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COLUMBIA BANKING SYSTEM, INC. (COLB)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered stable core trends but headline EPS declined on a one-time legal settlement; GAAP revenue rose to $491.4M while diluted EPS fell to $0.41 (operating EPS $0.67). Net interest margin ticked down 4 bps to 3.60% as lower earning-asset yields outpaced funding cost relief .
  • Deposits grew $497M (customer deposits +$440M) despite typical seasonal outflows, supported by small business campaigns; loans contracted slightly (-$65M) on payoffs and slower origination volume .
  • Non-interest expense jumped $74M QoQ on a $55M legal settlement and $15M severance; operating non-interest expense rose modestly (+$7M QoQ), consistent with seasonal payroll taxes and elevated legal costs .
  • Columbia announced an all-stock acquisition of Pacific Premier (PPBI), targeting ~$127M pretax cost saves, mid-teens EPS accretion by 2026–2027, and accelerated Southern California density; management highlighted low integration risk and no need for external capital. This is a key near- and medium-term catalyst for the stock narrative .
  • Guidance (operating opex and tax rate) was maintained; estimate comparisons for Q1 2025 EPS and revenue were unavailable via S&P Global, limiting beat/miss assessment (target price consensus $25.5)* .

What Went Well and What Went Wrong

  • What Went Well

    • Strong deposit growth against seasonality: “Customer deposits increased notably during the first quarter…highlighting the success of small business campaigns” — Clint Stein, CEO .
    • Strategic acceleration in SoCal via PPBI: “This combination truly establishes the leading banking franchise in the Western region…accelerates Columbia’s expansion in Southern California by approximately a decade” .
    • Operating cost discipline intact ex one-offs: Operating non-interest expense rose only ~$7M QoQ to $270.1M amid seasonal payroll taxes and elevated legal costs, showcasing underlying expense control .

  • What Went Wrong

    • Headline profitability pressure: Net income fell to $86.6M and diluted EPS to $0.41 on the $55M legal settlement and severance charges; efficiency ratio worsened to 69.1% on GAAP .
    • NIM compression: Net interest margin declined 4 bps QoQ to 3.60% as lower earning-asset yields outweighed reductions in funding costs; lower accretion income contributed to securities yield decline .
    • Slight loan contraction: Gross loans decreased $65M QoQ on payoffs and slower originations; management continues to allow transactional real estate balances to decline, prioritizing relationship-driven lending .

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Revenue (GAAP, $USD Millions)$473.719 $487.120 $491.372
Diluted EPS (GAAP, $)$0.59 $0.68 $0.41
Operating Diluted EPS ($)$0.65 $0.71 $0.67
Net Interest Margin (%)3.52% 3.64% 3.60%
Efficiency Ratio (%)60.57% 54.61% 69.06%
Return on Avg Assets (%)0.96% 1.10% 0.68%
Income Components ($USD Thousands)Q1 2024Q4 2024Q1 2025
Net Interest Income$423,362 $437,373 $424,995
Non-Interest Income$50,357 $49,747 $66,377
Non-Interest Expense$287,516 $266,576 $340,122
PPNR (Non-GAAP)$186,203 $220,544 $151,250
Operating PPNR (Non-GAAP)$200,683 $229,178 $211,833
Balance Sheet & Value MetricsQ1 2024Q4 2024Q1 2025
Total Assets ($USD Billions)$52.224 $51.576 $51.519
Loans & Leases ($USD Billions)$37.642 $37.681 $37.616
Deposits ($USD Billions)$41.706 $41.721 $42.218
Book Value/Share ($)$23.68 $24.43 $24.93
Tangible Book Value/Share ($)$16.03 $17.20 $17.86
Credit KPIsQ1 2024Q4 2024Q1 2025
Provision for Credit Losses ($USD Thousands)$17,136 $28,199 $27,403
Net Charge-offs / Avg Loans (Annualized, %)0.47% 0.27% 0.32%
Non-Performing Assets / Total Assets (%)0.28% 0.33% 0.35%
ACL / Loans & Leases (%)1.16% 1.17% 1.17%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Operating Non-Interest Expense (ex CDI amort.)FY 2025$1.00B–$1.01B (Q4 call) $1.00B–$1.01B (Q1 call) Maintained
Operating Tax RateFY 2025~25.7% used for 2025 (Q4 call) “Mid-25% range” (Q1 call) Maintained
Quarterly DividendOngoing$0.36 declared Nov 2024 $0.36 declared Feb 14, 2025; paid Mar 17; $0.36 declared May 16, 2025 Maintained
Net Interest Margin Commentary1H 2025Q4 up to 3.64% on deposit repricing Expect lower in Q1 due to seasonal wholesale funding; path driven by deposit flows Updated Commentary
Pacific Premier Transaction2026–2027N/A~$127M pretax cost saves; ~14–15% EPS accretion; 3-year TBV earnback; limited capital impact New

Earnings Call Themes & Trends

TopicQ3 2024 (Q-2)Q4 2024 (Q-1)Q1 2025 (Current)Trend
AI/Tech & DigitalEfficiency pilots; CRM upgrade; fee pipelines strengthened Plans to expand real-time payments; data analytics for fee growth AI-powered “Umpqua Smart Leads”, RTP live; fraud protection, cloud expansion Expanding digital & AI-enabled capabilities
Deposit StrategySmall business campaigns drove +$600M customer deposits; reduced brokered CDs by 20% Seasonal outflows late Q4; proactive repricing (spot 2.51%) Customer deposits +$440M amid seasonality; campaigns effective Strong campaigns sustain deposit momentum
Regional ExpansionDe novo branches in AZ and hiring in Intermountain 5 branches planned for 2025; talent adds across footprint Denver branch opened; PPBI adds significant SoCal density Accelerating Western U.S. density (SoCal focus)
Regulatory/LegalOperating above long-term capital targets; optimization optionality CET1 10.5%, RBC 12.6%; buyback optionality flagged $55M legal settlement; roadmap as assets approach ~$100B; minimal PPBI integration risk Legal one-off; regulatory readiness as scale rises
Balance Sheet OptimizationHighlighted transactional loan/wholesale funding headwinds; optionality as rates fall Similar commentary; let portfolios amortize/reprice Same strategy; PPBI marks provide flexibility Gradual remix toward relationship banking

Management Commentary

  • “Our consistent, repeatable performance in 2024 carried through to the first quarter of 2025…Customer deposits increased notably during the first quarter, despite anticipated seasonal balance declines.” — Clint Stein, CEO .
  • “We reported first quarter EPS of $0.41…operating EPS of $0.67…Operating PPNR was $212M…We repaid $590M of wholesale funding; seasonal deposit flows led to 4 bps of NIM contraction…We expect operating expense (ex CDI) to be in the $1.00B–$1.01B range for 2025.” — Ronald Farnsworth, CFO .
  • “We have a roadmap…as we skate towards $100B. No expense cliff at ~$70B; we’ll accelerate components, but not a meaningful adjustment to models.” — Clint Stein .
  • “Due diligence reviewed ~61% of PPBI’s loans; policies and underwriting closely align with ours; leverage-averse credit culture.” — Frank Namdar, CCO .

Q&A Highlights

  • Integration & regulatory posture: Experienced M&A teams; preflight regulatory discussions encourage faster approvals; DOJ review not expected for PPBI .
  • CRE concentration pro forma: ~330% including multifamily; excluding multifamily ~168%; plan to walk down transactional multifamily over time .
  • Capital actions: Buyback likely paused in 2025 pending PPBI close and final ratios; modest decline in capital ratios expected at closing, still above targets .
  • NIM trajectory: Expect Q1 lower within prior range due to seasonal wholesale (+up to $0.5B at ~4.4–4.5%); deposit flows more impactful than number of Fed cuts .
  • Expense/tax guidance: FY 2025 operating opex (ex CDI) $1.00–$1.01B; tax rate mid-25% on operating basis .
  • Loan growth outlook: Low to mid-single-digit C&I growth; transactional real estate runoff continues; pipelines steady and more relationship-focused .

Estimates Context

  • Q1 2025: S&P Global consensus EPS and revenue were unavailable for assessment; target price consensus $25.5* [GetEstimates].
  • Q4 2024 context (prior quarter): Primary EPS consensus mean 1.206*; Revenue consensus mean $634.2M*; number of estimates limited (EPS: 1; revenue: 1)* [GetEstimates].
  • Given limited and unavailable Q1 2025 consensus inputs, we cannot determine a definitive beat/miss for the quarter; we expect estimate models to incorporate legal settlement, deposit growth trajectory, and PPBI deal assumptions.

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Q1 earnings quality: Core operations were steady; headline EPS compressed on a one-time $55M legal settlement and severance. Focus on operating metrics (operating EPS $0.67, operating PPNR $212M) offers a cleaner read-through .
  • Funding and NIM: Seasonal wholesale adds near-term NIM pressure; deposit campaigns remain effective and should be the primary lever for margin stabilization into 2H as wholesale runs down and CDs reprice .
  • Deposit growth resilience: Customer deposits rose $440M despite seasonal outflows, signaling franchise strength in retail/small business acquisition without promotional pricing — a positive for cost of funds and NIM resiliency .
  • Balance sheet remix: Continued runoff of transactional real estate loans supports longer-term returns and capital efficiency; allows reallocation toward relationship banking and fee-income growth .
  • PPBI acquisition as a structural catalyst: Accelerates Southern California density by a decade; ~$127M pretax cost saves and mid-teens EPS accretion in 2026–2027; limited capital impact and low integration risk — a medium-term rerating potential .
  • Capital & shareholder returns: Buyback likely deferred until PPBI close and ratio clarity; quarterly dividend maintained at $0.36; capital ratios remain above targets, preserving flexibility .
  • Watchlist items: Track expense normalization (ex one-offs), deposit flow momentum, securities accretion trends, and regulatory approvals/timing on PPBI; expect estimate revisions to reflect legal settlement and deal synergies .