COLUMBIA BANKING SYSTEM, INC. Q3 FY2024 earnings call

• Achieved $270 million gross expense reductions from merger, net savings ~$213 million. - Opened second retail branch in Arizona, planned third and identified fourth; hired teams in various markets. - Piloting applications and onboarding 1,000 associates to CRM tool. - Loan portfolio stable with strong through-the-cycle underwriting; delinquencies improved 22%. - Successful small business campaigns with high retention, broad-based across markets, driving deposit growth and relationship deepening.

Core deposits grew while brokered deposits were reduced by 20% during the quarter. Loans declined $200 million, mostly due to reduced transactional loans. Interest-bearing deposit costs declined to 2.95% in Q3. Provision for credit loss was $29 million, with the leasing portfolio portion at $16 million. Overall allowance for credit loss was 1.17% of total loans. Operating expense in Q3 was $268 million, lower than previous quarters, with planned reinvestments to increase operating expense annualized range to $965 million to $985 million.

• Expect continued reduction in interest-bearing deposit costs in Q4. - Operating expense to increase with reinvestments, annualized range $965M-$985M. - Capital ratios expected to continue building, providing allocation flexibility. - Buyback discussions ongoing, with focus on 2025 for potential capital returns to shareholders.

• Regulatory and interest rate risks affecting deposit costs and balance sheet optimization. - Credit risks from normal business fluctuations and migration of smaller credits affected by higher rates. - Inflationary pressures with expected 3% annual inflation, needing to find efficiencies to offset costs.

Q: Just on the core margin, any color on near-term thoughts on core NIM given rate changes and deposit flows?

A: Ron mentioned NIM driver is deposit flows, with $8 billion of CDs and wholesale funding maturing in next 6 months, but normalized deposit flows key.

Q: On the adjusted expense annualized run rate guide, how do you feel about hitting the low end in 4Q?

A: Ronald Farnsworth feels good about hitting low end, with 3% inflation expectation and reinvestments in flight.

Q: On the buyback, any chance of buying back stock soon?

A: Clint Stein says it's ongoing conversations with Board, likely 2025 for capital return window.

Q: On small business campaigns, are they targeted to specific markets?

A: Christopher Merrywell says campaigns are broad-based across all markets.

Q: On organic growth and M&A, thoughts?

A: Clint Stein says focus is on organic growth now, M&A thoughts may change with election and rate clarity.

Q: On loan pipeline and competitive landscape?

A: Tory Nixon says pipeline is stable, with core relationship banking and fee income growth.

Q: On loan yield repricing dynamics?

A: Ronald Farnsworth and Tory Nixon discuss loan yield repricing and new loan yields ranging mid-7s to mid-8s.

Q: On credit and FinPac normalization?

A: Frank Namdar says FinPac normalization improving, expected to drop to 3.5%-4% range.

Q: On securities accretion and beta?

A: Ronald Farnsworth says securities accretion stable, liability sensitivity to mirror up cycle, with deposit beta in mid-50s.