Q2 2022 Columbia Banking System Inc Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the Columbia Banking system second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
John in California should require.
As a reminder, please.
Conference is being recorded I would now like to turn the call over to your host Clint Stein, President and Chief Executive Officer of Columbia Banking systems. Please go ahead.
Thank you Victor welcome and good morning, everyone and thank you for joining us on today's call as we review our second quarter results.
The earnings release and accompanying Investor presentation are available at Columbia Bank Dot com.
Our associates continue to remain focused on delivering favorable outcomes for each of our stakeholders and their efforts are reflected in our outstanding results for the second quarter.
Net income of $58 $8 million was the best quarter in our 29 year history.
Our solid operating fundamentals were propelled by exceptional loan growth and underpinned by the strength of our stable core deposit base.
We continue to see our investments in people and systems payoff in terms of production capabilities.
Our bankers are working hard every day to deepen and expand relationships with our clients by providing product solutions and industry specific expertise.
These activities support our clients' goals, which in turn supports the economic health of communities across our entire footprint.
Preparation for our combination with Umpqua holdings is progressing as teams from both companies eagerly await regulatory approval.
On the call with me today are Eric <unk>, our Chief Financial Officer, Chris Mary well, our Chief operating Officer, and Andy Mcdonald, Our Chief Credit Officer.
Following our prepared remarks, we will open the line for questions.
Before turning the call over to Aaron I need to remind you that we may make forward looking statements during the call for further information on forward looking comments, please refer to either our earnings release or website or SEC filings Erin.
Thank you Glenn.
Good morning, everyone.
Tax pre provision income rose by $11 2 million on a linked quarter basis to $78 7 million. The increase was driven by a combination of rising interest income higher noninterest income and lower operating expenses, most notably with declines in merger related costs and compensation and benefit costs.
Putting the impact of some one time items I'll discuss in a moment.
Total deposits ended the quarter at $18 billion, which is a decrease of $342 million for the quarter.
$2 6 billion from a year earlier with $1 7 billion coming from our merchants acquisition.
The linked quarter decrease was largely consistent with pre pandemic seasonal trends.
Our cost of deposits edged up one basis point to five basis points.
Loans rose by $563 million during the quarter to 11 3 billion after factoring in PPP balances loans increased by $614 million or 23% annualized.
Growth was propelled by $734 million in new loan originations and a two five point increase in our line utilization rates.
Two years after the launch the Paycheck protection program most of the $1 5 billion in loans, we've funded in communities throughout our footprint are not forgiven and paid off by the FCA as of June 30, only $32 million in PPP balances remain.
Total investment securities decreased $458 million during the quarter to $7 3 billion.
Which was split 70% available for sale and 30% of the held to maturity.
Quarterly decrease was driven by both third deferred value Mark on our <unk> portfolio as well as maturities premium amortization and pay downs no new purchases were made during the quarter. The expected yield on the current portfolio is 189% up three basis points during the quarter.
Our net interest margin increased four basis points on a linked quarter basis to three 6% largely due to the shift in earning assets from fed funds into higher yielding loans, excluding the four basis point differential of premium amortization on acquired loans and securities and a two basis point differential in accelerated PPP.
Fees between the two quarters the margin increased 10 basis points sequentially.
New loans were brought on an average tax adjusted coupon rate of 393%, which is up from 359% in the first quarter and the coupon rate on the overall portfolio, excluding PPP increased from 384% to four 7%.
More recent production is coming on at even higher rates and with more loans lifted our corporate rates, we should see those benefits more fully reflected in our third quarter results.
Noninterest income increased linked quarter by 826000 to $25 million service charges on deposits.
Excuse me service charges on deposit accounts increased by $1 1 million largely due to a 685000 increase in sweep accounts fees, which are reported on a gross basis with a similar offsetting amount recorded the legal and professional expense.
Loan revenue increased by 688000, mostly driven by an increase in our loan production and prepayment penalties, but partly offset by the cyclical decline in mortgage banking revenue.
Other noninterest income declined by 821, largely because of one time gains we recorded in the first quarter. So the second quarter, we still had $1 million in nonrecurring income, including a fully benefit and a payment for our participation in Oregon disaster relief program.
Noninterest expense decreased by $9 $7 million linked quarter to $95 4 million.
Adjusting for merger related expenses of $3 9 million in the second quarter and $7 1 million in the first quarter noninterest expense decreased by $6 5 million to $91 5 million.
The linked quarter decrease was due to several factors largely affecting the compensation and benefits line for one.
The first quarter included roughly $2 1 million of seasonally elevated payroll taxes and benefit costs.
Meanwhile, the second quarter benefited by about $1 4 million from benefit accrual and funding adjustments and finally, the second quarter also benefited from Fas 91 capitalized loan origination costs, owing to the very strong loan production in the period and that reduced compensation expense by about $1 million compared to the first quarter and about <unk> 5 million compared to the.
Average invoicing periods.
Finally occupancy and data processing costs also declined some of which stemmed from the completion of our merchants bank core conversion back in March.
To state our normalized expense run rate, excluding merger costs to be in the mid nineties.
The provision for income taxes increased 565000 on a linked quarter basis to $16 2 million, representing a 21, 6% effective rate. We continue to expect our 2022 tax rate to be end of 20% to 22% range, but perhaps toward the higher end of that range given our higher profitability.
Lastly, as I discussed last quarter the rise in interest rates resulted in a negative fair value Mark on our investment portfolio reflected through accumulated other comprehensive income while this mark does not affect our regulatory capital ratios. It does weigh on our tangible common equity ratios intangible book value. Excluding <unk>. However, both our TCE ratio.
And our tangible book value increased during the quarter and with that I'll turn the call over to Chris. Thank you Erin our forward momentum is accelerating.
The pandemic and in anticipation of our pending combination with Umpqua holdings.
Very competitive market, Colombia, as bankers are continuing to take care of existing clients, while simultaneously finding and driving new business.
As mentioned earlier in the call loan growth was outstanding ex PPP loan production of $734 million was another record shattering the old record of 640 million set just two quarters ago.
About 25% of the growth in the loan portfolio was due to increase in line utilization, primarily in the agricultural and finance sectors with the remaining growth driven by record production predominantly in real estate leasing health care agriculture and construction sectors.
New production was sourced 51% from Washington, 24% from Oregon, 10% from California, 6% from Idaho, and the remaining 9% from outside of our footprint through our specialty tribal and national health care teams.
Approximately $186 million of the new balances was from clients with commitments of greater than $10 million.
Notwithstanding the strong production during the quarter, our pipelines continued to expand and remains to our satisfaction.
The quarterly production mix was 75% fixed 22% floating and 3% variable.
Term loans represented $525 million of total new production, while lines accounted for $209 million.
The overall portfolio mix is now, 55% fixed 31% floating and 14% variable.
Over the past 12 months, we have seen a shift from C&I towards CRE loans, which now makes up 46, 4% of the portfolio up from 42, 3% one year ago.
The shift can be partly attributed to the payoff of $660 million of net PPP loans during the year.
As a result of higher rates, we continue to see a decline in our mortgage warehouse business during the quarter with some loans dropping from 57 million to $39 million, which compares to $101 million in the second quarter of 2021.
Overall, the composition of the loan portfolio did not change materially even with the increase in line utilization.
Deposits declined $342 million during the second quarter, which is normal due to seasonal business activity. The mix remained consistent at 49% noninterest bearing and 51% interest bearing.
The composition also remain consistent with 60% commercial and 40% retail.
If seasonal patterns hold deposit balances will pick up in the third quarter through the remainder of the year.
Earlier this month, we announced the expansion of our footprint into Utah, adding a highly experienced commercial lending team in the Salt Lake City market.
In addition, we continue to invest in our retail network with our newest financial hub opening next week and a vibrant crockford district of Tacoma.
Financial hubs are full service locations that are uniquely focused on helping our clients achieve the comprehensive financial goals, including investments Trust services and other financial considerations.
Both producers and clients across our footprint see the value of the upcoming combination with umpqua and the increased capabilities that it will bring.
Our bankers are doing a great job remaining outwardly focus expanding our customer base, while generating high quality loans and long term deposit relationships. During a time when many companies would be internally focus now I will turn the call over to Andy to review our credit performance.
Thanks, Chris.
The quarter, we had $2 1 million to our allowance.
The additional reserve was primarily driven by loan growth during the quarter and a less favorable economic forecast.
Last quarter, the unemployment rate was expected to end 2022 of three 4%.
And remain at or below pre pandemic levels throughout the forecast period.
The current forecast assumes the unemployment grew eight we'll end 2022 at three 7%.
<unk> remained above pre pandemic levels throughout the forecast period.
Last quarter, the full year GDP growth expectations for 2022 was three 3%.
Our current forecast assumes full year GDP growth expectations for 2022 of two 5% and assumes GDP will remain below 2% throughout the forecast period.
Offsetting loan growth and the less favorable economic forecast was a continuation in the trend of improving credit metrics and to a lesser extent net recoveries of 886000.
As I mentioned, a moment ago, our credit trends continue to move in a positive direction, albeit at a more modest pace.
Nonperforming loans remained low at only 15 basis points of period end loans.
And substandard loans declined $76 million during the quarter and now represent less than two 5% of total loans.
Special mentioned loans are less than 1% of total loans.
For the year problem loans, those rated watch or worse have declined $127 million.
The bank's impaired asset ratio has also declined from 21, 6% to 14, 5%.
Given these metrics our allowance going forward will continue to be driven primarily by loan growth and the economic forecast.
In summary, while we are seeing credit quality metrics similar to that which we enjoyed pre pandemic. We remain cognizant of the current global environment and instability in Europe .
Rising interest rates.
Especially their impact on housing and inflationary pressures here at home.
So while we are optimistic for the future performance of the portfolio near term we remain cautious as we look further down the road.
Okay back to your question.
This concludes our prepared comments as a reminder, Andy Chris and are with me to answer your questions and now Victor Let's open the line for questions.
Alright, as a reminder to ask a question you will need to press star one on your telephone.
Once again Thats star one for questions. Please standby with combined.
Sure.
Yes.
Yes.
Okay.
Once again Thats star one for questions.
Our first question comes from the line of David Feaster from Raymond James Your line is open.
Hey, good morning, everybody.
Okay great.
Maybe just.
Darting on on deposits.
Obviously, you guys have a phenomenal low cost core deposit franchise, but I'm just curious maybe if you could walk through some of the underlying trends that youre seeing especially since quarter end.
It sounds like in the market that we're hearing more conversations about exception pricing and those types of things and migration within books, just curious whether there's any interesting trends you've seen within your book.
And what drove the run off is it more munis or.
Anything like that and then just.
Any other trends worth highlighting and whether you would expect more outflows potentially for the remainder of the year.
So <unk> got Chris and air and fighting across the table.
Who gets to answer this first so I'm going to jump in and just.
<unk>.
Steal their thunder.
It.
What we saw in the second quarter.
Really was started to feel a lot like our seasonal patterns that we've had pre pandemic.
And I think it was in Chris's comments that that he mentioned.
Those traditional patterns hold true in the third quarter and for the balance of the year that we should see.
Some deposit growth come back in.
And I would say that so far at this point in the third quarter, we are seeing those those historical seasonal patterns of deposit growth.
And on a overall basis.
We werent down materially in the second quarter.
We move around 150 $200 million from day to day.
So sometimes it's just a matter of it that focal date of June 30, and somebody late a big deposit on us or or system cash out so ill step back now and let Chris and Eric continue their argument over who is going to fill in the details.
Hey, David This is Chris.
I'll provide a little color to the outflows.
As we've always talked we talked about.
Controlling our deposit costs through using wealth management, CV financial and during the quarter of that number about $55 million was the net movement to CB financial to take advantage of some some higher rate opportunities.
The exception pricing, we still continue to utilize that.
Yes.
It's trending kind of as the normal maybe a little bit more with what's going on in the market, but overall the base of our deposit funding is very consistent to where it was will continue to see what happens with the competition and things of that nature, but.
We're really following the playbook that we have.
We've always had and its as of today, it's continuing to bear.
Bear out.
Okay. That's helpful.
And then maybe just.
Look it's extremely impressive to see record origination production and if I heard correctly that you are continuing to see expanding pipelines like that combination really impressive I'm just curious.
What do you think is allowing you to be so successful I mean is it.
The economic recovery is it some of your new hires is it <unk>.
People are excited about the deal.
I'm just curious as you step back and look at it what do you think is allowing you to pieces so successful.
This kind of continued pace of growth sustainable.
Especially.
As we look at higher rates and potential deceleration in originations, but you also got the prospects of slower payoffs and paydowns.
Just any high level, though.
So.
I think it.
Really starts with a conscious decision that we made.
In the second quarter of 2020.
Well a lot of our competitors.
Shuttered their operations scattered their teams and tried to run their banks from the basement of their of their vacation homes.
We were here every day and.
And we continue to just serving the needs of our communities and taking care of our clients and a lot of the business that we've won over the last couple of years are prospects that we've called on for in some cases 10 plus years.
And they just didn't really like the experience or the lack of availability.
Their existing bank and or their existing bank pulled out of certain markets and.
And so I think that that that momentum that we didnt lose the momentum that a lot of I think end market competitors lost and so as they have been trying to regain.
Some momentum.
We've just continued to accelerate and I think that approach.
That's also helped us to attract.
Talent with some of the hires that.
That we've talked about.
Many that we haven't we continue to attract a lot of great bankers across the footprint.
And the announcement on our Utah team is just.
The most recent example of that type of activity.
And so I think it's.
It's not something where we just flip the switch and we had a lot of momentum actually going into.
2020 coming out of 2019.
We were starting off the first quarter.
It was shaping up to be a tremendous first quarter of 2020, and then of course.
The pandemic hit and everything kind of came to a standstill.
So I don't know if that gives you everything you want or if Chris wants to add some additional context or not but.
That's really I think it's not something that has just started its something we've been very focused on four for a few years now.
Yes.
David I'd add on the aspect of just backing up our bankers are out about they're very proactive.
And staying focused.
As you look towards the pending combination.
The integration management office is doing a fantastic job so that our bankers can focus on all the stuff that they do externally and then that team continues to work internally on on all of the stuff that happens on day one.
As far as when you look at how it kind of all came together.
Pacifically to production.
Theres certainly been some pent up demand that came through I think the second quarter, we saw a little bit of.
And some things that came through through some taken advantage of the lower rates before things started to rise that certainly helped with it as well.
We were able to take advantage of those get into some new deals.
While retaining a lot of our own business as well I think your question about is it sustainable.
That's certainly one of the unknown questions and we've talked before.
Acetate to speculate that will set record after record.
But I'm very comfortable with what our teams are doing.
And I think there is going to be a natural summer pullback.
As well and we'll see how it plays out for the rest of the year.
It's truly really wasn't incredible.
Yeah, that's great and maybe maybe just touching on asset quality and given Andy a little airtime you guys always maintained a conservative approach to credit.
Can see continued improvement in asset quality.
You guys talked about it there is some real challenges in the economy I'm just curious.
At a high level.
Your thoughts on on the credit outlook from you all standpoints in the pulse of the clients.
As you look out are there any segments that you are maybe a bit more cautious on are there any segments, where you're maybe seeing clients pull back or that you're avoiding and then on the other side I mean, what is your appetite for credit at this point and have you guys begun tightening standards.
Well first of all our appetite remained consistent through all of the cycles.
And I think that there.
That.
For our customers and for our prospects makes us I think predictable and they like that.
So we're not in and out of segments and we don't.
Adjust our underwriting criteria.
To get more loans are getting laid off and stuff like that we try to be consistent throughout the entire cycle. So are our risk appetite remains the same.
Overall, yes credits looking really good I hate to say it is probably as good as it's going to get that I guess I just said it.
And so really.
The economy will be a big driver of how we how we move forward.
The segments.
Are under stress.
<unk> to be concerned with.
<unk>, a little bit, but I think we got our arms around that and most of that I think is pretty well taken care of.
<unk> remains for certain kinds of especially if business travel related.
That remains a challenge versus vacation.
Elderly care.
Yes, the pandemic theoretically lower but not in assisted living and nursing care facilities, because theyre all of it.
Takes a small outbreak and then they get they can.
Take in new people, there's still a reluctance for a lot of people to place their.
Their mother or father into those facilities.
And they are designed in such a way that they need relatively high occupancy to cover the fixed costs of running the facility.
So elderly care there, we don't have a big bucket of elderly care, but it's less than a $190 for us, but almost all of it is exhibiting some kind of strategy.
I think on a broader case I'm not going to tell you anything you don't already know but.
A lot of businesses.
Are still struggling to find employees.
In the restaurant area they are open.
But they can't run at full capacity, because they don't have enough server and.
So that impacts their ability to generate revenue.
Grocery stores are closing Delhi.
Which happened to many of the other day.
Because they don't have enough people to staff the deli. So a lot of businesses are really struggling and.
Inflation, so far is running ahead of wages.
No real nominal.
Consumer spending hasn't really increase, but but I do and I think had some concerns over continued wage inflation.
Again to exceed.
The commodity side of inflation, if you will.
So thats, probably the longer term the concern in the portfolio.
Okay.
Helpful. Thanks, guys.
Okay.
Thank you one more for our next question.
And then meantime, once again Thats star one for questions Darwin.
Our next question comes from the line of Matthew Clark from Piper Sandler Your line is open.
Hey, good morning.
Okay.
Yes.
Maybe just to close the loop on credit.
Andy Thank you mentioned office, but that seems to be another kind of.
Longer term concern for.
Okay.
We've heard.
Property values in the <unk>.
Certain metro market.
I don't think you really.
Dabble in that much.
Values there could be a 25% are you seeing anything like that in any of your markets I know I'm sure a lot of what you have a suburban office, but.
Any color on the office so great.
Yes, certainly the downtown core.
Seattle and Portland.
Are the weakest office markets, but those buildings are way bigger than what we ever get it.
Ken.
But it does impact the region a bit and you are correct, we're primarily in the suburban and.
Rural markets.
Most of our office is actually walk up to three storey two by four construction you've got the veterinary clinic the dentists.
Maybe an architect and a law firm in it.
So.
Our office comp position is not sort of what you would be reading about in the Wall Street Journal.
Okay.
Got it no value.
I don't know where large buildings in Seattle are trading because thats not the market.
We plan, but I would say that in general our cap rates remain extremely low.
Because theres so much money looking for a home.
So while we aren't seeing the same inflationary pressures.
In real estate values are.
Our holding but theyre just not increasing so we'll have to wait and see as rates continue to rise by the fed.
If cap rates rise and youll see values, but right now theres a lot of money looking for homes and just about every segment.
The real estate market.
Okay, Great and then shifting gears to the margin.
Erin.
And have the margin the average margin in the month of June and.
As a follow up.
What the spot rate was on that.
At the end of June and the weighted average rate on new loans going into <unk>.
Okay.
So we did see margin improvement through the quarter.
The.
The new coupon on loans in June was.
Or 17.
Compares obviously favorably to the average for the quarter. So we're seeing good directional lift there.
The.
I think our.
You asked about the margin.
The margin overall for June was on an operating basis was $3 24 that was up about.
I think from 309 in the March month of March. So again, good good directional trends there, but one of the things that I want to point out.
I think it's an important point and we've talked about this in the past where there is.
With the.
Inflection of margin trends.
<unk> always said it was going to take a little bit of time before we really saw that pull through and a big part of that sentence from the.
<unk>.
The floors that we have on our loans and we've got some pretty good breakout on slide 10 of our investor deck, we kind of share with us and if you look back to the March quarter.
We had about $1 7 billion of loans that were still subject to floors.
And moving forward to June 30 that number drops to about $1 2 billion and.
Most of that would need just a 25 basis points.
Change in the fed funds to lift off floors, and obviously with next week's anticipated SLM C meeting, we're going to get something well above that.
So.
With that we will have over $3 5 billion in loans that will be.
Adjustable width.
Rate resets that should be coming in pretty short order.
So we should start to see a much better impact on the rate hikes coming forward.
Got it Okay, and then I don't know if you mentioned it during your prepared remarks.
Any guidance for the upcoming quarter on a standalone basis from a noninterest expense perspective.
Assuming production flows.
Capitalized deferred.
<unk> 91.
I would assume those would.
Increase but any guide around the run rate.
Yes, so looking for something in the mid nineties.
Okay.
And then maybe Clint.
Could you give us an update on kind of what youre hearing.
As it relates to the approval process if anything.
I'm sure, it's frustrating, but just any color.
<unk>.
And whether or not we might need to see the USB usp's acquisition have to get approval first or not.
Okay.
Yes.
Yes.
It's the it's it's a process and.
Yes.
We would like to have complete transparency and.
Into the timeline for the approval process, but unfortunately, that's just not the way that that works and we've been through this before with prior deals where.
The process has to run its course.
We're not we're not wasting any time to the extent that we can continue to prepare.
Prepare ourselves for.
For when we do receive approval and move quickly towards closing.
Theres not any.
Thing that jumps out.
From my perspective.
It creates.
Any type of an anomaly or core.
It makes the approval process more challenging or difficult.
If that helps you or not but it's just we're just going through.
Through the normal process.
I don't know the answer.
Specifically on if our deal is is in.
In line behind the U S Bank deal I think we announced.
What roughly 30 days or so after after they did.
So I know that the Doj is very busy.
But I don't have visibility into.
Everything in terms of what they're actually working on at any given point in time.
But I do know that our application is being worked on.
And while it's.
The delay is.
It is a little bit frustrating.
But the real value that we feel that this combination creates for all of our stakeholders.
<unk> is a long term decision and so if it's a matter of a few months here on the front end.
It doesn't change our excitement or.
Expectation for the benefits of this combination to all of our stakeholders.
Okay, great. Thank you.
Thank you.
Our next question.
And our next question comes from the line.
Jay.
Sorry, Jay <unk> from D. A Davidson your line is open.
Thanks, Good morning.
Just a couple of questions on maybe production.
Chris could you tell us.
Pipeline as we sit today versus where you said it.
At the same point in the second quarter.
It's very similar to what was going into the second quarter I won't give an absolute figure on that but yes, its very similar.
And Chris is there.
Pretty specific but thinking about.
The Utah expansion and those individuals is there any kind of non compete there do you.
Yes, I think that their book of business.
Beginning in the third quarter any any timing there.
Should we assume.
We could see some positive impact from that group immediately.
Yes.
<unk> been on for about a month now.
And so a couple of weeks in total.
And when you look at it the Theres always are typically there could be a non solicit or anything of that nature.
We're not really we don't build these.
We don't build these teams and expansions on what necessarily can come from their existing book, it's really more about what's the go forward how active are they in the market and how quickly can they seize on new opportunities.
The books they tend to be fairly.
Well, especially in a rising rate environment they tend to.
Really hard to pull somebody wins go in and offer them a higher rate today than what they had where they are currently at.
That'll take a little bit more time, we're really comfortable with these teams that they are the external sourcing types of bankers that we typically.
Correct.
And bring on board.
So from that standpoint.
So the team that started with US earlier in January they certainly hit the ground running into the second quarter.
So 90 ish days I do know there are some opportunities that we are working on currently.
Theyre already in there and so yes, I would expect that you start seeing something into the maybe not in the third quarter here, but certainly moving into the fourth quarter.
Got it thank you.
And Erinn.
I appreciate the kind of some of the touch points you gave on margin throughout the quarter.
Yeah.
Quick question to sort of cash and equivalents balances as those were worked down was that pretty steady through the quarter or was it.
Early part of late any anything on timing of how those balances move.
No.
Little bit of variability around you can tell that.
Yes.
April when you had a lot of tax payments going out and things like that there was some bigger variances, but no I would say in terms of how that low dose.
Those funds were used for Boeing funny, and it was a pretty steady flow through the quarter.
Okay.
And maybe a last one.
Perhaps for Clint just.
Okay.
Believes kind of organizational charts have been shared.
So you will be.
I guess is.
Is the next sort of point of stress if you think about the combined employee base.
Would that be.
Closing and conversion or is there anything more internal that.
As you work through as you said youre not sitting idly by Youre preparing I'm just thinking more of the personnel.
That.
Could be pressure points.
Lynn.
Companies have come together.
Anything.
Now in close or conversion.
Would also come up in that timeline.
Yes, I think.
I think just the length of time that we're in right now this period that we're in.
Waiting on regulatory approval.
That weighs on on on some folks I mean part of.
<unk>.
Part of the.
Bringing the companies together we have.
Both organizations today.
Leaders and individuals that want to retire.
And.
Through normal course of business when somebody retires. They can pick a date you have a big party. They plan a trip and they leave town for a month.
Well, we don't know if thats.
Exactly when to have that partner for them and so on.
I've seen that there is a few individuals.
Here in.
Our corporate headquarters that are in that situation.
And so that creates.
I guess a point of frustration for.
For them.
I think that we're still running two separate companies.
And we're planning for what we are when we come together.
So in essence, it's like you have got two jobs youre doing your job.
Today at Columbia Bank or co Op, Inc.
But then you're also thinking towards the future.
And so I think that once we get to the.
To close.
<unk>.
Some of that pressure.
Gets released from the organization.
There are situations, where there is.
One job for two people and to your earlier comment about or charts and things those have been communicated.
And so that's the other piece of where depending on at what point in the process it fits at.
At the close if its 30 days post close if it's 90 days post conversion.
And those that are.
Centered around the conversion now they still have some pretty good certainty around the timing of what that looks like but.
Those that are centered.
Or based on the actual.
The closing of the merger.
They don't really.
They don't really know exactly when that date will be so.
So I think that.
Debt.
<unk>.
I guess those are kind of a different.
Scenarios.
But I think about.
But all in all.
Across both organizations there is still a tremendous amount of excitement.
The opportunity that.
This creates for all of our stakeholders our clients.
<unk> been doing a lot of client visits.
Last couple of months and.
And some of them.
They are surprised to find out that the merger has closed.
And they are excited.
Have greater access to our bankers.
Greater availability of products and services so.
I don't want to take your question and just focus on on the.
The pressure points of the organization I think that the excitement still far outweighs.
Anything in terms of just the normal course of of merger type integration work.
Yes.
Got it.
Wasn't it negatively pointed just to kind of walk through the process. So that's helpful and I appreciate that.
The feedback thanks.
Thank you and I'm not showing any further questions in the queue I would like to turn the call back over to Clint Stein for any closing remarks.
So thanks, Victor Thank you for joining our call today and.
Don't hesitate to reach out if there is.
Any clarification that you'd like.
The items we discussed.
Have a good afternoon.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.
Okay.
Okay.
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Ladies and gentlemen, thank you for standing by and welcome to the Columbia Banking system second quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will be given at that time.
Consequently should require.
As a reminder, this conference is being recorded I would now like to turn the call over to your host Clint Stein, President and Chief Executive Officer of Columbia Banking systems. Please go ahead.
Thank you Victor welcome and good morning, everyone and thank you for joining us on today's call as we review our second quarter results.
The earnings release and accompanying Investor presentation are available at Columbia Bank Dot com.
Our associates continue to remain focused on delivering favorable outcomes for each of our stakeholders and their efforts are reflected in our outstanding results for the second quarter.
Net income of $58 8 million was the best quarter in our 29 year history.
Our solid operating fundamentals were propelled by exceptional loan growth and underpinned by the strength of our stable core deposit base.
We continue to see our investments in people and systems payoff in terms of production capabilities.
Our bankers are working hard everyday to deepen and expand relationships with our clients by providing product solutions and industry specific expertise.
These activities to support our clients' goals, which in turn supports the economic health of communities across our entire footprint.
Preparation for a combination with Umpqua holdings is progressing as teams from both companies eagerly await regulatory approval.
On the call with me today are Eric <unk>, our Chief Financial Officer, Chris Mary well, our Chief operating Officer, and Andy Mcdonald, Our Chief Credit Officer.
Following our prepared remarks, we will open the line for questions.
Before turning the call over to Aaron I need to remind you that we may make forward looking statements during the call for further information on forward looking comments, please refer to either our earnings release or website or SEC filings Erin.
Thank you Glenn and good morning, everyone pretax pre provision income rose by $11 $2 million on a linked quarter basis was $78 7 million increase was driven by a combination of rising interest income higher noninterest income and lower operating expenses, most notably with declines in merger related costs and compensation and bad.
Cost.
Including the impact of some one time items I will discuss in a moment.
Total deposits ended the quarter at $18 billion, which is a decrease of $342 million for the quarter.
$2 6 billion from a year earlier with $1 7 billion coming from our merchants acquisition.
The linked quarter decrease was largely consistent with pre pandemic seasonal trends.
Our cost of deposits edged up one basis point to five basis points.
Total loans rose by $563 million during the quarter to 11 3 billion after factoring in PPP balances loans increased by $614 million or 23% annualized.
Growth was propelled by $734 million in new loan originations and a two five point increase in our line utilization rates.
Two years after the launch the Paycheck protection program most of the one 5 billion in loans, we've funded in communities throughout our footprint are not forgiven and paid off by the FCA as of June 30, only $32 million in PPP balances remaining.
Total investment securities decreased $458 million during the quarter to seven 3 billion.
Which was split 70% available horsetail and 30% held to maturity.
The decrease was driven by both for the fair value Mark on our <unk> portfolio as well as maturities premium amortization and pay downs no new purchases were made during the quarter. The expected yield on the current portfolio is 189% up three basis points during the quarter.
Our net interest margin increased four basis points on a linked quarter basis to.
To three 1% to 6% largely due to the shift in earning assets in fed funds into higher yielding loans, excluding the four basis point differential of premium amortization on acquired loans and securities and a two basis point differential in accelerated PPP fees between the two quarters the margin increased 10 basis points sequentially.
New loans were brought on at an average tax adjusted coupon rate of 393%, which is up from 359% in the first quarter.
And the coupon rate on the overall portfolio, excluding PPP increased from 384% to four 7%.
More recent production is coming on at even higher rates and more loans lifted out forward rates, we should see those benefits more fully reflected in our third quarter results.
Noninterest income increased linked quarter by 826000 to $25 million.
Service charges on deposits.
Excuse me service charges on deposit accounts increased by $1 1 million largely due to a 685000, increasing sweep account fees, which are reported on a gross basis similar offsetting amount recorded in legal and professional expense.
<unk> revenue increased by 688000, mostly driven by an increase in our loan production and prepayment penalties.
Partly offset by the cyclical decline in mortgage banking revenue.
Other noninterest income declined by 821, largely because of one time gains we recorded in the fourth quarter for the second quarter, we still had $1 million in nonrecurring income, including only benefit and a payment for our participation in Oregon disaster relief program.
Noninterest expense decreased by $9 7 million linked quarter to $95 4 million.
Adjusting for merger related expenses of $3 9 million in the second quarter and $7 1 million in the first quarter noninterest expense decreased by $6 5 million to 91 5 million.
<unk> quarter decrease was due to several factors largely affecting the compensation and benefits line for one.
The fourth quarter included roughly $1 million of seasonally elevated payroll taxes and benefit costs.
While the second quarter benefited by about $1 $4 million from benefit accrual and funding adjustments and finally, the second quarter also benefited from Fas 91 capitalized loan origination costs and the very strong loan production in the period and that reduced compensation expense by about $1 million compared to the first quarter and about <unk> 5 million compared to the.
<unk>, we're seeing periods.
Finally occupancy and data processing costs also declined some of which stemmed from the completion of our merchants bank core conversion back in March.
Dissipate or normalized expense run rate, excluding merger cost to be in the mid nineties.
The provision for income taxes increased 565000 on a linked quarter basis to $16 2 million, representing a 21, 6% effective rate. We continue to expect our 2022 tax rate to be end of 20% to 22% range, but perhaps toward the higher end of that range given our higher profitability.
Lastly, as I discussed last quarter, the rising interest rates resulted in a negative fair value Mark on our investment portfolio reflected through accumulated other comprehensive income while this mark does not affect our regulatory capital ratios. It does weigh on our tangible common equity ratios intangible book value. Excluding <unk>. However, both our TCE ratio.
And our tangible book value increased during the quarter and with that I'll turn the call over to Chris. Thank you Erin our forward momentum is accelerating.
The pandemic and in anticipation of our pending combination with Umpqua holdings.
In a very competitive market, Colombia as bankers are continuing to take care of existing clients, while simultaneously finding and driving new business.
As mentioned earlier in the call loan growth was outstanding ex PPP loan production of $734 million was another record shattering the old record of $640 million, just two quarters ago.
About 25% of the growth in the loan portfolio was due to increasing line utilization primarily in the agricultural and finance sectors with the remaining growth driven by record production predominantly in real estate leasing health care agriculture and construction sectors.
New production was sourced 51% from Washington, 24% from Oregon, 10% from California, 6% from Idaho, and the remaining 9% from outside of our footprint through our specialty travel and National health care teams.
Approximately $186 million of the new balances was from clients with commitments of greater than $10 million.
Notwithstanding the strong production during the quarter, our pipelines continue to expand and remains to our satisfaction.
Our quarterly production mix was 75% fixed 22% floating and 3% variable.
Term loans represented $525 million of total new production, while lines accounted for $209 million.
The overall portfolio mix is now, 55% fixed 31% floating and 14% variable.
Over the past 12 months, we have seen a shift from C&I towards CRE loans, which now makes up 46, 4% of the portfolio up from 42, 3% one year ago.
The shift can be partly attributed to the payoff of $660 million of net PPP loans during the year.
As a result of higher rates, we continue to see a decline in our mortgage warehouse business during the quarter with solid solid loans dropping from 57 million to $39 million, which compares to $101 million in the second quarter of 2021.
Overall, the composition of the loan portfolio did not change materially even with the increase in line utilization.
Deposits declined $342 million during the second quarter, which is normal due to seasonal business activity. The mix remained consistent at 49% noninterest bearing and 51% interest bearing.
The composition also remain consistent with 60% commercial and 40% retail.
If seasonal patterns hold deposit balances will pick up in the third quarter through the remainder of the year.
Earlier this month, we announced the expansion of our footprint into Utah, adding a highly experienced commercial lending team in the Salt Lake City market.
In addition, we continue to invest in our retail network with our newest financial hub opening next week and a vibrant Procter district of Tacoma.
Financial hubs are full service locations that are uniquely focused on helping our clients achieve the comprehensive financial goals, including investments Trust services and other financial considerations.
Both producers and clients across our footprint see the value of the upcoming combination with umpqua and the increased capabilities that it will bring.
Our bankers are doing a great job remaining outwardly focus expanding our customer base, while generating high quality loans and long term deposit relationships. During a time when many companies would be internally focused now I will turn the call over to Andy to review our credit performance.
Thanks, Chris.
The quarter, we had $2 1 million to our allowance the.
The additional reserve was primarily driven by loan growth during the quarter and a less favorable economic forecast.
Last quarter, the unemployment rate was expected to end 2022 of three 4%.
And remain at or below pre pandemic levels throughout the forecast period.
The current forecast assumes the unemployment rate will end 2022 at three 7%.
And remained above pre pandemic levels throughout the forecast period.
Last quarter, the full year GDP growth expectations for 2022 was three 3%.
The current forecast assumes full year GDP growth expectations for 2022 of two 5% and assumes GDP will remain below 2% throughout the forecast period.
Offsetting loan growth and the less favorable.
Economic forecast.
A continuation in the trend of improving credit metrics and to a lesser extent net recoveries of 886000.
As I mentioned, a moment ago, our credit trends continue to move in a positive direction.
At a more modest pace.
Nonperforming loans remained low at only 15 basis points of period end loans and substandard loans declined $76 million during the quarter and now represent less than two 5% of total loans.
Special mentioned loans are less than 1% of total loans.
For the year problem loans, those rated watch or worse have declined $127 million.
The bank's impaired asset ratio has also declined from 21, 6% to 14, 5%.
Given these metrics our allowance going forward will continue to be driven primarily by loan growth and the economic forecast.
In summary, while we are seeing credit quality metrics similar to that which we enjoyed pre pandemic. We remain cognizant of the current global environment and instability in Europe .
Rising interest rates.
Specialty their impact on housing.
And inflationary pressures here at home.
So while we are optimistic for the future performance of the portfolio near term we remain cautious as we look further down the road.
Okay back to you Quintin.
David.
This concludes our prepared comments as a reminder, Andy Chris and here with me to answer your questions and now Victor Let's open the line for questions.
Alright, as a reminder to ask a question you will need to press star one on your telephone.
Once again, thanks, everyone for questions. Please standby with combined.
Sure.
Yes.
Yes.
Okay.
Once again Thats star one for questions.
Our first question comes from the line of David Feaster from Raymond James Your line is open.
Hey, good morning, everybody.
Okay.
Maybe just.
Darting on on deposits.
Obviously, you guys have a phenomenal low cost core deposit franchise, but im just curious maybe if you could walk through some of the underlying trends that youre seeing especially since quarter end.
It sounds like in the market that we are hearing more conversations about exception pricing and those types of things and migration within books, just curious whether there's any interesting trends you're seeing within your book and what drove the run off is it more munis or any.
Anything like that and then just.
Any other trends worth highlighting and whether you would expect more outflows potentially for the remainder of the year.
So <unk> got Chris and Eric fighting across the table.
Who gets to answer this first I'm going to jump in and just.
<unk>.
Their thunder.
What we saw in the second quarter.
Really was started to feel a lot like our seasonal patterns that we've had pre pandemic.
And.
I think it was in Chris's comments that that he mentioned.
If those traditional patterns hold true in the third quarter and for the balance of the year that we should see.
Some deposit growth come back in.
And I would say that so far at this point in the third quarter, we are seeing those those historical seasonal patterns of deposit growth.
And on a overall basis.
We werent down materially in the second quarter.
We move around 150 to 200 million from day to day.
So sometimes it's just a matter of it that focal date of June 30, and somebody late a big deposit on us or or system cash out. So I'll step back now and let Chris and Eric continue their argument over who is going to fill in the details.
Hey, David.
Sure.
I'll provide a little color to the outflows.
<unk> always talked we talked about.
Controlling our deposit costs through using wealth management, CV financial and during the quarter of that number about $55 million was the net movement to CV financial to take advantage of some some higher rate opportunities.
The exception pricing, we still continue to utilize that.
It's trending kind of as the normal maybe a little bit more with what's going on in the market, but overall the base of our deposit funding is a very consistent to where it was will continue to see what happens with the competition and things of that nature, but.
We are really following the playbook that we've we've always had and its as of today, it's continuing.
Ken Bear out.
Okay. That's helpful.
And then maybe just.
Look it's extremely impressive to see record origination production and if I heard correctly that you are continuing to see expanding pipelines like that combination really impressive I'm. Just curious what do you think is allowing you to be so successful I mean is it.
<unk> economic recovery is it some of your new hires is it.
People are excited about the deal.
I'm just curious as you step back and look at it what do you think is allowing you to be so successful.
This kind of continued pace of growth sustainable.
Especially.
As we look at higher rates and potential deceleration in originations, but you also got the prospects of slower payoffs and paydowns.
Just any high level thoughts.
So.
I think it really starts with a conscious decision that we made.
In the second quarter of 2020.
While a lot of our competitors shuttered.
Shuttered their operations scattered their teams and tried to run their banks from the basement of their of their vacation homes.
We were here every day and.
And we continue to just serving the needs of our communities and taking care of our clients and a lot of the business that we've won over the last couple of years.
There are prospects that we've called on for in some cases 10 plus years.
And they just didn't really like the experience or the lack of availability.
Their existing bank and or their existing bank pulled out of certain markets and.
And so I think that that that momentum that we didnt lose the momentum that a lot of I think end market competitors lost and so <unk> been trying to regain.
Some momentum.
We've just continued to accelerate and I think that approach.
That's also helped us to attract great talent with some of the hires that.
That we've talked about.
Many that we haven't we continue to attract a lot of great bankers across the footprint.
And the announcement on our Utah team is just just the most recent example of that type of activity.
And so I think it hit.
Not something where we just flip the switch and we had a lot of momentum actually going into.
2020 coming out of 2019.
We were starting off the first quarter.
It was shaping up to be a tremendous first quarter of 2020, and then of course.
The pandemic hit and everything kind of came to a standstill.
So I don't know if that gives you everything you want or if Chris wants to add some additional context or not but.
That's really I think it's not something that has just started.
It's something that we've been very focused on four for a few years now.
Yes.
David I'd add on the aspect of just backing up our bankers are out about they're very proactive.
And staying focused.
As you look towards the pending combination.
The integration management office is doing a fantastic job so that our bankers can focus on all the stuff that they do externally and then that team continues to work internally on on all of the stuff that happens on day one.
As far as when you look at highlights kind of all came together.
Specifically to production.
Theres certainly been some pent up demand that came through I think the second quarter, we saw a little bit of.
And some things that came through through some taken advantage of the lower rates before things started to rise that certainly helped with it as well.
We're able to take advantage of those get into some new deals.
While retaining a lot of our own business as well I think your question about is it sustainable.
That's certainly one of the unknown questions and we've talked before I hesitate to speculate that will set record after record.
But I'm very comfortable with what our teams are doing and I think there is going to be a natural summer pullback.
As well and we'll see how it plays out for the rest of the year.
It's truly really wasn't incredible.
Yeah, that's great and maybe maybe just touching on asset quality and given Andy a little airtime you guys always maintained a conservative approach to credit.
<unk> seen continued improvement in asset quality.
You guys talked about it there is some real challenges in the economy I'm just curious.
At a high level.
Your thoughts on on the credit outlook from you all standpoints in the pulse of the clients.
As you look out are there any segments that you are maybe a bit more cautious on are there any segments, where you're maybe seeing.
Lions pull back or that you're avoiding and then on the other side I mean, what is your appetite for credit at this point and have you guys begun tightening standards.
Well first of all our appetite remained consistent through all of the cycles.
Think that the.
That.
For our customers and for our prospects makes us I think predictable.
That.
So we're not in and out of segments and we do.
Hi, Josh.
Our underwriting criteria.
To get more loans are getting less and stuff like that we try to be consistent throughout the entire cycle. So are our risk appetite remains the same.
Overall, yes credits looking really good I hate to say its probably as good as it's going to get but I guess I just said it.
And so really.
The economy will be a big driver of how we how we move forward.
The segments.
Our under stress I mean, we continue to be concerned with.
Hospitality, a little bit, but I think we got our arms around that and most of that I think is pretty well taken care of.
It remains.
Certain kinds of especially if its business travel related.
That remains a challenge versus vacation.
Elderly care.
Yes, the pandemic theoretically lower but not in assisted living and nursing care facility because it only takes a small outbreak and then they get there.
I can't take in new people, there's still a reluctance for a lot of people to place.
Their mother or father into those facilities.
And they are designed in such a way that they need relatively high occupancy to cover the fixed costs of running the facility.
So elderly care there, we don't have a big bucket of elderly care, but it's less than 194, but almost all of that is exhibiting some kind of stress.
I think on a broader case I'm not going to tell you anything you don't already know but.
A lot of businesses.
Still struggling to find employees.
In the restaurant area they are open.
But they can't run at full capacity because they don't have enough server.
And so that impacts their ability to generate revenue.
Alright.
Grocery stores are closing Delhi.
What's happened to me the other day.
Because they don't have enough people to staff the Delhi. So a lot of businesses are really struggling and.
Inflation, so far youre running ahead of wages.
So real nominal.
Yes.
Consumer spending hasn't really increase, but but I view and I think had some concerns over continued wage inflation.
Begin to exceed.
The commodity side of inflation, if you will.
So that probably the longer term the concern in the portfolio.
Okay. That's helpful. Thanks, guys.
Okay.
Thank you one more for our next question.
In the meantime, we once again Thats star one for questions Star one.
Our next question comes from the line of Matthew Clark from Piper Sandler Your line is open.
Hey, good morning.
Okay.
Maybe just to close the loop on credit Andy.
Andy.
Thank you mentioned office, but that seems to be another.
Longer term concern for.
We've heard.
Property values in certain metro market.
I don't think you really.
Dabble in that much.
Values there could be 25% are you seeing anything like that in any of your markets I know I'm sure a lot of what you have a suburban office, but.
Any color on the office so great.
Yes, certainly the downtown core.
Seattle and Portland.
Are the weakest office markets, but those buildings are way bigger than what we ever get involved again.
But it does impact the region a bit and you are correct, we're primarily in the suburban and rural markets.
Most of our office is actually walk up to three storey two by four construction you've got the veterinary clinic the dentists maybe.
Maybe an architect and a law firm in it.
So.
Our office composition is not sort of what you would be reading about in the Wall Street Journal.
Okay.
Got it no value.
I don't know where large buildings in Seattle are trading because thats not the market.
We plan, but I would say that in general cap rates remain extremely low.
Because theres so much money looking for a home.
And so while we aren't seeing the same inflationary pressures.
In real estate values.
Our holding but theyre just not increasing so we'll have to wait and see as rates continue to rise by the fed.
Cap rates rise, then youll see values, but right now theres a lot of money looking for homes and just about every segment of the real estate market.
Okay, Great and then shifting gears to the margin.
Erin.
You have the the margin the average margin in the month of June and.
As a follow up.
What the spot rate was on.
At the end of June and the weighted average rate on new loans going into <unk>.
Okay.
The.
So we did see margin improvement through the quarter.
The.
The new coupon on loans in June was worse.
For 17.
That compares obviously favorably to the average for the quarter server, we're seeing good directional lift there.
The.
And I think our.
You asked about the margin.
March the margin overall for June was on an operating basis was 324 that was up about.
I think from 309 in the March month of March So again, good good directional trends there.
One of the things that I want to point out.
I think it's an important point as we've talked about this in the past where there is.
With the.
<unk>.
Inflection of margin trends.
We always said it was going to take a little bit of time before we really saw that pull through and a big part of that sentence from.
The.
The floors that we have on our loans and we've got some pretty good breakout on slide 10 of our investor deck, we kind of share with us and if you look back to the March quarter.
We had about $1 7 billion of loans that were still subject to floors and moving forward to June 30 that number drops to about one 2 billion and.
Most of that would need just a 25 basis points.
Change in the fed funds to lift off floors, and obviously with next week's anticipated SLM C meeting, we're going to get something well above that.
So.
With that we will have over $3 5 billion of loans will be.
Adjustable width.
Rate resets that should be coming in pretty short order.
So we should start to see a much better impact from the rate hikes coming forward.
Got it Okay, and then I don't know if you mentioned it during your prepared remarks.
Any guidance for the upcoming quarter on a standalone basis from a noninterest expense perspective.
Assuming production flows.
Capitalized deferred.
<unk> thousand 91.
I would assume those would.
Increase but any guide around the run rate.
Yes, so looking for something in the mid nineties.
Okay.
And then maybe Clint.
Could you give us an update on kind of what youre hearing.
As it relates to the approval process if anything.
I'm sure it's frustrating, but just any color you might have.
And whether or not we might need to see the USB usp's acquisition have to get approval first or not.
Hello.
Yes.
Yes.
It's it's it's a process and.
Yes.
We would like to have complete transparency and.
And the timeline for the approval process, but unfortunately, that's just not the way that that works.
<unk> been through this before with prior deals where.
The process has to run its course.
We're not we're not wasting any time to the extent that we can continue to prepare.
Prepare ourselves for.
For when we do receive approval and move quickly towards closing.
Theres not any.
Thing that jumps out.
From my perspective.
It creates.
Any type of an anomaly or core.
It makes the approval process more challenging or difficult I don't know if that helps you or not but it's just we're just going through.
Through the normal process.
I don't know the answer.
Specifically on if our deal is is in.
In line behind the U S Bank deal I think we announced.
What roughly 30 days or so after after they did.
So I know that the Doj is very busy.
But I don't have visibility into.
Everything in terms of what they're actually working on at any given point in time.
But I do know that our application is being worked on.
And while it's.
The delay is.
It is a little bit frustrating.
The real value that we feel that this combination creates for all of our stakeholders.
<unk> is a long term decision and so if it's a matter of a few months here on the front end.
It doesn't change our.
Excitement or expectation for the benefits of this combination to all of our stakeholders.
Okay, great. Thank you.
Thank you one more in for our next question.
And our next question comes from the line.
Jay.
Alright, J <unk> from D. A Davidson your line is open.
Great. Thanks, good morning.
Just a couple of questions on maybe production.
Chris could you tell us.
Pipeline as we sit today versus where you said it.
At the same point in the second quarter.
It's very similar to what was going into the second quarter I won't give an absolute figure on that but yes, its very similar.
And Chris is there.
It's pretty specific but thinking about that.
Utah expansion in those individuals is there any kind of non compete there do you.
Yes, I think that their book of business.
Can hit beginning in the third quarter any any timing there or could we assume.
We could see some positive impact from that group immediately.
Yes.
<unk> been on for about a month now.
And so a couple of weeks in total.
And when you look at it the Theres always are typically there could be a non solicit or anything of that nature.
We're not really we don't build these.
We don't build these teams and expansions on what necessarily can come from their existing book, it's really more about what's the go forward how active are they in the market and how quickly can they seize on new opportunities.
The books they tend to be fairly.
Well, especially in a rising rate environment they tend to.
Really hard to pull somebody wins go in and offer them a higher rate today than what they had where they are currently at.
That'll take a little bit more time, we're really comfortable with these teams that they are the external sourcing types of bankers that we typically.
<unk>.
And bring on board.
So from that standpoint.
So the team that started with US earlier in January they certainly hit the ground running into the second quarter.
So 90 ish days I do know there are some opportunities that we are working on currently.
There are already in there and so yes, I would expect that you start seeing something into the maybe not in the third quarter here, but certainly moving into the fourth quarter.
Got it thank you.
And Erinn.
I appreciate the kind of some of the touch points you gave on margin throughout the quarter.
Okay.
A quick question, David sort of cash and equivalent balances as those were worked down was that pretty steady through the quarter was it.
Early part of late any any thing on timing of how those balances move.
No.
Or was that a variability around you could tell us.
Yes.
April when you had a lot of tax payments going out and things like that there was some bigger variances, but no I would say in terms of how that low dose. Once we're used to loan funding and it was a pretty steady flow through the quarter.
Okay.
And maybe a last one perhaps for claim just.
Yes.
I believe kind of organizational charts have been shared.
Glenn you will be.
I guess.
Is the next sort of point of stress. If you think about the combined employee base would would that be.
At closing of conversion or is there anything more internal that.
As you work through as you said youre not sitting idly by Youre preparing I've just made.
More of the personnel that.
Could be pressure points.
Glenn.
Companies are coming together.
Anything.
We now close our conversion that.
Would also come up in that timeline.
Okay.
Yes, I think.
I think just the length of time that we're in right now this period that we're in.
Waiting on regulatory approval.
Weighs on on on some folks I mean part of.
Part of the.
Bringing the companies together we have.
Both organizations today.
Leaders and individuals that want to retire.
And.
Through normal course of business when somebody retires. They can pick a date you have a big party. They plan a trip and they leave town for a month.
Well, we don't know if that at all.
Exactly when to have that partner for them and so on.
I've seen that there is a few individuals.
Here in <unk>.
Our corporate headquarters that are in that situation.
And so that creates.
I guess the point of frustration for.
For them.
I think that we're still running two separate companies.
And we're planning for what we are when we come together.
So in essence, it's like you have got two jobs youre doing your job.
Today at Columbia Bank or Umpqua Bank.
But then you're also thinking towards the future.
And so I think that that once we get to the.
To close.
<unk>.
Some of that pressure.
Gets released from the organization.
There are situations where there's.
One job for two people and to your earlier comment about or charts and things those have been communicated.
And so that's the other piece of where depending on at what point in the process. It fits.
At the close if its 30 days post close if it's 90 days post conversion.
And those that are.
Centered around the conversion that they still have some pretty good certainty around the timing of what that looks like but.
For those that are centered.
Or based on the actual.
The closing of the merger.
They don't really.
They don't really know exactly when that date will be so.
So I think.
That debt.
I guess those are kind of differ.
Scenarios that I think about.
But all in all.
Across both organizations there is still a tremendous amount of excitement.
The opportunity that.
This creates for all of our stakeholders our clients.
We have been doing a lot of client visits.
The last couple of months and.
And some of them.
They are surprised to find out that the merger has closed.
And they are excited to have greater access to our bankers.
Greater availability of products and services so.
I don't want to take your question and just focus on on.
The pressure points in the organization I think that the excitement still far outweighs.
Anything in terms of just the normal course of of merger type integration work.
Yes.
Appreciate it.
It wasn't a negatively pointed just to kind of walk through the process. So that is helpful and I appreciate that.
The feedback thanks.
Okay.
Thank you and I'm not showing any further questions in the queue I would like to turn the call back over to Clint Stein for any closing remarks.
No. Thanks, Victor and thank you for joining our call today and.
Don't hesitate to reach out if there is any clarification that you'd like.
Any items that we discussed.
Have a good afternoon.
This concludes today's conference call. Thank you for participating you may now disconnect everyone have a great day.