Columbia Banking System signals accelerated capital return with $700M buyback and targets $8B loan optimization amid Pac Premier integration

Earnings Call Insights: Columbia Banking System, Inc. (COLB) Q3 2025

MANAGEMENT VIEW

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President and CEO Clint Stein emphasized the successful closing of the Pacific Premier acquisition on August 31, noting, "This milestone completes our 8-state Western footprint and bolsters our position as the preeminent regional bank in the Northwest with approximately $68 billion in assets." Stein highlighted expanded market share and described the bank as uniquely positioned for organic growth in dynamic Western markets, with a sharpened focus on "optimization, generating new business, supporting the growing needs of existing customers and delivering superior results for all of our shareholders, even as we look to complete the integration of Pac Premier."

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Stein outlined a strategic shift toward organic growth, supported by a "disciplined cost-conscious culture" and a commitment to "generating positive economic impact." He also announced a management transition: "This will be Ron's last earnings call with Columbia as he is stepping down following a very successful tenure as our CFO." Ivan Seda was named as the new CFO.

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CFO Ron Farnsworth stated, "We reported second quarter EPS of $0.40 and operating EPS of $0.85. 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." Farnsworth highlighted that operating PPNR increased 12% from the second quarter to $270 million and discussed the $1.9 billion reduction in broker deposits and term debt during the quarter, which "drove net interest margin expansion." He also noted the realization of $48 million of the targeted $127 million in expected annualized cost savings as of September 30.

OUTLOOK

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Stein announced, "I'm pleased to announce our Board of Directors authorized a $700 million share repurchase program, reflecting our confidence in the strength of Columbia's balance sheet." He cited "roughly 110 basis points or approximately $550 million of excess capital above our long-term target today."

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Management expects to "organically manage down roughly $8 billion of inherited transactional loans" over the next several years, with a focus on remixing the portfolio to drive profitability.

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Seda indicated that the pace of share repurchases in the remainder of this year will be "modestly lower than the average quarter before we look to ramp it back up into 2026," dependent on market conditions.

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Management expects "exceptional profitability, which will result in meaningful capital generation over the coming quarters."

FINANCIAL RESULTS

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Columbia reported operating EPS of $0.85 and operating PPNR of $270 million, reflecting 12% sequential growth. Net interest margin increased 9 basis points to 3.84%.

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The company reduced broker deposits and term debt by $1.9 billion, contributing to margin expansion. Tangible book value per share rose to $18.57, and regulatory capital ratios expanded, with Tier 1 common at 11.6% and total risk-based capital ratio at 13.4%.

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Noninterest income was $77 million for the quarter, with operating noninterest income at $72 million. Operating expense was $307 million, while $48 million of the planned $127 million in cost synergies from the Pacific Premier acquisition were achieved.

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On the lending side, "New loan originations of $1.2 billion is up 36% quarter, while year-to-date volume is up 21% from last year." Organic commercial portfolio growth was 5% annualized.

Q&A

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Christopher McGratty, KBW: Questioned the rationale and pacing for the $700 million buyback. Stein responded the program spans 12 months with flexibility for market conditions, and Seda clarified, "It's presumable that we could go through the entire authorization over the course of the next 12 months."

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David Feaster, Raymond James: Asked about the recent activist investor presentation. Stein replied, "Our priorities in no particular order are consistent, repeatable top-tier quarterly performance... we've been focused on and preparing for additional capital returns... Pac Premier... was the missing piece to our franchise... I have 0 interest in M&A for the foreseeable future."

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Jeff Rulis, D.A. Davidson: Inquired about loan growth outlook. Nixon replied, "New originations on the lending side are roughly between 6.5% and 8%. I think probably a weighted average this past quarter was in the low 7s." Nixon added, "5% annual loan growth... is definitely our target."

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Matthew Clark, Piper Sandler: Asked about margin expectations. Seda projected net interest margin "just north of 3.90%" for Q4, with a similar range for Q1 2026.

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Jared Shaw, Barclays: Queried about allowance levels and merger charges. Merrywell said allowance should "kind of a slow kind of upward migration," and Farnsworth confirmed merger cost expectations are "unchanged."

SENTIMENT ANALYSIS

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Analysts pressed management on the buyback pace, activist investor influence, loan growth, margin sustainability, and integration costs, reflecting a neutral to slightly positive but vigilant tone.

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Management exhibited a confident tone during prepared remarks, especially regarding capital strength, profitability outlook, and integration of Pac Premier. In the Q&A, the tone remained confident and occasionally emphasized focus, with Stein stating, "I have 0 interest in M&A for the foreseeable future."

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Compared to Q2, both analysts and management showed more direct focus on capital return, integration benefits, and organic growth, with management expressing increased confidence in the franchise's trajectory.

QUARTER-OVER-QUARTER COMPARISON

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Management's strategic focus shifted from anticipation of the Pac Premier acquisition to post-integration execution, with a significant new focus on capital return through the $700 million buyback.

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Capital ratios have increased from the previous quarter, and the tangible book value dilution from the acquisition came in well below initial expectations.

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The prior quarter emphasized operational efficiency and preparation for acquisition, while this quarter highlighted realized cost synergies, expanded markets, and new capital allocation strategies.

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Analyst questions have shifted from integration planning to execution, capital deployment, and sustainability of profitability amid balance sheet remixing.

RISKS AND CONCERNS

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Management cited the need to "organically manage down roughly $8 billion of inherited transactional loans" as a critical ongoing process.

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There is sensitivity to macroeconomic volatility, with share repurchase pacing subject to market conditions.

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Integration of Pac Premier, while progressing, still involves ongoing system conversions and realization of full cost synergies.

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Seasonality in deposits, potential deposit outflows, and the impact of interest rate movements were noted as factors to monitor.

FINAL TAKEAWAY

Columbia Banking System underscored the completion and integration of the Pacific Premier acquisition as a catalyst for expanded market reach, enhanced profitability, and capital strength. The company launched a $700 million share repurchase program, signaling confidence in the franchise and prioritizing shareholder returns. Management remains focused on remixing the loan portfolio for higher earnings quality, prudent expense management, and disciplined organic growth, with no plans for further M&A. The outlook reflects strong capital generation, robust loan pipelines, and ongoing optimization to deliver long-term shareholder value.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/colb/earnings/transcripts]

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