COLB - Earnings call transcript Q2 2019 | Columbia Banking System, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. Welcome to Columbia Banking System's Second Quarter 2019 Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to your host for today, Hadley Robbins, President and Chief Executive Officer of Columbia Banking System.

Hadley Robbins

Thank you, Carol. the thank review joining and our which released and call on year-to-date everyone, morning. we we this as second before morning, you us for today's results, Good opened market quarter XXXX The earnings are columbiabank.com. slide available at and release supplemental presentation

a exceeded by lending $XX our the time teams, strong million and new record, history. efforts were in quarter for earnings a the and result, credit As our second quarterly earnings first

higher $XX On and first ever, than teams year a quarter It narrowly production XX% only basis, busy which year-to-date lending million. levels well strong and the very quarter, last targets. the by X was of remained million, missing Capital income regulatory XXXX. was the half a second-best set generated our was net also above record

completed troubled point, Our million X assets time. seen interest of work the added which special nearing XX out credits not nonperforming bonds, reduced a a team some basis income and of for although, few

are also key back-office digital technology Our platforms. new include heads banking teams that projects implementing down

quarter the deposit see point quarter reduction at was activity The XX-basis in second XX%. deposits low of at also mix cost the ratio through The for did quarter. for core deposits strong points the to basis typically second seasonal points total a be during remain XX year. continue us. well-managed is We deposit stable. and Our overall a This

was deposit other yields One and accounts efforts of a by traditional the from levels help offerings. our cash to those alternative other overall impacting seeking moving factors to clients higher contributing brokerage

an Chief of Clint Officer, who'll performance. of our some are Officer, Greg earnings our today share review our status digital Chief and our activity our the provide performance Officer, Credit Stein, highlight call review Operating our Financial investments; our plan; credit with who'll our and Chief the me of On McDonald, repurchase details Andy about overview production who'll and Sigrist,

It's other economic be making important your we'll today, to that happy that I to statements comments, you questions. and we'll be factors. answer remind subject forward-looking prepared our Following are which

risks the associated our filings, with a discussion Form statements, and the refer of For our full please and securities XX-K. in particular, XXXX to uncertainties SEC forward-looking

I'd about to financial turn call performance. over this our the point, talk to Greg to like At

Greg Sigrist

you, morning, Thank Hadley, good and everyone.

earnings million quarter $X.XX $X.XX, $XX.X per and an share the quarter of quarter of Second an diluted $X.XX of increase compared EPS and second XXXX. to first of of increase the was from

our quarter net quarterly As the income in performance earnings second Hadley mentioned, history. best was

of points. took $XXX,XXX true-up margin points benefited net operating an accrual loans. up basis from basis, The FHLB interest in items advantage borrowing on loan year. was The two recoveries interest of basis of nearly this rates $X.X which interest XX X.XX%, million Partially net a linked-quarter of as nonaccrual impact X was was offsetting we earlier these of a short-term the on

Offsetting from shift first drivers quarter typical impact included we from X-basis-point rate the the seasonal funding mix deposit quarter. flows a X-basis-point a impact given in deposit and increases second experienced,

declining a the say managing in to strategies into beginning As the put past you've place are six XXXX. we our environment rate us actively for quarters, exposure through heard ALCO late

put respond million a derivative approximately environment; first in As sheet, purchasing collar the $XXX balance into million, quarter. additional include growing portfolio; down-rate early duration that the securities the $XXX those in then place the reminder, loan strategies would by in taking zero-cost well strategy a

by $X due interest million. million, $X $XX.X completely $X income rate reduce through by quarterly, to XX-basis-point However, income a million expected net we first million BOLI environment. cut immune net not year. On A interest benefits the linked-quarter mostly in be would a to are rate basis, to declining increased of

a was C&I million $X.X revenue strength of production. up on Loan

increasing quarter-on-quarter, at mid-XXs. to excluding in the that million well remains operating impact rate is increased with of we investments. the This digital controlled call noninterest largely our Our continue quarterly earnings in-line of shared the would run due expense last investments with expenses, $XX.X what expense digital

in expense digital X% million on incurred $X.X is second expenses is compensation was million half first to of million our cost In related we basis. directly the XXXX, expenses. or from initiatives, that initiatives. $X noninterest which the up of a of incentive Half acquisition and remained quarter, digital from $X.X Excluding increase of year-over-year the

the $X the in We the expect million noninterest for impacts to the investment to year. range expense balance digital to $X of be million

the the continue shares was tax capital to should our to program, the of our so. rate effective share continue feel for be our XX% as part for to year. we do year, in XX% range to strategy, repurchase provided it regard buyback the it and we to remainder is Our XX% to of shareholders for the intend quarter advantageous and With

well-balanced capital have with and special strategic We future. the position strong buybacks a opportunities and in dividends

over Clint. to I'd this to call the At like point, turn

Clint Stein

And Thank everyone. morning, you, good Greg.

first created had quarter quarter on outstanding fronts. the the continued during and We momentum all an second

Our first $XXX the existing production is market, and relationships sticking to of In very achieved continue above credit levels a new past. loan our in disciplines. million our business half competitive bankers XXXX of well to earn

we're more, unwilling is our increase appetite. at business impressive What's could this they point to in produce but the risk cycle,

recoveries. the the visible performance interest as second outcomes in loan of and of not quarter readily the this as quarter's are income growth financial Some successful

However, vital to growing revenue. and they are sustaining

many bankers performance of group focus our the while projects come. of We have losing enhance they're roadmap a working years very never on customer experience. importance now execution to who the digital talented working The on on the are our diligently for of will

Deposits due which the to is quarter, declined activity. during normal business second seasonal $XXX million

some equities, deposits services invest financial treasuries as balance to other off to our group seen clients migrate instruments. in have sheet We financial and

our $XX fairly quarter, activity second deposits the which financial million with the During the to $XX of services we quarter. had group, in is first that consistent million moved in roughly

between The generate composition base noninterest relationship pick The interest third of income. hold, patterns this up While client steady, in deposit the our with and evenly deposit noninterest-bearing. activity should remained XX% Retail. and consistent, balances, in the we and split deposit also seasonal XX% balances quarter. results Commercial lower mix If maintained remained

second-best Loan in to production mix quarter loan first Term rate missing variable. third set XXXX. loans the total XX% $XXX XX% our production remains the by for quarter while with fixed from represented was record stable, half the of satisfaction. million million. production, narrowly accounted at of ever pipeline record portfolio lines with million, $XXX and Even new loan X the The production, $XXX remained million

was points rate The during the with the the X.XX%, loans. higher-yielding to and in repayments is modest compares the which the X New throughout quarter loan result of coupled repricing came overall at down decline production basis and X.XX%, CRE quarter. space, an rate favorably of coupon variable-rate which average tax-adjusted on construction of portfolio

$XXX XXXX. the second in the of in quarter were Prepayments quarter lower current when million million of $XXX to compared elevated an

a million period was of workouts. when $XX current in credit the further. However, And trends improve our result excluded, special to even continue

union first terms For the commercial XXXX prepayments to well over our XX% have in remain as context, up The and offered or estate, prepayments XXXX prepayment of moderated XXXX. of were as drivers rates credit roughly the competitors. primary levels. sale XXXX half businesses bank above XXXX and real by and unattractive XX%

loans $XXX C&I quarter, totals commercial the the slightly real Year-over-year Commercial were sectors. and current are second are prior the during healthcare quarters. multi-family total construction $XXX quarter production down and XXXX. were primarily million estate during but up and the the while the of loan warehouse or is with was XX% flat production, in quarter, quarter, of multi-family since During declines million multi-family, consistent which

schedule. on Implementation programs activities for digital are our

the banking commercial the rollout online on end platform and of by system variety introduce human end projects, a of be by to ability Zelle open We year-end. of complete accounts and new talent resources also will being the live year. by September. to we're target deposit other going Our online on the smoothly is management anticipate Among a and

Our bankers war as a in loans on are trade long-term they relationships. are Recent our more businesses. base, Fed job assess rate great conversations announcements high-quality to the anticipated resulting impacts deposit and clients with with and generating the customer expanding doing their cuts

turn to I'll Now, call over Andy. the

Andy McDonald

Okay. Thanks, Clint.

lease quarter. in X.X and to West Our portfolio the Continental losses for releases Coast the of Offsetting net these XXX,XXX the for portfolio XXX,XXX second for Pacific XX,XXX portfolio. of of release the originated provisions XXX,XXX XXX,XXX first provision the million for loan PCI included portfolio. and from provisions quarter and a the This compared favorably was of

Provisioning was by charge-offs. primarily driven

by activity annualized However, up X to the favorable migration a extent impact points loan million basis, million were Net loss about quarter. the on basis quarter, XX from offset X basis was declining charge-offs to last and equate points and from rate. charge-off of X.X during lesser an up and growth

of with basis points XX I'm than while past good, bankers our the as quarter. this pleased still So, quarter, performance such, extremely and prior higher is very the

XX NPA, which points, lowest that, mentioned the were Hadley As to total the down since XXXX. basis prior XXXX and, to assets is

the and During to nonperforming driving in loans OREO resolve level. and our largest largest were the loans, we to down our nonperforming able quarter, OPPO, thus OREO comparable

of to also gain $XXX,XXX the so disposal and of OREO of Recorded In interest over able recapture recorded loans $X.X sale doing, $XXX,XXX. a were in income. gain on we the million of little on

without goes great special a had credits our saying, it So, team quarter.

points June loans XX to our points decreased basis XX, total of XXXX, X loans. basis to by allowance As to total

and the approximately that folks like $XX West for associated this value. of is $X that Coast at we ratio discount, Intermountain. we net acquisition with is portfolio; fair Continental Pacific with impacted million always, loans valuations with $XX $X As million in the portfolio; associated our million and remind the the million Embedded by to is approximately those recorded which

normal second charge-offs, first After we're net the relatively quarter quarter. levels in to back low

we the we concentrations, to focused summary, for the bank downturn. However, modestly perform credit well, The the of next and improved remained forward. on sector quarter. positioning In monitor are and we the we the and during believe collateral out reserve portfolio going actively continues

I all have. that's Hadley? So,

Hadley Robbins

Andy. Thanks,

the Regarding continues healthy fundamentals of look through economy, XXXX. the end to

However, Fed most conditions rate reductions and flat-to-inverted continue evolve the have uncertainties. to potential the of curve, potential earnings pressure, creating yield trade-related notably, that

and course position actions offensively to the materialize. a is prepared risk For us, remain we hold this our focus our and should stay on downturn with that a take be creating see disciplines, to time efficiencies, diligent us

stock our price July to of closing, which dividend our pleased on X.XX% the XX. regular of on based yield closing of a quarterly In dividend we're $X.XX, announce represents

on concludes afternoon. dividend will close of this August our as August business to X, XXXX. of prepared of shareholders in XX paid quarter's be record This comments, This

are questions. Greg, here Andy a to As reminder, your answer and with Clint, me

And now for Thank Carol, we’ll open questions. the you. call

Operator

the Thank you. today Our from first Rulis. Please question go comes [Operator ahead. phone over Instructions] Jeff

Jeff Rulis

morning. good Thanks,

Hadley Robbins

Good morning, Jeff.

Jeff Rulis

you margin, get down added you comparable were true-up and the Would the if there we the guess in recoveries on net of against That to to I interest X.XX%. QX, number core recoveries or So, X.XX%. X.XX%? if comparable the true-ups –

Greg Sigrist

No. the think of would those types we have true-ups I of had Jeff. any don't quarter, in first

And do from So, X.XX% the shift prepared X-basis seasonal it my in said the points I when and deposit-rate and on really increase you're coming that take quarter, that, seeing funding. the that compare the as from first in to number. X-basis-point adjustment remarks, I then mix you back the

Jeff Rulis

last take is So out quarter and the the recoveries that you operating if to X.XX% X.XX% comparable true-up?

Greg Sigrist

Yes.

Jeff Rulis

thanks translate in What rolled, the Greg, margin that get XX-basis on should I hit on within point just that on a Okay. as not your look – does guess, And like? we with then go-forward guess just one? cut. – the I but the interested outlook dollar yours, for

Greg Sigrist

to obviously, on whatsoever, loan parts a And Well, production is stats is on thinking new But any the but right quarter floor the rates lot details you the reprice adjust. second quarters. over loans that are some quarter. portfolio we the in four of to In now way rate I mean also we've deck, above yes, the loan this got Clint $XXX moving at next absent X.XX%. for subject million it floor below the gave are loans repricing, or I'm over cut IR about rate included the that of that rates

a rate So, that's cut, again, impact. positive a absent

assuming to Again, to back get back of of historic the the the to impact expect rates point, here levels. quarter. I turn will deposit mix Clint's would us funding in some third also

add impact And to absent like me together, we're I ALCO strategy's when in the I we it So, to mitigate margin. the of it all a said cut. expect impact points, rate have first basis a year my would the up rate cut. $X in But that if rate a prepared cut, little a in place, a as feels XX help we annual on do is million that remarks, XX-basis-point of which bit some after

Jeff Rulis

and had – million make to for compare X spend, an year? to the the quarter color. to – so if does Okay. million would wanted guess that additional call I Then assign in the – of I the digital expense, That's you sure good on you to X then that the balance million it X

Greg Sigrist

was quarter. The million roughly ahead Well, which X.X – of X million X.X no. spend in quarter, of the last last roughly, maybe quarter million ahead was

the X another I far, XX remarks on year, last $X so million million And X think So, and to in puts million. the balance the us XX million. quarter million full-year, to which, expecting X million to XX mark, I'm that indicated of million

So, we're be. would of we where kind still we thought

Jeff Rulis

Okay.

spend to So, we of X And were at – quarter. this million the either to if million. for year, X.X to the X balance up X digital million fair? then million was Is total that's flat the that look to

Greg Sigrist

fair. that's Quarter-on-quarter, Yes.

Jeff Rulis

Thanks. back. step I’ll you. Got Okay.

Operator

Please from Our Aaron next question go ahead. comes Deer.

Aaron Deer

Hi, good morning.

expense around here the confusing, Maybe noninterest be looking variances? we half back the the talking dollar in run there. just about expense little actual year because it's clarify on some Just the rate just for quarter-to-quarter the of guidance a give should to

Greg Sigrist

no, Yes. in expense still the for into drive I digital help still guidance try which mean how preferably XXXX. what and we I would seasonal I'm remain think rate, factor excluding but going initiatives – operational and we're pay the the and other get have in usually be noninterest impacts Aaron, we to but mid-XXs figure to digital, our quarters, of said run first efficiencies focused as that our we thing, on we out range. past quarter, the as expecting I to just couple get give and year, down next on very into to though, out that reiterate we not it,

Aaron Deer

you with expressed pipeline. then, And loan satisfaction Clint, the Okay.

curious got job Just good some on seems you hiring – – front. the doing like it been a if you've

new personal the just earlier guys week. announced here, You in banker

willing playing vis-à-vis what curious terms of half and mean what kind for sounds know, should that heading of what a to to Just year? are hires into how like back of you're the more in out outlook those conservative growth loan underwrite the

Clint Stein

Yes.

entire capacity, my to to think is to over I by across – on capacity our we've be talked us source couple calls increasing hiring fortunate employer focus that candidates. just talent of of choice, as that had talent what good to prior are our the get team term what well I footprint. remarks. And new done relationships, and selectively new great that really and an is a long-time And bankers, as past on continue enabled we've be and the that's about continues capacity very our used how years it's management prepared increase our in at I think we

relationship. it's existing So, deepening

deviating changing our a without our It's what's very from that's enabled of it's many, well from have as competitive. That's been terms recent combination of numbers production those for and disciplines. So, or that hires. years, us supplemental folks production growth tried-and-true as many been in with really to production the us have coming credit

on have but get if we absolutely compete will really we deals for price, to one solid won't structured. We

very you're much terms through a in some And come through think that that big depleted from of takes had gets if But still time we've little to and production come rebuild. – so, production the the it's historically, seeing satisfaction. quarterly numbers, you're I a usually to that quarter our seeing the standpoint, bit pipeline in

on give some in into is an competitive growth. so it and to activity, prepayment I It's that, that and won't color what in about XXXX. in there terms that extremely XXXX. guidance experienced compared continues we provide elevated market, loan it's of we did And for translates the of But moderate, what still third the it what the of first to we relative of increase what terms and in it's a half had XXXX to the was but

Aaron Deer

kind we've safe to your on as accelerated it rates result that prepayments of – drop-in of Is had Okay. commentary haven't that the the in based midpoint the that recently curve? say the a of there,

Clint Stein

given I came say the we been since still it's to of then some dynamic structurally sale unwilling estate that's competitors businesses, properties, are things of prepayment in because are. safe of a let that that us out the to we're the No. we're think valuations go and activity that's is where the sale real we'll willing downturn, what to And deals thing for Yes, really do. do seeing

Aaron Deer

you Thank Okay. back. I’ll for taking step my questions.

Clint Stein

Aaron. Thanks,

Operator

[Operator Instructions] Jon ahead. Our question next Arfstrom. comes from Please go

Jon Arfstrom

good Thanks, morning guys.

Hadley Robbins

morning. Good

Jon Arfstrom

headwind it million that any more $X and XX-basis-point year interest Or Couple the Maybe, of or similar? you is Greg, is is net a income, second-rate follow-ups for driving it less? here. it Or for a similar decline? impact

Greg Sigrist

It's linear. side kick on a in until XX basis protection approaches The derivative question, It's doesn't not the good really drop Yes. Jon. the points.

the XX in impact first strategy between and and would X it's we impact. X the So, million protection that's of about the have be basis derivative XX for $X of is strategy. X the investment of context, If million net the million about million, full points, a

you to the So, derivative pickup and of some benefit. see acceleration start

Jon Arfstrom

That seen low cresting costs Okay. as I topic well. on any relative deposit the to are Got it. you helps. deposit pressures? cost peers, but Have just know you're fairly guys in curious

Clint Stein

and move had – a been meeting. them after my and We've of to return. conversations there's the right pretty their get able desire if point to the prepared in now, clients, that group. based And to of – a frenzy. lot, conversations, of remarks, into what of a too a I But first are we've strong we think what back cresting at of deposits with curious next on year lot I financial in It's but our Fed do pricing their still being referenced I a to pressure. active. say half see that's client better happens services million word, I'm that – needs understanding to see don't $XXX That's a it's the want more

is So, that urgency deposit the was do. a was sense of creating expectations still and at think environment, there little folks tempered, the and client in rate – they've perspective to there that balances, what a from been there I urgency room that are the year terms out is of I sense this the from run to of earnings they low-rate that's of those a more expectations a perspective. start their on think through figure And for

Jon Arfstrom

more Okay. Good, one then production that's on just helpful. numbers. And your question bigger-picture maybe conceptual

about a the same competition. – Thanks. environment, assessment increased amount I'm But just economic your it talked payoffs? and little any just production the year really lower it but active but You or a curious, of is more is than was payoffs less production, this ago? Or of of overall less more the

Clint Stein

seasonality activity in the have that the mean in And think that's number. why number payoff that the as sales. quarter-over-quarter more business reduction It's well, in the don't growth show portfolio our we of is there the activity impact economic factors. production And production. I is off by bottom driven a factors, slowdown because the can based I i.e., line economic out we prepayment

really probably that around more that it's some year. think I elevation of last the things caused

some If while what level, a XXXX, more credit normalized throughout pruning you continue it year. that last still an compared to basis. say, ongoing we to was do I'd on It's recall, did additional we of

timing looking for alternatives So, bank lumpiness actually those businesses, M&A, then other in side do that's can some side are of that when of they clients like at one is our their it. as strategic much the things. of the And there's

Hadley Robbins

economic debt. supplying With we of our influences some there, the regard see cash clients to to out

that time. of that would at making cycle, they piece or their valued. they our that sell of I believe and the We because also fundamentals there. some this still prefer see is decisions in clients will deepen liquidate point believe business But property fully economic to the are And either particular a to

or at that. getting We're

We production. have some of increased our into feeds so capacities, that

opportunity. saw normalized that the are year. what So, overall, and us there They're last more that prepayment I trends are is economic don't really see activity we giving that approaching

bit context of a and past risk level to appetite, the produce Within the maybe able a more. we're in our seen

Jon Arfstrom

Okay, good. okay. it, for that. Thanks Appreciate

Operator

go Please Our next question comes ahead. from Gordon McGuire.

Gordon McGuire

Thanks the for question. taking

Hadley Robbins

Hi, Gordon.

Gordon McGuire

all? Hi, how are you

Hadley Robbins

Good.

Gordon McGuire

million balance a The that well? that is a cut, or XX-basis-point on on based growth $X was static sheet assuming as

Greg Sigrist

Static.

Gordon McGuire

NIM? I missed fall of then And thinking the it, Was of mechanics borrowings? just have about true-up, where out the in the may did that that Okay. the

Greg Sigrist

really borrowing the Yes. on That's It's FHLB side. right, Gordon.

Gordon McGuire

you'd guess think used expect you Looks where see quarters? on move of was to that can expectations I loan to will or next the to few start continue over like securities those? updated Any grow this the growth balances Okay. you the fund that some quarter.

Greg Sigrist

the that say and mean, I a deposits function that XX% mean, that's of of obviously, the I up loans to see. the Well, to moving deposits securities side quarter, as seasonality in other would much I we the portfolio. is

much exactly securities your But the – around would levels give difficult going reservoir loan and exactly rest get drop actually balance really loan to is if us that at say into look make the growth of to to translate I into of going So, to balances. deposits knowing we the how say how way it's production, to need what's liquidity the which sheet. that without happen the production fund we the would translates, portfolio, normalized Clint's assume assumptions securities then then you it

Gordon McGuire

down? – you these here at potential do the think borrowings, guess, those stick kind you of And there's to those levels? around it. manage those I Got just do Or

Greg Sigrist

balance about. to that No. We support – on had Gordon. continue strategy the of we that $XXX expect million some side, borrowing the to there level at strategy, support I security roughly sheet to roughly would grown by talked form be to the which to

Gordon McGuire

release mentioned Got I the buckets? it. expense wherein I did there think other were fees, lines last then the guess, professional but any for initiatives related me, the, million And the X.X fall? digital the to thing

Greg Sigrist

through in occupancy the line of different fees, certainly, to and comes lines. around the but A that's Well, be technology. also going Professional it's couple it of in it's two those lot lines.

Gordon McGuire

Got Thank step it. back. you. I’ll

Greg Sigrist

you. Thank Gordon. it, got You

Operator

for no have questions this further I'll at back the we call remarks. turn closing time. And

Hadley Robbins

call questions. the further prepared there if we're Thank close you. are I to no think

Operator

informative. joining great concludes of We Thanks Have hope webcast day. you us This disconnect. you and today. may for presentation our this a webcast, to found now our participants all

Columbia Banking System (COLB) 30 Jul 192019 Q2 Earnings call transcript