Columbia Banking System (COLB) Q3 2025: $700M Buyback Signals Confidence as PAC Premier Integration Drives 12% PPNR Lift

October 30, 2025 | By EarningsIQ Research

Columbia Banking System’s third quarter marked a strategic inflection, with the $700 million buyback authorization underscoring management’s conviction in the newly scaled Western franchise. The successful integration of Pacific Premier is already yielding tangible cost and revenue synergies, while disciplined balance sheet remixing is set to drive higher-margin, relationship-based growth. Investors should watch for further capital returns and stable profitability as the bank leans into organic expansion and operational leverage across its expanded footprint.

Summary

• Buyback Authorization Underscores Capital Strength: Management approved a $700 million share repurchase, reflecting surplus capital and high confidence in future profitability.
• PAC Premier Integration Accelerates Strategic Remix: Early revenue and cost synergies are materializing, with significant balance sheet optimization underway.
• Organic Growth and Margin Expansion in Focus: Remixing from transactional to relationship loans is expected to lift earnings quality and support stable returns even with muted balance sheet growth.

Performance Analysis

Columbia Banking System’s Q3 results highlight the early fruits of its Pacific Premier acquisition, with operating pre-provision net revenue (PPNR) up 12% sequentially and 22% year-over-year, driven by a combination of one month’s contribution from PAC Premier and ongoing balance sheet optimization. The bank’s tangible book value dilution from the acquisition was a modest 1.7%, far below initial expectations, and regulatory capital ratios expanded meaningfully, providing ample flexibility for shareholder returns. Customer deposit growth remained robust, with $800 million in organic inflows—about 30% from new clients—demonstrating continued franchise relevance across legacy and new markets.

The net interest margin (NIM) expanded by nine basis points to 3.84%, propelled by the runoff of higher-cost wholesale funding and remixing into core deposits and relationship-based lending. Loan origination volume climbed 36% quarter-over-quarter, with commercial and industrial (C&I) lending, a key relationship product, growing 5% annualized. Non-interest income benefited from both PAC Premier’s custodial trust business and deeper cross-sell activity, while operating expenses reflected the partial quarter of integration but are expected to decline as targeted cost synergies ramp up through 2026.

• Margin Expansion from Funding Actions: Wholesale funding runoff and deposit remixing drove a nine basis point NIM increase, with further upside expected in Q4.
• Cost Synergies Tracking Ahead: $48 million of $127 million targeted annualized savings achieved, with full run-rate expected by Q3 2026.
• Deposit Momentum Diversified: Growth was broad-based, with retail, commercial, and de novo branches all contributing, and 30% of new deposits from first-time customers.

Management’s focus on remixing $8 billion of transactional loans into higher-yielding, relationship-based assets is expected to sustain revenue growth and margin resilience even as total loan balances remain flat, positioning COLB for stable, high-teens return on tangible equity (ROTCE) and robust internal capital generation.

Executive Commentary

Strategic Positioning

1. Franchise Scale and Geographic Reach

The PAC Premier acquisition cements COLB’s position as a leading Western regional bank, spanning eight states and holding nearly 10% deposit share in the Northwest. The expanded presence in Southern California and new markets like Arizona, Colorado, Nevada, and Utah opens up organic growth avenues, especially as the bank leverages its low-cost core deposit base and relationship banking model.

2. Balance Sheet Optimization and Revenue Quality

Management is executing a deliberate remix of $8 billion in inherited transactional loans—lower-yield, non-relationship assets—into higher-margin, relationship-driven C&I and owner-occupied real estate loans. This shift is designed to increase fee income, deepen client stickiness, and enhance profitability without relying on balance sheet expansion, a key differentiator as many peers chase asset growth at the expense of margin.

3. Accelerated Capital Return and Shareholder Alignment

The $700 million buyback authorization signals management’s conviction in the franchise’s value and future earnings power, with excess capital ($550 million above targets) and strong internal capital generation expected to fund the program over the next 12 months. The bank’s peer-leading dividend remains intact, and management explicitly positioned COLB as a “capital return story.”

4. Integration Synergies and Operational Leverage

PAC Premier’s integration is already yielding $48 million in cost savings, with additional synergies expected as systems are converted in early 2026. New business lines—such as custodial trust, HOA banking, and 1031 exchange services—are expanding fee income potential, while cross-referrals between legacy and new branches are driving deeper customer engagement and product penetration.

5. Disciplined Lending and Credit Quality

The bank maintains a conservative credit stance, with stable portfolio metrics and lower net charge-offs. Loan growth is intentionally muted as remixing takes priority, but the C&I pipeline is robust, up $700 million quarter-over-quarter, and new originations are being priced attractively (low 7% range), supporting future margin and earnings quality.

Key Considerations

Columbia’s Q3 was defined by the intersection of strategic M&A execution, disciplined balance sheet management, and an explicit commitment to shareholder returns. The integration of PAC Premier is not only expanding scale but also catalyzing a shift toward higher-quality, recurring revenue streams and operational leverage.

Key Considerations:

• Buyback as Value Signal: The $700 million repurchase plan reflects both capital surplus and management’s belief in undervaluation, with flexibility to accelerate or pause based on market conditions.
• Deposit Franchise Resilience: Broad-based deposit growth, with 30% from new customers, demonstrates brand strength and competitive momentum across markets.
• Revenue Mix Upgrading: The shift from transactional to relationship-based lending is expected to boost fee income, margin, and customer lifetime value, even if total loan growth remains muted.
• Cost Synergy Realization: With $48 million in annualized savings already realized, expense leverage should accelerate as integration completes and systems consolidate by Q3 2026.
• Credit Vigilance Maintained: Conservative underwriting and active portfolio monitoring continue to support low charge-offs and a stable allowance ratio, even as the loan mix evolves.

Risks

Key risks center on integration execution, macroeconomic volatility, and the pace of balance sheet remixing. A sharper-than-expected economic downturn could pressure credit quality or slow deposit growth, while delays in achieving cost and revenue synergies from PAC Premier would weigh on profitability. Management’s commitment to a capital return story may be challenged if market conditions rapidly shift or if competitive deposit pricing intensifies across the region.

Forward Outlook

For Q4 2025, Columbia guided to:

• Net interest margin (NIM) just above 3.90%, including a temporary $12 million benefit from deposit premium accretion.
• Stable to modestly lower earning assets as balance sheet optimization continues.

For full-year 2026, management maintained guidance:

• Expense run-rate in the $330-340 million range per quarter, dropping lower after Q3 2026 as cost synergies are fully realized.

Management highlighted several factors that will shape results:

• Continued remixing of $8 billion in transactional loans over the next two years, muting headline loan growth but boosting revenue quality.
• Expectation of high-teens ROTCE and strong capital generation, supporting ongoing buybacks and dividend stability.

Takeaways

Columbia’s quarter marks a strategic pivot, with scale and capital return now at the forefront.

• Buyback Commitment Drives Shareholder Alignment: The $700 million authorization, backed by robust capital ratios, positions COLB as a clear capital return story among regionals.
• PAC Premier Integration Already Delivering: Early cost and revenue synergies are visible, with cross-sell and new business lines supporting fee income growth and operational leverage.
• Remix Strategy to Support Margin and Earnings Quality: The deliberate shift toward relationship-based lending and away from transactional assets should underpin stable NIM and ROTCE, even if total loan growth is modest.

Conclusion

Columbia Banking System exits Q3 with a stronger, more profitable footprint, early integration wins from PAC Premier, and a clear commitment to capital return. The bank’s remix strategy and operational discipline set the stage for stable, high-quality earnings growth as it leverages its expanded Western franchise.

Industry Read-Through

Columbia’s results reinforce the value of disciplined balance sheet management and capital return in a challenging regional bank landscape. The successful integration of a large acquisition with minimal tangible book dilution, rapid synergy realization, and a focus on remixing loan portfolios toward higher-margin, relationship-driven products set a template for peers seeking to create value beyond headline asset growth. Regional banks with excess capital and robust deposit franchises are likely to face increasing pressure to return capital and articulate clear paths to higher quality revenue, especially as competition for both loans and deposits intensifies across the Western U.S.

COLB Financials Regional Banks Capital Return M&A Integration Deposit Growth Loan Remix