Columbia (COLB) Q1 2026 Earnings Call Transcript

Motley Fool Transcribing, The Motley FoolThu, April 23, 2026 at 11:52 PM UTC

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April 23, 2026, 5 p.m. ET

CALL PARTICIPANTS -

President & Chief Executive Officer — Clint E. Stein

Chief Financial Officer — Ivan Seda

President, Commercial Banking — Torran B. Nixon

Chief Operating Officer — Christopher M. Merrywell

Chief Credit Officer — Frank Namdar

Director of Investor Relations — Jacquelynne Bohlen

TAKEAWAYS -

Earnings Per Share -- $0.66 (GAAP) and $0.72 (operating) reported for the quarter; operating growth reflects integration of Pacific Premier and disciplined expense control.

Pre-Provision Net Revenue -- Up 45% on an operating basis compared to 2025, tied to acquisition impact and balance sheet optimization.

Operating Net Income -- Increased 50% over 2025, driven by Pacific Premier and enhanced fee income generation.

Net Interest Margin -- 3.96%, compared sequentially to 4.06% in Q4; "pro forma for one-time Q4 items, roughly flat quarter over quarter," per Seda.

Year over year Net Interest Margin Expansion -- NIM up 36 basis points versus 2025, reflecting balance sheet optimization.

Guidance for Net Interest Margin -- Expected to cross 4% in Q2, with further expansion anticipated for the second half of 2026.

Average Earning Assets -- $60.8 billion, reflecting slight contraction; asset mix shifting toward relationship-based lending.

Wholesale Funding -- Decreased by $560 million from December 31; average Q1 reliance was up 7% from Q4, attributed to deposit seasonality.

Commercial Loan Origination Volume -- $1.2 billion, with $1.0 billion in commercial, up 38% and 35%, respectively, from Q1 2025.

Loan Portfolio Composition -- Commercial, including owner-occupied real estate, increased 6% annualized; total loan portfolio declined slightly to $47.7 billion from $47.8 billion.

Noninterest Income -- $83 million (GAAP); $81 million (operating); in guided $80 million-$85 million range; up $25 million, or 44%, over 2025.

Noninterest Expense -- $369 million operating, with $328 million excluding $41 million intangible amortization; below guided range due to early synergy realization.

Synergies from Pacific Premier -- $102 million achieved out of $127 million target; full run-rate expected by Q3.

Provision Expense -- $28 million, reflecting a modest increase in ag-related nonperforming assets and net charge-offs.

Allowance for Credit Losses (ACL) -- 1% of total loans (1.28% including credit discount on acquired loans) as of quarter end.

Capital Ratios -- Common Equity Tier 1 (CET1) at 11.5% and total risk-based capital at 13.3%, both down approximately 30 basis points sequentially.

Share Repurchase -- 6.5 million shares repurchased for $200 million; $400 million remains authorized for buybacks.

Excess Capital -- Approximately $500 million above regulatory minimums.

Tangible Book Value -- Declined slightly to $19.03 from $19.11 driven by higher securities portfolio AOCI losses.

Return on Average Assets (ROAA) -- 1.3% for the quarter.

Return on Tangible Common Equity (ROTCE) -- Over 15% reported.

Deposit Campaigns -- Retail and small business campaigns generated $450 million in new balances by mid-April, with three such campaigns planned annually.

Brokered Deposit Reduction -- Brokered deposits fell by $760 million, leading to total deposit decline to $53.5 billion from $54.2 billion.

Customer Deposit Growth -- Customer balances increased by $110 million as of March 31, despite seasonal withdrawal pressures.

Expense Guidance -- Operating noninterest expense targeted at $335 million-$345 million for Q2 (ex-CDI); expected to decline further in Q3 as full synergies are realized.

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RISKS -

Chief Credit Officer Namdar said credit issues in the agricultural portfolio were "centered in one customer relationship," resulting in increased charge-offs and nonperforming assets, but characterized as "not systemic."

Capital ratios declined "approximately 30 basis points" due to the combined impact of dividend and accelerated share repurchases outpacing capital generation.

Tangible book value decreased, attributed to "a higher accumulated other comprehensive loss on our securities portfolio given interest rate changes."

Columbia Banking System (NASDAQ:COLB) delivered substantial strategic progress by achieving the Pacific Premier systems integration and capturing cost synergies ahead of plan, supporting operating net income growth of 50% on an operating basis and net interest margin expansion amid stable credit conditions. Management increased share buyback activity with $200 million deployed, resulting in 6.5 million shares repurchased and $500 million excess capital, while capital ratios retreated modestly but stayed well above required levels. The bank realigned its loan portfolio through 38% origination growth, focused on commercial and relationship-driven loans, even as overall balances remained flat due to deliberate runoff of low-margin transactional lending. Tangible book value softened to $19.03, reflecting securities-related losses, and management reaffirmed cost controls with operating noninterest expenses projected to drop further next quarter as additional synergies are realized.

Pacific Premier integration generated positive client response, with human resources and customer retention described as "high" and no notable attrition reported.

AI adoption accelerated both operational efficiency—"were automated and completed in a fraction of the time"—and customer service, as the ratio of human-to-AI chats shifted from 2:1 to 3:1 in favor of AI agents.

Commercial loan pipelines reached $3.3 billion, up 50% year over year, underpinning optimism for organic growth as transactional runoff tapers by 2027.

Noninterest-bearing deposit averages dipped slightly even as period-end balances rose, with management maintaining that forward rate movements are unlikely to materially affect core deposit growth strategy.

Management continues to view company stock as the best use of capital, with share repurchases guided for $150 million–$200 million per quarter and $400 million remaining under current authorization.

INDUSTRY GLOSSARY -

CDI Amortization: Scheduled expense recognition that reduces the carrying value of acquired core deposit intangible assets over time.

FHLB: Federal Home Loan Bank; a source of wholesale funding for banks.

PAA: Purchase Accounting Adjustments; income statement adjustments for discounts or premiums created during acquisition accounting.

Noninterest Income: Revenue derived from sources other than interest on loans and securities, including fees, service charges, and other banking services.

Net Charge-Offs: Loans or receivables written off as a loss, net of recoveries, over a specific period.

Owner-Occupied CRE: Commercial real estate where the loan borrower uses at least a major portion of the property for business operations.

Transactional Portfolio: Loan book segment comprised of short-term, often rate-sensitive, loans not based on long-term customer relationships.

ACL (Allowance for Credit Losses): The reserve a bank sets aside for expected losses from its loan portfolio.

CET1: Common Equity Tier 1, a regulatory capital metric representing core equity capital as a percentage of risk-weighted assets.

ROTCE: Return on Tangible Common Equity; a measure of profitability relative to shareholders’ tangible capital investment.

Full Conference Call Transcript

Clint E. Stein: Thank you, Jackie. Good afternoon, everyone. Our first quarter results reflected continued execution against the same core priorities we have previously outlined: delivering consistent, repeatable results, optimizing our balance sheet, and returning excess capital to shareholders. We also completed the Pacific Premier systems conversion and consolidated nine branches during the quarter, putting us on track for full realization of all acquisition-related cost savings by the end of this quarter. I want to thank our highly experienced team of associates for their months of meticulous planning and the seamless execution of this key integration milestone.

Our operating results for the first quarter reflect the continuation of momentum established late last year, as solid C&I production offset a decline in below-market-rate transactional loan balances. We also reduced our reliance on wholesale funding as customer deposit balances expanded despite seasonal pressure typical during the first quarter. The resulting mix shift in both assets and liabilities fortifies and positions our balance sheet for sustained attractive returns over time. Our bankers’ proven ability to generate balanced, relationship-centric growth in deposits, loans, and quality fee income is driving sustainable earnings growth. We do not need to produce net balance sheet growth to achieve our EPS and ROTCE objectives. Columbia’s cost-conscious culture further enhances our top-quartile profitability profile.

Beyond savings associated with the Pacific Premier acquisition, our expense base reflects continuous fine-tuning. We remain disciplined in identifying offsets that create reinvestment dollars for initiatives that drive revenue and enhance efficiency. AI is becoming an important tool for driving efficiency across Columbia. During our Pacific Premier core systems conversion, we used AI to automate work that traditionally would be completed manually. Historically time-consuming conversion tasks, such as reviewing and validating thousands of data fields, were automated and completed in a fraction of the time historically required. Instead of relying on manual checks and custom coding, AI helped us move faster and reduce complexity with shortened review timelines and improved execution.

More broadly, AI is helping our technology teams work more efficiently. It allows our developers to move faster, test changes more quickly, and write software that is more secure. The result is higher productivity and better outcomes without adding incremental resources. We also enhanced our customer support experience with an AI-powered assistant. Our ratio of human calls to AI-powered agent chats moved from two to one in favor of humans to three to one in favor of AI agents, as many routine administrative questions are now handled by the virtual assistant. Macroeconomic headlines continue to dominate industry narrative, often driving outsized stock price reactions and unilaterally treating all banks as the same.

We are not all the same, and Columbia’s fundamentals warrant differentiation. Over my tenure at Columbia Bank, we have repeatedly demonstrated the ability to withstand industry stress as we consistently turn disruption into opportunity. During the global financial crisis, Columbia delivered strong credit performance while leveraging FDIC-assisted transactions to grow and strengthen our franchise. Since then, we have continued to expand our customer base through both organic growth and strategic acquisitions. Our best-in-class, low-cost core deposit franchise consistently ranks in the top quartile when measured on both cost and mix of noninterest-bearing balances. More recently, we successfully navigated the banking sector volatility of March 2023—again, another point in time where many regional banks were treated as one.

The Columbia team navigated this volatility without a discernible adverse impact to our business while simultaneously executing a successful systems conversion just three weeks after closing the Umpqua acquisition. Our credit fundamentals remain sound. Our office portfolio continues to perform. A modest uptick in our CRE exposure, which is attributable to acquired portfolios, continues to decline. Turning to another closely watched area, our NDFI exposure is minimal, well below peer averages, and underwritten with the same conservative and consistent rigor we apply across our broader loan portfolio. Our first quarter results marked the beginning of our third consecutive year of stable operational performance and strong organic capital creation.

Given our current capital position and strong forward outlook, we increased our pace of buybacks during the first quarter, returning $200 million to our shareholders, underscoring our belief that the best investment we can make at this time is in the stock of our own company. Looking forward, we will continue to execute on our established priorities—optimizing performance, driving new business growth, supporting the evolving needs of existing customers, and consistently delivering superior returns to our shareholders. I will now turn the call over to Ivan.

Ivan Seda: Thank you, Clint, and good afternoon, everyone. As Clint highlighted, our first quarter results reflect continued execution of our strategic priorities. Turning to slide 10, we reported earnings per share of $0.66 and operating earnings per share of $0.72 for the first quarter. On an operating basis, which excludes merger expense and other items detailed in our non-GAAP disclosure, first quarter pre-provision net revenue and operating net income increased 45% and 50%, respectively, compared to 2025 due to the addition of Pacific Premier, continued progress on our balance sheet optimization targets, and disciplined expense management.

Turning to slide 11, average earning assets were $60.8 billion during the first quarter, coming in at the midpoint of the range that I outlined in January, as continued balance sheet optimization contributed to modest contraction relative to the prior quarter. We modestly reduced cash as planned during the first quarter, utilizing excess balances to reduce wholesale funding sources, which declined by $560 million from December 31. Although wholesale funding declined as of March 31, balances were higher on an average basis during the first quarter due to typical seasonal customer deposit flows. Overall, the results were as anticipated, reflecting a stable balance sheet outlook and a remix in our loan portfolio out of transactional into relationship-based lending.

Following the modest earning asset contraction during the first quarter, we expect the balance sheet size to remain relatively stable, with commercial loan growth offset by contraction in the transactional portfolio. Slide 12 outlines contributors to the sequential quarter change in net interest margin. Net interest margin was 3.96% for the first quarter, right at the top end of the range that I outlined in our last call. While the headline net interest margin is down from 4.06% last quarter, recall that our net interest margin in Q4 benefited from an 11 basis point impact of the amortization of a premium on acquired time deposits and an accelerated loan repayment.

Pro forma for those factors, we were roughly flat quarter over quarter. Relative to 2025, net interest margin has expanded by 36 basis points, reflecting the impact of our balance sheet optimization strategy. We exited the first quarter with an improved funding mix relative to the fourth quarter and expect ongoing balance sheet optimization to drive net interest income growth and net interest margin expansion, with the first quarter setting the low watermark for 2026. As I outlined in our last call, we anticipate our net interest margin to grow modestly in Q2, crossing over 4% at some point in the quarter.

Our latest interest rate modeling continues to show that our balance sheet remains neutrally positioned to interest rates on slide 13, and you will note that we have over $6 billion in fixed and adjustable loans set to reprice over the next twelve months. Noninterest income in the first quarter was $83 million on a GAAP basis and $81 million on an operating basis, as detailed on slide 14, within our guided $80 million to $85 million range. The sequential quarter decrease was driven by lower swap syndication and international banking revenues following the strong performance in the prior quarter.

Despite that, operating noninterest income is up $25 million, or 44%, relative to 2025, from the impact of Pacific Premier alongside strong growth in fee income streams, as Tory will highlight later. We continue to expect noninterest revenues in the low- to mid-$80 million range for Q2. Slide 15 outlines noninterest expense, which was $369 million on an operating basis. Excluding intangible amortization of $41 million, the first quarter’s $328 million run rate was below our guided range due to the earlier realization of cost savings following January’s system conversion as well as some planned investments which fell back into Q2.

As of March 31, we achieved $102 million of the targeted $127 million in synergies, although these savings were not fully run-rated in the first quarter’s results. Excluding CDI amortization, we expect noninterest expense in the $335 million to $345 million range for the second quarter before declining in the third quarter as we realize all cost savings related to the transaction by June 30. CDI amortization will average around $40 million per quarter. Moving on to slide 16, provision expense was $28 million for the first quarter, reflecting loan portfolio runoff, credit migration trends, and changes in the economic forecast used in the credit models.

A relationship in the agricultural industry drove a modest increase in net charge-offs and nonperforming assets relative to the fourth quarter, with our overall credit metrics remaining stable and healthy. Slide 17 details our allowance for credit losses by portfolio, with coverage of total loans at 1% at quarter end, and 1.28% when credit discount on acquired loans is included. Turning to capital, slide 18 highlights our regulatory ratios at quarter end. Our CET1 and total risk-based capital ratios declined modestly to 11.5% and 13.3%, respectively, down approximately 30 basis points from the prior quarter end as our regular dividend and increased buyback activity outpaced capital generation during the quarter.

During the first quarter, we repurchased 6.5 million common shares, returning $200 million to our shareholders. As of March 31, our capital ratios remain comfortably above well-capitalized regulatory minimums and our long-term target ratios. We have excess capital of approximately $500 million, and $400 million remains in our current repurchase authorization. Tangible book value declined slightly to $19.03 from $19.11 as of December 31, reflecting a higher accumulated other comprehensive loss on our securities portfolio given interest rate changes between periods. We expect share repurchases to remain in the $150 million to $200 million range per quarter for our current authorization.

Overall, we are very pleased with the financial results for the first quarter, driving a 1.3% ROAA and over 15% ROTCE. We feel well positioned to drive strong profitability through the remainder of 2026 as our balance sheet optimization activity and continued share repurchases enhance long-term value creation. With that, I will hand the call over to Tory.

Torran B. Nixon: Thank you, Ivan. Our teams had another strong quarter of business generation, as new loan origination volume of $1.2 billion was up 38% from the year-ago quarter. As a result, Columbia’s commercial loan portfolio, inclusive of owner-occupied commercial real estate, increased 6% on an annualized basis, contributing to the continued remix of our loan portfolio toward higher return, relationship-based lending as transactional loan balances continue to decline. Although payoff and prepayment activity in the first quarter slowed relative to the fourth quarter’s elevated level, declining balances in the transactional portfolio contributed to slight overall loan portfolio contraction to $47.7 billion from $47.8 billion as of December 31.

We continue to expect relatively stable net loan portfolio balances in 2026 as we optimize our balance sheet for sustainable profitability improvement. Turning to customer deposits, our team’s ability to generate new business and strong quarter-end inflows offset seasonal deposit pressure during the first quarter, resulting in a $110 million increase in customer balances as of March 31. Our small business and retail deposit campaigns continue to bolster our deposit generation, and our current campaign has generated nearly $450 million in new balances to Columbia through mid-April. Further, the HOA business we acquired from Pacific Premier provided a countercyclical benefit during the first quarter, as balances seasonally expanded, increasing nearly $160 million since year-end.

Customer balance growth and the cash deployment Ivan discussed contributed to a $760 million reduction in brokered deposit balances as of quarter end, accounting for the decline in total deposits to $53.5 billion from $54.2 billion as of December 31. Although customer fee income decreased following our strong fourth quarter performance, our results highlight the notable progress we have made over the past year, driven by the addition of Pacific Premier and our continued efforts to expand the contribution of core fee income to total revenue. As Ivan discussed, operating noninterest income increased significantly between 2025 and 2026, with exceptional growth in financial services and trust revenue, treasury management, commercial card, merchant income, and other recurring customer fee business.

Our core fee income pipeline remains healthy, as do our loan and deposit pipelines, and we remain outwardly focused on generating business in a disciplined manner. We will now hand the call back over to Clint.

Clint E. Stein: Thanks, Tory. I want to take a moment to thank our team of talented associates for their hard work and contribution to our ninth consecutive quarter of solid financial performance and consistent results. Relationship-driven loan and deposit growth, and our balance sheet optimization efforts, are creating tangible earnings results, as evidenced by our net interest margin expansion over the past year. This concludes our prepared remarks. Chris, Tory, Ivan, and Frank are with me. We are happy to take your questions now. Didi, please open the call for Q&A.

Operator: Thank you. To withdraw your question, please press 11 again. Our first question comes from Jon Arfstrom of RBC Capital Markets. Your line is open.

Jon Arfstrom: Thanks. Good afternoon, everyone. This all looks good, but maybe on loans and margin: can you talk a little bit about the $1.2 billion-plus in originations—where that is coming from and general trends? It seems maybe a little better than a typical first quarter, but just give us an idea of what you are seeing there and what the drivers are. And then, Ivan, can you give us a little more on what you are thinking on the margin? It seems like the trajectory is higher—maybe a little better than you thought—but can you talk about medium-term expectations and also touch on what you are seeing in terms of deposit pricing competition?

Torran B. Nixon: Sure, Jon. I would say it is quite a bit better than year-over-year Q1 2025. Of the $1.2 billion, the commercial space is about $1 billion, roughly 35% growth from Q1 2025. There has been a lot of progress made in the company in an outbound effort to deploy our resources to bring new relationships into the bank. We have been very successful. We watch pipelines all the time. It is not coming from one particular part of the company; it is spread throughout the organization. We are seeing growth in our historical Pacific Northwest markets, growth out of California, and nice growth in our de novo markets.

It is spread throughout the company, and it is a combination of a significant effort on the part of our bankers to tell the story of Columbia Banking System, Inc., and it is a great story. We are having a lot of success with it.

Ivan Seda: That sounds great. I will start on margin and then look to Chris to talk about what we are seeing in the marketplace regarding deposits. This quarter, we landed right at the top end of the range we provided last quarter. There are two counteracting effects we saw in Q1. The headwind in Q1—every year—is seasonality, in which we see deposit outflows and a heavier reliance on wholesale funding channels. While our ending wholesale funding point-to-point was down, on average we had about a 7% increase in average reliance on brokered and FHLB relative to Q4.

What counteracted that and allowed us to stay stable relative to past years is the tailwind from continued optimization of the balance sheet and specifically the loan portfolio: repricing of low-coupon, low-duration transactional loans. In Q1, we saw an additional $230 million of that portfolio run down. Those balances are coming off in the low- to mid-4% range, and we continue to replace them with core relationship lending with a six handle. That is a very positive, continued engine we expect to continue. Ninety days ago, I hedged and said sometime in the spring or summer we would cross over the 4% level.

We will be roughly at that 4% marker in Q2 of this year, and then continue to step up from there and move north of 4% into the second half of the year. From a deposit perspective, there was a bit of noise in Q4 associated with some one-time tail-event items with the PPBI deal on acquired deposits. Adjusting for that, our Q4 cost of interest-bearing was 2.20%. For Q1, it was 2.04%—so 16 basis points down spot-to-spot, and we saw an additional eight basis point decrease during the quarter without any Fed funds actions. That continues to point to the discipline we bring to back-book CD pricing, as well as evaluating deposits on a relationship basis.

I was really pleased to see continued momentum there as well. I will hand it over to Chris.

Christopher M. Merrywell: Thanks, Ivan. Jon, that disciplined approach Ivan outlined has always been there. Tory and I constantly look through exception requests and work with our bankers on each of them, monitoring the competition for rack rates. We like where we are positioned and continue to look for opportunities to trim a few basis points where we can. Our bankers have really grabbed hold of that and are moving forward. If we do get a Fed cut later in the year, we have shown a solid playbook and a system to deal with that at large volume. Tory and I are looking at this every single day as items come due. I think the results are speaking for themselves.

Jon Arfstrom: Okay. Alright. Thank you very much, guys.

Operator: Thank you. Our next question comes from David Pipkin Feaster of Raymond James. Your line is open.

Clint E. Stein: Hey, David.

David Pipkin Feaster: I wanted to start by following up on Pacific Premier. It sounds like the deal has gone pretty well so far, but specifically on the conversion and integration: how did that go relative to expectations? How was feedback from clients? Have you seen any attrition? And post-conversion, how is the team doing, and has their go-to-market focus shifted now that we are integrated and heading in the right direction? And then on hiring, how active have you been, your appetite for additional hires, and what geographies or segments are you looking to add to or business lines to expand?

Lastly, on capital, with proposed regulatory relief, especially treatment of MSRs, have you done work around what that could mean for you? Does that change capital priorities, or are buybacks still the focus?

Clint E. Stein: Great questions, David. I have said since the first set of town halls a year ago with the team at Pacific Premier that their reaction was different. The enthusiasm they showed for the combination and becoming part of Columbia Banking System, Inc. and our market position throughout the West carried through all the way to the systems conversion. It went so smoothly that I almost forgot we did a conversion in the first quarter because there was no drama typically associated with it—no customer disruption. Out of all the ones we have done, it was the best we have ever had.

That is attributed to the talent at Columbia and the talent and experience Pacific Premier brought to the table as well. Since the January conversion, it has been business as usual. If anybody thought we got distracted, look at our performance during what is typically our seasonally weakest quarter—the momentum we had on the C&I side and actually growing customer deposits during the first quarter. Chris and Tory live this every day, so I will let them add color at the customer level.

Torran B. Nixon: I am incredibly impressed and proud of the Pacific Premier folks and how excited they have been from day one to be a part of Columbia. The conversion went extraordinarily well. We have a ton of momentum in Southern California. Teams have folded in to become one very unified, strong presence. We have not really lost anyone of note from an associate standpoint—high retention of people and very high retention of customers. We continue to find opportunity in the existing Pacific Premier book to grow relationships. Momentum is very strong and they feel very good about being part of our company and the opportunity in front of them.

Christopher M. Merrywell: On client feedback, during the conversion people could leave comments after using the contact center. We had numerous comments raving about the conversion—many had been through others and said this was the best and that they loved the bank. There were so many that I joked with the contact center about planting them, but they were real customers and it was phenomenal. Happy customers lead to happy bankers. With capabilities from both organizations together, our bankers are taking advantage of that, and we are starting to see bankers in our markets reaching out, asking what it is like and whether they can come on board. On hiring, we are always active.

You never know when the best bankers will decide to make a move, so we always have oars in the water and are ready. If it is the right bankers and they can bring value, we will create a position. We are looking at expanding our wealth management operation, building out Southern California with trust folks, financial advisers, private bankers, and focusing on health care as well.

Torran B. Nixon: Over the last six months, we have hired commercial bankers in Scottsdale, Denver, three or four in Utah, Eastern Washington, Seattle, Portland, Los Angeles, and Orange County. Bankers in the marketplace really appreciate and understand the Columbia story and our success, and they want to be a part of it. We are bringing them in and putting them to work, hitting the ground running. It is spread across business lines and geographies.

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Clint E. Stein: On capital priorities, the short answer is no change. We still firmly believe the best investment we can make is in our own company stock. We announced a big buyback last fall and we are almost halfway through that allotment. We are very serious about executing on the full amount. Ivan can address MSR treatment and the capital ratio implications.

Ivan Seda: Like everyone else, we are still evaluating and putting a finer point on the exact impacts of the proposed rulemaking, and it is still in a comment period. What is clear is meaningful capital benefit under the proposed rules. Our back-of-the-napkin analysis on the NPR shows a potential benefit of up to roughly 100 basis points of CET1, which would provide interesting optionality going forward. More work to be done to fully unpack that.

Operator: Thank you. Our next question comes from Jeffrey Allen Rulis of D.A. Davidson. Your line is open.

Jeffrey Allen Rulis: Maybe for Frank on the credit side, could you provide more color on the nonaccrual adds and some of the net charge-offs within the ag book? And is this systemic or isolated? Also, any linkage between the nonaccrual and charge-offs?

Frank Namdar: It was really centered in one customer relationship—a casualty of what is going on in the ag industry right now with input costs being extremely high and margins extremely tight. Those with higher leverage have a more difficult time. Inevitably there will be a casualty, and this is one of them. It is not systemic. This particular one was in the hop industry. Hops and grapes—beer, wine, spirits—are going through what I would call a generational shift in demand, and that compounded what was going on in this situation. The nonaccrual and the charge-off are interrelated.

Jeffrey Allen Rulis: Thank you. And on loan growth, you guided to flattish balances for the year as transactional runs off versus core growth. Is that straight-line over the year? And thinking about 2027, could the back half of 2026 see an uptick, and could 2027 get back to low single-digit growth?

Ivan Seda: Any given quarter, we could see some movement up or down. This quarter, we had about a $100 million reduction. Our general expectation for the next three or four quarters is relatively flat. In the last two quarters, we have seen almost $500 million of the transactional portfolio run down. We are actively replacing that with strong growth in C&I and owner-occupied real estate portfolios. Throughout 2026, we are expecting roughly flat overall.

Torran B. Nixon: On pipeline, our combined commercial pipeline as of the end of March was about $3.3 billion, up about $600 million from year-end, even with the production we had in the quarter. It is up about 50% from a year ago. Lots of activity and good momentum. We feel very optimistic about generating C&I loan growth, owner-occupied loan growth, and relationship growth. As momentum picks up, 2027 should be a good year for us.

Ivan Seda: Over the course of a year, out of that transactional book, we are expecting $1.0 billion to $1.25 billion to run down. For us to stay flat, it requires 4% to 5% loan growth out of the core relationship portfolio. That is very real in terms of the core loan growth we are seeing just to stay even on total portfolio size.

Operator: Thank you. Our next question comes from Matthew Timothy Clark of Piper Sandler. Your line is open.

Matthew Timothy Clark: A few cleanup credit questions. The uptick in 30–89 days past due—small in percentage terms—what drove that? Where did Finpack delinquency stand at quarter-end versus the fourth quarter? And classified balances this quarter versus year-end? And then on expenses, you maintained the adjusted expense run-rate guide of $335 million to $345 million for Q2 ex-CDI. With additional cost saves from PPBI, how should we think about core expenses for the year given Q1 tracked below?

Frank Namdar: On the 31–89 day delinquencies, the uptick was centered in one commercial real estate loan that is in the process of being paid off. That accounted for the entire difference between fourth quarter and first quarter. Finpack is exactly where we thought they would be. Delinquencies and charge-offs are down from the fourth quarter. Looking forward, they have been bouncing along the bottom in terms of charge-offs at about a 3.4% to 3.45% net charge-off clip, which is a great number for that business. Nonperforming levels at quarter-end are where we expected; next quarter could be pretty close, maybe a little higher, but we will see. As mentioned on previous calls, about 80% of nonaccruals typically roll to net charge-offs.

Classifieds held pretty flat quarter over quarter. Special mention improved significantly due to favorable resolutions and a couple of payoffs.

Ivan Seda: On expenses, Q1 came in lower than planned. There are always a few smaller one-off items—business-as-usual—which amounted to $1 million or $2 million of benefit. Strategically, strong execution on synergies happened a little earlier than anticipated and was a meaningful factor. We also have investments you will see in future quarters—bankers across the footprint and expansion in markets like Colorado, Utah, and Nevada, as well as in our legacy markets. There is reinvestment happening over the next two quarters. All that said, we expect to come within the $1.5 billion full-year expense guide due to continued expense discipline as we execute on those items.

Operator: Thank you. Our next question comes from Christopher Edward McGratty of KBW. Your line is open.

Christopher Edward McGratty: Going back to Matt’s question on expenses: ex-CDI, $335 million to $345 million in Q2—do you stay in that range in Q3, or can you get below that once everything is fully in the run-rate? And then on capital, you do not have an official public target on CET1, but how important is the TCE ratio, and how do you balance the right levels as you consider buybacks after this authorization?

Ivan Seda: We will come in below that range in the second half of the year. In Q3 and Q4, as we execute the remaining synergies, it is in the ballpark of $330 million to potentially $335 million. We are at $102 million executed out of the $127 million fully identified synergies. There is no question mark around timing, impact, or sizing of the remaining cost synergies—they are fully documented. That will start to flow through in Q3 and you will see a step-down into that range in the second half.

Clint E. Stein: From a TCE standpoint, we want to be in the neighborhood of 8%. The reason is it gives us flexibility and comfort. Historically, when we back out current AOCI impacts of bond portfolios, 8% for our balance sheet ties to roughly 12% total risk-based capital, and that continues to be our binding constraint in terms of capital deployment.

Christopher Edward McGratty: Two housekeeping items: tax rate to use, and on the ag loan that drove charge-offs and nonaccruals—has that been fully addressed provision-wise?

Ivan Seda: Same as last quarter, use a 25% all-in effective tax rate. On the ag relationship, yes—we feel very comfortable with the level of allowance we have at 1%. Our process factors in a baseline economic scenario and incorporates elements of an S2 downside scenario. We have 100 basis points of loss content—over three and a half years of charge-off content on a run-rate basis relative to the last few quarters—and an additional 28 basis points of coverage from the credit discounts on the acquired portfolio. Fully contemplated.

Operator: Thank you. Our next question comes from an Analyst of Jefferies. Your line is open.

Analyst: On the deposit outlook, you had good success with roughly $450 million in new deposits from your recent small business and retail campaign. Do you have similar campaigns planned for spring or summer to continue the deposit momentum? And on noninterest-bearing deposits, period-end was up modestly sequentially while averages were down a bit. With fewer cuts in the forward curve, to what extent could that be a headwind on noninterest-bearing deposit growth?

Christopher M. Merrywell: The current campaign will end in the next two weeks. We always take a brief break for cleanup and client follow-up, then relaunch. We will relaunch in June and then have another that goes into the fall—typically three per year. There are no special products or special pricing—this is all off-the-shelf. It is really a campaign around focusing our retail branches on going out and deepening and winning business.

Ivan Seda: I do not think we will see a big headwind in terms of noninterest-bearing deposit growth relative to 90 or 180 days ago when we expected two rate cuts. It has been a competitive market since March 2023 and will continue to be. Our relationship-based strategies on the commercial side and the retail campaigns should continue to drive positive growth in the core deposit portfolio. More broadly, our balance sheet is positioned for interest rate neutrality by design. Whether we get one cut late in the year or not does not move the needle as much as our execution against strategy.

Operator: Thank you. Our next question comes from Janet Lee of TD Cowen. Your line is open.

Janet Lee: For the second quarter, on NII, can we assume flattish average earning assets and, with NIM getting to about 4%, roughly $605 million of NII for Q2? And on slide 12, you noted NIM outside of the two one-off impacts in Q4 was fairly stable. If you strip out the entire PAA on a core basis, how has that trended, and any change in PAA forecast?

Ivan Seda: You are thinking about it correctly on NII given flattish average earning assets and the NIM crossover to 4% during Q2. Regarding PAA, we view the discount accretion on acquired loans, as well as on regular bond purchases, to be core. In unique circumstances, like in Q4 when a large credit with a large mark pays off early, there can be short-term volatility. We do not break out PAA separately.

Operator: Thank you. Our next question comes from Anthony Elian of JPMorgan. Your line is open.

Anthony Elian: You saw deposits contract in Q1 as expected. Can you give us some color on what you expect for Q2 deposits and the magnitude of the headwind from tax payments in April? And on slide 17, does the 1% ACL feel like a good level given your expectation for stable loan balances for the rest of this year?

Ivan Seda: Generally, deposit contraction begins in the latter part of Q4 as we enter the holiday season—we disclosed that last quarter. That Q4 contraction resulted in about $500 million of FHLB draws in the latter days of December. As we go through tax season in April, we typically reach a low point in mid-to-late April and then rebound through May and June—so Q2 is often a bit of a V pattern. Q3 tends to be strong; Q4 reflects the usual holiday seasonality again. On the ACL, we feel very comfortable with 1% on loans, and when you include the credit discount on the acquired components, we are at almost 1.3%.

We have reviewed it thoroughly and feel well reserved for the portfolio’s risk and the macroeconomic outlook.

Operator: Thank you. Our next question comes from an Analyst of UBS. Your line is open.

Analyst: Turning back to loan growth, payoffs in the traditional relationship-oriented portfolio still seem relatively elevated. Looking conceptually into 2027, do you need to see these payoffs moderate to start producing loan growth, or is production volume on its own able to push balances higher without payoff moderation? And do you have the retention rate on transactional loans that came due this quarter and stayed on balance sheet?

Torran B. Nixon: Payoffs and paydowns in the commercial book are about where they would normally land. We had C&I production that far exceeded that, so we posted nice C&I growth this quarter. We feel really good about the pipeline and C&I growth in Q2 and beyond through 2026. On real estate, much of the payoffs are transactional loans we are letting roll off because they are not going to be full relationships. Where we can bring in deposits and core operating accounts and make them relationships, we are doing that. As we get into 2027 and 2028, you will likely see less transactional runoff and continued production-driven growth.

Ivan Seda: We remain laser-focused on the transactional portfolio. As disclosed on slide 24, we have nearly $3 billion of transactional loans priced in the mid-4% range that will either mature or reprice over the next twelve months, and that volume slows meaningfully by mid-2027. That creates potential for elevated prepayments as those loans come back to the market at markedly different rates. Whether or not we fully replace 100% of that volume, we are confident in our ability to drive positive operating leverage and top-line revenue growth. As Clint mentioned earlier, we do not need net loan or balance sheet growth to drive positive operating leverage. Plan A is to replace with relationship-based volume.

If we do not fully replace it, we have opportunity to continue optimizing our funding stack, which is also accretive to NIM.

Torran B. Nixon: We do not have the precise retention number in front of us. With rates elevated, we are having a lot of success retaining loans that are moving from fixed to floating at a reprice, which is positive for the bank, and we are generating deposits and operating accounts from those transactional loans—turning them into full relationship customers.

Operator: Thank you. I am showing no further questions at this time. I would now like to turn it back to Jacquelynne Bohlen for closing remarks.

Jacquelynne Bohlen: Thank you, Didi. 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: This concludes today’s conference call. Thank you for participating and you may now disconnect.

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