COLUMBIA BANKING SYSTEM, INC. 10-Qquarter ended 2026-09-30
After Pacific Premier, a shift toward commercial loans and core deposits lifts margins, while an agricultural borrower drives higher problem loans.
Filed 2026-11-05 16:34 ET
Key figures · Q3 FY2026 · period ended 2026-09-30
- Net revenue$695.0M1YoY +19.4%QoQ +2.7%
How net revenue adds up Net interest income $615M + Total non-interest income $80M Net revenue $695M Lines as the filer presents them on its income statement.
- Net income$220.0MYoY +129.2%QoQ +5.8%
- Total assets$65.1BYoY −3.5%QoQ −0.4%
- Total debt$4.0B2YoY +45.9%QoQ −14.7%
How total debt adds up Subordinated and junior subordinated debentures, at amortized cost $343M + Borrowings $3,300M + Junior subordinated debentures, at fair value $353M Total debt $3,996M Lines as the filer presents them on its balance sheet.
- Shareholders' equity$7.1BYoY −9.1%QoQ −6.3%
- Tangible book value$5.0BYoY −10.0%QoQ −8.0%
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 $3.3B is the Borrowings line, one of the 3 lines that make up total debt (see ⓘ).
How this filing reads
- Health+0.2Liquidity of $26.0B covers $3.3B of 2026 advances; tangible common equity fell to 7.93%.
- Momentum+0.5Q3 revenue rose 19%, while net interest margin increased 18 basis points sequentially to 4.11%.
- Outlook−0.2Non-performing loans rose 26% to $250M; $1.2B in authorized repurchases could further reduce capital.
Executive Summary
Columbia Banking System provides loans, deposits and financial services to businesses and consumers, earning mainly the spread between lending income and funding costs. Following the Pacific Premier acquisition, it is shifting toward relationship-based commercial lending and customer deposits while reducing lower-yielding real-estate loans and wholesale funding. Q3 revenue rose 19%, and net income reached $220M as lending margins improved and acquisition-related costs faded. The opportunity is a more profitable lending and funding mix; the test is whether Columbia can sustain that improvement as problem loans rise and securities losses and shareholder distributions reduce equity.
What's Happening in the Business
The Pacific Premier acquisition still shapes the comparison: Q3 2025 included only one month of the acquired bank, while 2026 includes its full operations. Management says acquisition cost savings were essentially realized by 6/30/2026. Future improvement therefore depends more on lending relationships, funding costs and revenue opportunities than on further integration savings.
Columbia is deliberately shrinking parts of its balance sheet rather than pursuing volume alone. Commercial loans and leases reached $12.8B, up 6.8% from year-end, while commercial real-estate loans declined 4.9% to $26.5B. Core deposits increased to $50.6B from $50.2B, while brokered deposits fell to $622M from $2.36B. This shift helped lower funding costs even as total deposits and loans contracted.
Credit performance was less favorable. Management attributed the increase in problem assets primarily to one agricultural relationship, rather than broad deterioration, but commercial real-estate non-accrual loans also increased. Lower credit provisions therefore should not be read as uniformly improving borrower health.
Key Financial Highlights
| Metric | Q3 2026 | 9M 2026 | Investor interpretation |
|---|---|---|---|
| Total revenue | $695M; +19% Y/Y | $2.05B; +29% Y/Y | Acquisition timing inflates both comparisons; slower quarterly growth reflects a larger acquired-business contribution in the comparison period. |
| Net interest income | $615M; +22% Y/Y | $1.80B; +31% Y/Y | Lower funding costs and better asset yields supported Q3 despite lower average earning assets. |
| Non-interest expense | $370M; −5.9% Y/Y | $1.14B; +13% Y/Y | Fading merger costs reduced quarterly expense, while the larger combined operation raised YTD staffing and amortization costs. |
| Net income | $220M; +129% Y/Y | $620M; +85% Y/Y | Lower provisions and the absence of prior-year legal-settlement expense amplified revenue growth. |
| Diluted EPS | $0.78; +95% Y/Y | $2.16; +41% Y/Y | Acquisition-related shares limited per-share growth relative to net income. |
- Margin: Tax-equivalent net interest margin reached 4.11%, up 18 bp Q/Q. Higher loan and securities yields, cheaper funding and the absence of ≈$4M of Q2 interest reversals drove improvement.
- Comparison effects: Q3 merger and restructuring expense fell to $2M from $87M. The prior 9M period also included a $55M legal-settlement accrual and $70M of acquisition-related credit provision; these are not recurring operating improvements.
- Credit: Non-performing loans rose 26% from year-end to $250M, while allowance coverage fell to 192% from 245%. Nine-month net charge-offs increased 15% to $93M, principally from commercial lending excluding FinPac.
- Capital returns: Nine-month share purchases totaled $597M; shares outstanding fell 6.5% from year-end after issuance. Cash dividends were $316M, with dividends per share of $1.11 vs $1.08 a year earlier. On 10/20/2026, the board authorized another $1.2B of discretionary repurchases.
- Equity: Shareholders’ equity fell 9.7% to $7.08B. Repurchases, dividends and $475M of other comprehensive loss outweighed retained earnings; securities’ fair-value shortfall widened to $896M from $264M. The tangible common equity ratio fell to 7.93% from 8.73%.
Risk Assessment
- Property and borrower credit: Real-estate-related loans represent 74% of the portfolio; refinancing constraints and weaker regional property values could compound the emerging borrower problems and require higher provisions.
- Funding and liquidity: Estimated uninsured deposits rose to 41% of deposits from 36%, while $3.3B of Federal Home Loan Bank advances mature in 2026; reported available liquidity of $26.0B provides capacity, but deposit departures could increase funding costs.
- Interest rates and capital: Securities losses have already reduced equity, while a modeled sustained 200 bp rate decline would reduce second-year net interest income 6.2%, vs 1.6% under the year-end model.
- Litigation and third parties: iCap investors allege ≈$290M of losses, and MOVEit-related customer litigation continues; management expects no material consolidated impact but acknowledges potentially material effects on an individual 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.
What to Watch
- Relationship lending: Commercial loans are growing as real-estate exposure shrinks; subsequent filings should show whether customer lending replaces runoff without worsening credit quality.
- Deposit economics: Core deposits have held up as brokered funding declined; success means sustaining customer balances and margin, rather than replacing withdrawals with expensive wholesale funding.
- Borrower stress: Non-performing loans now total $250M; stabilization would support management’s isolated-problem explanation, while broader migrations and charge-offs would challenge it.
- Repurchase discipline: The new $1.2B authorization follows a decline in tangible common equity; watch whether distributions preserve capital strength or further erode the loss-absorbing cushion.
Longer version: the summary of each of the report's 6 sections, written by an AI model from the same filing.
Changes since the previous 10-Q
The core bet (strengthened): Relationship lending, customer deposits and wealth services would replace transactional loans and wholesale funding. → The relationship-banking strategy gained support from a better lending and funding mix.
- Watch item improved Customer funding
Year-to-date deposits fell 4%; borrowings rose 33% to $4.25B. → Q3 deposits grew 1%; borrowings fell to $3.3B while commercial lending expanded. - Risk eased Problem loans
Non-performing loans reached $268M, up from $198M at year-end. → Non-performing loans fell to $250M, although commercial real-estate non-accruals increased.
Figures are computed from the filing's XBRL data; the summary and scores are written by an AI model reading the filing.
Model 006 · prompt v172 · 2026-11-05 23:58:36Z