COLB Loan Remix May Reset Growth as Transactional Loans Run Off

Columbia Banking System COLB is in the middle of a deliberate balance-sheet reset following its Pacific Premier acquisition. The centre is a planned exit from inherited, lower-value “transactional” lending in favor of core, relationship-based production.

That remix likely keeps headline loan growth subdued near term. But it also sets up a cleaner earnings profile as funding, fees, and cost synergies start to line up.

COLB Winds Down Transactional Loan & Shifts Toward C&I

Columbia Banking is managing down about $8 billion of inherited transactional loans, concentrated in multifamily credits that were not built around full banking relationships. Management expects most of this book to either run off or reprice over eight quarters that began in the third quarter of 2025.

As the transactional book fades, Columbia Banking is pushing harder into relationship-driven commercial and industrial (C&I) lending and owner-occupied commercial real estate tied to deposits and fees. This is consistent with how the company describes its franchise, emphasizing full-relationship banking that links commercial, small business, consumer, and wealth teams.

The existing mix gives context for what management is trying to grow. As of Dec. 31, 2025, commercial and industrial loans were 22% of loans and leases, while owner-occupied commercial real estate was 15%. That mix suggests meaningful runway to increase core production without relying on one-off transactional categories.

Operationally, the company has flagged improving C&I production and pipelines in the fourth quarter of 2025. That matters because stronger pipelines are what ultimately translate into steadier, relationship-based growth, especially when the bank is selectively hiring in specialty areas to support that push.

COLB Loan Growth May Stay Muted Through 2027

Even with healthier pipeline commentary, overall loan growth is expected to remain muted as runoff offsets new originations through roughly 2027. The bank anticipates $1.0-$1.5 billion of transactional-loan runoff, with replacement coming from higher-yield core lending.

This dynamic can make reported growth look uninspiring in the near term. When a sizable legacy book is shrinking, even solid new production can get absorbed by runoff. For investors, that means the better signal may be mix and yield.

The payoff comes if replacement loans carry better economics. Management’s expectation is that core lending will be higher yielding than the inherited transactional balances. If that holds, a flatter growth profile can still support improved profitability as the mix shifts.

COLB Key Metrics To Track Ahead

Start with the pace of transactional runoff versus core growth. Management has laid out the timing for the $8 billion legacy book to run off or reprice over eight quarters starting in the third quarter of 2025. Investors should compare that progression against commercial and industrial production and any updates to pipeline momentum, which improved in the fourth quarter of 2025.

Next, watch margin direction as the mix changes. Net interest margin (NIM) improved to 4.06% in the fourth quarter of 2025 from 3.64% in the fourth quarter of 2024, and management expects NIM to trend higher each quarter throughout 2026, surpassing 4% in the second or third quarter of 2026.

Finally, look for evidence that the remix is translating into operating leverage as synergies build. Columbia Banking targeted $127 million in annualized cost savings from Pacific Premier, with $63 million realized by the end of 2025. Management expects a normalized expense run rate by the third quarter of 2026 as cost savings materialize. If loan mix improves while expenses settle, the earnings profile should look cleaner.

COLB’s Zacks Rank & Price Performance

With COLB stock at a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the past six months, shares of Columbia Banking have gained 3.6% against the industry’s decline of 6%.

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Columbia Banking’s Peers to Watch

East West Bancorp EWBC is a key peer with a Zacks Rank #3 (Hold) at present. EWBC’s NIM will likely be under pressure in the near-term because of interest rate cuts, while decent loan demand, lower deposit beta and funding costs, alongside balance sheet hedging, will offer support.

Zions Bancorporation ZION is a close peer with a Zacks Rank #3. ZION has been witnessing a rise in NIM for the last several quarters as funding costs declined. In the near-term, the company’s NIM is likely to be positively impacted, driven by stabilizing deposit costs and asset yield repricing.

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