980 | 219032 | 220218 |
| &nbsp;&nbsp;Effect of potentially dilutive common shares <sup>(1)</sup> | 423 | 549 |  |
| &nbsp;&nbsp;&nbsp;Weighted average number of common shares outstanding - diluted | 217403 | 219581 | 220218 |
| **Earnings (loss) per common share:** |  |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $1.55 | $1.92 | $(6.92) |
| &nbsp;&nbsp;&nbsp;Diluted | $1.55 | $1.91 | $(6.92) |

---

<sup>(1)</sup> Represents the effect of the assumed vesting of non-participating restricted shares based on the treasury stock method.

There were 417,000, 1,000 and 1.2 million weighted average outstanding restricted shares that were not included in the computation of diluted earnings per common share because their effect would be anti-dilutive for the years ended December 31, 2022, 2021, and 2020, respectively.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 23 – Segment Information**

The Company reports two segments: Core Banking and Mortgage Banking. The Core Banking segment includes all lines of business, except Mortgage Banking, including commercial, retail, and 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 the serviced loan portfolio, the quarterly changes to the MSR, 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 private banking channels. Management periodically updates the allocation methods and assumptions within the current segment structure.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Summarized financial information concerning the Company's reportable segments and the reconciliation to the consolidated financial results is shown in the following tables for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** | **Year Ended December 31, 2022** |
| (in thousands) | **Core Banking** | **Mortgage Banking** | **Consolidated** |
| Net interest income | $1065658 | $4358 | $1070016 |
| Provision for credit losses | 84016 |  | 84016 |
| Non-interest income |  |  |  |
| Residential mortgage banking revenue: |  |  |  |
| &nbsp;&nbsp;Origination and sale |  | 46712 | 46712 |
| &nbsp;&nbsp;Servicing |  | 37358 | 37358 |
| &nbsp;&nbsp;Change in fair value of MSR asset: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to collection/realization of expected cash flows over time |  | (20272) | (20272) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to valuation inputs or assumptions |  | 57537 | 57537 |
| &nbsp;&nbsp;&nbsp;&nbsp;MSR hedge loss |  | (14476) | (14476) |
| Gain on sale of debt securities, net | 2 |  | 2 |
| Loss on equity securities, net | (7099) |  | (7099) |
| Gain on swap derivatives, net | 16249 |  | 16249 |
| Change in fair value of certain loans held for investment | (58464) |  | (58464) |
| Non-interest income (excluding above items) | 141242 | 739 | 141981 |
| Total non-interest income | 91930 | 107598 | 199528 |
| Non-interest expense |  |  |  |
| Merger related expenses | 17356 |  | 17356 |
| Exit and disposal costs | 6805 |  | 6805 |
| Non-interest expense (excluding above items) | 618956 | 91833 | 710789 |
| Allocated expenses, net <sup>(1)</sup> | 5493 | (5493) |  |
| Total non-interest expense | 648610 | 86340 | 734950 |
| Income before income taxes | 424962 | 25616 | 450578 |
| Provision for income taxes | 107422 | 6404 | 113826 |
| Net income | $317540 | $19212 | $336752 |
| Total assets | $31577603 | $271036 | $31848639 |
| Loans held for sale | $— | $71647 | $71647 |
| Total loans and leases | $26155981 | $— | $26155981 |
| Total deposits | $26937431 | $128181 | $27065612 |
| <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. | <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. | <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. | <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** | **Year Ended December 31, 2021** |
| (in thousands) | **Core Banking** | **Mortgage Banking** | **Consolidated** |
| Net interest income | $908087 | $11560 | $919647 |
| (Recapture) provision for credit losses | (42651) |  | (42651) |
| Non-interest income |  |  |  |
| Residential mortgage banking revenue: |  |  |  |
| &nbsp;&nbsp;Origination and sale |  | 157789 | 157789 |
| &nbsp;&nbsp;Servicing |  | 36836 | 36836 |
| &nbsp;&nbsp;Change in fair value of MSR asset: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to collection/realization of expected cash flows over time |  | (18903) | (18903) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to valuation inputs or assumptions |  | 11089 | 11089 |
| Gain on sale of debt securities, net | 8 |  | 8 |
| Loss on equity securities, net | (1511) |  | (1511) |
| Gain on swap derivatives, net | 8395 |  | 8395 |
| Change in fair value of certain loans held for investment | 3032 |  | 3032 |
| Non-interest income (excluding above items) | 158725 | 858 | 159583 |
| Total non-interest income | 168649 | 187669 | 356318 |
| Non-interest expense |  |  |  |
| Merger related expenses | 15183 |  | 15183 |
| Exit and disposal costs | 12763 |  | 12763 |
| Non-interest expense (excluding above items) | 589556 | 142954 | 732510 |
| Allocated expenses, net <sup>(1)</sup> | 8174 | (8174) |  |
| Total non-interest expense | 625676 | 134780 | 760456 |
| Income before income taxes | 493711 | 64449 | 558160 |
| Provision for income taxes | 121748 | 16112 | 137860 |
| Net income | $371963 | $48337 | $420300 |
| Total assets | $30155058 | $485878 | $30640936 |
| Loans held for sale | $— | $353105 | $353105 |
| Total loans and leases | $22553180 | $— | $22553180 |
| Total deposits | $26370568 | $224117 | $26594685 |
| <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. | <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. | <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. | <sup>(1)</sup> Represents allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs, partially offset by internal charges of centrally provided support services and other corporate overhead to the Mortgage Banking segment. |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **Year Ended December 31, 2020** | **Year Ended December 31, 2020** | **Year Ended December 31, 2020** |
| (in thousands) | **Core Banking** | **Mortgage Banking** | **Consolidated** |
| Net interest income | $866996 | $15523 | $882519 |
| Provision for credit losses | 204861 |  | 204861 |
| Non-interest income |  |  |  |
| Residential mortgage banking revenue: |  |  |  |
| &nbsp;&nbsp;Origination and sale |  | 308219 | 308219 |
| &nbsp;&nbsp;Servicing |  | 35706 | 35706 |
| &nbsp;&nbsp;Change in fair value of MSR asset: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to collection/realization of expected cash flows over time |  | (19680) | (19680) |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes due to valuation inputs or assumptions |  | (53423) | (53423) |
| Gain on sale of debt securities, net | 190 |  | 190 |
| Gain on equity securities, net | 769 |  | 769 |
| Loss on swap derivatives, net | (9409) |  | (9409) |
| Non-interest income (excluding above items) | 148884 | 753 | 149637 |
| Total non-interest income | 140434 | 271575 | 412009 |
| Non-interest expense |  |  |  |
| Goodwill impairment | 1784936 |  | 1784936 |
| Exit and disposal costs | 2589 |  | 2589 |
| Non-interest expense (excluding above items) | 609497 | 149065 | 758562 |
| Allocated expenses, net <sup>(1)</sup> | (11557) | 11557 |  |
| Total non-interest expense | 2385465 | 160622 | 2546087 |
| (Loss) income before income taxes | (1582896) | 126476 | (1456420) |
| Provision for income taxes | 35381 | 31619 | 67000 |
| Net (loss) income | $(1618277) | $94857 | $(1523420) |
| Total assets | $28438813 | $796362 | $29235175 |
| Loans held for sale | $78146 | $688079 | $766225 |
| Total loans and leases | $21779367 | $— | $21779367 |
| Total deposits | $24200012 | $422189 | $24622201 |
| <sup>(1)</sup> Represents the internal charge of centrally provided support services and other corporate overhead to the Mortgage Banking segment, partially offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs. | <sup>(1)</sup> Represents the internal charge of centrally provided support services and other corporate overhead to the Mortgage Banking segment, partially offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs. | <sup>(1)</sup> Represents the internal charge of centrally provided support services and other corporate overhead to the Mortgage Banking segment, partially offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs. | <sup>(1)</sup> Represents the internal charge of centrally provided support services and other corporate overhead to the Mortgage Banking segment, partially offset by allocations from the Mortgage Banking segment to Core Banking for new portfolio loan originations and portfolio servicing costs. |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 24 – Related Party Transactions**

In the ordinary course of business, the Bank has made loans to its directors and executive officers (and their associated and affiliated companies). All such loans have been made in accordance with regulatory requirements.

The following table presents a summary of aggregate activity involving related party borrowers for the years ended December 31, 2022, 2021, and 2020:

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| Loans outstanding at beginning of year | $7564 | $9393 | $10540 |
| New loans and advances | 630 | 980 | 594 |
| Less loan repayments | (5784) | (2809) | (1741) |
| Loans outstanding at end of year | $2410 | $7564 | $9393 |

---

At December 31, 2022 and 2021, deposits of related parties amounted to $19.1 million and $41.0 million, respectively.

**Note 25 – Parent Company Financial Statements**

Summary financial information for Umpqua Holdings Corporation on a stand-alone basis is as follows:

***Condensed Balance Sheets***

December 31, 2022 and 2021

---

| | | |
|:---|:---|:---|
| (in thousands) | **December 31, 2022** | **December 31, 2021** |
| **ASSETS** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-interest bearing deposits with subsidiary bank | $143130 | $276572 |
| &nbsp;&nbsp;&nbsp;&nbsp;Investments in: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Bank subsidiary | 2744195 | 2860132 |
| &nbsp;&nbsp;&nbsp;&nbsp;Non-bank subsidiaries | 16932 | 16660 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other assets | 4048 | 1847 |
| Total assets | $2908305 | $3155211 |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Payable to subsidiary bank | $128 | $507 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other liabilities | 16899 | 24312 |
| &nbsp;&nbsp;&nbsp;&nbsp;Junior subordinated debentures, at fair value | 323639 | 293081 |
| &nbsp;&nbsp;&nbsp;&nbsp;Junior subordinated debentures, at amortized cost | 87813 | 88041 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 428479 | 405941 |
| &nbsp;&nbsp;&nbsp;&nbsp;Shareholders' equity | 2479826 | 2749270 |
| Total liabilities and shareholders' equity | $2908305 | $3155211 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

***Condensed Statements of Operations***

Years Ended December 31, 2022, 2021, and 2020

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| **INCOME** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends from subsidiaries | $194104 | $407371 | $213464 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other income | 127 | 5007 | 11 |
| Total income | 194231 | 412378 | 213475 |
| **EXPENSE** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Management fees paid to subsidiaries | 1434 | 1590 | 1165 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other expenses | 22396 | 17834 | 17894 |
| Total expenses | 23830 | 19424 | 19059 |
| Income before income tax benefit and equity in undistributed earnings of subsidiaries | 170401 | 392954 | 194416 |
| Income tax benefit | (4677) | (3470) | (4245) |
| Net income before equity in undistributed earnings of subsidiaries | 175078 | 396424 | 198661 |
| Equity in undistributed earnings (losses) of subsidiaries | 161674 | 23876 | (1722081) |
| Net income (loss) | $336752 | $420300 | $(1523420) |

---

***Condensed Statements of Cash Flows***

Years Ended December 31, 2022, 2021, and 2020

---

| | | | |
|:---|:---|:---|:---|
| (in thousands) | **2022** | **2021** | **2020** |
| **OPERATING ACTIVITIES:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net income (loss) | $336752 | $420300 | $(1523420) |
| &nbsp;&nbsp;&nbsp;&nbsp;Adjustment to reconcile net income to net cash provided by operating activities: |  |  |  |
| &nbsp;&nbsp;&nbsp;Gain on sale of Umpqua Investments, Inc. |  | (4444) |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Equity in undistributed (earnings) losses of subsidiaries | (161674) | (23876) | 1722081 |
| &nbsp;&nbsp;&nbsp;&nbsp;Depreciation, amortization and accretion | (228) | (228) | (228) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in other assets | (2334) | (1001) | (5) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net increase in other liabilities | 2212 | 2589 | 1262 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities | 174728 | 393340 | 199690 |
| **INVESTING ACTIVITIES:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (increase) decrease in advances to subsidiaries | (121409) | (313) | 315 |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash received from sale of Umpqua Investments, Inc. |  | 10781 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by investing activities | (121409) | 10468 | 315 |
| **FINANCING ACTIVITIES:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net (decrease) increase in advances from subsidiaries | (379) | 409 | 5 |
| &nbsp;&nbsp;&nbsp;&nbsp;Dividends paid on common stock | (182273) | (183734) | (184978) |
| &nbsp;&nbsp;&nbsp;&nbsp;Repurchases and retirement of common stock | (4163) | (80690) | (8655) |
| &nbsp;&nbsp;&nbsp;&nbsp;Net proceeds from issuance of common stock | 54 | 34 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net cash used in financing activities | (186761) | (263981) | (193628) |
| Net increase in cash and cash equivalents | (133442) | 139827 | 6377 |
| Cash and cash equivalents, beginning of year | 276572 | 136745 | 130368 |
| Cash and cash equivalents, end of year | $143130 | $276572 | $136745 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Note 26 – Revenue from Contracts with Customers** 

The Company records revenue when control of the promised products or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those products or services. All of the Company's revenue from contracts with customers in the scope of ASC 606 is recognized in non-interest income.

The following table presents the Company's sources of non-interest income for the years ended December 31, 2022, 2021, and 2020. Items outside of the scope of ASC 606 are noted as such.

---

| | | | |
|:---|:---|:---|:---|
| **(in thousands)** | **2022** | **2021** | **2020** |
| Non-interest income: |  |  |  |
| Service charges on deposits |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Account maintenance fees | $27274 | $24137 | $22497 |
| &nbsp;&nbsp;&nbsp;&nbsp;Transaction-based and overdraft service charges | 21091 | 17949 | 18341 |
| &nbsp;&nbsp;&nbsp;&nbsp;Total service charges on deposits | 48365 | 42086 | 40838 |
| Card-based fees | 37370 | 36114 | 28190 |
| Brokerage revenue | 90 | 5112 | 15599 |
| Total revenue from contracts with customers | 85825 | 83312 | 84627 |
| &nbsp;&nbsp;&nbsp;&nbsp;Other sources of non-interest income <sup>(1)</sup> | 113703 | 273006 | 327382 |
| Total non-interest income | $199528 | $356318 | $412009 |

---

<sup>(1)</sup> The revenue in the remaining non-interest income line items is out of the scope of ASC 606 accounting guidance and is recognized when earned in accordance with the Company's policies.

**Note 27 – Subsequent Events**

On January 9, 2023, Umpqua and Columbia announced that the FDIC approved the previously announced combination of the two companies and that the Companies extended the termination date of the Merger Agreement to March 11, 2023. On October 12, 2021, Umpqua and Columbia announced that their boards of directors unanimously approved a Merger Agreement under which the two companies will combine in an all-stock transaction. Under the terms of the Merger Agreement, Umpqua shareholders will receive 0.5958 of a share of Columbia stock for each Umpqua share they own. Upon completion of the transaction, Umpqua shareholders will own approximately 62% and Columbia shareholders will own approximately 38% of the combined company. The FDIC approval was the final outstanding regulatory approval necessary to complete the combination.

The merger is expected to close after close of business on February 28, 2023, subject to the satisfaction or waiver of the remaining closing conditions set forth in the Merger Agreement governing the transaction. Columbia and Umpqua have agreed to extend the outside date under the Merger Agreement to March 11, 2023. Upon closing, the combined company will become one of the largest banks headquartered in the West, with over $50 billion in assets and offices in eight western states that serve customers in all 50 states.

The two companies have received regulatory approvals to complete the combination from the Board of Governors of the Federal Reserve System; the FDIC; the Oregon Department of Consumer and Business Services, Division of Financial Regulation; and the Washington State Department of Financial Institutions. As previously announced, all required shareholder approvals related to the proposed combination were received on January 26, 2022. Columbia previously announced on November 7, 2022 that Columbia Bank entered into definitive agreements to divest the 10 branches identified by the U.S. Department of Justice, Antitrust Division, which was a condition for obtaining certain regulatory approvals. In January 2023, Columbia completed the divestiture of three branches, to satisfy regulatory requirements in connection with Columbia's merger with Umpqua. Columbia's divestitures of the remaining seven branches identified by the U.S. Department of Justice are scheduled to close in late February.

Post-closing, the holding company will operate under the Columbia Banking System, Inc. name and will be headquartered in Tacoma, Washington. The bank will operate under the Umpqua Bank name and will be headquartered in Lake Oswego, Oregon. Other major subsidiaries and divisions will include Columbia Trust Company, Columbia Wealth Advisors and Columbia Private Bank, which will operate under the umbrella of Columbia Wealth Management, as well as Financial Pacific Leasing, Inc. The combined company will trade under Columbia's ticker symbol (COLB) on the Nasdaq Stock Market.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.**

Not applicable.

**ITEM 9A. CONTROLS AND PROCEDURES.**

On a quarterly basis, the Company carries out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer, Principal Financial Officer, and Principal Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934. As of December 31, 2022, our management, including our Chief Executive Officer, Principal Financial Officer, and Principal Accounting Officer, concluded that our disclosure controls and procedures were effective in timely alerting them to material information relating to us that is required to be included in our periodic SEC filings.

Although management changes and improves our internal controls over financial reporting on an ongoing basis, we do not believe that any such changes occurred in the fourth quarter 2022 that materially affected or are reasonably likely to materially affect our internal control over financial reporting.

**REPORT OF MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING**

The management of Umpqua Holdings Corporation is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934. The Company's internal control system is designed to provide reasonable assurance to our management and Board regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:

&nbsp;&nbsp;&nbsp;&nbsp;• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company's assets;

&nbsp;&nbsp;&nbsp;&nbsp;• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with the authorizations of management and directors of the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2022. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). This assessment included controls over the preparation of the schedules equivalent to the basic financial statements in accordance with the instructions for the Consolidated Financial Statements for Bank Holding Companies (Form FR Y-9C) to meet the reporting requirements of Section 112 of the Federal Deposit Insurance Corporation Improvement Act. Based on our assessment and those criteria, management believes that, as of December 31, 2022, the Company maintained effective internal control over financial reporting.

The Company's independent registered public accounting firm has audited the Company's consolidated financial statements that are included in this annual report and the effectiveness of our internal control over financial reporting as of December 31, 2022 and issued their Report of Independent Registered Public Accounting Firm, appearing under Item 8. The audit report expresses an unqualified opinion on the effectiveness of the Company's internal control over financial reporting as of December 31, 2022.

February 24, 2023

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ITEM 9B. OTHER INFORMATION.**

Not Applicable

**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS** 

Not Applicable

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**PART III**

**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**

**DIRECTORS**

The age (as of February 24, 2023) and business experience and position with Umpqua of our directors are as follows:

**Peggy Y. Fowler**, age 71, has served as a director since 2009. Ms. Fowler served as CEO and President of Portland General Electric Company ("PGE") (NYSE: POR) from 2004-2008. She continued to serve on the PGE Board from 2009 - 2012, and previously served as Board Chair from 2001-2004. She is currently a director of Hawaiian Electric Industries (NYSE: HE), a position she has held since 2011.

**Stephen M. Gambee**, age 59, has served as a director since 2005. Mr. Gambee was CEO of Rogue Waste, Inc., a family-owned business providing waste collection, disposal, recycling and environmental services in Southern Oregon, until the business sold in October 2022. He also served as a senior executive of Rogue Waste (or its predecessor companies) from 1994 until 2022.

**James S. Greene**, age 68, has served as a director since 2012. Mr. Greene is founded Sky D Ventures, a private equity and advisory services company serving the financial services and FinTech global market, in 2015 and has continuously served as its Managing Partner.

**Luis F. Machuca**, age 65, has served as a director since 2010. Mr. Machuca served as President and Chief Executive Officer of Enli Health Intelligence Corporation, a healthcare applications company that activates collaborative care, from January 2002 until its sale on December 31, 2020. Mr. Machuca serves on the Board of Directors of UpHealth, Inc (NYSE: UPH), a position he has held since December 2022.

**Cort L. O'Haver**, age 60, has served as a director since 2017. Mr. O'Haver is President and Chief Executive Officer of the Company and Chief Executive Officer of Umpqua Bank, positions he has held since January 2017. Mr. O'Haver served as Commercial Bank President of Umpqua Bank from April 2014 to April 2016 when he became President of Umpqua Bank.

**Maria M. Pope**, age 58, has served as a director since 2014. Ms. Pope is President and CEO of PGE. She was appointed President on October 1, 2017 and Chief Executive Officer on January 1, 2018. From March 2013 to January 2018, Ms. Pope served as Senior Vice President, Power Supply, Operations, and Resource Strategy for PGE.

**John F. Schultz**, age 58, has served as a director since 2015. Mr. Schultz serves as Executive Vice President and Chief Operating Officer of Hewlett Packard Enterprise (NYSE: HPE), a position he has held since 2020. Prior to that, he served as HPE's Executive Vice President, Chief Legal and Administrative Officer and Secretary from December 2017 to July 2020, and served as HPE's Executive Vice President, General Counsel and Secretary from November 2015 to December 2017.

**Susan F. Stevens**, age 72, has served as a director since 2012. Ms. Stevens was a senior executive who retired as head of Corporate Banking for the Americas at J.P. Morgan Securities Inc. in 2011. She held that position from 2006 until 2011. She was at J.P. Morgan for 15 years.

**Hilliard C. Terry, III**, age 53, has served as a director since 2010. Mr. Terry, III, most recently served as Executive Vice President and Chief Financial Officer of Textainer Group Holdings Limited (NYSE: TGH), from 2012 to 2018. Before joining Textainer, he was Vice President and Treasurer of Agilent Technologies, Inc. (NYSE: A). He serves as a director of Upstart, Inc. (NASDAQ: UPST), a cloud-based artificial intelligence lending platform, a position he has held since February 2019, and of Asbury Automotive Group, Inc. (NYSE: ABG), the 6th largest franchised automotive retailer in the United States, a position he has held since February 2022.

**Bryan L. Timm**, age 59, has served as a director since 2004. Mr. Timm served as President of Columbia Sportswear Company (NASDAQ: COLM) from February 2015 to June 2017 and held the office of Chief Operating Officer from May 2008 to June 2017. He previously served as Chief Financial Officer of Columbia Sportswear.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Anddria Varnado**, age 37, has served as a director since 2018. Ms. Varnado is the GM and Head of the Consumer Business at Kohler Company, a global leader in home products, hospitality destinations and systems, a position she has held since 2020. Immediately prior to Kohler, she served as Vice President, Strategy & Business Development, at Macy's, Inc. (NYSE: M) from 2019 to 2020. Prior to Macy's, from 2016 to 2019, she was Vice President and Head of Strategy and Business Development at Williams-Sonoma, Inc. (NYSE: WSM) She serves as a director of Red Robin Gourmet Burgers, Inc. (NASDAQ: RRGB), an operator, franchisor, and developer of casual dining restaurants in North America, a position she had held since March 2021.

**EXECUTIVE OFFICERS**

The age (as of February 24, 2023), business experience, and position of our executive officers and Section 16 officers other than President and Chief Executive Officer Cort O'Haver, about whom information is provided above, are as follows:

**Ronald (Ron) Farnsworth**, age 52, serves as Executive Vice President/Chief Financial Officer of Umpqua and Umpqua Bank, positions he has held since January 2008 and Principal Financial Officer of Umpqua, a position he has held since May 2007.

**Neal McLaughlin**, age 54, serves as Executive Vice President/Treasurer of Umpqua and Umpqua Bank, positions he has held since February 2005 and served as Principal Accounting Officer from May 2007 to December 2019.

**Frank Namdar**, age 57, serves as Executive Vice President/Chief Credit Officer for Umpqua Bank, a position he has held since November 2018. From 2012 to 2018 Mr. Namdar was a senior credit officer at Umpqua Bank.

**Torran (Tory) Nixon**, age 61, serves as Umpqua Bank President, a position he has held since June 2020. From April 2018 to his promotion to President, he served as Senior Executive Vice President/Chief Banking Officer for Umpqua Bank. He previously served as Umpqua Bank's Executive Vice President/Head of Commercial & Wealth from October 2016 to April 2018 and Executive Vice President/Commercial Banking from November 2015 to October 2016.

**Andrew Ognall**, age 51, serves as Executive Vice President/General Counsel and corporate Secretary of Umpqua and Umpqua Bank, positions he has held since April 2014.

**David Shotwell,** age 64, serves as Executive Vice President/Chief Risk Officer of Umpqua and Umpqua Bank, positions he has held since September 2016. Mr. Shotwell served as Umpqua Bank's Chief Credit Officer from 2015 to November 2018.

**Lisa White**, age 40, serves as Executive Vice President/Corporate Controller of Umpqua and Umpqua Bank, and Principal Accounting Officer of Umpqua, positions she has held since January 2020. She previously served as Umpqua Bank's Senior Vice President/Bank Controller from April 2015 to January 2020.

**DELINQUENT SECTION 16(a) REPORTS**

Based solely upon our review of (i) Forms 3, 4 and 5 filed for directors and executive officers for the fiscal year ended December 31, 2022, and (ii) their written representations (if applicable) that no Form 5 is required, we believe that all reporting persons made all Section 16 filings required under the Securities Exchange Act of 1934 with respect to the 2022 fiscal year on a timely basis.

**EMPLOYEE CODE OF CONDUCT/CODE OF ETHICS FOR FINANCIAL OFFICERS** 

The Company has a code of conduct in its employee handbook, including Business Ethics and Conflict of Interest sections. We require all employees to adhere to these policies in addressing legal and ethical issues that they encounter in connection with their work. The policies require our employees to avoid conflicts of interest, comply with all laws and regulations, conduct business in an honest and ethical manner and otherwise act with integrity and in the Company's best interest. All new employees are required to review and understand this ethics code and certify so. Each year all other employees are reminded of, and asked to affirmatively acknowledge, their obligation to follow this ethics code.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

In addition, the Company has adopted a Code of Ethics for Financial Officers, which applies to our chief executive officer, our chief financial officer (principal financial officer), treasurer, corporate controller (principal accounting officer) and all other officers serving in a finance, accounting, tax or investor relations role. This corporate policy applicable to financial officers supplements our Business Ethics and Conflict of Interest policies and is intended to promote honest and ethical conduct, full and accurate financial reporting and to maintain confidentiality of the Company's proprietary and customer information.

Our Code of Ethics for Financial Officers, and the Business Ethics and Conflict of Interest sections of our employee handbook, are available in the Investor Relations section of our website, <u>https://www.umpquabank.com/investor-relations</u>.

**CHANGES IN NOMINATION PROCEDURES**

There have been no material changes to the procedures by which shareholders may recommend nominees to our Board of Directors since our procedures were disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021.

Our Statement of Governance Principles, a corporate policy reviewed and approved annually by the Board and available at https://www.umpquabank.com/investor-relations, describes the qualifications that the Company looks for in its Board members. The independent Nominating and Governance Committee has responsibility for recommending Board members.

The Statement of Governance Principles provides that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Directors should possess the highest personal and professional ethics, integrity and values and be committed to representing the long-term interests of our shareholders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• On an overall basis, the Board should have policymaking experience in all of the major business activities of the Company and its subsidiaries

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• To the extent practical, the Board should be representative of the major markets in which the Company operates

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The Board values diversity and the highest professional qualifications in its members

The Board has considered and will continue to consider the gender, ethnicity, background, and professional experiences of current and prospective directors and seeks a diverse group of directors. The Nominating and Governance Committee considers skills that will add value to the Board and those that will be lost upon the departure of a director. Directors must be willing to devote sufficient time to effectively carry out their duties and responsibilities. Directors should not serve on more than three Boards of public companies in addition to the Company's Board.

**BOARD COMMITTEES**

The table below shows the current membership of the five standing Board committees that meet regularly:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | Audit and Compliance | Finance and Capital | Compensation | Enterprise Risk and Credit | Nominating and Governance |
| Peggy Fowler | | | | | C |
| Stephen Gambee | • | • | | • | |
| Jim Greene | | • | | • | |
| Luis Machuca | | | C | • | • |
| Cort O'Haver | | • | | • | |
| Maria Pope | • | | • | | |
| John Schultz | • | | • | | |
| Susan Stevens | • | | | C | • |
| Hilliard Terry | C | | | | • |
| Bryan Timm | | C | • | | • |
| Anddria Varnado | | • | • | | |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Audit and Compliance Committee** 

The Board has a standing Audit and Compliance Committee that meets with our independent registered public accounting firm to plan for and review the annual audit reports. The Committee meets at least four times per year and is responsible for overseeing our internal controls and the financial reporting process. Each member of the Committee is independent, as independence is defined under applicable SEC and NASDAQ listing rules.

The charter provides that only independent directors may serve on the Audit and Compliance Committee. The charter further provides that at least one member shall have past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities. The Board has determined that the following Audit and Compliance Committee members meet the SEC criteria for an "audit committee financial expert": Hilliard Terry, Maria Pope and Susan Stevens. The Board previously determined that former Audit and Compliance Committee Chair Bryan Timm also meets the audit committee financial expert criteria. Each of the current members of the Audit and Compliance Committee has education or employment experience that provides them with appropriate financial sophistication to serve on the Committee.

**Compensation Committee**

The Compensation Committee oversees executive and director compensation, and the Company's policies and strategies relating to human capital management—talent, leadership and culture, including diversity, equity and inclusion. The Committee also oversees administration of the Company's employee benefit plans, including the Umpqua Bank 401(k) and Profit-Sharing Plan and our Supplemental Retirement / Deferred Compensation Plan. All of the directors serving on the Committee are independent, as defined in the NASDAQ listing standards.

**Enterprise Risk and Credit Committee**

The Enterprise Risk and Credit Committee approves loan and risk management policies including information technology, information security, third party risk and model risk; monitors compliance with those corporate policies; and oversees Umpqua's loan and lease portfolios. The Committee also oversees the Company's enterprise risk management program. In addition to its regular meetings, the Committee reviews and approves extensions of credit to Regulation O officers, directors or their related parties.

**Finance and Capital Committee**

The Finance and Capital Committee oversaw our budgeting process, including the annual operating and capital expenditure budgets. The Committee monitors liquidity and investment policies and oversees capital planning and stress-testing, dividend planning and our stock repurchase program, insurance, our investment portfolio, and all aspects of financial and liquidity risk management and financial performance.

**Nominating and Governance Committee**

The Nominating and Governance Committee proposes nominees for appointment or election to the Board and conducts searches to fill director vacancies and the CEO position. The Committee oversees the Company's corporate governance processes and Board structure, and periodically reviews the Company's corporate responsibility policies, practices and disclosures, including environmental, social and governance matters. The Committee is comprised of the Board Chair, and the Chair of each Board committee, provided such Chairs are independent. All of the directors serving on the Committee are independent, as defined in the NASDAQ listing standards.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Other Committees**

The Executive Committee may, subject to limitations in our bylaws and under Oregon law, exercise all authority of the Board when the Board is not in session. The Committee is comprised of the Board Chair, Umpqua's CEO and other members selected by the Board Chair. The Committee does not have regularly scheduled meetings.

CEO O'Haver chairs the Strategy Committee, formed in 2020 to assume the Executive Committee's responsibilities for the annual Board strategic planning process, including the Board's strategic planning retreat, and consideration of and planning for merger and acquisition opportunities. The Committee does not have regularly scheduled meetings.

**ITEM 11. EXECUTIVE COMPENSATION**

**COMPENSATION DISCUSSION AND ANALYSIS ("CD&A")**

Our CD&A is organized into three sections:

**Executive Summary**

**Compensation Process and Decisions** 

**Other Compensation Information**

The CD&A describes our executive compensation program for the following "named executive officers":

---

| | |
|:---|:---|
| **Name** | **Title** |
| **Cort O'Haver** | President and Chief Executive Officer |
| **Ron Farnsworth** | Executive Vice President/Chief Financial Officer |
| **Tory Nixon** | Senior Executive Vice President/President of Umpqua Bank |
| **Andrew Ognall** | Executive Vice President/General Counsel |
| **David Shotwell** | Executive Vice President/Chief Risk Officer |

---

**SECTION 1 - EXECUTIVE SUMMARY**

We maintain a strong pay for performance philosophy that links executive compensation to achieving the operating and financial goals set by the Board. Our independent Compensation Committee has built strong governance features into our executive compensation program.

**2022 Executive Compensation**

On October 11, 2021, we entered into the Merger Agreement, pursuant to which Columbia and Umpqua agreed to combine their respective businesses, with Columbia the surviving holding company. Columbia Bank, a wholly owned subsidiary of Columbia, will merge with and into Umpqua Bank, a wholly owned subsidiary of Umpqua, with Umpqua Bank as the surviving bank in the bank merger. Each share of Umpqua common stock issued and outstanding immediately prior to the closing will be converted into the right to receive 0.5958 of a share of Columbia common stock. Following the closing, Umpqua common stock will be delisted from the NASDAQ and will cease to be publicly traded.

We believe the transaction, which is expected to close on February 28, 2023, will create a premier West Coast banking franchise with more than $50 billion in total assets and $43 billion in total deposits, operating through locations spanning Oregon, Washington, California, Idaho and Nevada, and significantly advances our strategic growth initiatives. We originally anticipated that the business combination would close mid-2022.

The decisions made by the Compensation Committee related to executive compensation were based on:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• the assumption that the business combination would close in 2022 and certain compensation decisions would be made after the closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Mr. O'Haver will serve as Executive Chairman of Columbia and he negotiated an agreement setting his compensation with Columbia to be effective with the closing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• other named executive officers will depart or take on new or expanded roles at closing;

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• restrictions on compensation-related matters agreed to in the Merger Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• management's success in advancing strategic initiatives; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Umpqua's financial results for 2022, including continued growth while preparing for the integration of Columbia and Umpqua.

The Merger Agreement restricted Umpqua from entering into new, or amending, employment agreements and benefit plan, and certain increases in compensation or benefits.

Executive compensation decisions and Compensation Committee actions, described in more detail below, included:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• STI DESIGN AND ACHIEVEMENT

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ 80% based on operating earnings per share and 20% based on individual goals

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Maximum payout of 200% of target

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Circuit-breaker provisions require minimum level of performance to receive any payout

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Achievement of 2022 STI plan at 120% for CEO O'Haver and at an average of 116% for all NEOs

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ No changes to target incentive levels from 2021

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• LTI DESIGN AND ACHIEVEMENT

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Confirmed vesting levels of 2019 LTI at 108.5% (ROATCE-based) and 93.6% (TSR-based)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ All 2022 awards time based due to the pending Columbia merger

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• SALARY

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ No changes to salary due to the pending Columbia merger and anticipated changes at or shortly after closing

**Performance Focused Compensation Program** 

The Company has adopted the following executive compensation philosophy, which is reviewed annually by the Compensation Committee, to focus our management team on delivering sustained, long-term financial performance for our shareholders:

**STATEMENT OF PHILOSOPHY**

Decisions regarding executives' total compensation program design, as well as individual pay decisions, will be made in the context of this Executive Compensation Philosophy and our ability to pay, as defined by our financial success. We designed Umpqua's executive compensation to recognize superior operating performance thereby maximizing shareholder value, and to attract, motivate and retain the high performing executive team critical to our Company's success. Our executive compensation philosophy is: we pay competitive base salaries and we incentivize and strongly reward performance.

**Objectives:** Umpqua Bank is committed to providing competitive compensation opportunities based on performance to our executives who collectively have the responsibility for making our Company successful. Within that context, our prime objectives are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Attract and retain highly qualified executives that portray our Company culture and values

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Motivate executives to provide excellent leadership and achieve Company short and long-term goals

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Provide substantial performance-related incentive compensation that is aligned to our business strategy and directly tied to meeting specific business objectives and avoiding unnecessary and excessive risks that threaten the value of the Company

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Strongly link the interests of executives to the value derived by our shareholders from owning Company stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Connect the interests of our executives, our employees, and our shareholders and other stakeholders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;◦ Be fair, ethical, transparent, and accountable in setting and disclosing executive compensation

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Components of Compensation:** 

Base Salary – Base pay opportunities should be fully competitive with other relevant organizations within the markets in which we compete. Individual salary determinations involve consideration of qualifications, performance, behaviors, leadership, and culture.

Short-Term Incentive – Consistent with competitive practices, executives should have a significant portion of their targeted annual total cash compensation at risk, contingent upon the Company meeting its strategic goals including profitability targets, achievement of personal goals, and appropriate risk management including regulatory compliance.

Long-Term Incentives – Executives who are critical to our long-term success should participate in long-term incentive opportunities. At least 50% of equity awards should be "performance-based," to link a significant portion of total compensation to shareholder value.

Executive Benefits – We offer benefit programs, such as health insurance, 401(k) plan, vacation, and life insurance, similar to the programs that are offered to our employees.

**Strong Governance Features**

The effectiveness of our executive compensation program depends upon sound pay-for-performance practices, as well as certain pay practices that we chose not to implement.

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;**WHAT WE DO** | **WHAT WE DON'T DO** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>*&nbsp;&nbsp;&nbsp;&nbsp;*Independent Compensation Committee that engages its own advisors<br>*&nbsp;&nbsp;&nbsp;&nbsp;*Stock retention (hold-to-retirement) requirement for executive officers—75% of net equity awards<br>*&nbsp;&nbsp;&nbsp;&nbsp;*Stock ownership requirements for executive officers<br>*&nbsp;&nbsp;&nbsp;&nbsp;*Clawback provisions applicable to all incentive compensation<br>*&nbsp;&nbsp;&nbsp;&nbsp;*Annual review of peer groups<br>*&nbsp;&nbsp;&nbsp;&nbsp;*Annual best practices review and competitive assessment of compensation with independent consultant | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*No single trigger change-in-control provisions<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*No tax gross-ups on severance or change-in-control benefits<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*Hedging and pledging of Company stock is prohibited<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*Dividends on equity awards paid only upon vesting<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*No significant perquisites<br>*X* No repricing, reload or exchange of stock options without shareholder approval<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*No guaranteed bonuses<br>*X&nbsp;&nbsp;&nbsp;&nbsp;*No personal use of Company's leased aircraft |

---

**SECTION 2 – COMPENSATION PROCESS AND DECISIONS** 

**Roles and Responsibilities of the Compensation Committee**

The Compensation Committee carries out the Board's overall responsibilities with respect to executive compensation. The Board reviews the CEO's performance with respect to his leadership of the organization and the Company's financial performance and successful execution of the strategic plan. The CEO is not present during discussions regarding his compensation. All Committee members are required to meet the NASDAQ and SEC independence requirements.

The Compensation Committee operates under a written charter, which is posted on our website at www.umpquabank.com/investor-relations. The Committee annually reviews its charter and recommends changes to the Board. The Committee Chair sets the Committee's meeting agenda and calendar. As authorized by its charter, the Committee hires independent advisors and consultants for advice on compensation matters.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Each year the Compensation Committee engages in extensive executive compensation discussions in multiple meetings, including with its independent consultant. The Committee reviews total compensation and total cash compensation and approves each of the elements of executive officer compensation, and reviews whether compensation programs and practices carry undue risk.

**Say-on-Pay Vote**

Our say-on-pay resolution at the 2021 annual meeting received a favorable vote from over 95% of the shares voted. Our Compensation Committee considers the results of say-on-pay votes in making compensation decisions. Due to the pending Columbia merger, we did not hold an annual shareholder meeting in 2022.

**Role of the Compensation Consultant/Evaluation of Independence**

The Compensation Committee regularly reviews information provided by recognized, independent compensation consultants including survey or "benchmarking" data, peer group recommendations and plan design suggestions. The Committee uses this information to understand prevailing market practices and aggregate, as well as component, compensation packages provided by similarly sized financial services companies.

The Compensation Committee engaged Mercer as its compensation consultant for 2022. The Committee received information from Mercer assessing that firm's independence and the Committee made its own assessment of the independence of Mercer pursuant to SEC rules and concluded that no conflict of interest exists that would prevent Mercer from independently advising the Committee. Mercer also provides non-executive compensation services to Umpqua Bank, including consulting on, and serving as the broker for, our employee health and certain welfare benefits plans. In 2021, Mercer earned $168,500 in fees from its work with our Compensation Committee, and $1.3 million related to our health and welfare benefits primarily from benefit plan vendors in commissions to Mercer. The total fees earned by Mercer represent 0.0072% of Mercer's fiscal year 2021 revenues. No individual consultant or personnel who provided executive compensation services received any additional compensation as a result of Mercer providing these other services.

**Role of Management**

Our CEO is actively engaged in recommending the compensation of our other named executive officers. At the end of each fiscal year, he reviews with the Compensation Committee the performance of each executive officer and recommends the level of base salary, incentive compensation and equity awards. The Committee reviews those recommendations and compares them with market information to ensure that executive compensation is competitive, and that the CEO is exercising appropriate discretion. The Committee reviews, and ratifies or approves, all components of the compensation for executive officers covered by NASDAQ requirements, including salary, annual incentives and long-term incentive compensation.

Our human resources executive, the Chief People Officer, works with our CEO, the Compensation Committee, business unit executives, the General Counsel and, as appropriate, outside counsel and consultants to recommend and design the overall structure of the Company's incentive and benefit plans.

**Competitive Assessment and Relative Performance Peers**

For 2022 the Compensation Committee did not review the peer group or a competitive assessment due to the pending merger with Columbia.

**Performance-Based Plan Design and Objectives**

A significant component of compensation is related to Company performance. We believe that an executive's compensation should be tied to how well the Company performs, as well as the individual executive and the executive's team against both financial and non-financial goals and objectives. Our STI, primarily based on OEPS, and our LTI, based on TSR and ROATCE, plan metrics differ to promote a range of business developments while maintaining a focus on building long-term value.

For our STI, OEPS targets are set by the Compensation Committee based on the Company's Board-approved budget, which includes growth and expense targets that align with our strategic initiatives. Our historic OEPS achievement and STI payout levels for that component are:

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | | |
|:---|:---|:---|:---|
| | **OEPS for 100%** | | |
| &nbsp;&nbsp;&nbsp;**Year** | **Payout** | **OEPS** | **Actual Payout %** |
| &nbsp;&nbsp;&nbsp;**2020** | $1.33-$1.40 | $1.47 | 125% |
| &nbsp;&nbsp;&nbsp;**2021** | $1.32-$1.39 | $1.95 | 150% |
| &nbsp;&nbsp;&nbsp;**2022** | $1.52-$1.69 | $1.65 | 100% |

---

For our LTI, both TSR and ROATCE metrics are relative, compared to a group of financial services industry peers. We believe TSR directly links executive compensation to the returns realized by our shareholders, and that a measure based on return on equity links executive compensation to the creation of long-term value for shareholders, and the combination of metrics ensuring that our awards are not advantaged or penalized by general market conditions.

The following are the historic LTI vesting levels:

---

| | | |
|:---|:---|:---|
| | | **Vesting** |
| &nbsp;&nbsp;&nbsp;**Year of Award** | **Year Vested** | **Percentage** |
| **2017 (TSR-based)** | 2020 | 106% |
| **2017 (ROATCE-based)** | 2020 | 102% |
| **2018 (TSR-based)** | 2021 | 67% |
| **2018 (ROATCE-based)** | 2021 | 108% |
| **2019 (TSR-based)** | 2022 | 94% |
| **2019 (ROATCE-based)** | 2022 | 109% |

---

**Elements of 2022 Compensation**

<u>Base Salary</u>. Base salary provides a secure base of cash compensation for executives, in an amount that is designed to be competitive with the market. Executive salary increases do not follow a preset schedule or formula; however, the following are considered when determining appropriate salary levels:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The individual's current and sustained performance results and the methods utilized to achieve those results

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Non-financial performance indicators, to include strategic developments for which an executive has responsibility (such as product development, expansion of markets, increase in organic loan or deposit growth and acquisitions) and managerial performance (such as service quality, sales objectives and regulatory compliance)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Company financial performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Peer data through competitive assessment reports

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Promotions and changes in scope of job duties

With the pending Columbia Merger, the Compensation Committee did not increase salaries in 2022.

<u>STI.</u> At the beginning of each year, the Board of Directors, upon the recommendation of the Compensation Committee, approves the STI plan for our named executive officers. The Compensation Committee recommends the target incentive as a percentage of base salary based on peer and market data for similar positions, total compensation and internal groupings of executives. With the pending Columbia Merger, the Compensation Committee did not change target payout levels in 2022.

The Committee also assigns a maximum incentive above the target incentive (200% for 2022), and the minimum performance required to receive a payout on financial metrics (50% for 2022). Achievement of the target incentive is based on the success of the Company and the individual executive in certain performance areas. The Committee determined that the weighting would be 20% individual goals and 80% OEPS.

The Compensation Committee uses primarily objective elements for annual incentive plans. The CEO reports individual executive performance, which includes subjective assessments, to the Compensation Committee. Our annual incentive plans expressly provide the Compensation Committee authority to apply "negative discretion" to reduce awards.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The Compensation Committee selected OEPS as the financial performance metric for the following reasons:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Earnings per share is the key indicator of profitability

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• EPS aligns the interests of executive officers with shareholders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• OEPS eliminates income and expense items as described below

When calculating OEPS, we exclude the following items due to their one-time nature or relationship to market externalities:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gains or losses on our junior subordinated debentures carried at fair value resulting from changes in interest rates and the estimated market credit risk adjusted spread that do not directly correlate with the Company's operating performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gains or losses from the change in fair value of the Company's mortgage servicing rights, swap derivatives and loans

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Net gains or losses on investment securities

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Expenses that are related to the completion and integration of mergers and acquisitions or related to exit or disposal costs of certain business activities

Historically, when relevant, we have also excluded goodwill impairment charges or bargain purchase gains. All items are excluded net of their tax impact. We calculate operating earnings (loss) per diluted share by dividing operating earnings by the same diluted share total used in determining diluted earnings per common share.

The Company does not offer guidance on our OEPS, earnings per share or growth rate targets, and we regard these internal targets as confidential. However, we provide the Company-wide OEPS target on a historical basis. The OEPS target for 100% payout of the financial component is intended to be challenging but achievable, tied to completion of strategic initiatives and requiring year-over-year growth or increases in value relative to economic conditions. The targets set for 2022 were:

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;**OEPS Range** | **Payout Level** |
| &nbsp;&nbsp;&nbsp;Less than 50% of budget | 0% |
| &nbsp;&nbsp;&nbsp;50%-60% of budget | 50% |
| &nbsp;&nbsp;&nbsp;61%-80% of budget | 75% |
| &nbsp;&nbsp;&nbsp;81%-90% of budget | 90% |
| &nbsp;&nbsp;&nbsp;90%-100% of budget | 100% |
| &nbsp;&nbsp;&nbsp;101%-110% of budget | 125% |
| &nbsp;&nbsp;&nbsp;<u>111%-120% of budget</u> | 150% |
| &nbsp;&nbsp;&nbsp;<u>Greater than or equal to 121% of budget</u> | 200% |

---

In January 2023, the Compensation Committee reviewed 2022 OEPS and goals achievement for each of the named executive officers and discussed with the CEO any potential risk modifiers. Each of our incentive plans included a risk modifier, providing for potential reduction or elimination of incentive pay if participants failed to maintain satisfactory regulatory compliance or failed to demonstrate appropriate risk management practices. The Committee confirmed that the Company's OEPS for 2022 was at the 100% payout range.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

The following reconciles our reported earnings per diluted share for 2022 to our operating earnings per diluted share:

---

| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;**OEPS to EPS Reconciliation** | |
| &nbsp;&nbsp;&nbsp;OEPS | $1.65 |
| &nbsp;&nbsp;&nbsp;Gain on MSR asset due to model inputs | $0.20 |
| &nbsp;&nbsp;&nbsp;Loss on MSR hedge | $(0.05) |
| &nbsp;&nbsp;&nbsp;Loss on investment securities, net | $(0.03) |
| &nbsp;&nbsp;&nbsp;Gain on swap derivatives | $0.06 |
| &nbsp;&nbsp;&nbsp;Loss on loans at fair value | $(0.20) |
| &nbsp;&nbsp;&nbsp;Exit and disposal costs | $(0.02) |
| &nbsp;&nbsp;&nbsp;Merger related expenses | $(0.06) |
| &nbsp;&nbsp;&nbsp;GAAP EPS | $1.55 |

---

The 2022 incentive compensation awarded to each named executive officer (with the percentage indicating percent of overall target incentive opportunity for the specific metric), was:

---

| | | | | |
|:---|:---|:---|:---|:---|
| | | **% of** | **Individual** | **% of** |
| &nbsp;&nbsp;&nbsp;**Executive Officer** | **OEPS** | **Target** | **Goal** | **Target** |
| &nbsp;&nbsp;&nbsp;**O'Haver** | $840000 | 80% | $420000 | 20% |
| &nbsp;&nbsp;&nbsp;**Farnsworth** | $326400 | 80% | $163200 | 20% |
| &nbsp;&nbsp;&nbsp;**Nixon** | $520000 | 80% | $260000 | 20% |
| &nbsp;&nbsp;&nbsp;**Ognall** | $257600 | 80% | $128800 | 20% |
| &nbsp;&nbsp;&nbsp;**Shotwell** | $229600 | 80% | $57400 | 20% |

---

The total 2022 STI compensation approved by the Board and paid in the first quarter of 2023 is:

---

| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name** | **Total Paid** | **Target** | **Total as a**<br>**% of Target** |
| &nbsp;&nbsp;&nbsp;**O'Haver** | $1260000 | $1050000 | 120% |
| &nbsp;&nbsp;&nbsp;**Farnsworth** | $489600 | $408000 | 120% |
| &nbsp;&nbsp;&nbsp;**Nixon** | $780000 | $650000 | 120% |
| &nbsp;&nbsp;&nbsp;**Ognall** | $386400 | $322000 | 120% |
| &nbsp;&nbsp;&nbsp;**Shotwell** | $287000 | $287000 | 100% |

---

<u>LTI</u>. Under the shareholder-approved 2013 Incentive Plan, we may award stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance share awards, and performance compensation awards. The Committee has historically awarded RSUs that vest ratably over time and PSAs with relative performance metrics as the LTI component of executive compensation. The Committee selects all executive-level participants and determines participation levels and the terms and conditions of all awards made under the plan subject to plan requirements including minimum vesting periods. A maximum of 400,000 shares may be granted under the plan to an individual pursuant to stock options and stock appreciation rights during any one-year period; for any other award, a maximum of 200,000 shares may be granted under the plan to an individual during any one-year period. The Committee typically determines the cash value of proposed equity awards at its January meeting and sets the grant date in February or March with the number of shares based on the closing price of the Company's common stock on the day before the grant date.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

In 2022, the Committee decided to issue time-based awards, vesting ratably over three years, due to the pending Columbia merger and the significant anticipated changes in financial metrics and peers with the merger.

In January 2022, the Compensation Committee approved awards to Mr. O'Haver of 98,360 RSUs with an accounting value at grant of $2.1 million. After reviewing competitive data for equity awards to, and total compensation of, the CEO position, the Committee determined that the aggregate equity awards to the CEO should be valued at not less than his base salary and target cash incentive. CEO O'Haver recommended the amount and mix of other named executive officer equity awards; the Committee reviewed and approved the CEO's recommendations based on the competitive assessment and the CEO's evaluation of individual performance.

<u>Other Annual Compensation - Benefits and Perquisites.</u> We provide the following benefit programs to executive officers and to other employees:

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Benefit Plan** | **Executive Officers**<br>**and**<br>**Key Managers**<br>**and Contributors** | All Full Time<br>Employees |
| &nbsp;&nbsp;&nbsp;401(k) Plan | • | • |
| &nbsp;&nbsp;&nbsp;Group Medical/Dental/Vision | • | • |
| &nbsp;&nbsp;&nbsp;Group Life and Disability | • | • |
| &nbsp;&nbsp;&nbsp;Severance | • | • |
| &nbsp;&nbsp;&nbsp;Change in Control | • |  |
| &nbsp;&nbsp;&nbsp;Supplemental Retirement/Deferred Compensation Plan | • |  |

---

Umpqua sponsors and administers a 401(k) salary deferral and profit sharing plan covering substantially all employees of the Company and its subsidiaries. The qualified plan is subject to ERISA. Participants may elect to contribute 100% of eligible compensation to the plan each year, subject to applicable IRC limits on annual employee deferrals. In 2022, the Company made a matching contribution of 50% of each participant's salary deferral, up to 8% of eligible compensation (or a maximum of 4% of eligible payroll deferrals by associates). Our named executive officers are eligible to participate in the plan on the same terms and conditions as other employees.

The Company adopted a non-qualified Supplemental Retirement and Deferred Compensation Plan in 2008. The deferred compensation component of the SRP/DCP is available to a select group of officers determined by the Committee based on their position, duties and compensation level. All named executive officers are currently eligible to participate. Participants may elect to defer up to 50% of their salary or a portion of their annual cash incentive payment into a plan account. The Company did not make discretionary contributions to deferred compensation accounts in 2021. The supplemental retirement component of the SRP/DCP is provided for senior officers, primarily the CEO and executives who report to the CEO, who are selected by the Committee. All named executive officers are currently eligible to participate. Each year the Committee determines whether to recommend to the Board that the Company make a discretionary contribution to the supplemental retirement component of the SRP/DCP. The Compensation Committee did not recommend a contribution in 2021. Participants may invest deferred compensation and Company contributions in mutual funds like those available under the 401(k) plan. The Company does not guarantee earnings or pay interest on elective deferrals or Company discretionary contributions.

Umpqua has adopted a policy that governs use of the aircraft owned by the Company. That policy generally provides that the CEO or CFO must approve any use of this aircraft and it prohibits any purely personal use.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**SECTION 3 – OTHER COMPENSATION INFORMATION**

**Risk Assessment and Bank Regulatory Requirements**

The Company develops and implements compensation plans that provide strategic direction to the participant and engage and reward them for the Company's success, which we believe contributes to shareholder value. We believe our approach to goal setting, establishing targets with payouts at multiple levels of performance, evaluation of performance results and negative discretion in the payout of incentives help to mitigate excessive risk-taking that could harm Company value or reward poor judgment.

Compensation policies and practices are determined by reviewing compensation analyses including industry/market benchmarking reports to determine competitive pay packages. The Company's variable pay programs are designed to reward outstanding individual and team performance while mitigating risk taking behavior that might affect financial results. Performance incentive rewards for all plans continue to be focused on results that possibly impact earnings, profitability, credit quality, reasonable loan growth, deposit growth, sound investment advice, superior customer service, sound operations and compliance, sustainable culture, and leadership excellence. Incentive plans, which are reviewed and revised on an annual basis, have defined terms and conditions that enable the Company to adjust the final scoring and payment of the plan, including adjustments that may only become apparent upon an after the fact review. In addition, some incentive plans may have specific and defined holdbacks and modifiers enabling adjustments at the time of payout.

Generally, there is more oversight of plans that have a higher degree of risk, larger payouts, and those plans that could have the greatest negative impact on the Company's safety and soundness, such as plans for Commercial, Retail, and Mortgage. The more risk associated with the incentive plan the more review and approval hurdles must be crossed before payment is made. In the first quarter of 2022, the Compensation Committee met with executive officers to review the incentive compensation plans and concluded that, based on the controls described above and elsewhere in this proxy statement, those plans do not present risks that are reasonably likely to have a material adverse effect on the Company.

When evaluating risk, the Compensation Committee noted that OEPS, which is based on audited financial results, is the primary financial component of annual incentive compensation. In this environment, operating costs and the net interest margin are the primary drivers of OEPS. The Committee and the Board receive regular reports about OEPS and the steps taken by management to address operating efficiencies, deposit prices and loan yields. The degree of oversight devoted to OEPS is a strong risk control.

In addition, the Company has adopted compensation practices, as discussed in this proxy statement, that discourage excessive or unnecessary risk-taking, such as:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Requiring executives to acquire and hold substantial ownership positions in company stock

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Implementing "clawback" provisions in incentive plans

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Adopting a "hold to retirement" policy with respect to 75% of the net gains from equity awards

The agreements with our named executive officers also provide that Umpqua shall not pay any benefit to the extent that such payment would be prohibited by the provisions of Part 359 of the regulations of the Federal Deposit Insurance Corporation, as the same may be amended from time to time.

**Internal Pay Equity**

In the first quarter of 2022, the Compensation Committee considered internal pay equity when it reviewed the total compensation paid to the CEO, as compared to the other named executive officers and the CEO's other direct reports. Based on its review, the Committee was satisfied that the comparative relationship between the compensation of the CEO and Umpqua's other named executives is appropriate.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Equity Compensation Practices**

In general, we issue long-term equity incentives to our named executive officers at the following times:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• upon initial employment with the Company

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• in the first quarter of each year, in connection with establishing the long-term incentive compensation component of their compensation and at the same time as equity awards made to non-executive employees; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• in connection with a significant advancement or promotion or a significant change in compensation arrangements.

**Stock Ownership and Retention Policies**

We believe that key executives should have a significant stake in the performance of the Company's stock, to align their decisions with creating shareholder value and to minimize negative market perceptions caused by excessive insider sales of Company shares. Our Statement of Governance Principles (posted on our website) requires directors and executive officers to accumulate a meaningful position in Company shares. Our stock ownership requirement for outside directors and executive officers is tied to a multiple of director compensation for directors and a multiple of base salary for the executive officers, as noted below:

---

| | |
|:---|:---|
| | **Minimum Ownership** |
| &nbsp;&nbsp;&nbsp;**Position** | **(multiple of annual base salary/annual director compensation)** |
| &nbsp;&nbsp;&nbsp;CEO | 4 |
| &nbsp;&nbsp;&nbsp;President/Senior EVP | 2 |
| &nbsp;&nbsp;&nbsp;Other EVPs | 1.5 |
| &nbsp;&nbsp;&nbsp;Outside Director | 4 |

---

Under this policy, share ownership is determined from the totals on Table 1 of SEC Form 4, which includes unvested equity awards, and shares in which beneficial ownership is disclaimed. Compliance with share ownership guidelines is reviewed annually by the Nominating and Governance Committee. This minimum ownership must be achieved within five years after the officer or director takes office. As of December 31, 2022, all directors and executive officers satisfied these requirements or had not yet served for five years.

In addition, named executive officers must retain a substantial portion of the equity awards granted by the Company. A named executive officer must retain 75% of the following awards until the officer retires:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Gains from option exercises (shares remaining after payment of the exercise price and taxes)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Vested RSAs and PSAs (net of tax withholdings)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Shares issued in payment of RSUs (net of tax withholdings)

Exceptions to this holding requirement may be granted only by the Compensation Committee based upon bona fide personal financial need or family hardship, including divorce or death of a spouse.

Directors and executive officers may sell no more than 15,000 shares per calendar year unless he or she obtains authorization in a hardship situation from the Committee. A director or officer may, however, sell shares to cover the exercise price and estimated taxes associated with an option exercise or RSU vesting.

In 2022, the named executive officers, as a group, acquired 265,747 shares of Company stock through vesting of RSUs or PSAs and exchanged 103,712 shares to pay taxes in connection with vesting.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Hedging and Pledging**

We prohibit directors and executives from engaging in transactions in which they may profit from short-term speculative swings in the market value of Umpqua stock. These prohibited transactions include "short sales" (selling borrowed securities which the seller hopes can be purchased at a lower price in the future); "short sales against the box" (selling owned, but not delivered securities); "put" and "call" options (publicly available rights to sell or buy Umpqua shares at a specific price within a specified period of time); and derivative transactions. The Company and its affiliates will not make a loan to directors or executive officers secured by Company stock, and directors and executive officers are not permitted to pledge Company stock.

**Severance and Change in Control**

The occurrence or potential occurrence of a change in control transaction can create uncertainty regarding the continued employment of our executive officers. These transactions often result in significant organizational changes, particularly at the senior executive level. We believe that change in control benefits eliminate or at least reduce any reluctance of executive officers to actively pursue potential change in control transactions that may be in the best interest of shareholders and are competitive in the industry. Accordingly, we provide such protection for our named executive officers under their respective employment agreements. Our CEO recommends to the Compensation Committee the level of benefit to be provided to an executive, and the Committee considers that recommendation and makes a final decision. We consider these severance protections to be an important part of an executive's compensation and consistent with similar benefits offered by our competition.

All of our change in control provisions are "double trigger," such that the benefit is paid only if there is both a change in control transaction and a qualifying termination of employment. As a condition to receiving these severance benefits, the executive must agree non-compete or non-solicit covenants for a period following separation.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**COMPENSATION TABLES**

**SUMMARY COMPENSATION TABLE**

The following table summarizes the total compensation awarded to, paid to or earned by the named executive officers for the fiscal year ended December 31, 2022.

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Year** | **Salary** | Bonus | Stock<br>Awards | Option<br>Awards | Non-Equity<br>Incentive Plan<br>Compensation | Change in<br>Pension Value<br>and<br>Nonqualified<br>Deferred<br>Compensation<br>Earnings | All Other<br>Compensation | Total |
| (a) | (b) | (c) | (d) | (e)(1) | (f) | (g)(2) | (h) | (i)(3) | (j) |
| &nbsp;&nbsp;&nbsp;**O'Haver, Cort** | 2022 | $1050000 | $— | $2099986 | $— | $1260000 | $— | $4245 | $4414231 |
| &nbsp;&nbsp;&nbsp;President and CEO | 2021 | $1050000 | $— | $2179438 | $— | $1522500 | $— | $8769 | $4760707 |
|  | 2020 | $1000000 | $— | $2095865 | $— | $1208333 | $— | $18654 | $4322852 |
| &nbsp;&nbsp;&nbsp;**Farnsworth, Ron** | 2022 | $510000 | $— | $649979 | $— | $489600 | $— | $10200 | $1659779 |
| &nbsp;&nbsp;&nbsp;EVP/CFO | 2021 | $510000 | $— | $669267 | $— | $591600 | $— | $10400 | $1781267 |
|  | 2020 | $500000 | $— | $649067 | $— | $466000 | $— | $12515 | $1627582 |
| &nbsp;&nbsp;&nbsp;**Nixon, Tory** | 2022 | $650000 | $— | $1099995 | $— | $780000 | $— | $16800 | $2546795 |
| &nbsp;&nbsp;&nbsp;Sr EVP/President | 2021 | $650000 | $— | $1132645 | $— | $942500 | $— | $20369 | $2745514 |
| &nbsp;&nbsp;&nbsp;of Umpqua Bank | 2020 | $550000 | $— | $798838 | $— | $558663 | $— | $18789 | $1926290 |
| &nbsp;&nbsp;&nbsp;**Ognall, Andrew** | 2022 | $460000 | $— | $349991 | $— | $386400 | $— | $12200 | $1208591 |
| &nbsp;&nbsp;&nbsp;EVP/General | 2021 | $460000 | $— | $360349 | $— | $466900 | $— | $11800 | $1299049 |
| &nbsp;&nbsp;&nbsp;Counsel | 2020 | $440000 | $— | $349509 | $— | $358820 | $— | $12515 | $1160844 |
| &nbsp;&nbsp;&nbsp;**Shotwell, David** | 2022 | $410000 | $— | $374991 | $— | $287000 | $— | $11448 | $1083439 |
| &nbsp;&nbsp;&nbsp;EVP/Chief | 2021 | $410000 | $— | $386111 | $— | $416150 | $— | $11800 | $1224061 |
| &nbsp;&nbsp;&nbsp;Risk Officer | 2020 | $410000 | $— | $424394 | $— | $334335 | $— | $12515 | $1181244 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Fair value of stock awards issued during the year(s) shown; no option awards were issued. The assumptions made in calculating these values are disclosed in Notes 1 (Stock-Based Compensation discussion) and 19 to our Consolidated Financial Statements in this 2022 annual report on Form 10-K.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Earned and awarded under the Company's 2022 annual incentive plan in the year(s) noted but paid in Q1 2023.

(3)&nbsp;&nbsp;&nbsp;&nbsp;The table below itemizes the amounts shown in column (i), All Other Compensation, for 2022.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name** | **Annual Dues and Club Memberships** | **Match Contribution**<br>**to 401(k)** |
| &nbsp;&nbsp;&nbsp;**O'Haver** | $4245 |  |
| &nbsp;&nbsp;&nbsp;**Farnsworth** |  | $10200 |
| &nbsp;&nbsp;&nbsp;**Nixon** | $5044 | $11756 |
| &nbsp;&nbsp;&nbsp;**Ognall** |  | $12200 |
| &nbsp;&nbsp;&nbsp;**Shotwell** |  | $11448 |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

COMPENSATION AGREEMENTS

The table below sets forth the material provisions of our current named executive officer employment agreements:

---

| | | | |
|:---|:---|:---|:---|
| | **Expiration** | **Severance** | **Change in** |
| &nbsp;&nbsp;&nbsp;**Name** | **Date** <sup>(1)</sup> | **Benefit** <sup>(2)</sup> | **Control** <sup>(3)</sup> |
| &nbsp;&nbsp;&nbsp;**O'Haver** | 12/31/2024 | 24 mo. salary + 200% of target incentive | 30 mo. salary + 250% of target incentive + up to 30 mos. of COBRA reimbursement |
| &nbsp;&nbsp;&nbsp;**Farnsworth** | 12/31/2024 | 12 mo. salary | 24 mo. salary + 200% of target incentive + up to 24 mos. of COBRA reimbursement |
| &nbsp;&nbsp;&nbsp;**Nixon** | 12/31/2024 | 12 mo. salary | 24 mo. salary + 200% of target incentive + up to 24 mos. of COBRA reimbursement |
| &nbsp;&nbsp;&nbsp;**Ognall** | 12/31/2024 | 12 mo. salary | 24 mo. salary + 200% of target incentive + up to 24 mos. of COBRA reimbursement |
| &nbsp;&nbsp;&nbsp;**Shotwell** | 12/31/2024 | 12 mo. salary | 24 mo. salary + 200% of target incentive + up to 24 mos. of COBRA reimbursement |

---

(1) The agreements provide for at-will employment and are terminable by the Company or the executive at any time, with or without cause.

(2) Calculated based on base salary at the time of termination, and payable if the executive is terminated "without cause" or if the executive leaves for "good reason," as defined in the agreement.

(3) Calculated based on base salary at the time of termination, payable monthly over 18 months (or two years for Mr. O'Haver). This change in control benefit is payable only if the executive's employment is terminated following announcement of the proposed change in control to 18 months after the change in control transaction and it is paid in lieu of a severance benefit.

Employment agreements with our named executive officers also include the following provisions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A prohibition on competing with the Company during the time that the executive is receiving payment of a severance or change in control benefit

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Receipt of the change in control benefit is subject to a "double trigger" such that there must be a qualifying termination of employment in addition to a change in control event

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• A prohibition on solicitation of the Company's customers or employees for two years following the executive's departure

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**GRANTS OF PLAN-BASED AWARDS**

This table shows the plan-based awards granted to each named executive officer in the fiscal year ended December 31, 2022. The actual payouts under the annual non-equity incentive plans are shown in column (g) of the *Summary Compensation Table*.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | | Estimated Future Payouts Under<br>Non-Equity Incentive<br>Plan Awards | Estimated Future Payouts Under<br>Non-Equity Incentive<br>Plan Awards | Estimated Future Payouts Under<br>Non-Equity Incentive<br>Plan Awards | **All Other Stock**<br>**Awards: Number**<br>**of Shares of**<br>**Stock** | **Grant Date**<br>**Fair Value**<br>**of Stock** |
| **Name** | **Grant Date** | Threshold<br>($) | Target<br>($) | Maximum<br>($) | or Units<br>(#) | Awards<br>($) |
| (a) | (b) | (c)(1) | (d) | (e) | (i)(2) | (l)(3) |
| **O'Haver** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-Equity |  | $— | $1050000 | $1680000 |  |  |
| &nbsp;&nbsp;&nbsp;RSU | 2/28/22 |  |  |  | 98360 | $2099986 |
| **Farnsworth** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-Equity |  | $— | $408000 | $652800 |  |  |
| &nbsp;&nbsp;&nbsp;RSU | 2/28/22 |  |  |  | 30444 | $649979 |
| **Nixon** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-Equity |  | $— | $650000 | $1040000 |  |  |
| &nbsp;&nbsp;&nbsp;RSU | 2/28/22 |  |  |  | 51522 | $1099995 |
| **Ognall** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-Equity |  | $— | $322000 | $515200 |  |  |
| &nbsp;&nbsp;&nbsp;RSU | 2/28/22 |  |  |  | 16393 | $349991 |
| **Shotwell** |  |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Non-Equity |  | $— | $287000 | $401800 |  |  |
| &nbsp;&nbsp;&nbsp;RSU | 2/28/22 |  |  |  | 17564 | $374991 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;There is no minimum guaranteed payment or vesting. If performance under the non-equity incentive plan is below the threshold, the executive receives no cash incentive compensation.

(2)&nbsp;&nbsp;&nbsp;&nbsp;The shares underlying restricted stock units (RSU) reported in column (i) were issued under the 2013 Plan and vest 33.33% per year over three years, beginning one year following the grant date.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Column (l) shows the aggregate grant date fair value associated with RSUs, as determined in accordance with FASB ASC 718, Stock Compensation. The assumptions used to calculate fair value are described in the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

This table shows information concerning unvested restricted stock units held by each named executive officer as of December 31, 2022. All awards were made under the shareholder approved 2013 Plan.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Name** | **Number of Shares**<br>**or Units of Stock**<br>**That Have Not**<br>**Vested (#)** | **Market Value of**<br>**Shares or Units**<br>**of Stock That**<br>**Have Not Vested** | **Equity Incentive Plan Awards:**<br>**Number of Unearned Shares,**<br>**Units or Other Rights That Have Not Vested (#)** | **Equity Incentive Plan Awards:**<br>**Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested** |
| (a)(1) | (g)(2) | (h)(3) | (i)(4) | (j)(5) |
| **O'Haver** |  |  |  |  |
| 3/2/20 |  |  | 45595 | $813871 |
| 3/2/20 |  |  | 45595 | $813871 |
| 3/2/20 | 13027 | $232532 |  |  |
| 3/8/21 |  |  | 40630 | $725246 |
| 3/8/21 |  |  | 40630 | $725246 |
| 3/8/21 | 23216 | $414406 |  |  |
| 2/28/22 | 98360 | $1755726 |  |  |
| **Farnsworth** |  |  |  |  |
| 3/2/20 | 6720 | $119952 |  |  |
| 3/2/20 |  |  | 10080 | $179928 |
| 3/2/20 |  |  | 10080 | $179928 |
| 3/8/21 | 11976 | $213772 |  |  |
| 3/8/21 |  |  | 8982 | $160329 |
| 3/8/21 |  |  | 8982 | $160329 |
| 2/28/22 | 30444 | $543425 |  |  |
| **Nixon** |  |  |  |  |
| 3/2/20 | 8271 | $147637 |  |  |
| 3/2/20 |  |  | 12406 | $221447 |
| 3/2/20 |  |  | 12406 | $221447 |
| 3/8/21 | 20268 | $361784 |  |  |
| 3/8/21 |  |  | 15201 | $271338 |
| 3/8/21 |  |  | 15201 | $271338 |
| 2/28/22 | 51522 | $919668 |  |  |
| **Ognall** |  |  |  |  |
| 3/2/20 | 3618 | $64581 |  |  |
| 3/2/20 |  |  | 5428 | $96890 |
| 3/2/20 |  |  | 5428 | $96890 |
| 3/8/21 | 6448 | $115097 |  |  |
| 3/8/21 |  |  | 4836 | $86323 |
| 3/8/21 |  |  | 4836 | $86323 |
| 2/28/22 | 16393 | $292615 |  |  |
| **Shotwell** |  |  |  |  |
| 3/2/20 | 4394 | $78433 |  |  |
| 3/2/20 |  |  | 6591 | $117649 |
| 3/2/20 |  |  | 6591 | $117649 |
| 3/8/21 | 6909 | $123326 |  |  |
| 3/8/21 |  |  | 5182 | $92499 |
| 3/8/21 |  |  | 5182 | $92499 |
| 2/28/22 | 17564 | $313517 |  |  |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

(1) The grant date of each award is noted below the name of each named executive officer.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Number of shares of restricted stock units that have not vested as of December 31, 2022, each unit vests 33.3% per year over a three-year period, beginning one year following the date of grant.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Aggregate market value of restricted stock units that have not vested as of December 31, 2022, using the closing price of Umpqua stock of $17.85 on December 31, 2022.

(4)&nbsp;&nbsp;&nbsp;&nbsp;Shares issuable upon vesting of performance based awards (assuming target vesting of 100%).

(5)&nbsp;&nbsp;&nbsp;&nbsp;Aggregate market value of performance share awards that have not vested as of December 31, 2022, using the closing price of Umpqua stock of $17.85 on December 31, 2022 (assuming target vesting of 100%).

"IN THE MONEY" OPTIONS AT FISCAL YEAR-END

There were no stock options outstanding as of December 31, 2022.

OPTION EXERCISES AND STOCK VESTED

This table shows the number of restricted shares (RSUs and PSAs) that vested during the fiscal year ended December 31, 2022. In each case the Company received all required tax withholding. None of the named executive officers exercised stock options in 2022.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name** | **Number of Shares**<br>**Acquired**<br>**on Vesting** | **Value Realized**<br>**on Vesting** |
| &nbsp;&nbsp;&nbsp;(a) | (d)(1) | (e)(2) |
| &nbsp;&nbsp;&nbsp;**O'Haver** | 131905 | $3021827 |
| &nbsp;&nbsp;&nbsp;**Farnsworth** | 37500 | $852041 |
| &nbsp;&nbsp;&nbsp;**Nixon** | 47330 | $1068970 |
| &nbsp;&nbsp;&nbsp;**Ognall** | 21304 | $484517 |
| &nbsp;&nbsp;&nbsp;**Shotwell** | 27708 | $620246 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Each of the named executive officers received a smaller "net" number of shares after tax withholding.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Includes the amount of deferred dividends paid upon vesting to O'Haver--$279,429, Farnsworth--$73,590, Nixon--$89,225, Ognall--$42,195, and Shotwell--$56,161.

PENSION BENEFITS

There were no pension benefits outstanding for the named executive officers.

NONQUALIFIED DEFERRED COMPENSATION

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name** | Plan | **Executive**<br>**Contributions**<br>**in 2022** | **Registrant**<br>**Contributions**<br>**in 2022** | **Aggregate**<br>**Earnings**<br>**in 2022** | **Aggregate**<br>**Balance at**<br>**December 31,**<br>**2022** |
| &nbsp;&nbsp;&nbsp;(a) |  | (b)(1) | (c) | (d)(2) | (e) |
| **O'Haver** | SRP/DCP | $- | $- | $(32500) | $174739 |
| **Farnsworth** | SRP/DCP | $- | $- | $(7016) | $100076 |
| **Nixon** | SRP/DCP | $471250 | $- | $(85338) | $631050 |
| **Ognall** | SRP/DCP | $- | $- | $(12919) | $62787 |
| **Shotwell** | SRP/DCP | $145623 | $- | $(177165) | $835368 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Discretionary deferrals from salary or annual incentive compensation. All amounts deferred are included in the Salary or Non-Equity Incentive Plan Compensation disclosures in the Summary Compensation Table.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

(2)&nbsp;&nbsp;&nbsp;&nbsp;Amounts reflect change in market value including dividends paid and interest earned, but exclude fees paid by participants.

POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL

The following table shows the benefits payable to the named executive officers upon termination of employment for various reasons, including a change in control of the Company. See the summary of the executive's employment agreement following the *Summary Compensation Table* for a description of how the severance and change in control benefits are calculated. For purposes of this table, it is assumed that the change in control and termination of employment occurred on December 31, 2022.

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name of Executive and Triggering Events** | **Cash** | **Equity Value (1)** |
| &nbsp;&nbsp;&nbsp;**O'Haver** | | |
| &nbsp;&nbsp;&nbsp;Death/disability |  | $2415306 |
| &nbsp;&nbsp;&nbsp;Involuntary termination (35) | $4200000 |  |
| &nbsp;&nbsp;&nbsp;Qualifying termination following change in control (45) | $5296967 | $3725170 |
| &nbsp;&nbsp;&nbsp;**Farnsworth** |  |  |
| &nbsp;&nbsp;&nbsp;Death/disability (2) | $100000 | $533961 |
| &nbsp;&nbsp;&nbsp;Involuntary termination (35) | $510000 |  |
| &nbsp;&nbsp;&nbsp;Qualifying termination following change in control (45) | $1884278 | $1014237 |
| &nbsp;&nbsp;&nbsp;**Nixon** |  |  |
| &nbsp;&nbsp;&nbsp;Death/disability |  | $746801 |
| &nbsp;&nbsp;&nbsp;Involuntary termination (35) | $650000 |  |
| &nbsp;&nbsp;&nbsp;Qualifying termination following change in control (45) | $2634299 | $2414659 |
| &nbsp;&nbsp;&nbsp;**Ognall** |  |  |
| &nbsp;&nbsp;&nbsp;Death/disability |  | $287518 |
| &nbsp;&nbsp;&nbsp;Involuntary termination (35) | $460000 |  |
| &nbsp;&nbsp;&nbsp;Qualifying termination following change in control (45) | $1612278 | $546103 |
| &nbsp;&nbsp;&nbsp;**Shotwell** |  |  |
| &nbsp;&nbsp;&nbsp;Death/disability |  | $451821 |
| &nbsp;&nbsp;&nbsp;Involuntary termination (35) | $410000 |  |
| &nbsp;&nbsp;&nbsp;Qualifying termination following change in control (45) | $1428675 | $788131 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Dollar value of RSU and PSAs that would vest upon the event calculated at $17.85 per share, the closing price of Umpqua's stock on December 31, 2022.

(2)&nbsp;&nbsp;&nbsp;&nbsp;Bank owned life insurance (BOLI) death benefit, providing for a payment if death occurs while employed. Excludes amounts payable under company-wide group life and disability plans.

(3)&nbsp;&nbsp;&nbsp;&nbsp;Involuntary termination includes termination without "cause" by the Company and termination for "good reason" (material, adverse change in title, authority, duties or responsibility; material reduction in base salary and target annual incentive not shared by other executives; involuntary relocation; or material breach of employment agreement) by the executive officer. Cash payments equal two years' base salary and two years' target incentive (Mr. O'Haver) or one years' base salary (all other named executive officers) paid over time.

(4) Triggering events are termination without "cause" or executive termination for "good reason" within eighteen months following a change in control. Cash payments would have been 30 months' base salary, 250% of target incentive and up to 30 months COBRA reimbursement (Mr. O'Haver) and two years' base salary, 200% of target incentive and up to 24 months COBRA reimbursement (all other named executive officers). Change in control termination benefits are in lieu of severance benefits and are paid over time.

(5) Receipt of benefits are conditioned upon the executive not competing with the Company or soliciting the Company's employees or customers and releasing claims against the Company.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

(6) The amounts payable to the NEOs in the event of a change-in-control of the company may be subject to reduction under Sections 280G and 4999 of the Internal Revenue Code.

**PAY RATIO DISCLOSURE**

The 2022 total compensation for our median employee was $67,584 and was $4,414,231 for our CEO. The resulting ratio of our CEO's pay to the pay of our median employee for 2021 is 65 to 1.

We identified the median employee by examining the 2022 total compensation for all individuals, excluding our CEO, who were employed by us on December 31, 2022. We included all employees, whether employed on a full-time, part-time or seasonal basis. We annualized the compensation for full-time and part-time employees that were not employed by us for all of 2022. We calculated the median employee's annual total compensation using the same methodology we use for our named executive officers as set forth in the Summary Compensation Table in this proxy statement.

**DIRECTOR COMPENSATION**

In 2022, the Committee affirmed the following director compensation philosophy:

Umpqua's director compensation is designed to align the Board of Directors with its shareholders and other stakeholders, and to attract, motivate, and retain high performing members critical to our Company's success. Our director compensation philosophy is: we pay our directors competitively when compared to similar sized and performing financial services organizations.

Umpqua is committed to providing competitive compensation to our directors. Within that context, our prime objectives are to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Attract and retain highly qualified people that portray our culture and values

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Ensure the preservation and creation of value for our shareholders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Align the interests of our directors, executives, and employees with our shareholders and other stakeholders

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Conform to the highest levels of fairness, ethics, transparency, regulatory compliance and sound governance practice

**2022 Process**

The Compensation Committee annually reviews director compensation with its consultant, using the same peer group as the executive compensation peers. Any change to director compensation is first reviewed by the Committee prior to Board review and approval. Due to the pending Columbia merger, the Compensation Committee decided to maintain director compensation at the same level as 2021, pay all director compensation in cash and pay in three installments—May and October 2022 and January 2023.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**2022 Schedule of Directors' Fees**

The Board approved the following compensation schedule, consistent with 2021 and with $10,000 paid to any director serving on the FinPac board. For the 2022-2023 director service year, the Board approved payments in cash rather than equity due to the pending merger with Columbia. We made payments total 75% of the scheduled compensation in 2022 with the remainder paid in 2023.

---

| | |
|:---|:---|
| | **Total Compensation** |
| &nbsp;&nbsp;&nbsp;**Board Chair** | $207500 |
| &nbsp;&nbsp;&nbsp;**Audit and Compliance Committee Chair** | $163500 |
| &nbsp;&nbsp;&nbsp;**Other Committee Chairs** | $158000 |
| &nbsp;&nbsp;&nbsp;**Participating Director** | $147500 |

---

**DIRECTOR COMPENSATION**

The following table summarizes the compensation paid by the Company to non-employee directors for the year ending December 31, 2022.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Fees Earned or** | **Stock** | **All Other** | |
| | **Paid in Cash** | **Awards** | **Compensation** | **Total** |
| &nbsp;&nbsp;&nbsp;**Name** | **($)** | **($)** | **($)** | **($)** |
| &nbsp;&nbsp;&nbsp;(a)(1) | (b)(2) | (c) | (g) (3) | (h) |
| &nbsp;&nbsp;&nbsp;**Peggy Fowler** | $155625 | $— | $6984 | $162609 |
| &nbsp;&nbsp;&nbsp;**Stephen Gambee** | $110625 | $— | $7092 | $117717 |
| &nbsp;&nbsp;&nbsp;**James Greene** | $110625 | $— | $7092 | $117717 |
| &nbsp;&nbsp;&nbsp;**Luis Machuca** | $118500 | $— | $5317 | $123817 |
| &nbsp;&nbsp;&nbsp;**Maria Pope** | $110625 | $— | $7092 | $117717 |
| &nbsp;&nbsp;&nbsp;**John Schultz** | $110625 | $— | $7092 | $117717 |
| &nbsp;&nbsp;&nbsp;**Susan Stevens** | $126000 | $— | $8077 | $134077 |
| &nbsp;&nbsp;&nbsp;**Hilliard Terry III** | $122625 | $— | $5503 | $128128 |
| &nbsp;&nbsp;&nbsp;**Bryan Timm** | $118500 | $— | $7597 | $126097 |
| &nbsp;&nbsp;&nbsp;**Anddria Varnado** | $110625 | $— | $4964 | $115589 |

---

(1)&nbsp;&nbsp;&nbsp;&nbsp;Director O'Haver is omitted from this table because he received no separate compensation for Board service, and his compensation is disclosed in the Summary Compensation Table.

(2)&nbsp;&nbsp;&nbsp;&nbsp;2022 Directors fees were paid in cash.

(3) Amounts in column (g) are dividends received upon the vesting of equity awards.

Expenses incurred by directors in connection with attending meetings, such as travel costs and meals, are reimbursed by the Company. Such expenses are integrally and directly related to the performance of the directors' duties, and not personal benefits or perquisites.

We also offer a nonqualified deferred compensation plan to non-employee directors. Under this plan, each director may annually elect to place all or part of his or her director compensation for the coming year into the deferred plan. Under the plan, a director may choose to have distributions from the plan paid in a lump sum or in annual installments over three, five or ten-year periods following the date that the director leaves the Board. Shares issuable under equity awards that are deferred are held by a trustee and remain subject to the claims of general creditors of the Company. The dividends paid on those shares are credited to the director's account, but no interest or other compensation or earnings are paid by the Company with respect to the deferred account. Directors Gambee and Machuca have participated in the deferred compensation plan.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION**

No member of the Compensation Committee is now, or has ever been, an officer or employee of the Company. No member of the Compensation Committee had any relationship with the Company or any of its subsidiaries during 2022 pursuant to which disclosure would be required under applicable rules of the SEC pertaining to the disclosure of transactions with related persons. No Company executive officer currently serves or served during 2022 on the board of directors or compensation committee of another company at any time during which an executive officer of such other company served on the Company's Board or Compensation Committee.

**COMPENSATION COMMITTEE REPORT**

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K.

Based on the foregoing review and discussions, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this annual report on Form 10-K for the year ended December 31, 2022.

Submitted by the Compensation Committee:

Luis Machuca (Chair)

Maria Pope

John Schultz

Bryan Timm

Anddria Varnado

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**

***Equity Compensation Plan Information***

The following table sets forth information about equity compensation plans that provide for the award of securities or the grant of options to purchase securities to employees and directors of Umpqua and its subsidiaries and predecessors by merger that were in effect at December 31, 2022.

---

| | | | |
|:---|:---|:---|:---|
| | **Equity Compensation Plan Information** | **Equity Compensation Plan Information** | **Equity Compensation Plan Information** |
| | (A) | (B) | (C) |
| (shares in thousands)<br>Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans excluding securities reflected in column (A) |
| Equity compensation plans approved by security holders |  |  |  |
| 2013 Incentive Plan <sup>(1)</sup> | 390 | $— | 1804 |
| Equity compensation plans not approved by security holders |  |  |  |
| Total | 390 | $— | 1804 |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<sup>(1)</sup>Shareholders approved the Company's 2013 Incentive Plan on April 16, 2013, and approved an amendment to the 2013 plan to increase the number of authorized shares at the 2016 annual meeting of shareholders. The 2013 Plan authorizes the issuance of equity awards to directors and employees and reserves 12.0 million shares of the Company's common stock for issuance under the plan (up to 6 million shares for "full value awards" as described below). With the adoption of the 2013 Plan, no additional awards are being issued from prior plans. Under the terms of the 2013 Plan, restricted stock awards generally vest ratably over a three year period and performance share awards generally cliff vest at the end of a three-year performance period. The 2013 Plan weights "full value awards" (restricted stock and performance share awards) as two shares issued from the total authorized under the 2013 Plan; we have issued only full value awards under the 2013 Plan. For purposes of column (B) above, performance share awards are excluded from the calculation. For purposes of column (C) above, the total number of shares available for future issuance under the 2013 Plan for full value awards was 902,000 at December 31, 2022. At December 31, 2022, 390,000 performance share awards were outstanding and subject to satisfaction of performance based on the Company's total shareholder return or return on average tangible shareholders equity relative to a peer group. At December 31, 2022, 835,000 full value shares issued as restricted stock were outstanding, but subject to forfeiture in the event that time based conditions are not met.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**Security Ownership of Management and Others**

The following table sets forth the shares of common stock beneficially owned as of February 16, 2023, by each director and each named executive officer, the directors and executive officers as a group and those persons known to beneficially own more than 5% of Umpqua's common stock.

---

| | | |
|:---|:---|:---|
| | **Amount and nature of**<br>**beneficial** | **% of** |
| Name and address of beneficial owner of common stock\* | **ownership\*\*** | **class** |
| &nbsp;&nbsp;&nbsp;***Named Executive Officers*** |  |  |
| &nbsp;&nbsp;&nbsp;**Cort O'Haver (1)** | 245079 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Ronald Farnsworth (2)** | 190128 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Tory Nixon (3)** | 108011 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Andrew Ognall (4)** | 90542 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**David Shotwell (5)** | 78929 | \*\*\* |
| &nbsp;&nbsp;&nbsp;***Directors (Mr. O'Haver is listed above with NEOs)*** |  |  |
| &nbsp;&nbsp;&nbsp;**Stephen Gambee (6)** | 133117 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Bryan Timm** | 115663 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Peggy Fowler** | 111722 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Luis Machuca** | 86055 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Susan Stevens** | 70594 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Hilliard Terry, III** | 66003 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**James Greene** | 65894 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Maria Pope** | 62803 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**John Schultz** | 48063 | \*\*\* |
| &nbsp;&nbsp;&nbsp;**Anddria Varnado** | 24681 | \*\*\* |
| &nbsp;&nbsp;&nbsp;***Directors and Executive Officers*** |  |  |
| &nbsp;&nbsp;&nbsp;**All directors and executive officers as a group--18 persons (7)** | 1656130 | \*\*\* |
| &nbsp;&nbsp;&nbsp;***Beneficial Owners of more than 5% of Umpqua common stock*** |  |  |
| &nbsp;&nbsp;&nbsp;**The Vanguard Group (8)** | 21864775 | 10.07% |
| &nbsp;&nbsp;&nbsp;&nbsp;**100 Vanguard Blvd., Malvern, PA 19355** |  |  |
| &nbsp;&nbsp;&nbsp;**BlackRock, Inc. (9)** | 20634043 | 9.51% |
| &nbsp;&nbsp;&nbsp;&nbsp;**55 East 52nd Street, New York, NY 10055** |  |  |
| &nbsp;&nbsp;&nbsp;**Massachusetts Financial Services Company (10)** | 13487897 | 6.21% |
| &nbsp;&nbsp;&nbsp;&nbsp;**111 Huntington Avenue, Boston, MA 02199** |  |  |
| &nbsp;&nbsp;&nbsp;**Macquarie Management Holdings Inc. (11)** | 12367145 | 5.70% |
| &nbsp;&nbsp;&nbsp;&nbsp;**50 Martin Place, Sydney, New South Wales, Australia** |  |  |

---

\* The address for our officers and directors is care of Umpqua Holdings Corporation, 5885 Meadows Road, Suite 400, Lake Oswego, Oregon 97035.

\*\* Shares of no par value common stock held directly with sole voting and investment power unless otherwise indicated. Fractional shares in plans have been rounded down to the nearest whole share. Includes shares held indirectly in deferred compensation plans, 401(k) plans, supplemental retirement plans, and IRAs. Includes shares for which the director or executive officer has the right to acquire beneficial ownership within 60 days of the date of this proxy statement.

\*\*\* Less than 1.0%.

(1)Excludes 249,631 shares of unvested performance or restricted unit awards not eligible to vote.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

(2)Includes shares held with or by the individual's spouse. Excludes 64,408 shares of unvested performance or restricted unit awards not eligible to vote.

(3)Excludes 99,696 shares of unvested performance or restricted unit awards not eligible to vote.

(4)Excludes 34,680 shares of unvested performance or restricted unit awards not eligible to vote.

(5)Excludes 38,709 shares of unvested performance or restricted unit awards not eligible to vote.

(6)Includes 17,500 shares held by an entity Mr. Gambee is deemed to control.

(7)See footnotes (1) - (6); excludes an additional 50,317 shares of unvested performance or restricted unit awards not eligible to vote.

(8)Information from Schedule 13G/A filed on February 9, 2023, for holdings as of December 31, 2022, which indicates such person has the sole voting power for zero shares, shared voting power for 72,189 shares, sole dispositive power for 21,579,985 shares and shared dispositive power for 284,790 shares.

(9)Information from Schedule 13G/A filed January 24, 2023, for holdings as of December 31, 2022, which indicates such person has sole voting power for 19,626,502 shares and sole dispositive power for 20,643,043 shares.

(10)Information from Schedule 13G filed February 8, 2023, for holdings as of December 31, 2022, which indicates such person has sole voting power for 13,461,860 shares and sole dispositive power for 13,487,897 shares.

(11)Information from Schedule 13G/A filed February 14, 2023, for holdings as of December 31, 2022, which indicates such person has shared voting power for zero shares and shared dispositive power for zero shares, and reports that Macquarie Management Holdings Inc. and Macquarie Investment Management Business Trust have sole voting power of 12,312,349 shares and sole dispositive power of 12,312,349 shares. The principal business address of Macquarie Management Holdings Inc. and Macquarie Investment Management Business Trust is 2005 Market Street, Philadelphia, PA 19103.

**ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE**

**Transactions with Related Persons**

The Company has a formal process with respect to the review and approval of loans extended by Umpqua Bank to related persons, as described below. In accordance with our written procedures for the review of transactions with related persons and NASDAQ Listing Rules, all other transactions with related persons must be approved by disinterested members of the Board's Audit and Compliance Committee after a review of (i) the related person's relationship to the Company; (ii) the proposed aggregate value of such transaction; (iii) the approximate dollar value of the transaction to the related person; (iv) the benefits to the Company of the proposed transaction and the availability and price of comparable products or services; (v) an assessment of whether the proposed transaction is on terms that are comparable to the terms available to an unrelated third party or to employees generally; and (vi) management's recommendation.

Umpqua Holdings Corporation does not extend loans or credit to any officers or directors. However, many of our directors and officers, their immediate family members and businesses with which they are associated, borrow from and have deposits with Umpqua Bank. All such loans are made in the ordinary course of Umpqua Bank's business, and on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender, Umpqua Bank. These loans did not and do not involve more than the normal risk of collection or present other unfavorable features to Umpqua Bank.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

Loans by Umpqua Bank to directors and designated executive officers are governed by Regulation O, 12 CFR Part 215. Under Umpqua Bank's procedures, the Chief Credit Officer can approve individual credits subject to Regulation O up to a total credit exposure of $500,000 and report those loans to the Enterprise Risk and Credit Committee. All Regulation O credits must be made on non-preferential terms, and all Regulation O credits with a total credit exposure in excess of $500,000 must be approved by the Committee, with the number of affirmative votes representing at least a majority of the Board. Umpqua Bank also requires Regulation O applicants to submit a detailed financial statement at the time of application. Regulation O limits loans to an executive officer, including all loans personally guaranteed by the officer, to $100,000, unless the loan is (a) made to finance the purchase, construction, or improvement of the officer's primary or secondary residence and is secured by a first lien on such residence, (b) made to finance the education of the officer's children, or (c) fully secured by a deposit account, U.S. Treasury bonds, or certain U.S. government guarantees. All of our named executive officers are designated as executive officers of Umpqua Bank under Regulation O. In no case may the total loans to any designated executive officer exceed 5% of Umpqua Bank's capital absent the approval of a majority of the Company's disinterested directors. Each extension of credit to a designated executive officer must contain a written demand clause stating that the extension of credit will, at the option of Umpqua Bank, become due and payable at any time the officer is indebted to any other bank or banks in an aggregate amount greater than the amount specified for a category of credit in paragraph 215.5(c) of Regulation O.

As of December 31, 2022, the sum of committed but undisbursed funds plus the outstanding balances of all loans to Regulation O executive officers, directors, principal shareholders and their businesses was $2.5 million, which represented approximately 0.10% of our consolidated shareholders' equity and 0.07% of our risk-based capital at that date. All such loans are currently in good standing and are being paid in accordance with their terms.

**Director Independence**

The Board has determined that all directors except our CEO Mr. O'Haver qualify as "independent," as defined in NASDAQ listing rules. In determining the independence of directors, we considered the responses to annual Director & Officer Questionnaires that indicated no transactions between the Company or its affiliates and directors other than banking transactions with Umpqua Bank and arrangements under which Umpqua Bank purchases waste disposal services in southern Oregon that, until its sale in October 2022, was affiliated with Mr. Gambee. We paid waste disposal fees to such company at standard, regulated rates, which totaled $6,130.96 in 2022. The Board also considered the lack of any other reported transactions or arrangements; directors are required to report conflicts of interest and transactions with the Company pursuant to our Corporate Governance Principles and Code of Ethics, which can be found on our website https://www.umpquabank.com/investor-relations. See **Transactions with Related Persons** above for additional information.

**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**

***Independent Registered Public Accounting Firm***

Deloitte has audited our consolidated financial statements and internal controls over financial reporting as of and for the year ended December 31, 2022.

INDEPENDENT AUDITORS' FEES

The following table shows the fees incurred for professional services provided by Deloitte for 2022 and 2021:

---

| | | |
|:---|:---|:---|
| | **2022** | **2021** |
| &nbsp;&nbsp;&nbsp;Audit Fees (a) | $2342 | $2012 |
| &nbsp;&nbsp;&nbsp;Audit-Related Fees (b) | $56 | $52 |
| &nbsp;&nbsp;&nbsp;All Other Fees (c) | $2 | $2 |
| &nbsp;&nbsp;&nbsp;Tax Fees (d) | $111 | $76 |
| &nbsp;&nbsp;&nbsp;Total Fees | $2511 | $2142 |

---

---

| | | |
|:---|:---|:---|
| | **2022** | **2021** |
| &nbsp;&nbsp;&nbsp;Ratio of All Other Fees to Total Fees | 0.08% | 0.09% |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

(a)&nbsp;&nbsp;&nbsp;&nbsp;Audit Fees for 2022 include: (i) the integrated audits of the Company's annual consolidated financial statements and internal control over financial reporting as of and for the year ended December 31, 2022, including compliance with the FDIC Improvement Act; (ii) reviews of the Company's quarterly consolidated financial statements for the periods ended March 31, June 30, and September 30, 2022; and (iii) HUD and GNMA Audits for December 31, 2022.

(b)&nbsp;&nbsp;&nbsp;&nbsp;Audit-Related Fees for 2022 represent billings by Deloitte for services provided during the twelve months ended December 31, 2022, including the audit of the Umpqua Bank 401(k) and Profit Sharing Plan for the plan year ended December 31, 2021, audited during 2022.

(c)&nbsp;&nbsp;&nbsp;&nbsp;All Other Fees for 2022 represent all other billings by Deloitte for the twelve months ended December 31, 2022, including subscriptions to accounting research tools.

(d)&nbsp;&nbsp;&nbsp;&nbsp;Tax Fees include fees billed for professional services rendered for tax compliance, tax advice and tax planning.

The Audit and Compliance Committee discussed these services with the independent auditors and Company management and determined that they are permitted under the rules and regulations concerning auditor independence promulgated by the SEC to implement the Sarbanes-Oxley Act of 2002, as well as the American Institute of Certified Public Accountants.

PRE-APPROVAL POLICY

The Audit and Compliance Committee pre-approved the services performed by Deloitte for the 2022 audit engagement in May 2022 in accordance with the Committee's pre-approval policy and procedures. This policy describes the permitted audit, audit-related, tax, and other services (collectively, the "Permitted Services") that the independent auditor may perform. The policy requires that a description of the services expected to be performed by the independent auditor in each of the disclosure categories in the above table be provided to the Committee for pre-approval.

Services provided by the independent auditor during the year that are included in the Permitted Services list were pre-approved following the policies and procedures of the Audit and Compliance Committee. Any requests for audit, audit-related, tax, and other services not contemplated on the Permitted Services list must be submitted to the Committee for specific pre-approval and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been delegated to the Chair of the Committee. The Chair must update the Committee at the next regularly scheduled meeting of any services that received his pre-approval.

In addition, although not required by the rules and regulations of the SEC, the Audit and Compliance Committee generally requests a range of fees associated with each proposed service. Providing a range of fees for a service incorporates appropriate oversight and control of the independent auditor relationship, while permitting the Company to receive immediate assistance from the independent auditor when time is of the essence.

The policy contains a *de minimis* provision to provide retroactive approval for permissible non-audit services if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)The service is not an audit, review or other attest service; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)The aggregate amount of all such services provided under this provision does not exceed $5,000 per project if approved by the Principal Financial Officer or Principal Accounting Officer or $50,000 per project if approved by the Chair of the Audit and Compliance Committee.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**PART IV**

**ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Financial Statements:

The consolidated financial statements are included as <u>[Item 8](#i4e8ac2707a6d44908312b6c1bbd97512_139)</u> of this Form 10-K.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)Financial Statement Schedules:

All schedules have been omitted because the information is not required, not applicable, not present in amounts sufficient to require submission of the schedule, or is included in the financial statements or notes thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)The exhibits filed as part of this report and incorporated herein by reference to other documents are listed on the Exhibit Index to this annual report on Form 10-K, immediately before the signatures.

**ITEM 16. FORM 10-K SUMMARY.**

None.

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**EXHIBIT INDEX**

---

| | | |
|:---|:---|:---|
| Exhibit

# | Description | Location |
| 2.1(a) | <u>[Agreement and Plan of Merger by and among Umpqua Holdings Corporation, Columbia Banking System, Inc, and Cascade Merger Sub, Inc..](https://www.sec.gov/Archives/edgar/data/0001077771/000114036121034624/ny20000977x8_ex2-1.htm)</u> | Incorporated by reference to Exhibit 2.1 to Form 8-K filed October 15, 2021 |
| 2.1(b) | <u>[Amendment No. 1 to Agreement and Plan of Merger](https://www.sec.gov/Archives/edgar/data/1077771/000114036123001115/brhc10046453_ex2-1.htm)</u> | Incorporated by reference to Exhibit 2.1 to Form 8-K filed January 10, 2023 |
| 3.1 | <u>[Restated Articles of Incorporation, as amended](http://www.sec.gov/Archives/edgar/data/1077771/000107777118000082/umpqexh31restatedarticleso.htm)</u> | Incorporated by reference to Exhibit 3.1 to Form 8-K filed April 23, 2018 |
| 3.2 | <u>[Bylaws, as amended](http://www.sec.gov/Archives/edgar/data/1077771/000107777120000027/umpqex992uhcbylaws3-19.htm)</u> | Incorporated by reference to Exhibit 99.2 to Form 8-K filed March 24, 2020 |
| 4.1 | <u>[Specimen Common Stock Certificate](http://www.sec.gov/Archives/edgar/data/1077771/0000896595-99-000028.txt)</u> | Incorporated by reference to Exhibit 4 to the Registration Statement on Form S-8 (No. 333-77259) filed with the SEC on April 28, 1999 |
| 4.2 | The Company agrees to furnish upon request to the Commission a copy of each instrument defining the rights of holders of senior and subordinated debt of the Company. |  |
| 4.3 | <u>[Description of Registrant's Securities](https://www.sec.gov/Archives/edgar/data/1077771/000107777120000014/umpq-20191231xex43ng.htm)</u> | Incorporated by reference to Exhibit 4.3 to Form 10-K filed February 28, 2020 |
| 10.1\*\* | <u>[Employment Agreement dated effective April 1, 2021 between the Company and Cort O'Haver](https://www.sec.gov/Archives/edgar/data/0001077771/000107777121000019/exhibit101formea2021ceo.htm)</u> | Incorporated by reference to Exhibit 10.1 to Form 8-K filed April 6, 2021 |
| 10.2\*\* | <u>Form of [Employment Agreement dated effective April 1, 2021 with Executive Officers (including Ron Farnsworth](https://www.sec.gov/Archives/edgar/data/0001077771/000107777121000019/exhibit102formea2021neo.htm), Neal McLaughlin, Frank Namdar, Tory Nixon, Andrew Ognall, David Shotwell)</u> | Incorporated by reference to Exhibit 10.2 to Form 8-K filed April 6, 2021 |
| 10.3\*\* | <u>[Employment Agreement dated effective April 1, 2021 between Umpqua Bank and Lisa White](https://www.sec.gov/Archives/edgar/data/1077771/000107777122000011/umpq-20211231xex103.htm)</u> | Incorporated by reference to Exhibit 10.3 to Form 10-K filed February 25, 2022 |
| 10.4\*\* | <u>[Umpqua Holdings Corporation 2013 Incentive Plan, effective December 14, 2012, as amended](http://www.sec.gov/Archives/edgar/data/1077771/000107777117000059/umpq-2016123110kxex1010201.htm)</u> | Incorporated by reference to Exhibit 10.10 to Form 10-K filed February 23, 2017 |
| 10.5.a\*\* | <u>[Form of 2022 Restricted Stock Unit Award Agreement under 2013 Incentive Plan](https://www.sec.gov/Archives/edgar/data/1077771/000107777122000011/umpq-20211231xex105a.htm)</u> | Incorporated by reference to Exhibit 10.5.a to Form 10-K filed February 25, 2022 |
| 10.5.b\*\* | <u>[Form of Notice of Restricted Stock Unit Award](https://www.sec.gov/Archives/edgar/data/1077771/000107777122000011/umpq-20211231xex105b.htm)</u> | Incorporated by reference to Exhibit 10.5.b to Form 10-K filed February 25, 2022 |
| 10.5.c\*\* | <u>[Form of 2021 Notice of Restricted Stock Award](https://www.sec.gov/Archives/edgar/data/1077771/000107777121000011/umpq-20201231xex106a.htm)</u> | Incorporated by reference to Exhibit 10.6.a to Form 10-K filed February 25, 2021 |
| 10.5.d\*\* | <u>[Form of 2021 Notice of Performance (TSR) Share Award](https://www.sec.gov/Archives/edgar/data/1077771/000107777121000031/umpq-20210331xex101.htm)</u> | Incorporated by reference to Exhibit 10.1 to Form 10-Q filed May 6, 2021 |
| 10.5.e\*\* | <u>[Form of 2021 Notice of Performance (ROATCE) Share Award](https://www.sec.gov/Archives/edgar/data/1077771/000107777121000061/umpq-20210930xex101.htm)</u> | Incorporated by reference to Exhibit 10.1 to Form 10-Q filed November 4, 2021 |
| 21.1 | <u>[Subsidiaries of the Registrant](umpq-20221231xex211.htm)</u> | Filed herewith |
| 23.1 | <u>[Consent of Independent Registered Public Accounting Firm - Deloitte & Touche LLP](umpq-20221231xex231.htm)</u> | Filed herewith |
| 31.1 | <u>[Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002](umpq-20221231xex311.htm)</u> | Filed herewith |
| 31.2 | <u>[Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002](umpq-20221231xex312.htm)</u> | Filed herewith |
| 31.3 | <u>[Certification of Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act of 2002](umpq-20221231xex313.htm)</u> | Filed herewith |

---

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

---

| | | |
|:---|:---|:---|
| Exhibit

# | Description | Location |
| 32 | <u>[Certification of Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](umpq-20221231xex32.htm)</u> | Filed herewith |
| 101.INS | Inline XBRL Instance Document - The instance document does not appear in the interactive file because its XBRL tags are embedded within the Inline XBRL document | Filed herewith |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed herewith |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed herewith |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | Filed herewith |

---

\*\*Indicates compensatory plan or arrangement

------

<u>[**Table of Contents**](#i4e8ac2707a6d44908312b6c1bbd97512_7)</u>

**SIGNATURES** 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Umpqua Holdings Corporation has duly caused this Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized on February 24, 2023.

**UMPQUA HOLDINGS CORPORATION** (Registrant)

---

| | | |
|:---|:---|:---|
| /s/ Cort L. O'Haver | /s/ Cort L. O'Haver | February 24, 2023 |
| Cort L. O'Haver, President and Chief Executive Officer | Cort L. O'Haver, President and Chief Executive Officer |  |
| **Signature** | **Title** | **Date** |
| /s/ Cort L. O'Haver | President, Chief Executive Officer and Director | February 24, 2023 |
| Cort L. O'Haver | (Principal Executive Officer) |  |
| /s/ Ronald L. Farnsworth | Executive Vice President, Chief Financial Officer | February 24, 2023 |
| Ronald L. Farnsworth | (Principal Financial Officer) |  |
| /s/ Lisa M. White | Executive Vice President, Corporate Controller | February 24, 2023 |
| Lisa M. White | (Principal Accounting Officer) |  |
| /s/ Peggy Y. Fowler | Chair | February 24, 2023 |
| Peggy Y. Fowler |  |  |
|  | Director | February 24, 2023 |
| Stephen M. Gambee |  |  |
| /s/ James S. Greene | Director | February 24, 2023 |
| James S. Greene |  |  |
| /s/ Luis F. Machuca | Director | February 24, 2023 |
| Luis F. Machuca |  |  |
| /s/ Maria M. Pope | Director | February 24, 2023 |
| Maria M. Pope |  |  |
| /s/ John F. Schultz | Director | February 24, 2023 |
| John F. Schultz |  |  |
| /s/ Susan F. Stevens | Director | February 24, 2023 |
| Susan F. Stevens |  |  |
|  | Director | February 24, 2023 |
| Hilliard C. Terry, III |  |  |
| /s/ Bryan L. Timm | Vice Chair | February 24, 2023 |
| Bryan L. Timm |  |  |
| /s/ Anddria Varnado | Director | February 24, 2023 |
| Anddria Varnado |  |  |

---

## Exhibit 21.1

**Exhibit 21.1**

**Subsidiaries of Umpqua Holdings Corporation**

---

| | | |
|:---|:---|:---|
| **Name of Subsidiary** | **State of<br>Incorporation** | **Other Names Under Which Business is Conducted** |
| Umpqua Bank | Oregon | Umpqua Bank Home Lending, Umpqua Private Bank, Umpqua Bank Equipment Leasing and Finance, Umpqua Bank Mortgage, Umpqua Bank Vendor Finance |
| Financial Pacific Reinsurance Co., Ltd. | Washington | |
| Umpqua Master Trust I | Delaware | |
| Umpqua Statutory Trust II | Delaware | |
| Umpqua Statutory Trust III | Delaware | |
| Umpqua Statutory Trust IV | Delaware | |
| Umpqua Statutory Trust V | Connecticut | |
| Humboldt Bancorp Statutory Trust II | Connecticut | |
| Humboldt Bancorp Statutory Trust III | Connecticut | |
| CIB Capital Trust | Delaware | |
| Western Sierra Statutory Trust I | Connecticut | |
| Western Sierra Statutory Trust II | Connecticut | |
| Western Sierra Statutory Trust III | Delaware | |
| Western Sierra Statutory Trust IV | Delaware | |
| Klamath First Capital Trust I | Delaware | |
| Lynnwood Financial Statutory Trust I | Connecticut | |
| Lynnwood Financial Statutory Trust II | Delaware | |
| Sterling Capital Trust III | Delaware | |
| Sterling Capital Trust IV | Delaware | |
| Sterling Capital Statutory Trust V | Connecticut | |
| Sterling Capital Trust VI | Delaware | |
| Sterling Capital Trust VII | Delaware | |
| Sterling Capital Trust VIII | Delaware | |
| Sterling Capital Trust IX | Delaware | |

---

Umpqua Holdings Corporation directly owns 100% of the voting stock or membership interest of each subsidiary listed above.

## Exhibit 23.1

**Exhibit 23.1**

**CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

We consent to the incorporation by reference in Registration Statement No. 333-192346 on Form S-4 as amended by Post-Effective Amendment No. 1 on Form S-8, Registration Statement No. 333-195396 on Form S-3ASR, and in Registration Statement Nos. 333-211381, 333-188291, 333-144766, 333-143347, 333-135071, 333-117680, 333-117679, 333-105637, 333-101357, 333-58978, and 333-77259 on Form S-8 of our report dated February 24, 2023, relating to the financial statements of Umpqua Holdings Corporation, and the effectiveness of Umpqua Holdings Corporation's internal control over financial reporting, appearing in this Annual Report on Form 10-K of Umpqua Holdings Corporation for the year ended December 31, 2022.

/s/ Deloitte & Touche LLP

Portland, Oregon

February 24, 2023

## Exhibit 31.1

**<u>EXHIBIT 31.1</u>**

I, Cort L. O'Haver, certify that:

1. I have reviewed this annual report on Form 10-K of Umpqua Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function):

&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 24, 2023

---

| |
|:---|
| /s/ Cort L. O'Haver |
| Cort L. O'Haver |
| President and Chief Executive Officer |
| Umpqua Holdings Corporation |

---

## Exhibit 31.2

**<u>EXHIBIT 31.2</u>**

I, Ronald L. Farnsworth, certify that:

1. I have reviewed this annual report on Form 10-K of Umpqua Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function):

&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 24, 2023

---

| |
|:---|
| /s/ Ronald L. Farnsworth |
| Ronald L. Farnsworth |
| Executive Vice President/Chief Financial Officer and |
| Principal Financial Officer |
| Umpqua Holdings Corporation |

---

## Exhibit 31.3

**<u>EXHIBIT 31.3</u>**

I, Lisa M. White, certify that:

1. I have reviewed this annual report on Form 10-K of Umpqua Holdings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

&nbsp;&nbsp;&nbsp;&nbsp;a) Designed such disclosure control and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

&nbsp;&nbsp;&nbsp;&nbsp;b) Designed such internal controls over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

&nbsp;&nbsp;&nbsp;&nbsp;c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

&nbsp;&nbsp;&nbsp;&nbsp;d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's Board of Directors (or persons performing the equivalent function):

&nbsp;&nbsp;&nbsp;&nbsp;a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

&nbsp;&nbsp;&nbsp;&nbsp;b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: February 24, 2023

---

| |
|:---|
| /s/ Lisa M. White |
| Lisa M. White |
| Executive Vice President/Corporate Controller |
| and Principal Accounting Officer |
| Umpqua Holdings Corporation |

---

## Ex-32

**<u>Exhibit 32</u>** 

**CERTIFICATION OF** 

**CHIEF EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002** 

This certification is given by the undersigned Chief Executive Officer, Principal Financial Officer and Principal Accounting Officer of Umpqua Holdings Corporation (the "registrant") pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Each of the undersigned hereby certifies, with respect to the registrant's annual report on Form 10-K for the period ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), that:

&nbsp;&nbsp;&nbsp;&nbsp;(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

&nbsp;&nbsp;&nbsp;&nbsp;(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the registrant

---

| |
|:---|
| /s/ Cort L. O'Haver |
| Cort L. O'Haver |
| President and Chief Executive Officer |
| Umpqua Holdings Corporation |
| /s/ Ronald L. Farnsworth |
| Ronald L. Farnsworth |
| Executive Vice President/Chief Financial Officer and |
| Principal Financial Officer |
| Umpqua Holdings Corporation |
| /s/ Lisa M. White |
| Lisa M. White |
| Executive Vice President/Corporate Controller and |
| Principal Accounting Officer |
| Umpqua Holdings Corporation |
| February 24, 2023 |

---

<br>