COLB - Earnings call transcript Q4 2019 | Columbia Banking System, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Columbia Banking System's Fourth Quarter and Full Year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session through both the telephone and web. Instructions will be given at that time. reminder, is a recorded. As Instructions] this being conference [Operator

Banking call to your Chief I Columbia like the Executive over of and would now President turn to Stein, host, Officer System. Clint

Clint Stein

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

our of loan dedication bankers, and our work hard the ever. credit record to our was achieved disciplines industry-leading year production, talented best produced Due XXXX maintaining quality. that We have while

of All the do communities annual for in in our earnings who and of continually high the record these evident our results. The set clients generated XXXX year factors these exceeding by right the all tireless thing team we collaborate combined members, to are prior XX%. serve of efforts

very went smooth. transition leadership Our

succession bench Our the developing long-standing a approach assignments. blueprint to ready strength planning rotation leadership for provided seamless of now through

announcements in are track some these for but a you, with leaders all of resulted recent delivering exceptional record have new performance. names Our long

team executive tenure Columbia want recent our for roughly clients. additions including have and with our I opportunity an to driving nine average years. to this value long-term the of take reinforce current to Our commitment shareholders, employees

growth decade. and I'm will to Devine efficiencies done their professionals years value success are of of Moore commitment been the both support and our Eid drive past seamless Columbia's client for satisfaction; support franchise talent who come. many of integral additions in part two new executive that technology enhance were to Eric have leadership seasoned The to our future the and an and confident integration over David increased employee

our activity Andy our will highlight on will me Operating of today the our our production some Officer, of Merrywell, performance; provide who Officer Chief will we've with Chief and been details performance. provide review On Chief McDonald, Officer and Credit Sigrist, Greg who on; commentary Financial the earnings credit initiatives are about some Chris call the our status working who

prepared to your answer be remarks, our Following questions. we'll happy

Let me the remind during forward-looking call. make we statements that, you may

forward-looking information our earnings our comments, our release filings. on refer documents, further SEC website, please to or For

At to turn like point, our this I to call the to would performance. over Greg financial review

Greg Sigrist

earnings Thank temperate of interest a reflecting focus net EPS We $XXX.X $X.XX and a driving and record credit of you, achieved in loan million Clint. on and deposit environment strong XXXX, income. production

our amongst and was EPS growth to was Fourth income best benefit mitigate exposure falling efforts $XXX.X X% of quarter fourth our and environment, rate share quarter million loan rates. the in continued history. nearly up diluted $X.XX the ever in earnings $XX.X to of our interest of per net the to million Despite and the interest reflecting quarter strongest proactive

NIM Total Operating key $XXX quarter at prior offset the quarter. linked from down the was approximately costs. ended by $XX.X from billion deposits nearly funding million with partially year down loan lower drivers lower points yields X the basis being

of outflow $XXX the million quarter. of public planned have We funds a did approximately in

funds when source are alternative an so. economically to beneficial said do used be have more we will As as akin public and funding funding previously to wholesale often

during down up million on sale was of income to due was owned $X.X and third gain Non-interest to of largely of quarter million prior the the million the $XX.X compared fourth estate $X.X from the quarter XXXX. quarter real

services card continued and income, especially, make financial in progress generating loan, We have in revenues. non-interest to

rate Our third expense quarter fourth remained the with run flat non-interest expense of $XX stable to essentially million quarter.

in quarter as the X.XX% compared to quarter. ratio expense year was non-interest Our prior the X.XX% core for

X.XX% the prior For year. was X.XX% to compared ratio full as the year for this

million $X our more cost of impact million capitalize have success including quarter. Overall, to the on able in negotiating than The expense full that contract have year been favorable XXXX initiatives pricing fourth expected. digital had we $X.X was

XX%. rate range Our for to target tax is year the effective full within was XX.X%, XX% of which our

with we be In are earnings our last day one CECL adopting impact on muted. of the call, fairly comments expecting the to line

details we our Additional XX-K. when will be available file

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

Chris Merrywell

Thank in record billion and million. third you, a last to of annual quarter's year million set record good XXXX by Greg, the of quarter exceeded record propelled previous Fourth us and production of surpassing $X.X $XXX everyone. the morning, record loan new $XXX the set

the are three past efforts results the have production correlated we we to record announced. years, on directly focused capacity. These For increasing our

but quarter, reduction this expected we the the on success fourth experienced our seasonal production the decline. utilization, During bankers' offset in line front

are and we level our Our maintain strong to while production remains loan of discipline. that this credit confident we can pipeline adhering

very the deposit Our with is which with base consistent XX% levels. is end consumer, mix at XX% business stable year historical and our

even an down interest-bearing Our non-interest-bearing quarter balances other expenses. our deposit continues of and in and be cash cost expect than credit do We clients split our seasonality the lower first deposits pay deposits. to as peers typical down between reflecting draw to

Term loans XX% of The variable. were was portfolio XX% now X% quarterly of mix and floating, XX% XX% is fixed, XX% total. comprised floating overall The production fixed, variable. lines the the XX% production whereas XX%

X.XX%. than was coupon is rate points lower basis booked the rate the loan portfolio quarter. rate quarter portfolio average at adjusted production of tax X.XX%, declined an The of during overall XX which the New throughout

real C&I $XXX and And XX% million commercial total $XXX During the of the production million quarter, production. was XX% or or of total. was estate multifamily

C&I the driven multi-family during and Approximately in estate balances manufacturing permanent Commercial were offset moved by construction by estate as care $XXX loans real million sectors. to and increases seasonal a by loans increase office, multifamily in commercial $XXX up million sectors. was in of driven loan status. public down quarter, were totals $XXX and health warehouse, million, agriculture decrease real the administration, activity

retail in strategy our to continue will Sound Puget Oregon We the a be digital our branches to the we and physical markets quarter, four blend believe branch completed the a the presence. bringing for During consolidation of and of delivery our total year.

Integration, Our blending do hub Director years President XX neighbor is her based Sherman Vice and responsible banking of recently both. this on to Banking Nicole she is Digital experience We Retail positioned uniquely of concept. branch believe rollout including Columbia's announced for Executive and the of

will to continue better actively look We to we at our across access markets where network. to our want branch footprint position

of banking piece one community and the is continue journey a Digital our we will expansion perspective. from

capabilities, opening online lending later We online peer-to-peer in money expect to year. business our transfer go account capabilities and improvements small deposit our this

to I turn our to over performance. credit Andy review Now the will call

Andy McDonald

fourth as year was past remained assets and were one unchanged credit summary, for In in point quarter. problem basis Chris. only essentially total Thanks, were quality very NPAs were Net three and quarter charge-offs the they dues points. at loans. basis for minimal the stable the

of for quarter with a driven fourth loan of portfolio $XXX $XXX,XXX migration, this million negative release and customers. of unexpected for along The originated primarily the provision acquired lease the of provision modest which $X.X some due million seasonal offset at our not Our growth losses was in originated by amount by for nature time portfolios. is a $X.X was million the including to portfolio year of loan the of

the was included the provision the driver the the $XXX contraction growth in acquired which $X.X million portfolio year, the acquired which $X.X year. Again, releases. offset $XXX For million, this portfolios our the portfolios. as in primary Offsetting a portfolio was originated for lease in million, million million originated was was of for by loan losses $X.X production production the grew with loan record for the of alignment recapture and for and allowed loan

basis year-over-year. to allowance basis total but two of three points to XXXX, points XX loans down As total XX, loans, basis increased the our quarter during December by of was points

million like valuations is our impacted remind associated the that Embedded ratio this folks in As value. that approximately by recorded acquisitions is were of net those to always, and discount. at fair loans $XX we'd

$XX with X million Pacific the with portfolio. million associated For $X and which approximately the Coast Continental the is West Intermountain portfolio, with portfolio, million

that, Clint. call to the back I'll turn With

Clint Stein

Thanks, Andy.

to up has of personal been him. work wrap his friendship. are a take to my want service, I leadership privilege and It And we Hadley because company Robbins stronger Before to impact. guidance for a moment his we thank with

retirement. wish of we $X.XX. announced a dividend regular prosperous Hadley our of quarterly with financial and our Gayle results All long and us Along

constitutes a We of ratio payout dividend quarter. declared also which of $X.XX a XX% special for the

to I This paid XXXX on the quarter's as business, on shareholders February to record, your Andy, our of of Greg answer dividend This X. prepared comments. concludes will questions. are happy close of be February Chris, and

the open will questions. we now for call Mike,

Operator

first question comes [Operator Instructions] from Your [indiscernible]

Unidentified Analyst

Good doing? guys. morning How Hi. you

Clint Stein

morning, Good Luke. Good.

Unidentified Analyst

the more of than on, the quarter deployment, capital a quarters? dependent just in this special question, Just that the repurchases switch dividend anything else? to quick price against previous couple the first Is was

Clint Stein

Yes.

it than price the a stock this we management reinstituting like dividend special a from upward With where repurchases. in our the movement capital made quarter to point for sense more was perspective, felt

Unidentified Analyst

kind Thanks. half helpful. opening I into, of And year. wanted online I think, the guys move That's to account have first my this in were you here notes Okay. beginning that in just then to offer of

to Do platform. tracking? And that's you commercial the an just on just follow-up a online giving the mind just that as how on update traction then, is

Clint Stein

is On account year. this online the of second around opening front, first projected half the the consumer quarter

well. new we completed performing to believe the platform was commercial As the of And all far I as commercial it's our moved year September-ish. that very transformation last clients and

Unidentified Analyst

you the historically guys have given that. wanted to helpful. that, stuff lastly, a the conversations going going? and you just digital of that were you That's just Okay. capacity kind of were then relinquishing I the said see and of integrate for -- just ability in on of to kind think, wanted the past increased those downstream given continuing M&A you projects if see just over have the to guys I to to capacity were spend so And year. like move And M&A excess the how investment lot say

Clint Stein

around, kind and that's there, and into, M&A replacements view with stance Yeah. conversations or to downstream of out move percolating haven't of larger a the platform on ability we our process flow, have we additions. changed conclusion our ebb anything thought generally most and our of The

timing still process. And it's much very with a is M&A – takes just that's it it's matter – thought dependent. just a our of So – it lot of

as continue active well be the view a But evaluating looks just potential would point for population busy who at what of mix in very looking And good potential us the of both and to as pool we're candidates from we merger partner stay culturally. business like. a or very

Unidentified Analyst

you back. Thank I’ll helpful. That’s Okay. taking step my for question.

Operator

Your next question comes from Jeff Rulis.

is open. line Your

Unidentified Analyst

this is Levi actually morning. Jeff Rulis Posen on This for [ph]

Clint Stein

Levi. morning, Good

Unidentified Analyst

to Thank expenses to out came was strategy transitions more be the those of ask a overall we're of like? about kind of digital mentioned less just morning. that of I I Good you. You that where at million platform what and XXXX investment are does wanted kind $X.X bit of into kind there? kind expecting XXXX. spend digital of the that we little some in looking look just about to curious the in same

Clint Stein

I assume at perspective. referring from an expense you're

in XXXX, think XX I completed projects. we roughly

road as development And year we've talked as think around I being I efficiencies it's always map, always and would that So and in beyond the the three of I XXXX. really a we've spend said think just midstream, the think and the then characterized it's that. that continued operational about come edges majority XXXX we've

right And $X.X much to able is in beyond depreciation So the deferred $X.X directly as P&L? into million midstream question put would capitalize the has On I is maybe, now. of how the and/or and million it end hit that to knock-on the through that been your above being answer XXXX we were year. characterize

So in million. XXXX the was spend $X.X total

Unidentified Analyst

about strategy of strategy any to time Okay, kind quiet the change guys the same seem great. to the rates priority team down? in in just staying talking Are management topic. shifts around then And that with you coming

Clint Stein

in – the that executing the we've a very and that. it. The and of years. we've being bought during folks it, on committee much into And executive on the of We've remarks comment about our our No. setting all been path been part always my believe roughly tenure nine prepared on strategy average the

in terms of So hard right there's strategic no turns focus.

map of continue evolve are investments it us have and committee. was important reason the obviously and changes the on the example an and additions We'll that some the road executive evolution. we've of or to digital that With to that the team made very – elevated ones to that horizon, that see Eric continue Eid the the bringing the for on for to to and executive our we was

investments. and or digital on added head focused addition realize get In to our And focus making return those our that's retail adoption sure we rates a of technical a higher once position. that focus we on again

what as having with creative done to was Devine us that's on got become experience Moore then more like group important mind executive very the for we've than somebody well. employee and side, And David a that's important elevate client ever the to and

strategic not And as evolve more a it's to evolve. our it's and so the change industry evolving just continues focus continues in customer that to but base

Unidentified Analyst

That's like you. XXXX the a Thank management just the second there I wanted great. cost active forward? really seems helpful. then maybe with Okay about in And What going half -- one does look on like little to then and funds lastly It bit margin. yields some of the question that was more of side. also security ask

Clint Stein

we've the I I during maintaining Well, mean set kind really XXXX. course we're that and articulated say of would just

exposure managing how of we're rates. terms our to falling potential In

the shift any So, I there thought. think don't there's XXXX into -- in

in we've and year-end to strategy. kind think when come targeting you'll that the And the I to place the -- them changed. that funding probably that, we in we manage point, To with target so strategy needed that of rates. I to we're very -- we think of million But $XXX in strategy $XXX security to related associated XXXX, million. otherwise feel at probably hasn't the range expands your exposure have But -- see been the we fortunate down -- terms of closer tools falling us so that

Unidentified Analyst

all now. I it. That's I great. Okay, Step have. back appreciate

Clint Stein

welcome. You're

Operator

from next Jon Your question comes Arfstrom.

is Your open. line

Jon Arfstrom

Thanks. Good guys. morning

Hadley Robbins

Good Jon. morning

Jon Arfstrom

things. Few

Just bigger production. picture loan on

things curious year. you see could a had I'm you just us good idea normally the guys of quarter you what time to You if an point And relative give if really to would what could this more would two Is might with to? quarters? share? or really few one different the last activity, that you maybe it more taking existing be over market point Is clients or it

Chris Merrywell

this think is I Chris. Jon --

think of a many it's combination things. I

talked teams experienced have we've that adding of market year Those couple in comments they're well. with a certain our very came calls, the teams you as from higher board. are production that that the on some out in the well. when And of locations. And produced throughout And making and bankers driving aspect

Other than into pricing discipline our tell you I really the it would maintaining discipline. credit and that falls that

and it's it's -- the balancing a production. that new the that that but it's we So, folks bankers act really on continue have that talented brought we

Jon Arfstrom

more it? of way to QX strengthening Okay. little in is And just me the remind you QX and a then that typically see right bit about in think

Chris Merrywell

Well, it's largely weather-dependent.

Jon Arfstrom

Okay.

Chris Merrywell

see strengthening the towards can some of QX. We end

typically in not sector is field. when but But averages. really balances, date on weather-dependent focal So the it the and ag they get can

handicap So, right to now, that. it's for just hard us

Jon Arfstrom

Yes.

you or manage Okay. Coupons also call got a you And two can But margin I little the margin you think enough where of to have terms the margin, coupons. low-cost because on Greg, tools help in it then a new call you're margin, coming quarter big new more a high-class on pressure do but understand each it base. it us what a Chris, place the some about challenge in on about here, you fair problem, I deposit talked like stability? feel to wouldn't down about One, little this follow-ups. production bit. Is you've bit thinking

Greg Sigrist

room pricing that's Well, in net is production, we're But had drivers One we're program. again just place the what needed the the coupon the when margin income rate very as you've out I -- managing is feel that over think new honest. two some be focused other to hit deposit Jon, really to us. primary fortunate have saw on environment, part shape there of But interest just really them happens It's the on to the versus we Jon. we to for think managing important. of our But curve the we again, control is the time. of the protections I thing really interest go

our will that side, So on we that production control going I stay loan which think deposit on NII to and focused but is pipelines. us the what help can we're

Jon Arfstrom

and is spend. the said one just number shared total us. and the then, And But digital the good. is might this or on is is see XXXX the you I with message XXXX run that in message you Okay, spend 'XX, we the off spending is relative come message that follow-up XXXX the that -- capitalized be to incremental some XXXX? XXXX, rate and may of there in spending some for in the the appreciate

Greg Sigrist

we're we're to And range. think $XX I still guess provided to at some in XXXX, But going is in where run spend is quickly guidance where normalizes pace million I capitalized there's question at last because, Jon. lower level best out not total that some is capitalize, want here And my point flows we're now probably see just point a in rate. some the to just a $X we're XXXX. are quarter we and think in obviously was at right headed I The same in think a we throwing spend end with and the evolving investment investment. with offerings million -- to the digital approaching probably we ebbs of going that kind broad XXXX, digital of part the that our always in the very concepts the that keep of to but environment. ability still And range,

normalize thought to put in investment. part of that run rate. part where I going business. to out hit But in iron Digital So point and that -- always where or of the invested how. number and an we of curtain just now look XXXX, start in it's hard we've And is terms the to think are we it's

Jon Arfstrom

sense. Congrats. year makes you guys. That okay. for Yes, Good

Greg Sigrist

you. Thank

Operator

[Operator from Gordon comes next question McGuire. Instructions] Your

is line Your open.

Gordon McGuire

Good morning.

Greg Sigrist

Good morning, Gordon.

Gordon McGuire

the Did balances based But up yields if like I a sound the that securities about on right? part to $XXX portfolio. to out end-of-period wanted strategy. amortization, good bit. earlier of an back up close didn't on I the And were your question premium answer, get it that the were was like It I earlier million. Greg, follow-up looks security

Greg Sigrist

really. the you I way I I'm funds, really mean, factor in think translated is which basis. thinking wasn't It which the more liquidity on growth into stronger when we out about net-net the deposit had public it a portfolio

Gordon McGuire

seasonally then of portfolio in Okay. you little you're the a deposit at securities about growth And is next I Would for from what of bit size to seeing period levels? come expect quarter, the thinking just think end softer.

Greg Sigrist

flat target remain repay off bit, the If, there. to obviously, some some yes. have down to but maintaining on portfolio strategy just on well the not the probably cash out I to But rate a as a little come expect come to little But I there's think the coming Gordon, down would of some funding $XXX lot. our deposits of If think that, still focused but interest down coming I will around we're a it wholesale staying million. we room

Gordon McGuire

like looks And on you. Thank when timing this an FDIC you through? It realized the Okay. remaining to what's come have then was credit there might of just be quarter. expenses. the Do that and

Greg Sigrist

on us able down tells when de $X roughly million and they're level. we can that will take the ratio tell we're credit pretty FDIC left that It's fortunate, half it be – at. minimis but $X XXXX, to It's a It's to upon obviously its be first dependent us if in targeted And million the of looking level. we'll deposit take their it. it

Gordon McGuire

California. a earlier. Clint, to want touched you've past about I Northern M&A sense just on it. in talked Got get the you

between there this is focus expansion footprint a of California maybe or wise, in in Northern at time? preference or geography Just point geographic any

Clint Stein

continually the – pretty dynamics, look from we've at things There's many doesn't look economy. understanding update to a is I we California, done cost largest easier this. out opportunities we'll Northern that away there. various consider in all those political world's we for But we always But fifth that identify markets. geographic market markets. analysis the are broad you other of it's think years, relative footprint or done saves, the that we've mean California when Well, the that, shy the environment generating And at when and

but similar of the local of California Northern we're there's market of knowledge. to Some nuances very markets the that market the already local politics most is operating – within, the and

that's opinion a we're within that market to about think And go into hasn't learning so that that just footprint. it's are more our there. there spending we've then of already we our learned a And some difficult new lot time existing opportunities But do changed market. what something

Gordon McGuire

And was kind at What provide then Andy. could I you credit if see pause any Renton impacts Got of whether one wondering, it. nearby? assembly on local result you or factory economy kind some the you Boeing the the of risk exposure? growth see any local a might and of as MAX of last color XXX the

Andy McDonald

to go and need relocate Boeing's planes Sure. to been parked in retaining they deploying Frederickson existing proactive Everett, area, plant pretty in the get down south workforce Well, in up Tacoma the and as well that and Renton folks far here so to maintenance. as where XXX, then they're the trying to Lake have XXX them north Moses

don't And want that into and that other they Boeing get industries want they people to labor it is to back geographies. they understands unique, pretty because the when migrated have other or will pool lose companies, that to other to those want production, have

have in activities. area. those There'll dry Lake, impact those domino Frederickson effect written Moses gas as a on of an cleaning, Everett, employees the my move be to kinds on it restaurants, Nevertheless, and will stations; opinion

that estimated is exposure $XX our million. in and the Renton plant roughly around We'd

the just So exposure for real and both is modest a would commercial estate. it's us, and that what simple include consumer by amount addresses that's and commercial

for I Boeing XXX. nationally a that the and They communities, happens in spirit subcontractors the the the off company think of to that sense, make other what because X,XXX fuselage laid impact larger referenced I people. situation can

Here trying employee that retain to base. locally Boeing is

good that's us. so for And

financial to they're most parts they the also arrangements local either provide not though buy with even planes by continue suppliers, building will they then created they’ve will of And which support. or

we closely, mitigate to are So our right potential have identified to we're risks optimistic that impacts the it Boeing we and any to all things Colombia. monitoring economy. the big But is doing

Gordon McGuire

include local any that million supplier would exposure? So $XX

Andy McDonald

plan. the beyond around our written to And $XX million were just about if it's exposure supplier Well, total the to million. exposure, look extends at you $XX

Gordon McGuire

Got it.

Andy McDonald

in we is Eugene, for a Eugene from a is Renton. that long a and customer So to supplier big way example, Boeing have

Gordon McGuire

Yeah. Thank you.

Operator

time. at turn further back There questions no call will are I to presenters. this over the the

Clint Stein

talking we Well, and again next forward quarter. you to Bye. look thank you for with joining us,

Operator

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

Columbia Banking System (COLB) 23 Jan 202019 Q4 Earnings call transcript