COLB COLUMBIA BANKING SYSTEM, INC. 10-Q 2026-09-30 section summaries

Columbia Banking System (COLB) — Q3 and nine months ended September 30, 2026

Consolidated results

Total revenue increased 19% in Q3 and 29% for 9M; net income more than doubled in Q3 and rose 85% for 9M. Lower credit-loss provision and non-interest expense supported earnings. The Q3 expense decline chiefly reflected merger and restructuring expense of $2 million versus $87 million and no comparable legal-settlement expense. At the same time, salaries and benefits rose to $191 million from $171 million in Q3 and to $583 million from $471 million for 9M; 9M intangible amortization increased to $117 million from $85 million. Financial-services and trust revenue grew to $15 million from $9 million in Q3 and $45 million from $20 million for 9M.

The 2025 comparison includes Pacific Premier only from its August 31, 2025 acquisition, an all-stock transaction valued at $2.4 billion. Acquisition-related expenses were $2 million in Q3 and $29 million for 9M 2026. Diluted weighted-average shares were 280.338 million versus 238.925 million in Q3, and 286.246 million versus 219.712 million for 9M, reflecting acquisition-related shares as well as repurchases.

Balance sheet and cash flow

Other intangibles had gross carrying value of $1.065 billion and accumulated amortization of $470 million at September 30. Tangible common equity, calculated as equity less goodwill and other intangibles, was $5.002 billion. Goodwill includes $453 million from Pacific Premier; no impairment was identified. AFS securities were $11.831 billion at amortized cost and $10.935 billion at fair value, versus $11.376 billion and $11.112 billion, respectively, at year-end. The fair-value shortfall widened to $896 million from $264 million, and accumulated other comprehensive loss increased to $708 million from $233 million, largely reflecting securities valuation changes.

*Beginning-of-period cash for 9M 2026.

Cash declined by $643 million during 9M. Financing outflow included a $1.471 billion net decrease in deposits, $621 million of share repurchases, and $316 million of dividends; the company also received $246 million net proceeds from subordinated debentures. Shares outstanding fell from 295.422 million at January 1 to 276.330 million at September 30, including 20.253 million shares repurchased. Repurchases were $597 million for 9M (19.6 million shares, average $30.44); just $3 million remained under the prior authorization at quarter-end. On October 20, the board authorized a new $1.2 billion repurchase program, with purchases discretionary.

Credit, securities and lending

Loans and leases at amortized cost were $46.915 billion, down from $47.776 billion at year-end. The $480 million allowance for credit losses comprised $462 million for loans and leases and $18 million for unfunded commitments, versus total ACL of $485 million at year-end. Q3 provision was $33 million versus $70 million and net charge-offs were $28 million versus $22 million; for 9M, provision was $89 million versus $124 million and net charge-offs were $93 million versus $81 million. (The consolidated provision line also includes other credit-loss components.) In Q2, the company prospectively changed its ACL estimation method from DCF to non-DCF for substantially all loan segments; management said the estimate change was not material and considers reserves adequate, while noting future losses could exceed them.

Credit indicators were mixed: past-due loans rose to $192 million from $179 million, non-accruals to $157 million from $116 million, and loans 90+ days past due but accruing to $97 million from $85 million. Loans modified for borrowers experiencing financial difficulty totaled $165 million for 9M versus $122 million, or 0.35% versus 0.25% of relevant balances. Modified balances within the prior 12 months rose to $181 million from $141 million, including $60 million non-accrual versus $15 million. No Q3 modifications defaulted within 12 months, although amortized cost of modified loans subsequently defaulting was $29 million for 9M versus $10 million.

AFS securities in an unrealized loss position had $10.527 billion fair value and $898 million gross unrealized losses, versus $4.737 billion and $380 million at year-end; losses on securities held at least 12 months were $487 million. Management attributes losses mainly to interest rates and wider spreads, not credit deterioration; no ACL was recorded and there were no realized gains or losses from AFS debt-security sales. CRE-related loans and leases were 74% of the portfolio versus 76%; multifamily including construction was 23% versus 24%, and office 7% versus 8%. Management identifies economic conditions, rates, refinancing availability, and property values as key CRE repayment risks.

Funding, exposures and risks

FHLB advances were $3.3 billion, all maturing in 2026. In September, the Bank issued $250 million principal of subordinated notes due 2036, with a 6.721% fixed rate for five years then resetting to the five-year Treasury rate plus 195 basis points; carrying value after issuance costs was about $246 million. The company intends to use part of the proceeds to redeem approximately $240 million principal of junior subordinated debentures in Q4 2026 and early 2027.

Commitments to extend credit increased to $13.146 billion from $11.927 billion; standby letters of credit were $495 million versus $427 million. Commercial-borrower swaps were generally offset with third-party swaps. Derivative losses were $8 million in Q3 and $12 million for 9M, versus approximately zero and a $1 million gain, respectively; 9M 2026 losses principally reflected futures.

The Bank is defending litigation related to 34 iCap real-estate entities that filed for bankruptcy; investors allege losses of approximately $290 million. A separate investor class action was filed in September 2026. A 2023 MOVEit vendor incident exposed identifying information for approximately 429,000 consumer and small-business customers; related class actions are in federal multidistrict litigation. Management believes current information, counsel, insurance, and reserves support no material adverse effect on consolidated statements, but acknowledges uncertain outcomes could materially affect an individual period. The company reports one operating and reportable segment, managed on a consolidated basis.

Results and performance

Q3’s sequential earnings improvement reflected higher net interest income and lower non-interest expense, partly offset by lower non-interest income and higher provision and taxes. Net interest income benefited from higher loan and taxable-securities yields and lower funding costs, despite lower average earning-asset balances. Margin expansion also reflected a more favorable funding mix and the absence of approximately $4 million of Q2 interest reversals. Tax-equivalent NIM was 4.11%, up from 3.93% in Q2. The Q3 non-interest income decline included a $7 million net fair-value loss versus a $3 million gain in Q2; Q2 also included $3 million from a one-time death benefit.

For 9M, growth primarily reflects Pacific Premier contributing for all of 2026 versus only one month in 2025, as well as balance-sheet optimization; the periods are therefore not directly comparable. Tax-equivalent NIM rose to 4.00% from 3.73%. The cost of interest-bearing liabilities fell 52 basis points to 2.22%, while earning-asset yield declined 12 basis points to 5.46%. Higher expenses reflected the combined operations, including salaries, occupancy, deposit costs and acquired-intangible amortization. Merger and restructuring expense fell to $35 million from $109 million; the prior period included a $55 million legal-settlement accrual, and acquisition cost savings were essentially realized by June 30, 2026. The lower 9M provision also reflects $70 million of acquisition-related provision in 2025.

Balance sheet, funding and liquidity

Loans and leases declined $861 million, while deposits declined $1.471 billion, largely from deliberate reductions in brokered and wholesale public deposits. Core deposits increased to $50.6 billion from $50.2 billion; brokered deposits fell to $622 million (1% of deposits) from $2.355 billion (4%). Estimated uninsured deposits rose to $21.559 billion (41% of deposits) from $19.783 billion (36%). The loan-to-deposit ratio was 89%, versus 88%.

The company is reducing lower-yielding transactional real-estate loans and wholesale funding while emphasizing relationship-based commercial lending and customer deposits. Commercial loans and leases grew to $12.770 billion from $11.955 billion (9% annualized), while CRE declined to $26.497 billion from $27.870 billion and residential real-estate loans fell $281 million to $7.5 billion. Multifamily represented 23% of loans versus 24%, and office 7% versus 8%. CRE is concentrated in Southern California (32%), Puget Sound (14%), Portland Metro (11%) and other Oregon (12%).

Available liquidity was $26.025 billion, including $19.609 billion of net off-balance-sheet capacity, $1.461 billion of cash net of reserve requirements, and $4.955 billion of excess bond collateral. Off-balance-sheet capacity included $12.971 billion of FHLB lines and $5.938 billion at the Federal Reserve Discount Window. Management expects liquidity to remain satisfactory through 2026 but notes deposit fluctuations, the potential cost of defending deposits, collateral requirements and possible restrictions on wholesale funding as risks.

AFS securities had $11.831 billion amortized cost and $10.935 billion fair value at quarter-end. Gross unrealized losses were $898 million, mainly attributed to interest rates and wider spreads rather than credit deterioration; management considered no allowance necessary. FHLB advances were $3.3 billion, all maturing in 2026, and carried fixed rates of 3.95%–4.37%. The company issued $250 million principal amount of subordinated notes in September, qualifying as Tier 2 capital; they carry a 6.721% fixed rate for five years, then reset to the Five-Year U.S. Treasury Rate plus 195 basis points, and mature in 2036. Proceeds are expected to fund redemption of approximately $240 million principal amount of junior subordinated debentures. Contractual obligations included $4.3 billion of time deposits ($4.2 billion due within one year), $3.3 billion of FHLB advances due within one year, $13.1 billion of loan commitments and $495 million of letters of credit.

Credit quality

The increase in problem assets was attributed primarily to adverse performance in one agricultural relationship, rather than broad portfolio deterioration. Non-accrual loans and leases rose to $157 million from $116 million; non-performing loans included $71 million of government-guaranteed balances. CRE non-accrual loans increased to $84 million from $50 million, while commercial non-accruals were $73 million versus $66 million. Management cites CRE exposure to higher rates, refinancing constraints, economic weakness and regional property-value declines as risks.

Q3 net charge-offs were $28 million versus $30 million; 9M net charge-offs rose to $93 million from $81 million, primarily because commercial charge-offs excluding FinPac increased. The allowance estimate incorporates updated economic assumptions, portfolio activity and credit migration; in Q2 the company shifted substantially all loan segments from a DCF to a non-DCF estimation methodology. Management considers the allowance adequate but notes model sensitivity and economic deterioration could prompt higher provisions and further credit deterioration.

Capital and shareholder returns

All regulatory capital ratios exceeded well-capitalized requirements. The tangible common equity ratio declined to 7.93% from 8.73%. Equity fell $761 million, reflecting $621 million of common-stock repurchases and retirements, $318 million of cash dividends and $475 million of other comprehensive loss, partly offset by net income. The company repurchased 6.5 million shares in Q3 and 19.6 million in 9M; it paid $1.11 per share in 9M dividends, versus $1.08 in 9M 2025. In October, the board replaced the prior $700 million authorization with a no-expiration authorization for up to $1.2 billion of repurchases.

Key risks include real-estate exposure and regional property values, economic and interest-rate changes, deposit retention and funding costs, acquisition integration and realization of revenue opportunities, and liquidity or confidence shocks. Other exposures include competition, cyber or third-party system failures, regulatory costs and technology disruption.

Market risk

COLB reported no material change in its qualitative market-risk disclosures from its December 31, 2025 Form 10-K. Its interest-rate simulations nevertheless show increased sensitivity to rate declines in Year 2 and more favorable NII outcomes under rising-rate scenarios.

Net interest income sensitivity

The estimates assume a parallel, sustained rate shift over 12 months, with balance-sheet size and composition held constant.

The model excludes potential management responses, including balance-sheet and pricing changes, and does not capture rate effects on credit risk, prepayments, or spread relationships.

Economic value of equity sensitivity

EVE sensitivity estimates the fair-value impact on financial assets and liabilities, including expected future cash flows.

COLB remains asset-sensitive in rising-rate scenarios: higher rates reduce estimated EVE because the value decline in interest-earning assets exceeds the change in interest-bearing liabilities. Lower rates increase EVE, including through the value of core deposit intangibles. At September 30, 2026, estimated EVE was above book equity, primarily due to core deposit intangible value.

Interest-rate backdrop

The federal funds target range rose 25 basis points during Q3 2026, from 3.50%–3.75% to 3.75%–4.00%. FOMC members’ median expectations projected another 25-basis-point increase in December 2026, followed by a stable 4.00%–4.25% range through Q4 2027.

Item 4 — Controls and Procedures

As of September 30, 2026, management, including the CEO, CFO, and Principal Accounting Officer, concluded that the company’s disclosure controls and procedures were effective in ensuring required information was recorded, processed, summarized, and reported in a timely manner for SEC filings.

No changes during the quarter ended September 30, 2026 materially affected, or were reasonably likely to materially affect, internal control over financial reporting. This section reports no financial results or strategic developments.

The company reported no material changes to the risk factors disclosed in its Form 10-K for the year ended December 31, 2025. It cautioned that those existing risks could materially adversely affect its business, financial condition, liquidity, results of operations, and capital position, and could cause actual results to differ materially from historical results or forward-looking statements.

Rule 10b5-1 Trading Arrangements

During Q3 2026, Senior Executive Vice President Torran Nixon adopted a Rule 10b5-1 trading plan on August 5, 2026. The plan provides for the sale of up to 16,787 shares of Columbia common stock and is scheduled to terminate on June 8, 2027, subject to customary earlier-termination events.

No other directors or officers adopted or terminated a Rule 10b5-1 plan or non-Rule 10b5-1 trading arrangement during the quarter. Officers may also acquire or dispose of Columbia shares through tax-withholding elections, dividend reinvestment, the 401(k)/profit-sharing plan, and the ESPP; some of these arrangements may qualify as Rule 10b5-1 plans or non-Rule 10b5-1 arrangements.