Earnings call transcript: Columbia Banking Q2 2025 sees EPS growth

Columbia Banking System Inc. reported its financial results for the second quarter of 2025, showcasing a strong performance with an operating EPS of $0.76. With a market capitalization of $7.93 billion, the company demonstrated resilience, reflected in a 3.15% increase in its stock price, closing at $25.71. According to InvestingPro analysis, the stock currently trades below its Fair Value, suggesting potential upside opportunity. The bank’s strategic focus on innovation and disciplined growth contributed to its robust financial standing.

Key Takeaways

• Operating EPS for Q2 2025 stood at $0.76.
• Stock price increased by 3.15%, closing at $25.71.
• Net interest margin improved by 15 basis points to 3.75%.
• Commercial loan production rose by 30% from Q1.

Company Performance

Columbia Banking System Inc. delivered an impressive performance in Q2 2025, driven by a strategic focus on relationship-driven banking and fee income generation. The company reported a 16.85% operating return on average tangible equity and a 14% increase in operating pre-provision net revenue (PPNR) to $242 million compared to Q1. The acquisition of Pacific Premier Bancorp is expected to further enhance its technology stack and market reach.

Financial Highlights

• Revenue: Not specified in the earnings call summary.
• Earnings per share: $0.76 (Operating EPS)
• Net interest margin: 3.75% (15 basis point improvement)
• Provision for credit loss: $29 million
• Allowance for credit losses: 1.17% of total loans

Outlook & Guidance

Looking ahead, Columbia Banking System anticipates closing its acquisition of Pacific Premier Bancorp by September 1, which is expected to bolster its expansion into the Intermountain States such as Utah and Colorado. The bank plans to continue optimizing capital and returning excess capital to shareholders. Analyst consensus shows optimism, with price targets ranging from $26 to $35, suggesting potential upside. Future EPS forecasts suggest steady growth, with expectations set at $0.74 for Q4 2025 and $3.17 for FY 2026.

For deeper insights into Columbia Banking’s growth prospects and detailed financial analysis, access the comprehensive Pro Research Report available exclusively on InvestingPro.

Executive Commentary

CEO Clint Stein emphasized the company’s commitment to optimizing financial performance and enhancing long-term tangible book value, stating, "We remain laser focused on optimizing our financial performance and enhancing long-term tangible book value." He also highlighted the company’s advancements in AI, reinforcing their competitive edge in innovation.

Risks and Challenges

• Macroeconomic uncertainty, particularly regarding tariffs, could affect business borrowing.
• Seasonal deposit fluctuations due to tax payments may impact liquidity.
• The integration of Pacific Premier Bancorp poses potential operational challenges.
• External regulatory changes, especially in stablecoin legislation, could influence strategic initiatives.
• Maintaining disciplined growth amid competitive pressures in the banking sector.

Q&A

During the earnings call, analysts inquired about the drivers behind loan growth and the momentum of fee income initiatives. Management highlighted the strategic approach to balance sheet management and the careful oversight of the transactional real estate portfolio, addressing concerns about market volatility.

Columbia Banking System’s Q2 2025 results underscore its strategic agility and operational strength, positioning it well for future growth despite external challenges. The company maintains a FAIR Financial Health Score according to InvestingPro analysis, with particularly strong marks in profitability metrics. Investors seeking detailed insights can access over 30 additional financial metrics and exclusive ProTips through InvestingPro’s comprehensive analysis platform.

Full transcript - Columbia Banking System Inc (COLB) Q2 2025:

Jackie Bohlen, Investor Relations Director, Columbia Banking System: Hello and welcome to Columbia Banking System second 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 the question during the session you will need to press Star one one on your telephone. You will then hear an automatic message advising your hand is raised. To withdraw your question, please press Star one one again. I would now like to turn the conference over to Jackie Bohlen, Investor Relations Director, to begin the call. You may begin. Thank you. Good afternoon everyone. Thank you for joining us as we review our second 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 as 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 President and CEO Clint Stein.

Clint Stein, President and CEO, Columbia Banking System: Thank you, Jackie. Good afternoon, everyone. Our second quarter operating results are up 14% from the year-ago quarter. Our improved performance is a product of our focus on profitability, balance sheet optimization, and the impact of our operational efficiency initiative we executed during the first half of 2024. The results of the initiative and ensuing organizational focus on stable, recurring performance is evident in our results over the past six quarters. Specific to the current quarter, our net interest margin expanded, we had a meaningful increase in our core fee income, continued our disciplined approach to expenses, and our credit metrics remain healthy. Our loan portfolio was up slightly at quarter end, and I’m pleased with its ongoing remix. Commercial loan growth offset intentional runoff in transactional real estate loans.

Collaboration across teams and departments, the cornerstone of our Business Bank of Choice strategy, enabled us to win business and attract new relationships. We continue to prioritize profitability and credit quality over growth for growth’s sake. Deposit balances declined during the second quarter due to anticipated seasonal activity such as tax payments and owner distributions. Customers also continue to use their own cash to make investments in their businesses or pay down debt. While this serves as a headwind to both loan and deposit growth, it speaks to the quality of our customers. Columbia has always been a through-the-cycle lender to top business operators within their industries. Macroeconomic uncertainty around tariffs is causing companies to pivot in a manner best suited for their business. For some, this creates opportunities for growth and market share gain.

For others, it drives a conservative outlook that has the limited need to borrow and has elongated our pipelines. Our disciplined approach and deep relationships continue to serve us well. Columbia is positioned to not only navigate the current environment but to capitalize on strategic opportunities, including our upcoming acquisition of Pacific Premier Bancorp. Integration planning remains on track as both companies hosted their individual special shareholders meeting earlier this week, and we received overwhelming approval for the transaction. Since the announcement in April, I have said many times that Pacific Premier Bancorp is the most seasoned counterparty we have ever worked with. Pacific Premier’s prior M&A experience contributes to the continued excitement we see from their employees who will join our team. They’re raring to go, impatiently waiting to become part of Columbia.

The M&A experience of Steve, Eddie, and the entire Pacific Premier organization has us well positioned for a smooth and timely closing, which we believe could come as early as September 1. Although integrating Pacific Premier is our highest priority, its impact on our overall current operations is minimal. Approximately 100, or roughly 2% of Columbia’s 4,700 associates, are focused on integration activities. The remaining 98% are running and growing our company. We continue to plan for the future by strategically expanding and adjusting our footprint. Investment and improvement in our tech stack remains a priority as we are constantly anticipating our needs 1, 3, 5, and in some cases 10 years into the future. For instance, we are not losing ground on AI. Today we have 83 different platforms and solutions that use a form of AI that ranges from basic to powerful.

We have one group focused on running our current AI solutions and implementation of successful use cases that can improve operational effectiveness and employee efficiency, and another group that focuses on fintech partnerships and longer term emerging opportunities. For example, we are evaluating the legislative changes and proposals surrounding stablecoin. We are studying and monitoring developments so we’re ready to make informed decisions when it’s time to act. We continue to enhance our embedded banking capabilities to make banking easier for our customers and attract new business. Our embedded banking capabilities will get supercharged by Pacific Premier’s existing solutions. What Pacific Premier brings to the tech stack is so impressive that we recently announced internally that the Pacific Premier Chief Information Officer will remain as the CIO of Columbia. Tom and I have already had strategic technology discussions that span well beyond our anticipated systems conversion in early.

Over the past year, we have discussed the reinvestment of a portion of the 2024 expense initiative reductions into growing our density in Southern California. Considering the market density Pacific Premier provides us, we are shifting this investment to the Intermountain States, specifically Utah and Colorado, as we look to build a meaningful presence organically in these markets. We often say people are Columbia’s greatest asset. We continue to put action behind this statement with investment in our people as we develop the next generation of leadership of our company. We have an expanded internship program and added to our robust in-house educational offerings. We are sending a record number of people to banking school this year, and we expanded our executive leadership talent with the addition of Judy Geim, who joined Columbia in June as our CHRO.

Judy brings over 20 years of comprehensive human resource leadership experience for publicly traded companies. She’s also overseen the workforce and cultural integration of multiple newly combined companies in eight short weeks. Judy has already advanced our human capital management activities, and we’re thrilled to have her on the team. As previously announced, we are unifying our brand under the Columbia name. Effective July 1, Umpqua Bank changed its legal name to Columbia Bank, and we will begin doing business publicly under the Columbia Bank name and brand beginning September 1. Our simplified family of brands ensures clarity as we deepen our presence throughout the West. It’s a busy and exciting time at Columbia, and I want to thank our associates for their hard work and contribution to another period of solid performance with our second quarter results.

I am as enthusiastic as I have ever been in my 20 years with Columbia about our future as we continue to serve our customers and communities in support of generating long-term shareholder value. I’ll now turn the call over to Ron.

Ron, CFO, Columbia Banking System: Okay, thank you Clint. We reported second quarter EPS of $0.73 and operating EPS of $0.76. Operating excludes merger and restructuring expense along with other fair value and hedging items detailed in our non-GAAP disclosures which I encourage you to review. Our operating return on average tangible equity was 16.85% while operating PPNR increased 14% from the first quarter to $242 million. The main drivers for earnings and operating PPNR growth this quarter were rising earning asset yields and lower cost of interest-bearing liabilities, both driving a 15 basis point improvement in our NIM along with improving core fee non-interest income and flat operating non-interest expense, the textbook definition of operating leverage on the balance sheet. We increased available-for-sale investments by 5% to reduce our pro forma asset sensitivity and used wholesale borrowings to fund this along with seasonal customer deposit outflows.

Our tangible book value per share increased by 3% while regulatory capital ratios continue to build with our CET1 at 10.8% and total risk-based capital ratio at 13%. Capital ratios will continue to build allowing for additional forms of allocation and shareholder return next year. I mentioned earlier, our NIM increased 15 basis points to 3.75% this quarter. A little over half of that came from higher investment securities yields which can fluctuate a bit due to varying CPR fees. We also got a 1 basis point benefit from an interest recovery, but more fundamentally we saw higher loan yields added about five basis points to the NIM and lower funding costs added about one basis point. Good underlying trends. Our provision for credit loss was $29 million for the quarter and our overall allowance for credit losses remains robust at 1.17% of total loans.

In non-interest income, with $64.5 million for the quarter. On page 22 of our earnings release we detail the non-operating fair value changes. Excluding those items, our operating non-interest income of $65.1 million for Q2 was up $8 million or 14% reflecting strong core fee income growth. Also noted on page 22, total GAAP expense for the quarter was $278 million while operating expenses were relatively flat with Q1 at $269 million. Annual lists and compensation and incentives were offset by lower services, marketing and other expense along with lower intangible amortization. Now I’ll hand the call to Chris.

Chris, Executive, Columbia Banking System: Thanks Ron. As Clint noted, seasonal tax payments in April contributed to customer balance contraction during the second quarter, which followed strong customer balance growth in March. Customers also put their deposits to work by paying down debt and moving funds into our wealth management products. In aggregate, these trends reduced our commercial and consumer balances during the second quarter, but we saw modest growth in our small business deposits. Our recent campaign, which ran through mid-July, brought over $450 million in new core deposits to the bank, offsetting other balance declines. The campaign was also successful in generating new Small Business Administration relationships. Loan growth was centered in commercial portfolios during the quarter as owner-occupied CRE and commercial line balance increases offset multifamily and residential loan contraction. Our teams remain focused on relationship-driven activity, which includes core income and core fee income generation.

As Ron noted, operating non-interest income was up $8 million from the prior quarter due to higher card-based fee income, swap-related income, financial services and trust revenue, along with our other core banking income sources. We continue to target a higher contribution from core fee income to overall revenue, and we see revenue synergy opportunities through the Pacific Premier acquisition. Not only will Pacific Premier’s custodial trust business complement our existing wealth management platform, but their expertise in HOA banking, escrow, and 1031 exchange businesses also offer additional revenue-generating opportunities. We also expect to see deeper customer relationships as we introduce Pacific Premier branches to the CB Way, which proactively offers need-based solutions to our customers. We enhanced our customer and community support with the recent opening of three branches.

We added a second location in Phoenix and our first in Mesa to go along with our Scottsdale, Arizona office, bringing the branch count to four as we effectively serve this attractive and growing market in the state. We also opened a branch in Eastern Oregon, restoring essential banking services to a bankless rural community. Our de novo branch strategy supports bankers already serving customers in our markets and strengthens opportunities to bring new relationships to Columbia. I will now hand the call back to Clint.

Clint Stein, President and CEO, Columbia Banking System: Thanks, Chris. We remain laser focused on optimizing our financial performance and enhancing long-term tangible book value. We also expect to return excess capital to our shareholders. Our CET1 and total capital ratios were 10.8% and 13% at quarter end, both well above our long-term targets. We expect our acquisition of Pacific Premier Bancorp to meaningfully enhance our capital generation capabilities, which already exceed what is required to support prudent growth and our regular dividend. In the near future, as we integrate Pacific Premier Bancorp, we will have additional flexibility to return excess capital now. This concludes our prepared remarks. Chris, Tory, Ron, Frank, and I are happy to take your questions now. Tawanda, please open the call for Q&A.

Jackie Bohlen, Investor Relations Director, Columbia Banking System: Thank you, ladies and gentlemen. As a reminder, to ask a 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 David Fester with Raymond James. Your line is open.

Hey, good afternoon everybody. Hey David, I wanted to start on kind of the growth side and the loan side you touched on. You can see it in the deck. You got a double-digit increase in originations. I was hoping you could touch on what’s driving that. Is that client demand increasing, maybe just given a bit more certainty or less fears around the tariffs? Is it more a function of just increasing productivity of your bankers and market share gains? Just kind of curious your thoughts on that client sentiment and just how do you think about originations ultimately. Maybe being able to outpace strategic runoff and the payoffs and pay downs in the remainder of the year.

Clint Stein, President and CEO, Columbia Banking System: As usual, David, I think in every quarter you probably get this comment from you pack a lot into a single question. I’ll start off and then maybe see if Tory and Chris have anything to add. I think it’s a combination. If you look at the roll forward that we have in the earnings deck, it really kind of tells the story. We’ve seen this over the years from time to time, depending on the macroeconomic environment where bottom line growth maybe is hard to come by because of what’s going on in our established book with businesses selling and or the strength of their balance sheet and using their own cash as opposed to borrowing.

When I look at the activities and the excitement that our bankers have, we had the opportunity to have breakfast with a handful of leaders in one of our markets yesterday and they’re still just very excited about the opportunities that they’re seeing. I think it is in those newer markets that they’re doing the right things and they’re putting totals on the books. That helps the current of the runoff in the legacy portfolio, either through amortizations or just pay downs and prepayments, but broadly it’s utilization of cash. When we see that activity, we’re not really experiencing what we’d call leakage through the back door with customers going elsewhere. That’s my two cents. I’ll step back and see if Tory has anything to add.

Tory, Executive, Columbia Banking System: Okay. Yeah, thanks. This is Tory. I would echo all of Clint’s comments actually. Really quite excited and happy with the activity level, certainly in the commercial, with the commercial RMs. We had production for the quarter which is roughly 30% higher than Q1 and about 18% higher than Q2 last year. The activity level is really strong and really good, coming from de novo markets, coming from our legacy markets, a lot of good momentum on the CNI front. I think in particular, with everything that’s.

Clint Stein, President and CEO, Columbia Banking System: Going on in the economy, we were.

Tory, Executive, Columbia Banking System: Just subject to some payoffs or company sales, just things a little more abnormality than usual. The pipeline’s strong, the activities are good, and feel great about the banker’s ability to deepen relationships and bring new relationships into the company.

Clint Stein, President and CEO, Columbia Banking System: Okay, that’s great.

I’m curious, with the deal close approaching, encouraged by your commentary about potentially even closing it by September 1, it’s a much swifter timeline for approval and closing than the last deal. It’s a testament to the improving regulatory backdrop. I guess I’m just kind of curious, have your thoughts on the optimization of Pacific Premier Bancorp’s balance sheet changed at all or is there anything that maybe you execute ahead of the close, given the increased certainty and visibility into close.

are several different threads we could pull on that. If it’s specific to the Pacific Premier Bancorp balance sheet, you know, we would want to take advantage of getting the day one fair value marks. Otherwise, you know, you hard code a loss in there. You know, we have done a little bit in terms of just, you know, Ron did some pre-purchase of some securities that we think better fit the portfolio, and so we’ve done that, and then we’ll sell some of the securities that are in the Pacific Premier Bancorp book. In terms of other things like specific to loans and things of that nature, we’ve looked at a lot of different scenarios and we’re very active in looking at what those scenarios are. Broadly, we have zero credit concerns.

That is something that gives us pause given that these things will reset to a market rate with purchase accounting. Nonetheless, we’re still challenging ourselves to look at multiple scenarios. I know. Ron, you have anything to add?

Ron, CFO, Columbia Banking System: I think you hit the nail on the head.

Okay, that’s helpful. Maybe last one for me, I mean Chris Merrywell touched on a focus on increasing fee revenue contributions. You guys have done a great job building out some fee income lines. Pacific Premier Bancorp also brings a couple unique business lines. I’m curious maybe some of the initiatives on the fee income side that you’ve got. Is there anything as we’re sitting here as a $70 billion asset bank that you need or other lines or anything that you might need to be more competitive in that, you know, as just being a much larger financial institution. Is there anything that needs to be built out?

Tory, Executive, Columbia Banking System: Okay, David, it’s Tory. Let me start with initiatives first.

Clint Stein, President and CEO, Columbia Banking System: I think there are quite a few.

Tory, Executive, Columbia Banking System: We purposefully have been working the fee side of the house for quite some time, I mean several years. There’s tremendous momentum this quarter.

Clint Stein, President and CEO, Columbia Banking System: After quarter after quarter.

Tory, Executive, Columbia Banking System: It is very deliberate, starting with full relationship banking, making sure that if we’re going to lend money to somebody, we have their deposits and we have as much of their fee income business as we can get. We have a few initiatives where we’ve looked at, first of all, we talked about just four in previous calls, but we have a predictive analytics program that provides kind of a next best offer based on customers’ activity in their accounts, and we feed those to the treasury management folks and the RMs throughout the company. Got like a 50% closure rate on that, so it’s working extraordinarily well. We have a full relationship review process that we do throughout the company. We do something called working capital assessments.

Clint Stein, President and CEO, Columbia Banking System: Where we get together and kind of.

Tory, Executive, Columbia Banking System: Whiteboard with our commercial customers on how they use their cash in their entire working capital cycle to look for opportunities to provide kind of a needs-based solution.

Clint Stein, President and CEO, Columbia Banking System: It is very deliberate in the approach.

Tory, Executive, Columbia Banking System: It is producing a lot of really strong results. I’ll just give you a couple of numbers that I think we look at. Chris and I look at all the time on the treasury management side. Year over year, we’re up 6% in commercial card.

Chris, Executive, Columbia Banking System: Year over year we’re up 14% in merchant services, we’re up 10%.

Tory, Executive, Columbia Banking System: In international banking, we’re up 4.50%. On the trust side, we’re up 12%. We’ve got some really nice momentum spread throughout the company. You know, it’s something that personally I’m very proud of the team’s results and looking forward to continuing.

Clint Stein, President and CEO, Columbia Banking System: To do it quarter after quarter.

Tory, Executive, Columbia Banking System: Chris, anything else you want to add to that?

Chris, Executive, Columbia Banking System: Yeah, thanks. Tory, David. I’d add in there, you think about the initiatives that we’ve been running now for a year and a half or so, that focus on small business that goes to where Tory was talking about corporate card and merchant and things of that nature. Our private bank healthcare teams have done a pretty good job of when they’re winning business, utilizing those capabilities to bring in that corporate card and that merchant as well. Those are some pretty significant opportunities.

Tory, Executive, Columbia Banking System: Just one more add onto that would be last part of your question on Pacific Premier.

Clint Stein, President and CEO, Columbia Banking System: Obviously, I think we have a great.

Tory, Executive, Columbia Banking System: Product set and I don’t think there’s anything we’re missing from a product standpoint. We’re super excited about the Pacific Premier becoming part of the Columbia family. Great opportunity on the fee side there as well with commercial card in particular, treasury management, our leasing business, kind of some great, great stuff ahead of us.

Chris, Executive, Columbia Banking System: That’s awesome.

Clint Stein, President and CEO, Columbia Banking System: Thanks everybody.

Jackie Bohlen, Investor Relations Director, Columbia Banking System: Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Clark with Piper Sandler. Your line is open.

Ron, CFO, Columbia Banking System: Hey, good afternoon everyone. Thanks for the question. Just a quick one on accretion. I know you guys, looks like you pulled it out of the deck and I know most of that accretion is real. It’s not credit mark related, that disappears. For the sake of modeling, would you be able to provide us that number? I know there was a recovery on the loan within the loan yield of $2 million, I think you called out. Just trying to drill down on the interest income a little bit. Yeah, Matt. Obviously we view the income as core, driven by rate, not credit. The credit mark was 3 bps, consistent with Q1. Back to from a modeling standpoint, I would utilize the yields you see for the quarter along with slide 24. It is in our deck. It’s got some great data there just from a repricing standpoint.

RAN loans and deposits and then the bond portfolio, it’s pretty static. We’ve got a good slide on the bond portfolio, but you can see the yield there from a modeling standpoint. The key there is duration. Okay. Then just the securities growth you had in the quarter, the borrowings, the increase in borrowings and some brokered. How much of that is related to the Pacific Premier Bancorp deal and how should we think about those balances going forward? Yeah, no, we did back in late April, we added $600 million of par, but it was about $500 million of books. So deeply bonds, low coupon type stuff with duration, and the goal with that was to reduce the pro forma asset sensitivity of the combined company post close.

We utilize wholesale funds for that and we’ll pay those off as Clint mentioned, right, post close once we sell off a portion of their portfolio. Okay. Then just any updated thoughts on deposit, the deposit growth outlook, legacy Columbia ex-Pacific Premier Bancorp, and any thoughts on your updated thoughts on your pricing strategy. Looks like you’ve held rates fairly stable since April and whether or not you might get ahead of the Fed or kind of wait for the Fed to cut.

Chris, Executive, Columbia Banking System: Yeah, thanks, Matt.

Clint Stein, President and CEO, Columbia Banking System: This is Chris.

Ron, CFO, Columbia Banking System: Yeah, we’ve slowed the.

Chris, Executive, Columbia Banking System: Repricing on that aspect. I think the team’s fabulous job of working through this, working through the decreased cycle. They had actually started much in front of that, and I think that has given us this time period of things have been pretty stable. We see some competitors that will periodically go out there and offer up in excess of 4% for certain things.

Clint Stein, President and CEO, Columbia Banking System: We see a few case by case.

Chris, Executive, Columbia Banking System: Offers, exception offers that are made. We’re feeling pretty good about our ability to compete with those where we fall in the stack ranking of kind of the lowest to highest rates. We’re always looking at the portfolios, we’re always looking at the tranches that are in there, and if we can make a minor tweak of a basis point or two, we certainly will. It’s a very active process that we go through both from the competitive market and then just looking into what our flows are on the backside as well. CD pricing has been pretty much solid and the same since six plus months and not seeing a lot of activity. We’re still renewing at a rate that we’re satisfied with, and those rates continue to come down. That’s going to slow out in the future as you would expect.

More importantly, and I’ll let Tory talk about this as well, it’s the new business. People going out and winning accounts, winning the new relationships and getting those added, the total is offset a little bit somewhat as we saw in the first six months of this year. It built in the second quarter with taking advantage of some of our wealth management activities as well.

Clint Stein, President and CEO, Columbia Banking System: So Tori.

Tory, Executive, Columbia Banking System: Yeah, not a lot to add. I mean, I think the second quarter was kind of seasonal, what we would expect. We were a couple lumpy deposit outflows at the end of the quarter, big distributions by companies or company sales dollars came in, and then went to trust or some other place, starting to see a normal resurgence a little bit in Q3. It feels very normal. As I said earlier, I think with this real strong concept of full relationship banking, all the bankers throughout the company know that it’s about loans, deposits, and core fee income.

Ron, CFO, Columbia Banking System: Okay. Last one for me, maybe for Clint, just your appetite for cleaning up the capital stack and from, you know, legacy Umpqua, you know, just speak to the opportunity there and your.

Chris, Executive, Columbia Banking System: Appetite if you could. Thanks.

Yeah.

Clint Stein, President and CEO, Columbia Banking System: Matt, you’ve known me for a long time and you know I like as clean of a capital stack as possible. You know we’ve done some analysis and we look at what the capital stack of our peer banks looks like. In addition to the excess capital generation that we expect, that we’ve had really over the last two and a half years, we expect that to accelerate with Pacific Premier Bancorp. I think that gives us a lot of flexibility as we move forward to clean some things up and optimize that capital stack.

Ron, CFO, Columbia Banking System: Okay, thanks again.

Clint Stein, President and CEO, Columbia Banking System: Thanks, ma’am.

Jackie Bohlen, Investor Relations Director, Columbia Banking System: Please stand by for our next question. Our next question comes from the line of Jeff Rulis with D.A. Davidson. Your line is open.

Clint Stein, President and CEO, Columbia Banking System: Thanks.

Good afternoon. Hi Jeff, wanted to check in on that slide 28 again, the $6 billion of transactional assets. Do you have kind of a timeline or maturity schedule on that or kind of a forecast on how long that would take to purge from the balance sheet.

Yeah, it depends on a couple of factors. One, if the Fed were to lower rates, probably what we’re on, 150 basis points or so, that would certainly give us the opportunity to accelerate those as a lot of those would enter into kind of a refi window and we just wouldn’t be competitive and they would run off someplace else. Otherwise, as we think about kind of the repricing, we had some repricing this quarter. We have some more that, as we go through the rest of the balance of 2025, 2026, it really starts to pick up from a repricing standpoint, 2027, 2028. That’s really kind of the timeline. I’ve said this before to various investors that we’ve been talking about this for nearly a year and a half and I wish there was an easy fix.

The easy fix isn’t the one that creates the most shareholder value. The easy fix would be just to rip the band-aid and sell them, but the earn back on that would be about 10 years. When we’re looking at a two to three year kind of workout and wind down of these portfolios, that makes the most economic sense.

Gotcha.

Yeah, I understood that, you know, tough to the sales could accelerate, but just trying to get a sense on net growth, I guess through the end of 2026 is a reasonable window. Would you say that a quarter of that balance, if just straight maturities, could exit or, you know, I’m just trying to put a number on it because it’s against growth that you mean. You talked a lot about the origination activity and positive about that, but the net effect of that is how much you’re really going to grow in 2026.

Yeah. What I’d point you back to is that right now these portfolios are an earnings headwind for us, so we can improve and increase profitability through the repricing and or runoff in those as we affect this remix. I know that a lot of models are just based on a growth projection, but that doesn’t take into account the kind of the earnings headwind that we’re replacing this with as well as what we’re replacing it with are new CNI names and full relationships that have fee income capabilities and all the things that Tory previously discussed. I think that you could see growth remain muted. You could even see us contract the balance sheet a little bit, but we’d end up with a more profitable institution.

That’s really what I was trying to drive home in my prepared remarks when I said we’re going to stick to our discipline and not grow just for the sake of growth. Gotcha.

Thanks, Clint. Maybe on the margin, just circling back, Ron, sounds like the securities yield bump was pretty considerable this quarter. With the timing of those purchases, could there be a tail of benefit that stretches into Q3 on that? I’m just trying to get into where you think on margin from a carry forward basis.

Ron, CFO, Columbia Banking System: Yeah, I mean those were done late in April and granted when we close with Pacific Premier Bancorp we’ll have the ability to restructure that portfolio as well. There should be, all else being equal, a bit of a lift into Q3 just from a full quarter margin standpoint of the investment yields. Keep in mind we put them on with wholesale funds, so the net margin of that trade in and of itself was not intended to approximate our margin for this month or two or a couple month period of time prior to close. We will expand that back out post close with reducing the wholesale funds we put them on with. Another long way of saying I think the second quarter bond yields are closer to the norm than the first quarter. The first quarter was artificially low.

Ron, what was the margin for the month of June?

Month of June margin would have been 3.79% adjusted for timing differences throughout the quarter.

Clint Stein, President and CEO, Columbia Banking System: Got it.

The last one, just on the expense base, can we look at $278 million reported? If we exit the acquisition expenses, is $270 million a firm number to kind of grow off of or flatline? Any comment on expense levels from here pre-PPBI?

Yeah Jeff, this is Clint. I’ll say a couple of things and then turn it over to Ron. Part of what we’ve talked about was that we were going to invest in increasing our density in Southern California. We overshot our 2024 expense initiative to create some expense offsets to enable us to do that with Pacific Premier Bancorp. What that brings to us, we no longer need to do that, but it creates an opportunity to then go to phase two of our long term organic growth strategy, which was to make those investments in the Intermountain States, specifically Utah, Colorado, and Arizona. We’re actively in that process, but it’s delayed the actual spend and hitting our run rate. I think if you go with the $270 and cast that forward, it’s going to be a little bit light because it’s not going to include that level of investment.

I’ll step back and let Ron clean up anything that I missed.

Ron, CFO, Columbia Banking System: No, I think you’re spot on because we talked earlier in the year about a range for 2025 of $1 billion to $1.01 billion of expense ex CDI amortization. Here the last couple quarters, we’ve come in below that, $975 million this quarter on that measure. It goes right to what Clint just talked about.

Okay, thank you.

Yep, thanks.

Jackie Bohlen, Investor Relations Director, Columbia Banking System: As a reminder, ladies and gentlemen, star one one to ask the question. Please stand by for our next question. Our next question comes from the line of Chris McGrady with KBW. Your line is open.

Ron, CFO, Columbia Banking System: Oh, great. Thanks for the question, Clint. Ron, I want to make sure I.

Get the balance sheet size right. That’s kind of where my head’s spinning. If I think about the two earning.

Asset bases, it’s 48 and 16 to get you 64.

I’m trying to get a sense of kind of pro forma.

Is there anything?

Clint Stein, President and CEO, Columbia Banking System: It seems like you upped it about.

$400, $500 with the purchases.

Is that just.

You’re going to sell a piece of that PBVI $3.5 billion loans. I’m just trying to get kind of an opening day earning asset base to go from.

Ron, CFO, Columbia Banking System: I’d say at close we’ll net sell $500 million of PBVI bonds, where the marks are hard coded to pay down the wholesale funding that we put on as part of this trade in late April.

Chris, Executive, Columbia Banking System: Okay.

My math on kind of mid-60s.

Earning assets would seem reasonable.

Ron, CFO, Columbia Banking System: Yes.

Chris, Executive, Columbia Banking System: Okay, perfect. Thank you for that.

In terms of the margin.

Again, just clarification.

Ron, CFO, Columbia Banking System: Has your combined?

Margins of the two companies structurally changed?

Clint Stein, President and CEO, Columbia Banking System: You announced the merger.

Obviously, your bond yields were up notably. Is the structural combined margin of these two companies materially different than 90 days ago?

Ron, CFO, Columbia Banking System: I’d say our margins increased compared to 90 days ago. When you look back at the, when you look to the combined effects of the deal, I just default back to the materials. We also included here in the appendix of the earnings presentation around the deal math. That’s really more a function of where are those NIMs at today compared to what was in the consensus, which was the basis for the math.

Chris, Executive, Columbia Banking System: Okay.

The message is you’re feeling better about your margin. I can make the assumption on PBVN.

Okay.

Thanks.

Clint Stein, President and CEO, Columbia Banking System: Appreciate it.

Jackie Bohlen, Investor Relations Director, Columbia Banking System: Thank you. Ladies and gentlemen, I’m showing no further questions in the queue. I would now like to turn the call back over to Jackie for closing remarks. 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. Ladies and gentlemen, that concludes today’s conference call. Thank you for your participation. You may now disconnect.

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