COLB - Earnings call transcript Q2 2021 | Columbia Banking System, Inc.

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Operator

Ladies and gentlemen, thank you for standing by. Welcome to Columbia Banking Systems Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. reminder, is a recorded. As Instructions] this being conference [Operator to the Clint Officer I System. turn over of your Banking Executive will now Chief call host, and Stein, Columbia President

Clint Stein

you good we and as our investor earnings at market second we available everyone, and opened today's which review Welcome, columbiabank.com. results, presentation before Raquel. us on are you, and Thank release thank released for quarter this joining call The morning, the morning.

momentum continue Second months. remaining generated quarter the was build performance over XX by we and past to focused as externally open upon outstanding the

PPP, loan time million above our Excluding remained our shattering in exceeding teams history last our expectations. quarter quarterly generated the first inflows production year. the fourth and record deposit set record the robust for well and previous $XXX in of Moreover,

financial with signing entrance trust group credit we of is are exceptional. breakout even Sacramento-based with a the a into Commerce definitive and Northern announced quality Holdings. Bank having the better, year great of market quarter the and Making merger agreement our services Our company California

focus Our forward due existing safely prospective and to quarter all of the was we to open available the employees. remain success clients. and pandemic, our this Throughout of

win new our year-to-date approach balance Our bankers to and year evident in by their past are performance. cultivate relationships meeting efforts deploying sheet their of continue and solutions-based individual benefits business and to the needs, client over earnings the growth

Chief Officer; Aaron are Credit our and Chief today Financial our Chief Chris McDonald, Officer. me with Deer, call the Andy Merrywell, Officer; On our Operating

line prepared your remarks, take our open the and Following we'll questions.

forward-looking statements make the reminder, we call. a may As during

forward-looking turn or SEC earnings over Aaron. the comments, filings. on This refer please further our website I'll to our release, call to time, our For either information

Aaron Deer

everyone. Thank and good morning, you, Clint,

was assets driven solid share. During for in million solid of the Earning performance income XX% among non-interest was XX. quarters The $XXX,XXX billion costs, Adjusted increased, the per million best by income again fundamentals. $X.XX by of Columbia deposits pretax Total $XX.X of quarter during on annualized $XX record. one our a strong $XXX pre-provision quarter, $XX.X acquisition-related or of of to or contributor. increased best net generated and remained industry was the June at deposits our the cost income million

cost steady just loans increased increase production. record in billion to for basis time The or Our of points. our June our X loan history. of surpassed billion and held $XXX XX% balances XX. by by deposits at first at increased Total PPP, modestly driven $X.X annualized Net million the was $X

million PPP includes quarter, new the we million which $XXX of $XX loans, of originated During loans.

New loan to of X.XX%. production, overall which was excluding compares rate on the average brought an also excluding X.XX%, PPP coupon rate, PPP, portfolio of at tax-adjusted

securities linked-quarter driven of portfolio $XXX of was million, which purchases. June investment million $X.X $XXX as Our increase was a of billion XX, by

quarter, a to the the securities the book available-for-sale of with and Because rate valuation investments the the value. X.XX%. we these linked-quarter the During intent classification in basis points to The should reduce fair volatility to longer held-to-maturity to transferred no and hold connected interest subject related value XX interest equity changes, is adjustments decreased are from net $X margin to securities billion maturity, that to classification.

also investment while that treasury services by mostly in Bank margin increased remaining income as on portfolio, driven the a loan interest pressure new revenues, the yields basis PPP income, The offset $XX.X the $XXX,XXX, services Commerce The by XX rates securities. lines. points million Notably, amortized we million, to by revenue balances and Merchants of growth The by stemming behind most coupon related was factors down increased but $XXX,XXX trust on of interchange loan in due from loans. mostly $X decline. inflows margin were investment was mortgage fees However, to other $XXX,XXX. million Non-interest quarter deposit drop the securities decline as primarily card due and of deposit higher strength and reduction business management income $XX.X contributed linked-quarter included banking was expense slightly of lower rose drop from costs but financial those on a million. to fees yields, together pending from fees lower Non-interest lower $X.X a of net professional in basis revenue deposit by pressure portfolio to into and centered linked-quarter and in transaction. increased larger by loans deployed to our was key balances more and in

to Excluding to loan the costs said, acquisition expense. compared costs, origination the was That linked-quarter essentially to when we decreased commitments. line when other linked-quarter, benefit in level unfunded quarter. $X.X higher of Compensation loan quarter. high even in a quarter million to due the the origination second Meanwhile, flat million less and second non-interest costs for benefit the these compared expense increased capitalized mostly first first quarter, continue to capitalized $XX.X due provision expense of of from

increased provision on basis a the to taxes $X Lastly, linked-quarter effective a representing $XX.X million income rate. XX.X% million, for

turn in I'll of With Chris. We XX%. the call to expect XXXX that, to rate continue XX% our range tax the over remain to to

Christopher Merrywell

turbulence focused of Aaron, have and employees, clients we economic our the we XX what the in Throughout on months, and past communities. you, take morning, to order Thank of care can good everyone. control

systems. invest to banking We people, and our relationship training in continue

bankers pipeline clients. providing and needs Our the responded to and solutions new full the keeping existing meet have custom by of

positioned mindset, business quarter. the new on Following during this business win capitalize usual high-quality and us to credits as

lead economy. May for which second is were through PPP, both bank loans loans the the While Pacific story. billion The originate in to on approximately final into of in quarter, PPP pandemic infused the continued no over during X,XXX the tally rounds programs background originated and longer the end the still $X.X the X, Northwest

unearned as were loans at two quarter. $XXX the second round X. on underway platform now income, opened Net PPP clients is million of our rounds the the both for for Forgiveness of end July

over the round the and we received program opened. payoffs have and over for portal have since of related We round million received X,XXX loans $XXX forgiveness paydowns applications two of one to

Clint and estate round PPP utilization $XXX especially strong absolute and As in sectors. with a notably in lines. and loan loans, which record quarter quarter healthcare, was we record the CRE construction lending agriculture construction we than of was new flat growth two diversified saw and Line at of was dollar in prior XX.X%, $XXX good C&I but the increases C&I set higher was real the leasing, noted, million, fourth XXXX. achieved production Production during excluding of million

is the XX% the X% The XX% and relatively mix loan fixed, XX% Excluding overall production XX% X% quarterly was the remained fixed, PPP, non-PPP variable. floating loans, portfolio XX% mix portfolio floating and PPP variable. and composition now unchanged, of

delayed clients. to from XX% increase the to business slightly and quarterly attributed $X XX quarter of of As during by new the was Oregon region customers. our inflows majority consumer. from Over mentioned, and increase from The approximately Approximately over Sound is and The $XXX billion from deposits business the over non-interest consumers. past the and the were with Columbia half and business million quarterly split XX% XX% clients remainder existing Gorge came the the XX% by between months. mix grew with accounts, Puget deposit by spending increased investment and interest-bearing, with

We industry-leading of continue drive maintaining to cost our down, deposits. rates exception

on mortgage linked-quarter fee year, and achieving were a as Services tremendous residential benefit the Although Columbia deposit have focus higher categories Financial revenue Trust linked-quarter by from income on up CB a Card service slowed activity management. under record quarter increased $X had million relationship a both other referrals. up and we fees Company during our basis, $XXX,XXX. and and assets quality basis revenues was

rationalization year. of ongoing three branch our announced scheduled process, of of branches recently occur consolidation October during part this September we As to and the

have the decade, expand a on We been delivery given expanding in service local to each and optimizing Continuing conditions proactive are our delivery projected branches consolidating continually growth. area our over relocated which past strategy, and coverage goals. designed branch's are market strategy approach a we joins Boise our and branch support specifically Tigard, our our to and NeighborHubs, to XX, financial financial their hub. achieve July Oregon Ballard It clients opened helping new relationship-based

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

Andrew McDonald

Chris. you, Thank

net for the allowance $X.X a million of of from last quarter's be for million $X.X losses quarter. totaled the Net during also in $XXX,XXX noted release reduction of quarter. over about loan of credit led the $XXX provision muted provision should PPP by release recoveries $XXX million growth, It This quarter. from million, a the was that to

This at as Our GDP our in and of to X.X% pre-pandemic pandemic by XXXX growth IHS for XXXX, XXXX. improvement X.X% predicted unemployment forecast continued GDP economic full-year last of be X.X% is continue an forecast borrowers the X.X% close forecasted by impacted rate to levels. in in the XXXX related improved quarter and for at is over portfolio for XXXX the with market effects lingering stress counterbalanced when was The lockdowns. forecast loan assumes and the

QX high-risk employer. As million losses such, decrease at and downstream job a a we $XX.X real in to consider an of in from commercial for overlay Northwest impacts what $XX continue permanent reserves, significant estate we to potential combined apply These QX. million a amounted

the XX industry. of improved to with the have remaining shifting the an paydowns assets due was this in for challenges and not NPAs Our hospitality, loans amount X.XX%. decline the quarter to accrual closures Adjusting X.XX%. for relative and the impacts business period-end and adjustment of to loans to classification The with driven continuing to of restaurant the modest Most affecting points. to by our loans, a office principally status. increases period-end and related is labor to retail basis pandemic NPAs gained dynamics due in allowance to to allowance pandemic. returning payoffs NPAs ended in quarter PPP reasons are that We

at loans ability Problem quarter point. said, which some posted are has quarter. noted amount NPAs earlier, This within loans basis declined has points you with as loans, $XXX portfolios. However, Nevertheless, to worse, compared beverage hospitality, can June as to charge-offs, the when last basis see billion, points, with meaningful is of cases and watch $X.X due When there problem about as a the loans portfolio. very were from the or define the compared rebound. million within XX Net a for XX of the last recovery manageable and business' about were transportation, that retail pandemic Past a this impacted points food we XX, small XX basis in to million healing to $XXX,XXX. of principally $XXX been rated year-ago quarter XXXX.

of deferral. the from this different quarter, the time loans. of billion. X% first with as $X.X their The deferrals these majority $XX Okay, on This deferrals, restaurant and roughly we run hospitality part than excluding most can in portfolios, in of parking be portfolio, some year course, along the we had last our At or lots. found very It urban had continue less are off PPP XX% deferrals. active our for or of Deferrals expected. close million is, when to

classify risk is the the due to to for retail, portfolios billion segment largest our as at of $XXX the portfolio to continue $X.X portfolios outstanding million aggregate, the restaurant an of or We loans in our about of these end loan and account subject level XX% in In hospitality, quarter. Retail elevated loans at aviation pandemic. portfolio.

While the loans as year-over-year problem last we down this as over well on portfolio, actually from impact concerned remain quarter. pandemic's are

what We quarters, this for segment. X loans basis and were year-ago. they of XX. four now no trends only as credit consecutive were are has portfolio of in fact, exhibited half a were and on past improving points, deferral dues June retail no this Non-accruals had problem loans In

in portfolio. loans PPP borrowers have this made difference a before, certainly mentioned for As our

total, all bag we this labor footprint In While see mixed evidence at loans during problem now in are the continue a shown XX% from $XXX portfolio the our down declined Hospitality along and positive, segment has be the million XX% of quarter of with represent about seen these given year-ago. results. markets. a in here statistics in conditions colloquial cautious to we the

$XXX XX% which the substandard hospitality of properties. or Leisure discussed up have portfolio in properties, quarter, has $XX last better business-oriented assets XX%. for in roughly portfolio, about leisure-oriented a than does half original of our accounts loans appear portfolio's million. pandemic Leisure are clearly much business accounts business-oriented loans of for substandard there's our between the in problem portfolio, while the bifurcation It of this make As weathered leveled expectations, and properties longer level of classification to that About this most substandard the are recover. million taking off. hospitality while

Problem to get put plans roughly at for quarter. XX% remained this into substandard, consistent to of these were customers our about portfolio restaurant have a in general, $X.X year-over-year. stable of so we help properties place $XX $XXX bank account For most Restaurants, had to year past have reduction operators. long-term time We million which hotel through quarter action deferrals dramatic had million, this recovery. in loans Similar rated portfolio. about at this the million, to end. amounted the Again, loans meaningful in last deferrals impact for PPP a

restaurant June clear open of of our course, operators is XXX% occupancy, XX, XXX% great were As at which, news. to of

the XXX% issue occupancy. employees these affecting enough However, new is support finding operators to

scenario So it's bad a for restaurant news operations. good news,

portfolio quarter. $XXX $XX about million the roughly Finally, year-ago stable had million during the by aviation was a down from

a to is yet traffic traffic Hawaii. on XXXX will industry due as of to Grandparents finally travel, time XX% the by of families As as the and loans leisure awaited excited not many that in their on taking past demand as trip business pent-up quarters, customers which, to agreed recover, continue travel. July no leisure are to go rebounded pay levels. lot are no with has past were mostly visit grandchildren, as loans This long due, and seen as There deferral. side, of averaging TSA take to all are dramatically

now However, slow an debt hand liquidity return continued Despite and to recovery deleverage business headwinds back global demand the sheets. and positive over before, unequal balance quarters will the as next a to airlines flow call these headwinds, are recovery. low few travel, U.S. I to within retire projecting Clint. continue begun the have using many their due with cash noted for to their and

Clint Stein

Thanks, Andy.

announced We two been seamless banks of on with regular the a are Columbia merger. close. complementary have still closing of Bank join with partnership excited community-focused models closely target a Holdings fourth This have of working we Eslick will team to our ensure are The Commerce together and quarterly family quarter Columbia and for Randy to and cultures. their dividend integration business counterparts the and bring morning, $X.XX. his

be comments. will concludes August on to dividend paid of record our XX of quarter's XX. as on close This This August shareholders the business of prepared

As will Andy, your Chris and we me questions. now, Aaron questions. answer to line with the reminder, are And open a for Raquel,

Operator

[Operator Instructions] comes Matthew question Clark Piper line first from with of the Your Sandler.

Matthew Clark

Good morning.

Clint Stein

Good morning.

Matthew Clark

you're some the type to commercial concern production of office, this get a still sense better of Very doing, retail, quarter, are real strong wanted in production estate and hospitality of of new terms that assuming that areas business.

for get of Just estate wanted piece to a real sense what drove that commercial production?

Clint Stein

Yes.

in too Just front it a me paper. have let second, of you. much get I

Matt. the Andy the opening terms record in comments, – I And of in So as the in far the outlined of production surpassed for quarter record my noted quarter. previous was detail, the I'll in fourth speak general set last just year. it

liquidity in continued of activity saw third that that's and lot in just what there so quarter, to what we're some into there's continuation quarter share atmosphere. And we it's the year And competitive build saw just still the production though of that record seeing and that end a momentum that's and broadly market, fourth of a market even drove terms out going the We're what a the really you at very during taking of last time long of quarter. pipeline is the clients.

that think question. will your I to detail has the respond Andy

Andrew McDonald

Yes.

is million. warehouse a and in an done at then and actually modest retail growth it's the So also bit of And of pretty a space, we've owner-occupied combination little that's office most but owner-occupied properties. $X the CRE, warehouse-type

So owner-occupied. it's predominantly

Matthew Clark

or is like coming need does you the Okay. and basis trying XQ? change to pipeline backfill? to to of a a from production, it get year-over-year? just of for the pipeline? Or I'm feel out down it quarter in percentage sense how Given you kind Is compare quarter And then last on the even last

Clint Stein

with on We're books to And as quarter as to And we're the at. on bankers you existing deals those prospect, continue back after our record would a holding Matt. the a lot it's win that new very that loans Sure, some. well. expect expected, of pleased would and at pull levels pipeline our where

So at yes, should it the and growth to lead we're little, it's if level historic retreated at look us. in it for you – historically, it's very pleased but a at that

Matthew Clark

competitive new be down just then more just price? related the being to X.XX%, of materially I how And pretty And at quarter, on that from at think on X.XX% guess coupons related ex-PPP. Okay. how might of much that's was last the mix? I much to that then

Clint Stein

Yes, start I'll in that, the come mostly with take more some details. It a to maybe and and mix. have then on does do can Aaron

we some that larger had balances. quarter, in competitive participate deals opportunity some RFPs. the Those the During drove are to highly municipal

allowed approach, a lower those coupon, expertise our for Our the us credits along deals. to in and come But that that those skewed win certainly at space number quarter. high-quality the

we that, see improving Aaron anything there And level to add? you'd return is that past think like I numbers more to numbers. a and of

Aaron Deer

Matt, was the the I'd that PPP X.XX% in loan quarter. the excluding just to during and yields X.XX% quarter, add, compares first

Matthew Clark

Yes.

Okay. in – the revenue it's how fee I and much piece sense line. small in weaker last? you a And the of sale, on loans this your just pie. the a for I gain way specific embedded quarter us on in loan give the mortgage of Can But revenue mortgage, gain think on versus it's know then sold were the

Clint Stein

going specifics changed not of gain was pipeline. What to of Matt, I'm from the sales the on not was well quarter-to-quarter. pipeline sale So volume the on value as generally as the But the that. we're the provide sure and speaking, different materially

that what sequentially. decline really was So drove the

amount the in business versus drove activity of So the on of the sale change. it's the more that volume gain

Matthew Clark

you. Thank Okay.

Operator

of D.A. question with Rulis next Davidson. Jeff line Your from comes the

Jeffrey Rulis

morning. Good

Clint Stein

Jeff. morning, Good

Jeffrey Rulis

ball margin. if of guess together I on and as trying could is asset from margin your could know kind that what kind balance with and investments. go-forward question the of on the point the stabilizing needs? interplay securities you half thoughts goal spreading to just to think think well But as you back what the anything A you do offer any the I – just of earning kind you dollars. could

Aaron Deer

to challenge. going there's of lot a I factors play. bit at The mean, is of a to margin continue a be

the Ultimately, take noted, lower a loans. we during the increase and quarter very that in shift environment on going of either a securities see to kind significant that improvement you the balances rebound came toward is yields. to had an in the rate balances As did investment back significant at margin or

So I of you're next. think, that. to noise $XXX quarter the that this of over We forgiven still add be million is and that to the My of on the going much quarters, have next of PPP loans couple sheet. expectation to over balance will PPP have continuing

that, And full you're so continue as the the margin. yields the the and that both to to on impact lower on drive that I changes respect see well loan going will that income to and on the portfolio. of portfolio Underlying securities of discussed just the some fee securities benefit as the quarter with

be I'm we seen forecast XX-year that I've of Encouragingly going expect are see but Though to end fundamental getting obviously, ideal. some would year. So where a the the the flattening said, in bottom by more rates suggestive this closer in was more we the to very pressure come we're for we the out. improvement hopeful think recent some some bit, rates lift the Not that ideal. only not though, not And there's a quite rate I that that did see there environment. good could were The to that do get quarter that continues. that I of

little from terms kind the that than with So of system, kind of the we then but margin the closer expectation bottoming the working balance the hopefully, worst of in environment show improvement And further through of to pressures some rates still go. probably sheet is my here. operating have core to a a not, is

Andrew McDonald

you into, the the deposit what that, Jeff, we year. And guess, I margin liquidity all growth add the to is the I'll normal from environment, And all had asset that years created deposit year $X.X followed you another as shift this me, in billion with just happens virtually on half that's second and really of first in And a growth. our the And know, around shift. of half of the the comes earning wildcard of deposit us, mix to in growth. the the

four calculation. So funds. And cost but that know component basis for your certainly at the margin that's important of I impacts modeling, an we're points still of

really the it I down the focused have I'm is the sure growing income. while if interest where in strong loan-to-deposit and we're continue revenue we think to the should really us. the that that and net size so grow is And push focused And perhaps result ratio team deposit growth, securities increased we'll of for in book, making short-term,

Jeffrey Rulis

Okay. angle. Well, Maybe just appreciate a other, the one I different commentary.

of impact On but there, the low kind some PPP line, expense number. you of the noted a pretty it's

we You kind guys we if bit? for? came of rate. of run in Just squarely significant mid half there's a in should the lower? to sense had we investment Is that's to mid-XXs it upper-XXs in adjust Can if come if second look or trying about that kind talked

Aaron Deer

great the was here probably probably And the in There's line less help as bit software expect much third and processing be to quarter quarter. expenses in Jeff, I'm the job I in in project you And to third our still beneficial they'll strong. this Chris costs doing going of disinclined of I couple that's for And half, But million quarter. a data the some. at a but of then XX expecting the also on going impact that. are the noted, a consolidation hit we're controlling I that point. commend guess said, Yes. doing back got expenses. pretty to of we've a some lower team would second that have going That to FAS guide little I'm our

of clients our active more they've travel, and kind we're I a folks And more that But very while seeing think starting to think guidance stands, too. the particularly I those lot point, to mindful little in just going probably throughout, see get of expenses, with up, this been and so that's holding light at check. a being as costs prior certainly we're entertainment So of out. first bit we're still

Jeffrey Rulis

Okay. Thank you.

Operator

from the comes question Jackie with next line Bohlen of Your KBW.

Your line open. is

Jacquelynne Bohlen

everyone. Hi,

little for going question of you is where context a give my coming to So bit from. I'm

So focused have one line And is the feel actual draws. which – is actually asking asking. the lesser did if business I what little to question, quarters line opportunity be sure I is one, I've really I I apologize you of you had if it I had is I this through of guys a the but your make I've my should make when in I like PPP, balanced I other clear math if right, excluding and to I'm been portfolio. And focused been commercial want utilization the the looking releases, bit it the ask what realize growth – This right on that on you wordy, one that wrong I've had. so earnings

And so of going where sense some generation coming see of just more to you or that I and the customers whether you actually that out momentum a and the of want talking from were forward? have whether think it's you about new it's from? If spending that's there how kind are

Clint Stein

it But that did change. as of have and that I I'm quarter line the on commitments way increased. quarter-to-quarter. $XXX balances are change growth out think for of especially new because to or those have new if on Yes. I really increased, number not we're That's those is commitments linked originating Because about came our can roughly at you're new there commitments lines. I skew as the draws from just at in trying mean context you think year-over-year you're from growth absolutely bankers to much outstanding the right million about Yes, itself be what have how some utilization looking think get the – looking right it that ratio. utilization even at to thinking

Jacquelynne Bohlen

Yes.

Just new level wondering, is is you're and if because up. though not, seeing customers, utilization which don't out because I that's this not play commitment my going thesis the that adding change, know to is we're line drawing or

And benefit that so Does are masking the it's fair? the that sound draws some seeing. of you of

Clint Stein

that's for a of fair apologize not tip that at I be I to... and our fingers. having Jackie, the think question, happy I'd right

Jacquelynne Bohlen

No. the spot you I nuanced, so to on sorry like it's know that. really put

Clint Stein

information transferring No on get are We'll And here, certainly. of do coming get clients It's we'll back have you the overall that are another either it, balances question. to and see can in balances, you great it. the if worries. the we afterwards, our if aspect back or and does new you line a new have question certainly it mask

it's yes, an So excellent question.

Jacquelynne Bohlen

figure seeing of and ask thing are land is construction. demand just high second right related and of which kind everything. an Okay. of constraints heart looking I that And there, I'm relating dollar mean, is get just to so I availability than the your comments in market, you're the but know to actual what more to I then Chris, there wanted at, is just chains more the supply momentum inventory general to the obviously, and

And terms what that projects how – seeing in wondering growth moving are you're along? of how market in so and I'm potential

Christopher Merrywell

Yes.

getting So referring fantastic while builder our to – more through Builders second a having they're the group, still into inventory. sales to finding end longer, taking delayed strong. have the quarter very banking projects They're they’re up are they're year. and – were are they

segment houses are so that at on biggest us look around the when they're not quickly staying selling books. that our you challenge think for I is

of robust. the pretty So churn is it

lift of quick, date, down nature other tend from a than Now we're and the bit supply of going where the things extremely there. chain. to been us sales move that it's may to into a little a slow season give But to delays how

Jacquelynne Bohlen

Okay. you. Thank

Aaron Deer

your I'm about I correctly, understanding basis. And revolving lines up increased Aaron. the change, if in is at sequential increase on Jackie, the by bank this net question pulled sequential million just the $XX a

Jacquelynne Bohlen

and Aaron. what get such was technical a of apologize utilization for a of question, having rates. kind just trying impacts customer on Thanks, I Okay. again, sense activity I And to having new that's

Aaron Deer

That's a question. good

Operator

comes with RBC question line the next Your Markets. Jon Capital Arfstrom of from

Jon Arfstrom

morning. Thanks. Good

Clint Stein

morning, Good Jon.

Jon Arfstrom

to the question on deposits. Maybe just back

You're growth we seeing the in flows? words, of expecting excesses similar there market flowing terms some the money what deposit normalization are In you see developing out some half second deposit of historically. to maybe other in in we do in? still have Or

Aaron Deer

Wow, forward-looking historically, you've an that exact that's for love But to I'd answer a that. have it. seen question yes,

about that which be pickup could see would I there that exit equal, have. base and that what Money I one lot for of the is be liquidity not economic then they With think what's that, on be we'll that And offset our in there's client continue would system. which of being levels. as continues exact same remains in previous pinpoint seen. All going to an take things if the in said, offset to that and the think there we talked We've I I still come lot behave client system. at it be in a I to changing variables it. will hands, activity to may a liquidity expect of quarters is But may a that the space, think new is acquisition activity. can't it to to normal

but I say, that different. normal, would So fairly be it of going the think I to it's yes, be would components around, all may

Christopher Merrywell

assets maybe clients bank look for we and Financial our that other we've for rates, hundred one several above we with financial moved And our under group. a some sheet what that seen returns was couple pre-pandemic activity, balance see on and that we're off group. that's paying of quarters Services that's through million what services our dollars comes and management into something There's deposit variable do to begin play, into that CB as

see drive occurring still activity with So economics And can of the and from still that. see that that fee we positive driving that that you trajectory some from group. we're upward today, terms that you in income of

that quarter, through you. something that's and a that's balances, as driver the if for third net we'll that So we quarter, highlight deposit progress significant of fourth certainly

Jon Arfstrom

another so list. my can was scratch That off I Okay. I had, it question

question Andy, that. appreciate for I So a you.

And takes it and – strong, all the it in the keep reserve some provision, One down? bit your what does appreciate changing terms Is provisions things these it? take a is look does – and of of a I reserve that Is in forward your of guess of I'm to of we've very and just bringing take of quotes bring more does because what release that to to in puts seen factors? the but it the it negative the economic I are get of couple improvement trying last quarters?

Andrew McDonald

substandard Right. still $XXX Columbia, loans. million-plus we have in Well, for

meaningful And need our so recover. of impact for through to work level on have that help And will those losses. allowance continue and credit a we to borrowers

be levels loans, do think will activities a the trying I a not stabilizes and be, I traditional economy answer more guess, of to kinds the I problem COLB. question? forecast forecasts, we as dramatic more be and driver will of see less Does of your provision. specific driving and economic the mean to those changes in little economic charge-offs I'm that bit

Jon Arfstrom

I view, an levels from your guess, relatively outsider's the still see to as I help. particularly of high does relative NPAs. point that Yes, reserve

I on for in of kind we get of what P&L? should terms the impact the flavor quarterly a So wanted expect just to

Andrew McDonald

Okay.

Jon Arfstrom

Okay. Last question, Clint. maybe you, for

feel spending curious and you just kind different there? than leverage it like business couple capacity add I'm in other a assets model brings growth growth, this is something model? And of is ways, seeing, like of a assets. been hiring ago? that highlight You’re And But deposit do on and feels it what still Just years of as have we've up guys what so your you little your to production expected on in a way. positive in And bit without assets loan to lot always expenses well. of touched you you have that in different average kind a numbers you've

Operator

Ladies and gentlemen, this stand difficulty] operator is Please please [Technical the resume. by.

Clint Stein

All right. Jon given. ever Unfortunately, it. best was I've answer nobody heard that the

Jon Arfstrom

I mute and and put hit think me laughing started disconnect you on you instead. hysterically

Clint Stein

to under trying Andy the I'm it was Well, Andy... table, Chris decide or if kicked that but something

Jon Arfstrom

my Did you hear question?

Clint Stein

want it you make just to Do so. to believe sure? repeat I

Jon Arfstrom

going in business. a I'm operating up. in couple the you I'm the business to improvement production, the I'm just curious, hiring new curious last business without over it's the have is the capacity lot operating because about highlight loan the piece potential always the lenders? made little of And a different, meaning for looking leverage based of add there of bit assets you on leverage changes years? longer-term is just And operating your at model the And you leverage some of the

Clint Stein

discussed Yes. for is The operating types sheet, banker capacity, improvement, activities the we past focused our when volume Company remained we've short and normal Columbia automation, past the even back is CB business. that where something pandemic that of the of in well of those the worked a relationships of that both with well our years. internal always we've type as loan able in collaboration goal and answer but our that that's is activity activity in our well as on both driving those, Financial and the the we the front sides internal balance amongst over to to be teams process office, And additional to in volume of to resulted that's near forward ability things groups to particular, on the increased the to yes all Services. that on of several Trust throughout And externally and and it's right also initiatives nuanced have just terms various as the client. in been more in scale moving And getting say of handle included continued bankers capacity, in year, as

And for over results loans made PPP on just on where the I we've XX,XXX think So progress about program, both we and $X.X of of it. PPP the that we capabilities have that the demonstrated billion our booked been that. participation working rounds in

long double just well, you from the and ago what If couple volume year, to wasn't it ago. equated a PPP typically a standpoint think, about annual a would too then production loans years our was just alone in was do of we that that of number

deck able business our have of midst it two usual as than do PPP, which that, in and to be manner, of a do the all fashion. that, in – was on a was everything effort, essentially and controlled of very to first in so handled it other else And the production hands part top three wasn't of quarters

talent saying, But and the So that infrastructure it's do that's think some that can note also to large of of with with I in existing of national terms there's the we important occurring we yes, long-winded banks some have. way more how And the disruption some And have benefiting we're good them. to bankers, the bankers. the make also they they dissatisfaction bus serve good we level if clients. opportunity room bring the client really have we'll that from, that's creating at for some but their in on that's

Jon Arfstrom

Yes.

I I appreciate a And answer. was think that. Okay, a long good quarter. all good. it It's

thank you. So

Clint Stein

Thanks, Jon.

Operator

next question Andrew comes line from of Stephens. Instructions] with Your Terrell [Operator the

Andrew Terrell

morning. good Hey,

Clint Stein

Hey, Andrew.

Andrew Terrell

Maybe taking perspective longer the just in the trended seems to approach us to where investing quarter? securities be is? might portfolio like remind a overall can in start, portfolio with you given bit just duration, just Aaron, It you're a duration buying from you this duration the

Aaron Deer

Yes.

been that that to we've the We're beyond portfolio you have going extend portfolio. overall we we're think about an inched further portfolio and split duration in the AFS And as on bit right I don't buying. HTM between noted, is little up. now done We years. a five the where curve. The

between of to were X.X% and differential million. in new at held X.X%. right those the there's little around the $X is bit purchases two, The So about about a maturity AFS quarter is the

thoughtful some, said, buying. but we're I with have So what we at being as done we're also pretty

buying into that So cash if cash a prepay, we're things aren't the keeping that good reinvest that flows upfront have of buying we're we to continued so are that flows the up, deposit likelihood pretty seeing have extent if growth. to growth, that have we lower flows loan strong those things loan

what we mindful very purchases. high-quality course, with stick to we're type tend you of really being know of And doing. we're about So that

So it's size that so. see extend I the how book And not here. to go thoughtful with process materially the that would need we doing to to through. very you're a has very we're be, duration that. about from going we gotten portfolio that that deliberate Obviously, we're But expect be managing

Andrew Terrell

half And you. questions. back-to-back right maybe technical slide loan that the Okay. XX% book at for of currently But now. of rate a floor kind at deck, the looking helpful. about That's the Great. and is apologies is about Thank page XX – another variable of of

hikes floor? before for floor breaking to many loans Just how currently rates, we would average do need past kind think you loan the at those see rate of

Aaron Deer

going quickly where lift a little to Well, take have that going pretty are hand, a to there's I others it's are off but don't and that mix longer. there's some that

better we're So to I going and higher start looked disclosure moving that hope, some that and we going we'll at rates our this it's actually think, something because providing not lower. are to, is for inter-quarter obviously, be

help And start that. so that I providing can think you some we with will context additional with

Andrew Terrell

rate Great. would be the helpful. very That That’s Yes. it on side.

taking Okay. it the me. That's Thanks for questions. for

Operator

is question from next Clark Piper Your from the Matthew Sandler. of line

Matthew Clark

I just had few follow-ups. a

PPP to loans, as a that deposit-related growth. stronger going million a fair? second assume in which phenomenon $XXX here half. cause that I wagons of in expecting to well, kind half also on that deposits Just translates second continue is question, terms lot the to traditionally into just that the the you're of of likely circle of Is

Clint Stein

have money. forgiveness, a probably the I qualify assumption that's to think for already they spent fair because

Matthew Clark

Yes.

securities I weighted the second on purchases, question, you on you rate just guess. this And the average give bought then my yes, quarter? And Okay. us what can that's

Aaron Deer

Yes.

on at we was So up the first million where purchases the which $XXX actually is from the million. rate new and quarter $XXX were

in drop the the – despite on average the rates purchase quarter, So actually through the improved.

million purchases. was the given So added We've to the that. And during see $XXX about quarter. I of that pleased had we particularly volume

that's volume expectation my – your is won't question. forward. buying so that answers going hopefully, But be that And again that in we

Matthew Clark

part what the Yes. else. And my everybody of has you against that kind was and I gone guess curve to of question follow-up It's related done.

were if you are quarter of is what something blended to of you're today, guess, this thoughts guess, on what – that lower? I purchase volume rate the going going buy obviously, the your coming be I what knowing is to to probably, what So kind on, that

Aaron Deer

will early. average say and But But like I that happens we'll I in have need the Well, sound that that below quarter. suspending of flows late, was going to would make we continuing second reinvested. things to pretty a to quarter. because purchase. cash be to see seen are I purchases don't little the mean, we're the I are they still mean of have the we're through We're where what it

second either you this can't point, rates I but hopefully, tell down that where with what's directionally in purchases. turns. with But a quarter, bit we at going guess, the we're or from to little were So happen I

Matthew Clark

give loans you didn't it what's think amount catch you your pick Okay. your finally the And appetite specifically bought? to you just then Can do or comments, going I loan early purchased I forward? more – I of on of purchases, didn't in mentioned the what and us but And on it. that

Aaron Deer

Not sure the which not purchases are – we any during did quarter. make loan

Matthew Clark

of you I heard this know quarter. last more did I just did sure I it you wasn't quarter. Okay. if

I no single-family purchases? resi more So assume

Aaron Deer

in done there it do nothing if periodically, some Well, in portfolio, quarter. we sense, but might is up makes second of given paydowns of that, that the topping sort the

Matthew Clark

you. Thank Okay.

Operator

conference concludes and Ladies you this gentlemen, call. participating. Thank today’s for

may You now disconnect.

Columbia Banking System (COLB) 31 Jul 212021 Q2 Earnings call transcript