Columbia Banking Systems Inc Barclays 24th Annual Global Financial Services Conference

There is a lot of different aspects to that question. I think from my perspective, not much has changed in terms of our pipelines are pretty much where they were in July. Customers are still moving forward with their projects and activities and investments. Competition, it started really picking up in the second quarter on the deposit side. Then some, what I characterized in the second quarter as borderline irrational things on the loan side. We still see that. There is still a big push for folks that are just trying to grow totals on their balance sheet. But so far, our bankers have done a great job of navigating that. Part of that is the markets that we are in, our positioning within that market.

I guess if I just had to sum up the third quarter, I would say it's just been a continuation of the second quarter.

We see it on the loan side. We see it in both pricing and structure. Oftentimes we can compete on the pricing element. We're not going to relax our underwriting standards and give on structure. Our value proposition isn't to be the low-cost provider or a max proceeds lender. We work really hard, and have for many years, to be a trusted advisor. With that, we expect to get paid for that. That comes with a premium price. From that perspective, if we're going to compete and get a little more aggressive on pricing, we really look at the entire relationship. What's the profitability of it? What are the offsetting elements of it? Do they have significant non-interest-bearing deposits with us? Do we have their treasury management, their corporate card? Do we have a wealth relationship with the owners or executives?

All of those things, and it's really kind of on a loan-by-loan, customer-by-customer basis that we'll make that determination as to if we want to compete or if we want to walk away. For new relationships, it's a higher bar because you don't already have all of those things. That's typically where we'll just step back and say, "Come see us when the market's more rational." The deposit side, it's more excess liquidity that people are chasing yield. For that, the way I look at it, and Ivan Seda might feel differently, is what's our alternative? We're not going to pay more or risk cannibalizing the pricing of our entire deposit portfolio if we can just simply go and replace some of that funding at the Federal Home Loan Bank.

Yeah, I would agree with that. I think on the deposit side, the tide shifted in Q2 from my perspective, from an environment where I think if you go back six months, I think there was expectations that rates would continue to decline. That was what was originally within our plan at the beginning of the year. You go back to six months ago, I think it was kind of like a slack tide, is what I would call it. Then you started to see, I think in Q2, an expectation for we'll see what happens tomorrow, but rising interest rates. That's put pressure on funding costs across the entirety of the industry. We see it in our marginal funding costs, and I think what that's required is for us to be very surgical in terms of how we decide to price deposits.

We price in particular CDs, money market. The benefit that we have, I think, and what you saw from us in Q2 was continued decrease in the cost of interest-bearing deposits. I think we've signaled that'll be hard to replicate. In Q3, I think that if anything, we'll probably be flat or potentially up a little bit because we've had to really be thoughtful around where you place deposit pricing so that our bankers are out there competing for deposits, and we're not tying both hands behind their backs. But at the same time, making sure that we're not making irrational pricing decisions that are going to be a drag on that net interest margin. So it's required a really thoughtful surgical approach to that.

Yeah. Specific to California, that was one of the appealing things for us. One of many appealing things for us with the Pacific Premier Bancorp, Inc. acquisition was what it did for us in Southern California and the fact that that market is fragmented. There's not a clear dominant bank in there. We've seen opportunities from some of the acquisitions that have happened over the past call it three to five years, attracted some great talent in that market that has really built some nice portfolios on both sides of the balance sheet. We see it really throughout our entire footprint in terms of our ability to just be in a space that's different. We're kind of in a sweet spot when you just think about our market position. The money center banks don't always want to come down to the level that our business customers are at.

The smaller banks, they don't have the balance sheet or the products or both to serve those customers. There's only four of us west of the Rockies that are between that $50 billion and $100 billion mark. Two of them have very different business models from us. That's appealing to customers. It's appealing to talent. When I think about our expansion markets of Colorado, Utah, Arizona, the folks that have joined us in those markets are phenomenal. Our legacy markets in the Northwest, likewise, we've attracted talent from, you could pretty much name any top 10 bank, and we've hired great performers that do really well in our system. Super excited about what we're seeing on the talent front. We don't take it for granted. I've said before that our people used to always get recruited by smaller banks.

Now we see some of our junior bankers and others that are getting recruited by the large banks as well. Part of that's our market position, part of it's the kind of people that we have. We haven't lost any of what I consider our top talent to anybody either upstream or downstream. That's been helpful. It's also opened up doors in terms of bringing new customers into the bank.