Columbia Banking System's Q3 2025 Earnings Call: Contradictions Emerge on Loan Growth, Deposit Strategy, and Pacific Premier Integration

Date of Call: October 30, 2025

Financials Results

• EPS: GAAP EPS of $0.40 and operating EPS of $0.85 (as stated on the call).

Guidance:

• Board authorized a $700M share repurchase program spanning ~12 months; purchases to be opportunistic and modest for remainder of 2025, with ramp into 2026.
• Q4 NIM expected just north of 3.90% (includes ~$12M CD premium accretion); Q1 2026 NIM projected in a similar range.
• Expect stable to modestly growing NII over next two quarters despite potential modest earning-asset declines.
• Plan to organically manage down roughly $8B of transactional loans over the next ~2 years (remix into higher-yield relationships).
• Targeted $127M annualized cost synergies from Pac Premier; ~$48M realized as of Sept 30; systems conversions in Q1 and clean expense run rate by Q3 2026.
• Near-term operating expense run-rate ~$330–$340M/quarter (ex-CDI); CDI amortization ~ $40M/quarter.

Business Commentary:

* Strategic Acquisition and Franchise Expansion: - Columbia Banking System closed the strategic acquisition of Pac Premier, enhancing its presence in the Southern California market and increasing its deposit market share in the Northwest. - This acquisition bolstered Columbia's scale and positioned it as a leading regional powerhouse, with a focus on sustained relationship-driven growth and capital returns.

• Operating Performance and Earnings Growth:
• Operating PPNR increased by 12% from the second quarter and 22% year-on-year, driven by strong customer deposit growth and meaningful loan origination volume.

• The integration of Pac Premier's capabilities and enhanced customer banking services contributed to balance sheet optimization and internal capital generation.

• Balance Sheet Optimization and Share Repurchase Authorization:

• Columbia Banking System's shareholder return strategy includes a $700 million share repurchase authorization, reflecting excess capital and strong forward profitability expectations.

• The company is focused on reducing its reliance on wholesale funding and optimizing its balance sheet, which has led to a notable increase in net interest margin.

• Business Line Growth and Market Expansion:

• The commercial banking team achieved $1.2 billion in new loan originations, up 36% quarter-over-quarter, demonstrating strong organic growth initiatives.
• This growth is supported by increased customer acquisition, strong pipelines across various geographies, and the integration of Pac Premier's capabilities.

Sentiment Analysis:

Overall Tone: Positive

• Management described the quarter as one of "meaningful progress and growing momentum," reported operating PPNR up 12% Q/Q and 22% Y/Y, NIM expansion to 3.84% (up 9 bps), and announced a $700M share repurchase authorization tied to excess capital and confidence in continued high-teens ROTCE.

Q&A:

• Question from Christopher McGratty (Keefe, Bruyette, & Woods, Inc., Research Division): Please unpack the pace and balancing act of the $700M buyback and how to model purchases over the next 12 months.
  Response: 12-month authorization; opportunistic repurchases—modest pace through end-2025, expected to ramp in 2026; management believes full $700M is feasible given ~$550M excess capital and expected profitability.

• Question from David Feaster (Raymond James & Associates, Inc., Research Division): Thoughts on the recent activist presentation and any reaction?
  Response: Management reiterated priorities: consistent top-tier quarterly performance, preparation for capital returns (dividend + buybacks), and full integration of Pac Premier; no interest in M&A near term.

• Question from David Feaster (Raymond James & Associates, Inc., Research Division): Can you explain drivers of the ~$800M organic deposit growth?
  Response: Organic deposit growth ~ $800M in Q3; roughly 30% from new customers, ~$150M from de novo branches and ~ $180M attributed to deposit campaigns.

• Question from Jeff Rulis (D.A. Davidson & Co., Research Division): How should we think about loan growth in 2026 and near-term loan portfolio size?
  Response: Targeting ~5% annual organic loan growth supported by strong origination (Q3 production $1.2B) and a C&I pipeline up ~ $700M quarter-over-quarter.

• Question from Matthew Clark (Piper Sandler & Co., Research Division): Any NIM range for Q4 to level-set expectations?
  Response: Expect Q4 NIM just north of 3.90% (includes the ~$12M accretion); Q1 2026 expected in a similar range absent seasonal effects.

• Question from Timur Braziler (Wells Fargo Securities, LLC, Research Division): Why did the PPBI contribution to balances appear smaller than prior reported size?
  Response: Acquired loan balances were slightly below prior pro forma due to security sales, selective reinvestment, paying down wholesale funding and timing of close; marks disclosed in the release.

• Question from Andrew Terrell (Stephens Inc., Research Division): The interest-bearing deposit beta fell to ~49%—is your beta assumption changed?
  Response: Deposit beta remains roughly ~50%; the quarter was unique due to the Pac Premier book and late-quarter Fed action, and the bank is prepared to quickly lower customer rates as the Fed cuts.

• Question from Jon Arfstrom (RBC Capital Markets, Research Division): How are pipelines trending and what are you hearing from borrowers?
  Response: Pipelines are improving broadly across the franchise; C&I activity is strongest—C&I pipeline up ~ $700M Q/Q—while CRE pipeline is flat quarter-over-quarter.

• Question from Christopher McGratty (Keefe, Bruyette, & Woods, Inc., Research Division): Can you restate earning asset and NII/NIM moving pieces for Q4 and Q1 modeling?
  Response: Earning assets ~ $62B; Q3 NIM 3.84%; expect Q4 NIM just above 3.90% driven by a ~$12M CD premium accretion; absent that accretion, NII/NIM should be roughly stable into Q1 2026.

Contradiction Point 1

Loan Growth Expectations

It involves differing expectations and strategies regarding loan growth, which directly impacts the company's revenue and financial performance.

Could you compare the transactional repricing to expectations for loan growth? - Jeff Rulis (D.A. Davidson)

2025Q3: The C&I pipeline is up $700 million, with strong momentum. Tory mentioned an annual loan growth target of 5%. - Ivan Seda(EVP & Deputy CFO)

What is driving the double-digit increase in loan originations: client demand, reduced tariff fears, increased banker productivity, or market share gains? - David Pipkin Feaster (Raymond James & Associates, Inc., Research Division)

2025Q2: We're seeing 13% commercial loan growth, which is below our expectations. - Torran Nixon(Senior EVP & President of Commercial Banking)

Contradiction Point 2

Deposit Growth Strategy

It relates to the company's strategy for deposit growth, which is crucial for maintaining a stable funding base and supporting loan growth.

Can you provide insights into the drivers behind deposit growth and the activist investor situation? - David Feaster (Raymond James)

2025Q3: Strong deposit growth from multiple sources, including new customers and de novo branches. 30% of growth is from new customers, with significant contributions from de novo markets. - Torran Nixon(Senior EVP & President of Commercial Banking)

How do you view deposit growth, pricing strategy, and opportunities to clean up the legacy Umpqua capital stack? - Matthew Timothy Clark (Piper Sandler & Co., Research Division)

2025Q2: We have stabilized rates for some time. The capital stack analysis shows opportunities to optimize going forward. - Clint E. Stein(President, CEO & Director)

Contradiction Point 3

Pacific Premier Integration and Loan Portfolio

It involves the company's approach to integrating Pacific Premier and the expected impact on its loan portfolio, which affects the company's financial performance and strategic direction.

Did the acquisition of Pac Premier accelerate loan outflows? - Jared David Shaw (Barclays)

2025Q3: The loan portfolio landed slightly below expectations due to fair value marks. - Ivan Seda(EVP & Deputy CFO)

Has your view on Pacific Premier's balance sheet optimization changed with the closing timeline now clearer? - David Pipkin Feaster (Raymond James & Associates, Inc., Research Division)

2025Q2: We're taking advantage of getting day one fair value marks. We've done some prepurchase of securities that better fit our portfolio. We're not focusing on loans, but we're challenging ourselves to look at various scenarios. We have no credit concerns. - Clint E. Stein(President, CEO & Director)

Contradiction Point 4

Deposit Growth and Customer Acquisition

It involves the reported sources and drivers of deposit growth, which are crucial for understanding the bank's expansion strategy and financial health.

Can you provide insights into the activist investor initiatives and the drivers of deposit growth? - David Feaster (Raymond James)

2025Q3: Strong deposit growth from multiple sources, including new customers and de novo branches. 30% of growth is from new customers, with significant contributions from de novo markets. - Torran Nixon(Senior EVP & President of Commercial Banking)

What were the key performance highlights and areas for improvement in Q1? What are the key factors that could drive or hinder achievement of 2026 consensus estimates? - Jon Arfstrom (RBC Capital Markets)

2025Q1: We are well positioned for continued strong deposit growth from de novo availability, expanded market share, and a healthy customer acquisition pipeline. - Torran Nixon(Senior EVP & President of Commercial Banking)

Contradiction Point 5

Loan Growth Expectations

It involves the projected loan growth rates, which are critical for assessing the bank's lending strategy and revenue expectations.

How does transactional repricing compare to loan growth expectations? - Jeff Rulis (D.A. Davidson)

2025Q3: The C&I pipeline is up $700 million, with strong momentum. Tory mentioned an annual loan growth target of 5%. - Ivan Seda(EVP & Deputy CFO)

What balance sheet growth do you envision for the combined company? - Anthony Elian (JPMorgan)

2025Q1: We are encouraged by our pipeline of new client loan opportunities, which are active, aggressively priced, and well-diversified. We expect to deliver low to mid-single digit C&I loan growth for the year. - Torran Nixon(Senior EVP & President of Commercial Banking)