Earnings call transcript Q2 2023

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Operator

Hello and thank you for standing by. Welcome to Columbia Banking System’s Second Quarter 2023 Earnings Conference Call. [Operator Instructions] At this time, I would like to introduce Jacque Bohlen, Investor Relations Director for Columbia to begin the conference.

Jacque Bohlen

Thank you, Towanda. Good afternoon, everyone. us we review market released joining XXXX second closed for which results, shortly you as our we quarter today. Thank after the refer this release during our earnings and presentation, columbiabankingsystem.com. we The corresponding website at our are afternoon, will remarks available on which to

System; of and this Banking Umpqua Officer. Farnsworth, Financial are Officer; Bank; Namdar, of afternoon Tory Chief and me Stein, President Ron Merrywell With CEO Nixon, Frank Credit and Clint Columbia Chris the Presidents Chief

your questions. take our we’ll After prepared remarks,

During will uncertainties are are of by we today’s to intended subject Harbor law. Safe covered which call, statements, forward-looking make be risks provisions and and securities the federal to

our list from well as earnings to factors of our cause may the differ disclosures a contained expectations, actual filings. to materially refer within results of presentation For please SEC as that X Slide

We of reference presentation. the in discussion the and measures GAAP to alongside to throughout results. our non-GAAP will our review non-GAAP you provided reconciliations release GAAP encourage also financial earnings We earnings

I will call Clint. to over now turn the

Clint Stein

everyone. on Good as a for remains quarter Merger you, we Columbia. of Jacque. ahead be productive another activity It priority, to achieved nearing continue was its integration milestones but are completion or schedule. heightened Thank afternoon,

opportunities million additional report beyond have to X target $XXX original pleased track have am I to our and synergies. already million in been surpassed we We $XXX cost meet on next identified. remain over months already the

services. took conversion the unified from that We’re March, and systems out benefiting in teams X from and months place systems, products our are

legacy we support revenue to use expand necessary business relationships We synergies customer as and drive and tools new scale win bases. the have across both to our existing

drive which strategy to provides businesses deploy footprint into to new new supports markets, growth. successful Our opportunities our balanced enhanced

environment is not However, the without challenges. its current

industry balance base. is quantitative of modest the immune remix sheet affecting balances our actions deposit not contributing deposit and to to Our

within favorable to service-driven expansion with associates, the Our in operating resources our provide and markets talented retain industry. opportunities placement us and model newer

As in prospects I’m footprint X business throughout states, I our of Western by markets. each excited look our our grow these at to

call I turn the will Ron. now over to

Ron Farnsworth

June you, earnings call follow And we projecting track synergies target Thank as on we annualized in the be $XXX stages along, hit page as in from presentation. and Clint. we million Okay. achievement those want of of final on the well X, referring of are Starting who to as XX I numbers are cost Slide $XXX September to Again, higher for XX. certain a are on will of million targeting by integration. to the year-end complete number the

X. Slide Next, of balance on quarter We at and compared present the the prior discount closing. remaining as marks to

million income. portfolio, $XX acquired post million close $XX to this we along the bonds. arrive million our at with the bond earnings portfolio to we interest income detail, accretion higher In $XX For from the total for was accretion via $XX million AFS of reduced discount include interest restructure, release of the completed

combination and sale. of On income the The the of credit. had a QX we declined $X.X total $XX accretion million in accretion $XX.X loan rate loan side, million marks through million for interest and

liquidity, Slide including deposit X during the our covers quarter. flows

second For periods broker and all comparability, declined on short-term fund higher presented. the pressure for outflows Total and we table borrowings Loan to continued spending the consumer customer sheet as balances. liquidity. the tightening Bank deposits Home and on to we in Federal X.X% impact of deposit inflation We were utilize if the the balance maintain presented left on the deposits Market combined quarter. liquidity

of Below XXX% not that, and we liquidity billion. quarter $XX.X a upper available represents to deposits total excess table quarter details loans The our billion collateral for cash available sheet as bond off-balance This as of liquidity arrive right of with end. pledged $XX.X had of ahead. uninsured

knowing combined page, next income from costs X, between current time. course, market on investment fair we Slide to quarter, market amortized par in takes value, cost resulted par table decline upper discount, difference curve. amortize out to you detailed the The of interest On accretive slightly the portfolio. left the current yields from the over the will front this value to be The net is higher of which end the and

does greater this tell, portfolio you I’m optionality. stream stable with As us significantly can excited give earnings about as and higher it

help as And better in combination Slide items. which X.X unrealized and overall bonds, have X.XX% no provided lastly, XXXX we an the key an only financial given accounting The bonds To on duration moving several was statement outlook book end. HTM we effective $X.X for with loss. yield with represents of on X, million investors of quarter CRA-related updated some parts

NIM lower assumptions range the funding lower ranges the stability guided the continued incorporate at the end. incorporate remix, second upper remix of at Our quarter’s and end

the and guide. and assumptions, GAAP $XXX million in QX. Our This income. FDIC discount in into rates $XXX ex the last expense QX, expense cost outlook of range NIM all On expect an for rate realization by of run accretion expect rate by estimate September is realization to to quarterly run million quarter’s continue slowed we is have prepayment unchanged savings delaying includes interest the XX the the CDI assessment from in we hit estimates to includes impacted lower as further the special our higher

take provide summary Slides XX forward financials XX. for Slide XX QX, but I through you to want to

QX core non-operating GAAP resulting Here, and investors impacts the help merger-related to out faraway understand and earnings results the in column. bank break we

income or of first represents diluted per fully QX combined share. The column million the GAAP our $X.XX with results, $XXX net

value for net which second appendix. merger to in the included QX third resulting our for related along costs in changes mostly statement swings operating are income. with non-interest million $XX.X designation column reduction earnings, includes fair in as $XX expense, non-operating of to the million income in a The detailed column These

common diluted at share or XX.X%. our with on return X.X% per income on assets was $X.XX on Our for $XXX.X QX operating fully at basis combined a return equity tangible million and

presents the showed which accounting, column million benefit of $X.XX of Taking the $X.XX the tangible on solid excluding merger core income to $XX million equity. bank, net or accounting column, the us return fourth XX.X% or per diluted per last with net effect the results $XXX share share. merger diluted which and The in to

is XX.X% lower accounting with see equity, of when expected with this benefit outflows. interest While reflects excluding costs to higher expense, Even the combination our a on it great deposit net than QX combination the benefit. tangible borrowing was this return a it announced, merger with is higher

then majority be is of income. discount steady credit, CDI fair source The the operating by The income Now as of to and a I’m reliable well. going discount a adjusted with accretion accretion providing steady time not merger-related is XX as bridge of GAAP isolated value reported the rate, over Page driven then and items and changes, capital build time reiterate page. will to earnings, key interest from non-operating over the this and

We accretion bank continue valuing the both appropriately. to core in the to clearly highlight aid it and here investors

that, moving items. more ahead With of a couple for Okay.

offset from Slide from Slide decline basis XX the QX month income. in accretion from for higher sheet June was costs roughly deposit to under breaks on margin. excluding point quarter out borrowing slightly X.XX%. prior same directly from declined. balance net of of NIM The the expectations X.XX%, for field QT resulted prior held and NIM. the the the a the XX the interest The PAA June impact XX had month of excess And level NIM, on liquidity the does

and interest are Slide is our noting updated under portfolio, XX combined both XX% fixed, XX% scenarios. is repricing and XX% sensitivity adjustable. of rate maturity floating out XX ramp Slide an of characteristics shock breaks the and provides the loan And view

We proactive environment. to sensitivity balance measures future have to declining sheet taken rate the reduce a

here, over betas, the combined quarters rates noted over company calculate past cycle-to-date break As you risks down which periods are we where comparability. our on our been down few rates reduced calculated our presented can basis below, funding significantly. where trending the see have for a In the

Fed for is second of the XX% the of priced interest-bearing Notable spot As rate end matches stability. portfolio month highlighting of deposits, cost is which June increases. of in the of interest-bearing our X.X% funds X.XX% at rate quarter, the deposit the quarter here

capital XX, ratios points our capital the in on regulatory risk-based our back noting finally, roughly QX. in basis And Slide XX position, increased we highlight

capital, shareholders. expect We capital of on risk-based targets total to for XX% long-term provide will enhanced capital approach which our quickly to excess return to flexibility

now will I that, to Frank. the with call turn And over

Frank Namdar

Thank you, Ron.

XX, as earnings outlined volume in offset Turning $XXX to was the prepayments, Slide release. decision origination million loans roughly to of billion our the quarter $X.X in non-relationship in and payoffs sell by

Excluding sales and to annualized an sale, basis X% during by on loans held quarter. for the expanded reclassifications

quarter. details select production category major portfolio during loan XX characteristics a of with surrounding detail added second our by the Slide

provides it XX detail portfolio Additional is located markets. is in this I industry investor granular Slide data asset portfolio, office suburban by on a on of repricing that primarily on this supported XX in it Slide detail our points and our given you encourage provided number properties commercial credit portfolio information to on diversified, review provides focus category. and as for

reserve Slide category. our on. highlights Moving XX loan by coverage

include provides on reflects during commercial portfolio variables, Additionally, million reserve the that associated provision stabilizing recorded loss-absorbing non-relationship the points loans the loans reclassified. a quarter expense sold further which remaining FinPac were trends and credit basis of capacity. several and release discount $XX XX credit in with The

anticipated performance is consolidated our FinPac in remained and an charge-offs. trend our Slide ex credit XX has general, overview positive of the provides In credit trends.

As lag. sectors Charge-offs or improve trends broader any been portfolio elevated a the reached. trucking is continue during portfolio. previously at of communicated commercial There plateau Early-stage charge-offs no the FinPac. sector the second quarter, a indicative that to indication delinquency in of centered FinPac remained other within retreat spillover still the will has to

FinPac, a low charge-off bank remains very at at the level. activity Excluding

over call the turn now Tory. I’ll to

Tory Nixon

Frank. you, Thank

Slide that Turning of the to use deposit of contributed businesses Market granular the quarter. and tightening, impact to on the consumer quality deposit contraction spending took of during deposits. our place liquidity the XX cash modest second remix and base. inflation highlights

our proximity customer branches efforts ongoing in X-week the planning were successfully to rate our June, that and branches Umpqua any Bank provided without extensive XX May accounts have discernible process, to by service We to impacting way. the a we disrupting of locations contributed outstanding high teams closed, or and customers ability of to execute very existing continue over our consolidations to our retention. customer consolidated and an in of Due expertise a period bankers,

As more banking. deploy our Clint to to that taking are provide relationship liquidity actions aligned loans strategic The further our focus activities into non-relationship support sale business-generating highlighted, of growth teams growth balanced of we opportunities, intent management services, banking with capabilities company markets gathering support options to products commercial provides enhanced wealth and for avenues our and within newer existing profitability. and and continued expansion deposit like on

across success footprint our talent prospects. future our for add to and enthusiasm continue team’s We our drives

I will now turn to call back over the Clint.

Clint Stein

Tory. Thanks,

on discussed, outlined is XX. We during remain threshold strength targets. We flexibility organization. quickly foundational coming us position both per $X.XX accrete And to the capital with regulatory above our combined Slide regular dividend to shareholder the increased Our future internal share, our return. and to Ron we well-capitalized continue quarter capital second quarters highlighting expect as ample providing in of the for

The concludes available answer questions. This Q&A. is call the your open for to now comments. our prepared please team Towanda,

Operator

Jeff [Operator first comes from of D.A. Rulis with Davidson. Instructions] Our question the line

Your line open. is

Jeff Rulis

attractiveness or of check good the Thanks say. had now either north just the or here? CETX see I but from just want an maybe the in of guess I from you that buyback you north last should on could I afternoon. increase target, It comment of X% fleshing dividend, or looks and capital. the potentially like on raised mean, Clint, dividend, tackle your fully on, kind that that the I further special to on here target of or

Clint Stein

Sure.

various you I is the So capital. the the is – current constraint risk-based ratios, the one if guess, about time think the total at that

for target been for XX%. a long-term quite and while that Our has is it

room got that still we grow points. just of you into to so bit at capitalized be well and if target And in to regulatory a general, requirements take the basis little XXX

we that’s targets. align how think our closely going whatever to pretty you So optimum with are ratio long-term about using,

do we quarters that the next we and there have prepared for So the get couple dividends dividend, things our with be in certainly and accrete risk-based of quickly. remarks, we not yet. in distinct those and don’t all regular talked total but you on over And pretty past there discuss possibilities so, and capital I in think. or when of our are will capital the Board will things will remain not as terms potential quarter special mentioned buybacks, we But

Jeff Rulis

that’s Okay, then the deposit second first on I got it. guess in deposits the, And for guess, balances. question checking in on half, I expectations flows both the

just interest-bearing at be would question your betas XX% or The either second at beta the total XX%.

some check wanted mentioned expectations. beta I there. on of just think terminal to maybe I deposit in your Ron indication stability some

deposit Thanks. part, is So of sort one part beta? flows, the terminal second

Ron Farnsworth

Hey, Jeff. afternoon. Ron. Good This is

back the of take for last part. I’ll that and me part to first Let turn Tory the it

betas, So we XX% on yes the are cumulative. the at

Our that. closer by the But over couple consistently the of page. this be on XX%, that we back footnotes to on of said that couple a below the expect is end the raise time of lag model pretty at to XX% as per to get in quarters, the the end of we we’ve least quarter cycle or last

continued that but XX%. Tory? beta, little staying expect increase shy in I’d of So modest a the

Tory Nixon

XX, of granularity I the mean lot you over if the kind did our of is consumer the $XX,XXX. look course back if base, deposit the analysis to I you kind Slide average of mean deposit mean the of a I at at the Yes. we of deposits, go look flow quarter. I

Our average kind usage. of really And and business of commercial normal shows business normal most some of and up, the is just usage is activity inflation cash deposit $XXX,XXX. normal analysis but quantitative just business the tightening flow

turned look the of to teams us generate conversion hard went of really, were out – really and their and working for deposits on have as pipelines strong we So activity. they outbound lot a and attention really through kind

feel about certainly the the I and that So on company on really deposit the side. and the income the energy are fee activities in on happening good –

Jeff Rulis

if tax impacting at we I guess at have now to the firmer am answer, pressure that’s us that early we in Obviously, to the the where to we the know question for abated market a Tory, of all? pressure half. X-month it’s market-related and I we levels, look But terms back, in early just seasonally season in impacting just spot? guess third in I inflation quarter footing better that – not look but look at a second quarter, inflation has and I in looking deposit are tough want second items?

Tory Nixon

Yes.

that look it’s the best the on side to answer think the at is the I if account in balance to way in $XXX average change quarter-over-quarter, even from $XX,XXX consumer me to million. for the $XX,XXX – I $XXX

especially portfolio, up run just balances. it’s see business being of because the – the start flow the natural to for just of you So a second us, Typically activities. ag cash for used you half deposit of a year, in

So thinking nice the about I’m for looking and the second historical half trends, is got of pipelines my at if expectation we’ve kind the year. momentum some in deposit activity of

Jeff Rulis

one slide sorry, and might than inclusive more Or looking million you is that synergies carve of you this opportunities? announced calendar $XXX have outside I’m just something Is year? I the of a rate. kind you. you guys additional cost that those $XXX on timing are The out than deal. expenses we lower – million thank at talking of housekeeping. to $XXX million to run $XXX million Okay, the last, on outlook the can’t opportunistically, about for

Ron Farnsworth

Hey, million. number the the not additional include is Jeff, $XXX above Ron does That again. this

more October could will in hit balance call We talk of see the into million QX, that QX. we once outlook $XXX for the going about we the

Clint Stein

footprint, while Clint uncertainty this would But the to also on one add those reason going had that some the is in markets. pending, again. around early Jeff, markets, our target The was internal I is and higher part we in and expanded to was a invest said inflation. new of we that thing we the we’re merger we’re

in of is that maybe part a into of And footprint. expanding certain parts of expense our that reallocation so

Jeff Rulis

appreciate Thank you. Okay, it.

Operator

from next Piper Sandler. of [Operator the Clark question line Matthew you. Our with Thank comes Instructions]

line is open. Your

Matthew Clark

Good afternoon, everyone.

Clint Stein

Hi, Matt.

Matthew Clark

with mentioned additional they remarks forecast deck, think for sense prepared sales the were in slide reasonable I a loan and whether deliberate here? sense And in consistent is flattish your there sales, a from loan are come the loan for and to of sales trying get on quarter? just not any Maybe just to kind balances still this or

Tory Nixon

syndications It’s – transactional Tory what future wasn’t exited sales just the anticipate this at that of perspective. loan point. from is mean in don’t really I we’re capital larger liquidity right This really from Hi. our and participations I just again. deployment we

thing I think kind was kind moving forward. really the and good do move right of of it’s for to a it and it’s So company over and

Matthew Clark

Okay. or a ago not? report whether And was weeks of that then couple came a not media business? to on just can suggesting you that want address Just true that Umpqua out that’s of or out confirm multifamily getting

Tory Nixon

accurate. time, for $X small with was at $X Bank to existed legacy We the the Yes, garden-style decision case strong million, bank we the – some billion average in multifamily the not deal quite was had of around part full commentary that billion which not line it is about it’s about again, that, Umpqua and relationship Tory kind a very and Definitely of the apartments, exited commercial was division, $X.X just made in transactional, really assets, it just banking. again.

so – we many company division multifamily commercial we for community estate commercial that the to will of have in other lending the parts that continue but in customers business. banking. And exited And do real our

we lots So continue will multifamily to do of lending.

just the multifamily not it division. doing We’re through

Matthew Clark

thank Okay, you.

Tory Nixon

Welcome.

Operator

KBW. Instructions] [Operator you. comes next McGratty of from line question Chris Thank with the Our

Your open. line is

Chris McGratty

Great, question. maybe margin thanks. Ron, a

is stays of Fed the Fed about this the to full that. X.XX%, imply end how a of I low your QX. kind to view core you I the to Looking If entering on once trending around to done? do core X.XX% about margin the the the you guide Slide the like on your would company temperature of of range take guess of wanted your you at take would you thoughts X.XX% X%. high at end get X, to and basis, that year rates, your talked – X.XX% assume an – And of To exit, low for XXXX. high get if gave what to obviously, that

Ron Farnsworth

Hey, Chris, this is Ron.

a we again, be of a can plays and to going annual but We of we that basis. it first the it, about is that March out. recognizes – number, standalone. for QX included quarter, the that’s holding months fact the based at through is still and this bit combination that an sort that X we X% was guide off there year. So but the how not velocity the third of talked the an guide, in on This exit of the see the flows in closed then year saying is also the deposit month I’m blended given

So one be would QX. flows QX to in pretty as Again, to that’s be be assume will deposit that there going are the determining factor. stable in we consistent expect

Chris McGratty

Okay.

So based that range I QX, up. to on QX could make right? want the X.XX% button to X.XX% the that range just for I for be sure Is also got that –

Ron Farnsworth

based Very sensitivity that. that Simple And deposit much off Very so. be range flows. so. much will as within

Chris McGratty

Understood.

about Okay. may of talk just know us Is that more quarter, what but – Got it. you the expenses, I additional to trying savings. that kind come some want in additional in trying about next numbers. to the have kind message? Thanks. you’re Is back And you’ve the of what message to to of cost you’re to don’t putting then saves to on I talked – cost go that investing

Clint Stein

delivering going line. tight we inflation, yes. stated everything million Phoenix to so internal – markets. that – on market also market. to committed, were of, Columbia, into of it’s else all but those into into of Clint. $XXX Columbia this and to both commitment and market. opportunities issues. were bank services address cost Utah was bring Chris, scope other was to And the full period, minimum have we market separately a Umpqua expanded and of Colorado those Umpqua what on what is is bottom of labor we along also our Sort the regardless with working that expanded – flexibility to our And And during the that time solutions the savings Yes, we and

costs rough part of and just of just, we on retail frankly, kind locations And so put what us. some a each number is essentially retail out location that can

taking – tell in of so you established branch let’s read those about, extra say, that amount we we are we that a And kind go you will location as ways by and – might Utah.

release, we put will you’ll how it. about okay, read offset then will a We talk out here’s And the press we about, cost.

be million that’s scope of will the you expect talking that $XXX think how can it to of So but temerity go, I outside about. we’ve that been

Chris McGratty

a if That’s And quick Okay. modeling helpful. I to ones. then couple get could just of

On is a that dropping help a the to. And assessment, little talked – your haven’t of tax – that in would then the right? talked least most just step-up banks a there third be that kind I in would at great. the quarter, be in about rate, special guess one-time assessment, I’ve of the or Is that

Ron Farnsworth

low all rule Chris, quarter. bit rate be this the target the XX% out a is here be expect consensus, you that once of or might to And that everyone years. assessment special Tax expense the here. we the would just finalized, expensed the in of the over above course XX%, target see little what paid on little QX Ron a And be X is in we that for third internally.

Chris McGratty

thanks. Great, Okay.

Ron Farnsworth

you. Thank

Operator

question Alexopoulos Thank of you. Instructions] Our line with JPMorgan. the from next Steven [Operator comes

open. Your line is

Janet Lee

on question for Lee on Janet Hello, this Steven is Alexopoulos. first My NIM. is

on X.XX% range. you what’s non-interest-bearing high level of of deposit stand mix low through where NIM? fairly you end is terms wide that So Can today and to your XXXX, X.XX% a bias for what talk guidance? based for in of assumed And that’s the that

Ron Farnsworth

Ron Yes. from This following the comments And earlier. on just again. is up

it’s stabilized, So for in standpoint. that the QX we flows we side that in middle upper, range. if than better if the the be saw consistent the like we’d the in and we end be deposit we’d QX get see third lower of from quarter, If on on same

there. So that’s the driver simply

Janet Lee

could stay Right. you if quarter, of you deposit XX% today, through will what the XXXX? deposit half non-interest-bearing side you less – look Or the it Is from second do relative second to mix so here? fairly outflows of there that non-interest-bearing think that consistent of of pace

Ron Farnsworth

on see non-interest-bearing flows, shift in what mix talked center I Again, the of that you’d market deposit back we range. money the about. If be we see lower on in time, consistent including increase just we your reduction end in

which July, still it through quarter of middle net fourth the ago are middle if and the change. only – they has quarter, Third it and would X July, again, stabilizes, of months but in early it’s that

straightforward, I hope pretty So that’s right?

Janet Lee

Okay. And any look maintain billion. if on – quarter for the the half the – you Are versus have level you you near-term? to you the over there second $X year, versus the contemplate a the want cash near-term $X at of what is of would your borrowing balance sheet as over second paydowns billion, of you

Ron Farnsworth

my be they expectations Yes. world, interest-bearing flow cash In half a are would where now. of normalized – be cash about flow will

also on earning a we think what you QT get And sitting Reserve, Federal that out X%, prudent So field this that, the cash point balance sheet. deposit in is it’s I’d uncertainties of within excess just sense consider the at the outflows. given We environment the the X.XX%.

So is that $X.X on quarterly $X.XX the talking effect small, pretty at a penny a maybe that additional billion basis. net is of

it’s the So clears environment this moves. some till before make just hold based we we that just think point the outlook off at to prudent

Janet Lee

releases for second allowance in the some had with terms forecast, of And of like to loan in would assuming your leases do changes loan have of no ratio Okay. the sales, a terms is you loans. good That’s helpful. in that level reserve reserve percentage economic levels, a as but to the major I maintain? level understand reserve

Ron Farnsworth

right, feel Yes. on mean the the be. with I economic based where forecast, reserve we that’s CECL, should

is X% over years, when of to around X I bps going the of loan book, down that stay up bps. It’ll the to time, I And X% down. long-term generally say duration about think time. right, big think if remains be it all over it’s not give closer drift level, would the if, which else over XXX about a I about at history or to course when XX you equal, just and charge-offs of

etcetera. bit we’re forecast part on So a in point the deal this the that part at above based based on marks, in economic

So in unless a stay I’d near-term, levels, change it around the significant forward. to current is there expect economic

Janet Lee

Okay, thanks.

should question, about loan we growth the the So think my last of XXXX? rest how for

Tory Nixon

Hi, Janet, Nixon. this Tory is

I we It’s grow, eight earlier, full the company on think opportunities looking continues relationship banking. good, states. the a are strong briefly pipeline just of and throughout really our loan lot I touched Western to at in

We’re don’t deposits not with people we put loans opportunities fee us, provide for income us. who and don’t for making

So we’re loan book, is is at the way opportunity best looking to we grow to full we it’s forward. which us relationship feel for bank banking, I the the – carry We have feel and low going throughout loan prudent and I to loan relationship supports will growth to be mid continue is to we growth do for single digits growth. But the think footprint. banking that good relationship what

Janet Lee

you. thank Okay,

Operator

of Jared Wells Fargo. you. Thank [Operator the Shaw Instructions] Our next from line with comes question

is line open. Your

Jared Shaw

looking be from there at we revenue, the how thinking sale? maybe about MSR the Good and hedging revenue the impact I afternoon, with should guess, mortgage normalized everybody. planned

Ron Farnsworth

the they mortgage story relatively obviously rates Yes. X.X are big and years. Again, been consistent. stay This levels Ron, I’d last over be the lending consistent assuming where is will say within now. with That’s

reduce to that We continue MSR billion of volatility. – to of are future $X.X sale just targeting reduce

some value into that fact bit that market. So a the MSR quarter in saw that you played have of didn’t before you the gain we had earlier bond also in the price the fair quarter because locked this

So add to and still you Clint, very much to the... core want product

Clint Stein

more a around from bank of model, out I relationships. nice into with Yes. model brokerage tie there. a plenty of we’ve Thanks, into I’ll more Ron. Tory’s pivot place Jared, a coverage settled the comments of think it to

should as the in But wind to the there team the think the environment. offering shift, purchases. making portfolio, and products sale less and footprint, in across on We the pipeline. It’s lending well. going requesting be construction in, current over applauded for I I it’s we couple the on out for making the there. That’s like some come granular focusing have customers down of quarters still that it’s have our seeing still next and the We’re held that’s transition, still more but really

Jared Shaw

Great. Thanks.

Operator

Preston [Operator Instructions] comes the UBS. line you. Brody from Thank next Our of question with

line open. Your is

Brody Preston

I maybe Thanks get good follow-up MSRs. questions. everyone. my was just I the the the wanted those for just just valuable on know pretty are hoping to MSR in right sale from is Hey, afternoon, gain given to the now? the taking capital the But I from you relief to ask, did disclose the book reduction happen you you what a expect sale. MSR that of

Ron Farnsworth

I’d at fair carry say value. Ron. is This we that

that on XXX overall price, in going the points gain portfolio loss XXX the the priced balance quarter $X.X – it’s the at basis in roughly to at locked So or sale. – sale We end. basically not be overall with of a billion at portfolio the the

is we’ve comes discount of the no noticed the when it loss additional that or there on asset MSR when of where overall market levels liquidity component but that itself gain some So here it’s that with the is, to sold.

Brody Preston

loans. And for I sold of I what just also marks clarification. that want mean, to in if quarter. the there that tied – were $X to follow-up how Could accounting those happened loans there you that this sale mark? all? the a the loans Thank Was works? that negative sold of that on million And was change loan was that certain fair to maybe on just you the the HFI then Okay. value me you you at was through that then walk

Ron Farnsworth

that portfolio decrease. value a the it and to fair is become and a rates gain No, flip will again. $X led fact Brody, Ron the million fair the at separate increase carried loss, was fair this that’s Yes, value rates value related when to

QX, on settled, it the In had $XXX will a in of terms $X.X weren’t that million sold just all sale about in there given we of loans QX, it. recognized that that sale, on get to gain we marked, didn’t in we able $XXX,XXX be $XXX,XXX had sale a were loss roughly sitting held for were billion recognize recognized of we

discounts. on sale the So to of means market was in that a it right price our that push, close will of just credit be rate top but terms price the and

So, or no on loss significant that. gain

Brody Preston

talk dynamics. shift follow-up different But the for beta cycle. Got to I obviously the interest-bearing NIM the Ron, what tried on it, forward? want deposit last or the a that. we for sort you’re on on in I’m the I assuming just an that think And hear then guidance, scenarios moving I not did to you about XX-plus total mix It’s you and thank of glad past

the or X.XX% NIM I of what kind you for third guess, guide to that assuming within deposit costs costs? for X.XX% just are quarter. deposit So interest-bearing

Ron Farnsworth

the assuming quarters. move it We’re beta two to has the over last as

single-digit the get in overall increase time recognized XX% still of far the shy but end year. by stay we small the QX, of a QX, to cumulative beta So

Brody Preston

It we’re just is that for I Great. follow-up on want the some some different Alright. gain sale the differing channels? the with this between like very on the channels origination just to well – then what that. between Okay. did as difference reporting maybe have others Is results. Is amongst correspondent mortgage origination that seems now? you guess, banks I seeing preference retail and you maybe right channels a Thank quarter mortgage And margins? much dynamics is there and

Ron Farnsworth

to someone margin, referring else’s higher than into sale gain very you’re play gain If could on margin it. much that yes, sale on being

margin the a to it’s if wholesale, despite loan a paying it’s because you’re be to commission to fall the example, and it. lower For get resell going

gain rate is think, volatility the that in over we on number expect consistent over around that range our relatively market the balance a again, the near-term, will I consistent subject sale year. the of relatively in So be to but X.X%, margin

Brody Preston

it. Got

the Okay. And I feels is – doing what expect. then it on you’re that – the million maybe $XX quickly it about expenses math, assessment, I saying like was real to looks the just FDIC and quick think but special just

of would it area be for quarter? the fair third a that expense tuck around as maybe one-time that in to So kind

Ron Farnsworth

bit that. We a just underneath are estimating

look you the annual range midpoint if and the last April you from now, our take are of guidance probably million range. at talking high $XX So, updated you

we expense it that range, we in if that somewhere finalized, the So, do expect all of and in quarter. gets third see to will

there So, be time. cash expense be it paid any won’t tail just on over

Brody Preston

Got it.

a kind at do to Where normalized use me. balance cash cash last – balances if do of look is And down to start the of deposit to liquidity forward? pay flows borrowings? going Okay. for I view you all, guess some if balance you maybe stabilize sheet level those bit would the for you And excess then still the elevated. one Our

Ron Farnsworth

this about just talked a We ago, minutes Yes. of couple right.

level half is on just ideal of given on So ballpark, the environment in about in XXth, world, brought I cash the think back maybe just billion the it pressure. roughly We as inspiring $X now. conservative an be March to with outlook the

still to sparing feel there prudent it’s on cash. out pressure hold that is in level higher there, given So, we QT to deposit

say world, than Fed, $X.X sitting we that that hasn’t being balance cash a see When the but it’s billion you roughly cash $X that will cash of – it look at point. to and or see can cost we at $X.XX as on be then park borrowings. is change, you that And that that are got billion the at So, on as ideal that’s target given would net in Fed, higher that carried so the level so the I too, the sheet in quarterly the of in this of basis. of happened on change,

So, prudent a material, not think to just number, for exit being. number – but the hold liquidity on it’s a to we time good

Brody Preston

Got one quick. real it. guess and one last I

decided of the is like theory billion How much what short-term borrowings. that if in within have through that $X.XX in guess of how I Like – so? could Just it do year-end paid get of you could, portion quickly kind to down paid down? you get that

Ron Farnsworth

call in four-month that that, it, of all kept two-month tenure. to We

bond what months, quick if So, months the pretty a so do that given two you future. to flows in cash But in portfolio, that like the ever acting four rates turn. a see swap idea stand the

Brody Preston

very guys you, much. Thank Great.

Ron Farnsworth

you. Thank

Operator

Please question. you. standby for Thank our next

James. line Our Raymond from with David next comes question the of Feaster

open. is line Your

David Feaster

Hi. everybody. Good afternoon

Clint Stein

Good afternoon.

David Feaster

I on to commentary. we just Maybe back focused loan switching appreciate four are relationships. the your Obviously, side,

where this of an more you that you at returns segments are have, more those seeing where still or the four to like opportunity pretty now exited the did markets was risk-adjusted some right gain have curious, growth We good it sales loan point? excluding any looks are transactional am broad-based. I businesses, the opportunity seeing But just you relationships? Are there

Tory Nixon

Yes. space our Hey for there throughout again. Certainly, C&I of is ton footprint. this David, in Tory the us is opportunity a

– bankers bank a prospects, And high-quality eight pipelines, Western throughout customers really company. existing of customers and states. new the then their So have great they within have we got lot and the great from

ton opportunities, the So, in there go a on of – where for a a C&I it’s you in footprint opportunity is great lot of us. disruption depending

and I lending to income C&I continue be. going – good deposits, What to a for is non-interest with for. be us deposits, fee So, of are opportunity bearing a looking big other focus everything comes kind see that’s will core we

David Feaster

made, infill what’s is expansion or of about Clint’s it And Are as Is on of we for a how the you earlier disruption Okay. sense. up bit think expanding hires you. there expansion? And you focused would that it market truly of this interested locations I be would comments into? infill supporting point? just some the about would of seeing mean in be and – That you curious be Is are segments following guess more appetite there hiring? the kind makes lot – that. market the have front? am for additional on a opportunities then maybe branch has new at C&I any it at just dislocation I or look that that I it expansion, kind and around your been you more

Clint Stein

of answer is yes all this Hey Clint. is those. The David, to

quality markets. and can newer us how always talent bankers with that’s pending expand are mean even attract to in markets We grow long-term. new the on able Colorado. help were Arizona, Utah we I magnitude of And in the that that merger the our into the size top that’s we and franchise had and lookout for

some them maybe to are Tory they that going it some And so talk are am the with and over the and let more pass I specific about disruption, yes, focused on. things Chris of opportunities. to there

Chris Merrywell

Yes. would Thanks mortgage in Quickly is portfolio there of Chris. bit say I that of growth, I your the on And as Clint. David, question, this is mentioned, little last construction. of a part

that the along So, commercial with side. goes

putting locations about are postings best the and and ready And versus find As you over have somebody is they out I to quality best a to time are and the years they there on the far bankers. segments, build available I think and think as we go talked that. market trying when into hire

reiterating yes. Clint said, the So, what is answer

locations we you pretty that with up our some will different. branches and will will It It Tory. there, look there, the support bankers, around over opportunities soon do out getting of things to – then be And looking – we many newer Utah, yes support Arizona, it follow-up some we opportunities. nature. commercial we in I about of mentioned won’t the or from in California Colorado as things are see there And to our as our the market and markets the and excited efforts. earlier. are our that, But to and those efforts, pick small kick some you, around density Now, that little you a would from see business with And at we some hands Southern opportunities, infill in Tory are have should of for Northwest.

Tory Nixon

with it’s looking to forward a and want don’t people add. to and story got organization. tell And think the fun to much We grow great a I work I us here. continue to to company have to opportunity the great

Chris Merrywell

Yes.

opportunities with with and philosophy think and we seeing really capabilities I with community to people put how our are then a are to what join market where ultimately, as model size bank we intrigued our you of together, scale. of up our go our

David Feaster

where is that this? you guys in smaller kind with? I am to more that And prototypical had you branches you I curious look NeighborHub I been to just at looking And are of what was of helpful. does branches roll I mean the footprints? just are of out? guess That the it concept looking is playing like? we what that That’s kind then dabbling expand branches? Are am curious, kind looking

Tory Nixon

lease, done concept. be in to anything with an have considerably. have that NeighborHub certainly things more move opportunity Typically, it’s smaller. the see we will along that of They where open That’s had of a to go concept, that teller downsized walk a and nature. We we

one a similar, very they other dense of that it. neighborhood are opened in that with are hubs that financial there it’s downtown there there, but bankers and out. call you right fantastic are opportunities. we lookout It the fairly we we on Boise, the was things if of it. it’s last The are house certainly things walkable specifically, types in over NeighborHub nature, a always some it and is have check requires and We for in core,

David Feaster

you I credits more look broadly, And outside classified were mean, talked helpful. curious That’s I But up down. most? are I of watching that anything any there as on think held tighten mean steady credit causing mean I about assets touching maybe guess as your at or ball, and is that’s you standards you are you seeing how pretty more perhaps the about obviously, crystal then that, going are just what you am closely just look I And FinPac. portfolio, into we concern, well. you your do maybe NPAs credit forward?

Frank Namdar

personally I surprised portfolio our Hey held has certainly am it. David, by Frank. well. up Yes, this is not very And

continue we small yes, what is, watch the to think some lower-margin I consumers. see businesses and you of

the pools the obligations, we and have lower that. But mean within that’s on are seeing but based CMBS We there, You something direct the portfolio. But but and nature could have issue completed, quite see as very certainly are valuations. impact exposure leverage-averse our no deals are up we our I begin no our now are developing. are and watching valuations an office closely. certainly have of portfolio, CMBS maturing don’t right the resizing upon am to cognizant tick there. valuations there we potential are We to got I that honestly, cracks that of on we space don’t big delinquencies eyes seeing there those watching start to on it as mature – are as relates

David Feaster

helpful. everybody. Thanks That’s Alright.

Operator

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

open. is Your line

Andrew Terrell

afternoon. Good Hi.

Clint Stein

Good afternoon.

Andrew Terrell

to and the book in borrowers you are had last the on go have the credit trend suburban-focused. of sticking you was obviously valuations helpful. to noticed in where have specifically, past kind and to I look office be then at can declining you quarter, in trends loan point would or or at any But are curious, in office you reappraising the as market, The on a portfolio have just speak any or you Maybe the just granular loan XX%. more the for more there coming is or that kind valuations any process properties that really level of low values are up appraisals of incredibly broadly,

Clint Stein

are just portfolio with Andrew, very – no one We our Yes. We it’s slowly. they moving had one. refinanced issue. actually in just

relatively they really So, it’s as than other seen mature. of surprising or slowly anything deals some how materially haven’t concerning we cap stressful in kind of and these no, rates are But terms valuations that, moving. rewriting of

Andrew Terrell

within trucking us color? we decline? quarter? I the you charged the on level related, give FinPac help specifically, I off this step color maybe plateau And a rates has or then or can saw you occurred some just larger last a know I there And we that talked after portfolio why guess Okay. off I appreciate but give here in color. And FinPac couple any this should had on the loss was about you of a again clearly can deals potentially it were quarter up they think being accelerated. plateau the rates potential loss quarter. in

Frank Namdar

Sure.

XX-day delinquencies, at XX% to are over from XX-day delinquencies, – compare And sort at when X/XX, they to now quarter, trend if has are and you XX/XX. reduced. period happening at that and quarter-over-quarter XX-day look When have been We But over of since delinquencies down they look now XX%. look this guided you every you quarter. ‘XX XX/XX year-end that the XX-day

the reducing is especially reducing are So in are that they the and extremely space – look term portfolio and at the regard. that in now predictive delinquencies delinquencies, this so when you later-term – earlier that

its of a the saying the portfolio related decline as in this numbers in why point I and forward. in trucking that’s XX% been to has And the with million we that it very has reached, losses so And see likely portfolio, feel $XX that comfortable from fairly loss that impact plateau been should delinquencies.

left sweet spot $XX $XX So, if you operates. kind where take you that’s the million, XX% of are off FinPac million, and that with of

expected to within portfolio So, are as looking that me. things

Andrew Terrell

helpful. very That’s I Great. appreciate it.

Frank Namdar

Sure.

Andrew Terrell

some sell some a position. gain those just points at on But a of $X the moving of portfolio appreciate don’t position and accretive at within Ron, term. underwater And back nature obviously XXX-plus to NII would – on I those unwind position of guess yield kind start up, of not those in a I I securities now, guess why the in to unwind borrowings I but the guess at flexibility given the billion one not the then with going around the particularly right quick the billion of yields marked kind bond margin as discussion it over gain be X.XX%, you spot specifically. of well. and gain of to I pick well. of maybe shorter a like as know, trade? the I the week, the bonds flexibility guess potentially bonds $X.X some and or or gain have higher for in got, looking understand a having then I on X.XX% position given our of a next costs securities the portfolio bonds the basis borrowing little that kind are X.XX% why and

Ron Farnsworth

here. this Well, is Ron

levels, at if to we though I capital that. going through there, I to the these discount recapture obviously, took the not get and bonds sell am So

time more need including being, I to standpoint. the And for So, time. the that looking at be maintain am a over time the over much the from have got increase those as we capital flexibility very borrowings, that it return

I So, back the time. talk early when discount to have have I prices. a at too about come discounted off to over accrete bonds other income selling and much

Andrew Terrell

appreciate Okay. it. Understood. I

Ron Farnsworth

Thank you.

Operator

standby Please next question. you. for our Thank

Jared follow-up Fargo. with Wells a We the of question have Shaw line from

line open. Your is

Jared Shaw

and follow-up. people for suburbs, cities. area hearing a we question that and business some health leaving is you moving and of more you lot are on – how Portland actually Hey. customers the markets, the moving seeing or somewhere in in Thanks impacted the seeing are the else? by businesses Maybe about of your of How some just the being the Are that? the are a strain other

Clint Stein

I think little of of that’s occurring. a there is all bit that

Portland, So, the I that. moved section Umpqua think a say, of great downtown have businesses to suburbs. in the is Bank example of, core

that probably events this I but in and city of from Seattle. week, some a last leave it’s MLB cruise season pretty the isn’t will for showed that the seen Seattle. well. in were measure, also And a have say cruises good All-Star But We Alaska the Seattle

so there tourism quite And is a that’s bit of going on.

office on more for are more is So, news core we there had a Portland, that But the Likewise, tends impact same to businesses it of saw the little whatever riots that XXth section I in night, but area Downtown dinner a that it towers. – and District think vibrant. had was it hasn’t Pearl and those pretty vibrancy, in housed the or with that downtown don’t it’s in last of was section really you that was.

but I the core still downtowns, on they optimistic ahead remain path suburbs pretty more The and vibrant am that I footprint. our say would have I think challenging So, of throughout a them.

the Tory’s seeing have being would and and So customers and of very product And we Frank pretty vibrant doing they default out deposits then and relationship and during focus Tory, a And seen our a think different outlook host still loans for industries of sizes. think different states of and you of businesses are some states well. to where because of we by the It’s in what I in have. the optimistic eight the six response quarter that’s markets. visited their Chris, optimism that myself, are I all

we if a of credit kind lot the you also the don’t operations know, add that that’s in So, very portfolio positive if to don’t if to but FinPac, anything? from it’s Chris, of continues metrics. And with think trucking Tory, seeing never I little perform one come, see our soft don’t want we credit well. you the I are When mom-and-pop very, does. why I absent recession it sector customers. that’s things know landing. know anybody up I end of is, a And

Tory Nixon

I you are on. No. think spot I mean

we sometimes urban the a much stream. visiting I our to have going is it’s think you balance for markets. sheet, people and it’s And have And It’s very consistent customers to our in you customers, And rural those the we And the markets, markets and the there with great earnings big great in for so on lot ground, variety parts is it’s get great West. very boots it’s the suburbs and to media of and for of granularity out in that – of bank. customers of great doing of is everybody what one all what takeaway versus well from Clint’s is read point, these different. talking how see. our

Jared Shaw

Okay. Thank you.

Operator

Thank and showing I Bohlen am further Ladies queue. the closing you. turn to gentlemen, would no for back in the remarks. call questions Jacque now like to I

Jacque Bohlen

provided our contact Thank you clarification today joining Thank call. this Bye. me conclude our are items earnings of in for you, would you on Towanda. any material. the call. like if This discussed will Please afternoon’s

Operator

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

may disconnect. now You

Columbia Banking System (COLB) 19 Jul 232023 Q2 Earnings call transcript