Columbia Banking System(COLB) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported Q3 EPS of $0.70 and operating EPS of $0.69 per share, with an operating return on tangible equity of 16% and operating PPNR of $221 million [10] - Total deposits remained flat, with a seasonal increase in noninterest-bearing DDA and strong growth in interest-bearing deposits, leading to a 20% reduction in brokered deposits [10][11] - Tangible book value per share increased by 10% to $17.81, driven by a 50% reduction in accumulated other comprehensive loss [11] Business Line Data and Key Metrics Changes - Customer deposit balances increased by $602 million, reflecting successful small business campaigns and a 20% reduction in brokered deposits [20] - Loan balances declined by $207 million, primarily due to a strategic reduction in transactional real estate loans [21] - Core fee income pipelines expanded, with treasury management and commercial card income increasing by 12% and 19% year-to-date, respectively [22] Market Data and Key Metrics Changes - The company successfully entered and grew in newer markets such as Arizona, Colorado, and Utah, while also enhancing its presence in established regions [6][7] - The company opened its second retail branch in Arizona and plans to open a third location, indicating ongoing market expansion efforts [7] Company Strategy and Development Direction - The company aims to regain long-term top quartile performance by focusing on operational efficiency and reducing costs, achieving $270 million in gross expense reductions to date [3][4] - There is a commitment to relationship banking, with a focus on balanced growth with new and existing customers while reducing exposure to transactional loans [8] - The company is actively evaluating opportunities for organic growth and potential M&A, with a focus on maximizing performance from existing operations [32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's future, emphasizing the focus on driving balanced growth and regaining top performance [8] - The company expects continued reductions in interest-bearing deposit costs and a stable net interest margin, despite the challenges posed by the current economic environment [12][13] - Management highlighted the importance of maintaining a cost-conscious culture while supporting reinvestments for future growth [5] Other Important Information - The company reported a provision for credit loss of $29 million for the quarter, with a robust overall allowance for credit loss at 1.17% of total loans [13] - Total GAAP expense for the quarter was $271 million, with operating expenses reflecting continued efficiency initiatives [14] Q&A Session Summary Question: Core margin and near-term thoughts on core NIM - Management indicated that normalized deposit flows will be key to NIM performance, with expectations for stability in the fourth quarter [25] Question: Adjusted expense annualized run rate - Management expressed confidence in hitting the low end of the expense range for Q4, with expectations for continued reinvestments [26] Question: Potential for stock buyback - Management is actively evaluating capital return options, including stock buybacks, but emphasized the importance of maintaining regulatory capital levels [27] Question: Small business campaigns and their targeting - Management confirmed that small business campaigns have been broad-based across all markets, contributing to high retention rates [29] Question: Loan yield repricing dynamics - Management discussed the stability of the loan pipeline and the potential for continued growth in relationship-driven commercial loans [33] Question: Credit quality and normalization of FinPac - Management reported improvements in credit quality, with expectations for further normalization in the FinPac portfolio [46][47] Question: Securities accretion and prepayment trends - Management indicated that prepayment levels are expected to stabilize, with no significant increases anticipated unless market conditions change [50] Question: Cycle-to-date beta and funding dynamics - Management expects that deposit beta will mirror previous cycles, with ongoing adjustments based on market conditions [53]