Columbia Bank has priced a $250 million subordinated note offering that will add a new long-dated layer to its regulatory capital structure while creating room for parent Columbia Banking System to retire certain existing trust preferred securities. The Tacoma, Washington-based bank said on September 14 that the securities will carry an initial fixed annual coupon of 6.721% and mature in 2036.

The offering consists of $250 million aggregate principal amount of 6.721% fixed-to-fixed rate subordinated notes. Columbia Bank expects the transaction to close on September 18, 2026, subject to customary closing conditions. The notes are obligations of Columbia Bank, the operating bank subsidiary, rather than direct obligations of Nasdaq-listed Columbia Banking System.

The securities will pay interest semiannually in arrears at a fixed 6.721% annual rate from issuance through September 18, 2031, unless redeemed earlier. From September 18, 2031 through maturity, the coupon will reset to a fixed rate determined using the five-year U.S. Treasury rate on the applicable reset determination date plus 195 basis points. That fixed-to-fixed structure gives investors a known coupon for the first five years while linking the later cost of the debt to prevailing medium-term Treasury yields.

The capital treatment is central to the transaction. Columbia Bank said it intends the notes to qualify as Tier 2 capital for regulatory purposes. Tier 2 instruments sit below common equity and additional Tier 1 capital in the regulatory capital hierarchy but can provide banks with supplementary loss-absorbing capacity and support total risk-based capital ratios, subject to applicable regulatory requirements.

For Columbia, the financing is also part of a broader balance-sheet and capital-management exercise. The bank said it intends to use the net proceeds for general corporate purposes, including supporting growth and maintaining capital adequacy. It also plans to return as much as $250 million of capital to Columbia Banking System. The parent intends to use the returned funds to redeem certain outstanding trust preferred securities.

The arrangement effectively gives management an opportunity to alter the composition of capital across the organization. Rather than treating the entire $250 million issuance simply as incremental balance-sheet funding, investors will need to consider the combination of the new Tier 2 debt, any capital distributed from the bank to the holding company and the retirement of older parent-level securities. The ultimate effect on consolidated funding costs and regulatory ratios will depend on the amount of capital returned, the securities actually redeemed and other balance-sheet changes occurring around the transaction.

The new notes are unsecured and subordinated. They rank behind all existing and future senior obligations of Columbia Bank, whether secured or unsecured, including claims of depositors and general creditors. That position in the creditor hierarchy is one reason subordinated bank debt generally carries a higher yield than senior bank obligations: investors accept greater potential loss exposure if the issuer encounters financial distress.

The notes are not guaranteed by Columbia Banking System. Columbia emphasized that the debt is an obligation of Columbia Bank alone, an important structural distinction for institutional investors assessing creditor claims at the bank and holding-company levels. The securities are also not deposits and are not insured by the Federal Deposit Insurance Corporation or any other government agency or fund.

The notes have not been registered under the Securities Act of 1933. According to Columbia’s announcement, they are being offered and sold only to institutional accredited investors in reliance on the exemption under Section 3(a)(2) of the Securities Act. The transaction therefore targets institutional buyers rather than retail investors.

The financing comes with Columbia operating from a sizable post-acquisition balance sheet. Columbia Banking System reported $65.38 billion of consolidated assets at June 30, 2026, according to its latest quarterly filing with the Securities and Exchange Commission. Loans and leases totaled approximately $47.17 billion, while deposits stood at $52.06 billion. Shareholders’ equity was approximately $7.55 billion.

Those figures reflect the enlarged franchise following Columbia’s acquisition of Pacific Premier Bancorp, which closed in August 2025. Management said earlier this year that systems conversion and nine related branch consolidations had been completed during the first quarter of 2026, while organizational changes and the targeted cost savings associated with the transaction were essentially complete by the end of June.

Capital remained above regulatory well-capitalized thresholds at midyear. Columbia estimated its total risk-based capital ratio at 13.4% as of June 30, compared with 13.5% three months earlier. Its estimated common equity Tier 1 risk-based capital ratio was 11.6%, versus 11.7% at March 31. The planned subordinated issuance adds another capital-management instrument while the bank continues integrating the larger franchise and repositioning its balance sheet.

Columbia’s second-quarter results also showed the balance-sheet optimization already under way. Gross loans and leases declined to $47.2 billion from $47.7 billion at the end of March, partly because of continued runoff in lower-rate transactional loans and lower non-owner-occupied commercial real estate balances. At the same time, commercial loans, including owner-occupied commercial real estate, increased at a 5% annualized rate from the first quarter, according to the company.

The distinction matters for interpreting the subordinated debt sale. Columbia has been reducing some lower-return assets while directing resources toward relationship-based commercial activity. A larger regulatory capital cushion can provide additional flexibility to support that strategy without requiring management to rely solely on common equity issuance, which could dilute existing shareholders.

Deposits declined during the second quarter as Columbia deliberately reduced some wholesale funding. Total deposits fell to $52.1 billion at June 30 from $53.5 billion at March 31. The bank attributed part of the contraction to intentional reductions in brokered deposits and wholesale public deposits, as well as seasonal tax-related outflows early in the quarter. Management said customer balances subsequently stabilized as the quarter progressed despite competitive deposit conditions.

Liquidity remained substantial. Columbia reported approximately $25.6 billion of available liquidity at June 30 when secured off-balance-sheet lines were included. That represented about 39% of total assets, 49% of total deposits and 125% of uninsured deposits, according to its second-quarter disclosures. Against that backdrop, the subordinated transaction is principally a capital-structure measure rather than an indication that the bank is seeking emergency liquidity.

The balance sheet already contains several forms of subordinated funding. Columbia Banking System reported approximately $339 million of junior subordinated debentures carried at fair value at June 30, along with roughly $97 million of junior and other subordinated debentures carried at amortized cost. Columbia has not specified in the September 14 announcement exactly which trust preferred instruments it intends to redeem or the final amount to be retired.

Replacing or retiring older capital instruments can have several strategic benefits when economics and regulatory treatment permit. It can simplify a financial institution’s liability structure, alter future interest expense and improve the alignment between the capital held at the regulated bank and the securities outstanding at the parent. The new issuance gives Columbia a defined 6.721% funding cost for the first five years, although its cost after 2031 will depend on the five-year Treasury rate prevailing at each applicable reset.

The reset mechanism leaves Columbia exposed to future interest-rate conditions if the notes remain outstanding beyond the initial fixed-rate period. If five-year Treasury yields are materially higher when the coupon resets, the bank’s interest expense could increase. Conversely, lower Treasury yields could reduce the reset coupon. The possibility of earlier redemption can affect those economics, but any redemption would depend on the terms of the securities and applicable regulatory requirements.

For institutional buyers, the 195-basis-point spread over the five-year Treasury benchmark in the reset period is one of the central pricing terms. Investors must weigh that spread against Columbia Bank’s credit profile, the subordinated ranking of the notes, the decade-long final maturity and the possibility that the securities remain outstanding after the first reset date. Because the notes rank behind depositor and senior creditor claims, their risk characteristics differ substantially from insured deposits or conventional senior bank debt.

The transaction also comes as Columbia continues to generate substantial earnings. The company reported second-quarter net income of $208 million and diluted earnings per common share of $0.73. Net interest income was $589 million, while the net interest margin was 3.93%, modestly below 3.96% in the first quarter but above 3.75% a year earlier. Management has emphasized expense discipline, commercial relationship growth and continued optimization of the enlarged post-merger balance sheet.

Columbia operates across a broad western and southwestern footprint. Columbia Bank has offices in Arizona, California, Colorado, Idaho, Nevada, Oregon, Texas, Utah and Washington, serving retail and commercial banking customers as well as institutional, equipment finance, private banking and wealth-management clients. That geographic scale expanded considerably through the Pacific Premier acquisition and has increased the importance of disciplined capital allocation as management balances organic growth opportunities with shareholder distributions and balance-sheet restructuring.

The subordinated offering therefore connects several priorities. At the banking subsidiary, the notes are designed to count as Tier 2 regulatory capital and provide capacity for general corporate purposes. At the holding company, capital returned from the bank can fund redemption of selected trust preferred securities. At the consolidated level, the transaction could change the mix, maturity profile and cost of outstanding capital instruments without requiring a common equity raise.

The next operational milestone is the scheduled September 18 closing. Until then, completion remains subject to customary conditions. After closing, attention will shift to the amount of proceeds ultimately deployed for growth or retained for capital adequacy, the size of any capital distribution from Columbia Bank to Columbia Banking System, and which trust preferred securities the parent chooses to redeem.

For credit and bank investors, those follow-through decisions will determine how much of the transaction represents incremental capital and how much represents substitution within Columbia’s existing capital stack. The announced terms already establish the key framework: $250 million of bank-level subordinated debt, a 6.721% fixed coupon through 2031, a subsequent five-year Treasury-plus-195-basis-point reset formula and a 2036 maturity. Together, those features make the issuance a notable capital-markets transaction for a regional bank that is still optimizing its enlarged balance sheet following a major acquisition.