Columbia Banking System Q2 2025 Earnings Report

Columbia Banking System EPS Results

• Actual EPS: $0.76
• Consensus EPS: $0.66
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $0.67

Columbia Banking System Revenue Results

• Actual Revenue: $511.55 million
• Expected Revenue: $492.00 million
• Beat/Miss: Beat by +$19.55 million
• YoY Revenue Growth: +8.20%

Columbia Banking System Announcement Details

• Quarter: Q2 2025
• Date: 7/24/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 24, 2025
• Conference Call Time: 5:00PM ET

Columbia Banking System (NASDAQ:COLB) operates as the holding company of Umpqua Bank that provides banking, private banking, mortgage, and other financial services in the United States. The company offers deposit products, including business, non-interest bearing checking, interest-bearing checking and savings, money market, and certificate of deposit accounts; and insured cash sweep and other investment sweep solutions. It also provides commercial lending products, such as commercial lines of credit and term loans, accounts receivable and inventory financing, international trade finance, commercial property loans, multifamily loans, equipment loans, commercial equipment leases, real estate construction loans and permanent financing, and small business administration program financing, as well as capital markets. In addition, the company offers wealth management comprising financial planning, investment, trust, and insurance; treasury management, which includes digital and mobile banking solutions, ACH, wires, positive pay, remote deposit capture, integrated payments, integrated receivables, lockbox, cash vault, real-time payments, commercial card, and foreign exchange and international banking related products, as well as merchant services; and brokerage services, residential real estate loans and consumer loans. It serves its products to corporate, institutional, small business, and individual customers. The company was founded in 1953 and is headquartered in Tacoma, Washington.

Columbia Banking System Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Our second quarter operating PPNR increased 14% year-over-year, driven by net interest margin expansion, strong core fee income growth, and disciplined expense management.
• Positive Sentiment: The net interest margin expanded 15 basis points to 3.75%, reflecting higher earning asset yields and lower funding costs.
• Positive Sentiment: Regulatory capital remains robust with a 10.8% CET1 ratio and 13% total capital, with expectations for excess capital generation and shareholder returns.
• Positive Sentiment: The acquisition of Pacific Premier received overwhelming shareholder approval and remains on track for a potential September 1 closing with minimal impact on day-to-day operations.
• Negative Sentiment: Deposit balances declined due to anticipated seasonal outflows and customer paydowns, creating a headwind to both loan and deposit growth despite reflecting strong customer quality.

Presentation

[Operator]

Hello, and welcome to Columbia Banking System Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask the question during the session, you will need to press 11 on your telephone. You will then hear an automatic message advising your hand is raised.

[Operator]

To withdraw your question, please press 11 again. I would now like to turn the conference over to Jackie Boland, Investor Relations Director, to begin the call. You may begin.

[Jacquelynne Bohlen, SVP & Director - IR at Umpqua]

Thank you, Towanda. Good afternoon, everyone. Thank you for joining us as we review our second quarter results. The earnings release and corresponding presentation are available on our website at columbiabankingsystem.com. During today's call, we will make forward looking statements, which are subject to risks and uncertainties and are intended to be covered by the Safe Harbor provisions of federal securities law.

[Jacquelynne Bohlen, SVP & Director - IR at Umpqua]

For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non GAAP financial measures, and I encourage you to review the non GAAP reconciliations provided in our earnings materials. I will now hand the call over to Columbia's President and CEO, Clint Stein.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Thank you, Jackie. Good afternoon, everyone. Our second quarter operating results are up 14% from the year ago quarter. Our improved performance is a product of our focus on profitability, balance sheet optimization and the impact of our operational efficiency initiative we executed during the first half of twenty twenty four. The results of the initiative and ensuing organizational focus on stable recurring performance is evident in our results over the past six quarters.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Specific to the current quarter, our net interest margin expanded, we had a meaningful increase in our core fee income, continued our disciplined approach to expenses, and our credit metrics remain healthy. Our loan portfolio was up slightly at quarter end and I'm pleased with its ongoing remix. Commercial loan growth offset intentional runoff in transactional real estate loans. Collaboration across teams and departments, the cornerstone of our business bank of choice strategy, enabled us to win business and attract new relationships. We continue to prioritize profitability and credit quality over growth for growth's sake.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Deposit balances declined during the second quarter due to anticipated seasonal activity such as tax payments and owner distributions. Customers also continue to use their own cash to make investments in their businesses or pay down debt. While this serves as a headwind to both loan and deposit growth, it speaks to the quality of our customers. Columbia has always been a through the cycle lender to top business operators within their industries. Macroeconomic uncertainty around tariffs is causing companies to pivot in a manner best suited for their business.

[Clint Stein, President, CEO & Director at Columbia Banking System]

For some, this creates opportunities for growth and market share gain. For others, it drives a conservative outlook that has the limited need to borrow and has elongated our pipelines. Our disciplined approach and deep relationships continue to serve us well. Columbia is positioned to not only navigate the current environment, but to capitalize on strategic opportunities, including our upcoming acquisition of Pacific Premier. Integration planning remains on track as both companies hosted their individual special shareholders meeting earlier this week and we received overwhelming approval for the transaction.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Since the announcement in April, I have said many times that Pacific Premier is the most seasoned counterparty we have ever worked with. PAC Premier's prior M and A experience contributes to the continued excitement we see from their employees who will join our team. They're raring to go and patiently waiting to become part of Columbia. The M and A experience of Steve, Eddie, and the entire PAC Premier organization has us well positioned for a smooth and timely closing, which we believe could come as early as September 1. Although integrating Pacific Premier is our highest priority, its impact on our overall current operations is minimal.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Approximately 100 or roughly 2% of Columbia's 4,700 associates are focused on integration activities. The remaining 98% are running and growing our company. We continue to plan for the future by strategically expanding and adjusting our footprint. Investment and improvement in our tech stack remains a priority as we are constantly anticipating our needs one, three, five, and in some cases ten years into the future. For instance, we are not losing ground on AI.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Today we have 83 different platforms and solutions that use a form of AI that ranges from basic to powerful. We have one group focused on running our current AI solutions and implementation of successful use cases that can improve operational effectiveness and employee efficiency, and another group that focuses on fintech partnerships and longer term emerging opportunities. For example, we are evaluating the legislative changes and proposals surrounding stablecoin. We are studying and monitoring developments, so we're ready to make informed decisions when it's time to act. We continue to enhance our embedded banking capabilities to make banking easier for our customers and attract new business.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Our embedded banking capabilities will get supercharged by Pacific Premier's existing solutions. What PAC Premier brings to the tech stack is so impressive that we recently announced internally that the PAC Premier Chief Information Officer will remain as the CIO of Columbia. Tom and I have already had strategic technology discussions that span well beyond our anticipated systems conversion in early twenty six. Over the past year, we have discussed the reinvestment of a portion of the 2024 expense initiative reductions into growing our density in Southern California. Considering the market density PAC Premier provides us, we are shifting this investment to the Intermountain States, specifically Utah and Colorado, as we look to build a meaningful presence organically in these markets.

[Clint Stein, President, CEO & Director at Columbia Banking System]

We often say people are Columbia's greatest asset. We continue to put action behind this statement with investment in our people as we develop the next generation of leadership of our company. We have an expanded internship program and added to our robust in house educational offerings. We are sending a record number of people to banking school this year and we expanded our executive leadership talent with the addition of Judy Gaim, who joined Columbia in June as our CHRO. Judy brings over twenty years of comprehensive human resource leadership experience for publicly traded companies.

[Clint Stein, President, CEO & Director at Columbia Banking System]

She's also overseeing the workforce and cultural integration of multiple newly combined companies. In eight short weeks, Judy has already advanced our human capital management activities, and we're thrilled to have her on the team. And as previously announced, we are unifying our brand under the Columbia name. Effective July 1, Umpqua Bank changed its legal name to Columbia Bank, and we will begin doing business publicly under the Columbia Bank name and brand beginning September 1. Our simplified family of brands ensures clarity as we deepen our presence throughout the West.

[Clint Stein, President, CEO & Director at Columbia Banking System]

It's a busy and exciting time at Columbia, and I want to thank our associates for their hard work and contribution to another period of solid performance with our second quarter results. I am as enthusiastic as I have ever been in my twenty years with Columbia about our future as we continue to serve our customers and communities in support of generating long term shareholder value. I'll now turn the call over to Ron.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Okay. Thank you, Clint. We reported second quarter EPS of $0.73 and operating EPS of $0.76 Operating excludes merger and restructuring expense along with other fair value and hedging items detailed in our non GAAP disclosures, which I encourage you to review. Our operating return on average tangible equity was 16.85%, while operating PPNR increased 14% from the first quarter to $242,000,000 The main drivers for earnings and operating PPNR growth this quarter were rising earning asset yields and lower cost of interest bearing liabilities, both driving a 15 basis point improvement in our NIM, along with improving core fee non interest income and flat operating non interest expense, the textbook definition of operating leverage. On the balance sheet, we increased available for sale investments by 5% to reduce our pro form a asset sensitivity and use wholesale borrowings to fund this along with seasonal customer deposit outflows.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Our tangible book value per share increased by 3%, while regulatory capital ratios continue to build with our Tier one common at 10.8% and total risk based capital ratio at 13%. Capital ratios will continue to build, allowing for additional forms of allocation and shareholder return next year. I mentioned earlier, our NIM increased 15 basis points to 3.75% this quarter. A little over half of that came from higher investment securities yields, which can fluctuate a bit due to varying CPR speeds. We also got a one basis point benefit from an interest recovery.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

But more fundamentally, we saw higher loan yields added about five basis points to the NIM and lower funding costs added about one basis point. So good underlying trends. Our provision for credit loss was $29,000,000 for the quarter and our overall allowance for credit losses remains robust at 1.17% of total loans. Non interest income was $64,500,000 for the quarter. On page 22 of our earnings release, we detail the non operating fair value changes.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Excluding those items, our operating non interest income of $65,100,000 for Q2 was up $8,000,000 or 14%, reflecting strong core fee income growth. Also noted on page 22, total GAAP expense for the quarter was $278,000,000 while operating expenses were relatively flat with Q1 at $269,000,000 Annual list and compensation and incentives were offset by lower services, marketing and other expense along with lower intangible amortization. Now I'll hand the call to Chris.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

Thanks Ron. As Clint noted, seasonal tax payments in April contributed to customer balance contraction during the second quarter, which followed strong customer balance growth in March. Customers also put their deposits to work by paying down debt and moving funds into our wealth management products. In aggregate, these trends reduced our commercial and consumer balances during the second quarter, but we saw modest growth in our small business deposits. Our recent campaign, which ran through mid July, brought over $450,000,000 in new core deposits to the bank, offsetting other balance declines.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

The campaign was also successful in generating new SBA relationships. Loan growth was centered in commercial portfolios during the quarter, as owner occupied CRE and commercial line balance increases offset multifamily and residential loan contraction. Our teams remain focused on relationship driven activity, which includes core fee income generation. As Ron noted, operating non interest income was up $8,000,000 from the prior quarter due to higher card based fee income, swap related income, financial services and trust revenue, along with our other core banking income sources. We continue to target a higher contribution from core fee income to overall revenue, And we see revenue synergy opportunities through the Pacific Premier acquisition.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

Not only will Pacific Premier's custodial trust business complement our existing wealth management platform, but their expertise in HOA banking, escrow and ten thirty one exchange businesses also offer additional revenue generating opportunities. We also expect to see deeper customer relationships as we introduce Pacific Premier branches to the CB way, which proactively offers need based solutions to our customers. We enhanced our customer and community support with the recent opening of three branches. We added a second location in Phoenix and our first in Mesa to go along with our Scottsdale, Arizona office, bringing the branch count to four. As we effectively serve this attractive and growing market in the state.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

We also opened a branch in Eastern Oregon, restoring essential banking services to a bankless rural community. Our De Novo branch strategy supports bankers already serving customers in our markets and strengthens opportunities to bring new relationships to Columbia. I will now hand the call back to Clint.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Thanks, Chris. We remain laser focused on optimizing our financial performance and enhancing long term tangible book value. We also expect to return excess capital to our shareholders. Our CET1 and total capital ratios were 10.813% at quarter end, both well above our long term targets. We expect our acquisition of Pacific Premier to meaningfully enhance our capital generation capabilities, which already exceed what is required to support prudent growth and our regular dividend.

[Clint Stein, President, CEO & Director at Columbia Banking System]

In the near future, as we integrate Pacific Premier, we will have additional flexibility to return excess capital. This concludes our prepared remarks. Chris, Tory, Ron, Frank and I are happy to take your questions now. Tawanda, please open the call for Q and A.

[Operator]

Thank you. Our first question comes from the line of David Fester with Raymond James. Your line is open.

[David Feaster, Director - Banking at Raymond James Financial]

Hi, good afternoon everybody.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Hey David.

[David Feaster, Director - Banking at Raymond James Financial]

I wanted to start on on kind of the growth side and the loan side. You you touched on you can see it in the in the the deck. You got a a double digit increase in originations. I was hoping you could touch on what what do you what's what's driving that? Is that client demand increasing, maybe just given a bit more certainty or less fears around the tariffs?

[David Feaster, Director - Banking at Raymond James Financial]

Or is it more a function of just increasing productivity of your bankers and market share gains? Just kind of curious your thoughts on that client sentiment and just how do you think about, you know, originations ultimately maybe being able to outpace strategic runoff and the payoffs and pay downs in the remainder of the year.

[Clint Stein, President, CEO & Director at Columbia Banking System]

As usual, David, I think in every quarter you'll probably get this comment from us. You pack a lot into a single question, but I'll start off and then maybe see if Tory and Chris have anything to add. I think it's a combination. If you look at the roll forward that we have in the earnings deck, it really kind of tells the story and we've seen this over the years from time to time, depending on the macroeconomic environment where bottom line growth maybe is hard to come by because of what's going on in our established book with businesses selling and or the strength of their balance sheet and using their own cash as opposed to borrowing. So when I look at the activities and the excitement that our bankers have, We had the opportunity to have breakfast with a handful of leaders in one of our markets yesterday and they're still just very excited about the opportunities that they're seeing.

[Clint Stein, President, CEO & Director at Columbia Banking System]

So I think it is in those newer markets that they're doing the right things and they're putting totals on the books. And then that helps kind of the current of the runoff in the legacy portfolio either through amortizations or just pay downs and prepayments. But broadly, it's utilization of cash when we see that activity. We're not really experiencing what we'd call leakage through the back door with customers going elsewhere. That's my 2¢.

[Clint Stein, President, CEO & Director at Columbia Banking System]

I'll step back and see if Tore has anything to add.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

Okay. Yeah, thanks. This is Tore. I would echo all of Clint's comments, actually really quite excited and happy with the activity level, certainly in the commercial with commercial RMs. We had production for the quarter, which is roughly 30% higher than Q1 and about 18% higher than Q2 last year.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

So the activity level is really strong and really good coming from de novo markets, coming from our legacy markets. Lot of good momentum on the C and I front. I think in particular, with everything that's going on in the economy, were just subject to some payoffs or company sales, just things a little more abnormality than usual. But the pipeline's strong, the activities are good, feel great about the banker's ability to deepen relationships and bring new relationships into the company.

[David Feaster, Director - Banking at Raymond James Financial]

Okay, that's great. And then, maybe just I'm curious with the deal close approaching, encouraged by your commentary about potentially even closing it by September 1. It's much swifter timeline for approval and closing than the last deal, a testament to the improving regulatory backdrop, I guess. I'm just kind of curious, has your thoughts on the optimization of Pacific Premier's balance Or is there anything that maybe you execute ahead of the close just kind of given the increased certainty and visibility into close?

[Clint Stein, President, CEO & Director at Columbia Banking System]

There's several different threads we could pull on that. If it's specific to PAC Premier balance sheet, we would wanna take advantage of getting the day one fair value marks. Otherwise, you hard code a loss in there. We have done a little bit in terms of just Ron did some pre purchase of some securities that we think that better fit the portfolio. And so we've done that and then we'll sell some of the securities that are in the PAC Premier book.

[Clint Stein, President, CEO & Director at Columbia Banking System]

In terms of other things like specific to loans and things of that nature, we've looked at a lot of different scenarios and we're very active in looking at what those scenarios are. Broadly, we have zero credit concerns. So that's something that gives us pause given that these things will reset to a market rate with purchase accounting. Nonetheless, we're still challenging ourselves to look at multiple scenarios. Don't know, Ron, do you have anything to add?

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

I think you hit the nail on the head.

[David Feaster, Director - Banking at Raymond James Financial]

Okay, that's helpful. And then maybe last one for me. Chris touched on on focus on increasing fee revenue contributions. You guys have done a great job building out some fee income lines. Pac Premier also brings a couple, unique business lines.

[David Feaster, Director - Banking at Raymond James Financial]

I'm curious maybe some of the initiatives on the fee income side And then just is there anything as as we're sitting here as as a 70,000,000,000 asset bank, like, that you need or other lines or anything that you might need to be more competitive in that, you know, as just being a much larger financial institution? Is there anything that needs to be built out?

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

David, it's Tory. So let me start with initiatives first. I think there are quite a few. We purposefully have been working the fee side of the house for quite some time, several years. And there's tremendous momentum quarter after quarter after quarter.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

And it's very deliberate, starting with full relationship banking, making sure that if we're going to lend money to somebody, we have their deposits and we have as much of their fee income business as we can get. We've got a few initiatives where we've looked at first of we talked about just four in previous calls, but we have a predictive analytics program that provides kind of a next best offer based on customers' activity in their accounts. And we feed those to the treasury management folks and the RMs throughout the company. It's got like a 50% closure rate on that. So working extraordinarily well.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

Have full relationship review process that we do throughout the company. We do something called working capital assessments, where we get together and kind of whiteboard with our commercial customers on how they use their cash in their entire working capital cycle to look for opportunities to provide kind of a needs based solution. So it's very deliberate in approach and it's producing a lot of really strong results. And I'll just give you a couple of numbers I think we look at Chris and I look at all the time. On the treasury management side, of year over year, we're up 6% In commercial card year over year, we're up 14%.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

In merchant services, up 10%. In international banking, we're up 50%. On the trust side, we're up 12%. So we've got some really nice momentum spread throughout the company. And it's something that personally, I'm very proud of the team's results and looking forward to continuing to do it quarter after quarter.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

So Chris, anything else you want to add to that?

[Christopher Merrywell, Senior EVP at Columbia Banking System]

Yeah. Thanks, Dore. David, I'd add in there. You think about the initiatives that we've been running now for a year and a half or so that focus on small business. That goes to where Tory was talking about corporate card and merchant and things of that nature.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

And our private bank health care teams have done a pretty good job of, when they're winning business, utilizing those capabilities to, to bring in that corporate card and that that merchant as well. And those are some pretty significant opportunities.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

Just one more add on to that would be just last part of your question of Pacific Premier. Obviously, think we we have a great product set and there I don't think there's anything we're missing from a product standpoint. And we're super excited about the Pacific Premier becoming part of the Columbia family. Great opportunity on the fee side there as well with commercial card in particular, treasury management, our leasing business, kind of some great stuff ahead of us.

[David Feaster, Director - Banking at Raymond James Financial]

That's awesome. Thanks everybody.

[Operator]

Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is open.

[Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies]

Hey, good afternoon, everyone. Thanks for the question. Just a quick one on accretion. I know you guys it looks like you pulled it out of the deck, I know most of that accretion is real. It's not credit mark related that disappears.

[Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies]

But for the sake of modeling, would you be able to provide us that number? Know there was a recovery on the loan within the loan yield of $2,000,000 I think you called out, but just trying to drill down on the interest income a little.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Yes, Matt. Yes, obviously we view income as core driven by rate and that credit. Add the credit mark was three bps consistent with Q1, but back to from a modeling standpoint, I would utilize the yields you see for the quarter along with slide 24 it is in our deck. It's got some great data there just from a repricing standpoint around loans and deposits. Then the bond portfolio is pretty static.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

We've got a good slide on the bond portfolio, but you can see the yield there from a model standpoint. The key there is duration.

[Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. And then just the securities growth you had in the quarter, the borrowings, the increase in borrowings and some brokered. I mean, much of that is related to the PBBI deal and how should we think about those balances going forward?

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Yes, no, we did back in late April. We added $600,000,000 of par, but it was about $500,000,000 of books, so deeply discounted bonds, low coupon type stuff with duration. The goal with that was to reduce the pro form a asset sensitivity of the combined company post close. We utilize wholesale funds for that and we'll pay those off, as Clint mentioned, right post close once we sell off a portion of their portfolio.

[Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. And then just any updated thoughts on deposit, the deposit growth outlook, legacy Columbia ex PBBI and any thoughts on your updated thoughts on your pricing strategy? I mean, it looks like you've held rates fairly stable since April and whether or not you might get ahead of the Fed or kind of wait for the Fed to cut?

[Christopher Merrywell, Senior EVP at Columbia Banking System]

Yeah, thanks, Matt. This is Chris. Yeah, we've kind of we've slowed the repricing on that aspect. I think the teams did a fabulous job of working through this working through the decreased cycle, but they had actually started much in front of that. And so there was I think that that has given us this time period of things have been pretty stable.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

We see some competitors that will periodically go out there and offer up in excess of 4% for certain things. We see a few case by case, offers, exception offers that are made, but we're feeling pretty good about our ability to compete with those. Where we fall in the stack ranking of kind of the lowest to highest rates. And but we're always looking at the portfolios, we're always looking at the tranches that are in there. And if we can make a minor tweak of a basis point or two, we certainly will.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

And so it's a very active process that that we go through both from the competitive market and then just looking into what our flows are on the on the backside is as well. CD pricing has been pretty much solid and the same since for six plus months. I'm not seeing a lot of activity. We're still renewing at a a rate that we're satisfied with, and those rates continue to come down. That's gonna slow out in the future as you would expect.

[Christopher Merrywell, Senior EVP at Columbia Banking System]

And then more importantly, and I'll let Tory talk about this as well is it's the new business. And so people going out and winning winning accounts, winning the new the new relationships, and getting those added to the total. It is offset a little bit somewhat as we saw in the first six months of this year and it built in the second quarter with taking advantage of some of our wealth management activities as well. So for

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

Yeah, not a lot to add. I mean, I think the second quarter was kind of seasonal, what we would expect. We were a lumpy deposit outflows at the end of the quarter, big distributions by companies or company sales, dollars came in and then went to trust or some other place and starting to see a normal resurgence a little bit in Q3. So it feels very normal. As I said earlier, think with this real strong concept of full relationship banking, I mean, the bankers throughout the company know that, it's about loans, deposits and core fee income.

[Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. And then last one for me, maybe for Clint. Just your appetite for cleaning up the capital stack and from legacy Umpqua, what's just speak to the opportunity there and your appetite if you could. Thanks.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Yeah, well Matt, you've known me for a long time and you know I like as clean of a capital stack as possible. And we've done some analysis and we look at what the capital stack of our peer banks looks like and in addition to the excess capital generation that we expect that we've had really over the last two and a half years and we expect that to accelerate with PAC Premier. And so I think that gives us a lot of flexibility as we move forward to clean some things up and optimize that capital stack.

[Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies]

Okay, thanks again.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Thanks, Matt.

[Operator]

Please stand by for our next question. Our next question comes from the line of Jeff Rulis with D. A. Davidson.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

I wanted to check-in on at Slide 28, again, the $6,000,000,000 of transactional assets, you have kind of a timeline or maturity schedule on that or kind of a forecast on how long that would take to kind of purge from the balance sheet?

[Clint Stein, President, CEO & Director at Columbia Banking System]

Yeah, it depends on a couple of factors. One, the Fed were to lower rates, probably what we're on 150 basis points or so, that would certainly give us the opportunity to accelerate those as a lot of those would enter into kind of a refi window and we just wouldn't be competitive and they would run off someplace else. Otherwise, as we think about kind of the repricing, we had some repricing this quarter. We have some more that as we go through the rest of the balance of 2526, it really starts to pick up from a repricing standpoint, 2728. So that's really kind of the timeline.

[Clint Stein, President, CEO & Director at Columbia Banking System]

I've said this before to various investors that we've been talking about this for nearly a year and a half and I wish there was an easy fix. The easy fix isn't the one that creates the most shareholder value. The easy fix would be just to rip the band aid and sell them, but the earn back on that would be about ten years and so when we're looking at a two to three year kind of workout and wind down of these portfolios that makes the most economic sense.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Got you, yeah, I understood that, it's tough to the sales could accelerate, but just trying to get a sense on a net growth, I guess, through the '6 is a reasonable window. Would you say that a quarter of that balance, if just straight maturities, could exit or just trying to put a number on it because it's against growth that you talked a lot about the origination activity and positive about that. But the net effect of that is how much you're really gonna grow in '26.

[Clint Stein, President, CEO & Director at Columbia Banking System]

Yeah, what I'd point you back to is that right now these portfolios are an earnings headwind for us. So, we can improve and increase profitability through the repricing and or runoff in those as we affect this remix. So, I know that a lot of models are just based on a growth projection, but that doesn't take into account the of the earnings headwind that we're replacing this with, as well as what we're replacing it with our new C and I names and full relationships that have fee income capabilities and all the things that Tory previously discussed. So, I think that, yeah, you could see growth remain muted. You could even see us contract the balance sheet a little bit, but we would end up with a more profitable institution and that's really what I was trying to drive home in my prepared remarks when I said, we're going to stick to our discipline and not grow just for the sake of growth.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Got you. Thanks, Clint. Maybe on the margin, just circling back, Ron, it sounds like the securities yield bump pretty considerable this quarter. What the timing of those purchases, I. E, could there be a tail of benefit that stretches into Q3 on that?

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

I'm just trying to get into where you think on margin from a carry forward basis.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Yes. I mean, those were done late in April. And granted, when we close PPBI, we'll have the ability to restructure that portfolio as well. So there should be, all else being equal, bit of a lift into Q3 just from a full quarter margin standpoint of the investment yields. But keep in mind, we put them on with wholesale funds.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

So the net margin of that just trade in and of itself was not intended to approximate our margin for this month or two or a couple of month period of time prior to close. So we will expand that back out post close with reducing the wholesale funds to put them on with. So another long way of saying, I think the second quarter bond yields are closer to the norm than the first quarter. The first quarter was artificially low.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Ron, what was the margin for the month of June?

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Month of June margin would have been 3.79 adjusted for timing differences throughout the quarter.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Got it. And then last one, just on the expense base. Can we look at $2.78 reported if we exit acquisition expenses is $2.70 a firm number to kind of grow off of or flat line? Any comment on expense levels from here pre PPBI?

[Clint Stein, President, CEO & Director at Columbia Banking System]

Yeah, Jeff, this is Clint. I'll say a couple of things and then turn it over to Ron. Part of what we've talked about was that we were going to invest in increasing our density in Southern California. So we overshot our 2024 expense initiative to create some expense offsets to enable us to do that. With PAC Premier and what that brings to us, we no longer need to do that, but it creates an opportunity to then go to phase two of our long term organic growth strategy, which was to make those investments in the Intermountain States and specifically Utah and Colorado and Arizona.

[Clint Stein, President, CEO & Director at Columbia Banking System]

And so we're actively in that process, but it's delayed the actual spend and hitting our run rate. I think if you go with the $270,000,000 and cast that forward, it's going to be a little bit light because it's not going to include that level of investment. I'll step back and let Ron clean up anything that I missed.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

No, I think you're spot on because we talked earlier in the year about a range 25 of 1,000,000,000 to $1,010,000,000 of expense ex CDI amortization. In the last couple of quarters, we've come in below that $9.75 this quarter on that measure and it goes right to what Clint just talked about.

[Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies]

Okay, thank you.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Yep, thanks.

[Operator]

Our next question comes from the line of Chris McGratty with KBW.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Clint and Ron, I want to make sure I get the balance sheet size right. That's kind of where my head is spinning. If I think about the two earning asset bases, it's 48 and 16 to get you to 64. I'm trying to get a sense of kind of pro form a. Is there anything it seems like you updated about $400.500 dollars with the purchases, but is that just you're going to sell a piece of that PPBI $3,500,000,000 loans?

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

I'm just trying to get to kind of an opening day earning asset base to go from.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

Yes. I'd say at close, we'll net sell $500,000,000 of PDVI bonds where the marks are hard coded to pay down the wholesale funding that we put on as part of this trade in late April.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Okay, so the my math on kind of mid 60s earning assets would seem reasonable.

[Torran Nixon, President - Commercial Banking of Umpqua Bank at Columbia Banking System]

Yes.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Okay, perfect.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Thank you for that. And then in terms of the margin, again, just clarification, the has your combined margins of the two companies structurally changed? You announced the merger. Obviously, bond yields noted were up notably, but it's the structural combined margin of these two companies materially different than ninety days ago.

[Ronald Farnsworth, EVP & CFO at Columbia Banking System]

I'd say, well, our margins increased compared to ninety days ago. And again, when you look back at the when you look to the combined effects of the deal, just default back to the materials we also included here in the appendix of the earnings presentation around the deal map. So that's really more a function of where are those NIMs at today compared to what was in the consensus, which was the basis for the math.

[Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)]

Okay. But the message is you're feeling better about your margin. That's I can make the Okay. Assumption on Thanks. Appreciate it.

[Operator]

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

[Jacquelynne Bohlen, SVP & Director - IR at Umpqua]

Thank you, Talanda. Thank you for joining this afternoon's call. Please contact me if you have any questions or would like to schedule a follow-up discussion with members of management. Have a good rest of the day.

[Operator]

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Participants

Executives

• Clint Stein, President, CEO & Director
• Ronald Farnsworth, EVP & CFO
• Torran Nixon, President - Commercial Banking of Umpqua Bank

Analysts

• Jacquelynne Bohlen, SVP & Director - IR at Umpqua
• Christopher Merrywell, Senior EVP at Columbia Banking System
• David Feaster, Director - Banking at Raymond James Financial
• Matthew Clark, MD & Senior Research Analyst at Piper Sandler Companies
• Jeff Rulis, MD & Senior Research Analyst at D.A. Davidson Companies
• Christopher Mcgratty, MD & Head - U.S. Bank Research at Keefe, Bruyette & Woods (KBW)