COLUMBIA BANKING SYSTEM, INC. (COLB)

Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. These statements may include statements that expressly or implicitly predict future results, performance, or events. Statements other than statements of historical fact are forward-looking statements. You can find many of these statements by looking for words such as "anticipates," "expects," "believes," "estimates," "intends," "forecast," and words or phrases of similar meaning.

We make forward-looking statements including, but not limited to, statements about derivatives and hedging; the results and performance of models and economic assumptions used in our calculation of the ACL; projected sources of funds and the Company's liquidity position and deposit level and types; our securities portfolio; loan sales; adequacy of our ACL, including the RUC; provision for credit losses; non-performing loans and future losses; our CRE portfolio, its collectability and subsequent charge-offs; resolution of non-accrual loans; mortgage volumes and the impact of rate changes; the economic environment; inflation and interest rates generally; litigation; dividends; junior subordinated debentures; fair values of certain assets and liabilities, including MSR values and sensitivity analyses; tax rates; deposit pricing; and the effect of accounting pronouncements and changes in accounting methodology.

Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. Risks and uncertainties include those set forth in our filings with the Securities and Exchange Commission and the following factors that, among others, could cause actual results to differ materially from the anticipated results expressed or implied by forward-looking statements:

•changes in general economic, political, or industry conditions, and in conditions impacting the banking industry specifically;

•deterioration in economic conditions that could result in increased loan and lease losses, especially those risks associated with concentrations in real estate related loans;

•uncertainty in U.S. fiscal and monetary policy, including the interest rate policies of the Federal Reserve or the effects of any declines in housing and CRE prices, high or increasing unemployment rates, renewed or sustained inflation, or any recession or slowdown in economic growth particularly in the western United States;

•volatility and disruptions in global capital and credit markets;

•risks related to the acquisition of Pacific Premier including, among others, any revenue synergies from the acquisition may not be fully realized or may take longer than anticipated to be realized, and the risk that deposit attrition may result from the transaction;

•the impact of proposed or imposed tariffs by the U.S. government and retaliatory tariffs proposed or imposed by U.S. trading partners that could have an adverse impact on customers;

•the impact of bank failures or adverse developments at other banks on general investor sentiment regarding the stability and liquidity of banks;

•changes in interest rates that could significantly reduce net interest income and negatively affect asset yields and valuations and funding sources, including impacts on prepayment speeds;

•competitive pressures among financial institutions and nontraditional providers of financial services, including on product pricing and services;

•the competitive and other impacts on our business of emerging technologies, including stablecoins and other digital currencies, tokenized deposits, blockchain, artificial intelligence, quantum computing and related innovations affecting both us and the banking industry generally;

•continued consolidation in the financial services industry resulting in the creation of larger financial institutions that have greater resources;

•our ability to successfully, including on time and on budget, implement and sustain information technology product and system enhancements and operational initiatives;

•our ability to attract new deposits and loans and leases;

•our ability to retain deposits;

•our ability to achieve the efficiencies and enhanced financial and operating performance we expect to realize from investments in personnel, acquisitions, infrastructure, and technology;

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•the possibility that our recorded goodwill could become impaired, which may have an adverse impact on our earnings and capital;

•demand for financial services in our market areas;

•stability, cost, and continued availability of borrowings and other funding sources, such as brokered and public deposits;

•changes in legal or regulatory requirements or the results of regulatory examinations that could increase expenses or restrict growth;

•changes in the scope and cost of FDIC insurance and other coverage;

•our ability to manage climate change concerns, related regulations, and potential impacts on the creditworthiness of our customers;

•our ability to recruit and retain key management and staff;

•our ability to raise capital or incur debt on reasonable terms;

•regulatory limits on the Bank's ability to pay dividends to the Company that could impact the timing and amount of dividends to shareholders;

•financial services reform and the impact of legislation and implementing regulations on our business operations, including our compliance costs, interest expense, and revenue;

•a breach or failure of our operational or security systems, or those of our third-party vendors, including as a result of cyber-attacks;

•success, impact, and timing of our business strategies, including market acceptance of any new products or services;

•the outcome of legal proceedings;

•our ability to effectively manage credit risk, interest rate risk, market risk, operational risk, legal risk, liquidity risk, and regulatory and compliance risk;

•the possibility that the anticipated benefits from ongoing initiatives to improve operational performance and efficiency are not realized in the amounts or when expected if at all;

•economic forecast variables that are either materially worse or better than end of quarter projections and deterioration in the economy that exceeds current consensus estimates;

•the effect of geopolitical instability, including wars, conflicts, and terrorist attacks;

•natural disasters, including earthquakes, tsunamis, flooding, fires, pandemics, and other similarly unexpected events outside of our control;

•our ability to effectively manage problem credits;

•our ability to successfully negotiate with landlords or reconfigure facilities; and

•the effects of any damage to our reputation resulting from developments related to any of the items identified above.

There are many factors that could cause actual results to differ materially from those contemplated by these forward-looking statements. Forward-looking statements are made as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under federal securities laws. Readers should consider any forward-looking statements in light of this explanation, and we caution readers about relying on forward-looking statements.

General

Columbia Banking System, Inc. (referred to in this Quarterly Report on Form 10-Q as "we," "our," "the Company" and "Columbia") is a registered financial holding company, which wholly owns the Bank. FinPac, a commercial equipment leasing company, is a subsidiary of Columbia Bank.

Columbia Bank is an award-winning preeminent regional bank with offices in Arizona, California, Colorado, Idaho, Nevada, Oregon, Texas, Utah, and Washington. Columbia Bank combines the resources, sophistication, and expertise of a national bank with a commitment to deliver superior, personalized service. The bank supports consumers and businesses through a full suite of services, including retail and commercial banking, Small Business Administration lending, institutional and corporate banking, and equipment leasing. Columbia Bank customers also have access to comprehensive investment and wealth management expertise as well as healthcare and private banking through Columbia Wealth Management.

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Along with its subsidiaries, the Company is subject to the regulations of state and federal agencies and undergoes regular examinations by these regulatory agencies.

Executive Overview

Financial Performance

Comparison of current quarter to prior quarter

•Earnings per diluted common share was $0.73 for the three months ended June 30, 2026, as compared to $0.66 for the three months ended March 31, 2026. The increase was primarily attributable to lower non-interest expense and higher non-interest income, partially offset by lower net interest income and higher provision for income tax. Non-interest expense benefited from lower merger and restructuring expense, and the continued realization of cost savings associated with the Pacific Premier acquisition. The decrease in net interest income primarily reflects lower average interest-earning asset balances and lower yields on taxable securities, partially offset by lower interest expense as lower deposit costs offset the impact of higher average borrowings balances. Lower weighted-average diluted common shares outstanding for the three months ended June 30, 2026, as compared to the three months ended March 31, 2026, also contributed to the increase in earnings per diluted common share between periods, as Columbia repurchased 2.3% of its common shares outstanding during the second quarter.

•Net interest margin, on a tax-equivalent basis, was 3.93% for the three months ended June 30, 2026, as compared to 3.96% for the three months ended March 31, 2026. The 3 basis point decrease was driven primarily by interest income reversals recorded during the three months ended June 30, 2026. Otherwise, net interest income was relatively consistent between periods as a lower yield on taxable securities was offset by lower deposit costs and continued improvement in the Company's funding mix, including a lower proportion of higher-cost brokered deposits. The average cost of interest-bearing deposits declined by 8 basis points to 1.96%, while the cost of interest-bearing liabilities declined 3 basis points to 2.21%. The decline in the yield on taxable securities between periods was driven by changes in prepayment speed expectations.

•Non-interest income was $88 million for the three months ended June 30, 2026, as compared to $83 million for the three months ended March 31, 2026. Interest rate movements resulted in a net fair value loss of $3 million related to fair value adjustments and mortgage servicing rights hedging activity during the second quarter of 2026, as compared to a net fair value gain of $2 million during the first quarter of 2026. Excluding these impacts, the increase in non-interest income primarily reflects higher customer fee income, including service charges on deposits, card-based fees, and other income. Other income also benefited from $3 million of BOLI death benefit proceeds from a single policy, while trading, international banking, syndication, and swap-related revenue increased from the seasonally lower levels typically experienced during the first quarter.

•Non-interest expens

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

See the discussion of forward-looking statements and risk factors in Part I Item 1 and Item 1A of this Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations constitutes management's review of the factors that affected our financial and operating performance for the years ended December 31, 2025 and 2024. This discussion should be read in conjunction with the consolidated financial statements and notes thereto contained elsewhere in this Annual Report on Form 10-K. For a discussion of the year ended December 31, 2023, including a comparison to the year ended December 31, 2024, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, on Registrant's Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 25, 2025.

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EXECUTIVE OVERVIEW

Acquisition of Pacific Premier

•On August 31, 2025, the Company completed its all-stock acquisition of Pacific Premier, the parent company of Pacific Premier Bank. Pursuant to the terms of the acquisition agreement, Pacific Premier stockholders received 0.9150 of a share of Columbia common stock for each share of Pacific Premier common stock they held. Systems conversion and branch consolidations are on track to be completed during the first quarter of 2026, supported by comprehensive cross-company teams led by Columbia's Integration Management Office. The acquisition rounds out our western footprint and strengthens our presence as a leading financial institution in the western United States. It also expands our product and service offerings, enabling us to deliver more comprehensive, needs-based financial solutions to both existing and prospective customers. For additional information regarding this acquisition, see Note 2 – Business Combinations and Note 9 – Goodwill and Other Intangible Assets in Item 8 of this Annual Report on Form 10-K.

Financial Performance

•Earnings per diluted common share were $2.30 for the year ended December 31, 2025, compared to $2.55 for the year ended December 31, 2024. The decrease was driven by an increase in weighted-average diluted common shares outstanding as common shares were issued in connection with the Pacific Premier acquisition. The impact was partially offset by an increase in net income.

•Net income was $550 million for the year ended December 31, 2025, compared to $534 million for the year ended December 31, 2024. The increase was driven by higher net interest income and non-interest income, partially offset by an increase in non-interest expense due to higher expenses related to the acquisition. In addition, provision for credit losses increased, primarily due to the initial provision for credit losses attributed to the acquired non-PCD loans and unfunded commitments.

•Net interest income was $2.0 billion for the year ended December 31, 2025, as compared to $1.7 billion for the year ended December 31, 2024. The increase was driven by a larger average balance sheet and the impact of four months as a combined company due to the Pacific Premier acquisition, as well as a decrease in interest expense due to lower interest rates and a favorable shift in our funding mix.

•Net interest margin, on a tax equivalent basis, was 3.83% for the year ended December 31, 2025, compared to 3.57% for the year ended December 31, 2024. The increase was due to a reduction in the cost of interest-bearing liabilities, partially offset by lower average yields on interest-earning assets. Net interest margin also benefited from a favorable shift in our funding mix, reflecting a higher contribution from lower-cost customer deposits and a lower contribution from higher-cost wholesale funding sources, like brokered deposits and term debt.

•Non-interest income was $298 million for the year ended December 31, 2025, compared to $211 million for the year ended December 31, 2024. The increase was driven by four months of combined operations following the Pacific Premier acquisition, as well as fair value adjustments. The impact of fair value adjustments and hedges resulted in a net fair value gain of $16 million related mainly to loans held for investment at fair value, gain on investment securities, and MSR hedging activity in 2025, compared to a net fair value loss of $13 million in 2024.

•Non-interest expense was $1.4 billion for the year ended December 31, 2025, compared to $1.1 billion for the year ended December 31, 2024. The increase was primarily driven by a $124 million increase in merger and restructuring expense to $148 million, primarily related to the Pacific Premier acquisition, four months of combined operations, higher salaries and employee benefits, increased occupancy costs, and a $55 million accrual for a legal settlement. The increase was partially offset by the partial recognition of cost savings related to the Pacific Premier acquisition later in 2025.

•Total loans and leases were $47.8 billion as of December 31, 2025, an increase of $10.1 billion, or 27%, compared to December 31, 2024. The increase in total loans and leases was driven by $11.4 billion in loans acquired through the Pacific Premier acquisition, partially offset by runoff in commercial development and below-market-rate transactional loans, as well as the transfer of $295 million in residential real estate loans to held-for-sale.

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•Total deposits were $54.2 billion as of December 31, 2025, an increase of $12.5 billion, or 30%, from December 31, 2024. The increase was primarily driven by the Pacific Premier acquisition, which contributed $14.5 billion of deposits, and organic increases from recent small business and retail deposit campaigns, partially offset by a reduction in brokered deposits.

•Total consolidated assets were $66.8 billion as of December 31, 2025, compared to $51.6 billion as of December 31, 2024. The increase was primarily driven by the acquisition of Pacific Premier, which contributed $11.4 billion in loans, $2.8 billion in investment securities, and $874 million in cash.

Credit Quality

•Non-performing assets were $200 million, or 0.30% of total assets, as of December 31, 2025, compared to $170 million, or 0.33% of total assets, as of December 31, 2024. Non-performing loans were $198 million, or 0.41% of total loans and leases, as of December 31, 2025, compared to $167 million, or 0.44% of total loans and leases, as of December 31, 2024. As of December 31, 2025, non-performing loans included $79 million in government guarantees. The increases in non-performing assets and loans primarily reflect assets acquired through the Pacific Premier acquisition.

•The ACL was $485 million, or 1.02% of loans and leases, as of December 31, 2025, an increase of $44 million, as compared to $441 million, or 1.17% of loans and leases, as of December 31, 2024. The change reflects loan growth from the Pacific Premier acquisition, updated economic forecasts incorporated into credit models, and includes $5 million related to PCD loans booked at closing, which did not impact earnings.

•Provision for credit losses was $150 million for the year ended December 31, 2025, compared to a provision for credit losses of $106 million in the prior year. The increase in the provision includes an initial provision of $70 million for acquired non-PCD loans and unfunded commitments, and changes in economic forecasts used in the ACL methodology. As a percentage of average outstanding loans and leases, the provision for credit losses for the year ended December 31, 2025 was 0.36%, as compared to 0.28% for the prior year.

Liquidity

•Total cash and cash equivalents were $2.4 billion as of December 31, 2025, an increase of $502 million from December 31, 2024. The increase was primarily driven by the acquisition of Pacific Premier, which contributed $874 million in cash. The Company manages its cash position as part of management's strategy to maintain a high-quality liquid asset position to support balance sheet flexibility, fund growth in lending and investment portfolios, and deleverage the balance sheet by decreasing debt and non-relationship deposit liabilities as economic conditions permit.

•Including secured off-balance sheet lines of credit, total available liquidity was $27.9 billion as of December 31, 2025, representing 42% of total assets, 51% of total deposits, and 141% of uninsured deposits.

Capital

•The Company's total risk-based capital ratio was 13.6% and its CET1 risk-based capital ratio was 11.8% as of December 31, 2025, as compared to 12.8% and 10.5%, respectively, as of December 31, 2024. In November 2025, the Company increased its quarterly dividend to $0.37 per common share, compared to $0.36 per common share previously.

•The Company paid cash dividends of $1.45 per common share during the year ended December 31, 2025, as compared to $1.44 in 2024.

•The Company repurchased 3.7 million common shares for a total of $100 million during the year ended December 31, 2025, under the new repurchase program, approved by Columbia's Board in October 2025, which authorizes the Company to repurchase up to $700 million of common stock through November 30, 2026. The timing and amount of common share repurchases will be at the discretion of senior management and subject to various factors, including, without limitation, Columbia’s capital position and financial performance, market conditions, and regulatory considerations. Our capital deployment strategy remains focused on supporting organic growth, maintaining strong regulatory ratios, and returning capital to shareholders through dividends and share repurchases.

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CRITICAL ACCOUNTING ESTIMATES

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates.

The consolidated financial statements are prepared in conformity with GAAP and follow general practices within the financial services industry, in which the Company operates. This preparation requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. These estimates, assumptions, and judgments are based on information available as of the date of the financial statements; accordingly, as this information changes, actual results could differ from the estimates, assumptions, and judgments reflected in the financial statements. Certain estimates inherently have a greater reliance on the use of assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Management believes the ACL and business combination estimates are important to the portrayal of the Company's financial condition and results of operations and requires difficult, subjective, or complex judgments and, therefore, management considers them to be critical accounting estimates.

Allowance for Credit Losses

The ACL represents management's best estimate of lifetime credit losses for loans and leases and unfunded commitments. The ACL was $485 million at December 31, 2025 and $441 million at December 31, 2024.

Under CECL, Management has flexibility in selecting the methodology for estimating expected credit losses, which must be calculated over the asset’s contractual term, and adjusted for prepayments, utilizing quantitative and qualitative factors. Management uses complex models to forecast future economic conditions based on specific macroeconomic variables for each loan and leas

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