What Happened?

A number of stocks jumped in the afternoon session after investor fears over a potential credit crisis eased, following reassuring commentary from regional banks. 

After a volatile previous week sparked by news of stress from some U.S. regional banks, sentiment shifted. These events now appear to be isolated, according to market analysis. The recovery was evident as the KBW Nasdaq Regional Banking Index rose, regaining some of its recent losses. Adding to the positive momentum, several regional bank CEOs reported that their loan portfolios remain broadly healthy. This wave of reassuring news helped calm jitters that had revived memories of the 2023 banking turmoil, leading to a recovery in bank stock prices.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Regional Banks company Fulton Financial (NASDAQ: FULT) jumped 3%. Is now the time to buy Fulton Financial? Access our full analysis report here, it’s free for active Edge members.
• Regional Banks company First Interstate BancSystem (NASDAQ: FIBK) jumped 3.7%. Is now the time to buy First Interstate BancSystem? Access our full analysis report here, it’s free for active Edge members.
• Regional Banks company First Busey (NASDAQ: BUSE) jumped 3%. Is now the time to buy First Busey? Access our full analysis report here, it’s free for active Edge members.
• Regional Banks company Dime Community Bancshares (NASDAQ: DCOM) jumped 3.1%. Is now the time to buy Dime Community Bancshares? Access our full analysis report here, it’s free for active Edge members.
• Regional Banks company Columbia Banking System (NASDAQ: COLB) jumped 4.1%. Is now the time to buy Columbia Banking System? Access our full analysis report here, it’s free for active Edge members.

Zooming In On Columbia Banking System (COLB)

Columbia Banking System’s shares are not very volatile and have only had 9 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.

The previous big move we wrote about was 4 days ago when the stock dropped 7.9% on the news that disclosures from two lenders raised concerns about deteriorating loan quality across the industry. The drop was triggered by specific incidents that have spooked investors. Zions Bancorp announced a $50 million charge-off—a debt the bank doesn't expect to collect—on a single loan. Separately, Western Alliance Bancorp revealed it was dealing with a borrower who had failed to provide proper collateral. These events are compounding existing anxieties about the regional banking sector, which is already under pressure from elevated interest rates and declining commercial real estate values. The news heightened investor concerns that more cracks could appear in borrowers' creditworthiness, potentially leading to increased loan losses and reduced profitability for other banks in the sector.

Columbia Banking System is down 5.1% since the beginning of the year, and at $25.50 per share, it is trading 20.3% below its 52-week high of $32.01 from November 2024. Investors who bought $1,000 worth of Columbia Banking System’s shares 5 years ago would now be looking at an investment worth $1,187.

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