Columbia Banking System Q4 2025 Earnings Call Transcript

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Provided by Quartr
January 22, 2026

Key Takeaways

  • Positive Sentiment: Closed the acquisition of Pacific Premier and report smooth cultural integration and a planned systems conversion this quarter; achieved $63M of annualized deal-related cost savings (≈50% of the $127M target) with remaining savings expected by end of Q2.
  • Positive Sentiment: Reported strong Q4 operating results — operating pre-provision net revenue +27% QoQ, operating net income +19% QoQ, and operating EPS $0.82 — with NIM expanding to 4.06%, partly boosted by one-time CD premium amortization that will not repeat in 2026.
  • Positive Sentiment: Credit metrics remained stable: Q4 provision was $23M and allowance for credit losses was 1.02% of loans (1.32% when including acquired loan credit discount), with management noting healthy portfolio performance versus some peers.
  • Neutral Sentiment: Balance sheet dynamics include gross loans at $47.8B as transactional and CRE construction balances declined, intentional reductions in brokered/public deposits, and an expected modest Q1 earning-asset contraction to ~$60.5–61B with NIM guided to 3.90–3.95% before trending above 4% in Q2/Q3.
  • Positive Sentiment: Returned capital to shareholders by increasing the dividend to $0.37, repurchasing 3.7M shares in Q4, and planning $150–200M of quarterly buybacks in 2026 with ≈$600M authorization remaining and >$600M of excess capital reported.
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Earnings Conference Call
Columbia Banking System Q4 2025
00:00 / 00:00

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Operator

Hello, and thank you for standing by. Welcome to Columbia Banking System fourth quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. At this time, I would like to introduce Jacque Bohlen, Director of Investor Relations, to begin the conference call. You may begin.

Jacque Bohlen
Jacque Bohlen
Director of Investor Relations at Columbia Banking System

Thank you, Tawanda. Good afternoon, everyone. Thank you for joining us as we review our fourth quarter results. The earnings release and corresponding presentation are available on our website at columbiabankingsystem.com. During today's call, we will make forward-looking statements which are subject to risks and uncertainties and are intended to be covered by the safe harbor provisions of federal securities law. For a list of factors that may cause actual results to differ materially from expectations, please refer to the disclosures contained within our SEC filings. We will also reference non-GAAP financial measures, and I encourage you to review the non-GAAP reconciliations provided in our earnings materials. I will now hand the call over to Columbia's Chair, CEO, and President, Clint Stein.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Thank you, Jacque. Good afternoon, everyone. The fourth quarter marked a strong end to a tremendous year for Columbia. We continued to advance our strategic priorities while delivering solid operating performance and consistent, repeatable financial results. During 2025, we announced and closed our strategic acquisition of Pacific Premier Bank. As I have stated many times, Pac Premier was the missing puzzle piece to complete our Western footprint. The acquisition bolstered our position as the preeminent regional bank in the Northwest and improved our competitive position in other key Western markets, most notably Southern California, where we now hold a top 10 deposit market share position. We remain on track for another seamless systems conversion this quarter, supported by our highly experienced team of associates, meticulous planning, and successful integration activity to date. I'm very pleased with the cultural integration I have witnessed over the past several months as well.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Our new team members from Pac Premier continue to impress with their unrelenting focus on taking care of customers while adapting to Columbia's products, policies, and processes. We also contributed to our operational momentum through de novo growth, opening new locations in Arizona, Colorado, California, and Oregon during 2025. These investments reflect our commitment to expanding our presence throughout our entire footprint. We have planned for continued targeted de novo activity in 2026, with investments funded by resources set aside from our 2024 expense initiative and other efficiency opportunities. Turning to the fourth quarter, Columbia's operating results were once again consistent and repeatable, underscoring our focus on operational enhancement and top quartile, and in some cases, top decile performance. Fourth quarter operating PPNR was up 27% from the third quarter, as our focus on profitability and balance sheet optimization was enhanced by the full quarter run rate of Pac Premier.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

We are already seeing that momentum carry into 2026 with the continued realization of deal-related cost savings and healthy customer pipelines across each of our business units and geographies. Our teams remain focused on the activities that drive business with new and existing customers. Our ongoing balance sheet management strategies are enhancing the quality of our earnings and driving strong internal capital generation. Our disciplined approach to balance sheet management encompasses our prudent credit underwriting and proactive portfolio monitoring. Our fourth quarter metrics highlight our strong credit profile, which remained stable throughout 2025 as we were untouched by external events that negatively impacted some of our peer banks. Looking forward to 2026 and beyond, we will continue to prioritize profitability over growth just for the sake of growth. Our priorities have not changed.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

We remain focused on optimizing performance, driving new business growth, supporting the evolving needs of existing customers, and consistently delivering superior financial results for our shareholders. Our bankers have worked tirelessly to generate consistent, repeatable earnings for eight consecutive quarters. Consistency has long been a historical trend for Columbia, and we expect that trend to continue as we go forward. I want to thank our associates for another incredible year. Your dedication and passion to be the best drive our success, and I couldn't be more excited about the opportunities ahead. Together, we are building a stronger, more dynamic Columbia, one that delivers lasting value for our customers, communities, and shareholders. I'll now turn the call over to Ivan.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Thank you, Clint, and good afternoon, everyone. As Clint highlighted, the fourth quarter completed a strong year for Columbia. On an operating basis, which excludes merger expense and other items detailed in our non-GAAP disclosure, fourth quarter pre-provision net revenue and operating net income increased 27% and 19% respectively compared to the prior quarter, while full year 2025 results rose 22% and 31% compared to 2024. These improvements reflect four months of operating as a combined company following our acquisition of Pac Premier, as well as our continued emphasis on balance sheet optimization and disciplined expense management. Focusing on the fourth quarter, we reported EPS of $0.72 and operating EPS of $0.82, increases of 6% and 15% respectively from the prior year's fourth quarter. Net interest margin expansion and corresponding increase in net interest income was a key driver of earnings performance.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Net interest margin was 4.06% for the fourth quarter, up from 3.84% for the third quarter and 3.64% for the fourth quarter of 2024. Slide 19 of our earnings presentation outlines the contributors to the 22 basis points potential quarter expansion, with improved funding performance serving as a primary factor alongside continued earning asset optimization. Having reduced wholesale funding by nearly $2 billion during the third quarter, the fourth quarter results reflect the full benefit of these actions alongside two additional months of operating as a combined company. Net interest income during the fourth quarter also benefited from $12 million in premium amortization related to acquired time deposits, which we anticipated and highlighted last quarter, and $5 million from an accelerated loan repayment, contributing a combined 11 basis points to the margin. The premium on time deposits was fully amortized as of year-end, and it will not repeat in 2026.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Non-interest income was very strong in Q4, with $90 million on a GAAP basis and $88 million on an operating basis, as detailed on slide 21. Of the $16 million sequential quarter increase in operating non-interest income, $13 million reflects two additional months of Pac Premier, while the remaining $3 million was driven by higher customer fee income, most notably in swap and syndication banking revenue, representing a high watermark for those revenue streams. Slide 22 outlines non-interest expense, which was $373 million on an operating basis. Of the $66 million sequential quarter increase, $62 million relates to Pac Premier, inclusive of cost savings. As of year-end, we achieved $63 million in annualized deal-related cost savings, or approximately 50% of the targeted $127 million, although these savings were not fully run rated for the fourth quarter's result.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Excluding CDI amortization expense of $42 million, operating non-interest expense of $331 million was at the lower end of our $330-$340 million range that we signaled in our last call, as certain investments fell back into 2026 from a timing perspective. Flipping back to slides 16 and 17, provision expense was $23 million for the fourth quarter, reflecting low loan portfolio runoff, credit migration trends, and changes in the economic forecast used in our credit models. Our credit metrics remained stable and healthy, and our allowance for credit losses was 1.02% of loan at quarter-end and 1.32% of loan balances when the credit discount on acquired loans is factored in. Continuing with the balance sheet, our investment securities portfolio is outlined on slide 11.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

The portfolio increased by approximately $100 million during the fourth quarter, as we purchased $246 million of securities at a weighted average base yield of 4.52%, partially offset by paydowns. Gross loans and leases were $47.8 billion as of December 31st, down from $48.5 billion as of September 30th, as we continue to allow below-market-rate transactional loan balances to decline, alongside declines in our CRE construction and development portfolio. Chris will discuss loan portfolio trends in greater detail shortly. Total deposits were $54.2 billion as of December 31st, compared to $55.8 billion as of September 30th. During the fourth quarter, we intentionally reduced brokered and select public deposits, which collectively declined by over $650 million, as alternative funding sources offered more attractive rates. Seasonal customer outflows, which Chris will discuss, also contributed to the decline. To supplement funding, term debt increased to $3.2 billion as of December 31st.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Slides 20 and 25 review funding flows, our balance sheet sensitivity to interest rate changes, and maturity and repricing schedules. Turning to capital, slide 18 highlights our expanding ratios, supported by net capital generation and balance sheet optimization. During the fourth quarter, we increased our common dividend to $0.37 per share from $0.36 per share and repurchased 3.7 million common shares at an average price point of $27.07. Even with the execution of our buyback activity, we saw CET1 and total risk-based capital ratios increase to 11.8% and 13.6% respectively as of December 31st. Tangible book value increased to $19.11 as of December 31st, up 3% from the prior quarter and 11% from the prior year. Looking forward, we expect net interest margin in the first quarter to land in a range from 3.90%-3.95%, consistent with what we indicated on our last call.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

This change reflects the absence of the 11 basis point benefit in the fourth quarter from acquired CD premium amortization and the accelerated loan repayment activity that I discussed earlier, as well as higher wholesale balances added to the balance sheet in the latter part of December, resulting from seasonal deposit flows. After bottoming out in the first quarter, we expect net interest margin to trend higher each quarter throughout 2026, as customer deposit balances rebound and balance sheet optimization actions continue to improve profitability, ultimately surpassing 4% net interest margin in the second or third quarter of the year. As we saw this past quarter, our continued balance sheet optimization activity may lead to modest earning asset contraction during the first quarter.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

We have maintained a conservative level of excess liquidity following the Pacific Premier acquisition, and we may reduce excess cash to further optimize our funding structure by repaying wholesale sources. Following these actions, we expect the balance sheet size to remain relatively stable, with commercial loan growth offsetting contraction in the transactional portfolio. Excluding CDI amortization, we expect non-interest expense to remain in the $335-$345 million range in the first and second quarters before declining modestly in the third quarter, as we realize all cost savings related to Pacific Premier by the end of Q2. CDI amortization will average around $40 million per quarter. We expect to increase share repurchase activity to a range of $150-$200 million per quarter in 2026, noting $600 million remains authorized under our current plan. We ended the year with over $600 million in excess capital on our most constrained measure.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Overall, we are very pleased with the financial results for the fourth quarter, driving over 1.4 ROAA and over 17% return on tangible common equity, and we feel very well positioned to continue to drive strong profitability as we move into 2026. I will now hand the call over to Chris.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Thank you, Ivan. Our teams had another strong quarter of business generation. New loan origination volume of $1.4 billion was up 23% from the year-ago quarter, while full year 2025 volume was up 22% from the previous 2024. As a result of this activity, Columbia's commercial loan portfolio increased 6% on an annualized basis, although the growth was offset by a decline in transactional loan balances, construction, and development loans. We also sold $45 million in acquired loans risk-rated Special Mention, as we continually prune our loan portfolio. Slide 24 in our earnings presentation provides additional balance and repricing details related to transactional loans. We continue to expect this portfolio to amortize down until loans reach their repricing date, limiting our net loan portfolio growth but improving our profitability.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Turning to customer deposits, the strong growth momentum from the third quarter carried into October, bolstered by our successful small business and retail deposit campaign, which ran from September through mid-November and added $473 million in low-cost deposits. Inclusive of the two campaigns completed earlier in 2025, Columbia generated $1.3 billion in new customer deposits through three successful campaigns. Returning to the fourth quarter, customer deposit balances contracted due to seasonal decreases in customer accounts driven by company distributions, tax payments, and other typical year-end payouts. We expect modest additional deposit contraction during the first quarter and into April, given anticipated customer tax payments, with net growth resuming in the spring as business activity accelerates and seasonal payments end. As Ivan discussed, customer fee income increased for the fourth quarter.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

This was driven by the addition of Pac Premier and our continued efforts to expand the contribution of core fee income to total revenue. On an operating basis, non-interest income increased 26% in 2025 over the previous year, with exceptional growth in treasury management, international banking, financial services, and trust revenue, along with strength across other core fee businesses. Pac Premier's custodial trust business has been a powerful complement to our existing wealth management platform, and we expect continued fee income momentum as we deepen customer relationships with legacy Pac Premier customers. Our loan, deposit, and core fee income pipelines are healthy, and we remain outwardly focused on generating business in a disciplined manner. I will now hand the call back to Clint.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Thanks, Chris. The past several years have brought significant change to Columbia. 2023 was a year of widespread integration following the closing of the Umpqua acquisition, which impacted every associate at each legacy organization. We collectively managed through industry liquidity events that occurred in tandem with the deal's elongated closing and our scheduled systems conversion. 2024 was a year of efficiency initiatives. Our full-scale review resulted in consolidated positions, simplified organizational structures, and an improved profitability outlook. In 2025, we added the missing piece to our Western footprint with the Pac Premier acquisition. We continued to invest a portion of 2024's cost savings into de novo locations in targeted markets. In addition, we added new talent throughout the company, launched new products, and implemented new technology, all with an eye toward improving operational efficiencies and growing revenue.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

We also made significant progress optimizing our balance sheet as we increased capital, returned to our shareholders by repurchasing shares. As we look to 2026, we have set the stage for an exciting future. We are now positioned to deliver on the full capabilities of our company with the resources, talent, and vision to excel in every market we serve in the pursuit of long-term shareholder value creation. We expect to continue to generate meaningful excess capital and fully intend to return that excess to our shareholders. This concludes our prepared comments. Chris, Tory, Ivan, and Frank are with me, and we're happy to take your questions. Tawanda, please open the call for Q&A.

Operator

Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Jon Arfstrom with RBC Capital Markets. Your line is open.

Jon Arfstrom
Jon Arfstrom
Managing Director and Associate Director of US Research at RBC Capital Markets

Thanks. Good afternoon, everyone.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Hi, John.

Jon Arfstrom
Jon Arfstrom
Managing Director and Associate Director of US Research at RBC Capital Markets

Hey. Congrats on the chairman role, Clint, first of all.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Thank you.

Jon Arfstrom
Jon Arfstrom
Managing Director and Associate Director of US Research at RBC Capital Markets

Yeah. I guess maybe to start this, can you talk a little bit more about Pac Premier? You referenced it in your prepared comments, but it's showing up everywhere in the P&L, and you talked about it as the missing puzzle piece. Can you talk about how it's going so far and what kind of contributions you've seen so far in terms of growth?

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Yeah. I'll kick it off and then ask Tory and Chris both to offer their insight as well. I've said on previous calls and in various discussions from the very first week that we announced this, how this one was different and how the folks at Pac Premier showed a level of excitement that typically you don't see initially, or at least not widespread, like what we experienced in the days and weeks following the announcement. And then typically, it's an emotional time for people, as change can be hard, and so there can be a little bit of ebb and flow in terms of emotions. And we've seen none of that, nothing but excitement, embracing the ability to do more with their long-standing and very deep customer relationships, excitement of being part of this broader company that has a footprint and reach throughout the Western U.S.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

We work really hard at it. We have some great leaders that joined us from Pac Premier that we're working hard every single day to make sure they're taking care of their people, taking care of their customers, and managing through the change. The last hurdle that we have is the systems integration. We have a very seasoned team, as well as Pac Premier has had a very seasoned team. Both Columbia and Pac Premier, I think on a combined basis over the last 15 years, have done 20+ systems conversions and integrations. That talent has been hard at work and completing mock conversions and all kinds of other detailed work that goes beyond the scope of my knowledge.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

But I can tell you that the two co-leaders of the integration management office, we were on a call on Tuesday, and they look very calm, rested, and confident in their ability to execute on the task that's at hand. So I'm going to step back and ask Tory to provide a little more detail on what he's seen as he's been throughout the market and in front of customers more recently than I have.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

Great. Thanks, Clint. And John, just to give a slightly a little bit more color, as Clint said, I mean, the enthusiasm and excitement from the Pac Premier folks has just been amazing. I mean, it's been centered in kind of three different areas. One is the ability to grow with their existing customer base. So as those customers get bigger, they get to do more stuff with them. Second would be to call on larger customers, I think, than they historically have on the commercial side of the house. They're continuing to do what they've always done, but they're kind of slightly going up market, which has been fun for them and great for the bank. And I think the third is just provide more products and services for the customers based on the capabilities that we have as a new company.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

I'll give you a couple of examples because we look at these often, and they're kind of fun to see. I mean, they had a law firm that they brought into the bank that's $22 million in credit and $20 million in deposits. They brought in an environmental remediation company, about $200 million in revenue, a company much bigger than they would historically call on, $10 million in credit facility and $10 million in deposits. They got a surgery center, again, something bigger than they would normally call on, $40 million in deposits, $15 million in credit. And then lastly, they had a construction contractor that they banked for a while that expanded their credit facility, and they added $20 million and got up to a $60 million credit facility.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

So just some great examples, I think, of the Pac Premier folks embracing our new company and seeing the opportunity in front of them and seizing on it. It's been really fun to be a part of.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Hey, John, this is Chris. I'll add, well, I'll echo the excitement. That has not waned at one bit. The quarter was full of training on our relationship strategy and getting people ready. We'd talked previously about the number of referrals that were coming in across all different business lines. Tory gave you some really nice of the larger ones there, but it's very granular as well. I think another piece is we really started digging in and seeing how the deposit portfolio, which we said was similar to ours, how it has really held up, and the customers are behaving in that manner. So that's a real good indication that everything we thought in that space is playing itself out. I'll close you with the trainings there. We're getting ready to go.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Later this quarter, we'll launch another retail campaign, and I can't wait to see the results of that. It's pretty exciting.

Jon Arfstrom
Jon Arfstrom
Managing Director and Associate Director of US Research at RBC Capital Markets

Okay. Good. Thank you for that. And then just a small one, Ivan, thanks for the guidance, by the way. What does a modest step down in earning assets mean? Can you help us frame that up?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yep. I certainly can. So we ended the quarter with earning assets at around $61.3 billion. And as we look out into Q1, our expectation at this point is that HFI loans will stay roughly flat to modestly down relative to our ending balance that we just published at 12/31. I mentioned it earlier. We will likely see some modest decline in our cash balance levels as well relative to where we finished up the year, just in that we've been holding in excess there for the last few months following the PPBI close. So that'll impact earning assets. Obviously, it won't impact net interest income in regard to that. So I would signal a range probably in the $60.5-$61 billion range for the first quarter of this year.

Jon Arfstrom
Jon Arfstrom
Managing Director and Associate Director of US Research at RBC Capital Markets

Okay. Good. Thanks for the help. Good luck with the lawn this weekend.

Operator

Thank you. Our next question comes from the line of David Feaster with Raymond James. Your line is open.

David Feaster
David Feaster
Managing Director of Banking at Raymond James

Hey. Good afternoon, everybody.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Hey, David.

David Feaster
David Feaster
Managing Director of Banking at Raymond James

I wanted to maybe kind of follow up kind of on that growth side. I mean, obviously, we had a lot of payoffs and paydowns this quarter. I'm curious maybe how much of that was intentional runoff versus normal payoffs and paydowns just being elevated. And then just as you look at those transactional relationships, I mean, we got $2.8 billion. How much of that do you think you can retain, or would you expect a majority of that to exit the bank?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Thanks, David. Ivan here. I'll start, and then I'll hand over to Tory for maybe more of the color commentary. When you think about that loan decline at $686 million quarter on quarter, I really break it down into two major buckets. The first is what you referenced earlier, which is that transactional portfolio decline at just under $300 million. And then the second really being very concentrated within the commercial real estate construction and development portfolio. And Tory will speak a little bit more to that aspect of it. Within the transactional book, so far, we're seeing CPRs at kind of an 11%, 12%, 13% type level as we've been tracking it over the last quarter. We do believe that'll move a bit quarter on quarter depending on kind of what's coming up for repricing.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

We've got $4 billion of that book that will be maturing or repricing here over the next 24 months, and as we've talked about in the past, some of that stuff is likely to reprice and stay on our balance sheet. But if it exits, that's also an opportunity for us to drive strong accretive value from a revenue growth perspective, whether that's in the form of backfilling with core relationship lending kind of in the six and a half plus type range is what we're seeing. So a 200 basis point yield improvement on that or through kind of elevating our paydowns on the wholesale side of the equation. So that's kind of how we're thinking of it at this point, fairly similar to where we were.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

So as I look at it quarter on quarter, kind of validation of what we were thinking would likely occur and what we talked about three months ago. I'll hand over to Tory just to kind of give more color commentary as well.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

Thanks, Ivan. David, this is Tory. I break it down into two different pieces. The first would be the transactional multifamily division lending that we've talked about a lot. And Ivan mentioned that. And I would say this, that roughly 70% or 80% of it today that's coming up from kind of this fixed to floating period is just rolling into the bank at a 6.5 to 7 coupon. And then the balance of that is exiting the balance sheet and going either being paid off or going someplace else, being financed somewhere else. But we're retaining right now somewhere between 75% and 80% of it. I don't know if that changes much over the course of this year, but that's kind of what we're seeing today.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

On the construction side, I mean, essentially, we've got a lot of projects that have gotten to a point where they are seasoned and stable, and they're just rolling from the construction facility into permanent financing, and roughly 85% of that that's exiting the bank is being permanently financed by Fannie or Freddie, and the balance is either being done a little bit by us or other banks or life companies, so the majority of it's going to the agencies, and just a little bit of it's kind of rolling into either life companies or commercial banks, so that's kind of where we are on those two big asset classes for us.

David Feaster
David Feaster
Managing Director of Banking at Raymond James

Okay. That's great. And then maybe just following up on John's question a little bit on Pac Premier. I know we've got the conversion upcoming. I was hoping we could maybe get a sense of the timeline for the integration of all the systems. And you got a slide in here that talks about some of the rollout of all their technologies in addition to some of the key businesses that you're focused on cross-selling or leveraging. Chris, you mentioned the custodial trust business. I know they're going to be included in this next small business campaign. We're just kind of curious, again, the process and the timeline to roll out some of their technologies and then the fee income lines to cross-sell post-conversion.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

David, you never disappoint. You packed a lot into that follow-up question. I'll just start by saying kind of a general guide in terms of the systems component of it is in Ivan's prepared remarks. He noted that we expect to have the full realization of the cost saves in by the end of the second quarter, so that kind of gives you a good sense of the ancillary systems and shutting down surplus servers and getting all of those other things aside from just the core system integrated. I don't think we will ever be done in terms of when we look at technology implementation and utilization because it's a moving target, and that's just as an organization. We're always going to be in some form of investing and optimizing the tech stack.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

In terms of timing of some of the technology that we were excited about from a proprietary standpoint that Pac Premier brought along, the first mandate was to make sure that the folks from Pac Premier don't lose any of the functionality or the customers lose any of the functionality that they've had for many years. So we don't want anybody going backwards, and we want to use it as a way to springboard the legacy Columbia customer base and employee base forward. So you had a lot in that question, and so I'm going to step back and let Ivan, Chris, and Tory offer their insights.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

Go ahead, Chris.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Hey, David. You mentioned the custodial trust piece of it. I tell you, that's an example of where there's a real win from the standpoint of the technology that they use for the core business is something that we're actually looking to adopt into our fiduciary trust business and bring them even closer in line together. They have a deposit portfolio that'll go through the banking conversion. HOA goes through that. The rest of the bank goes through it as well. As Clint said in his remarks, we're very comfortable with where we're at. That's upcoming. From there, I think you'll see it's pretty stable. We'll really look at these opportunities where we're taking advantage, not just the things that we bring to the table, but the things that Pac Premier brings to the table.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

That custodial trust one has already paid dividends in winning new business because we have that capability now or the combined capabilities.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

I'll just add, David, this is Tory, that we're full steam ahead, and I think they're doing a great job. Chris mentioned earlier in prepared remarks of a 20%, I think 23% origination growth quarter-over-quarter. A big chunk of that is Pacific Premier. And what excites me about that growth is all the growth from Q3 to Q4 is C&I growth. And they're fully locked in on that. Our pipeline for core fee income, TM, commercial card, international banking, and merchant is up nicely. We're about a roughly $10 million pipeline, which is really strong. A big chunk of that is Pacific Premier. So they're out there providing the products and capabilities that we brought to them, and they're doing a great job executing it.

David Feaster
David Feaster
Managing Director of Banking at Raymond James

That's great. Thanks, everybody. Yeah.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Yeah, David, and I'll just add another example of one of the things that we were excited about was Pac Premier's. They called it their API marketplace and that connectivity to customer systems and everything, and we're not super creative as bankers, and so that is now the Columbia Bank API marketplace, and it's been fully implemented and is operational and being utilized across the combined company today as we sit here, so every component of what we can do, and I'll kind of lean into some of my prepared comments about how do we get more efficient, how do we get better every day as an organization, and then what kind of activities can we do or what kind of talent can we bring in to drive additional revenue sources and value for all of our stakeholders.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

And so it's just what I'll call a relentless pursuit of those types of activities.

David Feaster
David Feaster
Managing Director of Banking at Raymond James

All right. That's awesome. Thanks.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Jeff Rulis with DA Davidson. Your line is open.

Jeff Rulis
Jeff Rulis
Managing Director and Senior Research Analyst at DA Davidson

Thanks. Good afternoon. Ivan, I appreciate the earning assets discussion for Q1. I wanted to try to get the sense for the full year on the loan balance. It looks like $2.8 billion set to reprice or runoff within a year in that table on 2024. Just wanted to see what the offset is on organic growth. So what do you expect the loan portfolio on net for the balance of the year?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Pretty flat is our current outlook. So we saw a bit of that step down here, as you saw during Q4. As Tory mentioned earlier, we've seen some of that transactional portfolio roll into relationships we've been able to retain. So currently, the outlook for total loans is relatively flat to year-end. That'll ebb and flow quarter on quarter. So you'll probably see some plus or minus to that each quarter. But generally, the goal is to offset any of that transactional runoff with core relationship-based lending activities.

Jeff Rulis
Jeff Rulis
Managing Director and Senior Research Analyst at DA Davidson

Okay. All right. Appreciate that. And then this second question on capital sounds like on the buyback. I guess the first part of that is I think your stock's 10% higher than it was on average what you bought back in the fourth quarter. So won a nice trade. But does that diminish your appetite at all? And then the second piece is the alternative use of capital beyond buyback and organic growth if you focus on talent lift-outs, a special dividend, and/or M&A. Thanks.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

So Jeff, you're taking a cue from David Feaster and packing a lot of threads into that. And so there's parts of it that probably make sense for Ivan to respond to. And then obviously, I have some thoughts. And so I'll try to hit on between Ivan and myself, we'll try to hit on all your points. But if we miss one, just redirect us. I still think as a company that we're undervalued, the lift in our share price has been nice, but it doesn't change our view on reducing the share count and repurchasing stock. I said on the last quarter's call that I believe that the best investment we can make is in our own company. I still firmly believe that. And so really no interest in M&A with our increase in our share price. Still, buybacks make sense for us from my point of view.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

We fully expect at some point we may get to a position where the market's got us valued appropriately, and buybacks may not make sense. And special dividends are tools that we've used in the past when we've been in that position and obviously would take a lot of discussion with our board. And as we approached that, we would signal that to investors and make sure that folks fully understood why we were making that pivot. There are some things that we can do in terms of cleaning up the capital stack and things of that nature. And that's where I'll step back and ask Ivan to give you his thoughts.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yeah. No, it's a great question and something we spend a lot of time on. When we talk about capital priorities, really there's four of them, right? Ensuring that we've got the capital necessary to lend to our core clients, right? So supporting core loan growth opportunities there. Number two, obviously the dividend you saw us take that up 3% quarter on quarter. And we announced that last quarter as well. Number three, we are making investments in the business. Clint referenced some of them earlier in terms of market expansion opportunities. And we've heard Chris and Tory talk kind of in the past quarter as well about some of the teams that we're building out and bankers that we're adding in certain markets, which is very exciting. And then fourth, to the extent to which we still have excess capital, we will continue to execute our share buyback program.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

And we do see that as a programmatic approach to it, likely a multi-year approach given the level of excess that we're currently looking at. So that's kind of how we've thought about the capital opportunity there.

Jeff Rulis
Jeff Rulis
Managing Director and Senior Research Analyst at DA Davidson

Appreciate it. Thanks.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Jared Shaw with Barclays. Your line is open.

Jared Shaw
Jared Shaw
Managing Director at Barclays

Hey, good afternoon.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Hey, Jared.

Jared Shaw
Jared Shaw
Managing Director at Barclays

Maybe starting with the loan sales that you broke out, the $45 million, were those considered or were those classified PCD? I guess where did that sale come through in terms of where they were carried or marked? Is that what that $1 million gain is on gain on sale of loans?

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Those were all Pac Premier adversely rated loans, I will call that. And we had kind of a unique opportunity to offload some loans with certain accounting, and that's what we did. So there's about a $1 million hit, I believe, to goodwill associated with that loan sale. So it was really a win-win.

Jared Shaw
Jared Shaw
Managing Director at Barclays

Okay. So otherwise, it was basically sold at carrying value. There wasn't a gain or loss associated with that?

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Correct.

Jared Shaw
Jared Shaw
Managing Director at Barclays

What's the appetite for additional loan sales from here? I mean, I guess it sounds like that was a little bit of a unique situation, but could we think that there's additional sale opportunities out there?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

We've looked at, and every single quarter we look at component parts of that transactional portfolio in particular. The piece that Frank just talked about was kind of a cleanup execution from the PPBI acquired portfolio. I would not expect anything big from a transactional portfolio. We would still take a significant capital hit if we were to do kind of a bulk sale on some of those assets. But we will continue to evaluate for kind of more surgical opportunities as we go throughout the year.

Jared Shaw
Jared Shaw
Managing Director at Barclays

Okay. Thanks. And then shifting to deposits and deposit costs, thanks for giving us the spot right there of 2.06% at 12/31. How should we think about deposit pricing and deposit costs as we sort of move through the first half of the year with some of the moving parts in the deposit categories?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yeah. And we try to be careful. I'll start, and then maybe I'll hand it over to Chris. So quarter over quarter, like you mentioned, we saw interest-bearing deposits flow from about a 2.43% last quarter down to 2.20% when you exclude the CD premium impact. And as you quoted kind of that 2.06% in the closing days of the year, with the rate cuts happening throughout the course of Q4, the full effect of that wasn't reflected within the quarter. We've seen, I think since Q2, a beta over 50%. We continue to believe that 50% is a good estimate from a through-the-cycle perspective on the interest-bearing deposit beta. And really, that comes down to execution. And I think we talked in prior quarters around the rates down deposit playbook. And we've now done that three times in the last several months and to great effect.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

I'll hand over to Chris to give kind of some business commentary as well.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Thanks, Ivan. And Jared, the pricing aspect of it really becomes market-driven. And so we're analyzing that and following our competitors all the time. And when we see opportunities where we can bring it down five basis points, we will. When we see renewal rates are maybe a little higher than what we typically anticipate, we might see that there's opportunities to bring down CD rates and things of that nature. And so it's a pretty fluid process throughout the quarter in looking at those opportunities. And then further, we're really starting to look at, because of our footprint now, we're really looking at some regional types of pricing, which may give us the opportunities to be able to recognize markets that aren't quite as competitive versus those that are and keep that more in balance and check. But it's really an active, ongoing process.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Tory and I have conversations with bankers all the time about the exception portfolio and what we can do in there, and it's not waiting for just a Fed action to make things happen, although the deposit playbook has been fantastic. We're always looking for opportunities to trim there if we can.

Jared Shaw
Jared Shaw
Managing Director at Barclays

Okay. Thank you.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Chris McGratty with KBW. Your line is open.

Chris McGratty
Chris McGratty
Head of US Bank Research at KBW

Oh, great. How are you doing? Thanks for the question. Ivan, on the expense guide, I just want to make sure I'm clear. So Q1, 335, 345, and then add 40 from there. If I'm doing the math on kind of your run rate, half of the run rate expenses are in. I presume Q1 is your seasonally high watermark, and then I guess I'm trying to get after the exit rate once you get all the synergies. Any fourth quarter exit rate would be helpful. Thanks.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yep. I think you nailed it. Full year, somewhere in the ballpark of $1.5 billion with more of that in the first half than the second half. Second, exit velocity should be south of 370 all in and probably in the range of about a 330 excluding the CDI impact.

Chris McGratty
Chris McGratty
Head of US Bank Research at KBW

Okay. So one that's super helpful. The 15, is that a fully loaded or is that a fully loaded number, right?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yep. That includes the CDI accretion impact.

Chris McGratty
Chris McGratty
Head of US Bank Research at KBW

Okay. And then if we think about expensive investments and technology have been a big theme this quarter, once you get to that stripped out number in the fourth quarter, can you just speak about the need to invest, the balancing act between operating leverage as you go into next year?

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

This is Tory. I mean, I'll just jump in on the investment side quickly. I will tell you that Chris and I are continuously looking for opportunity to bring people into the company. So there's been over the past probably quarter and a half, we've added five commercial RMs in Utah, a team in Northern Idaho, a team in Eastern Washington, a franchise finance team, a couple of RMs in Phoenix, three new TM. I mean, we're continuously looking at and finding really good talent that we're investing in bringing to the company, and we watch very closely the de novo locations that we've created, and every one of them is profitable within 12 months, most of them a lot earlier than that. They're just really good solid bankers coming in, bringing customers with them and kind of just off to the races right out of the gate.

Tory Nixon
Tory Nixon
Co-President at Columbia Banking System

I think, Chris, I don't know if you have anything to add to that, but.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

No, I just echo it. Same markets. We're finding talent in the healthcare space. They've hit the ground running extremely quickly. We're finding talent in the wealth space. That typically takes a little longer because of the fee-based type of business that they run. But we do it at a 12-month lookback, and we're very pleased with the folks that we brought in last year, and we're continuing to build out that business as well. And I think maybe part of your question, Chris, was around the other technology and the things of investing in the bank. And that's just always been part of our run rate. I don't know that you see anything different unless we come across something that's going to be a real game changer for us. That's really built into a way of life for us, so. Perfect.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

And then, Ivan, on the tax rate, any thoughts?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Right now, we're modeling a 25% effective tax rate for 2026.

Chris McGratty
Chris McGratty
Head of US Bank Research at KBW

Great. Thank you.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Clark with Piper Sandler. Please go ahead.

Matthew Clark
Matthew Clark
Managing Director and Senior Research Analyst at Piper Sandler

Hey, good afternoon, everyone. Just circling back to the deposit discussion, can you remind us what your comfort zone is from a loan-to-deposit ratio perspective?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yeah. Right now, we're in a very comfortable spot. I think we finished the quarter at 88%, comfortable into kind of the low 90s, certainly 90%, 94%, maybe 95%. We'd start to kind of look at other options there, but we've got excess liquidity to work with in regard to that.

Matthew Clark
Matthew Clark
Managing Director and Senior Research Analyst at Piper Sandler

Okay. Great. And then yep, yep. And then the other one for me, just on with the sale of the special mention loans that were acquired from Pacific Premier. I don't think I saw it in the deck or the release, but can you give us a sense for where your criticized loans or classified loans stood at the end of the year relative to last quarter?

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Special mention loans were lower. Substandard loans were a little bit higher, roughly about a $130 million swing each direction. So basically resulting in some special mention, those special mention loans migrating down into substandard. And not necessarily due to degrading performance, but more of an elongated term of an elongated downturn, let's call it. We don't really expect anything more negative to come out of that, but we're just reflecting the risk profile at this point.

Matthew Clark
Matthew Clark
Managing Director and Senior Research Analyst at Piper Sandler

Okay. Okay, so net-net relatively flat, is that what I'm hearing, or?

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Correct. Yep. Exactly.

Matthew Clark
Matthew Clark
Managing Director and Senior Research Analyst at Piper Sandler

Okay. Got it. Thank you.

Chris Merrywell
Chris Merrywell
Co-President at Columbia Banking System

Yep.

Operator

Thank you. Please stand by for our next question. Our next question comes from the line of Anthony Elian with JPMorgan. Please go ahead.

Anthony Elian
Anthony Elian
Equity Research Analyst at JPMorgan

Hi everyone. Ivan, appreciate the color you gave us on NIM for this quarter. How are you thinking about NII and 1Q, just considering the impact, day count, and the absence of the time deposit premium?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yeah. I think when you look at so first of all, we put up obviously a very banner-strong finish to the year. We talked about in Q4 some of the elements, including the $12 million impact of the CD accretion. So I'd back that out with earning asset outlook that I talked about earlier, along with the 390-395 net interest margin for Q1. Would expect NII to dip down just below kind of the $600 million range in the first quarter before yo-yoing back up above that in Q2.

Anthony Elian
Anthony Elian
Equity Research Analyst at JPMorgan

And above that in the second half as well, correct?

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

Yes. Yeah. It should continue to trend up throughout the course of the year.

Operator

Ladies and gentlemen, as a reminder, to ask a question, please press star, then one. Please stand by for our next question. Our next question comes from the line of Janet Lee with TD Securities. Please go ahead.

Janet Lee
Janet Lee
Director of US Mid-Cap Banks Equity Research at TD Securities

Good afternoon. If I were to put together the comments that were provided on earning assets, $60.5 billion and $61 billion for the first quarter, and then NIM surpassing the 4% mark in either second or third quarter, so am I fair to describe earning assets staying in that $60.5-$61 billion or modestly trending down throughout 2026 while NIM stays in that 4% range in the back half of 2026? Is that a fair way to describe the baseline expectations?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yes, on the first part regarding earning assets. On the second part regarding NIM, what I expect is that we'll dip down to a range of 390-395 in Q1, and then we'll grow back up each quarter sequentially from a net interest margin perspective, surpassing 4% at some point in Q2 or Q3, and we'll continue upward from there.

Janet Lee
Janet Lee
Director of US Mid-Cap Banks Equity Research at TD Securities

Oh, continue going upwards above that 4% each quarter.

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Correct. Yep. Yep.

Janet Lee
Janet Lee
Director of US Mid-Cap Banks Equity Research at TD Securities

Got it. And sorry if this was asked already. Did you talk about the fee income growth expectations for 2026? Obviously, fourth quarter was a very solid quarter, it appears. How should we think about the growth in fee income?

Ivan Seda
Ivan Seda
EVP and CFO at Columbia Banking System

Yeah. From a core perspective, I would model core fee income in the low-to-mid 80s type range. Q4 was an absolute banner finish to the year. And we talked a bit about swap syndications and some of those items that we don't have a lot of kind of chunkier fee income elements within our core operating non-interest revenue base, but those elements were high watermarks for the quarter. So modeling somewhere in the low-to-mid 80s would be appropriate.

Janet Lee
Janet Lee
Director of US Mid-Cap Banks Equity Research at TD Securities

Got it. Thank you.

Operator

Thank you. Please stand by for our next question. We have a follow-up question from the line of Anthony Elian with J.P. Morgan. You're line is open.

Anthony Elian
Anthony Elian
Equity Research Analyst at JPMorgan

Hey, thanks for the follow-up. Clint, for you, just from a strategic perspective, does anything change with you now adding the role of Chair? Thank you.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

The short answer is no. This is something that, from a board perspective, we've anticipated would occur around this time, and we began actively discussing and working towards it from a full board perspective in kind of the back half of 2024. And I'll say that one area that has been a focus of conversation over that time period and will remain a focus initially for the board and specifically for me with the expanded role is to continue to work with Maria and Luis on what's the right size for our board, what does refreshment look like. So I guess the way to sum it up is our roles are changing, but our priorities as a board are not. And we added three directors from Pac Premier. That was also a component of refreshment as we had three directors that rotated out in 2025.

Clint Stein
Clint Stein
Chair, CEO, and President at Columbia Banking System

And I think we've quickly seen the impact that fresh thinking and new perspective brings. It's been very healthy, a lot of great dialogue with the board. And so that's just the kind of work that we're going to be focused on in 2026.

Anthony Elian
Anthony Elian
Equity Research Analyst at JPMorgan

Thank you.

Operator

Thank you. Ladies and gentlemen, I am showing no further questions in the queue. I would now like to turn the call back over to Jackie Bohlen for closing remarks.

Jacque Bohlen
Jacque Bohlen
Director of Investor Relations at Columbia Banking System

Thank you, Tawanda. Thank you for joining this afternoon's call. Please contact me if you have any questions or would like to schedule a follow-up discussion with members of management. Have a good rest of the day.

Operator

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.

Executives
    • Tory Nixon
      Tory Nixon
      Co-President
    • Clint Stein
      Clint Stein
      Chair, CEO, and President
    • Ivan Seda
      Ivan Seda
      EVP and CFO
    • Jacque Bohlen
      Jacque Bohlen
      Director of Investor Relations
    • Chris Merrywell
      Chris Merrywell
      Co-President
Analysts
    • Chris McGratty
      Head of US Bank Research at KBW
    • Jared Shaw
      Managing Director at Barclays
    • Jon Arfstrom
      Managing Director and Associate Director of US Research at RBC Capital Markets
    • Jeff Rulis
      Managing Director and Senior Research Analyst at DA Davidson
    • Anthony Elian
      Equity Research Analyst at JPMorgan
    • Matthew Clark
      Managing Director and Senior Research Analyst at Piper Sandler
    • Janet Lee
      Director of US Mid-Cap Banks Equity Research at TD Securities
    • David Feaster
      Managing Director of Banking at Raymond James
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