COLB Q3 2026 earnings call transcript, October 22, 2026

Hello, and welcome to Columbia Banking System third quarter 2026 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11.

At this time, I would like to introduce Jackie Bullen, Director of Investor Relations, to begin the conference. You may begin. Thank you, Tawanda. Good afternoon, everyone. Thank you for joining us as we review our third 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 address the question. 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 Chairman, Chief Executive Officer, and President Clint Stein.

Thank you, Jackie, and good afternoon, everyone. Our third quarter results demonstrate steady progress on the same core priorities we have outlined for the past several years, delivering consistent, repeatable performance, continuing to reshape the balance sheet to support long-term profitability, and returning excess capital to shareholders. This quarter, we continued to grow relationship-based commercial loans and utilized funds from strong customer deposit growth. to reduce our reliance on wholesale funding, enabling both sides of the balance sheet to contribute to net interest margin expansion. We also returned over $1 billion to our shareholders over the past year through dividends and share repurchases. The completion of our existing buyback authorization resulted in an 8% reduction in our common share count over the duration of the program. Given our confidence in Columbia's long-term strategy, and our outlook for continued excess capital generation, our board of directors has authorized a new $1.2 billion share repurchase program. Our results reflect the benefits of consistent execution, even as the operating environment continued to shift. Discipline is not always the easiest path, but it's one our teams have maintained quarter after quarter across loan and deposit pricing, credit, and expense management. That sustained consistency has driven improved profitability and a balance sheet increasingly built around full customer relationships. In August, we marked the one-year anniversary of closing our acquisition of Pacific Premier, which was the smoothest integration I've experienced in my 21 years with Columbia. Over that time, we have built a compelling footprint across the West, achieving scale and a competitive presence through the combination of

organic growth and strategic acquisitions. As I have repeatedly stated over the past 18 months, Pacific Premier was the missing piece to the franchise we envisioned. Our focus remains on fine-tuning our franchise and continued execution on organic growth opportunities. Our Northwest roots support our 10% market share in Washington, Oregon, and Idaho, while our growing presence in other key Western markets provides us with significant opportunity to gain share and further enhance our market position. With deintegration fully behind us, we are applying our operational discipline with even greater focus, looking across the company for additional opportunities to improve efficiency and profitability. Together with our continued balance sheet optimization and intentional approach to capital management, this work strengthens our ability to deliver to the future. Sustainable, long-term value for our shareholders. I'll now turn the call over to Ivan.

Thank you, Clint, and good afternoon, everyone. As Clint highlighted, our third quarter results reflect the progress we continue to make on our strategic priorities. Turning to slide 11, we reported EPS of $0.78 and operating EPS of $0.82 for the third quarter. On an operating basis, which excludes items detailed in our non-GAAP disclosure, third quarter pre-provision net revenue and operating net income increased 7% and 6% respectively, compared to the second quarter of 2026, and 25% and 12% respectively, compared to the third quarter of 2025. A more favorable mix of loans and funding, together with disciplined expense management, drove both the sequential and annual growth. The addition of Pacific Premier also benefited the year-on-year comparison. Turning to slide 12, average earning assets were $0.52. $69.8 billion during the third quarter, as balance sheet optimization and elevated CRE payoffs contributed to modest contraction compared to the prior quarter. We actively managed our funding base, using strong customer deposit growth to reduce wholesale funding, including public wholesale balances. Between June 30th and September 30th, we reduced wholesale funding by $1.5 billion, contributing favorably to net interest margin. Slide 13 outlines the contributor to sequential quarter change in net interest margin, with NIM at 4.11% for the third quarter. Adjusting for the three basis point benefit from accelerated repayments this quarter, and the three basis point impact of one-time credit-related interest reversals last quarter, our NIM expanded by 12 basis points sequentially. Our balance sheet optimization strategy drove meaningful NIM expansion, building on improvement throughout the past year. As previously articulated, NIM moved about

4% and excluding unusual items, we expect it to remain above 4% for Q4. More specifically, we are guiding to a Q4 NIM of around 4.05%, which incorporates the impact of carrying excess subordinated debt throughout Q4 at a modestly negative carry. Our latest interest rate modeling continues to show that our balance sheet ratios remain largely neutrally positioned to rates, as slide 14 details, providing earnings insulation, whether in- interest rates rise or fall. Non-interest income in the third quarter was $80 million on a gap basis and $87 million on an operating basis, as detailed on slide 15, at the high end of our guided range. Our results reflect continued momentum across products and businesses, and we expect non-interest revenue to remain in the mid-$80 million range for Q4. Slide 16 outlines non-interest expense, which was $365 million on an operating basis. consistent with last quarter and reflecting disciplined expense management across our core franchise. Excluding a CDI amortization, which will decline slightly each quarter, we expect fourth quarter non-interest expense to be in the $330 to $335 million range as we continue to reinvest in our franchise. Moving on to slide 17, provision expense was $33 million for the third quarter, reflecting loan portfolio runoff, credit migration trends, and changes in the economic forecast used in our credit models. Credit metrics remain stable and healthy.

Slide 18 details our allowance for credit losses by portfolio with coverage of total loans at 1.02% at quarter end and 1.25% when credit discount on acquired loans is included. Turning to capital, slide 19 highlights our regulatory ratios at quarter ends. Our CET1 ratio declined slightly to 11.5% as our regular dividend and robust buyback activity modestly outpays strong capital generation and the benefits of balance sheet optimization. During the third quarter, we repurchased 6.5 million common shares, returning approximately $200 million to our shareholders and completing our prior repurchase plan. Our total risk-based capital ratio increased to 13.8%, reflecting Columbia Bank's issuance of $250 million in aggregate principal amount of subordinated notes during the quarter. We expect to use these proceeds to redeem approximately $240 million in aggregate principal amount of junior subordinated debentures associated with certain trust-preferred securities through early 2027, causing our total risk-based capital ratios to decline by approximately 50 basis points, all else equal. These actions advance our broader strategy to optimize both our balance sheet and our capital structure. Tangible book value declined during the quarter to $18.10 due primarily to an increase in other comprehensive loss as interest rates moved notably higher during the third quarter. Looking forward, we expect share repurchases to remain in the $150 to $200 million range for the fourth quarter under the new repurchase plan that Clint outlined. Overall, we're very pleased with the financial results for the quarter, generating an ROAA of 1.4% and an ROTCE of over 17%.

Our focus remains on protecting the quality of earnings as we work to improve returns over time. With that, I will now hand the call over to Tori.

Thanks, Ivan. Our teams produce another quarter of solid, relationship-driven results. Our loan portfolio continues to shift in the direction we want, with commercial loans inclusive of owner-occupied CRE comprising 43% of the total portfolio, compared to 42% at June 30th. and 39% a year ago. Competitive pricing and structures that we are unwilling to match contributed to a decline in loans to $46.9 billion from $47.2 billion as of June 30th, although the pace of decline slowed relative to last quarter. Loan origination volume was $1.2 billion during the third quarter, with nearly 70% attributable to commercial loans. Our focus remains on winning full commercial relationships rather than single product transactions. These broader relationships extend naturally into deposit and fee income opportunities, supporting stronger overall profitability. Turning to deposits, strong growth in customer balances supported an increase in total deposits to $52.7 billion compared to $52.1 billion at June 30th. As we intentionally reduce public wholesale and brokered balances, customer deposits increased by nearly $1.2 billion during the third quarter due to seasonal balance growth and new customer activity. As Clint noted, our discipline extends to deposit pricing. The average cost of interest-bearing deposits declined one basis point to 1.95% for the third quarter. Our spot cost of deposits was largely stable at $1.2 billion.

0.96% as of September 30th, reflecting a measured response to the Fed's rate increase in September. Our relationship approach to banking is driving a greater contribution from fee income to total revenue. We are seeing momentum across core fee businesses, including treasury management, card-based fee income, and services such as international banking. Wealth management also is contributing to more non-interest income. Consistent with our broader focus on improving profitability, we regularly evaluate our physical footprint to ensure it reflects how customers bank with us today and into the future. To that end, we close four branches during the third quarter as we continually fine-tune our physical presence. We also opened a branch and a financial hub in Utah, adding locations to support our customers and bankers in our de novo markets. At the same time, we are bringing new talent to Columbia Bank. Investing in the development of our existing teams, reinforcing our relationship banking approach, and cultivating the next generation of leaders. I will now hand the call back to Clint. Thanks, Tori. From the outside, it was a relatively uneventful quarter for Columbia, reflecting another period of consistent execution. Behind the scenes, we were very busy. We've delivered 11 consecutive quarters of predictable financial performance while continuing to reshape our balance sheet.

And strengthen the franchise we've built across the West. We embrace technology and automation to improve the customer experience and make our teams more effective, enabling our bankers to spend more time serving their customers. Technology enhances our relationship model. It does not replace it. We remain confident in our strategy because our customers are attached to relationships, not a robot. Our customers choose Columbia.

Because of the bankers who know them and their businesses, and our branches remain an important part of how we build and retain these relationships. I want to thank our teams for their disciplined execution and drive to get better each and every day. This concludes our prepared remarks. Chris, Tori, Ivan, and Frank are with me, and we're happy to take your questions now. Tawanda, please open the call for Q&A. Thank you. Ladies and gentlemen, as a reminder to ask the question.

Please press star 1-1 on your telephone, then wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of John Obstrom with RBC Capital Markets. Your line is open.

Hi, John. Nice job. There's a lot of places to go, but maybe, Ivan, start with you on the margin. Thanks for the thoughts on the fourth quarter margin. But, you know, the 405 was a surprise to us, I think. I mean, 411 was a big surprise, but I see the Adams. The 405 was a surprise to us. And I guess I'm just curious how you feel about the momentum and the margin where you think this could go over time. You mentioned things like sub debt, maybe surprising it in the near term. What do you think the trajectory of the margin could look like over time here? Yeah. Thank you, John. I appreciate the question. So, a couple things I'd say around that. First of all, just kind of unpacking Q4 in a little bit more depth, potentially. Recall that while our margin for Q2 reported was 393, that had some negative impacts that we called out last quarter, including the one-time credit-related interest. Income reversals and some of the accounting yields associated with the investment portfolio. When you think about where we landed for Q3, there's really four factors in terms of how I have thought about the margin this quarter. First, obviously, we're benefiting from the absence of those headwinds that we called out 90 days ago, and you can see that pretty clearly on the walk on slide 13. Second, as you get into the earnings release detail, you'll see that our loan portfolio optimization in what Tori articulated earlier out of lower rate transactional and into our core

relationship commercial lending portfolios continues to help support stronger returns. And that's something that we do anticipate to continue as we look forward in this higher for longer rate environment. Third, we were, I think, very pleased with the results from a deposit generation perspective without really seeing at least quarter on quarter a meaningful shift in the overall cost of the deposit. And like I mentioned earlier, that allowed us to continue to optimize the other side of our balance sheet, which has been a core focus of ours with about a billion and a half of higher cost wholesale funding coming down. And then we noted it earlier, but we did have about 5 million in interest income related to accelerated repayments. And that part of it is more, you know, one time in nature. The other factors are really aligned. to the strategy that we're pursuing. And I think if you look back at the net interest margin over the past four or five quarters, you can see the progress. And it's not always linear. But we anticipated, as we've talked about, I think pretty openly crossing over the 4%. As we look further on, you know, we'll continue to expect to be operating in that low 4% range for the next several quarters. Q4. A few things I'd say around that 4.05%. You know, number one, we will be holding some amount of excess debt as we work through the Trump's redemptions. And that's really just, you know, a function of kind of the timing associated with the sub debt issuance versus, you know, going through the various redemption activities over the course of Q4 and Q1. We'll work through the majority of that, but that will cause a couple basis point headwind as we as we operate through that. And then number two.

We tend to see seasonal outflows in the second half of Q4 like many of our peers do. And so we factor that into to our modeling as well for Q4. And so, you know, if if you would have asked me and if I would have been willing, which which I wouldn't, by the way, but if I would have been willing to give you a Q4 number 90 days ago, I would have said 405 at that point as well. And so, you know, we're definitely pacing towards where we expect to be. If we do outperform that, I think it'll be a function of what we've. We've seen within rates and the rate impact on asset yields potentially impacting our margin more rapidly than the funding side. But we'll see how that shakes out as we move through the course of this quarter. Yeah. Okay. Very helpful. It was a good performance. Maybe just to follow up on that, Tori, on the origination pace, you mentioned some irrational competition in spots. Can you touch on that a little bit? And then just also. Maybe comment on what you're seeing in the pipelines. Sure. Yeah. So production was really strong and steady. Pretty consistent kind of quarter over quarter over quarter. So great to see that. And kind of as I look into Q4, it looks pretty comparable. And like the direction that the teams are going in. The irrational. Behavior at sometimes in some markets is a little bit silly, especially on the real estate front. You know, you either see, you know, much too much leverage in a deal that we're just not interested in or without any real recourse, any guarantee. So a non-recourse structure that the income from the property really doesn't warrant it. Or you're seeing rates that are crazy low. We've seen a bump.

at, you know, a SOFR plus 100. I have yet to see one dip below 100, but I know it's coming. And, you know, so we just kind of have a quick conversation with the teams and just pass on it because it's not something we want to do. But, you know, and I've been looking a lot at it to see geographically or product type or kind of where it's coming from. But it's not a ton of it, but in its broad base. So it's not in one geography or one asset class. It's kind of. Spread out a bit and it's not all the time, but it's enough to kind of make you shake your head for sure. All right. Thank you very much. Thank you. Our next question comes from the line of Chris McGrady with KBW. Your line is open. Oh, great. Thank you. Clint, for you, when you announced last year's buyback, which is about a year ago to the day, I think I asked you.

Any more comfort giving us kind of a bogey that you're targeting over the medium term? Well, I think we've been pretty consistent for 15-plus years in terms of where we want to be on the target level. We've also had a hard time getting our capital down to those target levels. You know, I think, and Ivan can speak. I don't know if he will share with you, but all the modeling that he's done and stress scenarios and how not only the newly authorized repurchase plan, but also our regular dividend, you know, and we feel really comfortable with those stressed results and our ability to continue to return. capital to shareholders. The one area that we've talked about, you know, in the past is the TCE ratio. And just kind of naturally over time in a stable operating environment, you know, 12% total risk-based capital, 12.5, somewhere in there, equates to roughly 8% TCE. And at least on our balance sheet, that's been the historical. Alignment. I exclude the AOCI to a certain extent when I'm thinking about TCE. Just like as we were building from, you know, below 7 to well above 8 over the past couple of years, I excluded it at that time as well because, you know, we have a phenomenal deposit base. We have great liquidity and we have the ability to hold those securities that are driving those AOCI marks to their maturity or until the rate environment changes course a little bit. So, and I think also back to the modeling that Ivan and his team do, you know, they also model additional rate shocks and what that impact is on

our tangible ratio. And, you know, we have a lot of comfort around it. I don't know, Ivan, if you want to add any detail. Not a ton to add there. Like Clint indicated, every single quarter as we go through this, we model out what we expect from a capital generation, capital needs, payback period associated with the repurchase program. We're also keenly aware and monitor closely capital ratios on the marked capital basis, including TCE to T. Like everyone else, you know, we're also keeping an eye to the future with regard to monitoring the potential regulatory capital effects of Basel III proposed rule making. And we have a sense for what that could offer, but we're not explicitly counting on that sort of capital relief at this point in time. So long winded way of saying that, you know, it all goes into the mix. We keep track of all of it and we're comfortable with our. levels, you know, confident in terms of the capital generation that we're going to create here in Q4 and into 2027. And that all goes into the equation as we balance out the capital impacts. I guess the last thing I would say, you didn't explicitly ask about it, but we're also kind of in the mix of kind of our tier two capital remix strategy is, as you know, Chris, with the bond issuance that we completed in Q3 and then the associated redemptions that we're working through now. So. That's an active part of our capital management that we're in the midst of as well.

Great. Thank you.

Our next question comes from the line of Jeff Rulis with DA Davison.

The other dynamic is more just the seasonal flows associated with our deposit portfolio. Q3 is seasonally strong for us, and that wasn't the entirety of the strength that Tori talked about earlier. I'm sure we'll talk more about it here in a bit, but that was. It was a factor in Q3, and we tend to see a little bit of an outflow in the second half of Q4 from a core deposit perspective, typically. And so that's worth a few basis points as well. So those are the two things that we're looking at in terms of that guiding to that 405 relative to, you know, that pro forma adjusted 4.08 for this quarter, excluding the one-time accelerated prepayment. Right. Sorry, I was. I was kind of alluding to 27. If you just think about the major pieces of, if you enter the year with maybe the seasonal deposit outflows are a headwind in the first half, but the Trump's redemption, the flip of what's happening in Q4 is maybe a net positive. Then you layer on the favorable back book repricing potentially in 27. I just want to like net that out. It still looks like a 405 starting. Going into the year, it's still a net maybe positive upward trajectory. Is that fair to say on the margin? I think that's fair. Although, Jeff, it almost sounds like you're trying to tease out a 2027 guide, but I know you're not. You know, what I would say, we're still going through our planning on 2027, but there are a few things I think that we could expect at least as we turn the corner into the first half of the year.

I think on the balance sheet, you can largely expect more of the same over Q4 and Q1 as we continue to optimize the mix of loans out of transactional and into core relationship-based commercial lending, which, as you've seen throughout the course of this year, mute the actual balance sheet growth, but does provide what you're alluding to, which is positive revenue momentum in the form of margin expansion. We will continue to maintain what I would call an intense focus on driving core sticky client deposits and leveraging that funding to continue to optimize our wholesale sources. And I think when we've connected with you in the past, you'll note that that's not linear, right? That there are seasonal flows associated with that optimization, but that will continue as well. And so I think the resulting NIM kind of in that low four range to start the year, but continuing to expand is a reasonable. Expectation when you put those puzzle pieces together. Yep. Just trying to get to the drivers. Appreciate it. Maybe hopping over just one other question on the provisioning and the reserve levels. You had net loan runoff this quarter and NPAs down. And I guess theoretically, you've got a more relationship heavy model. So sort of de-risking in some ways. I just want to get. Some understanding of the reserve build in. With some of these other factors would suggest maybe lightening up. I appreciate it.

Yeah, you're spot on. And I guess one of the things I would say is I would categorize. I'm not sure I would note this being a material shift. Right. Going from basically a one basis point movement in our overall. Once for loan losses, the economic backdrop that we put into the model this quarter versus 90 days ago was pretty darn similar. I think the one difference being the rate environment and and not just kind of where we're at today, but what the model expects going into next year, where I think most folks are modeling a further increase later on this year and then anywhere from from one to three increases over the course of kind of the first half of 2027, whether or not. That translates into more pressure for certain borrowers in real estate and other verticals or not is probably beyond beyond my crystal ball to read. But I think that's probably what the model's catching up on is is is just that factor. So it's really more the economic backdrop that that I think the model is picking up versus anything idiosyncratic in our portfolio. Look to Frank if he wants to add anything to to my comments here. But but generally. In terms of what we're seeing in our book, it's been very positive. No, I think you I think you said it really well. I don't have anything else to add. Appreciate it. Thank you. Thank you.

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

You know, we had another great year in terms of the SBA rankings. That's been a big focus of ours and making sure that we are serving the smallest of businesses. As well as all the way up through the upper middle market. So I think that what you saw, in addition to third quarters always our seasonally strongest from a deposit standpoint. But I'll point you back to it's our business model. And it's the ongoing activity of our bankers that are committed to that model. And I'll step back and see if Chris is anxiously waiting to add his commentary here, David. Anxious, very anxious. Thanks for the question. Good question, David. Yeah, you know, small business campaigns, they extend across quarters. So I want to be pretty upfront that that's not driving all of this growth. And, you know, there's no special products. There's no special pricings. It just allows our branches to have a common purpose and actually have some fun. I think, though, most of all, you know, we're proud of the focus of our bankers that they have on relationship selling to not only new customers, but to deepening existing customers. There's lots of opportunities there, too, with deposits that are held elsewhere. I'd also, you know, kind of pile on that of campaigns are just a piece of what we do. The third quarter deposit growth is truly a team effort across our franchise, and it touched every single business line and was previously stated earlier in the call.

You know, the deposit growth is driven in a disciplined model towards pricing. I mean, holding our cost of funds steady while we continue to remix from higher-priced CDs into core deposits is, actually, it's fantastic. And simply put, and I'll turn it over to Tori, I would say this is how we do business.

Well, between Chris and Clint, they probably stole all the thunder, but I got a couple things I want to add, because I was very proud of the commercial folks this quarter. They had nearly a billion dollars. and customer deposit growth, and it's a combination of new customers, new relationships, and new money to the bank with just growth in existing accounts, but then also confidently going back to our customer base and really having that confidence to have conversations to bring any balances they have other places into the company. And I give it. A special shout out to those folks and our treasury management folks for the work they did. Clint talked a lot about activities and behaviors. And we have over the last year or so really instituted some accountability around working capital assessments and relationship reviews. And it's producing some really nice results for us, not only in the deposit side, but on the fee income side. And just to give you a couple stats that are, I think, very. Relevant to it on the fee income side. Our treasury management business is up 7% year over year. Our international banking business is up 19% year over year. Our commercial card business is up 23% year over year. And our merchant card business is up 11% year over year. So all of that is a result of some real core behaviors and activities. I think the teams are doing great. Lastly, Clint talked about the integration with Pacific Premier. When you look at the.

deposit growth for commercial, nearly half of that came out of legacy PPP, Southern California folks, and really shows that they have fully integrated into the company and they're making some real progress in their existing customers, but getting out in the markets and taking advantage of who we are there to grow our customer base in Southern California. Okay, that's super helpful. And maybe just touching on the expense side. Look, you've always been cost conscious. And we've talked about this previously. It's a part of your DNA. How do you think about the expense front? Like where are you finding these savings and improving efficiency to fund the investments that you're making? And just what are some of the key investments that you're focused on as it relates to tech or hiring and even some of the branch expansion that you highlighted in the release? Well, David, you, as always, tend to pack a lot into a single question. And so as a group. We'll try to do our best to touch on all those points. And I'll just start off by, you know, saying that, you know, we've we've put three large organizations together. And anytime you do that, there's processes and things that that maybe worked for one organization, but are not as efficient as what they can be. organization are with our size and scale now. And then you add into that the speed to which we can automate things. And again, I'll go back to my prepared comments about we have a lot of technology. I think our platforms are contemporary. We don't shy away from from from that. But it's a tool. It's a tool that helps remove friction, increase our speed.

Take care of our customers and create a better employee experience. So we're always looking at how do we get better every day? The team and you've probably heard this over the years, whenever they come forward with an investment opportunity, it's it's usually do you have an offset? There's got to be an inefficiency somewhere in your vertical. Go find it and use that. To offset it. And in the rare occasion that we can't find an offset, then we let the revenue projections speak to themselves and and we'll make the investment that way. And that's kind of similar on our on our branch or, you know, our de novo branching activity is, you know, we we determine if there's an underserved market, if there's a gap in in continuity of our existing footprint. Things of that nature. And most importantly, do our do our commercial bankers in those markets? Are they are they pushing for and requesting and stating the need for a branch location? Because once they do that, then we know they're there. The whole market is committed to making that a success. That's been the model we had. I don't know, six, seven years ago when we put our first branch in in downtown. Boise. And that's the same model we've utilized as we've expanded to Utah, Arizona, and Colorado, as well as within existing markets. You know, we just opened a branch last quarter in Las Vegas. And that's one that, again, the teams were saying, we need some infrastructure. We can leverage that. We can bring in more commercial customers. So I'm sure I've only touched on a fraction.

of the points that you had. So I'll step back and see if Ivan, Chris, or Tori want to add anything. I mean, not much to add from my perspective other than, David, I know we've talked about this when we've been together here over the course of the year, that we flagged from the very beginning that we thought we had a unique story to tell for 2026 with, you know, embedded within positive operating leverage, right, with revenues coming up as we continue to optimize our business. Continue to drive the core fee income that Tori talked about with a lot of singles and doubles. And then on the expense side, a scenario where we had an opportunity to, as revenue goes up from H1 to H2, an opportunity to take expenses down. And I think we've been extremely disciplined in execution of PPBI. I think we celebrated outperforming our original goals and targets with regard to identification of cost savings, predominantly in vendor-based spend and contract spend. Which is great. And that's allowed us the, frankly, the luxury from my perspective of continuing to reinvest while still, you know, staying within the guardrails that we've established for ourselves in funding. And again, this quarter, you know, being able to redeploy some of that capital into future growth in the form of expanded physical presence in markets that we are really excited about. And I think as you look out into next year, that discipline will continue as will.

The reinvestment. And so I think it's a pretty good it's a pretty good mix with regard to that. I don't think I would add this story would be some of the people side of it where to Clint's point, we find an offset and we've invested some on the commercial banking side in Utah and Arizona, our Native American banking business, and then our fast food franchise business. You know, those are like four or so areas where we really look to increase the. The number of folks, but the talent and we're we're bringing in some incredibly talented bankers into into many, many parts of the company, but it's specifically those areas. Yeah, David, and what I doubt on that is we're doing the same thing in the wealth management space. I'm pretty excited about some of the talent we're currently talking to. And when you look at the addition of the private trust business, joined us a year ago from Pacific Premier. And wealth management continues to become a bigger presence, bigger part of that non-interest income. The last quarter was actually our second largest source of it. And so, you know, we're expecting great things out of that and continued growth as well. And maybe just kind of a following up on some of those to some degree. I mean, Clint, the way you started out the call was talking about the consistency of your performance and what you guys have done. And we spent a lot of time talking to investors, talking about the durability of earnings.

What gives you confidence? I mean, a lot of that that we've talked about has been a decent amount of self-help and balance sheet optimization. There's still some tailwinds there. But, you know, we had tailwinds from the synergies from the deal. And again, a lot of the repricing and shrinking of net negative yielding assets. What gives you confidence that, you know, that that that's sustainable going forward? Well, David, what we can't what we can't control is the macro environment. And so, you know, there's a little bit and, you know, as our industry, as the macro environment changes, our industry either gets headwinds. And we face those same same same headwinds and tailwinds. But we do focus on what we can control and we can control our expense discipline, our pricing discipline, the quality of our fortress balance sheet, the granularity and diversification that's that's on both sides of the balance sheet. Whether it's the loan portfolio, the quality of our investment portfolio or our portable. And that has given us a very resilient, stable, performing company that throughout really throughout the 33 year history of our company and various business cycles, you know, I'll use the GFC as a as an example. You know, we took our lumps just like everybody else, but we came through it, bought five failed. Thanks from the FDIC and built the company that we have today. So it wasn't fun, but it was an opportunity for us to, you know, really to thrive coming out of it.

And a lot of our customers, we view the same way. They're good operators. And whatever, whenever their industry goes through any type of pullback or downturn, they usually come out stronger because it's the. The weaker operators that that go away or retrench. And, you know, we're no different in terms of how we think about our business. And so I always look at at on a relative basis. How are we doing? And we've stated that, you know, our objective is to always be top quartile. And if we're not, then we're working hard to figure out how to get get there. And so. It's just, I've seen it play out over the last 21 years. And when I say we're running the historical Columbia business model, you can see that in terms of what's coming on the balance sheet, what we're flushing off the balance sheet. And then we have these head or these tailwinds of that you mentioned, you know, mixing out of lower yielding assets, mixing into more of our traditional assets that are. Coming on at 200 plus basis points higher than the stuff that's rolling off and then I know we still have pockets of inefficiency within our company that either exist as a byproduct of the, you know, bringing on impact premier under under our umbrella or just with the. advancement in, in, in technology and our ability to, to do things quicker and better you know, it's, it's not any one single thing. It's really just being focused on, on, on every little detail. I think I probably drive the team nuts sometimes with some of the details that I come, come back and ask them with, you know, you're, you're pretty busy right now. I mean, you've got, you've got a baseball team to root for.

the world series. You know, we didn't get any, you know, Mariners didn't make the playoffs. So October, I spent a lot of time, you know, digging into the weeds instead of watching baseball. And, you know, so that's why I'm pretty confident that we still have some things we can do. Are any of them going to move us from, you know, say a 140 ROAA to 160? No, but what they will do is enable us to maintain our level of performance, maintain that top four time. And top decile returns and continue to make these investments in our company, whether it be platforms or some of the investments in people that Terry, that Tori spoke of. So, yeah, we're just a lot of optimism. That's terrific. Thanks, everybody. Thank you. Please stand by for our next question.

Our next question comes from the line of Bernard Vaughan.

And I think Chris and Tori can add their thoughts, but, you know, when we look at where we have a lot of density and the way that the company was built over time and some of the markets that we're in, and, you know, they're stable markets. They're not high-growth markets, but, you know, we have great market share and plan to stay in each community that... that we're in, but you look at, kind of, let's use the Phoenix market as an example, and I think we have five offices there now. We probably, over time, maybe need two or three more, and we'll have the entire metro area covered in terms of how we think about, you know, folks, you know, my view is... is folks will drive 30 minutes if they have a problem that they need to solve or they want to strategize and meet with somebody in person. You know, in our metro areas, 30 minutes is kind of what everybody's commute is anyway. So in a market like Phoenix where traffic moves and everything, we can do it with a very branched-like approach. The problem that we were trying to solve, and we spent a couple years trying to solve it... PAC Premier solved it for us, was how do we build that kind of density in Southern California? Because one, it's an immense market. Two, 30 minutes with LA traffic, you might go two and a half or three miles. And so, you know, it's really market by market. And then I look at things like Washington. So, you know, in Washington, we have our highest...

Branch count. You know, it's a few more than what we have in Oregon and a few more than what we have in California. But, you know, there's an underserved market that we're looking at right now. And we believe that, you know, that branch would be profitable very, very quickly. And so it's just sometimes being opportunistic. Sometimes it's... Satisfying the request from customers who are saying, there's an unmet need here. And then assessing it and determining the type of value and business volume we can drive from it. You know, and so where we look at it, you know, we've kind of, you know, we probably need some more infrastructure in Colorado to properly serve the Denver market. What we did in... Utah was we had some money pigeonholed for Southern California that we were able to divert and reinvest in the Salt Lake area. And I feel like that strategically where those offices are placed are pretty, we pretty much have coverage that we need in that market. So we'll shift our attention to some of the other locations. Chris, you want to add anything? Yeah, the only thing I really say is that fine-tuning is always going on. What Clint describes is, you know, it's almost a daily process. We're always looking at branch profitability, coverage, where customers are going. You know, I'd kind of just say it as demand drives some of those new opportunities, and customers certainly do. And beyond that, what you won't see is a mass announcement of closures or something of that nature, and we're going to be pretty strategic on any new location.

But, you know, expect to see probably some down the road.

Great. And just as a follow-up, just to clarify on the $1.2 billion buyback authorization, was it contemplated the potential capital relief from Basel III in that, or is that still just additive? Just kind of curious on that one. No, no, that would be additive. Like Clint indicated earlier, unlike what we talked about 12 months ago, almost to the day, this one does not have a time-bound nature to it, so we do have flexibility to look beyond, you know, a one-year marker with what our board has authorized regarding that, but no, we're not counting on Basel III regulatory capital relief to be able to fully leverage that program, but again, it'll take longer than... and the one-year marker that we executed this latest authorization under. Great. Thanks for taking my questions.

Our next question comes from the line of Matthew Klopp with Piper Sandler. Your line is open.

Wanted to hone in on that securities yield up nicely this quarter. I know the last quarter... Rates up. You got tagged with, you know, creating less of the discount. But just wanted to answer the question that I'm sure I'm going to get as to, you know, why that wasn't a headwind this quarter with rates up. Thanks, Matt. I'll take that one. So, yeah, I think you've got the backstory right. And you'll recall that last quarter I noted... As part of our discussion around the investment portfolio itself, that while we had some temporary headwinds with regard to the accounting yield, I expressed confidence that over a long period of time, we'd continue to see the bond portfolio yield increase, which is essentially what we're seeing. We continue to have the dynamic of, you know, purchases and front book acquisitions in the bond portfolio coming in at significantly better yields and rates than the back book. As that kind of matures off or amortizes away. And we've got something like 250 to 350 million per quarter of that activity occurring. So that so you think about kind of modeling us out over a longer period of time and and and or if you look kind of on a year on year basis, you'll continue to see that that fixed asset repricing story continue more specifically to your question. Last quarter, what we saw was a decline in the discount accretion. associated with with rising interest rates essentially translating into slower prepayment speeds. And directionally, I think that that makes sense. But what I would, I guess, the nuance that I would introduce to the conversation there is that for those underlying assets, predominantly mortgage backed securities and commercial mortgages, rates and prepayment speeds aren't linear. And as we dig deeper into the modeling, there's there's typically an S curve that goes into it. And so unlike last quarter,

we didn't see a meaningful headwind to discount accretion via CPR speeds in Q3. So rates moved up, but prepayment speeds essentially already reset or adjusted to very low levels last quarter in response to the initial rate increase in the marketplace. And so with, you know, refinance activity already minimal, this quarter's additional rate movement didn't really translate significantly into CPR speeds. Overall, our discount accretion on the securities portfolio in Q3 wasn't all that materially different than it was in Q2, i.e. very low, but it's still significantly below what we recognized in Q1 when we were in a lower rate environment. And so if you were to kind of balance out two factors, last quarter the factor of discount accretion recognition reduction was greater than the, you know, the core backbook repricing factor, and it was the inverse this quarter, right, that we kind of took our lumps and sustained at a lower level on discount accretion recognition in Q3, and then really the core thesis being kind of that backbook repricing kind of carrying the day from a securities yield perspective. Probably more than you asked for, Matt, but you did ask, so figured I'd get into the details there a bit. That's great. Great color. Thank you. And then just on earning asset levels and loan balances, net loans down less than last quarter, I think the experience. Expectation is flat to down until maybe mid next year on loans. But just help us think through net loan balances. I would assume they're still, you know, maybe down a little bit, but in overall earning asset levels over the next few quarters.

Yeah, I think you've got it right. I think for the next quarter, two quarters, probably three quarters, you can continue to expect to see more of the same from us in terms of you know, core focus on driving relationship based lending. You know, the variable there that probably is the most, you know, the transactional portfolio has been fairly consistent. And we've we keep a very close eye on that. I look at it almost daily in terms of the trends that we see within that portfolio. One factor that, you know, could play play out in Q4 and into Q1 is a slight reduction in CPR. As you know, rates have reset to a higher for longer environment. But it's been pretty consistent in order to plan around that transactional portfolio at roughly a quarter of a billion dollars per quarter. The CRE marketplace, as Tori described it earlier, is dynamic. And we have each and every time erred on, you know, maintaining our discipline, both regarding structure and price, as Tori talked about. And we think that that is serving us. Very well, as we continue to kind of work through this in a discipline, manager and optimize our portfolio. So I think, you know, flat to slightly down over the course of Q4 and into Q1 would be a fair expectation there. And then maybe I'll just ask Tori if there's anything else he'd speak to in terms of what we're seeing in the marketplace. No, other, you know, activity wise, you know, pipeline, the things that I'm seeing on the commercial side of the house is pretty confident that.

Our CNI growth can, you know, remain in this low to mid single digit level, kind of consistent what we've done the last three quarters, obviously, barring any, you know, big macroeconomic, you know, headwind, but lots of lots of good activity, lots of good stuff going on in the various parts of the franchise. So feel relatively optimistic to kind of continue what we've been doing.

Great. Thank you. Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of David Ciovarini with Jeffries. Your line is open.

Yeah, David, what I'd add to what Ivan laid out there is that, you know, he previously in this call stated that fourth quarter rates could improve. projected to potentially rise. You know, we always look at it from the standpoint of whether rates go up or they go down. We're going to perform better than the peers. And I think we've been able to show that through this latest cycle that we're able to hold costs low through our relationship strategy and disciplined approach between higher price CDs and things of that nature. But, you know, the goal is is to outperform what the market is. What Ivan puts out there is a good proxy for it. But we battle it each and every day. We talk about deals each and every day. And, you know, it just all adds up. So it's just part of our discipline. That's helpful. And then on the non-interest bearing deposit mix, holding in nicely at 33 percent, how do the pipelines look on? On that side, is the ability to hold this steady kind of in the cards given or I should say despite the backdrop of higher rates? Yeah, this is Tori. I would answer that pretty briefly and say, yes, the goal in the assumption is to continue to maintain that mix. It's a result of core operating accounts, new businesses brought into the company, you know, managing. And in working through all the things we've been talking about, full relationship banking, it's just going to come with non-inspirating demand deposits. And that's the emphasis and focus.

Yeah. In the current rate environment, that's a pretty steady. We've seen it be steady. And that's kind of the mix that the customers are, how they're choosing to keep their money between operating accounts and money market accounts or whatever it may be. You know, it'd take a pretty. Significant rate decrease before people start looking at it and going, there's no reason to move it into a money market. So I think that that's the goal. And I think we're seeing that just over and over with, especially with new customers as well. One thing that we do do, I'll just add one thing real quick is this relationship profitability model that we leverage in the company of how we price loans, how we price deposits is dependent on all the various pieces that we earn. From the customer. So some of that is just good old fashioned, you know, blocking and tackling and telling, you know, customers, hey, this is what you need to have with us so that we can maintain this level of pricing so that we can all continue to win and be profitable. Good color. Thank you.

Our next question comes from the line of Janet Lee with TD Colwood. Your line is open.

If that does occur, you know, we still have the benefit of repricing behavior within the portfolio. The, the, the. The, you know, buckets that we laid out here on slide 25 are generally not maturity dates, but they're when these assets come up for repricing. And so even if they stick around for a little bit longer, they, they become less and less of a handwind. And I think you see that in the form of this transactional portfolio kind of inching up over time in terms of the yield associated with it. Okay. It seems like it's 40.3 billion to the same. From a year ago slide, but maybe I'm misunderstanding something. Can check back. You've been obviously holding the line very well on expenses, which is really impressive. But as the growth that accelerates in 2027 versus 2026, should the growth trajectory on... Expenses change in any meaningful way versus what we've seen over the past couple of years? Thank you. Great question. Obviously, this year we had over the course of Q4 in 2025 and then Q1 and Q2 of this year, we were operating through identification and execution on $127 million worth of PPBI cost. The $127 being our original target, we outperformed that. I think we landed at $132 or $133 in terms of total identified savings. And so that provided an opportunity to continue to bring our expense base down from H1 to H2. I signaled that a range for Q4 that's pretty static to where we landed this quarter in terms of operating expenses. And then as we think about 2027, we guide to...

Something that is in the realm of kind of inflationary-based expenses, something in the 2% type range, is probably a pretty reasonable modeling assumption. Again, we're building our plan now. We'll continue to invest in infrastructure and people and technology to grow the bank for years to come. But we'll continue to maintain our discipline and find offsets where possible.

Please stand by for our next question. Our next question comes from the line of Time of Year Braziler with UBS. Your line is open.

From a payoff perspective, yes. We did start to see a little bit of reduction in prepayment speeds over the course of Q3, in particular in August and September as rates rose. You know, it's anyone's guess as to how that's going to manifest in Q4, but I would suspect that prepayment behavior will slow down relative to earlier in the year in the first half. I didn't quite catch the first half of the second question there that you asked. It looks like in the other column, it's negative $417 million. That number is larger than it's been in recent quarters. I'm just wondering what that driver was readily available. So maybe we can follow up with you on that one. Okay. Great. And then maybe just circling back to the deposit commentary, it looks like there's a decent slug of CDs that mature here in the coming quarter. I guess what's the intent to retain? The maturity is there. And then I appreciate your comments about starting to adjust some of your rates for increased competition. I'm just wondering what your current CD replacement rates are.

Yep. In general, I think the movement that you've seen over the course of the last year around term deposits, a lot of that movement was in the function of brokered CDs. You can see in kind of our liquidity slide that that's a very small piece of our funding stack at this point. We have kind of finalized the optimization of our brokered CD portfolio. The vast majority of what remains is retail consumer CD portfolio. We are working to kind of stabilize and maintain that portfolio under its current size. I think we're seeing kind of CD rollover rates probably north of 80% in general, Chris, which is kind of where we'd like to where we'd like to be there. We've adjusted some of our flagship. offers really in kind of the six to nine month term structures at this point. Although, you know, we continue to look at rate environment outlook, what's likely, and then balance that out with our asset liability management position. And so we'll continue to be active, usually one or two terms per quarter where we'll look to, you know, adjust our pricing. See if Chris wants to add anything. Yeah, what I wanted to add to that is, you know, we really look at those CDs on a daily basis. What's renewing? What's coming in? You know, obviously we could, if we saw a need to boost the retention rate, we could change the underlying rate, you know, for tomorrow and vice versa. If we were renewing too much, we could take it back the other day. So it really works hand in hand with what our other balances are doing as well.

We don't utilize it as a one-off. Let's drive balances through higher price CDs. We use it as a tool amongst the whole portfolio. We're pretty comfortable with where it's at. We're comfortable with where we fall into the market, and you saw earlier in the year where people, a lot of banks went out and raced out and raised rates, and we held ours down for a while and continued to monitor it. And then we'd come back to where we typically fall kind of in the middle of the pack or so. Again, I'm not sure what the competitors are going to do, but Monday I'll know what the new offers are. And we'll go from there. Great. Thank you. Thank you. Please stand by for our next question. Ladies and gentlemen, just in the interest of time, our final question will come from the line of Jared Shaw with Barclays. Your line is open.

People in the company, when I think about where we've added, uh, bankers throughout the franchise, I think that the, the, the greatest acumen and strength and just, just banking prowess has been in our treasury management folks. They really have elevated the game and they're doing some great things. So all of those things combined are, I think, allowing us to continue to focus on it and grow the business.

Okay, great. That's a really good overview. That's all for me. Thanks.

Thank you. Ladies and gentlemen, at this time, 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. That concludes today's call. Thank you for your participation. You may now disconnect.