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Date

  • Thursday, July 24, 2025, at 5 p.m. ET

Call participants

  • Chief Executive Officer — Clint Stein
  • Chief Financial Officer — Ronald Farnsworth
  • Chief Operating Officer — Christopher Merrywell
  • Chief Human Resources Officer — Judy Gime
  • Unknown Title — Torrey [last name not provided]
  • Investor Relations — Jackie Bohlen

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Takeaways

  • Operating results-- Operating results increased by 14% in fiscal Q2 2025 compared to the prior year period, driven by profitability and efficiency initiatives.
  • EPS-- Reported earnings per share were $0.73 for fiscal Q2 2025, with operating EPS, which excludes merger and restructuring expenses, at $0.76.
  • Net interest margin (NIM)-- NIM expanded by 15 basis points to 3.75% in fiscal Q2 2025, attributed to higher earning asset yields and lower funding costs.
  • Operating pre-provision net revenue (PPNR)-- Operating PPNR reached $242 million, up 14% from fiscal Q1 2025 on an operating (non-GAAP) basis.
  • Capital ratios-- Common Equity Tier 1 (CET1) capital ratio was 10.8% in fiscal Q2 2025; total risk-based capital ratio was 13% at quarter end, both building toward additional shareholder returns.
  • Tangible book value-- Tangible book value per share increased 3% in fiscal Q2 2025.
  • Allowance for credit losses-- Credit loss allowance was 1.17% of total loans in fiscal Q2 2025, with $29 million in provision for credit loss.
  • Non-interest income-- Operating non-interest income was $65.1 million, up $8 million, or 14%, from the prior quarter, reflecting growth in card-based, swap-related, financial services, and trust income.
  • Operating expenses-- Operating non-interest expense was flat sequentially at $269 million, while reported GAAP expense was $278 million; costs were contained through lower services, marketing, and amortization expenses.
  • Deposits-- Total customer balances contracted sequentially due to seasonal activity, but a campaign running through mid-July 2025 generated over $450 million in new core deposits, offsetting broader declines.
  • Loan portfolio-- The portfolio grew modestly, with commercial loan increases offsetting intentional runoff in transactional real estate, and loan production in the commercial segment grew approximately 30% sequentially (compared to fiscal Q1 2025) and 18% year-over-year (compared to fiscal Q2 2024).
  • Pacific Premier Bancorp acquisition-- Integration planning is progressing on track for a closing as early as September 1; special shareholder meetings yielded 'overwhelming approval' for the transaction.
  • AI and tech initiatives-- Management stated the company operates 83 AI-enabled platforms and is focused on both short-term operational efficiencies and longer-term fintech opportunities.
  • Strategic market expansion-- With the Pacific Premier Bancorp acquisition, investments previously planned for Southern California are now directed toward establishing operations in Utah and Colorado, and four new branches were opened in Arizona and Oregon during the quarter.
  • Brand unification-- As of July 1, Umpqua Bank changed its legal name to Columbia Bank, with public business transition set for September 1 for a streamlined brand presence.
  • Fee income initiatives-- Year-over-year, treasury management fee income increased 6% in fiscal Q2 2025. Commercial card fee income increased 14% in fiscal Q2 2025 compared to fiscal Q2 2024. Merchant services increased 10% in fiscal Q2 2025 compared to fiscal Q2 2024. International banking was up 50% in fiscal Q2 2025 compared to fiscal Q2 2024. Trust revenue increased 12% in fiscal Q2 2025 compared to fiscal Q2 2024 through targeted relationship-driven strategies.
  • Asset sensitivity management-- Available-for-sale investments increased 5% in fiscal Q2 2025 and were funded with wholesale borrowings to proactively manage pro forma asset sensitivity in anticipation of the Pacific Premier Bancorp closing.
  • Expense outlook-- Management indicated $270 million would be a little light as a forward run-rate baseline for expenses, as it does not include upcoming investment, but stated future expenses will rise due to market expansion investments not yet reflected in the $270 million fiscal Q2 2025 expense run-rate.

Summary

Columbia Banking System(COLB 1.21%) delivered operating results for fiscal Q2 2025 reflecting a 14% increase from the year-ago quarter, a 15 basis point NIM expansion, and improved capital metrics, facilitated by disciplined cost management and non-interest income growth. Loan production rose sharply in commercial segments, while management reiterated strong asset quality and described deposit trends as seasonally driven but offset by targeted core deposit campaigns. Approximately 2% of associates focused on integrating the Pacific Premier Bancorp (PPBI 1.50%) acquisition during fiscal Q2 2025, with the majority of personnel focused on core operations rather than integration. Technology advancement, including AI and digital banking, was emphasized as a priority alongside investments in geographic expansion as facilitated by organic growth and M&A synergies.

  • Stein said, "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."
  • Farnsworth reported, "Month of June margin would have been 3.79 adjusted for timing differences throughout the quarter," providing incremental visibility on margin trends.
  • The company disclosed a 50% closure rate on predictive analytics-driven relationship manager offers, evidencing measurable technology-driven origination success.
  • Future expense run-rate will rise as expansion shifts planned investment to Intermountain markets, rather than being fully captured in current fiscal Q2 2025 results.
  • The legal name change to Columbia Bank and the Sept. 1 brand rollout represent operational simplification associated with the strategic regional growth plan.

Industry glossary

  • Transaction real estate loans: Shorter-term, often interest-only loans secured by real estate assets, typically subject to paydowns and prepayments based on property sales or refinancing.
  • NIM (net interest margin): The difference between interest income earned on assets and interest paid on liabilities, expressed as a percentage of average earning assets.
  • Operating PPNR: Pre-provision net revenue reported on an operating (non-GAAP) basis, excluding merger and restructuring and other specified items.
  • CET1 (Common Equity Tier 1): A key regulatory capital measure of a bank’s core equity capital compared to its total risk-weighted assets.
  • Accretion: Recognition of interest income attributable to the discount recorded on acquired loans or securities, particularly relevant in M&A transactions.
  • Core fee income: Non-interest income from recurring, relationship-based banking services such as treasury management, card fees, and trust services.

Full Conference Call Transcript

Clint Stein: 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 2024. The results of the initiative and ensuing organizational focus on stable recurring performance are evident in our results over the past six quarters. Specific to the current quarter, our net interest margin expanded, and we had a meaningful increase in our core fee income. We 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 is a cornerstone of our business bank of choice strategy, enabling us to win business and attract new relationships. We continue to prioritize profitability and credit quality over growth for growth's sake. Positive 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. For some, this creates opportunities for growth and market share gain. For others, it drives a conservative outlook that has limited the 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.

Since the announcement in April, I have said many times that Pacific Premier is the most seasoned counterparty we have ever worked with. Pacific Premier's prior M&A experience contributes to the continued excitement we see from their employees who will join our team. They are raring to go and patiently waiting to become part of Columbia. The M&A experience of Steve, Eddie, and the entire Pacific Premier organization has us well-positioned for a smooth and timely closing, which we believe could come as early as September 1st. Although integrating Pacific Premier is our highest priority, its impact on our overall current operations is minimal. 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 remain a priority. 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. 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 are 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. Our embedded banking capabilities will get supercharged by Pacific Premier's existing solutions. What Pacific Premier brings to the tech stack is so impressive that we recently announced internally the Pacific 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 2026.

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 Pacific 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. 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 Gime, who joined Columbia in June as our CHRO. Judy brings over 20 years of comprehensive human resource leadership experience for publicly traded companies. She's also overseen 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. As previously announced, we are unifying our brand under the Columbia name. Effective July 1st, Umqua Bank changed its legal name to Columbia Bank.

We will begin doing business publicly under the Columbia Bank name and brand beginning September 1st. Our simplified family of brands ensures clarity as we deepen our presence throughout the West. 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'm as enthusiastic as I have ever been in my 20 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: Okay. Thank you, Clint. 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 million. 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 sale investments by 5% to reduce our pro forma asset sensitivity and used wholesale borrowings to fund this along with seasonal customer deposit outlook. 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. But more fundamentally, we saw higher loan yields added about five basis points to the NIM. We lower funding costs added about one basis point. So good underlying trends. Our provision for credit loss was $29 million for the quarter. Our overall allowance for credit losses remains robust at 1.17% of total loans. Non-interest income was $64.5 million for the quarter. On page 22 of the earnings release, we detail the non-operating fair value changes. Excluding those items, our operating non-interest income was $65.1 million for Q2 and was up $8 million or 14% reflecting strong core fee income growth.

Also noted on page 22, total GAAP expense for the quarter was $278 million while operating expenses were relatively flat with Q1 at $269 million. Annual list and compensation and incentives were offset by lower services, marketing, and other expense along with lower intangible amortization. I will now hand the call to Chris.

Christopher Merrywell: 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 million in new core deposits to the bank, offsetting other balance declines. The campaign was also successful in generating new SBA relationships. Loan growth was centered in commercial portfolios during the quarter.

As owner-occupied CRE commercial line balance increases offset multifamily and residential loan contraction. Our teams remain focused on relationship-driven activity, which includes core income core fee income generation. As Ron noted, operating non-interest income was up $8 million 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 higher contribution from core fee income to overall revenue, and we see revenue synergy opportunities through the Pacific Premier acquisition. Not only will Pacific Premier's custodial trust business complement our existing wealth management platform, but their expertise in HOA banking, escrow, and 1031 exchange businesses also offer additional revenue-generating opportunities.

We also expect to see deeper customer relationships as we introduce specific career 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. 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: 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 10.8% and 13% 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. In the near future, as we integrate Pacific Premier, we will have additional flexibility to return excess capital. This concludes our prepared remarks. Chris, Torrey, Ron, Frank, and I are happy to take your questions now. Twanda, please open the call for Q&A.

Operator: Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one on your telephone. To withdraw your question, please press star one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Feaster with Raymond James. Your line is open.

David Feaster: Hi. Good afternoon, everybody.

Clint Stein: Hey, David.

David Feaster: I wanted to start on the growth side and the loan side. You touched on it, and you can see it in the deck. You got a double-digit increase in originations. I was hoping you could touch on what is driving that? Is that client demand increasing, maybe just given a bit more certainty and or less fears around the tariffs, or is it more a function of just increasing productivity of your bankers and market share gains? Just curious your thoughts on that, client sentiment, and just how do you think about originations ultimately maybe being able to outpace strategic runoff and the payoffs and paydowns in the remainder of the year.

Clint Stein: 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 Torrey 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 tells the story. 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. 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 paydowns and prepayments. 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 two cents.

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

Torrey: Okay. Yeah. Thanks. This is Torrey. I would echo all of Clint's comments. Actually, really quite excited and happy with the activity level certainly on 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. So the activity level is really strong and really good coming from de novo markets, coming from our legacy markets. A lot of good momentum on the C&I front. I think, in particular, with everything that's going on in the economy, we 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, and feel great about the banker's ability to deepen relationships and bring new relationships into the company.

David Feaster: 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 1st. It's a much swifter timeline for approval and closing than the last deal. A testament to the improving regulatory backdrop, I guess. Just curious, has your thoughts on the optimization of Pacific Premier's balance sheet changed at all? Or is there anything that maybe you execute ahead of the close just given the increased certainty and visibility into close?

Clint Stein: There's several different threads we could pull on that. If it's specific to the Pacific Premier balance sheet, we would want to 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 prepurchase of some securities that we think better fit the portfolio, and so we've done that, and then we'll sell some of the securities that are in the Pacific Premier book. 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. But nonetheless, we're still challenging ourselves to look at multiple scenarios. I know, Ron, you have anything that I forget the mail and the hood.

David Feaster: Okay. That's helpful. And then maybe last one for me. I mean, Chris touched on a focus on increasing the revenue contribution. You guys have done a great job building out the fee income lines. Pacific Premier also brings a couple of unique business lines. I'm curious, maybe some of the initiatives on the fee income side that you've got. And then just is there anything as we're sitting here as a $70 billion 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?

Torrey: Okay. David, it's Torrey. So let me start with initiatives first. I think there are quite a few. We, like, purposefully have been working the fee side of the house for quite some time. I mean, several years. And there's tremendous momentum kind of quarter after quarter after quarter, and it's very deliberate starting with full relationship banking, you know, making sure that if we're gonna lend money to somebody, we have their deposits and we have as much of their fee income business as we can get.

And, you know, we've got a few initiatives where we've looked at, you know, first, 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. Got, like, a 50% closure rate on that. So it's working extraordinarily well. We do forward, we have full relationship review process that we do throughout the company. We do something called working capital assessments.

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 the approach. And it's producing a lot of really strong results. And I'll just give you a couple of numbers that I think we look at, you know, Chris and I look at all the time. On the treasury management side, kind of year over year, we're up 6%. In commercial card, year over year, we're up 14%. In merchant services, we're 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, you know, 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. So, Chris, anything else you wanna add to that?

Christopher Merrywell: Yeah. Thanks, Torrey. David, I'd add in there, you think about the that we've been running now for, you know, a year and a half or so that focus on small business. You know, that goes to where Torrey was talking about corporate card and merchant and things of that nature. And our private bank healthcare teams have done a pretty good job of when they're winning business, utilizing those capabilities to bring in that corporate card and that merchant as well in are some pretty significant opportunities. Just one more add onto that would be just last part of your question of Pacific Premier.

You know, obviously, I think we have a great product set, and then there I don't think there's anything we're missing from a product standpoint. We're super excited about Pacific Premier becoming a 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: That's awesome. In HOA. Thank you.

Operator: 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: 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, and I know most of that accretion is real. It's not credit mark related that disappears. So for the sake of modeling, would you be able to provide us that number and I know there was a recovery on the loan within the loan yield of $2 million, I think, you called out, but just trying to drill down on the interest income a little.

Ronald Farnsworth: Yeah, Matt. Yeah. Obviously, we view the income as core driven by rate and not credit. At the credit mark, was three bps consistent with Q1, but back to from a modeling standpoint, I would utilize, you know, the yields you see for the quarter along with slide 24 it is in our deck. Got some great data there just from a repricing standpoint. Around loans and deposits. And then the bond portfolio pretty static. We've got a good slide in there on the bond portfolio, but you can see the yield there from a modeling standpoint. And, you know, the key there is duration.

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

Ronald Farnsworth: Yeah. No. We did. Back in late April, we added $100 million of par, but it's about $500 million of books, so deeply discounted. You know, bonds. Low coupon type stuff with duration. And the goal was that was to reduce the pro forma asset sensitivity with the combined company post-close. Utilize wholesale funds for that and we'll pay those off as Clint mentioned right post-close once sell off a portion of their portfolio.

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

Christopher Merrywell: Yeah. Thanks, Matt. This is Chris. Yeah. We kinda we 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 has given us this time period of things have been pretty stable. We see some competitors that will periodically go out there and offer up in excess of 4% per 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, you know, 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. And so it's a very active process that we go through both from the competitive market then just looking into what our flows are in the on the back backside as well. CD pricing has been pretty much solid and the same since for six plus months. And seeing a lot of activity. We're still renewing. At 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. And then more importantly, and I'll let Torrey talk about this as well, is it's the new business. And some people going out and winning accounts, winning the new the new relationships, and getting those added is 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 Torrey.

Torrey: Yeah. Not a lot to add. I mean, I think that second quarter was kinda seasonal, what we would expect. We were a couple lumpy deposit, you know, outflows at the end of the quarter. Big distributions by companies or company sales that keep 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 it feels very normal. And I as I said earlier, I think with this real strong concept of full banking, I mean, all the bankers throughout the company know that it's about loans, deposits, and core fee income.

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

Clint Stein: 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, you know, we've done some analysis and we look at what the capital stack of our peer banks looks like and, you know, 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 Pacific 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: Okay. Thanks again.

Clint Stein: Thanks, Matt.

Operator: Please stand by for our next question. Our next question comes from the line of Jeff Rulis with DA Davidson. Your line is open.

Jeff Rulis: Thanks. Good afternoon. I just wanted to check-in on slide 28, again, the $6 billion of transactional assets. You have kind of a timeline or much 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: Yeah. It depends on a couple of factors. So one, if 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 2025, 2026, it really starts to pick up from a repricing standpoint, 2027, 2028. So that's really kind of the timeline.

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 it was 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 to earn back on that would be about ten years. And so when we're looking at it, two to three-year kind of workout and wind down of these portfolios that makes the most economic sense.

Jeff Rulis: Gotcha. Yeah. I understood that, you know, it's tough to the sales could accelerate, but just trying to get a sense on the net growth, I guess, through the end of 2026 is a reasonable window. Would you say that a quarter of that balance if just straight maturities could exit or, you know, I just trying to put a number on it because it's against growth that you I mean, 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 2026.

Clint Stein: Yeah. What I'd point you back to is that right now, these portfolios are an earnings headwind for us. So you know, 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 kind of the earnings headwind that we're replacing this with. As well as what we're replacing it with our new C&I names and full relationships that have fee income capabilities and all the things that Torrey 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'd 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 gonna stick to our DISH.

Jeff Rulis: Gotcha. Thanks. Clint, on the maybe on the margin, just circling back, Ron, the you know, sounds like the securities yield bump up 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? I'm just trying to get into where you think on margin from a carry forward basis.

Ronald Farnsworth: Yeah. I mean, those were done late in April and then granted we close with PPPI, 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 margins full quarter margin standpoint of the investment yields. But keep in mind, we put them on with wholesale funds. So you know, the net margin of that just trading of itself was not intended to approximate our margin for this, you know, month or two or a couple month period of time. Prior to close.

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

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

Jeff Rulis: Got it. And then last one, just on the expense base, can we look at, you know, $278 million reported if we ex the acquisition expenses? Is $270 million a firm number to kind of grow off of or flat line? Any comment on expense levels from here? Pre PPBI?

Clint Stein: Yeah, Jeff. This is Clint. I'll say a couple of things and then turn it over to Ron. You know, part of what we've talked about was that we were going to invest in increasing our density in Southern California. And so we overshot our 2024 expense initiative to create some expense offsets to enable us to do that. With Pacific 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 since specifically Utah and Colorado and Arizona. And so we're actively in that process.

But it's delayed the actual spend and hitting our run rate. So I think if you go with the $270 million and cast that forward, it's gonna be a little bit light because not gonna include that level of investment. I'll step back and let Ron clean up anything that I mentioned.

Ronald Farnsworth: I think you're spot on because we talked earlier in the year about a range for 2025 or $1 to $1.01 billion of expense ex CDI amortization. And here the last couple quarters, we've come in below that $975 million this quarter. On that measure, and it gets right to what Clint just talked about.

Jeff Rulis: Okay. Thank you.

Ronald Farnsworth: Yep. Thanks.

Operator: Our next question comes from the line of Chris McGrady with KBW. Your line is open.

Chris McGrady: Oh, great. Thanks for the question. Clint, Ron, I want to make sure I get the balance sheet size right. That's kinda where my head's spinning. If I think about the two earning asset bases, it's $48 billion and $16 billion. To get you $64 billion. I'm trying to get a sense of kind of pro forma. Is it is there anything it seems like you updated about $400 million and $500 million with the purchases. But is that just gonna sell a piece of that PBVI $3.5 million loan? I'm just trying to get an opening day or an asset base to go from.

Ronald Farnsworth: Yeah. Yeah. I'd say, at close, we'll net sell half a billion dollars 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.

Chris McGrady: Okay. So my math on kinda mid-sixties earning assets would seem reasonable.

Ronald Farnsworth: Yes.

Chris McGrady: Okay. Perfect. Thank you for that. And then in terms of the margin, again, just clarification, has your combined margins of the two companies structurally changed you announced a merger? Obviously, your bond yields noted, you know, were up notably. But is the structural combined margin of these two companies materially different than 90 days ago?

Ronald Farnsworth: I'd say, well, our margins increased compared to 90 days ago. And, again, look back at the you look to the combined effects of the deal, I 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, you know, are those NIMs at today compared to what was in the consensus which was the basis for the math.

Chris McGrady: Okay. But your the message is you're feeling better about your margin. That's I can make the assumption on PPPN. Okay. Thanks. Appreciate it.

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

Jackie Bohlen: Thank you, Talinda. 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.