Columbia Banking System Maps Post-Deal Profit Push, NIM Lift and $700M Buyback at Conference

Executives from Columbia Banking System (NASDAQ:COLB) outlined the company’s post-acquisition priorities, balance sheet strategy, and capital return plans during an afternoon fireside chat, emphasizing a shift from large-scale integration work to profitability-focused optimization.

Company overview and post-acquisition focus

Columbia said it is headquartered in Tacoma, Washington, and operates “a little over 350 locations” across eight Western states, with about 300 in the coastal states of California, Oregon, and Washington. Management highlighted the recent acquisition of Pacific Premier Bank as a milestone that “rounded out the franchise” the company envisioned. Executives said the systems conversion was completed a couple months ago and described it as successful, adding that Pacific Premier’s team is productive and engaged.

With several large combinations completed in recent years—including the Umpqua acquisition announced roughly four to four-and-a-half years ago and the addition of Pacific Premier—management said the franchise is now “complete,” shifting attention to streamlining processes, improving technology, and “fine-tuning” operations to enhance profitability and efficiency.

Economic backdrop in the West and business climate concerns

Management said it generally feels good about the health of the company’s footprint and borrower sentiment. Executives described a mid-2024 slowdown in business activity tied to uncertainty around tariffs, with a more pronounced effect in coastal states compared with the intermountain region. They said pipelines began rebuilding in late summer and early fall, leading to a “pretty solid fourth quarter” for commercial and industrial (C&I) growth, with momentum carrying into the first quarter.

One area flagged for monitoring was the longer-term business climate in Portland and Seattle. Executives said businesses are performing well but expressed concern about the region’s business-friendliness and the potential for companies with mobility to relocate. The discussion also touched on Washington tax changes, including an increase in the state’s business and occupation tax that management said raised the company’s state tax liability by about $7.5 million, as well as newly passed measures referenced as a personal income tax. Management also cited a Seattle “head tax” that currently costs the company “a few hundred thousand” and said a statewide version could be “several million.” Executives noted that Columbia’s multistate footprint provides flexibility to move certain non-customer-facing roles to other states.

Finance priorities under the new CFO

Ivan, introduced as the new CFO, said his focus is shifting the finance function from primarily reporting results to becoming more strategically oriented, including scenario analysis and deeper engagement with business performance. He said the company bolstered its treasury organization and announced a new corporate treasurer earlier in the week, based in the Arizona market. He also said Columbia plans to launch quarterly business reviews to connect performance metrics and operating trends to strategic plans across business platforms.

Balance sheet remix: loans, funding, and margin trajectory

On the asset side, Ivan described a roughly $48 billion loan portfolio and highlighted what the company calls its “transactional portfolio,” totaling about $7.85 billion. He defined these as loan relationships with no deposits or ancillary business—relationships that are not “true core clients.” Management said it is difficult to generate mid-teens returns on capital with “credit-only” relationships and expects that book to continue running off over time.

• Management said about $300 million of transactional loans ran off in Q4, with Q1 expected in a similar range.
• Executives anticipated roughly $1 billion to $1.5 billion of transactional loans could move off over time.
• They said runoff loans are generally at 4% to 4.5% coupons and are being replaced by core relationship lending at 6% to 7%.

Management characterized the remix as a key driver of positive operating leverage, even if overall balance sheet or loan growth remains relatively flat.

On liabilities, executives said Columbia has a strong deposit base, noting that customer deposits are about 33% to 34% non-interest-bearing. They said wholesale funding can dilute how the deposit franchise is perceived and framed the runoff of transactional loans as a way to reduce wholesale funding. Management also referenced plans to clean up certain capital instruments, including trust preferred securities and inherited subordinated debt, before considering potential longer-term actions such as preferred issuance.

Ivan said the company’s “muscle memory” in deposit portfolio management is strong, citing a disclosed 54% deposit beta. He also pointed to $5.5 billion of higher-cost wholesale funding as an area of ongoing opportunity to improve funding costs over time.

On net interest margin (NIM), management described a seasonal pattern that makes the first quarter the most difficult and guided to roughly 3.90% to 3.95% for Q1, citing the ongoing loan remix and continued core deposit growth as the “engine” for improvement. They also said they expect revenue to rise from the first half to the second half of the year with the NIM trajectory, while expenses are expected to decline slightly as Pacific Premier integration synergies flow through during Q1 and Q2.

Capital return, M&A stance, and credit

Management emphasized capital return as a key priority. Executives said the company has a “very healthy dividend” and expressed no concerns about covering it. They also discussed a $700 million share repurchase authorization announced in October, stating the company began executing immediately and had completed the amount it expected to complete for the first quarter.

Executives said that even after planned capital returns, the company expects to remain above long-term capital targets and cited more than $600 million of “excess capital.” They indicated capital returns are not intended to be “one and done,” arguing that the balance sheet remix over the next 12 to 24 months should generate more capital than the company can prudently deploy. Management said that, at current valuation levels, buying back stock is viewed as the best investment, while special dividends could be a future lever if valuation returns to a premium level.

On mergers and acquisitions, management said that despite industry “chatter,” additional M&A is “not for us,” reiterating that Pacific Premier was the “missing piece” and that the franchise is complete. Executives said the company’s focus is internal execution and investments in de novo markets including Utah, Colorado, and Arizona, while noting it could potentially benefit from disruption if competitors pursue deals.

On credit, Ivan said the transactional portfolio is not a “good bank, bad bank” issue and described it as “pristine” from a credit perspective. He added that the bank does not have a large software lending business and said MDI is less than 1% of total assets, with limited exposure to private credit. Agriculture was cited as a sector the company continues to monitor due to variability tied to external conditions.

About Columbia Banking System (NASDAQ:COLB)

Columbia Banking System, Inc is a bank holding company that operates through its principal subsidiary, Columbia State Bank. Headquartered in Tacoma, Washington, the company provides a full range of banking and financial services to commercial, small business and consumer customers. Its branch network is concentrated in the Pacific Northwest, with locations across Washington, Oregon and Idaho, where it aims to combine local decision-making with the resources of a larger institution.

The company’s offerings include commercial real estate lending, construction and development financing, equipment and small business loans, and deposit products such as checking, savings and money market accounts.