Columbia Banking System NIM Compresses as Balance Sheet Deleveraging Continues
Net interest income fell to $589 million in the second quarter as the bank reduced its reliance on high-cost brokered deposits.
Net interest income for Columbia Banking System (COLB) decreased by $5 million sequentially to $589 million in the second quarter of 2026. The decline followed $4 million in interest income reversals and modest balance sheet deleveraging. Net interest margin compressed 3 bps sequentially to 3.93%, though NIM remained consistent when excluding the income reversals, as higher loan yields offset lower taxable security yields.
Balance sheet contraction was driven by intentional reductions in funding costs. Total deposits decreased to $52.1 billion from $53.5 billion in the first quarter. This was led by a reduction in brokered deposits, which fell to $978 million from $1.6 billion, and a decrease in wholesale public deposits to $928 million from $1.2 billion. Consequently, the cost of interest-bearing deposits decreased 8 bps sequentially to 1.96%.
Loan volumes also trended lower, with gross loans and leases falling to $47.2 billion from $47.7 billion in the prior quarter. The decline was due to runoff in below-market-rate transactional loans and lower non-owner occupied commercial real estate balances amid competitive pricing pressure. Commercial loans grew 5% on an annualized basis.
Non-interest income rose by $5 million sequentially to $88 million, supported by higher card-based and treasury management fees. These gains were partially offset by a $3 million net fair value loss related to MSR hedging activity. Non-interest expense fell by $19 million sequentially to $375 million as the bank realized cost savings from the Pacific Premier acquisition and saw a reduction in merger-related expenses. The efficiency ratio improved to 55.15% from 58.03% in the first quarter.
Credit quality showed mixed signals. Annualized net charge-offs improved to 0.25% of average loans and leases, down from 0.30% in the first quarter. However, the ratio of non-performing assets to total assets increased to 0.42% from 0.40%.
Capital levels tightened slightly as the bank continued its buyback program. The CET1 risk-based capital ratio decreased 10 bps sequentially to 11.6%, while the total risk-based capital ratio fell 10 bps to 13.4%. Columbia repurchased $199 million of common stock during the quarter, nearly identical to the $200 million repurchased in the first quarter.