Columbia Banking System (COLB) Q3 2026 earnings review
Columbia Bank's lending spread widens, but its loan book shrinks
Columbia Banking System, a regional bank across the western United States, widened its lending spread while its loan book shrank. Net interest margin rose to 4.11% as customer deposit campaigns let the bank pay down 22% of its wholesale borrowings. Operating profit per share climbed 8% from last quarter, and chief executive Clint Stein announced a new $1.2 billion share buyback.
| Net interest margin | 4.11% up 0.18 percentage points from last quarter |
|---|---|
| Profit per share, excluding one-offs | $0.82 +8% from last quarter |
| Total loans and leases | $46.9B -1% from last quarter |
| Share buyback plan | Raised to $1.2B after finishing prior $700M plan |
⚖️ Verdict: 🟢 Bullish
The story got better because the bank cleared its 4% lending margin target and problem loans fell 7%. By our math, the margin reached 4.08% even without early loan payoff income, and early-stage loan delinquencies dropped by a quarter. The bad news: rival pricing and property loan payoffs shrank total loans again, while bond losses cut tangible book value per share by 6%.
The question now is whether relationship commercial lending can outgrow property loan payoffs once seasonal deposit inflows fade. Either repricing loans and new commercial credit lines lift net interest income, or a shrinking loan book caps revenue growth near current levels. Fourth-quarter relationship loan growth and September's uptick in deposit costs will tell.
🐂 Bull Case
Net Interest Margin Cleared Four Percent
Columbia's net interest margin (NIM), the spread between what the bank earns on loans and bonds and what it pays on deposits and debt, had missed management's 4% target last quarter. In the third quarter, NIM rose 0.18 percentage points from last quarter to 4.11%, driving net interest income up $26 million to $615 million.
- Underlying NIM: 4.08% by our math, excluding 0.03 percentage points from early payoffs on two acquired loans
- Loan yields: 5.90%, up 0.13 percentage points from last quarter
- Taxable bond yields: 4.27%, up 0.30 percentage points as bond prepayment speeds settled
This matters because the margin cleared 4% even without the $5 million one-time payoff benefit. Higher loan and bond yields did the work while funding costs ticked down.
What to watch: fourth-quarter net interest margin. Holding above 4.05% without early payoff income would show that loan repricing is lifting profitability on its own.
Customer Deposits Replaced Wholesale Debt
Columbia relies on low-cost customer deposits to fund its balance sheet, and president Chris Merrywell pointed to "seasonal customer balance growth and new customer acquisition" this quarter. A summer promotion brought in over $700 million, lifting core deposits by $1.16 billion from last quarter to $50.6 billion.
The bank used that cash to cut brokered and public deposits by $511 million by our math and reduce borrowings by $950 million, or 22%. That lowered the average cost of interest-bearing deposits by 0.01 percentage points to 1.95%, though the rate ticked back to 1.96% in September.
What to watch: the cost of interest-bearing deposits in the fourth quarter, when seasonal inflows usually reverse. A flat reading would show that deposit competition is not forcing Columbia to pay more.
Board Approved a 1.2 Billion Dollar Buyback
Returning extra capital to shareholders is central to chief executive Clint Stein's plan after last year's Pacific Premier acquisition. Columbia bought back 6.5 million shares for $199 million in the third quarter, finishing its prior $700 million buyback plan two months early and cutting ending share count by 7.6% from a year ago.
The board approved a new $1.2 billion repurchase plan with no expiration date, which Stein said reflects "confidence in our long-term strategy and our outlook for continued excess capital generation". By our math, the new authorization equals 24% of the bank's $5.0 billion in tangible common equity.
What to watch: fourth-quarter share repurchases against the common equity tier 1 (CET1) regulatory capital ratio, which dipped to 11.5% this quarter. Buying back another $150 million or more while holding CET1 near 11.5% would show that quarterly profit alone can fund the new plan.
Problem Loans Fell Across the Board
Rising problem loans in the first half of 2026 had raised concern that credit losses were spreading beyond a single troubled agricultural borrower. In the third quarter, non-performing assets — loans not paying interest plus foreclosed property — fell 7% from last quarter to $255 million, or 0.39% of total assets.
Early-stage delinquencies (loans 31 to 89 days past due) dropped 24% to $95 million, and annualized net loan write-offs edged down to 0.24% of average loans. Write-offs in the FinPac equipment leasing portfolio fell from $15 million to $11 million, though write-offs outside FinPac ticked up by $2 million to $17 million.
What to watch: non-accrual commercial and commercial real estate loans in the fourth quarter. A second straight quarterly decline would show that first-half credit stress was isolated.
Positives this quarter didn't test
One standing growth priority saw a normal seasonal dip this quarter rather than a clear test.
- Fee income expansion: non-interest income excluding one-off fair value swings was $87 million, down from $91 million last quarter because a $3 million life insurance benefit did not repeat; fourth-quarter service charges and trust revenue will show the underlying growth rate.
🐻 Bear Case
Commercial Real Estate Payoffs Shrank the Loan Book
"While transactional loan payoffs moderated overall growth, we continued to grow in the ways we intend, increasing the proportion of relationship-based commercial loans within our portfolio," Merrywell said. Columbia is deliberately letting low-rate inherited loans run off to protect its loan yields, while counting on relationship commercial loans to replace them.
Total loans fell $251 million from last quarter to $46.9 billion because of "continued expected runoff in below-market-rate transactional loans and lower commercial real estate balances, as elevated payoffs and competitive pricing pressures muted growth". By our math, the four relationship commercial loan categories (commercial term, credit lines, equipment leases, and owner-occupied commercial real estate) grew by $169 million to $20.0 billion, down from a $252 million gain last quarter because owner-occupied property loans fell 3%.
This matters because relationship loans rose to 42.6% of the book by our math mostly because the rest of the loan portfolio shrank. If rival banks keep refinancing Columbia's property borrowers away, net interest income will eventually stall once deposit costs stop falling.
What to watch: net dollar growth in the four relationship commercial categories next quarter. A reading below $200 million would show that rival pricing is capping the bank's main growth engine.
Bond Losses Cut Tangible Book Value
Columbia holds $10.9 billion of available-for-sale investment securities, which are bonds carried on the balance sheet at current market prices. When bond prices fell during the third quarter, the bank's after-tax unrealized bond losses widened from $275 million to $663 million.
Combined with $199 million of share buybacks executed at $30.65 per share — well above book value — those bond losses pushed tangible book value per share (net worth per share excluding goodwill and intangibles) down 5.8% from last quarter to $18.10. Tangible common equity fell from 8.59% of tangible assets to 7.93%.
What to watch: tangible common equity to tangible assets in the fourth quarter. A further drop toward 7.5% would test how fast Columbia can run its new $1.2 billion buyback.
Risks this quarter didn't answer
Four standing concerns and watch items cannot be read from the earnings release alone and await the conference call, investor presentation, or quarterly filing.
- Inherited transactional loan balance: not disclosed in the release; the investor presentation will show whether quarterly runoff stayed near $250 million from last quarter's $7.3 billion balance.
- Purchase-accounting income: the release does not separate loan and bond discount accretion from core interest income, leaving the clean margin level awaiting call commentary.
- Real estate loan concentration: property loans still make up about three-quarters of the portfolio; the quarterly filing will update commercial real estate concentration against capital.
- iCap Trust lawsuit: the release gives no update on legal reserves or litigation progress; the quarterly filing's legal footnote will carry any change.
👓 Other Themes
Subordinated Debt Refinancing and Branch Shifts
Columbia issued $250 million of 10-year subordinated notes in September at a 6.721% fixed rate for the first five years. The bank will use the cash in the fourth quarter and early 2027 to pay off about $240 million of older junior debentures, which carried an average rate near 7.0% this quarter. Separately, Columbia opened two locations in Utah and closed four branches elsewhere.
💲 Other KPIs
Profit per share excluding merger costs and fair-value swings rose 7.9% from last quarter, up from $0.66 in the first quarter and $0.76 in the second. Compared with a year ago, operating profit per share dipped 3.5% because Columbia issued shares to buy Pacific Premier last August, though GAAP profit per share nearly doubled to $0.78 as merger costs faded.
The share of revenue spent on operating costs fell 1.58 percentage points from last quarter and 0.98 percentage points from a year ago. Excluding merger charges and $38 million of intangible amortization, operating expenses were $327 million by our math, down $1 million from last quarter as lower employee benefit costs offset a $9 million rise in miscellaneous expenses.
The reserve for future loan losses rose $5 million from last quarter to 1.02% of total loans, up from 1.00% in the first quarter and 1.01% in the second. Management recorded a $33 million credit provision — up from $27 million last quarter — to cover $28 million of net loan write-offs and updated economic forecasts.
🔮 Guidance
Raised. After spending $199 million in the third quarter to finish its prior $700 million buyback plan, the board approved a new $1.2 billion program with no expiration date. Columbia does not issue quarterly revenue or profit ranges in its earnings release, but by our math, prior full-year cost targets leave about $371 million of total non-interest expense for the fourth quarter.
❓ Key Questions
How much did the inherited transactional loan portfolio shrink?
The release notes continued runoff in low-rate transactional loans but leaves the exact balance for the presentation. Investors need to know if runoff stayed near $250 million from last quarter's $7.3 billion level and how much reprices in 2027.
Why did owner-occupied commercial real estate loans shrink 3%?
Columbia groups owner-occupied property loans with its core relationship book, yet that line fell by $186 million this quarter. Was that drop driven by customer payoffs, or did the bank reclassify more loans between categories?
What drove the $388 million jump in unrealized bond losses?
After-tax unrealized losses on available-for-sale bonds more than doubled from $275 million to $663 million in a single quarter, cutting tangible book value per share by 6%. Management should explain the portfolio's duration and sensitivity to interest rates.
What is the quarterly pace for the $1.2 billion buyback?
Columbia bought back $199 million of stock in each of the last two quarters, but its common equity tier 1 ratio edged down to 11.5% and tangible equity fell to 7.93% of tangible assets. Will the bank slow repurchases to rebuild capital buffers?
What caused the $9 million rise in other miscellaneous expenses?
Other non-interest expense jumped 16% from last quarter to $67 million, offsetting lower employee benefit costs. Investors need to know whether that increase reflects legal reserves for the iCap Trust lawsuit, deposit campaign marketing, or ongoing operating costs.