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On Monday, Citi analyst Benjamin Gerlinger adjusted the price target on Columbia Banking System (NASDAQ:COLB), currently trading at $22.63, to $24 from the previous $30, while maintaining a Neutral rating on the stock. The $4.75 billion market cap bank has seen its shares decline significantly over the past three months, according to InvestingPro data. The revision comes in the wake of Columbia Banking System’s acquisition of Pacific Premier Bancorp Inc (NASDAQ:PPBI), which marks the company’s strategic expansion into Southern California.
Gerlinger noted that although the move into Southern California seems like a natural step for Columbia Banking System, the benefits of the acquisition might not be immediate. He pointed out that the integration of the two entities and the establishment of a unified market strategy are expected to take time. The analyst expressed confidence in the credit profile of the combined entity but showed concern over the current commercial real estate (CRE) concentration. Despite these challenges, the bank maintains a strong dividend track record, having paid dividends for 29 consecutive years, with a current yield of 6.36%.
The acquisition provides Columbia Banking System with a physical branch network in Los Angeles, which is anticipated to contribute to operational synergies. However, Gerlinger highlighted the challenges of entering the commercial and industrial (C&I) lending market in one of the United States’ largest economic hubs.
Despite these concerns, Gerlinger believes that Columbia Banking System holds long-term potential, forecasting that the return on tangible common equity (ROTCE) should surpass that of its peers once the full benefits of the acquisition are realized. Trading at a P/E ratio of 9.93x, InvestingPro analysis suggests the stock is currently undervalued. The lowered price target reflects the perceived operational challenges and potential risks associated with the integration process. For a comprehensive analysis of Columbia Banking System’s valuation and growth prospects, access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Columbia Banking System Inc. reported its first-quarter 2025 earnings, surpassing analysts’ expectations with an earnings per share (EPS) of $0.67, exceeding the forecast of $0.63. The company’s revenue also outperformed projections, reaching $491.37 million against an expected $482.62 million. Columbia Banking System announced a significant acquisition of Pacific Premier Bancorp, valued at approximately $2 billion, which is expected to enhance its market presence, particularly in Southern California. DA Davidson analyst Gary Tenner upgraded Pacific Premier Bancorp’s stock from ’Buy’ to ’Neutral’ following the merger news, setting a price target of $23.00. Despite the low premium and valuation, Tenner believes the merger could be beneficial for Pacific Premier Bancorp shareholders. Columbia Banking projects a 14% EPS accretion in 2026 and a 15% increase in 2027 due to the acquisition. The merger will create a $70 billion asset franchise, with Pacific Premier shareholders owning 30% of the combined company. The transaction is expected to have minimal impact on Columbia’s capital ratios, with no need for additional capital to support the deal.
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