COLB Pivots From Transactional Loans to Relationship Banking

Columbia Banking System COLB is executing a deliberate shift away from transactional loans toward full relationship banking after closing the Pacific Premier deal. The transition leans on granular deposits, an expanded Western footprint and fee platforms to support durable earnings.

Why COLB’s Mix Shift Matters Now

Management plans to manage down $8 billion of inherited transactional loans, largely multifamily, over about eight quarters beginning in the third quarter of 2025. The portfolio will not be rebuilt, with capital reallocated to relationship-driven commercial and industrial (C&I) and owner-occupied CRE. 

Columbia Banking’s strategy is timed to a funding mix already improving the net interest margin (NIM) as higher-cost wholesale sources are reduced and deposit costs ease. NIM improved to 3.84% in the third quarter of 2025 from 3.56% a year earlier, aided by growth in customer deposits and lower brokered balances.  

With disciplined, holistic pricing in competitive markets, overall loan growth at COLB is likely to remain muted as runoff offsets originations through roughly 2027. 

C&I and owner-occupied CRE loans accounted for about 21% and 15% of total loans, respectively, as of Sept. 30, 2025. COLB is prioritizing lending with operating deposits and treasury attachments to improve leverage and returns. 

As relationship loans scale, the broader product set from the Pacific Premier acquisition, including custodial trust, HOA banking, escrow, and 1031 exchange capabilities, is expected to support deeper wallet share.  

Early Signs in COLB’s Production & Pipelines

Columbia Banking witnessed improvement in C&I production and pipelines in the third quarter of 2025, an early marker that the remix is taking hold. 

The bank’s specialty hires and cross-line referrals are amplifying relationship growth. Since closing of the Pacific Premier deal, the company has generated more than 1,200 cross-sell referrals, contributing to meaningful deposit inflows into mid-October.

How the Shift Supports Columbia Banking’s Earnings Durability

Relationship deposits are expected to lower funding costs and help stabilize COLB’s NIM as rates decline. Management targets deposit betas for cuts around half, with proactive repricing to defend margins. The company’s NIM is projected to be 3.90% in the fourth quarter of 2025 and the first quarter of 2026.  

Additionally, fee income breadth will enhance revenue quality. Year-to-date 2025, treasury management and commercial card grew, while financial services and trust expanded; card, financial services, and trust together were nearly 30% of non-interest income as of Sept. 30, 2025. 

Management reiterates a high-teens operating ROTCE framework and a Street earnings cadence stepping into the low $3s for 2026, consistent with synergy realization and portfolio remix.

Columbia Banking’s Zacks Rank & Growth Prospects

At present, COLB carries a Zacks Rank #3 (Hold). The rank reflects stable near-term earnings expectations as the bank executes on margin defense, fee income expansion and loan-mix remix. 

Columbia Banking’s earnings trajectory is expected to improve into 2026 as integration benefits and the mix shift mature, supporting the targets above.

COLB’s Peers to Watch

East West Bancorp EWBC is a better-ranked peer in the same industry, with a Zacks Rank #2 (Buy) at present. The company provides a useful barometer for C&I-anchored relationship growth in the Western markets. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Western Alliance WAL is another Western regional bank with an active commercial franchise. WAL, presently carrying a Zacks Rank #3, offers vital data on deposit mix, specialty verticals and credit trends in growth markets.

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This article originally published on Zacks Investment Research (zacks.com).

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