COLUMBIA BANKING SYSTEM, INC. 10-Qquarter ended 2026-03-31
PositiveCybersecurity incidentRestructuring
Pacific Premier systems conversion is complete; full cost-synergy benefits are expected from Q3 as problem loans rise.
Filed 2026-05-05 16:32 ET
Key figures · Q1 FY2026 · period ended 2026-03-31
- Net revenue$677.0M1YoY +37.9%QoQ −5.6%
How net revenue adds up Net interest income $594M + Total non-interest income $83M Net revenue $677M Lines as the filer presents them on its income statement.
- Net income$192.0MYoY +120.7%QoQ −10.7%
- Total assets$66.0BYoY +28.2%QoQ −1.2%
- Total debt$3.8B2YoY +28.6%QoQ +5.4%
How total debt adds up Junior and other subordinated debentures, at amortized cost $97M + Borrowings $3,400M + Junior subordinated debentures, at fair value $333M Total debt $3,830M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$7.7BYoY +46.3%QoQ −2.2%
- Tangible book value$5.5BYoY +46.9%QoQ −2.4%
Notes (2)
- Net revenue: Net interest income plus non-interest income, as the filer presents them.
- Total debt: Includes both junior subordinated debenture lines, at fair value and at amortized cost (the latter this filer's own balance-sheet line, not a standard concept), and the Borrowings line, mostly FHLB advances. Excludes deposits, repurchase agreements, federal funds purchased and securities loaned. About the summary: The summary's $3.4B is the Borrowings line, one of the 3 lines that make up total debt (see ⓘ).
How this filing reads
- Health+0.6CET1 was 11.58% and available liquidity was $27.1B against $3.4B of 2026 maturities.
- Momentum+0.4Revenue rose 38% to $677M year over year, while net interest margin fell to 3.96% sequentially.
- Outlook+0.2Full synergies are expected from Q3, while nonaccrual loans increased to $187M.
Executive Summary
Columbia Banking System’s Q1 2026 earnings rose sharply year over year, but the comparison is substantially shaped by its August 2025 acquisition of Pacific Premier and a legal-settlement expense in the prior-year quarter. Sequentially, earnings and net interest margin declined as unusually favorable Q4 interest income did not recur. Management completed the acquired bank’s systems conversion and is targeting the full benefit of cost synergies from Q3, while deliberately replacing brokered funding and transactional loans with customer relationships. For investors, the opportunity is improved earnings from integration and funding mix; the principal test is whether those gains outpace rising problem loans and deposit pressure.
Key Financial Highlights
| Metric | Q1 2026 or 03/31/2026 | Investor interpretation |
|---|---|---|
| Total revenue (net interest income + non-interest income) | $677M, vs $491M Y/Y | Acquisition-expanded revenue; not wholly organic growth. |
| Net interest income | $594M, +39.8% Y/Y; down $33M Q/Q | Lower funding costs helped Y/Y, while nonrecurring Q4 interest income affected the sequential comparison. |
| Fully tax-equivalent net interest margin | 3.96%, vs 4.06% Q/Q | Margin narrowed after Q4 benefits did not recur. |
| GAAP net income; diluted EPS | $192M; $0.66, vs $87M; $0.41 Y/Y | The prior-year quarter included a $55M legal-settlement accrual and excluded Pacific Premier. |
| Total assets | $66.0B, down from $66.8B at year-end | Excess cash was reduced. |
| Total equity; tangible common equity | $7.66B; $5.51B | Tangible common equity excludes $1.48B of goodwill and $671M of net other intangibles. |
| Deposits | $53.5B, down $722M from year-end | Largely reflects intentional brokered-deposit reductions rather than a comparable decline in customer funding. |
- Expense: Non-interest expense was $394M, up from $340M Y/Y as the acquired workforce, branches and intangible amortization entered results; $24M of merger and restructuring costs remain.
- Cash conversion: Q1 operating cash flow was $494M vs $192M of net income; capital expenditures were $17M, yielding $477M of free cash flow. The gap should not be treated as a recurring earnings uplift without considering balance-sheet cash-flow movements.
- Capital return: Cash-flow disclosures show $215M of repurchases; the repurchase-program disclosure records 6.5M shares for $200M. Shares outstanding fell from 295M to 290M, net of issuance, while common dividends used $107M. The common equity tier 1 capital ratio was 11.58%, down from 11.80% at year-end.
Business Developments
The $2.4B all-stock Pacific Premier acquisition enlarged Columbia’s lending, deposit and fee businesses; its inclusion in Q1 2026 makes reported Y/Y growth an imperfect measure of underlying momentum. Financial services and trust revenue rose to $15M from $5M, aided by acquired clients and custodial trust business.
Management completed systems conversion and consolidated nine branches during Q1. It expects all previously disclosed cost synergies to be achieved by 06/30/2026, with their full impact beginning in Q3, while continuing targeted technology and customer-facing investment. Its stated balance-sheet strategy favors relationship lending and customer deposits over transactional loans and wholesale funding: brokered deposits fell to $1.60B from $2.36B at year-end, while commercial loans grew despite broadly flat total loans.
Risk Assessment
- Credit deterioration: Nonaccrual loans rose to $187M from $116M at year-end and past-due loans to $246M from $179M, while the $478M allowance for credit losses declined $7M; management attributes much of the deterioration to one agricultural relationship, but further migration could require higher provisions.
- Commercial real estate concentration: Real-estate-related loans represent ≈75% of loans, including a $3.57B office portfolio; weaker property values or refinancing conditions could impair repayment.
- Funding and refinancing: Deposits fell $722M, while $3.4B of Federal Home Loan Bank advances mature in 2026; $27.1B of available liquidity provides a buffer, but deposit-pricing or wholesale-funding pressure could raise costs.
- Securities and interest rates: Available-for-sale securities carry $410M of gross unrealized losses, principally attributed to rates and spreads; a +200 bp shock models a 4.4% decline in economic value of equity, even though modeled first-year net interest income changes little.
- Valuation uncertainty: Net loans’ estimated fair value was $885M below carrying value, with most loan estimates classified as Level 3; changes in credit or valuation assumptions could widen that gap.
- Litigation and data exposure: An investor suit involves ≈$90M of claims, and litigation concerning the MOVEit incident follows exposure of identifying information for ≈429,000 customers; an unfavorable outcome could materially affect a particular period.
This 10-Q lists no risk factors of its own and refers to the annual report. The risks above come from the rest of this filing. Full list: FY2025 10-K.
Strategic Outlook and Investor Actionables
Columbia’s near-term thesis rests on converting a larger franchise into sustained earnings after integration costs subside, without sacrificing credit quality or relationship funding. Management expects the full cost-synergy effect from Q3; the next results should distinguish that benefit from acquisition-driven Y/Y growth and nonrecurring items.
- Integration: Track non-interest expense and merger costs against Q1’s $394M and $24M; sustained reductions would support the synergy thesis.
- Credit: Track nonaccrual loans, delinquencies and allowance coverage against $187M, $246M and $478M; continued problem-loan growth without reserve rebuilding would weaken it.
- Funding and margin: Track customer deposits, brokered deposits and net interest margin against $48.9B, $1.60B and 3.96%; stable relationship funding and margin would validate the intended balance-sheet shift.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 005 · prompt 9e47f58d3c