Is Columbia Banking Attractive Now With Dividend Yield and Buybacks?

Core Insights - Columbia Banking (COLB) is focusing on dividend income and share buybacks while integrating Pacific Premier, with management's execution through 2026 being a critical factor for shareholder rewards [1] - COLB's shares have increased by 29.4% over the past six months, outperforming the industry's 17.4% rise [1] Dividend and Share Buyback - Columbia Banking offers a 5.06% dividend yield, recently raised to 37 cents per share, and has authorized up to $700 million in share repurchases through November 30, 2026 [3][6] - The bank's capital levels exceed regulatory requirements, with a common equity Tier 1 ratio of 11.6% and total risk-based capital at 13.4% as of September 30, 2025 [6] Cost Savings and Earnings - The integration of Pacific Premier is expected to yield $127 million in annual cost savings, with $48 million already realized [6][11] - COLB trades at a forward P/E of 9.55X, which is below the broader Finance sector's 17.36X and the S&P 500's 23.35X, indicating a relative discount despite improving fundamentals [8] Earnings Drivers - The net interest margin (NIM) improved to 3.84% in Q3 2025, with expectations of approximately 3.90% in Q4 2025 [10] - The consensus estimate for COLB's Q4 2025 earnings is 74 cents per share, reflecting a year-over-year growth of 4.2% [12] Integration and Efficiency - Non-interest expenses rose due to merger and restructuring costs, with management targeting operating expenses of $330-$340 million per quarter for the next several quarters [13] - The Pacific Premier system conversion is planned for Q1 2026, with a normalized expense run-rate expected by Q3 2026 [14] Loan Growth and Credit Risks - Loan growth expectations are muted as the company manages down approximately $8 billion of inherited transactional loans over eight quarters starting in Q3 2025 [15] - Credit quality remains a concern, particularly in small-ticket leasing and office loans, with net charge-offs increasing in Q3 2025 [16] Investment Consideration - Currently, COLB holds a Zacks Rank 3 (Hold) with a price target of $31 over the next 6-12 months, suggesting modest upside from current levels [17][18]