COLUMBIA BANKING SYSTEM, INC. REPORTS SECOND QUARTER 2024 RESULTS

TACOMA, Wash., July 25, 2024 /PRNewswire/ -- 

 

 

 

Organizational Update

Columbia Banking System, Inc. ("Columbia," the "Company," "we," or "our") completed an enterprise-wide evaluation of our operations during the first quarter of 2024. The full-scale review resulted in consolidated positions, simplified reporting and organizational structures, and an improved profitability outlook. Through June 30, 2024, 91% of the identified cost savings have been realized, and we expect to carry out the remaining actions during the third quarter of 2024. Please refer to the Q2 2024 Earnings Presentation for additional details.

Columbia's primary subsidiary, Umpqua Bank ("Umpqua"), opened its first retail location in Phoenix, Arizona and its first Financial Hub in Southern California, replacing an existing branch. Umpqua has closed four branches on a net basis during 2024 as strategic consolidations offset new locations in targeted growth markets.

On February 28, 2023, Columbia completed its merger with Umpqua Holdings Corporation ("UHC"), combining the two premier banks in the Northwest to create one of the largest banks headquartered in the West (the "merger"). Columbia's financial results for any periods ended prior to February 28, 2023 reflect UHC results only on a standalone basis. In addition, Columbia's reported financial results for the six months ended June 30, 2023 reflect UHC financial results only until the closing of the merger after the close of business on February 28, 2023. As a result of these two factors, Columbia's financial results for the six months ended June 30, 2024 may not be directly comparable to prior reported periods. Under the reverse acquisition method of accounting, the assets and liabilities of Columbia as of February 28, 2023 ("historical Columbia") were recorded at their respective fair values.

Net Interest Income

Net interest income was $427 million for the second quarter of 2024, up $4 million from the prior quarter. The increase reflects higher income earned on loans and investment securities, including accretion income, and lower borrowing costs. The favorable change was only partially offset by higher deposit costs as targeted pricing actions limited the increase in Columbia's cost of interest-bearing deposits.

Columbia's net interest margin was 3.56% for the second quarter of 2024, up 4 basis points from 3.52% for the first quarter of 2024. The expansion was driven by higher yields on loans and investment securities, including the benefit of accretion income, which offset a modest increase in the cost of interest-bearing deposits following a comprehensive review undertaken during the first quarter of 2024 related to how Columbia evaluates and approves deposit pricing. The cost of interest-bearing deposits increased 9 basis points on a linked-quarter basis, and was 2.97% for both the three months ended June 30, 2024 and as of June 30, 2024, which compares to 3.00% for the month of June. "Actions taken during the first quarter resulted in enhanced pricing visibility, which contributed to stability in interest-bearing core deposit rates during the second quarter," commented Chris Merrywell, President of Umpqua Bank. "Our teams have done an exceptional job leading with service, not price, as they meet with current and prospective customers."

Columbia's cost of interest-bearing liabilities increased 6 basis points on a linked-quarter basis, and was 3.31% for both the three months ended June 30, 2024 and as of June 30, 2024, which compares to 3.34% for the month of June. Please refer to the Q2 2024 Earnings Presentation for additional net interest margin change details and interest rate sensitivity information as well as to our non-GAAP disclosures in this press release for the impact of purchase accounting accretion and amortization on individual line items.

Non-interest Income

Non-interest income was $45 million for the second quarter of 2024, down $6 million from the prior quarter. The decline was driven by quarterly fluctuations in fair value adjustments and mortgage servicing rights ("MSR") hedging activity, which collectively resulted in a net fair value loss of $10 million in the second quarter compared to a net fair value loss of $4 million in the first quarter, as detailed in our non-GAAP disclosures. Excluding these items, non-interest income was stable between periods, with favorable trends in card activity, financial services and trust revenue, and mortgage banking.

Non-interest Expense

Non-interest expense was $279 million for the second quarter of 2024, down $8 million from the prior quarter level. Excluding merger and restructuring expense, exit and disposal costs, and accruals for the FDIC special assessment, non-interest expense was $263 million², down $14 million from the prior quarter due to ongoing strategic actions taken to reduce our non-interest expense run rate, lower CDI amortization following the one-year anniversary of the merger, and a $7.7 million reversal of prior compensation-related accruals. Please refer to the Q2 2024 Earnings Presentation for additional expense details.

Balance Sheet

Total consolidated assets were $52.0 billion as of June 30, 2024, down slightly from $52.2 billion as of March 31, 2024. Cash and cash equivalents were $2.1 billion as of June 30, 2024, also down slightly from $2.2 billion as of March 31, 2024. Including secured off-balance sheet lines of credit, total available liquidity was $19.1 billion as of June 30, 2024, representing 37% of total assets, 46% of total deposits, and 140% of uninsured deposits. Available-for-sale securities, which are held on balance sheet at fair value, were $8.5 billion as of June 30, 2024, a decrease of $114 million relative to March 31, 2024, due to paydowns and a decline in the fair value of the portfolio. Please refer to the Q2 2024 Earnings Presentation for additional details related to our securities portfolio and liquidity position.

Gross loans and leases were $37.7 billion as of June 30, 2024, an increase of $68 million relative to March 31, 2024. Columbia sold loans with a book balance of $95 million during the second quarter of 2024, including $80 million in residential mortgage loans held on the balance sheet at fair value. Excluding these actions, the loan portfolio increased by 2% on an annualized basis during the quarter due primarily to commercial line utilization and construction project activity. Please refer to the Q2 2024 Earnings Presentation for additional details related to our loan portfolio, which include underwriting characteristics, the composition of our commercial portfolios, and disclosure related to our office portfolio.

Total deposits were $41.5 billion as of June 30, 2024, a decrease of $183 million relative to March 31, 2024. Customer deposits drove the quarter's decrease due in part to anticipated customer tax payments, partially offset by targeted campaigns run by our branch network. "Our teams wrapped up a successful small business account campaign in April, generating nearly 6,000 accounts and $345 million in new deposits to the bank, 27% of which were non-interest-bearing balances," stated Mr. Merrywell. "We use a collaborative approach to find needs-based solutions for our customers—and these campaigns do not include promotional pricing." Please refer to the Q2 2024 Earnings Presentation for additional details related to deposit characteristics and flows.

Credit Quality

The allowance for credit losses was $439 million, or 1.16% of loans and leases, essentially unchanged from March 31, 2024. The provision for credit losses was $32 million for the second quarter of 2024, and it reflects credit migration trends and changes in the economic forecasts used in credit models.

Net charge-offs were 0.32% of average loans and leases (annualized) for the second quarter of 2024, compared to 0.47% for the first quarter of 2024. Net charge-offs in the FinPac portfolio were $25 million in the second quarter, largely unchanged from the first quarter. Net charge-offs excluding the FinPac portfolio were only $6 million in the second quarter. As of June 30, 2024, non-accrual loans were $93 million compared to $99 million as of March 31, 2024, due to lower balances in commercial portfolios. Non-performing assets were $156 million, or 0.30% of total assets, as of June 30, 2024, compared to $144 million, or 0.28%  of total assets, as of March 31, 2024. The quarter's increase in loans and leases past due 90+ days and accruing, which accounted for the increase in nonperforming assets, was driven in part by the expiration of COVID-related designations within the residential mortgage portfolio. After accounting for government guarantees, non-performing assets declined by $9 million during the second quarter due primarily to lower balances in the FinPac portfolio. Please refer to the Q2 2024 Earnings Presentation for additional details related to the allowance for credit losses and other credit trends.

Capital

Columbia's book value per common share was $23.76 as of June 30, 2024, compared to $23.68 as of March 31, 2024. The linked-quarter change reflects organic net capital generation, partially offset by a change in accumulated other comprehensive (loss) income ("AOCI") to $(456) million at June 30, 2024, compared to $(426) million at the prior quarter-end. The change in AOCI is due primarily to an increase in the tax-effected net unrealized loss on available-for-sale securities to $442 million as of June 30, 2024, compared to $413 million as of March 31, 2024. Tangible book value per common share³ was $16.26 as of June 30, 2024, compared to $16.03 as of March 31, 2024.

Columbia's estimated total risk-based capital ratio was 12.1% and its estimated common equity tier 1 risk-based capital ratio was 9.9% as of June 30, 2024, compared to 12.0% and 9.8%, respectively, as of March 31, 2024. Columbia remains above current "well-capitalized" regulatory minimums. The regulatory capital ratios as of June 30, 2024 are estimates, pending completion and filing of Columbia's regulatory reports.  

Earnings Presentation and Conference Call Information

Columbia's Q2 2024 Earnings Presentation provides additional disclosure. A copy will be available on our investor relations page: www.columbiabankingsystem.com.

Columbia will host its second quarter 2024 earnings conference call on July 25, 2024, at 2:00 p.m. PT (5:00 p.m. ET). During the call, Columbia's management will provide an update on recent activities and discuss its second quarter 2024 financial results. Participants may register for the call using the below link to receive dial-in details and their own unique PINs or join the audiocast. It is recommended you join 10 minutes prior to the start time.

Register for the call: https://register.vevent.com/register/BIdb1fd24ce3994192abaccb701c2ce451

Join the audiocast: https://edge.media-server.com/mmc/p/tog4rq49/

Access the replay through Columbia's investor relations page: www.columbiabankingsystem.com

About Columbia Banking System, Inc.

Columbia (NASDAQ:COLB) is headquartered in Tacoma, Washington and is the parent company of Umpqua Bank, an award-winning western U.S. regional bank based in Lake Oswego, Oregon. Umpqua Bank is the largest bank headquartered in the Northwest and one of the largest banks headquartered in the West with locations in Arizona, California, Colorado, Idaho, Nevada, Oregon, Utah, and Washington. With over $50 billion of assets, Umpqua Bank combines the resources, sophistication and expertise of a national bank with a commitment to deliver superior, personalized service. The bank supports consumers and businesses through a full suite of services, including retail and commercial banking; Small Business Administration lending; institutional and corporate banking; and equipment leasing. Umpqua Bank customers also have access to comprehensive investment and wealth management expertise as well as healthcare and private banking through Columbia Wealth Advisors and Columbia Trust Company, a division of Umpqua Bank. Learn more at www.columbiabankingsystem.com.

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the "Safe-Harbor" provisions of the Private Securities Litigation Reform Act of 1995, which management believes are a benefit to shareholders. These statements are necessarily subject to risk and uncertainty and actual results could differ materially due to various risk factors, including those set forth from time to time in our filings with the Securities and Exchange Commission. You should not place undue reliance on forward-looking statements and we undertake no obligation to update any such statements. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "target," "projects," "outlook," "forecast," "will," "may," "could," "should," "can" and similar references to future periods. In this press release we make forward-looking statements about strategic and growth initiatives and the result of such activity. Risks and uncertainties that could cause results to differ from forward-looking statements we make include, without limitation: current and future economic and market conditions, including the effects of declines in housing and commercial real estate prices, high unemployment rates, continued inflation and any recession or slowdown in economic growth particularly in the western United States; economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that could result in increased loan and lease losses, especially those risks associated with concentrations in real estate related loans; our ability to effectively manage problem credits; the impact of bank failures or adverse developments at other banks on general investor sentiment regarding the liquidity and stability of banks; changes in interest rates that could significantly reduce net interest income and negatively affect asset yields and valuations and funding sources; changes in the scope and cost of FDIC insurance and other coverage; our ability to successfully implement efficiency and operational excellence initiatives; our ability to successfully develop and market new products and technology; changes in laws or regulations; any failure to realize the anticipated benefits of the merger when expected or at all; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger and integration of the companies; the effect of geopolitical instability, including wars, conflicts and terrorist attacks; and natural disasters and other similar unexpected events outside of our control. We also caution that the amount and timing of any future common stock dividends or repurchases will depend on the earnings, cash requirements and financial condition of Columbia, market conditions, capital requirements, applicable law and regulations (including federal securities laws and federal banking regulations), and other factors deemed relevant by Columbia's Board of Directors, and may be subject to regulatory approval or conditions.

¹ "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for additional information.

² "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for additional information.

³ "Non-GAAP" financial measure. See GAAP to Non-GAAP Reconciliation for additional information.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles in the United States of America ("GAAP"), this press release contains certain non-GAAP financial measures. The Company believes presenting certain non-GAAP financial measures provides investors with information useful in understanding our financial performance, our performance trends, and our financial position. We utilize these measures for internal planning and forecasting purposes, and operating pre-provision net revenue and operating return on tangible common equity are also used as part of our incentive compensation program for our executive officers. We, as well as securities analysts, investors, and other interested parties, also use these measures to compare peer company operating performance. We believe that our presentation and discussion, together with the accompanying reconciliations, provides a complete understanding of factors and trends affecting our business and allows investors to view performance in a manner similar to management. These non-GAAP measures should not be considered a substitution for GAAP basis measures and results, and we strongly encourage investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names.

 

 

 

 

 

 

 

 

 

 

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SOURCE Columbia Banking System, Inc.