Core Insights - Columbia Banking (COLB) ended 2025 with improved funding structure, stable spreads, and an expanded presence in the Western U.S. following the acquisition of Pacific Premier [1] - The net interest margin (NIM) for Q4 2025 reached 4.06%, an increase of 42 basis points year-over-year, driven by lower deposit costs and reduced reliance on higher-cost wholesale funding [1][10] - Net interest income (NII) rose by 43% year-over-year in the first full quarter after the merger, supported by lower funding costs and a broader range of earning assets [1] Funding and Margin Outlook - Management anticipates NIM to increase each quarter in 2026, potentially exceeding 4% in Q2 or Q3 as deposit balances recover and balance sheet optimization continues [2] - The bank aims to maintain NIM as rates decline, with deposit betas targeted around half and proactive repricing strategies in place [2] Loan Portfolio Management - Columbia Banking is reducing approximately $8 billion in inherited multi-family balances over eight quarters starting from Q3 2025, which will limit headline loan growth through 2027 [3] - The focus is shifting towards relationship-driven commercial and industrial loans and owner-occupied commercial real estate, which are expected to generate deposits and fees [3] Fee Income and Revenue Diversification - Treasury management and commercial card fees saw year-over-year increases in 2025, with significant growth in financial services, trust, and international banking revenues [5] - Card, financial services, and trust now account for nearly 34% of non-interest income, providing stability as loan growth slows [5] Strategic Enhancements Post-Acquisition - The acquisition of Pacific Premier has expanded Columbia Banking's service offerings, including homeowners association banking and custodial trust services, leading to over 1,200 cross-sell referrals since the merger [6] Expense Management and Operational Efficiency - Expense normalization is crucial following the first-quarter system conversion, with anticipated operating expenses (excluding amortization) of $335-$345 million in Q1 and Q2, normalizing by Q3 as savings from the Pacific Premier integration are fully realized [7] Market Competition and Credit Quality - Monitoring deposit trends is essential as competition remains high, with large national banks and digital competitors potentially exerting pricing pressure on NIM [8] - Credit quality is another area of concern, with increased loss content in small-ticket leasing and office loans comprising 8% of total loans, although overall credit metrics remain manageable [9]

Core Insights - Columbia Banking System (COLB) is shifting from transactional loans to full relationship banking following the Pacific Premier acquisition, focusing on granular deposits and fee platforms to enhance earnings durability [1][9] Loan Strategy - Management plans to reduce $8 billion in inherited transactional loans, primarily multifamily, over eight quarters starting in Q3 2025, reallocating capital to relationship-driven commercial and industrial (C&I) and owner-occupied commercial real estate (CRE) [2][9] - As of September 30, 2025, C&I and owner-occupied CRE loans represented approximately 21% and 15% of total loans, respectively, with a focus on lending that enhances leverage and returns [4] Financial Performance - The net interest margin (NIM) improved to 3.84% in Q3 2025 from 3.56% a year earlier, driven by increased customer deposits and reduced reliance on higher-cost wholesale funding [3][9] - NIM is projected to reach 3.90% in Q4 2025 and Q1 2026, supported by lower funding costs from relationship deposits [6] Revenue Growth - Fee income from treasury management and commercial card services has expanded, with non-interest income from these services making up nearly 30% as of September 30, 2025 [7] - Management anticipates a high-teens operating return on tangible common equity (ROTCE) and earnings in the low $3s for 2026, aligning with synergy realization and the loan mix shift [7][10] Relationship Development - Columbia Banking has seen improvements in C&I production and pipelines, indicating the effectiveness of its new strategy, with over 1,200 cross-sell referrals generated since the Pacific Premier deal [5] - The acquisition is expected to enhance the breadth of products offered, supporting deeper customer relationships and increasing wallet share [4]

Core Viewpoint - Compass Inc. is facing significant stock pressure following its announcement to acquire Anywhere Real Estate in an all-stock deal valued between $1.5 billion and $1.6 billion, leading to a stock decline of over 15% while the S&P 500 only fell by 0.6% [2][3] Valuation - Compass's price-to-sales ratio is 0.7, lower than the S&P 500's 3.3, but it has a negative price-to-earnings ratio due to ongoing losses, and its price-to-free-cash-flow multiple of 30.2 is higher than the market's 21.2, indicating a weak valuation argument despite moderate sales [4] Growth - Revenue has shown a complex trajectory, with a slight average decrease over the past three years, but a 21% increase in the last twelve months, including a 21% year-over-year surge in the latest quarter, suggesting inconsistency in growth [5] Profitability - Compass has not achieved sustained profitability, with a negative operating margin of 0.7% and a net margin of -0.9%, despite positive operating cash flow of $164 million, which is trivial compared to the broader market's 20% margin [6] Financial Stability - The company has a favorable debt-to-equity ratio of 12.3% with $547 million in debt against a market cap of $4.4 billion, and a cash-to-assets ratio of 11.1%, but the upcoming Anywhere deal, which includes $2.6 billion in assumed debt, could threaten this stability [7] Downturn Resilience - Compass's stock has shown significant vulnerability during downturns, plummeting nearly 91% during the 2022 inflation shock, while the S&P 500 only declined by 25%, indicating a strong correlation with the housing cycle and investor sentiment [8] Conclusion - The acquisition of Anywhere Real Estate, while ambitious, may not translate to shareholder value due to moderate valuation, erratic growth, weak profitability, potential financial instability from increased debt, and poor downturn resilience, making Compass stock appear unfavorable at this time [9]