Merger cleanup is becoming a buyback story
- Columbia ended Q1 2026 with $66.0 billion in assets after buying Pacific Premier.
- The bank repurchased $200 million of stock in Q1, leaving $400 million under its current plan.
- Management says all disclosed Pacific Premier cost savings should be realized by June 30, 2026.
- Loans were $47.7 billion, with commercial real estate still the largest piece of the book.
- Credit quality needs watching after non-performing assets rose to 0.40% of assets.
Execution is the story now
Columbia has moved past the biggest Pacific Premier integration worry. The systems conversion finished in Q1 2026, and management still expects all disclosed cost savings from the deal to be in place by June 30, 2026. That matters because the bank is trying to prove the deal can lift earnings without needing a much bigger balance sheet.
The bull case is simple: cut the costs, remix the loan book, lower funding costs, and buy back stock. Columbia repurchased $200 million of stock in Q1 2026, after a $100 million repurchase in 2025 under the same $700 million plan. As of March 31, 2026, $400 million remained.
The bear case is also clear. Transactional real estate loans are running off, and new relationship loans must replace enough of them to protect net interest income. Non-performing assets also rose in Q1. Management said the increase came mainly from one agricultural relationship, but investors need a few more quarters of proof.
A bigger Western bank, run for mix
Columbia makes most of its money the usual bank way. It gathers deposits, lends that money out, and earns the spread between loan yields and funding costs. In Q1 2026, net interest income was $594 million, far larger than non-interest income of $83 million.
The bank now operates across Arizona, California, Colorado, Idaho, Nevada, Oregon, Texas, Utah, and Washington. Pacific Premier added scale, especially in Southern California, but management says it has little interest in more M&A for now. The focus is on making the combined bank more efficient.
A key part of the plan is shrinking lower-return transactional loans and growing relationship-based commercial business. Columbia says it does not need net balance sheet growth to hit its earnings and return targets. That is helpful if the mix improves, but risky if runoff is faster than new production.
Deposits are just as important as loans. Total deposits were $53.5 billion at March 31, 2026, down from year-end because the bank intentionally reduced higher-cost brokered deposits. If customer deposits do not grow enough, funding costs could pressure the margin.
Commercial clients drive the menu
Commercial and industrial lending
This is the loan growth area management wants most. The goal is relationship lending tied to deposits, treasury services, and fee income.
Owner-occupied commercial real estate
These loans finance business properties used by the borrower. They fit the relationship banking strategy better than stand-alone real estate deals.
Transactional real estate loans
Columbia is actively managing down inherited transactional loans, including parts of the multifamily book. Runoff helps the mix, but it can also shrink earning assets.
Treasury management and commercial cards
These services help business customers move, store, and manage cash. They can add fee income and make deposits stickier.
Financial services, trust, and wealth
These businesses add fee income that is less tied to loan growth. In Q1 2026, financial services and trust revenue was $15 million.
Residential mortgage banking
Columbia offers home loans, but the strategy is mainly to originate and sell them rather than hold them. This serves existing customers without adding as much balance sheet risk.
Loan book tells the mix
The mix uses the Q1 2026 loan and lease table from the Form 10-Q. Columbia reports as a bank, so this view shows loan portfolio exposure rather than separate operating divisions.
What could break the setup
Cost savings do not hold
High impact · Medium oddsManagement expects all disclosed Pacific Premier cost savings by June 30, 2026. If the Q3 expense run rate does not drop, the merger math gets weaker. The market may then treat the deal as larger, not better.
Loan runoff beats new production
High impact · Medium oddsColumbia is shrinking inherited transactional loans on purpose. That helps quality and mix only if new commercial relationship loans replace enough of the runoff. If total loans keep falling, net interest income can come under pressure.
Agricultural credit stress spreads
Medium impact · Medium oddsNon-performing assets rose to $264 million, or 0.40% of assets, at March 31, 2026. Management said the increase mainly came from a single agricultural relationship. If more categories weaken, the credit story changes.
Buybacks slow down
Medium impact · Medium oddsThe stock repurchase plan is a major part of the thesis. Columbia bought back $200 million in Q1 and had $400 million left under the authorization. Repurchases can slow if capital, market conditions, credit losses, or regulators demand more caution.
Funding mix worsens
Medium impact · Medium oddsColumbia is trying to lower reliance on higher-cost brokered deposits and wholesale funding. That helped the funding story in Q1, but customer deposits still need to support the loan book. If deposit costs rise again, net interest margin could compress.
In one breath
What does Columbia Banking System do?
Columbia is a regional bank in the Western U.S. It takes deposits, makes loans, and offers services like treasury management, cards, trust, wealth, and mortgage banking.
Why did Columbia buy Pacific Premier?
The deal added scale and density, especially in Southern California. The current plan is to integrate the banks, cut costs, improve the loan and deposit mix, and return excess capital to shareholders.
Is Columbia still buying other banks?
Management has said the focus is not on more M&A for now. The story has shifted to integration, balance sheet optimization, and the $700 million share repurchase program.
What is the main risk for COLB stock?
The main risk is that the post-merger plan does not show up in clean earnings. Watch Q3 expenses, loan growth versus runoff, credit quality, and whether buybacks continue.